AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 11, 2002
REGISTRATION NO. 333-
---------
==============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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MAIL-WELL I CORPORATION
AND
AFFILIATE GUARANTORS
LISTED ON SCHEDULE ATTACHED HERETO
(Exact name of registrant as specified in its charter)
DELAWARE 2677 84-1250533
(State or Other Jurisdiction of (Primary Standard Industrial (IRS Employer Identification No.)
Incorporation or Organization) Classification Code Number)
---------------
8310 S. VALLEY HIGHWAY, SUITE 400
ENGLEWOOD, CO 80112
(303) 790-8023
(Address, including zip code, and telephone
number, including area code, of registrant's
principal executive offices)
---------------
ROGER WERTHEIMER
VICE PRESIDENT--GENERAL COUNSEL & SECRETARY
MAIL-WELL, INC.
8310 S. VALLEY HIGHWAY, SUITE 400
ENGLEWOOD, CO 80112
(303) 790-8023
(Name and address, including zip code, and telephone number,
including area code, of agent for service)
---------------
COPIES TO:
HERBERT H. DAVIS III DOUGLAS R. WRIGHT
SENIOR VICE PRESIDENT--CORPORATE DEVELOPMENT JEFFREY A. SHERMAN
AND CHIEF LEGAL OFFICER MICHAEL M. MCGAWN
MAIL-WELL INC. FAEGRE & BENSON LLP
8310 S. VALLEY HIGHWAY, SUITE 400 370 SEVENTEENTH STREET, SUITE 2500
ENGLEWOOD, CO 80112 DENVER, CO 80202
(303) 790-8023 (303) 592-9000
---------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF SECURITIES TO THE
PUBLIC: As soon as practicable after this registration statement becomes
effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance
with General Instruction G, check the following box. [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
CALCULATION OF REGISTRATION FEE
============================================================================================================================
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
SECURITIES TO BE REGISTERED REGISTERED PER UNIT(1) PRICE(1) REGISTRATION FEE(1)
--------------------------------------------- ------------ ---------------- ------------------ -------------------
9 5/8% Senior Notes due 2012................. $350,000,000 100% $350,000,000 $ 32,200
Guarantee of 9 5/8% Senior Notes due 2012.... -- -- -- --(2)
============================================================================================================================
(1) Calculated in accordance with Rule 457(f)(2). For purposes of this
calculation, the offering price per senior note was assumed to be the
stated principal amount of each senior note that may be received by the
registrants in the exchange transaction in which the senior notes will
be offered.
(2) Pursuant to Rule 457(n), no registration fee is required for the
guarantees of the senior notes registered hereby.
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THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS
REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH
SECTION 8(a) OF THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE
REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES
AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY
DETERMINE.
==============================================================================
ADDITIONAL REGISTRANTS
STATE OR PRIMARY
OTHER STANDARD I.R.S.
JURISDICTION OF INDUSTRIAL EMPLOYER
NAME OF INCORPORATION CLASSIFICATION IDENTIFICATION
ADDITIONAL REGISTRANT OR FORMATION CODE NUMBER NUMBER
------------------------------------- ------------ ----------- ------
ABP Books, Inc....................... MI 2732 38-1957430
Discount Labels, Inc................. IN 2759 35-1119834
Hill Graphics, Inc................... TX 2752 74-1993978
Mail-Well, Inc....................... CO 6719 84-1250533
Mail-Well Commercial Printing, Inc... DE 2752 84-1461875
Mail-Well Mexico Holdings, Inc....... CO 2677 84-1468396
Mail-Well Services, Inc.............. CO 7331 84-1513702
Mail-Well Texas Finance, L.P......... TX 2677 52-2360462
Mail-Well West, Inc.................. DE 2677 84-1313079
National Graphics Company............ CO 2761 84-0692676
Poser Business Forms, Inc............ DE 2761 75-2195786
Wisco III, LLC....................... DE 2677 84-1362168
The name and address of the principal executive office for each of the
additional registrants is the same as is set forth for Mail-Well I
Corporation on the facing page of this registration statement.
******************************************************************************
The information in this prospectus is not complete and may be changed. We
may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This prospectus is not
an offer to sell these securities and it is not soliciting an offer to buy
these securities in any state where the offer or sale is not permitted.
******************************************************************************
Subject to completion, dated June 11, 2002
PROSPECTUS
[MAIL-WELL LOGO]
MAIL-WELL I CORPORATION
EXCHANGE OFFER FOR $350,000,000
OF
9 5/8% SENIOR NOTES DUE 2012
---------------
Material terms of the exchange offer:
o We are offering to exchange the notes that we sold on March 13, 2002
in a private offering for new notes to be issued in registered
transactions.
o The exchange offer expires at 5:00 p.m., New York City time, on
, 2002, unless we extend it.
--------------
o The new notes will be identical to the old notes in all material
respects, except that they will not have transfer restrictions,
registration rights, or certain rights to additional interest that
the old notes had.
o The exchange of old notes for new notes will not be taxable for U.S.
Federal income tax purposes, but you should see the discussion under
the caption "Material Federal Income Tax Considerations" for more
information.
o We will exchange all old notes that are properly tendered. You
should carefully review the procedures for tendering the old notes
beginning on page of this prospectus.
--
o Tenders of old notes may be withdrawn at any time prior to 5:00
p.m., New York City time, on the expiration date of the exchange
offer.
o We will not receive any cash proceeds from the exchange offer.
YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS BEGINNING ON PAGE 8 OF THIS
PROSPECTUS BEFORE PARTICIPATING IN THE EXCHANGE OFFER.
---------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON
THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
There is no established trading market for the new notes or the old
notes. However, you may trade the old notes and the new notes in the PORTAL
market.
This prospectus is dated , 2002
Each broker-dealer that receives new notes for its own account pursuant to
the exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new notes. The letter of transmittal
states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within
the meaning of the Securities Act. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of new notes received in exchange for old notes where such old
notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. We have agreed that, for a period of
180 days after the expiration date of the exchange offer (as defined
herein), we will make this prospectus available to any broker-dealer for use
in connection with any such resale. See "Plan of Distribution."
i
TABLE OF CONTENTS
PAGE
----
Summary....................................................... 1
Risk Factors.................................................. 8
Forward Looking Statements.................................... 16
Use of Proceeds............................................... 16
Selected Consolidated Financial Information................... 17
Unaudited Pro Forma Condensed Consolidated Financial
Information................................................. 18
Management's Discussion and Analysis of Financial Condition
and Results of Operations................................... 21
Business...................................................... 38
Management.................................................... 46
The Exchange Offer............................................ 49
Description of the New Notes.................................. 56
Description of Certain Indebtedness........................... 91
Description of Capital Stock.................................. 95
Material Federal Income Tax Considerations.................... 96
Plan of Distribution.......................................... 100
Legal Matters................................................. 101
Experts....................................................... 101
Where You Can Find More Information........................... 101
Index to Financial Statements................................. F-1
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This prospectus incorporates important business and financial
information about us that is not included in or delivered with this
prospectus. This information is available without charge to security holders
upon written or oral request to Mail-Well, Inc., Attn: Secretary, 8310 S.
Valley Highway, Suite 400, Englewood, Colorado, 80112, telephone (303)
790-8023. To obtain timely delivery of such information, you must request
the information no later than , 2002.
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ii
SUMMARY
This summary highlights selected information about us and does not
contain all of the information that is important for you to consider in
deciding whether to participate in the exchange offer. In addition to
reading this summary, you should carefully review this entire prospectus,
especially the "Risk Factors" section beginning on page 7.
The data used in this prospectus are drawn from the financial
statements of Mail-Well, Inc. and its subsidiaries on a consolidated basis.
Mail-Well, Inc. is the direct parent company of Mail-Well I Corporation.
Because Mail-Well, Inc. has immaterial assets, revenues and expenses (other
than through ownership of Mail-Well I Corporation), the financial condition
and results of operations of Mail-Well I Corporation and its subsidiaries on
a consolidated basis do not materially differ from those of Mail-Well, Inc.
on a consolidated basis. Mail-Well, Inc. and certain of its subsidiaries
will guarantee all of Mail-Well I Corporation's obligations under the new
notes.
OUR COMPANY
We are one of the largest printers in North America competing
primarily in the commercial printing and envelope market segments. We
believe we are the world's largest manufacturer of envelopes, the leading
printer of envelopes in the United States and Canada, the largest high
impact color printer in the United States, and a leading general commercial
printer in several major U.S. markets. Our principal executive offices are
located at 8310 S. Valley Highway, Suite 400, Englewood, Colorado, 80112,
and our phone number is (303) 790-8023.
We operate in the following market segments:
Commercial Printing. We serve two primary commercial printing
markets: (i) high impact color printing, in which we print a wide range of
longer run premium products for national and regional accounts; and (ii)
general commercial printing, in which we print a wide array of products and
offer printing services to local commercial customers. Our commercial
printing segment operates 29 plants throughout the United States and one in
Canada.
Envelope. We serve two primary markets with our envelope business:
(i) customized envelopes and packaging products, including Tyvek(R) mailers
used by the U.S. Postal Service, sold directly to end users or to
independent distributors who sell to end users; and (ii) envelopes and other
products sold to wholesalers, paper merchants, printers, brokerage firms,
office product establishments and superstores. We manufacture envelopes in
30 U.S. plants and 13 Canadian plants.
Printed Office Products. In addition to our two primary business
segments, we also operate a printed office products segment. As discussed
below, we are seeking to sell this business and therefore account for it as
a discontinued operation. Our printed office products segment has 12
manufacturing facilities located throughout the United States.
2001 STRATEGIC PLAN
In May 2001, we completed a comprehensive review of our operations
and adopted a new strategy that focuses on our two core
businesses--commercial printing and envelope. In support of this strategy,
we sold our label segment and announced our intention and are in the process
of seeking to sell our printed office products segment and certain other
non-core assets in our commercial printing and envelope businesses. We
intend to use any proceeds from these divestitures to reduce our senior
secured debt. Accordingly, in the second quarter of 2001 we began reporting
the label and printed office products segments as discontinued operations,
began reporting the other non-core assets as assets held for sale, and
recorded the loss
1
anticipated on these dispositions. In February 2002, we sold Curtis 1000
Inc., a printed office products company, for approximately $40 million.
Also, in May 2002, we sold our label segment for approximately $75 million.
As of the date of this prospectus, we have not entered into any other
definitive agreements to sell the remaining operations of our printed office
products segment or our other non-core assets. We expect to realize proceeds
of approximately $290 million from the sale of these companies and assets
including the sale of our label segment and Curtis 1000 Inc. In connection
with our new strategic plan, we also announced plans to consolidate three of
our commercial printing plants into one facility, to close eleven of our
envelope plants and to redeploy the equipment and other assets at other
facilities. As of March 2002, we completed the consolidation of the
commercial printing plants and closed seven of the envelope plants. We plan
to complete the remaining plant consolidations by the end of 2002.
Our new strategy also includes the launch of several initiatives to
significantly improve operations and marketing effectiveness. Both the
commercial printing and envelope businesses have programs in place to
institute best practices, install pricing disciplines and align equipment
and services to better serve our customers and markets.
2
SUMMARY DESCRIPTION OF THE EXCHANGE OFFER
Issuer.......................................... Mail-Well I Corporation.
Old Notes....................................... 9 5/8% Senior Notes due 2012, which we issued on
March 13, 2002 in transactions exempt from registration
under the Securities Act of 1933.
New Notes....................................... 9 5/8% Senior Notes due 2012, the issuance of which has
been registered under the Securities Act. The form and
terms of the new notes are identical in all material
respects to those of the old notes, except that the
transfer restrictions and registration rights relating to
the old notes do not apply to the new notes.
Exchange Offer.................................. We are offering to issue up to $350,000,000 aggregate
principal amount of the new notes in exchange for a like
principal amount of the old notes to satisfy our
obligations under the registration rights agreement that
we entered into when the old notes were issued.
Expiration Date................................. The exchange offer will expire at 5:00 p.m., New York City
time, on , 2002, or a later date and
------------------
time to which we extend it.
Withdrawal...................................... You may withdraw your tender of the old notes pursuant to
the exchange offer at any time prior to 5:00 p.m., New
York City time, on , 2002, or a later date
--------------
and time to which we extend the offer. We will return any
old notes that we do not accept for exchange for any
reason without expense to the tendering holder as soon as
practicable after the exchange offer expires or terminates.
Interest on the New Notes and the Old Notes..... Interest on the new notes will accrue from the date of the
original issuance of the old notes or from the date of the
last periodic payment of interest on the old notes,
whichever is later. No additional interest will be paid
on old notes tendered and accepted for exchange.
Conditions of the Exchange Offer................ The exchange offer is subject to customary conditions,
some of which we may waive. See "The Exchange
Offer--Conditions of the Exchange Offer."
Procedures for Tendering Old Notes.............. To accept the exchange offer, you must complete, sign and
date the letter of transmittal in accordance with the
instructions contained in this prospectus and in the
letter of transmittal, and send the letter of transmittal
and the old notes and any other required documentation to
the exchange agent at the following address:
State Street Bank and Trust Company,
Exchange Agent
Attn: MacKenzie Elijah, Corporate Actions
2 Avenue de Lafayette, Sixth Floor
Boston, Massachusetts 02111
Telecopier No.: (617) 662-1452
3
If you hold the old notes through the Depository Trust
Company, to accept the exchange offer you must use the
DTC's Automated Tender Offer Program, by which
each tendering participant will agree to be bound by
the letter of transmittal. By executing or agreeing
to be bound by the letter of transmittal, each
holder will represent to us that, among other things,
o it is acquiring the new notes in the exchange
offer in its ordinary course of business;
o it has no arrangement or understanding with
any person to participate in a distribution
of the new notes, and if it is not a broker-dealer,
it is not engaged in, and does not intend to engage
in, a distribution of the new notes;
o it is not an "affiliate" of Mail-Well I Corporation,
as defined in Rule 405 of the Securities Act, or if
it is such an affiliate, it will comply with the
registration and prospectus delivery requirements
of the Securities Act to the extent applicable; and
o if it is a broker-dealer, it will receive new notes
for its own account in exchange for old notes that
it acquired as a result of market-making activities
or other trading activities.
Each broker-dealer that receives new notes for its own account
in exchange for old notes, where such old notes were acquired
by such broker-dealer as a result of market-making activities
or other trading activities, must acknowledge that it will
deliver a prospectus in connection with any resale of such
new notes. See "Plan of Distribution."
We will accept for exchange any and all old notes that are
properly tendered and not withdrawn in the exchange offer
prior to 5:00 p.m., New York City time, on , 2002.
-------------
The exchange agent will deliver the new notes issued pursuant
to the exchange offer promptly following the expiration
date. See "The Exchange Offer--Terms of the Exchange Offer;
Period for Tendering Old Notes."
Federal Income Tax Considerations............... The exchange of old notes for new notes in the exchange
offer will not be a taxable event for U.S. federal income
tax purposes. See "Material Federal Income Tax
Considerations."
Effect of Not Tendering......................... Old notes that are not tendered or that are tendered but
not accepted will, following the completion of the
exchange offer, continue to be subject to the existing
restrictions on transfer. Except as described in
"Description of the New Notes--Registration Rights;
Liquidated Damages," we will have no further obligation to
provide for the registration under the Securities Act of
the old notes. Holders of old notes do not have any
appraisal or dissenters' rights in connection with the
exchange offer.
4
SUMMARY DESCRIPTION OF THE NEW NOTES
Issuer.......................................... Mail-Well I Corporation.
Interest Rate................................... The new notes will bear interest at an annual rate of 9 5/8%.
Interest Payment Dates.......................... We will pay interest on the new notes semi-annually on
March 15 and September 15 of each year, beginning
September 15, 2002.
Optional Redemption............................. We may redeem the new notes, in whole or in part, on or
after March 15, 2007, at the redemption prices specified
under "Description of the New Notes--Optional Redemption."
In addition, prior to March 15, 2005, we may redeem new
notes, in an aggregate principal amount not to exceed
35% of the aggregate principal amount of notes originally
issued and at a redemption price of 109.625%, with the
net cash proceeds of certain equity offerings. See
"Description of the New Notes--Optional Redemption."
Change of Control............................... If we experience a change of control, we may be required
to make an offer to purchase the new notes at a purchase
price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest, if any.
Ranking......................................... The new notes will be:
o senior unsecured obligations and equal
in right of payment with all of our
existing and future senior unsecured
indebtedness and that of the subsidiary
guarantors;
o senior to all of our existing and future
subordinated obligations and those of the Parent
Company and the subsidiary guarantors; and
o effectively subordinated to our secured
obligations.
Asset Sale Proceeds............................. We may be obligated to offer to purchase new notes at a
redemption price of 100% of the principal amount thereof
plus accrued and unpaid interest, if any, to the date of
purchase, with the net cash proceeds of certain sales or
other dispositions of assets. We intend to use the
proceeds of the sale of our label segment to either pay
down the balance on our senior secured debt or reinvest in
our business.
Guarantees...................................... The new notes will be unconditionally guaranteed on a
senior unsecured basis by our parent company and certain
of our existing domestic subsidiaries and our future
domestic subsidiaries.
Restrictive Covenants........................... We will issue the new notes under the indenture among us,
the guarantors and State Street Bank and Trust Company, as
trustee. The indenture will contain covenants that will
limit our ability and the ability of our restricted
subsidiaries to:
o incur or guarantee additional indebtedness;
o pay dividends or distributions on, or redeem or
repurchase, our capital stock;
5
o make investments;
o engage in transactions with affiliates;
o transfer or sell assets;
o create liens;
o restrict dividend or other payments to us from
our subsidiaries;
o issue or sell capital stock of our subsidiaries;
and
o consolidate, merge or transfer all or
substantially all of our assets and the assets of
our subsidiaries.
These covenants are subject to important exceptions and
qualifications.
Resale of the New Notes......................... We believe that the new notes may be offered for sale,
resold or otherwise transferred by holders without
compliance with the registration and prospectus delivery
requirements of the Securities Act. Our belief is based
on interpretations by the staff of the Securities and
Exchange Commission, as set forth in no-action letters
issued to persons unrelated to us, and is conditioned upon
the new notes being acquired in the ordinary course of the
holders' business and the holders having no arrangement
with any person to engage in a distribution of new notes.
Furthermore, each holder, other than a broker-dealer, must
acknowledge that it is not engaged in, and does not intend
to engage in, a distribution of the new notes and has no
arrangement or understanding to participate in a
distribution of new notes.
Each broker-dealer that receives new notes for its own
account in this exchange offer must acknowledge that it
will comply with the prospectus delivery requirements of the
Securities Act in connection with any resale of the new
notes. Broker-dealers that acquired old notes
directly from us and not as a result of market-making
activities or other trading activities may not rely on the
staff's interpretations discussed above or participate in the
exchange offer and must comply with the prospectus delivery
requirements of the Securities Act in order to resell the
old notes.
Please note that the Commission has not considered this
exchange offer in the context of a no-action letter and we
cannot be sure that the staff of the Commission would
make a similar determination with respect to this
exchange offer as it did in the no-action letters to the
unrelated persons upon which we are relying.
Use of Proceeds................................. We will not receive any proceeds from this offering.
Risk Factors.................................... See "Risk Factors" for a discussion of the factors you
should carefully consider before deciding to participate
in the exchange offer.
6
RISK FACTORS
You should carefully consider all of the information in this
prospectus, including the following risk factors, before tendering your
shares in the exchange offer. When we use the term "notes" in this
prospectus, the term includes the old notes and the new notes.
RISKS RELATING TO THE EXCHANGE OFFER
HOLDERS WHO FAIL TO EXCHANGE THEIR OLD NOTES WILL CONTINUE TO BE SUBJECT TO
RESTRICTIONS ON TRANSFER.
If you do not exchange your old notes for new notes in the exchange
offer, you will continue to be subject to the restrictions on transfer of
your old notes described in the legend on the certificates for your old
notes. The restrictions on transfer of your old notes arise because we
issued the old notes under exemptions from, or in transactions not subject
to, the registration requirements of the Securities Act and applicable state
securities laws. In general, you may only offer or sell the old notes if
they are registered under the Securities Act and applicable state securities
laws, or are offered and sold under an exemption from these requirements. We
do not plan to register the old notes under the Securities Act. For further
information regarding the consequences of tendering your old notes in the
exchange offer, see the discussions below under the captions "The Exchange
Offer--Consequences of Failure to Exchange" and "Material Federal Income
Tax Considerations."
YOU MUST COMPLY WITH THE EXCHANGE OFFER PROCEDURES IN ORDER TO RECEIVE NEW,
FREELY TRADABLE NEW NOTES.
Delivery of new notes in exchange for old notes tendered and
accepted for exchange pursuant to the exchange offer will be made only after
timely receipt by the exchange agent of the following:
o certificates for old notes or a book-entry confirmation of a
book-entry transfer of old notes into the exchange agent's
account at DTC, New York, New York as a depository, including
an agent's message if the tendering holder does not deliver a
letter of transmittal;
o a completed and signed letter of transmittal (or facsimile
thereof), with any required signature guarantees, or, in the
case of a book-entry transfer, an agent's message in lieu of
the letter of transmittal; and
o any other documents required by the letter of transmittal.
Therefore, holders of old notes who would like to tender old notes
in exchange for new notes should be sure to allow enough time for the old
notes to be delivered on time. We are not required to notify you of defects
or irregularities in tenders of old notes for exchange. Old notes that are
not tendered or that are tendered but we do not accept for exchange will,
following consummation of the exchange offer, continue to be subject to the
existing transfer restrictions under the Securities Act and, upon
consummation of the exchange offer, certain registration and other rights
under the registration rights agreement will terminate. See "The Exchange
Offer--Procedures for Tendering Old Notes" and "The Exchange Offer--
Consequences of Failure to Exchange."
SOME HOLDERS WHO EXCHANGE THEIR OLD NOTES MAY BE DEEMED TO BE UNDERWRITERS.
If you exchange your old notes in the exchange offer for the
purpose of participating in a distribution of the new notes, you may be
deemed to have received restricted securities and, if so, will be required
to comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction.
7
RISKS RELATING TO HOLDING THE NEW NOTES
OUR SUBSTANTIAL EXISTING DEBT SERVICE REQUIREMENTS COULD IMPAIR OUR
FINANCIAL CONDITION AND OUR ABILITY TO FULFILL OUR OBLIGATIONS UNDER OUR
INDEBTEDNESS, INCLUDING THE NOTES.
We have incurred substantial amounts of debt, and our level of debt
may affect our operations and our ability to make payments on the new notes.
As of March 31, 2002, our total indebtedness was approximately $971.7
million, representing 71.4% of our total capitalization (net of cash), and
our interest expense for the three months ended March 31, 2002 was
approximately $12.1 million.
Our substantial indebtedness could have several important effects
on our future operations. For example:
o our ability to obtain additional financing for working capital,
capital expenditures, acquisitions or other corporate purposes
in the future may be limited;
o a substantial portion of our cash flow from operations will be
dedicated to the payment of principal and interest on
indebtedness, and will not be available to fund working
capital, capital expenditures, acquisitions and other business
purposes;
o we may be more vulnerable to economic downturns or other adverse
developments than less leveraged competitors;
o borrowings under our senior credit facility bear interest at
fluctuating rates, which could result in higher interest
expense in the event of an increase in interest rates; and
o we may be unable to repurchase all of the notes tendered to us
if we undergo a change of control.
Our ability to make scheduled payments of principal or interest on,
or to reduce or refinance, indebtedness will depend on our future operating
performance and resulting cash flow. To a certain extent, our future
performance will be subject to prevailing economic conditions and financial,
competitive and other factors beyond our control. We cannot be certain,
however, that our business, or businesses that we acquire in the future,
will generate sufficient cash flow from operations to enable us to service
all of our debt, including the new notes or any old notes that remain
outstanding after completion of the exchange offer. We may need additional
funding from either debt or equity offerings in the future in order to
refinance our existing debt, including the new notes, or to continue to grow
our business. We cannot be sure that we will have access to any such sources
of funding on satisfactory terms or on a timely basis or at all.
THE TERMS OF OUR INDEBTEDNESS IMPOSE SIGNIFICANT RESTRICTIONS ON OUR
BUSINESS.
The indentures governing the new notes and our senior subordinated
notes and the agreement governing the senior credit facility contain various
covenants that limit our ability, and that of our restricted subsidiaries,
to, among other things:
o incur or guarantee additional indebtedness;
o make restricted payments, including dividends;
o create or permit to exist certain liens;
o enter into business combinations and asset sale transactions;
o make investments;
o enter into transactions with affiliates; and
o enter into new businesses.
These restrictions could limit our ability to obtain future
financing, make acquisitions or needed capital expenditures, withstand a
future downturn in our business or the economy in general, conduct
8
operations or otherwise take advantage of business opportunities that may
arise. Our senior credit facility also requires us to maintain specified
financial ratios. Our ability to meet future financial ratios may be
affected by events beyond our control, such as general economic conditions.
Our failure to maintain applicable financial ratios would prevent us
from borrowing additional amounts under our senior credit facility, and
could result in a default under that facility. A default could cause the
indebtedness outstanding under the facility, and by reason of cross-
acceleration or cross-default provisions, the new notes and any other
indebtedness we may then have, to become immediately due and payable. If we
are unable to repay those amounts, the lenders under our senior credit
facility could initiate a bankruptcy proceeding or liquidation proceeding or
proceed against the collateral granted to them to secure that indebtedness.
If the lenders under our senior credit facility were to accelerate the
repayment of outstanding borrowings, we might not have sufficient assets to
repay our indebtedness, including the new notes.
THERE ARE ADDITIONAL BORROWINGS AVAILABLE TO US THAT COULD FURTHER
EXACERBATE THE RISKS DESCRIBED ABOVE.
Despite current indebtedness levels, we and our subsidiaries may be
able to incur substantial additional indebtedness in the future. The terms
of the indenture governing the new notes limit but do not prohibit us from
doing so. Our senior credit facility would permit additional borrowings of
up to $150 million (less any outstanding letters of credit) after completion
of this offering. All of those borrowings would be secured and effectively
senior to the new notes and the guarantees. If new debt is added to our and
our subsidiaries' current debt levels, the related risks that we and they
now face could intensify.
NOT ALL SUBSIDIARIES ARE GUARANTORS OF THE NEW NOTES, AND YOUR RIGHT TO
RECEIVE PAYMENTS ON THE NEW NOTES COULD BE ADVERSELY AFFECTED IF ANY OF OUR
NON-GUARANTOR SUBSIDIARIES DECLARE BANKRUPTCY, LIQUIDATE OR REORGANIZE.
Some of our subsidiaries, including our subsidiaries held for sale
as part of our strategic plan, will guarantee the new notes. These and other
guarantor subsidiaries would be released from their guarantees upon their
sale if we satisfy certain conditions under the indenture regarding
application of the sale proceeds. In the event of a bankruptcy, liquidation
or reorganization of any of the non-guarantor subsidiaries, holders of their
indebtedness and their trade creditors will generally be entitled to payment
of their claims from the assets of those subsidiaries before any assets are
made available for distribution to us. Such actions by the non-guarantor
subsidiaries could adversely affect our debt coverage ratios or our ability
to make payments on the new notes when they become due. Assuming we had
completed this offering on December 31, 2001 and after giving effect to the
offering of the old notes, the new notes would have been effectively junior
to approximately $128 million of indebtedness and other liabilities,
including trade payables, of our non-guarantor subsidiaries. In addition, an
indeterminate amount may be available to those subsidiaries for future
borrowing. The non-guarantor subsidiaries generated approximately 12% of our
consolidated pro forma revenues in the year ended December 31, 2001 and held
approximately 25% of our consolidated assets and approximately 11% of our
consolidated liabilities as of December 31, 2001.
THE GUARANTEES MAY BE SUBJECT TO FRAUDULENT CONVEYANCE LAWS, AND A COURT MAY
VOID THE GUARANTEES OF THE NEW NOTES OR SUBORDINATE THE GUARANTEES TO OTHER
OBLIGATIONS OF THE SUBSIDIARY GUARANTORS.
Although standards may vary depending on the applicable law,
generally under U.S. federal bankruptcy law and comparable provisions of
state fraudulent transfer laws, if a court were to find that, among other
things, at the time any guarantor of the new notes incurred the debt
evidenced by its guarantee of the new notes, the guarantor:
either:
o was insolvent or rendered insolvent by reason of the incurrence
of the guarantee;
9
o was engaged or about to engage in a business or transaction
for which that guarantor's remaining assets constituted
unreasonably small capital;
o was a defendant in an action for money damages, or had a
judgment for money damages docketed against it, if in either
case, after a final judgment, the judgment were unsatisfied;
or
o intended to incur, or believed that it would incur, debts
beyond its ability to pay such debts as they mature;
and
o the guarantor received less than reasonably equivalent value or
fair consideration for the incurrence of its guarantee; or
o incurred the guarantee or made related distributions or payments
with the intent of hindering, delaying or defrauding creditors,
there is a risk that the guarantee of that guarantor could be voided by the
court, or claims by holders of the new notes under the guarantee could be
subordinated to other debts of that guarantor. In addition, any payment by
that guarantor pursuant to its guarantee could be voided and required to be
returned to the guarantor, or to a fund for the benefit of the creditors of
the guarantor.
The measures of insolvency for purposes of these fraudulent
transfer laws will vary depending upon the law applied in any proceeding to
determine whether a fraudulent transfer has occurred. Generally, however, a
guarantor would be considered insolvent if:
o the sum of its debts, including contingent liabilities, were
greater than the fair saleable value of all of its assets;
o the present fair saleable value of its assets was less than
the amount that would be required to pay its probable
liability on its existing debts, including contingent
liabilities, as they become absolute and mature; or
o it could not pay its debts as they become due.
On the basis of historical financial information, recent operating
history and other factors, we believe that each guarantor, after giving
effect to its guarantee of the new notes, will not be insolvent, will not
have unreasonably small capital for the business in which it is engaged and
will not have incurred debts beyond its ability to pay such debts as they
mature. There can be no assurance, however, as to what standard a court
would apply in making such determinations or that a court would agree with
our conclusions in this regard.
THE NEW NOTES AND THE GUARANTEES THEREOF ARE EFFECTIVELY JUNIOR TO ALL OF
OUR AND THE GUARANTORS' EXISTING AND FUTURE SENIOR SECURED DEBT TO THE
EXTENT OF THE COLLATERAL.
The new notes and the guarantees provided by the guarantors will be
general unsecured obligations. This means that you will have no recourse to
our or the guarantors' specific assets upon any event of default under the
indenture governing the new notes. Accordingly, the new notes will be
effectively subordinated to any of our secured obligations to the extent of
the value of the assets securing such obligations. Under certain
circumstances, we may also incur secured debt to other creditors that will
have the right to be repaid out of specific property. Your right to be
repaid principal and interest on the new notes will be secondary to the
right of our lenders to be repaid for all current and future borrowings
under our senior credit facility and other secured debt. We may also issue
additional unsecured and unsubordinated debt, which will also rank equally
with your right to be repaid. Your right to be repaid amounts owing under
the guarantees will rank equally to the rights of other unsecured and
unsubordinated obligations of the guarantors.
10
If we default on the new notes, become bankrupt, liquidate or
reorganize:
o you will be entitled to be repaid from our remaining assets
only after any secured creditors have been paid out of
proceeds from the sale of their collateral; and
o to the extent there are assets available after all of the
foregoing creditors have been paid, then you will be entitled
to be repaid on a pro rata basis with and only to the extent
that there are sufficient assets to repay any other
obligations of the Company and its subsidiaries that rank
equally with the new notes in right of payment.
In the event we or the guarantors become bankrupt, liquidate or
reorganize or become involved in a similar proceeding, if we have secured
debt, the holders of the new notes will participate with all other holders
of our or the guarantors' unsecured and unsubordinated indebtedness in the
assets remaining after we and the guarantors have paid all of our secured
debt. In any such case, we and the guarantors may not have sufficient funds
to pay all of our unsecured creditors. If the holders of our secured debt
are not fully paid, the holders of the new notes will not receive any
payments. If, at the time of a bankruptcy, liquidation, reorganization or
similar proceeding relating to us or the guarantors, we and the guarantors
have no secured debt, holders of the new notes will participate ratably with
all of our and the guarantors' other unsecured and unsubordinated creditors,
including unsecured trade creditors and tort claimants, in our and the
guarantors' assets.
Assuming we had completed this offering on December 31, 2001 and
after giving effect to the offering of the old notes, the new notes and the
guarantees would have been effectively subordinated to approximately $187
million of secured debt, and approximately $150 million (less any
outstanding letters of credit) would have been available for borrowing as
additional secured debt under our senior credit facility. Under the terms of
the indenture, we will be permitted to borrow substantial additional
indebtedness, including secured debt, in the future.
THE INSTRUMENTS GOVERNING OUR CURRENT DEBT CONTAIN CROSS DEFAULT PROVISIONS
THAT MAY CAUSE ALL OF THE DEBT ISSUED UNDER SUCH INSTRUMENTS TO BECOME
IMMEDIATELY DUE AND PAYABLE AS A RESULT OF A DEFAULT UNDER AN UNRELATED DEBT
INSTRUMENT.
Our senior credit facility and the indenture pursuant to which our
existing 8 3/4% senior subordinated notes were issued, as well as the
indenture under which the new notes are being issued, contain numerous
financial and operating covenants and require us and our subsidiaries to
meet certain financial ratios and tests. Our failure to comply with the
obligations contained in the senior credit facility, the senior subordinated
indenture or the indenture governing the new notes could result in an event
of default under our senior credit facility, the senior subordinated
indenture or the indenture, which could result in the related debt and the
debt issued under other instruments to become immediately due and payable.
In such event, we would need to raise funds through any number of
alternative available sources, which funds may not be available to us on
favorable terms, on a timely basis or at all. Alternatively, such a default
would require us to sell our assets and otherwise curtail operations in
order to pay our creditors.
WE MAY BE UNABLE TO REPURCHASE THE NEW NOTES IF WE EXPERIENCE A CHANGE OF
CONTROL.
If we were to experience a change of control, as defined in the
indenture governing the new notes, we will be required to make an offer to
purchase all of the new notes at a purchase price equal to 101% of the
principal amount, plus accrued and unpaid interest. Our senior credit
facility restricts our ability to repurchase new notes, including the
repurchase of new notes under a change of control offer. Our failure to
repay holders tendering new notes upon a change of control would result in
an event of default under the new notes. A change of control, or an event of
default under the new notes, may also result in an event of default under
our senior credit facility, which may result in the acceleration of the
indebtedness under that facility requiring us to repay that indebtedness
immediately. If a change of control were to occur, we cannot assure you that
we would have sufficient funds to repay debt outstanding under the senior
credit facility or to purchase the new notes or any other securities which
11
we would be required to offer to purchase or that become immediately due and
payable as a result. We expect that we would require additional financing
from third parties to fund any such purchases, and we cannot assure you that
we would be able to obtain financing on satisfactory terms, or at all.
THERE IS NO PUBLIC TRADING MARKET FOR THE NOTES, AND THEY ARE SUBJECT TO
TRANSFER RESTRICTIONS.
The new notes will be a new issue of securities for which there
will be a limited trading market.
The initial purchasers of the old notes have advised us that they
are making a market in the notes and will do so for the new notes following
the completion of this offering. However, the initial purchasers are not
obligated to do so, and may discontinue any market-making activities with
respect to the new notes at any time without notice. In addition, such
market-making activity will be subject to the limitations imposed by the
Securities Act and the Securities Exchange Act of 1934, and may be limited
during this exchange offer.
If an active market for the new notes were to exist, the new notes
might trade at prices lower than their initial offering price. The trading
price would depend on many factors, such as prevailing interest rates and
the market for similar securities, general economic conditions and our
financial condition, performance and prospects.
RISKS RELATED TO OUR BUSINESS
OUR PARENT COMPANY'S CONVERTIBLE NOTES BECOME DUE IN NOVEMBER 2002, AND WE
MAY NEED TO BORROW ON OUR SENIOR CREDIT FACILITY TO REPAY A PORTION OF THOSE
NOTES.
Mail-Well, Inc. has outstanding $139 million in aggregate principal
amount of 5% convertible notes. The convertible notes are due November 1,
2002. We expect to use available cash and, to the extent necessary,
borrowings under our senior credit facility to repay an inter-company note
between the Company and the Parent Company, which will use those funds to
repay the holders of the convertible notes. The senior credit facility has
several conditions to borrowing. If we are unable to satisfy all of these
conditions, we would be unable to borrow under the senior credit facility to
repay the convertible notes. We would then need to obtain the funds to repay
the convertible notes through other sources, which funds may not be
available to us on favorable terms, on a timely basis or at all. The Parent
Company's failure to pay the convertible notes when due would be an event of
default under the convertible notes.
WE MAY NOT BE ABLE TO EFFECTIVELY IMPLEMENT OUR STRATEGIC PLAN.
In May 2001, we announced the adoption of a strategic restructuring
plan that calls for the divestiture of our label and printed office products
segments. We currently continue to operate those businesses much as we have
in the past but, for accounting purposes, we account for these operations as
"discontinued operations." The implementation of our plan to sell these
businesses may adversely affect the results of operations of these
businesses due to diversion of management's attention, the impact on
customers and other factors. As of the date of this prospectus, we have sold
our subsidiary Curtis 1000 Inc. and our label segment, but we have not
entered into any other definitive agreements of sale. There can be no
assurance that we will be able to consummate any sale of those businesses,
or that the terms, conditions or timing of any sale, if consummated, will
achieve the results contemplated by our strategic plan. We intend to use the
proceeds of these proposed sales to repay some of our existing debt under
our senior credit facility. There can be no assurance that we will receive
cash proceeds in the amounts contemplated by our strategic plan to retire a
material amount of existing debt. In addition, if any proposed sale is
consummated, we may have to retain certain liabilities associated with those
business segments' prior operations, including pension benefit obligations,
environmental liabilities and indemnification obligations customarily
contained in sale agreements.
12
WE HAVE RECENTLY REPORTED LOSSES, AND IT IS UNCERTAIN WHEN WE WILL RETURN TO
PROFITABILITY.
We reported losses for the last three fiscal quarters of 2001
primarily as a result of expenses related to our restructuring initiatives
and the economic slowdown, which in particular adversely affected our sales
to significant advertising and automotive customers and direct mail. These
adverse factors have continued to affect our results in the first quarter of
2002, and our results in the first quarter of 2002 were below the results of
the comparable period in 2001. Our ability to return to profitability
depends in part on our customers' recovery from this slowdown and the
success of our efforts to reduce operating expenses through our plant
consolidations and ongoing cost-cutting measures in connection with our
recent strategic initiatives. Our operating results are difficult to
predict, and we cannot assure you that we will be successful in achieving
increased revenues, positive cash flows or profitability.
TO THE EXTENT THAT WE MAKE SELECT ACQUISITIONS, WE MAY NOT BE ABLE TO
SUCCESSFULLY INTEGRATE THE ACQUIRED BUSINESSES INTO OUR BUSINESS.
In the past, we have grown rapidly through acquisitions. Although
we believe that our experience in making acquisitions is an important asset,
our strategic plan and the terms of our senior credit facility limit the
acquisitions that we may currently pursue. To the extent that we pursue
acquisitions, we cannot be certain that we will be able to identify and
acquire other businesses on favorable terms or that, if we are able to
acquire businesses on favorable terms, we will be able to successfully
integrate the acquired businesses into our current business or profitably
manage them.
THE PRINTING BUSINESS DOES NOT GENERALLY USE LONG-TERM AGREEMENTS, AND OUR
PRINTING OPERATIONS MAY BE SUBJECT TO QUARTERLY AND CYCLICAL FLUCTUATIONS.
The printing industry in which we compete is generally characterized
by individual orders from customers or short-term contracts. Most of our
customers are not contractually obligated to purchase products or services
from us. Most customer orders are for specific printing jobs, and repeat
business largely depends on our customers' satisfaction with the work we do.
Although our business does not depend on any one customer or group of
customers, we cannot be sure that any particular customer will continue to
do business with us for any period of time. In addition, the timing of
particular jobs or types of jobs at particular times of year may cause
significant fluctuations in the operating results of our various printing
operations in any given quarter. We depend to some extent on sales to
certain industries, such as the advertising and automotive industries. We
estimate that approximately 50% of our commercial printing sales are related
to advertising. To the extent these industries experience downturns, as is
currently the case in advertising, the results of our operations are
adversely affected.
OUR INDUSTRY IS HIGHLY COMPETITIVE.
The printing industry in which we compete is extremely fragmented and
highly competitive. In the commercial printing market, we compete against a
number of large, diversified and financially stronger printing companies, as
well as regional and local commercial printers, many of which are capable of
competing with us on volume, price and production quality. In the envelope
market, we compete primarily with a few multi-plant and many single-plant
companies servicing regional and local markets. There currently is excess
capacity in the printing industry, which could result in excessive price
competition. We are constantly seeking ways to reduce our costs and become
more efficient competitors. However, we cannot be certain that these efforts
will be successful or that our competitors will not be more successful in
their similar efforts to reduce costs and become more efficient. If we fail
to reduce costs and increase productivity, we may face decreased profit
margins in markets where we encounter price competition, which in turn could
reduce our cash flow and profitability.
13
FACTORS AFFECTING U.S. AND CANADIAN POSTAL SERVICES CAN IMPACT OUR BUSINESS.
Most envelopes used in the United States and Canada are sent through
the mail and, as a result, postal rates can significantly affect envelope
usage. Historically, increases in postal rates, relative to changes in the
cost of alternative delivery means and/or advertising media, have resulted
in temporary reductions in the growth rate of mail sent, including direct
mail, which is a significant portion of our envelope volume. We cannot be
sure that direct mail marketers will not reduce their volume as a result of
any increases. Because rate increases in the United States and Canada are
outside our control, we can provide no assurance that any increases in U.S.
and/or Canadian postal rates will not have a negative effect on the level of
mail sent, or the volume of envelopes purchased, in either or both
countries. In such event, we would expect to experience a decrease in cash
flow and profitability or financial position.
Factors other than postal rates that detrimentally affect the volume
of mail sent through the U.S. and Canadian postal systems may also negatively
affect our business. If the threats of mass bio-terrorism in the U.S. mail
system persist, or if there is a perception of a lack of safety in the U.S.
or Canadian postal systems, we cannot be sure that direct mail marketers
will not reduce their volume as a result of any such persisting threats or
insecurity, or that such decreases in demand will not have a negative effect
on the level of mail sent or the volume of envelopes purchased.
INCREASES IN PAPER COSTS AND ANY DECREASES IN THE AVAILABILITY OF PAPER
COULD HAVE A MATERIAL ADVERSE EFFECT ON OUR BUSINESS.
Paper costs represent a significant portion of our cost of
materials. Changes in paper pricing generally do not affect the operating
margins of our commercial printing business because we historically have
been able to pass on paper price increases and increased proceeds from waste
paper sales. Paper pricing does, however, impact the operating margins of
our envelope business because we generally are not able to increase our
prices as quickly as paper prices increase. We cannot be certain that we
will be able to continue to pass on future increases in the cost of paper.
Moreover, rising paper costs and their consequent impact on our pricing
could lead to a decrease in our volume of units sold. For example,
successive paper price increases during late 1995 and early 1996 resulted in
a decline in demand for our products, particularly from the direct mail
advertising industry. Although we have been successful in negotiating
favorable pricing terms with paper vendors, we cannot be certain we will be
successful in negotiating favorable pricing terms in the future. This may
result in decreased sales volumes as well as decreased cash flow and
profitability.
We depend on the availability of paper in manufacturing most of
our products. During periods of tight paper supply, many paper producers
allocate shipments of paper based on the historical purchase levels of
customers. As a result of our large volume paper purchases from several
paper producers, we generally have not experienced difficulty in obtaining
adequate quantities of paper, although we have occasionally experienced
minor delays in delivery. Although we believe that our attractiveness to
vendors as a large volume paper purchaser will continue to enable us to
receive adequate supplies of paper in the future, unforeseen developments in
world paper markets coupled with shortages of raw paper could result in a
decrease in supply, which in turn would cause a decrease in the volume of
products we could produce and sell and a corresponding decrease in cash flow
and profitability.
THE AVAILABILITY OF ALTERNATIVE DELIVERY MEDIA MAY ADVERSELY AFFECT OUR
BUSINESS.
Our envelope manufacturing and printing business is highly dependent
upon the demand for envelopes sent through the mail. Such demand comes from
utility companies, banks and other financial institutions, among others. Our
printing business also depends upon demand for printed advertising and
business forms, among others. Consumers increasingly use the Internet and
other electronic media to purchase goods and services, and for other
purposes such as paying utility and credit card bills. Advertisers use them
for targeted campaigns directed at specific electronic user groups. Large
and
14
small businesses use electronic media to conduct business, send invoices
and collect bills. As a result, we expect the demand for envelopes and other
printed materials for these purposes to decline.
Although we expect countervailing trends, such as the growth of
targeted direct mail campaigns based upon mailing lists generated by
electronic purchases, to cause overall demand for envelopes and other
printed materials to continue to grow at rates comparable to recent
historical levels, we cannot be certain that the acceleration of the trend
towards electronic media such as the Internet and other alternative media
will not cause a decrease in the demand for our products. If demand for our
products decreases, we may not generate sufficient cash flow to make
required payment on the notes.
WE DEPEND ON GOOD LABOR RELATIONS.
Following the sale of our label segment, as of May 31, 2002, we had
approximately 11,800 full-time employees, of whom approximately 2,200 were
members of various local labor unions. If our unionized employees were to
engage in a concerted strike or other work stoppage, or if other employees
were to become unionized, we could experience a disruption of operations,
higher labor costs or both. A lengthy strike could result in a material
decrease in our cash flow or profitability.
ENVIRONMENTAL LAWS MAY AFFECT OUR BUSINESS.
Our operations are subject to federal, state, local and foreign
environmental laws and regulations, including those relating to air
emissions, wastewater discharge, waste generation, handling, management and
disposal, and remediation of contaminated sites. In addition, some of the
sellers from which we have bought businesses in the past have been
designated as potentially responsible parties under the federal
Comprehensive Environmental Response, Compensation and Liability Act of
1980, or CERCLA, or similar legislation in Canada, with respect to off-site
disposal of hazardous waste at two sites. CERCLA imposes strict, and in
certain circumstances joint and several, liability for response costs.
Liability may also include damages to natural resources. We believe that we
have minimal exposure as a result of such designations, either because
indemnities obtained in the course of acquisitions or because of the de
minimis nature of the claims, or both. We also believe that our current
operations are in substantial compliance with applicable environmental laws
and regulations. We cannot be certain, however, that available indemnities
will be adequate to cover all costs or that currently unknown conditions or
matters, new laws and regulations, or stricter interpretations of existing
laws and regulations will not have a material adverse effect on our business
or operations in the future.
WE ARE DEPENDENT ON KEY MANAGEMENT PERSONNEL.
Our success will continue to depend to a significant extent on our
executive officers and other key management personnel. We do not as a matter
of policy have employment agreements with our executive officers. We cannot
be certain that we will be able to retain our executive officers and key
personnel or attract additional qualified management in the future. The
success of our new strategic plan may depend, in part, on our ability to
retain management personnel during the implementation of the plan. In
addition, the success of any acquisitions we may pursue may depend, in part,
on our ability to retain management personnel of the acquired companies. We
do not carry key person insurance on any of our managerial personnel.
15
FORWARD-LOOKING STATEMENTS
This prospectus includes "forward-looking statements" within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities and Exchange Act of 1934. All statements other than statements of
historical facts included in this prospectus regarding the prospects of our
industry and our prospects, plans, financial position and business strategy,
may constitute forward-looking statements. In addition, forward-looking
statements generally can be identified by the use of forward-looking
terminology such as "may," "will," "should," "expect," "intend," "estimate,"
"anticipate," "believe," "predict," "potential" or "continue" or the
negatives of these terms or variations of them or similar terminology.
Although we believe that the expectations reflected in these forward-looking
statements are reasonable, we cannot assure you that these expectations will
prove to be correct. Important factors that could cause actual results to
differ materially from our expectations are disclosed in this prospectus,
including in conjunction with the forward-looking statements included in
this prospectus and under "Risk Factors." All subsequent written and oral
forward-looking statements attributable to us or persons acting on our
behalf are expressly qualified in their entirety by the cautionary
statements included in this document. These forward-looking statements speak
only as of the date of this prospectus. We do not intend to update these
statements unless the securities laws require us to do so.
USE OF PROCEEDS
We will not receive any proceeds from the issuance of the new notes or
consummation of the exchange offer. In consideration for issuing the new
notes as contemplated in this prospectus, we will receive corresponding old
notes in like principal amount. The old notes will be retired and cancelled
and cannot be reissued. Accordingly, issuance of the new notes will not
result in any change in our indebtedness.
The approximate net proceeds from our sale of the old notes, after
deducting underwriting fees and expenses of the offering, were $341.0
million. We used the net proceeds to repay $197.0 million of term loans
outstanding under our senior credit facility, to repay all outstanding
amounts under our revolving credit facility and to repay approximately $22.0
million of other senior debt. The remaining proceeds will be used to fund
working capital needs and provide the liquidity needed for the repayment of
our convertible debt due in November 2002.
16
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The selected consolidated historical financial information for the
years ended December 31, 1999 through 2001 are derived from our consolidated
financial statements and notes, which have been audited by Ernst & Young
LLP. The previously audited financial statements for the years ended
December 31, 1997 and 1998 have been restated to reflect our discontinued
operations. This information for 1997 and 1998 has been prepared by
management, and these adjustments have not been reviewed by our current or
prior auditors. The following summary information for the three months
ended March 31, 2002 and 2001 is derived from our interim unaudited
consolidated financial statements.
Since the information presented below is only a summary and does
not provide all of the information contained in our financial statements,
including the related notes, you should read this information in conjunction
with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and the consolidated financial statements and
accompanying notes included elsewhere in this prospectus.
THREE MONTHS ENDED
------------------
YEAR ENDED DECEMBER 31, MARCH 31,
----------------------- ---------
1997 1998 1999 2000 2001 2001 2002
---- ---- ---- ---- ---- ---- ----
STATEMENT OF OPERATIONS:
Net sales..................................... $1,086,401 $1,337,006 $1,533,840 $1,823,583 $1,653,471 $432,976 $391,729
Cost of sales................................. 847,393 1,054,072 1,182,893 1,438,435 1,324,091 345,142 317,695
---------- ---------- ---------- ---------- ---------- -------- --------
Gross profit............................... 239,008 282,934 350,947 385,148 329,380 87,834 74,034
Selling, general and administrative
expenses..................................... 153,712 175,603 212,130 261,465 250,774 66,150 59,139
Restructuring, asset impairments and
other charges................................ -- 32,123 1,807 6,160 44,790 -- 13,647
---------- ---------- ---------- ---------- ---------- -------- --------
Operating income........................... 85,296 75,208 137,010 117,523 33,816 21,684 1,248
---------- ---------- ---------- ---------- ---------- -------- --------
Interest expense.............................. 29,930 31,132 40,208 62,127 52,751 14,751 12,008
Other expense (income), net................... (2,088) (995) (1,228) 974 1,790 526 254
---------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) before income taxes.......... 57,454 45,071 98,030 54,422 (20,725) 6,407 (11,014)
Provision (benefit) for income taxes.......... 22,663 21,679 39,428 20,213 (7,684) 2,220 (2,749)
---------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) from continuing
operations................................... 34,791 23,392 58,602 34,209 (13,041) 4,187 (8,265)
Income (loss) from discontinued operations,
net of income tax expense (benefit).......... 185 2,449 5,880 (8,038) (123,176) (564) (8,580)
---------- ---------- ---------- ---------- ---------- -------- --------
Income (loss) before extraordinary gain....... 34,976 25,841 64,482 26,171 (136,217) 3,623 (16,845)
Extraordinary gain (loss), net............. 6,100 4,132 -- 1,447 -- -- (4,763)
---------- ---------- ---------- ---------- ---------- -------- --------
Net income (loss)............................. $ 28,876 $ 21,709 $ 64,482 $ 27,618 $ (136,217) $ 3,623 $(21,608)
========== ========== ========== ========== ========== ======== ========
OTHER FINANCIAL DATA:
Ratio of earnings to fixed charges(1)......... 2.55x 2.09x 2.69x 1.56x N/A N/A
DECEMBER 31,
---------------------------------------------------------------- MARCH 31,
1997 1998 1999 2000 2001 2002
-------- ---------- ---------- ---------- ---------- -----------
BALANCE SHEET DATA:
Working capital................................... $ 75,064 $ 153,099 $ 91,591 $ 513,346 $ 133,656 $ 214,069
Property, plant and equipment net................. 262,797 359,193 413,984 431,025 375,415 361,555
Intangible assets net............................. 153,927 250,070 315,827 389,148 347,061 348,010
Total assets...................................... 665,974 1,099,453 1,294,412 1,652,957 1,449,124 1,526,445
Total debt........................................ 340,890 583,657 663,349 919,793 852,999 969,253
Shareholders' equity.............................. 171,820 299,375 375,310 385,853 241,877 219,076
Book value per share.............................. 3.99 6.13 7.63 8.13 5.01 4.53
--------
(1) For purposes of calculating the ratio of earnings to fixed charges, (i)
earnings consist of income (loss) from continuing operations before
fixed charges and income taxes, and (ii) fixed charges consist of
interest expense on all indebtedness (including amounts allocated to
discontinued operations), including the amount of amortization of
deferred financing costs and capitalized interest in 2001 and 2000. For
the three months ended March 31, 2002 and the year ended December 31,
2001, the earnings, as defined above, were less than fixed charges, as
defined above, by $11.0 million and $21.0 million, respectively.
17
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
The following unaudited pro forma condensed consolidated financial
data include an unaudited pro forma condensed consolidated statement of
operations for the year ended December 31, 2001 and the three months ended
March 31, 2002. The pro forma statements are derived from our audited
consolidated financial statements for the year ended December 31, 2001 and
our unaudited consolidated financial statements for the three months ended
March 31, 2002, which are included elsewhere in this prospectus. The
unaudited pro forma condensed consolidated financial data have been prepared
for illustrative purposes only and do not purport to represent what our
financial condition or results of operations would actually have been had
the transactions described below in fact occurred as of the dates specified.
In addition, the unaudited pro forma condensed consolidated financial data
do not purport to project our results of operations as of any date or for
any future period.
The unaudited pro forma condensed consolidated statement of
operations includes the effects of the issuance of the new notes and other
adjustments related to the issuance of the new notes. The unaudited pro
forma condensed consolidated financial data should be read in conjunction
with our audited financial statements as of December 31, 2001 and the year
then ended and our unaudited consolidated financial statements as of March
31, 2002 and the quarter then ended and "Management's Discussion and
Analysis of Financial Condition and Results of Operations" included
elsewhere in this prospectus.
18
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND THE YEAR ENDED DECEMBER 31, 2001
(in thousands)
(Unaudited)
YEAR ENDED DECEMBER 31, 2001
----------------------------
PRO FORMA
OFFERING
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
Net sales............................. $ 1,653,471 $ $ 1,653,471
Cost of sales......................... 1,324,091 1,324,091
----------- ---------- ------------
Gross profit....................... 329,380 329,380
Selling, general and administrative
expenses........................... 250,774 250,774
Restructuring, asset impairments and
other charges...................... 44,790
----------- ---------- ------------
Operating income...................... 33,816 33,816
Interest expense (income)............. 52,751 33,688 (a) 67,333
(19,015)(a)
(1,299)(b)
904 (c)
Other expenses........................ 1,790 1,790
----------- ---------- ------------
Loss from continuing operations
before income taxes................ (20,725) (14,278) (35,307)
Provision (benefit) for income taxes.. (7,684) (5,497)(d) (13,181)
----------- ---------- ------------
Loss from continuing operations....... $ (13,041) $ (8,781) $ (21,822)
=========== ========== ============
THREE MONTHS ENDED MARCH 31, 2002
---------------------------------
PRO FORMA
OFFERING
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
Net sales............................ $ 391,729 $ $ 391,729
Cost of sales........................ 317,695 317,695
----------- ---------- ------------
Gross profit...................... 74,034 74,034
Selling, general and administrative
expenses.......................... 59,139 59,139
Restructuring, asset impairments and
other charges..................... 13,647 13,647
----------- ---------- ------------
Operating income..................... 1,248 1,248
Interest expense (income)............ 12,008 8,422 (a) 16,512
(3,927)(a)
(217)(b)
226 (c)
Other expenses....................... 254 254
----------- ---------- ------------
Loss from continuing operations
before income taxes............... (11,014) (4,504) (15,518)
Benefit for income taxes............. (2,749) (1,734)(d) (4,483)
----------- ---------- ------------
Net loss from continuing operations.. $ (8,265) $ (2,770) $ (11,035)
=========== ========== ============
19
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
(Amounts in thousands)
(a) Adjustment to record interest on the new notes, less interest incurred
on the portions of the Tranche A and B term loans and on other senior
debt repaid by the new notes and the reduction of interest expense as
a result of assumed decrease in balances outstanding under the
revolving credit facility.
December 31, March 31,
2001 2002
---- ----
Interest on new notes......................... $ 33,688 $ 8,422
Less:
Interest on Tranche A term loan repaid....... (7,114) (1,393)
Interest on Tranche B term loan repaid....... (7,242) (1,429)
Interest on other senior debt repaid......... (937) (158)
Interest on revolving credit facility........ (3,722) (946)
-------- ---------
(19,015) (3,927)
-------- ---------
$ 14,673 $ (4,495)
======== =========
(b) Adjustment to remove amortization of deferred financing fees related
to the senior credit facility, which were written off as a result of
the sale of the new notes, net of additional amortization on fees
incurred to amend the senior credit facility. The pro forma adjustment
does not include the impact on results of the write-off of these fees
since the write-off is nonrecurring.
(c) Adjustment to record amortization of deferred financing fees related to
the new notes.
(d) Adjustment to record the taxes on the above adjustments at the
statutory rate of 38.5%.
Ratio of Earnings to Fixed Charges--For purposes of calculating the pro forma
ratio of earnings to fixed charges, (i) earnings consist of income (loss) from
continuing operations before fixed charges and income taxes, and (ii) fixed
charges consist of interest expense on all indebtedness (including amounts
allocated to discontinued operations), including the amount of amortization
of deferred financing costs and capitalized interest. For the pro forma three
months ended March 31, 2002 and the pro forma year ended December 31, 2001,
the earnings, as defined above, were less than fixed charges, as defined above,
by $15.5 million and $35.6 million, respectively.
20
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
CORPORATE OVERVIEW
We are one of the largest printers in North America competing
primarily in the commercial printing and envelope market segments. We
believe we are the world's largest manufacturer of envelopes, the leading
printer of envelopes in the United States and Canada, the premier high
impact color printer in the United States, and a leading general commercial
printer in several major U.S. markets. We operate 73 facilities throughout
North America in our commercial printing and envelope businesses. The
combination of our broad printing facility network and our sales force,
which is among the largest in the industry, has enabled us to build our
primary customer base to over 20,000 customers.
In May 2001, we completed a comprehensive review of our operations
and adopted a new strategy that focuses on our two primary businesses--
commercial printing and envelopes. In support of this strategy, we announced
our intention to sell of our label and printed office products businesses
and certain other non-strategic assets. In February 2002, we sold Curtis
1000 Inc., a printed office products company, for approximately $40 million.
In addition, we sold our label segment for approximately $75 million in May
2002. We intend to use the net proceeds from the divestitures to reduce our
senior secured debt. In connection with our new strategic plan, we also
announced plans to consolidate three of our commercial printing plants into
one facility, to close 11 of our envelope plants and to redeploy the
equipment and assets at other facilities. We have completed the plant
consolidations in commercial printing and seven of the closures in envelope,
and plan to complete the remaining consolidations by the end of 2002. Our
new strategy includes the launch of several initiatives to significantly
improve operations and marketing effectiveness. Both the envelope and
commercial printing businesses have programs in place to institute best
practices, install pricing disciplines and align equipment and services to
better serve our customers and markets. We believe these initiatives will
significantly improve the performance of our businesses.
Paper is our most significant raw material. We purchased
approximately 437,000 tons of paper in 2001 for our envelope and commercial
printing businesses. Prices of uncoated papers, which are the principal
grades of paper used to manufacture envelopes, decreased 10% in 2001 after
an increase of approximately 5% at the end of 1999. Prices of coated papers,
which are used principally in commercial printing, increased approximately
3% in 2000 but decreased approximately 8% in 2001. Changes in paper pricing
generally do not affect the operating results of our commercial printing
business because we can pass on paper price increases to our customers.
Paper pricing does, however, impact the operating margins of our envelope
business. When paper prices are rising, operating margins on our envelope
products tend to be lower because we generally are not able to increase our
prices as quickly as paper prices increase. Thus, when uncoated paper prices
increased at the end of 1999, operating margins of the envelope business
were negatively impacted in 2000. We expect uncoated and coated paper
pricing to be stable in 2002.
Our significant growth has been primarily due to our acquisition
strategy. However, we curtailed our acquisitions in 2001 in order to
concentrate on implementing our strategic plan. In 2000, we acquired
American Business Products, Inc. and four smaller companies. In 1999, we
acquired eight companies. The acquisitions completed in 2000 and 1999 were
accounted for as purchase transactions. Recording acquisitions in this
manner impacts comparability of our financial statements because the results
of each of the acquired companies are included in the consolidated results
from the dates acquired. The impacts of our acquisitions are included in the
following discussions of our results.
CONSOLIDATED RESULTS OF OPERATIONS
The financial statements for all periods presented have been restated
as required by generally accepted accounting principles to report the results
of our label and printed office products businesses
21
as discontinued operations. The summary financial data set forth in the
tables that follow present reported amounts as well as comparable financial
data for New Mail-Well. When we refer to "New Mail-Well," we are referring
to results of the operations that will constitute Mail-Well subsequent to
the planned divestitures of the operations reported as discontinued
operations and assets held for sale and that exclude restructuring, asset
impairments and other charges reported in the consolidated statements of
operations for the years ended December 31, 2001, 2000 and 1999, and for the
three-month periods ended March 31, 2002 and 2001.
The economic downturn in 2001 adversely affected the sales and
margins of both of our primary businesses, especially the portion of our
commercial printing business related to print advertising. The economy
continues to adversely affect our business in 2002. The reduced sales and
margins have resulted in corresponding decreases in operating income and net
income mitigated in part by reductions in operating expenses and interest
expense.
SALES
Comparison of First Quarter 2002 and 2001
QUARTER ENDED MARCH 31 % CHANGE
---------------------- --------
2002 2001 2001
---- ---- ----
(DOLLARS IN THOUSANDS)
Reported................... $391,729 $432,976 (9.5)%
New Mail-Well*............. $364,836 $410,889 (11.2)%
--------
* Excludes sales of certain operations of our envelope and commercial
printing businesses held for sale. New Mail-Well's sales include sales
of $4 million and $7 million in 2002 and 2001, respectively, to Curtis
1000 Inc. as well as other operations being divested, which sales are
anticipated to continue subsequent to the disposition of the operations.
New Mail-Well's sales in the first quarter of 2002 were $364.8
million, or 11.2% below sales during the first quarter of 2001. Despite
reported improvements in the general economy, we have yet to see
improvements in the key markets we serve. Demand for commercial printing
continues to be weak, and sales of envelopes into the resale and direct mail
markets are below levels of a year ago.
Comparison of 2001, 2000 and 1999
YEAR ENDED DECEMBER 31 % CHANGE
---------------------------------------- -------------------
2001 2000 1999 2001 2000
---------- ---------- ---------- ---- ----
(DOLLARS IN THOUSANDS)
Reported................... $1,653,471 $1,823,583 $1,533,840 (9)% 19%
New Mail-Well*............. $1,563,749 $1,719,393 $1,436,068 (9)% 20%
--------
* Excludes sales of certain operations of our envelope and commercial
printing businesses held for sale. New Mail-Well's sales include sales
of $23 million and $16 million in 2001 and 2000, respectively,
to Curtis 1000 Inc. as well as other operations being divested,
which sales are anticipated to continue subsequent to the disposition
of the operations.
New Mail-Well's sales were down $155.6 million, or 9%, in 2001.
Excluding the impact of acquisitions completed during 2000, the sales
decline was 11%. The slowdown in the economy during 2001 significantly
impacted sales. Reductions by our customers in spending on printed
advertising material and direct mail promotions impacted sales of commercial
printing and envelopes. Problems in the technology, telecommunications and
travel industries also adversely affected our business.
New Mail-Well's sales of $1.7 billion in 2000 were $283.3 million
higher than sales in 1999. Sales contributed by acquisitions completed in
2000 and 1999 accounted for $159 million of this increase. Internal growth
in both our commercial printing and envelope businesses accounted for the
remainder.
22
Reported sales in 2001 and 2000 changed from the prior year in the
same proportions and were impacted by the same factors as the sales of New
Mail-Well.
RESTRUCTURING, ASSET IMPAIRMENTS AND OTHER CHARGES
2002. As announced in 2001, we are consolidating certain operations
to eliminate excess internal capacity in order to reduce costs and improve
our long-term competitive position. In addition, we are significantly
reducing the size of certain of our facilities in response to current market
conditions. The restructuring charge related to these plans totaled $11.7
million in first quarter of 2002. The following table and discussion present
the details of this restructuring charge, as well as other related charges
recorded during the quarter:
COMMERCIAL
ENVELOPE PRINTING CORPORATE TOTAL
-------- ---------- --------- -------
(IN THOUSANDS)
Employee separation and related expenses.......... $ -- $ 233 $ -- $ 233
Other exit costs.................................. 3,498 -- -- 3,498
Asset impairment charges.......................... 4,895 -- -- 4,895
Implementation expenses........................... 3,040 -- -- 3,040
------- ------ ---- -------
Total restructuring costs.................... 11,433 233 -- 11,666
Other charges..................................... 580 774 627 1,981
------- ------ ---- -------
Total restructure and other charges.......... $12,013 $1,007 $627 $13,647
======= ====== ==== =======
In addition to the three envelope manufacturing facilities
consolidated in 2001, our envelope business consolidated four facilities in
the first quarter of 2002 and will consolidate four additional operations
during the remainder of 2002. When this consolidation plan is completed we
will have closed 11 envelope plants and substantially reduced excess
internal capacity and improved utilization of equipment and resources at the
remaining 27 domestic plants and 12 plants in Canada. In 2001, we accrued
the separation and related employee costs covering the 923 employees
expected to be terminated over the course of this project. As of March 31,
2002, 553 employees had been separated. Other exit costs of $3.5 million are
primarily training costs and other incremental expenses incurred in
connection with those employees added at the plants that are absorbing the
sales of the plants being closed. Incremental external implementation
expenses were $3.0 million. Equipment taken out of service during the first
quarter of 2002 as a result of our consolidation program was written down
$4.9 million to its fair market value.
Our commercial printing business completed the consolidation of its
operations in the Philadelphia, Pennsylvania area in 2001. We are also
reducing fixed costs at certain of our commercial printing facilities in
response to changes in market conditions. As a result, we reduced headcount
in the first quarter of 2002 by 143 employees and incurred severance costs
of $233,000.
In 2001, we initiated several programs to significantly improve
operations and marketing effectiveness. Both the envelope and commercial
printing businesses have programs in place to institute best practices,
install pricing disciplines and align equipment and services to better serve
our customers and markets. We believe these initiatives will significantly
improve the performance of our businesses; accordingly, we have expedited
the implementation of these programs by investing in outside assistance. The
external incremental expenses incurred on these initiatives totaled $2.0
million during the first quarter of 2002 and are reported in other charges.
We expect to complete our restructuring and other strategic
initiatives by the end of 2002 and anticipate further charges of
approximately $35.0 million. Implementation expenses are expected to total
$4 million and training and other exit costs are estimated to be $15 million.
In addition, $16 million of equipment, which will not be sold or redeployed,
will be written-off.
23
2001. The restructuring charges related to our new strategic plan
totaled $37.4 million in 2001. The following table and discussion present
the details of these restructuring charges, as well as other charges
recorded in 2001:
COMMERCIAL
ENVELOPE PRINTING CORPORATE TOTAL
-------- -------- --------- -----
(IN THOUSANDS)
Employee separation and related expenses..... $ 9,042 $ 385 $ -- $ 9,427
Lease termination costs...................... 1,368 346 -- 1,714
Other exit costs............................. 13,174 1,632 -- 14,806
Asset impairment charges..................... 8,178 601 -- 8,779
Strategic assessment costs................... -- -- 2,677 2,677
------- ------ ------ -------
Total restructuring costs................. 31,762 2,964 2,677 37,403
Other charges................................ 1,360 1,482 1,600 4,442
------- ------ ------ -------
Total restructuring, asset impairments and
other charges............................. $33,122 $4,446 $4,277 $41,845
======= ====== ====== =======
Our envelope business has implemented a plan to consolidate nine
(the decision to close two additional plants was made in the first quarter
2002) of our manufacturing facilities over an 18-month period. This plan
will substantially reduce excess internal capacity and improve utilization
of equipment and resources at the remaining 41 plants. The separation and
related employee costs cover 923 employees to be terminated over the course
of this project, of which 359 had been separated as of December 31, 2001.
Other exit costs include training costs for those employees at the plants
that are absorbing the sales of the plants being closed and external
assistance in implementing the plant closures. As of December 31, 2001, we
had completed the closure of our facilities in Omaha, Nebraska; Allentown,
Pennsylvania; and Santa Fe Springs, California. The $8.2 million asset
impairment charge relates to the write down of equipment taken out of
service as a result of these plant closures.
Our commercial printing business consolidated three printing
operations in the Philadelphia, Pennsylvania area into one. This
consolidation was done to improve the cost effectiveness of these operations
and their competitive position in the Philadelphia market. The costs
associated with this consolidation included severance and related expenses
covering the termination of 25 employees, all of whom have been terminated.
Other exit costs include expenses incurred to move and reinstall equipment.
Equipment taken out of service was written down $0.6 million to its fair
market value.
In developing our new strategic plan, we engaged outside advisors
to research and evaluate our markets, survey our customers and assess
existing strategies. In addition, we engaged financial advisors to evaluate
options for improving our capital structure. The cost of these advisors was
$2.7 million.
The external incremental cost incurred for the initiatives to
improve operations and marketing effectiveness described above totaled $2.1
million in 2001 and is reported as other charges.
Other charges include the write-off of a $1.6 million investment in
a company developing a service to enable online management of the creative
process of a printing job and a $0.7 million write-off of the cost incurred
for a human resource information system that will not be implemented.
24
2000. We began our comprehensive review of our operations in 2000
and identified certain actions that could be taken at that time. The
following table and discussion present the details of restructuring charges,
as well as other charges recorded in 2000:
COMMERCIAL
ENVELOPE PRINTING TOTAL
-------- -------- -----
(IN THOUSANDS)
Employee separation and related employee costs.................... $ 86 $ 188 $ 274
Lease termination costs........................................... -- 428 428
Asset impairment charges.......................................... -- 749 749
Other exit costs.................................................. -- 45 45
------ ------ ------
Total restructuring costs...................................... 86 1,410 1,496
Other asset impairments........................................... 1,872 2,036 3,908
------ ------ ------
Total restructuring, asset impairments and other charges...... $1,958 $3,446 $5,404
====== ====== ======
Our envelope business closed a resale operation in Vancouver,
Washington. The separation and related employee costs covered the
termination of 19 employees, all of whom have been terminated.
Our commercial printing business consolidated two operations in
St. Louis into an existing facility and closed our bindery operation in Mexico.
We reduced our total workforce by 165 employees by taking these actions.
We also incurred asset impairment charges in 2000 totaling $3.9
million that were unrelated to the restructuring. These assets were taken
out of service and could not be redeployed or sold, and therefore were
written off.
We completed a restructuring program initiated in 1998 during 2000.
Changes related to that program, which were recorded in 2000, totaled $0.8
million.
IMPAIRMENT OF ASSETS HELD FOR SALE
As part of our new strategy, the sale of certain assets that are
not strategic to our envelope or commercial printing businesses was approved
in May 2001. We incurred a charge of $2.9 million in 2001 to write down
certain of these assets to fair value.
OPERATING INCOME
Comparison of First Quarter 2002 and 2001
QUARTER ENDED MARCH 31 % CHANGE
---------------------- --------
2002 2001
---- ----
(DOLLARS IN THOUSANDS)
Reported
Operating income.................. $ 1,248 $21,684 (94)%
Operating margin.................. 0.3% 5.0%
New Mail-Well*
Operating income.................. $12,607 $19,230 (34)%
Operating margin.................. 3.5% 4.7%
--------
* Excludes income from continuing operations of certain operations of our
envelope and commercial printing businesses held for sale, and
restructuring and other charges of $13.6 million in 2002.
New Mail-Well's operating income declined 34% in the first quarter
of 2002 to $12.6 million. The reduction in operating income was due
primarily to the contribution lost on the decline in sales, estimated to be
approximately $12.5 million. Increased competition resulting from the lower
demand reduced contribution margins by more than 6% and total contribution
by approximately another
25
$8.7 million. Offsetting these declines were reductions in fixed costs,
which totaled approximately $12 million during the quarter.
The $13.6 million restructuring and other charges discussed above
are the primary difference between reported operating income and the
operating income of New Mail-Well.
Comparison of 2001, 2000 and 1999
YEAR ENDED DECEMBER 31 % CHANGE
---------------------- -------------------
2001 2000 1999 2001 2000
------- -------- -------- ---- ----
(DOLLARS IN THOUSANDS)
Reported
Operating income................... $33,816 $117,523 $137,010 (71)% (14)%
Operating margin................... 2% 6% 9%
New Mail-Well*
Operating income................... $65,848 $110,497 $127,233 (40)% (13)%
Operating margin................... 4% 6% 9%
--------
* Excludes operating income in 2001, 2000 and 1999 of certain operations
of our envelope and commercial printing businesses held for sale, the
$2.9 million impairment of assets held for sale in 2001 and
restructuring, asset impairments and other charges of $41.8 million,
$6.2 million and $1.8 million in 2001, 2000 and 1999, respectively.
New Mail-Well's operating income declined 40% in 2001 to $65.8
million. Excluding earnings contributed by acquisitions completed in 2000,
the decline was 42%. The reduction in operating income was primarily due to
the estimated $53 million of contribution margin lost on the decline in
sales. Increased competition resulting from the lower demand due to the
slowdown in the economy impacted contribution margins by approximately $6
million. Offsetting these declines were reductions in fixed manufacturing
costs, primarily production support, and administrative expenses, which
totaled approximately $13 million during 2001.
New Mail-Well's operating income in 2000 declined 13%. Excluding
the $8.2 million attributable to acquisitions completed in 2000 and 1999,
the decline was 19%. This decline was the result of lower margins in our
envelope business due to higher paper prices and lower profits in our
commercial printing business. The lower earnings of our commercial printing
business were due to a change in the mix of the products sold and to poor
operating performance at four manufacturing facilities, including asset
write-offs and accrual adjustments, totaling $6.1 million at two of these
plants. Corporate expenses were also higher primarily due to special
retirement expenses of $2.6 million recorded in 2000.
INTEREST EXPENSE
Comparison of First Quarter 2002 and 2001
QUARTER ENDED MARCH 31 % CHANGE
---------------------- --------
2002 2001
---- ----
(DOLLARS IN THOUSANDS)
Total interest expense............................ $18,482 $21,533 (14)%
Less: Allocation to discontinued operations...... (6,474) (6,782)
------- -------
Reported interest expense......................... 12,008 14,751 (19)%
Less: Allocation to assets held for sale......... (968) (1,621)
------- -------
New Mail-Well..................................... $11,040 $13,130 (16)%
======= =======
During the quarter ended March 31, 2002, interest before
allocations to discontinued operations and assets held for sale declined 14%
due to lower average debt balances and lower average interest
26
rates. Our weighted average interest rate will increase as a result of the
issuance of $350 million of 9 5/8% senior notes on March 13, 2002.
Reported interest excludes an allocation of total interest expense
to discontinued operations based on the net assets of those operations.
Interest expense applicable to New Mail-Well excludes interest allocated to
certain operations of the envelope and commercial printing businesses that
are held for sale based on the net proceeds anticipated from the sales of
these assets.
Comparison of 2001, 2000 and 1999
YEAR ENDED DECEMBER 31 % CHANGE
---------------------- ------------------
2001 2000 1999 2001 2000
-------- -------- -------- ---- ----
(DOLLARS IN THOUSANDS)
Total interest expense.................... $ 78,891 $ 92,138 $ 55,247 (14)% 67%
Less: Allocated to discontinued
operations............................. (26,140) (30,011) (15,039)
-------- -------- --------
Reported interest expense................. 52,751 62,127 40,208 (15)% 55%
Less: Allocated to assets held for sale... (5,255) (6,013) (4,796)
-------- -------- --------
New Mail-Well............................. $ 47,496 $ 56,114 $ 35,412 (15)% 58%
======== ======== ========
In 2001, total interest expense declined 14% due to lower average
debt balances and lower average interest rates. Interest rates and expense
are expected to increase in 2002 due to anticipated debt refinancing related
to the repayment of our 5% convertible notes on or before their maturity at
November 1, 2002.
In February 2000, we entered into a new senior secured credit
facility to finance the acquisition of American Business Products, Inc. The
increase in interest in 2000 was due to higher total borrowings and higher
average interest rates.
INCOME TAXES
Comparison of First Quarter 2002 and 2001
QUARTER ENDED MARCH 31
----------------------
2002 2001
---- ----
(DOLLARS IN THOUSANDS)
Reported
Provision (benefit) for income taxes................. $(2,749) $2,220
Effective tax rate................................... 25.0% 34.6%
New Mail-Well
Provision for income taxes........................... $ 524 $2,500
Effective tax rate................................... 41.0% 45.5%
New Mail-Well's effective tax rate for 2002 decreased by 4.5
percentage points due to higher estimated pre-tax income in 2002, which
decreased the impact of nondeductible permanent differences on the effective
rate.
The reported effective tax rate for 2002 reflects the tax impact of
the restructuring and other charges.
27
Comparison of 2001, 2000 and 1999
YEAR ENDED DECEMBER 31
----------------------
2001 2000 1999
---- ---- ----
(DOLLARS IN THOUSANDS)
Reported
Provision (benefit) for income taxes........................... $(7,684) $20,213 $39,428
Effective tax rate............................................. 37.1% 37.1% 40.2%
New Mail-Well
Provision for income taxes..................................... $ 7,146 $19,242 $37,428
Effective tax rate............................................. 43.4% 36.1% 40.2%
New Mail-Well's effective tax rate for 2001 increased by 7.3
percentage points due to lower pre-tax income, which increased the impact of
nondeductible goodwill amortization on the effective rate.
The 4.1 percentage point decline in New Mail-Well's effective tax
rate for 2000 was due in part to a reduction in the statutory rates in
Canada. In addition, net impact of permanent differences reduced taxable
income in 2000.
The reported effective tax rate for 2001 reflects the tax impact of
the restructuring charge.
INCOME (LOSS) FROM CONTINUING OPERATIONS AND INCOME PER SHARE--ASSUMING
DILUTION
Comparison of First Quarter 2002 and 2001
QUARTER ENDED MARCH 31 % CHANGE
---------------------- --------
2002 2001
---- ----
(DOLLARS IN THOUSANDS)
Income (loss) from continuing operations
Reported......................................... $(8,265) $4,187 (297)%
New Mail-Well*................................... $ 755 $2,779 (73)%
Income (loss) from continuing operations per share
Reported......................................... $ (0.17) $ 0.09 (289)%
New Mail-Well*................................... $ 0.02 $ 0.06 (67)%
--------
* Excludes income from continuing operations of certain operations of our
envelope and commercial printing businesses held for sale, and
restructuring and other charges of $13.6 million in 2002.
New Mail-Well's income from continuing operations per share
declined 67% in the first quarter of 2002, reflecting a similar decrease in
income from continuing operations. The earnings decline was due to lower
sales and lower margins partially offset by lower fixed costs, lower
amortization expense and lower interest expense. Lower amortization expense
was due to the implementation of SFAS 142 whereby goodwill is no longer
required to be amortized.
Our reported loss from continuing operations of $8.3 million, or
$.17 per share, includes the restructuring and other charges of $13.6
million.
28
Comparison of 2001, 2000 and 1999
YEAR ENDED DECEMBER 31 % CHANGE
---------------------------------- --------------------
2001 2000 1999 2001 2000
-------- ------- ------- ------ -----
(DOLLARS IN THOUSANDS)
Income (loss) from continuing operations
Reported................................... $(13,041) $34,209 $58,602 (138)% (42)%
New Mail-Well*............................. $ 9,319 $34,060 $55,622 (73)% (39)%
Income (loss) from continuing operations
per share--assuming dilution
Reported................................... $ (0.27) $ 0.69 $ 1.10 (139)% (38)%
New Mail-Well*............................. $ 0.19 $ 0.69 $ 1.05 (72)% (34)%
--------
* Excludes income from continuing operations in 2001, 2000 and 1999 of
certain operations of our envelope and commercial printing businesses
held for sale, the $2.9 million impairment of assets held for sale in
2001 and restructuring, asset impairments and other charges of $41.8
million, $6.2 million and $1.8 million in 2001, 2000 and 1999,
respectively.
New Mail-Well's income (loss) from continuing operations per share
declined 72% in 2001, reflecting a similar decrease in income from
continuing operations. The earnings decline was due to lower sales and lower
margins partially offset by lower fixed costs and lower interest expense. In
addition, our reported loss from continuing operations of $13 million, or
$0.27 per share, was also negatively impacted by the restructuring, asset
impairments and other charges of $41.8 million and the impairment charge
recorded on assets held for sale of $2.9 million which are excluded from
income from continuing operations of New Mail-Well.
In 2000, income from continuing operations for New Mail-Well
declined 39% with a corresponding 34% decrease in earnings per share. This
decline in earnings reflected lower operating margins, higher fixed costs,
higher amortization expense and higher interest expense than in 1999.
LOSS ON DISCONTINUED OPERATIONS
In June 2001, we announced our intention to sell our label and
printed office products businesses. Generally accepted accounting principles
require that our financial statements be restated to exclude the sales and
expenses of these business and that their results be reported as
discontinued operations.
During the quarter ended March 31, 2002, we recorded a loss of $8.6
million from discontinued operations, which included a loss from operations
of $1.0 million after the allocation of interest and taxes and $7.6 million
of additional loss estimated on the disposition of our label and printed
office products businesses. During the quarter, we competed the sale of
Curtis 1000 for approximately $40.0 million, which includes the assumption
of debt. Curtis 1000 was reported as part of our printed office products
business.
Our estimates of the sales proceeds expected from the divestitures
are based on data provided by our financial advisors and indications of
value received from prospective buyers. The loss is adjusted once the actual
sales proceeds are known or management has information indicating that the
actual sales proceeds are likely to be different than the estimates. We do
not expect the actual sales proceeds to be significantly different from
those assumed, and we expect to complete these dispositions during the
second quarter or early in the third quarter of 2002.
Sales of our label and printed office products businesses during
the first quarter of 2002 totaled $127.8 million. The operating income
earned by these businesses was $6.7 million.
29
The loss reported from discontinued operations for the year ended
December 31, 2001 was $123.2 million, or $2.59 per share, after income tax
benefits from the loss and included the following:
o A write-down to net realizable value based on estimated sales
proceeds; and
o The actual and forecasted results of these businesses from the
date of the announcement through the expected date of
disposal, including an allocation of interest expense.
Sales of our label and printed office products businesses in 2001
totaled $605.6 million. The operating income earned by these businesses in
2001 was $19.3 million.
EXTRAORDINARY ITEM
Results for the quarter ended March 31, 2002 include an
extraordinary charge of $4.8 million, net of tax, or $0.10 per share. We
wrote-off the pro rata portion of the deferred financing fees, $8.2 million,
incurred in connection with our bank credit facility which related to the
portion of the term debt repaid with the proceeds from the senior notes
issued in March 2002 and from the sale of Curtis 1000 in February 2002.
NET INCOME (LOSS) AND NET INCOME (LOSS) PER SHARE--ASSUMING DILUTION
Comparison of First Quarter 2002 and 2001
QUARTER ENDED MARCH 31 % CHANGE
---------------------- --------
2002 2001
---- ----
(DOLLARS IN THOUSANDS)
Net income (loss)
Reported....................................... $(21,608) $3,623 (696)%
New Mail-Well*................................. $ 755 $2,779 (73)%
Net income (loss) per share - assuming dilution
Reported....................................... $ (0.45) $ 0.08 (663)%
New Mail-Well*................................. $ 0.02 $ 0.06 (67)%
--------
* Excludes income from continuing operations of certain operations of our
envelope and commercial printing businesses held for sale, and
restructuring and other charges of $13.6 million in 2002.
30
Our reported net loss for the first quarter of 2002 was $21.6
million, or $0.45 per share. This loss was due to lower income from
continuing operations, the charges taken in connection with our
restructuring and other strategic initiatives, the loss on discontinued
operations and the extraordinary charge.
Comparison of 2001, 2000 and 1999
YEAR ENDED DECEMBER 31 % CHANGE
-------------------------------------- -------------------
2001 2000 1999 2001 2000
---- ---- ---- ---- ----
(DOLLARS IN THOUSANDS)
Net income (loss)
Reported..................................... $(136,217) $27,618 $64,482 (593)% (57)%
New Mail-Well*............................... $ 9,319 $34,060 $55,622 (73)% (39)%
Net income (loss) per share--assuming dilution
Reported..................................... $ (2.86) $ 0.56 $ 1.20 (611)% (53)%
New Mail-Well*............................... $ 0.19 $ 0.69 $ 1.05 (72)% (34)%
--------
* Excludes operating income in 2001, 2000 and 1999 of certain operations
of our envelope and commercial printing businesses held for sale, the
$2.9 million impairment of assets held for sale in 2001 and
restructuring, asset impairments and other charges of $41.8 million,
$6.2 million and $1.8 million in 2001, 2000 and 1999, respectively.
In 2001, the reported net loss was $136.2 million, or $2.86 per
share assuming dilution. This loss was due to lower operating results from
continuing operations, the restructuring, asset impairments and other
charges and the losses recognized on discontinued operations and assets held
for sale. Net income in 2000 included an extraordinary gain of $1.4 million.
Reported net income and net income per share in 2000 were down over 50% from
1999 because of lower operating results, higher amortization expense and
higher interest expense.
New Mail-Well's net income and net income per share are the same as
shown from New Mail-Well's continuing operations because New Mail-Well
excludes results of discontinued operations, the impairment on assets held
for sale and the restructuring, asset impairments and other charges.
BUSINESS SEGMENTS
ENVELOPE
The following tables present the reported sales and operating
income of our envelope business, as well as sales and operating income
excluding the results of operations that are held for sale ("New Envelope")
and restructuring and other charges.
Comparison of First Quarter 2002 and 2001
QUARTER ENDED MARCH 31 % CHANGE
---------------------- --------
2002 2001
---- ----
(DOLLARS IN THOUSANDS)
Net sales
Reported.................... $200,975 $221,616 (9)%
New Envelope*............... $185,099 $209,022 (11)%
Operating income
Reported.................... $ 7,738 $ 22,975 (66)%
New Envelope*............... $ 18,318 $ 21,022 (13)%
--------
* Excludes sales and operating income of certain operations of our
envelope business held for sale. New Envelope sales include sales of
$3 million and $7 million in 2002 and 2001, respectively, to Curtis
1000 Inc. as well as other operations being divested, which sales are
anticipated to continue subsequent to the disposition of the operations.
31
New Envelope's sales in the first quarter of 2002 were down 11.0%
from the first quarter of the prior year. We continue to experience lower
sales in the direct mail segment of our market. Sales to our direct mail
customers were down approximately $8.0 million in the quarter. Demand in the
resale segment of our market, which began to soften in the second half of
2001, continues to be weak. Sales to our merchant and office products
customers were down $8.5 million.
Operating income of New Envelope declined 13%. Reductions of $8.1
million in fixed costs were not sufficient to offset the contribution lost
due to lower sales and lower margins. Margins are down from the prior year
due to competitive pressures and lower sales of higher value added products.
Reported results of our envelope business are significantly lower
due to the $12.0 million of restructuring and other charges recorded during
the first quarter of 2002.
Comparison of 2001, 2000 and 1999
YEAR ENDED DECEMBER 31 % CHANGE
---------------------- -----------------
2001 2000 1999 2001 2000
-------- -------- -------- ---- ----
(DOLLARS IN THOUSANDS)
Net sales
Reported..................... $835,534 $861,803 $738,288 (3)% 17%
New Envelope*................ $781,463 $801,253 $679,257 (2)% 18%
Operating income
Reported..................... $ 54,168 $ 90,202 $ 90,996 (40)% (1)%
New Envelope*................ $ 79,286 $ 84,980 $ 86,344 (7)% (2)%
--------
* Excludes sales and operating income of certain operations of our
envelope business held for sale. New Envelope sales include sales
of $20 million and $15.5 million in 2001 and 2000, respectively, to
Curtis 1000 Inc. as well as other operations being divested, which
sales are anticipated to continue subsequent to the disposition of
the operations.
New Envelope's sales in 2001 were down 2% from the prior year.
Excluding the impact of acquisitions completed in 2000, sales were down
approximately $35.6 million, or approximately 4%. This decline was due
primarily to the general decline in the economy. Sales to direct mail
customers were lower in 2001 by approximately $12.2 million due to
reductions in spending on direct mail promotions. Sales of specialty
packaging were down approximately $12.6 million primarily due to reduced
demand from the U.S. Postal Service. We also experienced lower sales of
approximately $4.7 million in the resale segment of our market as customers
reduced inventories.
In 2000, approximately $78.2 million of New Envelope's sales
increase was due to the impact of companies acquired in 2000. Internal
growth accounts for the remaining increase of $43.8 million.
Operating income of New Envelope was down 7% in 2001 from the prior
year. Excluding the earnings of companies acquired in 2000 the decline was
9%. The decline in operating income in 2001 was due to lower sales and the
resulting decrease in gross profit of $11.2 million. In response to the
lower sales, we reduced fixed manufacturing costs in 2001 such that gross
profit margin was down only 50 basis points to 20.5%. Excluding the impact
of acquisitions, selling and administrative expenses were down $3.5 million
from 2000 reflecting lower sales commissions and reductions in
administrative overhead.
In 2000, New Envelope's operating income was also down from the
prior year. Excluding earnings of companies acquired in 2000 and 1999, the
decline in operating income was 10%. In 2000, selling prices remained
relatively constant with selling prices in 1999 despite higher paper costs
in 2000 compared to 1999. Lower margins reduced gross profits by $14.5
million. Excluding the impact of acquisitions, administrative expenses were
$1.8 million lower in 2000 than in 1999.
32
COMMERCIAL PRINTING
The following tables present the reported sales and operating
income of our commercial printing business, as well as sales and operating
income excluding the results of its operations that are held for sale
("New Commercial Printing") and restructuring and other charges.
Comparison of First Quarter 2002 to 2001
QUARTER ENDED MARCH 31 % CHANGE
---------------------- --------
2002 2001
---- ----
(DOLLARS IN THOUSANDS)
Net sales
Reported................................ $190,754 $211,360 (10)%
New Commercial Printing*................ $184,588 $203,587 (9)%
Operating income (loss)
Reported................................ $ (3,463) $ 6,361 (154)%
New Commercial Printing*................ $ (2,473) $ 5,585 (144)%
--------
* Excludes sales and operating income of certain operations of our
commercial printing business held for sale. New Commercial Printing sales
include sales of $1 million in 2002 to Curtis 1000 Inc. as well as other
operations being divested, which sales are anticipated to continue
subsequent to the disposition of the operations.
Sales of New Commercial Printing in the first quarter of 2002 were
down 9.0% from the prior year. While total revenues from our annual report
and car brochure business were lower than in the first quarter of 2001, they
were higher than the first quarter of 2000. Demand for general commercial
printing continues to decline. Approximately 50% of the first quarter sales
decline was low margin work, which we chose not to retain due to competitive
pricing pressures in the market.
The decline in operating income of New Commercial Printing in the
first quarter of 2002 is due the contribution lost on lower sales and lower
margins, which were down 270 basis points from the first quarter of 2001.
Fixed costs are $2.8 million lower than the first quarter of 2001.
Reported results of our Commercial Printing business were lower due
to the $1.0 million of restructuring and other charges recorded during the
first quarter of 2002.
Comparison of 2001, 2000 and 1999
YEAR ENDED DECEMBER 31 % CHANGE
---------------------------------- ------------------
2001 2000 1999 2001 2000
-------- -------- -------- ---- ----
(DOLLARS IN THOUSANDS)
Net sales
Reported............................... $817,937 $961,780 $795,552 (15)% 21%
New Commercial Printing*............... $782,286 $918,140 $756,811 (15)% 21%
Operating income
Reported............................... $ 14,763 $ 54,758 $ 65,108 (73)% (16)%
New Commercial Printing*............... $ 15,974 $ 52,648 $ 59,673 (70)% (12)%
--------
* Excludes sales and operating income of certain operations of our
commercial printing business held for sale. New Commercial Printing sales
include sales of $3 million and $0.5 million in 2001 and 2000, respectively,
to Curtis 1000 Inc. as well as other operations being divested, which sales
are anticipated to continue subsequent to the disposition of the operations.
The economic slowdown in 2001 had a significant impact on our
commercial printing business. Sales of New Commercial Printing were down 15%
from the prior year. Excluding the impact of acquisitions completed in 2000,
the sales decline was $147.3 million, or 16%. Customers have reduced
spending on advertising in reaction to the recession, which has directly
impacted our commercial
33
printing business. We estimate that approximately 50% of commercial printing
sales are related to advertising. Reductions in spending by our customers on
print advertising account for approximately 28% of the sales decline in 2001.
In addition, sales to our technology and telecommunications customers were
down approximately $30 million, or approximately 20% of the decline, in 2001.
The remaining sales decline was due to general reductions in demand and
increased competition.
New Commercial Printing's sales in 2000 were up 21%. Excluding the
impact of sales by companies acquired in 2000 and 1999, the increase was
13%. Sales of annual reports, automotive brochures, magazine inserts and
printed educational materials were strong in 2000 and responsible for much
of this growth.
The decline in operating income of New Commercial Printing in 2001
was primarily related to the significant sales decline in 2001. Contribution
margin lost due to lower sales was more than $40 million. This reduction was
offset by a reduction in administrative expenses, before considering
acquisitions, of $3.3 million.
In 2000, New Commercial Printing's operating income declined 12%.
Excluding the impact of acquisitions completed in 2000 and 1999, the decline
in operating income was 17%. Despite the increase in sales during 2000,
margins declined primarily due to significant operating problems at four of
our printing plants. The operating income at these four plants was $10.1
million lower in 2000 than in 1999, before considering charges of $6.1
million to write-off assets and adjust accruals at two of these plants. A
change in mix of business in 2000 also had a negative impact on results.
LIQUIDITY AND CAPITAL RESOURCES
In March 2002, we sold $350 million of 9 5/8% senior notes due
2012. We used the proceeds from this offering to repay $197.0 million of our
bank term debt and $22.0 million of other debt. The remaining proceeds will
be used to fund working capital needs and provide the liquidity needed for
the repayment of our convertible debt due in November 2002. In March 2002,
we applied $20.5 million of the proceeds received from the sale of Curtis
1000 to the repayment of our bank term debt. Also, in May 2002, we applied
$65.0 million of the net proceeds received from the sale of our label
segment to the repayment of our bank term debt.
Since December 31, 2001, we have reduced the bank borrowings under
our secured senior credit facility from $393.7 million to $168.8 million at
March 31, 2002. Our senior secured credit facility contains certain cash
flow financial covenants which we could violate if some or all of our
divestitures are successfully completed in the near future. Even if the
divestitures do not occur as planned, these covenants could be violated if
our operating results continue to be disappointing. Rather than seek a
waiver from these restrictive covenants, as we have done successfully in the
past, we have determined to pursue an asset-based lending arrangement of the
kind which does not typically have similar restrictions. We believe we will
be able to refinance our senior secured credit facility in such a manner
prior to any possible violation of the existing covenants.
Cash flow from continuing operations was $3.6 million in the first
quarter of 2002 compared to $58.1 million in the first quarter of 2001.
Capital expenditures totaled $8.0 million in the first quarter of 2002
compared to $4.9 million in the first quarter of 2001. In addition, we made
a $1.0 million contractual payment on a small acquisition that was
consummated in the first quarter of 2001 for $3.9 million.
Our debt, net of cash, was 71.4% to total capital at March 31,
2002, up from 70.2% at December 31, 2001.
34
The following table summarizes our cash obligations as of March 31,
2002:
PAYMENTS DUE BY YEAR
--------------------
2002 2003 AND 2004 2005 AND 2006 THEREAFTER TOTAL
---- ------------- ------------- ---------- -----
(IN THOUSANDS)
Long-term debt................... $310,372 $ 45,059 $ 95,951 $517,871 $ 969,253
Operating leases................. 33,844 56,913 42,545 32,066 165,368
-------- -------- -------- -------- ----------
Total cash obligations........... $344,216 $101,972 $138,496 $549,937 $1,134,621
======== ======== ======== ======== ==========
Long-term debt due during 2002 includes the retirement of our
convertible notes, other current debt and the portion of our bank borrowings
that will be paid from the proceeds from our planned divestitures pursuant
to the terms of our senior credit facility, net of amounts that would become
available as a result of such repayments under our revolving credit
facility.
Our convertible notes mature in November 2002. We have provided for
the mandatory retirement of these notes as a result of our bond offering in
March 2002 and the amendment obtained on our secured senior credit facility.
At March 31, 2002, we had outstanding letters of credit of
approximately $6.2 million related to performance and payment guarantees. In
addition, we have issued letters of credit of $2.4 million as credit
enhancements in conjunction with other debt. Based on our experience with
these arrangements, we do not believe that any obligations that may arise
will be significant.
We expect to be able to fund our operations, capital expenditures
and debt and other contractual commitments within the next year from the
proceeds from the sales of our planned divestitures, which we expect to
approximate $290 million (of which approximately $40 million has been
received from the sale of Curtis 1000 and approximately $75 million from
the sale of Label), internally generated cash flow and funds available
under our revolving credit facility. At March 31, 2002, we had $150 million
of unused credit available under our revolving credit facility.
We generated cash of $152.0 million from continuing operations in
2001 compared to $131.4 million in 2000 and $107.2 million in 1999. While
earnings declined in 2001 and 2000, noncash charges increased primarily due
to the increase in the noncash portion of the restructuring and asset
impairment charges recorded in 2001 and 2000. In addition, working capital,
which consists of current assets exclusive of cash and cash equivalents, net
assets of discontinued operations and net assets held for sale, less current
liabilities, exclusive of the current portion of long-term debt, was reduced
$88.5 million in 2001 to $135.2 million at December 31, 2001 compared to a
reduction of $35.0 million in 2000 and an increase of $4.3 million in 1999.
Capital expenditures, excluding acquisitions, were $26.8 million in
2001, $57.8 million in 2000 and $65.1 million in 1999. We anticipate capital
expenditures of approximately $42 million in 2002.
Consistent with our new strategy to reduce our leverage, free cash
flow in 2001 was used primarily to reduce debt. There were no significant
acquisitions in 2001 or during the quarter ended March 31, 2002. In 2000,
we obtained a new senior secured credit facility to fund the acquisition of
American Business Products, Inc. for $331.1 million in cash plus $7.5 million
of assumed debt. We sold the extrusion coating and laminating operation of
American Business Products in September 2000 for after-tax cash proceeds of
approximately $110.6 million. Other acquisitions in 2000 included three
commercial printing companies and an envelope company. The cash paid for these
four companies totaled $48.1 million. Debt was the principal source of funds
used in 1999 for the acquisitions of seven printing companies and one envelope
company for purchase prices totaling $130.9 million.
We repurchased 1,821,000 shares of common stock for an aggregate
purchase price of $10.0 million during 2000. We did not repurchase any
common stock in 2001 and have no plans to do so in 2002. In addition, we
repurchased $13.0 million of our outstanding convertible subordinated notes
in 2000. These transactions reduced the number of shares outstanding on a
fully diluted basis by 473,402 and 541,491, respectively. The impact on
diluted earnings per share was not material.
35
SEASONALITY AND ENVIRONMENT
Our commercial printing business experiences seasonal variations.
Our revenues from annual reports are generally concentrated from February
through April. Revenues associated with holiday catalogs and automobile
brochures tend to be concentrated from July through October, and calendars
from May to September. As a result of these seasonal variations, we are at
or near capacity in some facilities at certain times during these periods.
Several consumer direct market segments served by our envelope
business, such as photo finishing packaging and certain segments of the
direct mail market, experience seasonality, with a higher percentage of the
volume of products sold to these markets occurring during the fourth quarter
of the year. This seasonality is due to the increase in sales to the direct
mail market due to holiday purchases. Seasonality is offset by the diversity
of our other products and markets, which are not materially affected by
seasonal conditions.
Environmental matters have not had a material financial impact on
our historical operations and are not expected to have a material impact in
the future.
CRITICAL ACCOUNTING POLICIES AND JUDGMENTS
In preparing our financial statements, we are required to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. We evaluate our estimates and
judgments on an ongoing basis, including those related to bad debts,
inventory valuations, property, plant and equipment, intangible assets,
income taxes, restructuring costs, and contingencies and litigation. We base
our estimates and judgments on historical experience and on various other
factors that we believe to be reasonable under the circumstances. Actual
results may differ from these estimates.
The most significant judgments made in our financial statements for
2001 involve the estimation of net sales proceeds to be received form the
sales of our discontinued operations and assets held for sale. We have based
our estimates on indications of value expressed by prospective buyers and
the advice of our financial advisors. We do not expect the actual proceeds
to be significantly different from our estimates; however, until we have
completed each of our planned divestitures, the possibility exists that
actual proceeds could be materially different from our estimates.
We exercise judgment in evaluating our long-lived assets for
impairment. We believe our businesses will generate sufficient undiscounted
cash flow to more than recover the investments we have made in property,
plant and equipment, as well as the goodwill and other intangibles recorded
as a result of our acquisitions.
We are self insured for the majority of our workers' compensation
costs and group health insurance costs. We rely on claims experience and the
advice of consulting actuaries and administrators in determining an adequate
liability for self-insurance claims.
The determination of our tax provision is complex due to the number
of acquisitions we have completed and due to operations in several tax
jurisdictions outside the United States. In addition, realization of certain
deferred tax assets is dependent upon our ability to generate future taxable
income.
NEW ACCOUNTING STANDARDS
In June 2001, the Financial Accounting Standards Board ("FASB")
issued Statements of Financial Accounting Standards ("SFAS") No. 141,
Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets. Statement 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001.
Statement 141 also includes guidance on the initial recognition and
measurement of goodwill and other intangible assets arising from business
36
combinations completed after June 30, 2001. Statement 142 prohibits the
amortization of goodwill and intangible assets with indefinite useful lives.
Statement 142 requires that these assets be reviewed for impairment at
least annually. Intangible assets with finite lives will continue to be
amortized over their estimated useful lives. Additionally, Statement 142
requires that goodwill included in the carrying value of equity method
investments no longer be amortized.
We began our application of Statement 142 beginning on January 1,
2002. We have completed the first step of the two-step process prescribed in
Statement 142 to test goodwill for impairment and have concluded that a
portion of the $213.5 million of goodwill related to our commercial printing
business is impaired. We will not know the extent of this impairment until
we have completed step two of the process, which we expect to begin prior to
the end of the second quarter. We will recognize the amount of the
impairment as a cumulative effect of a change in accounting principle as of
January 1, 2002, when it is determined.
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. Statement 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. Mail-Well will
adopt Statement 143 on January 1, 2003. We are evaluating the impact of the
adoption of Statement 143 on the consolidated financial statements.
In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which establishes one
accounting model to be used for long-lived assets to be disposed of by sale
and broadens the presentation of discontinued operations to include more
disposal transactions. Statement 144 supercedes SFAS No. 121, Accounting for
the Impairment of Long-Lived Assets to Be Disposed Of and the accounting and
reporting provisions of ABP Opinion No. 30, Reporting the Results of
Operations--Reporting the Effects Of Disposal of a Segment of a Business,
and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. Mail-Well adopted Statement 144 as of January 1, 2002 and
there was no impact from the adoption of this statement. Because the sale of
the discontinued operations and the assets held for sale were amortized in
2001, these were accounted for under APB 30.
MARKET RISK
We are exposed to market risks such as changes in interest and
foreign currency exchange rates, which may adversely affect results of
operations and financial position. Risks from interest and foreign currency
exchange rate fluctuations are managed through normal operating and
financing activities. We do not utilize derivatives for speculative
purposes, nor do we hedge interest rate exposure through the use of swaps
and options or foreign exchange exposure through the use of forward
contracts.
Exposure to market risk from changes in interest rates relates
primarily to our variable rate debt obligations. The interest on this debt
is the London Interbank Offered Rate ("LIBOR") plus a margin. At March 31,
2002, we had outstanding variable rate debt outstanding of $171.0 million. A
1% increase in LIBOR on the maximum amount available under our credit
agreement, which is $321.0 million, would increase our annual interest
expense by $3.2 million and reduce annual net income by approximately $2.0
million.
We have operations in Canada, the United Kingdom and Mexico, and
thus are exposed to market risk for changes in foreign currency exchange
rates of the Canadian dollar, the British pound and the Mexican peso.
RECENT DEVELOPMENT
On May 21, 2002, we consummated the sale of our label segment to
MWL Acquisition Corp., for approximately $75 million. The label segment
generated $219 million of sales for the year ended December 31, 2001, $53
million of sales for the three months ended March 31, 2002 and $56 million
of sales for the three months ended March 31, 2001.
37
BUSINESS
We are one of the largest printers in North America competing
primarily in the commercial printing and envelopes market segments. We
believe we are the world's largest manufacturer of envelopes, the leading
printer of envelopes in the United States and Canada and the largest high
impact color printer in the United States. We operate 85 printing
manufacturing facilities throughout North America. The combination of our
broad printing facility network and our sales force, which is among the
largest in the industry, has enabled us to build our customer base to over
20,000 in the commercial printing and envelope segments, including major
national and regional accounts. In addition to our two primary business
segments, we also operate a printed office products segment. As discussed
below, we are actively trying to sell this business.
In May 2001, we completed a comprehensive review of our operations
and adopted a new strategy that focuses on our two core businesses--commercial
printing and envelopes. In support of this strategy, we sold our label
segment and announced our intention and are in the process of seeking to
sell our printed office products segment and certain other non-core assets
in our commercial printing and envelope businesses. We intend to use any
proceeds from these divestitures to decrease our secured indebtedness.
Accordingly, in the second quarter of 2001 we began reporting the label and
printed office products segments as discontinued operations, began reporting
the other non-core assets as assets held for sale, and recorded the loss
anticipated on these dispositions. In February 2002, we sold Curtis 1000
Inc., a printed office products company, for $40 million, including the
assumption of debt. In addition, we sold our label segment for $75 million
in May 2002. As of the date of this prospectus, we have not entered into any
other definitive agreements to sell any of the companies in these segments
or our other non-core assets. In connection with our new strategic plan, we
also announced plans to consolidate three of our commercial printing plants
into one facility, to close nine of our envelope plants and to redeploy
their assets for other facilities by the end of 2002.
Our new strategy also includes the launch of several initiatives to
significantly improve operations and marketing effectiveness. Both the
commercial printing and envelope businesses have programs in place to
institute best practices, install pricing disciplines and align equipment
and services to better serve our customers and markets.
THE PRINTING AND ENVELOPE INDUSTRIES
The printing industry is one of the largest and most fragmented
industries in the United States with total estimated 2000 sales of $163
billion among an estimated 47,667 printing businesses, according to the
Printing Industry of America, Inc. The printing industry includes general
commercial printing, financial printing, printing and publishing of books,
labels, newspapers and periodicals, quick printing and production of
business forms and greeting cards. The envelope industry is not as highly
fragmented as the print industry, and envelope printing and manufacturing
combined constitute a $4.3 billion market in North America. Products in the
envelope industry include customized envelopes for direct mailing,
transactional envelopes, non-custom envelopes for resale and specialty
envelopes and files.
OUR COMPETITIVE STRENGTHS
We believe that our business is characterized by the following
competitive strengths:
SUPERIOR INFRASTRUCTURE AND SCALE. We currently operate one of the
world's largest print, envelope and label manufacturing and
distribution networks, with 103 printing and manufacturing
facilities throughout North America and three in the United
Kingdom. Our extensive network allows us to cost-effectively
deliver high quality products to our customers on a just-in-time
basis. Our network also has enabled us to increase sales to
national customers that require our products and services in
multiple regions of the country. In addition to the distribution
and marketing advantages provided by our strategically located
infrastructure, our scale enables us to realize cost savings as a
result of volume related purchases of paper, ink and other raw
materials used in the printing process. We are one of the largest
U.S. buyers of several paper grades. In 2001, we purchased
38
466,000 tons of coated and uncoated paper. Our scale also enables
us to achieve cost savings through the consolidation of insurance
administration, financial management and other administrative
functions.
BROAD RANGE OF QUALITY PRODUCTS AND SERVICES. We provide one of the
broadest offerings of quality products and services in our
industry. We print virtually anything that can be printed, from
business cards to premium full-color brochures and annual reports
and from white envelopes to highly customized direct mailers. We
offer a broad range of services that are tailored to our customers'
needs, including direct-to-plate technology and color sheet-fed
presses. The quality of our work has been recognized in the
commercial printing industry, and we were awarded numerous Gold Ink
Awards in 2001 for various brochures and reports that we printed.
We believe our commitment to quality, combined with our broad range
of specialized products and services, has allowed us to continually
meet our customers' needs.
STRONG, LONGSTANDING CUSTOMER RELATIONSHIPS IN DIVERSE END MARKETS.
We sell our products to more than 20,000 customers in our
commercial printing and envelope segments and over 24,000 customers
in our label and printed office products segments, and we maintain
longstanding relationships with leading retailers, advertising
agencies and other Fortune 500 Companies. Our largest ten customers
for 2001 included United Stationers Inc., the U.S. Postal Service,
Corporate Express, Inc., the U.S. Government Printing Office and
Compaq Computer Corporation. The length of our relationships with
our ten largest 2001 customers ranged from seven to 42 years, with
an average of approximately 16 years.
INDUSTRY LEADING TECHNOLOGY AND INNOVATION. Since our inception, we
have dedicated significant resources to our print technology in
order to be a leading innovator in the industry. We were one of the
first printing companies in the United States to operate an
eight-unit web press and ten color sheet-fed press. In addition, we
were one of the earliest adopters of direct-to-plate technology.
Our state of the art Anderson printing facility in Los Angeles is
considered one of the premier high impact printing facilities in
the United States. Our leading technology enables us to better meet
our customers' needs for product innovation, consistent quality and
cost efficiency.
EXPERIENCED MANAGEMENT AND OPERATIONS TEAM. Our senior management
team has significant experience in printing and manufacturing and
has substantial experience implementing cost-cutting and facility
consolidation programs, integrating acquisitions, and managing a
company through changing economic conditions. Our chief executive
officer, Paul Reilly, has spent over 20 years in the printing and
publishing industry with our company and at Polychrome Corporation,
a pre-press supplier to the printing industry. Our chief financial
officer, Michel P. Salbaing, has served as chief financial officer
of several businesses over the course of his 34 year career,
including with Quebecor World, a leading Canadian printing company.
Our plant managers in the commercial printing and envelopes
segments are some of the most experienced in the business,
averaging over 19 years in the printing industry.
OUR STRATEGY
Our objective is to continue to increase our cash flows and profits
through a business strategy that enhances operating leverage and achieves
cost efficiencies in our core business segments. The key elements of our
strategy include:
FOCUS ON COMMERCIAL PRINTING AND ENVELOPE CORE BUSINESSES. As
mentioned previously, in May 2001 we completed a comprehensive
review of our operations and adopted a new strategy that focuses on
our two core businesses--commercial printing and envelope. We
decided to sell our label and printed office products segments and
certain other non-core assets in order to concentrate our resources
on our core businesses in which we believe there is significant
opportunity for growth. Additionally, we plan to target our
resources on specific companies and industries that offer the
greatest potential opportunities for our core business. In
conjunction with our new strategy, we plan to consolidate
operations within the commercial printing and envelope
39
segments and improve our financial condition by reducing our
outstanding debt. We are taking these measures in order to optimize
capacity utilization and the use of our resources. We expect the
consolidation of our operations to generate approximately $26
million in annual cost savings.
IMPLEMENT INITIATIVES TO INCREASE OPERATING EFFICIENCY AND CASH
FLOW. We continually reevaluate our cost structure and processes to
identify potential cost savings and productivity improvements that
will increase our profitability and cash flow. In addition to the
significant savings we expect to realize from consolidating our
plants, we commenced the Excellence Demands Group Effort or EDGE
Initiative in June 2001. The EDGE Initiative and other initiatives
we commenced in 2001 include implementing firm-wide "best
practices," installing standard pricing and cost accounting models
across our business, more effectively aligning equipment and
employee capabilities with the needs of targeted customers and
industries, reducing waste, and regionalizing our sales and general
administration functions. As part of all these initiatives, we have
developed dedicated teams to track and benchmark operating
performance as well as implement organizational changes.
EXPAND OUR PRODUCT AND SERVICE OFFERINGS. Since our inception, we
have worked closely with our customers to develop innovative
products that meet their specific requirements. During 2001, we
introduced several new commercial printing and envelope products
and services. The Visulope(TM), which is an envelope we began to
manufacture in the fourth quarter of 2001, has an extra window to
detect unusual substances prior to opening. In addition, we
introduced Mail-Well 1-2-1, an Internet-based advertising solution
that allows our clients to send out personalized marketing
materials. We also implemented our innovative "Go-to" marketing
program, a team approach to expanding customer service
relationships that we believe is unique in the printing industry.
We will continue our focus on product and service improvements and
new innovations in order to meet our customers needs and grow our
business.
OUR PRODUCTS
Commercial Printing. We believe we are the leading printer of
envelopes in the United States and Canada, the largest high impact color
printer in the United States, and a leading general commercial printer in
several major U.S. markets. Our commercial printing segment generated $818
million of sales for the year ended December 31, 2001, representing 39% of
our total pro forma sales. We serve two primary commercial printing markets:
(i) high impact color printing, in which we print a wide range of longer run
premium products for national and regional accounts; and (ii) general
commercial printing, in which we print a wide array of products and offer
printing services to local commercial customers. Our printing products
include advertising literature, corporate identity materials, annual
reports, car brochures, calendars, greeting cards, brand marketing
materials, catalogs, maps, CD packaging and direct mail. We offer a wide
range of commercial printing services to our customers, including electronic
prepress, digital archiving, direct-to-plate technology, and high quality
web and color sheet-fed presses. Our high impact printing customers include
The Coca-Cola Company, Microsoft Corporation and DaimlerChrysler AG, and our
general commercial customers include Anheuser-Busch Inc., Compaq Computer
Corporation and GlaxoSmithKline PLC. In 2001, we served over 12,000
commercial customers. We printed over 24 million annual reports for 122
public companies, including 10 of the Fortune 50 companies, and we printed
over 40 million auto brochures for 14 automobile manufacturers. Our
commercial printing segment operates 29 plants throughout the United States
and one in Canada.
Envelope. We believe we are the world's largest manufacturer of
envelopes. Our envelopes segment generated $836 million of sales for the
year ended December 31, 2001, representing 40% of our total pro forma sales.
We serve two primary markets: (i) customized envelopes and packaging
products, including Tyvek(R) mailers used by the U.S. Postal Service, sold
directly to end users or to independent distributors who sell to end users;
and (ii) envelopes and other products sold to wholesalers, paper merchants,
printers, brokerage firms, office product establishments and superstores. In
the customized envelope market, we offer printed customized conventional
envelopes for billing and
40
remittance, filing systems, direct mail marketers, photo processing, medical
records, catalog orders and other end-users, such as banks, brokerage firms
and credit card companies. In addition to the U.S. Postal Service, our major
customized envelope customers include State Farm Insurance Company, Reader's
Digest and the Internal Revenue Service. In the wholesale envelope market,
we manufacture and print a broad line of custom envelopes that are featured
in national catalogs for the office products market or offered through
office products retailers, including contract stationers. Our wholesale
market customers include United Stationers Inc., S.P. Richards Co., Boise
Cascade Office Products and Corporate Express, Inc. In 2001, we served over
8,000 envelope customers. We manufacture envelopes in 30 U.S. plants and 13
Canadian plants.
Printed Office Products. In addition to our two primary business
segments, we also operate a printed office products segment. As discussed
elsewhere in this prospectus, we are seeking to sell this business and
therefore account for it as discontinued operation. Our printed office
products segment generated $215 million of sales for the year ended December
31, 2001, representing 10% of our total pro forma sales. We believe we are
the largest manufacturer of printed office products sold through
distributors. The printed office products segment prints a diverse line of
custom products for small and medium-sized businesses including both
traditional and specialty forms for use with desktop PCs and laser printers.
Printed office products customers include Data Supplies, Wall Street
Business Products and Minuteman Press International, Inc. Our printed office
products segment has 12 manufacturing facilities located throughout the
United States.
OUR SERVICES
We offer our customers a wide variety of related services to
enhance the value of our products, such as:
Prepress. The traditional design phase typically requires us to
incorporate customer-submitted graphics, photograph the artwork, develop the
file and prepare a plate from which to print.
Electronic Prepress. This is a fully automated electronic process
that allows the customer to submit its artwork and other data in digital
format, either on a diskette, high speed transmission line or in hard copy
that can be computer-scanned. We can then manipulate the image, prepare
color separations and edit the design on a computer to create the file from
which the printing plate is made. Electronic prepress greatly reduces the
time and the number of people involved in the production of plates, and we
believe that we are an industry leader in fully automated electronic
prepress operations.
Direct-to-Plate Technology. We offer digital direct-to-plate
technology, which eliminates the production of film and several manual
functions in the platemaking process. This technology offers a complete
digital workflow, providing a better printed product and faster turnaround
without additional cost.
Mail-Well 1-2-1. We offer on-demand digital printing services using
variable imaging and other features to produce personalized marketing
material, direct mail and other forms of targeted customer communications.
Digital Archiving. We allow customers to store digitally rendered
artwork on our file servers. The artwork can then be accessed and retrieved
either at the plant during the prepress stage or from a remote site via high
speed transmission during the design stage.
Delivery Systems. We offer a flexible "just-in-time" delivery
program. This program allows customers to receive their products just prior
to when they are needed.
Warehousing Services. A customer will often place an order for
significantly more product than it may need at the time. When this occurs,
we offer to store the finished product and drop-ship them on an "as-needed"
basis.
Inventory Management Systems. We offer this service primarily to
large national organizations with centralized purchasing and supply
departments that service multiple locations. We facilitate order
41
processing by giving customers information on usage by item and/or available
supply in our warehouses and provide for summary billing.
Fulfillment. We offer a complete fulfillment center with online
ordering, pic n' pac and barcoding located in Denver.
E-commerce. We have the capability to offer our customers a full
range of e-commerce services to order printing or other products through
their web page.
Printmailwell.com. We offer a full range of robust Internet-based
print procurement and print management solutions via our Printmailwell.com
e-commerce platform, powered by PrintCafe.
Our goal is to offer the highest standards in meeting our
customers' needs with our primary focus on responding quickly and
competitively to customer demands and requirements. Many of our production
facilities are open 24 hours a day, seven days a week, to allow for timely
production of materials. At certain facilities we also offer a number of
unique services to our customers such as complimentary transportation
between the airport and our offices, in-plant overnight accommodations,
on-site meeting rooms and lounge, travel and hotel arrangements and
computers for use by the customers when on-site.
We believe that the consolidation of the printing industry is being
driven in part by the rapid pace of technological change. Recent advances in
computer-based prepress equipment, such as electronic prepress, allow for
faster and more precise manipulation of images and text prior to printing.
Similarly, recent advances in photo imaging technology have greatly
increased the quality of the final image produced in the printing process.
These advances have increased the capital requirements for maintaining
technologically advanced equipment. We believe that many smaller local and
regional commercial printers will find it increasingly difficult to obtain
adequate financial resources to remain competitive in the segments of the
commercial printing market in which we operate.
MARKETING, DISTRIBUTION AND CUSTOMERS
As a result of the wide array of applications, customer preferences
and order sizes, our marketing efforts vary significantly among markets and
by region. Although our marketing efforts traditionally have been local or
regional, we continue to emphasize a more focused national accounts program
to attract customers whose needs are national or cover multiple regions. We
now have a national marketing director and a print marketing campaign.
We maintain one of the largest sales staffs in the industry, with
over 640 sales representatives in the commercial printing and envelope
segments and 85 in the label and printed office products segments as of
December 31, 2001. The vast majority of our printed products are sold
through sales representatives, the exception being occasional "house" or
company accounts. Our sales representatives work closely with customers from
the initial concept through prepress, proofing and finally the press run.
Because our sales representatives are our primary contacts with our
customers, our goal is to attract, train and retain an experienced,
qualified sales force in each of our business segments. Sales
representatives typically are compensated by straight commission.
Commissions generally depend on such factors as order size and type,
prepress work, reruns or rework and overall profitability of the job. We
also coordinate sales efforts among regions within our operating segments,
and among the operating segments themselves, in order to compete for
national account business, enhance the internal dissemination of successful
new product ideas, efficiently allocate our production equipment, share
technical expertise and increase company-wide selling of specialty products
manufactured at selected facilities.
In commercial printing our marketing efforts differ between two
broad product areas: high impact color products, such as auto brochures,
annual reports and high-end catalogs, and general commercial work. We market
high impact printing primarily on a regional basis, through sales
representatives working out of sales offices across the United States.
Because of the highly fragmented nature of the general commercial printing
and envelope businesses, and the wide array of customer needs and
42
preferences, we market most of our general commercial printing and envelopes
locally. Due to the project-oriented nature of these market segments, sales
to particular customers may vary significantly from year to year depending
upon the number and size of their projects. Our customer supply agreements
are typically on an order by order basis or for a specified period of time.
The sales force is supported by a technical service team that provides
customers with highly customized printing solutions. Most of our printing
facilities have customer service representatives that work with the sales
team and the customers to manage orders efficiently and effectively. In some
cases, the customer service representatives have direct responsibility for
accounts. In 2001, we implemented our innovative "Go-to" marketing program
as part of our strategic plan. This program utilizes a team approach to
customer service relationships that we believe is unique in the printing
industry.
Our customer base totals more than 20,000 in the commercial
printing and envelope segments, and over 24,000 in the label and printed
office products segments. Our customers in the high impact commercial
printing market include Fortune 500 companies, graphic designers and
advertising agencies. Our customers in the general commercial printing and
envelope businesses include national and local businesses, government
agencies and not for profit organizations. None of our customers accounted
for more than 2% of revenue in 2001.
PRINTING AND MANUFACTURING
Our commercial printing segment operates 29 printing facilities
throughout the United States, and one in Canada. These plants combine
advanced prepress technology with high-quality web and sheet-fed color
presses and extensive binding and finishing operations. Many of our
commercial printing facilities operate seven days a week, 24 hours a day to
meet customer printing requirements.
Our envelope segment operates 43 printing facilities throughout
North America. Envelopes are produced from either flat sheets or rolls of
paper. The paper is folded into an envelope, which is glued at the seams and
on the flap, and then printed as required. Webs are typically used for
larger runs with multiple colors and numerous features, and die cut
machines, which require a preliminary step to provide die cut envelope
blanks from paper sheets, are used primarily for smaller orders typically
including customized value-added features. The manufacturing process used is
dependent upon the size of a particular order, custom features required,
machine availability and delivery requirements.
In our printed office products segment, we operate 12 facilities in
North America. In printed office products, we design and print forms and
other customized materials for a wide range of businesses. A majority of
printed office products orders are delivered to us "camera ready," and we
perform prepress and platemaking functions and print on web presses.
MATERIALS AND SUPPLY ARRANGEMENTS
The primary materials used in each of our printing divisions are
paper, ink, film, offset plates, chemicals and cartons, with paper
accounting for the majority of total material costs. We are the largest U.S.
buyer of several paper grades. In 2001, we purchased 466,000 tons of coated
and uncoated paper. We purchase these materials from a number of suppliers
and have not experienced any significant difficulties in obtaining the raw
materials necessary for operations. We have implemented an inventory
management system in which a limited number of paper suppliers supply all of
our paper needs. These suppliers are responsible for delivering paper on a
"just-in-time" basis directly to our facilities. We believe that this system
has allowed us to enhance the flexibility and speed with which we can serve
customers, improve pricing on paper purchases, eliminate a significant
amount of paper inventory and reduce costs by reducing warehousing capacity.
We believe that we purchase our materials and supplies at very competitive
prices due to our volume leverage.
43
PATENTS, TRADEMARKS AND BRAND NAMES
We market products under a number of trademarks and brand names. We
also hold or have rights to use various patents relating to our envelope
business, which expire at various times through 2012. Our sales do not
materially depend upon any single or related group of patents.
COMPETITION
The commercial printing industry is highly competitive and
fragmented. We compete against a number of large, diversified and
financially stronger printing companies, as well as regional and local
commercial printers, many of which are capable of competing with us in both
volume and production quality. Although we believe customers are price
sensitive, we also believe that customer service and high quality products
are important competitive factors. We believe we provide premium quality and
customer service while maintaining competitive prices through stringent cost
control efforts. The main competitive factors in our markets are customer
service, product quality, reliability, flexibility, technical capabilities
and price. We believe we compete effectively in each of these areas.
In envelope printing, we compete with a few multi-plant and many
single-plant companies that primarily service regional and local markets. We
also face competition from alternative sources of communication and
information transfer such as facsimile machines, electronic mail, the
Internet, interactive video disks, interactive television and electronic
retailing. Although these sources of communication and advertising may
eliminate some domestic envelope sales in the future, we believe that we
will experience continued demand for envelope products due to (i) the
ability of our customers to obtain a relatively low-cost information
delivery vehicle that may be customized with text, color, graphics and
action devices to achieve the desired presentation effect, (ii) the ability
of our direct mail customers to penetrate desired markets as a result of the
widespread delivery of mail to residences and businesses through the U.S.
Postal Service and the Canadian Post Corporation and (iii) the ability of
our direct mail customers to include return materials in their mail-outs.
Principal competitive factors in the envelope business are quality, service
and price. Although all three are equally important, various customers may
emphasize one or more over the others. We believe we compete effectively in
each of these areas.
EMPLOYEES
Following the sale of our label segment, we employed approximately
11,800 people as of May 31, 2002. Approximately 2,200 people we employ at
the various facilities are represented by unions affiliated with the AFL-CIO
or Affiliated National Federation of Independent Unions. These employees are
governed by collective bargaining agreements, each of which covers the
workers at a particular facility, expires from time to time and is
negotiated separately. Accordingly, we believe that no single collective
bargaining agreement is material to our operations as a whole.
PROPERTIES
Following the sale of our label segment, as of May 31, 2002, we
occupied 85 printing and manufacturing facilities in the United States and
Canada, of which 43 were owned and 42 were leased. In addition to on-site
storage at these facilities, we store products in 16 warehouses, of which
two are owned. We also lease 47,754 square feet of office space in
Englewood, Colorado for our corporate headquarters and an additional 10,258
square feet of office space in Chicago, Illinois for information systems
support persons. We believe that we have adequate facilities for the conduct
of our current and future operations.
LEGAL PROCEEDINGS
From time to time we may be involved in claims or lawsuits that
arise in the ordinary course of business. Accruals for claims or lawsuits
have been provided for to the extent that losses are deemed probable and
estimable. Although the ultimate outcome of these claims or lawsuits cannot
be
44
ascertained, on the basis of present information and advice received from
counsel, it is our opinion that the disposition or ultimate determination of
such claims or lawsuits will not have a material adverse effect on us. In
the case of administrative proceedings related to environmental matters
involving governmental authorities, we do not believe that any imposition of
monetary damages or fines would be material.
ENVIRONMENTAL
Our operations are subject to federal, state, local and foreign
environmental laws and regulations, including those relating to air
emissions, wastewater discharge, waste generation, handling, management and
disposal, and remediation at contaminated sites. We have implemented
environmental programs designed to ensure that we operate in compliance with
the applicable laws and regulations governing environmental protection. We
believe that we are in substantial compliance with applicable laws and
regulations relating to environmental protection. We do not anticipate that
material capital expenditures will be required to achieve or maintain
compliance with environmental laws and regulations. However, there can be no
assurance that newly discovered conditions or new or stricter enforcement of
existing requirements will not result in material expenses.
45
MANAGEMENT
The name, age and position of each of the directors and executive
officers of the Parent Company are set forth below:
DIRECTOR
NAME AGE POSITION SINCE(1)
---- --- -------- --------
Paul V. Reilly.................. 49 Director, Chairman of the Board & Chief 1998
Executive Officer
Michel P. Salbaing.............. 56 Senior Vice President & Chief Financial Officer
Herbert H. Davis III............ 54 Senior Vice President--Corporate Development &
Chief Legal Officer
Gordon Griffiths................ 59 Chief Executive Officer--Commercial Print
Robert C. Hart.................. 64 Chief Executive Officer--Envelope
Roger Wertheimer................ 42 Vice President--General Counsel & Secretary
D. Robert Meyer, Jr............. 45 Vice President--Treasurer
Mark L. Zoeller................. 42 Vice President--Corporate Development
William W. Huffman, Jr.......... 53 Vice President--Controller
Keith T. Pratt.................. 55 Vice President--Purchasing
Frank P. Diassi(4).............. 68 Director 1993
Frank J. Hevrdejs(2)(3)......... 56 Director 1993
Janice C. Peters(3)............. 50 Director 1999
Jerome W. Pickholz(2)(4)........ 69 Director 1994
W. Thomas Stephens(2)(3)........ 59 Director 2000
Alister W. Reynolds............. 45 Director 2002
--------
(1) Directors serve one-year terms.
(2) Member of the Nominating Committee.
(3) Member of the Compensation Committee.
(4) Member of the Audit Committee.
PAUL V. REILLY was named our Chief Executive Officer in March 2001
and he became Chairman of the Board in September 2001. Prior to that Mr.
Reilly was our President and Chief Operating Officer from January 1998 to
March 2001 and was our Senior Vice President--Finance and Chief Financial
Officer from September 1995 to January 1998. Mr. Reilly spent 14 years with
Polychrome Corporation, a prepress supplier to the printing industry, where
he held a number of positions including Assistant Corporate Treasurer,
Corporate Treasurer, Vice President and Chief Financial Officer, and General
Manager of United States Operations. Mr. Reilly is a Certified Public
Accountant.
MICHEL P. SALBAING has been our Senior Vice President--Finance and
Chief Financial Officer since November 2000. From 1996 to November 2000, Mr.
Salbaing was with Quebecor World, the largest North American printer, where
he held a number of positions including Chief Financial Officer of the
overall corporation, President and Chief Executive Officer of Quebecor
Printing Europe and Senior Vice President and Chief Financial Officer of
Quebecor World North America. Prior to 1996, Mr. Salbaing held various
senior financial positions with three large Canadian manufacturing firms and
spent eight years with Ernst & Young LLP. Mr. Salbaing is a member of the
Canadian Institute of Chartered Accountants.
HERBERT H. DAVIS III has been our Senior Vice President--Corporate
Development and Chief Legal Officer since August 2001. Prior to that time,
Mr. Davis was in the private practice of law and
46
was a partner at the Denver, Colorado law firm of Rothgerber Johnson & Lyons
LLP for over 20 years.
GORDON GRIFFITHS has served as Chief Executive Officer of the
commercial print segment of the Company since April 8, 2002. Mr. Griffiths
most recently served as the chairman, CEO and co-founder of Caxton Group, a
marketing services organization. Prior to founding Caxton Group, Mr.
Griffiths served Canada's largest privately owned printer, St. Joseph
Corporation, as president and chief operating officer. St. Joseph is
Canada's third largest printing and communications organization. For 18
years, Mr. Griffiths was associated with Quebecor Printing, Inc.,
serving in various positions including president of Quebecor Printing
Canada. His experience in the printing industry dates back to 1964.
ROBERT C. HART has served as Chief Executive Officer of the
envelope segment of the Company since October 2000. From 1998 until he
joined Mail-Well, he owned his own consulting firm after having spent over
thirty years, from 1967 to 1998, with Riverwood International, a $1.3
billion paperboard and packaging company headquartered in Atlanta, GA.
Throughout his tenure with Riverwood, Mr. Hart served as Vice President &
Mill Manager; Vice President, Sales and Marketing; Vice President, and
General Manager of Paperboard Operations. Most recently, as Senior Vice
President of the $600 million Paperboard Operation, Mr. Hart directed the
operations of three paper mills, producing 1.4 million tons of packaging
products to improve productivity over 250,000 tons in eight years.
ROGER WERTHEIMER has been our Vice President--General Counsel and
Secretary since February 1995. Mr. Wertheimer began practicing law in 1984
and served as Corporate Counsel for PACE Membership Warehouse, Inc. from
1988 to 1994. Mr. Wertheimer was in private practice from March 1994 until
February 1995, when he joined us.
D. ROBERT MEYER, JR. has been our Vice President--Treasurer and Tax
since 1998. Mr. Meyer is a licensed attorney, Certified Public Accountant
and Certified Financial Planner. From 1988 to 1998, Mr. Meyer was a partner
in the tax department of the accounting firm of Deloitte & Touche LLP.
MARK L. ZOELLER has been our Vice President--Corporate Development
since May 2001. Mr. Zoeller joined us in 1997 as Corporate Counsel, and from
May 2000 to May 2001, he was Assistant General Counsel. Prior to joining us,
Mr. Zoeller was an associate at the law firm of Rothgerber Johnson & Lyons
LLP, and he is a licensed attorney.
WILLIAM W. HUFFMAN, JR. has been our Vice President--Controller since
November 2000. Prior to that he served in various financial capacities at
Custom Papers Group, Specialty Coatings International, and James River
Corporation. Mr. Huffman began his career with Coopers & Lybrand, and is a
Certified Public Accountant.
KEITH T. PRATT has been our Vice President--Purchasing since 1998.
From 1994 to 1998, Mr. Pratt was Vice President of Material Sourcing and
Logistics of Ply Gem Industries. From 1981 to 1994, Mr. Pratt was
responsible for purchasing and logistics with several companies where he
held a variety of positions up to the director level.
FRANK P. DIASSI has been a director since our inception in 1993.
Mr. Diassi was Chairman of Sterling Chemicals, Inc., a manufacturer of commodity
petrochemicals and chemicals used primarily in the pulp and paper industry,
from August 1996 through December 2001. He was a founding director of
Arcadian Corporation, the largest nitrogen fertilizer company in North
America. From 1989 to 1994, Mr. Diassi was a Director and Chairman of the
Finance Committee of Arcadian Corporation. Mr. Diassi is a director of
Fibreglass Holdings, Inc., a truck accessory manufacturer, a director and
Chairman of Amerlux Inc., a commercial lighting company, and director and
Chairman of Software Plus, Inc., a human resources/payroll software design
firm. On July 16, 2001, Sterling Chemicals, Inc., a company for which
Mr. Diassi has served as an executive officer, filed a voluntary petition for
reorganization under Chapter 11 of the United States Bankruptcy Code.
Mr. Diassi is a member of the Audit Committee of the Board of Directors.
47
FRANK J. HEVRDEJS has been a director since our inception in 1993. In
1982 Mr. Hevrdejs co-founded The Sterling Group, L.P., a major management
buyout company, where he is currently a principal shareholder and president.
He also serves as Chairman of First Sterling Ventures Corp., an investment
company, Endoro Holdings, Inc., a structural and electrical manufacturing
company, and Fibreglass Holdings, Inc., a truck accessory manufacturer. He
is a director of Eagle U.S.A., an air-freight company, Sterling Chemicals,
Inc., a petroleum chemical company and serves on the Houston Regional Board
of J.P. Morgan Chase and Co., a financial institution. Mr. Hevrdejs serves
as Chairman of the Nominating Committee and is a member of the Compensation
Committee of the Board of Directors.
JANICE C. PETERS has been a director since 1999. From 1997 to 2000,
Ms. Peters served as President and Chief Executive Officer of MediaOne(R),
the broadband services arm of MediaOne Group. From 1995 to 1997, Ms. Peters
was employed by US WEST, MediaOne's former parent company, in various
positions including Executive Vice President of Media One Group, Managing
Director of One2One, a United Kingdom wireless communications joint venture
between US WEST and Cable & Wireless, and President of Wireless Operations
for US WEST Media Group. Ms. Peters serves as a director of Primus Knowledge
Solutions, Inc., a knowledge-enabled software provider and 3COM, a
communications company specializing in network solutions. Ms. Peters serves
as Chairperson of the Compensation Committee of the Board of Directors.
JEROME W. PICKHOLZ has been a director since September 1994. From
1978 until 1994, he was Chief Executive Officer of Ogilvy & Mather Direct
Worldwide, a direct advertising agency. From 1994 until September 1995, he
served as Chairman of the Board of Ogilvy & Mather Direct worldwide where he
is now Chairman Emeritus. Since January 1, 1996, Mr. Pickholz has served as
founder and Chairman of Pickholz, Tweedy, Cowan, L.L.C., a marketing
communications company. Mr. Pickholz serves as the Chairman of the Audit
Committee and as a member of the Nominating Committee of the Board of
Directors.
W. THOMAS STEPHENS has been a director since 2000 and served as
Chairman of the Board from February 2001 to June 2001. From 1997 to 1999,
Mr. Stephens served as President and Chief Executive Officer of MacMillan
Bloedel, Canada's largest forest products company. From 1986 to 1996, he
served as CEO and President of Johns Manville Corporation serving as
Chairman from 1993 to 1996. Currently, Mr. Stephens is a director of Qwest
Communications International, Inc., Norske Skog Canada Limited, Xcel Energy,
Inc., TransCanada PipeLines Ltd., and a trustee of Putnam Mutual Funds. Mr.
Stephens is a member of the Compensation Committee and the Nominating
Committee of the Board of Directors.
ALISTER W. REYNOLDS was elected a director at the 2002 Annual Meeting.
Mr. Reynolds has been employed by Quest Diagnostics, Inc., a Delaware
corporation, since 1996 in various positions, including Senior Vice
President--U.S. Operations, and, most recently, Senior Advisor to the
Chairman and CEO. He serves as director of Soma Logic Incorporated, a
Delaware corporation, and Health Care Waste Solutions, a Delaware
corporation.
48
THE EXCHANGE OFFER
PURPOSE OF THE EXCHANGE OFFER
Mail-Well I Corporation originally issued and sold $350,000,000
aggregate principal amount of 9 5/8% Senior Notes due 2012 on March 13,
2002, in an offering that was exempt from registration under the Securities
Act of 1933 pursuant to Section 4(2), Rule 144A and Regulation S of the
Securities Act. Accordingly, the old notes may not be transferred in the
United States unless registered under the Securities Act or unless an
exemption from the registration requirements of the Securities Act and
applicable state securities laws is available.
As a condition to the sale of the old notes, we entered into a
registration rights agreement dated as of March 13, 2002 with the initial
purchasers of the old notes. In the registration rights agreement, we agreed
to file with the Securities and Exchange Commission a registration statement
under the Securities Act no later than June 11, 2002, with respect to the
$350,000,000 aggregate principal amount of 9 5/8% senior notes due 2012
offered by this prospectus. We also agreed to use our reasonable best
efforts to have the registration statement declared effective within 90 days
after June 11, 2002. In addition, we agreed to use our reasonable best
efforts to cause the registration statement to be effective for a period of
not less than 20 business days after the date notice of the exchange offer
is mailed to the holders of the old notes, to keep the exchange offer open
for a period of not less than 20 business days, and to cause the exchange
offer to be consummated no later than the 30th business day after the
registration statement is declared effective by the Commission.
Pursuant to the exchange offer, holders of the old notes may
exchange their old notes for registered new notes. For each old note
surrendered pursuant to the exchange offer, the holder of the old note will
receive a new note having a principal amount equal to that of the
surrendered old note. Interest on each new note will accrue from the last
interest payment date on which interest was paid on the old note surrendered
in exchange for the new note or, if no interest has been paid on such old
note, from the date the old note was issued.
To participate in the exchange offer, each holder must represent
that:
o it is acquiring the new notes in the exchange offer in its
ordinary course of business;
o it has no arrangement or understanding with any person to
participate in a distribution of the new notes, and if it is
not a broker-dealer, it is not engaged in, and does not intend
to engage in, a distribution of the new notes;
o it is not an "affiliate" of Mail-Well I Corporation, as
defined in Rule 405 of the Securities Act, or if it is such
an affiliate, it will comply with the registration and
prospectus delivery requirements of the Securities Act to the
extent applicable; and
o if it is broker-dealer, it will receive new notes for its own
account in exchange for old notes that it acquired as a
result of market-making activities or other trading
activities.
Each broker-dealer that receives new notes for its own account in
exchange for old notes, where such old notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such new notes. See "Plan of Distribution." The
Commission has taken the position that these broker-dealers may fulfill
their prospectus delivery requirements with respect to new notes, other than
a resale of an unsold allotment from the original sale of the old notes,
with this prospectus. Under the registration rights agreement, we are
required to allow these broker-dealers and other persons, if any, with
similar prospectus delivery requirements to use this prospectus in
connection with the resale of the new notes. We have filed a copy of the
registration rights agreement as an exhibit to the registration statement of
which this prospectus is a part.
49
RESALE OF THE NEW NOTES
Based on no-action letters issued by the staff of the Commission to
persons who are not associated with us, we believe that the new notes issued
in exchange for old notes pursuant to this exchange offer will in general be
freely transferable after this exchange offer without further registration
under the Securities Act and without the holder's delivery of a prospectus
under the Securities Act. This presumes that the holder of the new notes
makes the representations described above and, if the holder is a
broker-dealer, it represents that it will receive new notes for its own
account in exchange for old notes that were acquired as a result of
market-making activities or other trading activities and that it will
deliver a prospectus in connection with any resale of the new notes.
However, the Commission has not considered this exchange offer in the
context of a no-action letter and there can be no assurance that the staff
of the Commission would make a similar determination with respect to this
exchange offer as it made in the no-action letters to the unrelated persons.
Holders of old notes wishing to accept the exchange offer must
complete and sign the letter of transmittal that will be mailed to each
holder of the old notes. The letter of transmittal contains the required
representations described above and an agreement to comply with the
agreements and covenants set forth in the registration rights agreement.
This prospectus, as it may be amended or supplemented from time to
time, may be used by broker-dealers in connection with resales of new notes
received in exchange for old notes where the old notes were acquired by the
broker-dealer as a result of market-making activities or other trading
activities. A broker-dealer that signs a letter of transmittal and delivers
a prospectus to purchasers in connection with resales may be deemed to be an
"underwriter" within the meaning of the Securities Act; however, the holder
will not be deemed to admit that it is an "underwriter" within the meaning
of the Securities Act.
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
Upon the terms and subject to the conditions described in this
prospectus and contained in the letter of transmittal, we will accept for
exchange any and all old notes that are properly tendered on or prior to the
expiration date of the exchange offer, , 2002, and are not
-------------
withdrawn as permitted below. We will issue $1,000 principal amount of new
notes in exchange for each $1,000 principal amount of outstanding old notes
surrendered pursuant to this exchange offer. Old notes may be tendered only
in integral multiples of $1,000.
The form and terms of the new notes are the same as the form and
terms of the old notes except that:
o the new notes will be registered under the Securities Act and
hence the new notes will not bear legends restricting their
transfer, and
o holders of the new notes will not be entitled to most rights
under the registration rights agreement, which will terminate
upon the closing of the exchange offer.
The new notes will evidence the same debt as the old notes and will
be issued under, and be entitled to the benefits of, the same indenture.
As of the date of this prospectus, an aggregate of $350,000,000 in
principal amount of the old notes is outstanding. This prospectus, together
with the letter of transmittal, is first being sent on or about
, 2002, to all holders of old notes known to us.
-----------------
Holders of the old notes do not have any appraisal or dissenters'
rights under the indenture in connection with the exchange offer. We intend
to conduct the exchange offer in accordance with the provisions of the
registration rights agreement and the applicable requirements of the federal
securities laws.
50
We expressly reserve the right, at any time or from time to time,
to extend the period of time during which the exchange offer is open, and by
the extension to delay acceptance for exchange of any old notes. Notice of
any extension will be issued by means of a press release or other public
announcement no later than 9:00 a.m., New York City time, on the next
business day after the previously scheduled expiration date. During the
extension, all old notes previously tendered will remain subject to the
exchange offer and may be accepted for exchange by Mail-Well I Corporation.
We will return any old notes not accepted for exchange for any reason
without expense to the tendering holder as promptly as practicable after the
expiration of the exchange offer. We will give written notice of any
extension, amendment or nonacceptance to the holders of the old notes as
promptly as practicable.
PROCEDURES FOR TENDERING OLD NOTES
Your tender to Mail-Well I Corporation of old notes as described
below and our acceptance of the old notes will create a binding agreement
between us upon the terms and subject to the conditions set forth in this
prospectus and in the letter of transmittal. Except as set forth below, a
holder who wishes to tender old notes for exchange must send a completed and
signed letter of transmittal, including all other documents required by the
letter of transmittal, to the exchange agent, State Street Bank and Trust
Company, at the address set forth below under "--Exchange Agent" on or
before the expiration date. In addition, either:
(1) certificates for the old notes must be received by the
exchange agent, or
(2) a timely confirmation of a book-entry transfer of the old
notes into the exchange agent's account at the Depository
Trust Company pursuant to the procedure for book-entry
transfer described below, must be received by the exchange
agent before the expiration date, or
(3) the holder must comply with the guaranteed delivery
procedures described below.
The method of delivery of old notes, letters of transmittal and all other
required documents is at the election and risk of the holders. If the
delivery is by mail, we recommend you use registered mail, properly insured,
with return receipt requested. In all cases, you should allow sufficient
time to assure timely delivery. No letters of transmittal or old notes
should be sent to Mail-Well I Corporation.
Any beneficial owner whose old notes are registered in the name of
a broker, dealer, commercial bank, trustee or other nominee and who wishes
to tender should contact the registered holder of the old notes promptly and
instruct the registered holder to tender on behalf of the beneficial owner.
If the beneficial owner wishes to tender on its own behalf, the beneficial
owner must, prior to completing and executing the letter of transmittal and
delivering its old notes, either make appropriate arrangements to register
ownership of the old notes in the beneficial owner's name or obtain a
properly completed power of attorney from the registered holder of the old
notes. The transfer of record ownership may take considerable time.
Signatures on a letter of transmittal or a notice of withdrawal
need not be guaranteed if the old notes surrendered for exchange are
tendered:
(1) by a registered holder of the old notes who has not completed
the box entitled "Special Issuance Instructions" or "Special
Delivery Instructions" on the letter of transmittal, or
(2) for the account of an eligible institution.
An "eligible institution" means a firm that is a member of a registered
national securities exchange or a member of the National Association of
Securities Dealers, Inc. or a commercial bank or trustee having an office or
correspondent in the United States. In the event that signatures on a letter
of transmittal or a notice of withdrawal are required to be guaranteed, the
guarantees must be by an eligible institution. If old notes are registered
in the name of a person other than a signer of the letter of transmittal,
the old notes surrendered for exchange must be endorsed by the registered
holder, or be accompanied by appropriate powers of attorney or by a written
instrument or instruments of transfer
51
or exchange, in satisfactory form as determined by Mail-Well I Corporation
in its sole discretion, signed by the registered holder with the signature
guaranteed by an eligible institution.
We will determine all questions as to the validity, form,
eligibility and acceptance of old notes tendered for exchange in our sole
discretion, and our determination shall be final and binding. We reserve the
absolute right to reject any tenders of any particular old notes not
properly tendered or not to accept any particular old notes whose acceptance
might, in our judgment or the judgment of our counsel, be unlawful. We also
reserve the absolute right to waive any defects or irregularities or
conditions of the exchange offer as to any particular old notes either
before or after the expiration date, including the right to waive the
ineligibility of any holder who seeks to tender old notes in the exchange
offer. Our interpretation of the terms and conditions of the exchange offer
as to any particular old notes either before or after the expiration date
shall be binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of old notes for exchange must be
cured within a reasonable period of time as we shall determine. Neither
Mail-Well I Corporation, the exchange agent nor any other person shall be
under any duty to give notification of any defect or irregularity with
respect to any tender of old notes for exchange, nor shall any of them incur
any liability for failure to give the notification.
If the letter of transmittal or any old notes or powers of attorney
are signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, those persons should so indicate when signing, and, unless waived
by Mail-Well I Corporation, proper evidence satisfactory to Mail-Well I
Corporation of their authority to so act must be submitted.
BOOK-ENTRY TRANSFER
The exchange agent will request to establish an account for the old
notes at DTC for the exchange offer within two business days after the date
of this prospectus. Any financial institution that is a participant in DTC's
systems may make book-entry delivery of old notes by causing DTC to transfer
the old notes into the exchange agent's account at DTC in accordance with
DTC's procedures for transfer.
Although delivery of old notes may be effected through book-entry
transfer at DTC, the letter of transmittal or facsimile, or an agent's
message, with any required signature guarantees and any other required
documents, must, in any case, be received by the exchange agent at the
address set forth below under "--Exchange Agent" on or before the expiration
date or the guaranteed delivery procedures described below must be complied
with.
The term "agent's message" means a message, transmitted by DTC to,
and received by, the exchange agent and forming a part of a book-entry
confirmation, which states that DTC has received an express acknowledgment
from the tendering participant stating that the participant has received and
agrees to be bound by the terms of the letter of transmittal, and Mail-Well
I Corporation may enforce the letter of transmittal against the participant.
GUARANTEED DELIVERY PROCEDURES
If a registered holder of the old notes wishes to tender the old notes
and the old notes are not immediately available, or time will not permit the
holder's old notes or other required documents to reach the exchange agent
before the expiration date, or the procedure for book-entry transfer cannot
be completed on time, a tender may be effected if:
(1) the tender is made through an eligible institution;
(2) prior to the expiration date, the exchange agent has received
from the eligible institution:
(a) a completed and signed letter of transmittal, or a
facsimile;
52
(b) notice of guaranteed delivery substantially in the
form provided by Mail-Well I Corporation, setting
forth the name and address of the holder of the old
notes and the amount of old notes, stating that the
tender is being made by that holder and guaranteeing
that within three New York Stock Exchange trading
days after the date of execution of the notice of
guaranteed delivery the certificates for all physically
tendered old notes, in proper form for transfer, or
a book-entry confirmation, and any other documents
required by the letter of transmittal will be
deposited by the eligible institution with the
exchange agent; and
(3) the certificates for all physically tendered old notes, in
proper form for transfer, or a book-entry confirmation and
all other documents required by the letter of transmittal,
are received by the exchange agent within three New York
Stock Exchange trading days after the date of signing the
notice of guaranteed delivery.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the
exchange offer, we will accept, promptly after the expiration date, all old
notes properly tendered and will then promptly issue the new notes. For
purposes of the exchange offer, we will be deemed to have accepted properly
tendered old notes for exchange when, as and if we have given either oral or
written notice to the exchange agent. Oral notices will promptly be
confirmed in writing. Holders whose old notes are accepted for exchange will
be deemed to have waived the right to receive any accrued but unpaid
interest on the old notes.
In all cases, the issuance of new notes for old notes that are
accepted for exchange pursuant to the exchange offer will be made only after
timely receipt by the exchange agent of certificates for the old notes or a
timely book-entry confirmation of the old notes into the exchange agent's
account at DTC, a completed and signed letter of transmittal, or an agent's
message, and all other required documents. If any tendered old notes are not
accepted, or if old notes are submitted for a greater amount than the holder
desires to exchange, the unaccepted or non-exchanged old notes will be
returned without expense to the tendering holder as promptly as practicable
after the exchange offer expires or terminates. In the case of old notes
tendered by book-entry procedures described above, the non-exchanged old
notes will be credited to an account maintained with DTC designated by the
tendering holder as promptly as practicable after the exchange offer expires
or terminates.
CONDITIONS OF THE EXCHANGE OFFER
Notwithstanding any other term of the exchange offer, we will not
be required to accept for exchange, or to issue new notes in exchange for,
any old notes. We may terminate or amend the exchange offer prior to the
expiration date if any of the conditions to the exchange offer are not met.
These conditions include that the exchange offer, or the making of any
exchange by a holder of old notes, does not violate applicable law or any
applicable interpretation of the staff of the Commission. The conditions
also include that none of the following has occurred which in our judgment
would reasonably be expected to impair our ability to proceed with the
exchange offer:
(1) institution or threat of an action or proceeding in any court
or by or before any governmental agency or body with respect
to the exchange offer;
(2) adoption or enactment of any law, statute, rule or regulation;
(3) declaration of a banking moratorium by United States federal
or New York State authorities; or
(4) suspension of trading on the New York Stock Exchange or
generally in the United States over-the-counter market by
order of the Commission or any other governmental authority.
53
In addition, we may impose such other conditions as may be reasonably
acceptable to the initial purchasers of the old notes. We will give written
notice of any termination to the holders of the old notes as promptly as
practicable.
WITHDRAWAL RIGHTS
Tenders of old notes may be withdrawn at any time prior to the
expiration date. For a withdrawal to be effective, a written notice of
withdrawal must be received by the exchange agent at the address set forth
below under "--Exchange Agent." Any notice of withdrawal must specify the
name of the person who tendered the old notes to be withdrawn, identify the
old notes to be withdrawn, including the amount of the old notes, and
specify the name in which the old notes are registered, if different from
that of the withdrawing holder. If certificates for old notes have been
delivered or otherwise identified to the exchange agent, then, prior to the
release of the certificates the withdrawing holder must also submit the
serial numbers of the particular certificates to be withdrawn and a signed
notice of withdrawal with signatures guaranteed by an eligible institution
unless the holder is an eligible institution.
If old notes have been tendered pursuant to the procedure for
book-entry transfer described above, any notice of withdrawal must specify
the name and number of the account at DTC to be credited with the withdrawn
old notes and otherwise comply with the procedures of DTC.
We will determine all questions as to the validity, form and
eligibility of the notices, and our determination will be final and binding
on all parties. Any old notes so withdrawn will be deemed not to have been
validly tendered for exchange for purposes of the exchange offer. Any old
notes that have been tendered for exchange but that are not exchanged for
any reason will be returned to the holder without cost to the holder as soon
as practicable after withdrawal, rejection of tender or termination of the
exchange offer. In the case of old notes tendered by book-entry transfer
into the exchange agent's account at DTC pursuant to the book-entry transfer
procedures described above, the old notes will be credited to an account
with DTC specified by the holder as soon as practicable after withdrawal,
rejection of tender or termination of the exchange offer. Properly withdrawn
old notes may be re-tendered by following one of the procedures for
tendering old notes as previously described at any time on or before the
expiration date.
EXCHANGE AGENT
State Street Bank and Trust Company has been appointed as the
exchange agent for the exchange offer. All signed letters of transmittal
should be directed to the exchange agent at the address set forth below.
Questions and requests for assistance, requests for additional copies of
this prospectus or of the letter of transmittal and requests for notices of
guaranteed delivery should be directed to the exchange agent addressed as
follows:
State Street Bank and Trust Company, Exchange Agent
2 Avenue de Lafayette, Sixth Floor
Boston, Massachusetts 02111
Telecopier No.: (617) 662-1452
Attention: MacKenzie Elijah, Corporate Actions
Delivery of a letter of transmittal to an address other than as set
forth above or transmission of instructions via facsimile other than as set
forth above does not constitute a valid delivery of the letter of
transmittal.
FEES AND EXPENSES
We will pay the cash expenses we will incur in connection with the
exchange offer. Also, in connection with the registration statement for the
new notes, we will reimburse the holders for the reasonable fees and
disbursements of not more than one counsel, who shall be chosen by the
holders
54
of a majority in principal amount of the old notes for whose benefit
the registration statement has been prepared.
ACCOUNTING TREATMENT
For accounting purposes, we will recognize no gain or loss as a
result of the exchange offer. The expenses of the exchange offer will be
amortized over the term of the new notes.
TRANSFER TAXES
Holders who tender their old notes for exchange will not be
required to pay any transfer taxes, except that holders who instruct
Mail-Well I Corporation to register new notes in the name of, or request
that old notes not tendered or not accepted in the exchange offer be
returned to, a person other than the registered tendering holder, will be
responsible for paying any applicable transfer tax.
REGULATORY MATTERS
We are not aware of any governmental or regulatory approvals
that are required in order to complete the exchange offer.
CONSEQUENCES OF FAILURE TO EXCHANGE
Participation in the exchange offer is voluntary. Holders of the old
notes are urged to consult their financial and tax advisors in making their
own decisions on what action to take. See "Material Federal Income Tax
Considerations."
The old notes that are not exchanged for the new notes in the
exchange offer will remain restricted securities. Accordingly, those old
notes may only be transferred:
(1) to Mail-Well I Corporation or any of its subsidiaries,
(2) to a person whom the seller reasonably believes is a
qualified institutional buyer purchasing for its own account
or for the account of a qualified institutional buyer in a
transaction meeting the requirements of Rule 144A,
(3) in an offshore transaction meeting the requirements of
Rule 903 or Rule 904 under the Securities Act,
(4) in a transaction meeting the requirements of Rule 144 under
the Securities Act,
(5) in accordance with another exemption from the registration
requirements of the Securities Act, and based upon an opinion
of counsel acceptable to Mail-Well I Corporation, or
(6) pursuant to an effective registration statement,
and, in each case, in accordance with the applicable securities laws of any
state of the United States or any other applicable jurisdiction.
55
DESCRIPTION OF THE NEW NOTES
Mail-Well I Corporation will issue the new notes under an indenture
dated March 13, 2002, among itself, the guarantors and State Street Bank and
Trust Company, as trustee. The terms of the new notes include those stated
in the indenture and those made part of the indenture by reference to the
Trust Indenture Act.
The following description is a summary of the material provisions
of the indenture for the old notes and the new notes. It does not restate
those provisions in their entirety. You may obtain a copy of the indenture
from us; the indenture has also been filed as an exhibit to the registration
statement of which this prospectus is a part.
BRIEF DESCRIPTION OF THE NEW NOTES AND THE GUARANTEES
THE NEW NOTES
The new notes:
o are identical to the old notes in all material respects,
including the guarantees on the new notes, except that the new
notes are registered under the federal securities laws and
will not contain any legends restricting their transfer;
o are general unsecured obligations of Mail-Well I Corporation;
o are not secured by any of our assets and will be effectively
subordinated to any of our secured obligations to the extent
of the value of the assets securing such obligations,
including obligations under our credit facilities;
o are pari passu in right of payment to all of our other existing
and future unsecured and unsubordinated obligations;
o are senior in right of payment to our existing and future
subordinated indebtedness, including Mail-Well I Corporation's
8 3/4% Senior Subordinated new notes, Mail-Well, Inc's 5%
Convertible Subordinated new notes, and any obligations of the
guarantors with respect thereto; and
o are unconditionally guaranteed by the guarantors.
THE GUARANTEES
The new notes are unconditionally guaranteed on an unsecured basis,
jointly and severally, by Mail-Well, Inc. and certain of the current
subsidiaries of Mail-Well I Corporation that were formed under the laws of a
state of the United States (including the District of Columbia) and have
their principal place of business within the United States. The following is
a list of the guarantors as of the date of this prospectus:
ABP Books, Inc.
Hill Graphics, Inc.
Mail-Well Commercial Printing, Inc.
Mail-Well Mexico Holdings, Inc.
Mail-Well Services, Inc.
Mail-Well Texas Finance LP
Mail-Well West, Inc.
Wisco III, L.L.C.
The new notes also will be guaranteed by the following
subsidiaries, which are subsidiaries that are held for sale under our
strategic plan. These subsidiaries will be released from their guarantees
upon
56
their sale or other disposition, provided that we comply with the
requirements for release set forth in "Note Guarantees; Restrictions on
Mail-Well, Inc. and Subsidiaries" below.
Discount Labels, Inc.
Mail-Well Label USA, Inc.
National Graphics Company
Poser Business Forms, Inc.
The new notes will be guaranteed by each new subsidiary of
Mail-Well I Corporation or Mail-Well, Inc., other than any special purpose
financing vehicle, that:
o has not been designated as an unrestricted subsidiary by
Mail-Well I Corporation's board of directors under the indenture,
o is or becomes a "significant subsidiary," as defined in
Article 1, Rule 1-02 of Regulation S-X under the Securities
Act of 1933, of Mail-Well I Corporation or Mail-Well, Inc.,
as applicable,
o is formed under the laws of the state of the United States or
the District of Columbia, and
o has its principal place of business within the United States.
The guarantees of the new notes:
o are general unsecured obligations of each guarantor;
o are not secured by any assets of any of the guarantors and
will be effectively subordinated to any secured obligations of
the guarantors to the extent of the value of the assets
securing such obligations, including obligations of the
subsidiaries under our credit facilities;
o are pari passu in right of payment to all other existing and
future unsecured and unsubordinated obligations of each
guarantor; and
o are senior in right of payment to any existing and future
subordinated indebtedness of each guarantor including
guarantees of the obligations under Mail-Well I Corporation's
8 3/4% Senior Subordinated new notes.
As of December 31, 2001, and after adjustment for the application
of the net proceeds from the sale of the old notes, we would have had total
secured indebtedness of approximately $187 million, with an additional $150
million (less any outstanding letters of credit) available under our senior
credit facility. As indicated above, payments on the new notes and under the
guarantees will be effectively subordinated to the payment of the secured
indebtedness to the extent of the value of any assets securing such secured
indebtedness. The indenture permits us to incur additional secured
indebtedness under certain circumstances.
Not all of our subsidiaries will guarantee the new notes. In the
event of a bankruptcy, liquidation or reorganization of any of these
non-guarantor subsidiaries, these non-guarantor subsidiaries will pay the
holders of their debt and their trade creditors before they will be able to
distribute any of their assets to us. The subsidiary guarantors generated
approximately 69% of our consolidated revenues in the year period ended
December 31, 2001 and held approximately 61% of our consolidated assets as
of December 31, 2001. In addition, following their sale the subsidiary
guarantors that are held for sale will be released from their guarantees
upon their sale or other disposition, provided that we comply with the
conditions to release set forth in "Note Guarantees; Restrictions on
Mail-Well, Inc. and Subsidiaries" below. These subsidiaries generated
approximately 22% of our consolidated revenues in the year ended December
31, 2001 and held approximately 17% of our consolidated assets as of
December 31, 2001.
PRINCIPAL, MATURITY AND INTEREST
We will issue new notes with an aggregate principal balance of $350
million in exchange for old notes, which have an aggregate outstanding
principal amount of $350 million. We will issue the new
57
notes in denominations of $1,000 and integral multiples of $1,000. The new
notes will mature on March 15, 2012. Subject to our compliance with the
covenant described under the caption "--Certain Covenants--Incurrence of
Indebtedness," we may, without the consent of the holders, issue more notes
under the indenture on the same terms and conditions and with the same CUSIP
numbers as the new notes, in an unlimited principal amount. Any such
additional notes that are actually issued will be treated as issued and
outstanding new notes for all purposes of the indenture and this
"Description of the New Notes" unless the context indicates otherwise.
Interest on the new notes will accrue at the rate of 9 5/8% per
annum and will be payable semiannually in arrears on March 15 and September
15 commencing on September 15, 2002. We will make each interest payment to
the holders of record of the new notes on the immediately preceding March 1
and September 1.
Interest on the new notes will accrue from the date the old notes
were issued or, if interest has already been paid on the old notes, from the
date it was most recently paid. Interest will be computed on the basis of a
360-day year comprised of twelve 30-day months.
NOTE GUARANTEES; RESTRICTIONS ON MAIL-WELL, INC. AND SUBSIDIARIES
The guarantors will jointly and severally guarantee the obligations
of Mail-Well I Corporation under the new notes. Each guarantee will be
effectively subordinated to the prior payment in full of all secured
indebtedness of that guarantor to the extent of the value of any assets
securing such obligations. Each guarantee will be pari passu with all
unsecured and unsubordinated obligations of that guarantor and to the
guarantees of that guarantor of our future unsecured and unsubordinated
obligations.
The guarantees will rank at least on a parity with claims of all
unsecured creditors (including unsecured trade creditors and tort claimants)
of the respective guarantors. The obligations of each guarantor under its
guarantee will be limited as necessary to prevent that guarantee from
constituting a fraudulent conveyance under applicable law.
Except in a transaction as a result of which a subsidiary guarantor
would be released from its guarantee as provided in the indenture and
described below, no guarantor may sell or otherwise dispose of all or
substantially all of its assets, or consolidate with or merge with or into
(whether or not such guarantor is the surviving person), another person
(other than Mail-Well I Corporation or a subsidiary guarantor) unless:
(1) either: (a) such guarantor is the surviving corporation; or
(b) the person formed by or surviving any such consolidation
or merger (if other than such guarantor) or to which such
sale, assignment, transfer, conveyance or other disposition
shall have been made is a corporation organized or existing
under the laws of the United States, any state thereof or the
District of Columbia or the jurisdiction in which such
guarantor is organized and under the laws of which it is
existing;
(2) the person formed by or surviving any such consolidation or
merger (if other than such guarantor), or the person to which
such sale, assignment, transfer, conveyance or other
disposition shall have been made assumes all the obligations
of such guarantor under the guarantees and the indenture, as
applicable, pursuant to agreements reasonably satisfactory to
the trustee;
(3) immediately after such transaction no default or event of
default exists under the indenture; and
(4) such guarantor or the person formed by or surviving any such
consolidation or merger (if other than such guarantor) will
have consolidated net worth immediately after the transaction
equal to or greater than the consolidated net worth of such
guarantor immediately preceding the transaction.
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The guarantee of a subsidiary guarantor will be released:
(1) in connection with any sale or other disposition of all or
substantially all of the assets of that subsidiary guarantor
(including by way of merger or consolidation), if we apply the
net proceeds of that sale or other disposition in accordance
with the applicable provisions of the indenture; or
(2) in connection with any sale of all of the capital stock of a
subsidiary guarantor, if we apply the net proceeds of that
sale in accordance with the applicable provisions of the
indenture.
See "Repurchase at the Option of Holders--Asset Sales."
OPTIONAL REDEMPTION
The new notes will not be redeemable at our option prior to March
15, 2007.
After March 15, 2007, we may redeem all or a part of the new notes
(which includes additional notes, if any) upon not less than 30 nor more
than 60 days' notice, at the redemption prices (expressed as percentages of
principal amount) set forth below plus accrued and unpaid interest thereon,
if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on March 15 of the years indicated below:
YEAR PERCENTAGE
---- ----------
2007........................ 104.813%
2008........................ 103.208%
2009........................ 101.604%
2010 and thereafter......... 100.000%
In addition, prior to March 15, 2005, we may at our option on any
one or more occasions redeem new notes (including additional notes, if any)
in an aggregate principal amount not to exceed 35% of the aggregate
principal amount of the new notes (including additional notes, if any)
originally issued at a redemption price of 109.625% of the principal amount
thereof, plus accrued and unpaid interest thereon, if any, to the redemption
date, with the net cash proceeds of one or more equity offerings; provided
that:
(1) at least 65% of such aggregate principal amount of new notes
(including additional notes, if any) originally issued remains
outstanding immediately after the occurrence of such
redemption (other than new notes held directly or indirectly
by us and our affiliates); and
(2) each such redemption must occur within 90 days of the date of
the closing of such equity offering.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
If a change of control under the indenture occurs, each holder of
new notes will have the right to require us to repurchase all or any part
(equal to $1,000 or an integral multiple thereof) of that holder's notes
pursuant to the offer described below. In a change of control offer,
Mail-Well I Corporation will offer a change of control payment in cash equal
to 101% of the aggregate principal amount of new notes repurchased plus
accrued and unpaid interest thereon, if any, to the date of purchase. Within
30 days following any change of control, we will mail a notice to each
holder describing the transaction or transactions that constitute the change
of control and offering to repurchase new notes on the date specified in
such notice, pursuant to the procedures required by the indenture and
described in such notice. We will comply with the requirements of Rule 14e-l
under the Securities Exchange Act of 1934 and any other securities laws and
regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the new notes as a result of
a change of control. To the extent the provisions of any securities laws are
inconsistent with the
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terms of the indenture, we will not be deemed to have breached this covenant
by complying with such laws.
On the change of control payment Date, we will, to the extent lawful:
(1) accept for payment all new notes or portions thereof properly
tendered pursuant to the change of control offer;
(2) deposit with the paying agent an amount equal to the change of
control payment in respect of all new notes or portions
thereof so tendered; and
(3) deliver or cause to be delivered to the trustee the new notes
so accepted together with an officers' certificate stating the
aggregate principal amount of new notes or portions thereof
that we are purchasing.
The paying agent will promptly mail to each holder of new notes so
tendered the change of control payment for such new notes, and the trustee
will promptly authenticate and mail (or cause to be transferred by
book-entry) to each holder a new note equal in principal amount to any
unpurchased portion of the new notes surrendered, if any; provided that each
such new note will be in a principal amount of $1,000 or an integral
multiple thereof. We will publicly announce the results of the change of
control offer on or as soon as practicable after the change of control
payment date.
The provisions described above that require us to make a change of
control offer following a change of control will be applicable regardless of
whether or not any other provisions of the indenture are applicable. Except
as described above with respect to a change of control, the indenture does
not contain provisions that permit the holders of the new notes to require
that we repurchase or redeem the new notes in the event of a takeover,
recapitalization or similar transaction.
We will not be required to make a change of control offer upon a
change of control if a third party makes the change of control offer in the
manner, at the times and otherwise in compliance with the requirements set
forth in the indenture applicable to a change of control offer made by
Mail-Well I Corporation and purchases all new notes validly tendered and not
withdrawn under such change of control offer.
The definition of change of control includes a phrase relating to
the sale, lease, transfer, conveyance or other disposition of "all or
substantially all" of the assets of Mail-Well I Corporation and its
subsidiaries taken as a whole. Although there is a limited body of case law
interpreting the phrase "substantially all," there is no precise established
definition of the phrase under applicable law. Accordingly, the ability of a
holder of new notes to require us to repurchase such new notes as a result
of a sale, lease, transfer, conveyance or other disposition of less than all
of the assets of Mail-Well I Corporation and its subsidiaries taken as a
whole to another person or group may be uncertain.
ASSET SALES
We will not, and will not permit any of our restricted subsidiaries
to, consummate an asset sale unless:
(1) We, or our restricted subsidiary, as the case may be, receive
consideration at the time of such asset sale at least equal to
the fair market value of the assets or equity interests issued
or sold or otherwise disposed of;
(2) such fair market value is determined by our board of directors
and evidenced by a resolution of the board of directors set
forth in an officers' certificate delivered to the trustee;
and
(3) at least 80% of the net proceeds received by us or our
restricted subsidiary is in the form of cash. For purposes of
this provision, each of the following shall be deemed to be
cash:
o any liabilities (as shown on the most recent balance sheet
of us or our restricted subsidiary, of us or any of our
restricted subsidiaries (other than contingent liabilities
and liabilities that are by their terms subordinated to
the new notes or any guarantee) that are assumed by the
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transferee of any such assets pursuant to a customary
novation agreement that releases us or our restricted
subsidiary from further liability; and
o any securities, new notes or other obligations received by
us or any of our restricted subsidiaries from such
transferee that we contemporaneously (subject to ordinary
settlement periods) convert into cash (to the extent of
the cash received in that conversion).
Within 360 days after the receipt of any net proceeds from an asset
sale, we must apply such net proceeds:
(1) to be reinvested in our business;
(2) to the extent that the net proceeds relate to a disposition of
assets or stock of a restricted subsidiary that is not formed
under the laws of a state of the United States, including the
District of Columbia, or which does not have its principal
place of business within the United States, to repay or retire
indebtedness under credit facilities; or
(3) to make an offer to purchase the new notes at 100% of
principal amount, plus accrued and unpaid interest, if any,
and if applicable, to make an offer to the holders of other
indebtedness that ranks pari passu with the new notes and that
by its terms requires us to make an offer to purchase such
other debt upon consummation of an asset sale, to purchase
such other debt on a pro rata basis with the new notes.
SELECTION AND NOTICE
If less than all of the new notes are to be redeemed at any time,
the trustee will select new notes for redemption on a pro rata basis, by lot
or by such method as the trustee shall deem fair and appropriate.
No new notes of $1,000 or less shall be redeemed in part. Notices
of redemption shall be mailed by first class mail at least 30 but not more
than 60 days before the redemption date to each holder of new notes to be
redeemed at its registered address. Notices of redemption may not be
conditional.
If any note is to be redeemed in part only, the notice of
redemption that relates to that note shall state the portion of the
principal amount thereof to be redeemed. A note in principal amount equal to
the unredeemed portion of the original note will be issued in the name of
the holder thereof upon cancellation of the original note. Notes called for
redemption become due on the date fixed for redemption. On and after the
redemption date, interest ceases to accrue on new notes or portions of them
called for redemption.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
We will not, directly or indirectly, make any of the following
restricted payments:
(1) declare or pay any dividend or make any other payment or
distribution on account of Mail-Well I Corporation's or any of
its restricted subsidiaries' equity interests (including,
without limitation, any payment in connection with any merger
or consolidation involving Mail-Well I Corporation or any of
its restricted subsidiaries) or to the direct or indirect
holders of Mail-Well I Corporation's or any of its restricted
subsidiaries' equity interests in their capacity as such
(other than dividends or distributions payable in equity
interests of Mail-Well I Corporation or to Mail-Well I
Corporation or one of its restricted subsidiaries);
(2) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger
or consolidation involving us) any of our equity interests
(other than any such equity interests owned by Mail-Well I
Corporation or any of its restricted subsidiaries);
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(3) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any
indebtedness that is pari passu with or subordinated to the
new notes or the guarantees (other than the new notes or the
guarantees), except a payment of interest or principal at the
stated maturity thereof; or
(4) make any restricted investment,
unless, at the time of and after giving effect to such restricted
payment:
(1) no default or event of default under the indenture shall have
occurred and be continuing or would occur as a consequence
thereof; and
(2) at the time of such restricted payment and after giving pro
forma effect thereto as if such restricted payment had been
made at the beginning of the applicable four-quarter period,
we would have been permitted to incur at least $1.00 of
additional indebtedness pursuant to the fixed charge ratio
test set forth in the first paragraph of the covenant
described below under the caption "--Incurrence of
Indebtedness;" and
(3) such restricted payment, together with the aggregate amount of
all other restricted payments we made or make after December
31, 2001 (excluding restricted payments permitted by clauses
(3), (5), (7), (8) and (9) of the next succeeding paragraph),
is less than the sum, without duplication, of
o 50% of our consolidated net income (or, in each case such
consolidated net income is a deficit, minus 100% of such
deficit) since December 31, 2001, plus
o the aggregate net cash proceeds we receive after December
31, 2001 from the sale of equity interests or any
indebtedness that is convertible into capital stock and
has been so converted, plus
o the aggregate cash received by Mail-Well I Corporation as
capital contributions after December 31, 2001, plus
o $25 million.
So long as no default under the indenture has occurred and is
continuing or would be caused thereby, the preceding provisions will not
prohibit:
(1) the payment of any dividend within 60 days after the date of
declaration thereof, if at said date of declaration such
payment would have complied with the provisions of the
indenture;
(2) the repurchase, redemption, defeasance, retirement or other
acquisition of any pari passu or subordinated indebtedness of
Mail-Well I Corporation or any guarantor or of any equity
interests of Mail-Well I Corporation or any restricted
subsidiary in exchange for, or out of the net cash proceeds of
the substantially concurrent sale (other than to a subsidiary
of Mail-Well I Corporation) of, equity interests of Mail-Well
I Corporation;
(3) the redemption, repurchase, defeasance, retirement or other
acquisition of pari passu or subordinated indebtedness of
Mail-Well I Corporation or any guarantor with the net cash
proceeds from an incurrence of permitted refinancing
indebtedness;
(4) the payment of any dividend by any of our restricted
subsidiaries to the holders of its common equity interests on
a pro rata basis;
(5) the repurchase, redemption or other acquisition or retirement
for value of any equity interests of Mail-Well I Corporation
or any restricted subsidiary of Mail-Well I Corporation held
by any member of Mail-Well I Corporation's (or any of its
subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement in effect as
of the date of the indenture; provided that the aggregate
price paid for all such repurchased,
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redeemed, acquired or retired equity interests shall not
exceed $1 million in any twelve-month period;
(6) the making of any restricted investment, directly or
indirectly, out of the net cash proceeds of substantially
concurrent sales (other than to a subsidiary) of equity
interests of Mail-Well I Corporation;
(7) the repurchase, redemption, retirement or other acquisition of
equity interests of Mail-Well I Corporation or any restricted
subsidiary issued, or indebtedness incurred, by Mail-Well I
Corporation or any restricted subsidiary in connection with
the acquisition of any person or any assets to the former
owners of such person or assets;
(8) the redemption, repurchase, defeasance, retirement or other
acquisition of Mail-Well, Inc.'s 5% Convertible Subordinated
new notes, and the payment of a demand note issued by
Mail-Well I Corporation to Mail-Well, Inc. in connection with
the new notes, in an aggregate amount not to exceed $140
million of principal, plus accrued interest thereon; and
(9) permitted payments to Mail-Well, Inc. under the indenture.
The amount of all restricted payments (other than cash) shall be
the fair market value on the date of the restricted payment of the asset(s)
or securities proposed to be transferred or issued by Mail-Well I
Corporation or such restricted subsidiary, as the case may be, pursuant to
the restricted payment. The fair market value of any assets or securities
that are required to be valued by this covenant shall be determined by the
board of directors whose resolution with respect thereto shall be delivered
to the trustee. The board of directors' determination must be based upon an
opinion or appraisal issued by an accounting, appraisal or investment
banking firm of national standing if the fair market value exceeds $10
million. Not later than the date of mailing any restricted payment, we will
deliver to the trustee an officers' certificate stating that such restricted
payment is permitted and setting forth the basis upon which the calculations
required by this "restricted payments" covenant were computed, together with
a copy of any fairness opinion or appraisal required by the indenture.
INCURRENCE OF INDEBTEDNESS
Mail-Well I Corporation will not, and will not permit any of its
restricted subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to any indebtedness, including
acquired debt); provided, however, that Mail-Well I Corporation and any
restricted subsidiary may incur indebtedness (including acquired debt), if
the fixed charge coverage ratio for Mail-Well I Corporation's most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional
indebtedness is incurred would have been at least 2 to 1, determined on a
pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional indebtedness had been incurred at the
beginning of such four-quarter period.
The first paragraph of this covenant will not prohibit the
incurrence of any of the following items of indebtedness (collectively,
"permitted debt"):
(1) the incurrence by Mail-Well I Corporation and any restricted
subsidiary of indebtedness under credit facilities (including
amounts outstanding on the date we sold the old notes);
provided that the aggregate principal amount of all
indebtedness under such credit facilities (including all
permitted refinancing indebtedness incurred to refund,
refinance or replace any indebtedness incurred pursuant to
this clause (1)) permitted by this clause (1) does not exceed
an amount equal to $375 million, less any repayments actually
made thereunder with the net proceeds of asset sales in
accordance with clause (2) of the second paragraph of the
covenant described under "Repurchase at the Option of the
Holders--Asset Sales;"
(2) the incurrence by Mail-Well I Corporation and its
subsidiaries of existing indebtedness (excluding amounts
outstanding under credit facilities on the date we sold the
old notes);
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(3) the incurrence by Mail-Well I Corporation and the subsidiary
guarantors of indebtedness represented by the new notes and
the guarantees issued on the date we sold the old notes;
(4) the incurrence by Mail-Well I Corporation or any of its
restricted subsidiaries of indebtedness represented by
capital lease obligations, mortgage financings or purchase
money obligations, in each case, incurred for the purpose of
financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment
used in the business of Mail-Well I Corporation or such
restricted subsidiary, in an aggregate principal amount
(including all permitted refinancing indebtedness incurred to
refund, refinance or replace any indebtedness incurred
pursuant to this clause (4)) not to exceed $50 million at any
time outstanding;
(5) the incurrence by Mail-Well I Corporation or any of its
restricted subsidiaries of permitted refinancing indebtedness
in exchange for, or the net proceeds of which are used to
refund, refinance or replace, indebtedness (other than
intercompany indebtedness) that was permitted by the
indenture to be incurred under the first paragraph of this
covenant or clause (1), (2), (3), (4) or (9) of this
paragraph;
(6) the incurrence by Mail-Well I Corporation or any of its
restricted subsidiaries of intercompany indebtedness between
or among Mail-Well I Corporation and any of its wholly owned
restricted subsidiaries; provided, however, that:
o indebtedness is owed to or held by a restricted subsidiary
that is not a subsidiary guarantor, such indebtedness must
be expressly subordinated to the prior payment in full in
cash of all obligations with respect to the new notes, in
the case of Mail-Well I Corporation, or the guarantee of
such subsidiary guarantor, in the case of a subsidiary
guarantor, and
o (i) any subsequent issuance or transfer of equity interests
that results in any such indebtedness being held by a person
other than Mail-Well I Corporation or a wholly owned
restricted subsidiary thereof and (ii) any sale or other
transfer of any such indebtedness to a person that is not
either Mail-Well I Corporation or a wholly owned restricted
if Mail-Well I Corporation or any subsidiary guarantor is
the obligor on such indebtedness and such subsidiary thereof,
shall be deemed, in each case, to constitute an incurrence
of such indebtedness by Mail-Well I Corporation or such
restricted subsidiary, as the case may be, that was not
permitted by this clause (6);
(7) the incurrence by Mail-Well I Corporation or any of its
restricted subsidiaries of hedging obligations that are
incurred for the purpose of fixing or hedging interest rate
risk with respect to any floating rate indebtedness that is
permitted by the terms of this indenture to be outstanding;
(8) the guarantee by Mail-Well I Corporation or any of its
restricted subsidiaries of indebtedness of Mail-Well I
Corporation or a restricted subsidiary of Mail-Well I
Corporation that was permitted to be incurred by another
provision of this covenant;
(9) the incurrence by Mail-Well I Corporation or any of its
restricted subsidiaries of additional indebtedness in an
aggregate principal amount (or accrued value, as applicable)
at any time outstanding, including all permitted refinancing
indebtedness incurred to refund, refinance or replace any
indebtedness incurred pursuant to this clause (9), not to
exceed $50 million;
(10) the incurrence by Mail-Well I Corporation's unrestricted
subsidiaries of non-recourse debt; provided, however, that if
any such indebtedness ceases to be non-recourse debt of an
unrestricted subsidiary, such event shall be deemed to
constitute an incurrence of indebtedness by a restricted
subsidiary of Mail-Well I Corporation that was not permitted
by this clause (10);
(11) the incurrence by Mail-Well I Corporation or any of its
restricted subsidiaries of indebtedness in respect of
judgment, appeal, surety, performance and other like bonds,
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bankers acceptances and letters of credit provided by
Mail-Well I Corporation and its subsidiaries in the ordinary
course of business (including any indebtedness incurred to
refinance, retire, renew, defease, refund or otherwise
replace any indebtedness referred to in this clause (11));
and
(12) indebtedness incurred by Mail-Well I Corporation or any of
its subsidiaries arising from agreements or their respective
bylaws providing for indemnification, adjustment of purchase
price or similar obligations, or from guarantees of letters
of credit, surety bonds or performance bonds securing the
performance of Mail-Well I Corporation or any of its
subsidiaries to any person acquiring all or a portion of such
business or assets of a subsidiary of Mail-Well I
Corporation.
For purposes of determining compliance with this incurrence of
indebtedness covenant, in the event that an item of proposed indebtedness
meets the criteria of more than one of the categories of permitted debt
described in clauses (1) through (12) above, or is entitled to be incurred
pursuant to the first paragraph of this covenant, we will be permitted to
classify such item of indebtedness on the date of its incurrence in any
manner that complies with this covenant.
LIENS
Mail-Well I Corporation will not, and will not permit any of its
restricted subsidiaries to, directly or indirectly, create, incur, assume or
suffer to own any lien of any kind securing indebtedness, attributable debt
or trade payables on any asset now owned or hereafter acquired, except
permitted liens under the indenture.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
Mail-Well I Corporation will not permit any of its restricted
subsidiaries to, directly or indirectly, create or permit to exist or become
effective any encumbrance or restriction on the ability of any restricted
subsidiary to pay dividends or make any other distributions or pay
indebtedness to Mail-Well I Corporation or any of Mail-Well I Corporation's
restricted subsidiaries, or with respect to any other interest or
participation in, or measured by, its profits, or pay any indebtedness owed
to Mail-Well I Corporation or any of Mail-Well I Corporation's restricted
subsidiaries.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
Mail-Well I Corporation may not, directly or indirectly: (1)
consolidate or merge with or into another person (whether or not Mail-Well I
Corporation is the surviving corporation); or (2) sell, assign, transfer,
convey or otherwise dispose of all or substantially all of its properties or
assets, in one or more related transactions, to another person; unless:
(1) either: (a) Mail-Well I Corporation is the surviving
corporation; or (b) the person formed by or surviving any such
consolidation or merger (if other than Mail-Well I
Corporation) or to which such sale, assignment, transfer,
conveyance or other disposition shall have been made is a
corporation organized or existing under the laws of the United
States, any state thereof or the District of Columbia;
(2) the person formed by or surviving any such consolidation or
merger (if other than Mail-Well I Corporation) or the person
to which such sale, assignment, transfer, conveyance or other
disposition shall have been made, expressly assumes all the
obligations of Mail-Well I Corporation under the new notes and
the indenture pursuant to agreements reasonably satisfactory
to the trustee;
(3) immediately after such transaction no default or event of
default exists under the indenture; and
65
(4) Mail-Well I Corporation or the person formed by or surviving
any such consolidation or merger (if other than Mail-Well I
Corporation):
(1) will have consolidated net worth immediately after the
transaction equal to or greater than our consolidated net
worth immediately preceding the transaction; and
(2) will, on the date of such transaction after giving pro
forma effect thereto and any related financing
transactions as if the same had occurred at the beginning
of the applicable four-quarter period, be permitted to
incur at least $1.00 of additional indebtedness pursuant
to the fixed charge coverage ratio test set forth in the
first paragraph of the covenant described above under the
caption "Incurrence of Indebtedness."
In addition, we may not, directly or indirectly, lease all or substantially
all of its properties or assets, in one or more related transactions, to any
other person. This "Merger, Consolidation, or Sale of Assets" covenant will
not apply to a sale, assignment, transfer, conveyance or other disposition
of assets between or among Mail-Well I Corporation and any of its wholly
owned subsidiaries. For the avoidance of doubt, this covenant also will not
apply to sales of the assets or stocks of subsidiaries Mail-Well I
Corporation currently is holding for sale as part of its strategic plan.
TRANSACTIONS WITH AFFILIATES
Mail-Well I Corporation will not, and will not permit any of its
restricted subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for
the benefit of, any affiliate, unless:
(1) such affiliate transaction with an affiliate is on terms that
are no less favorable to Mail-Well I Corporation or the
relevant restricted subsidiary than those that would have been
obtained in a comparable transaction by Mail-Well I
Corporation or such restricted subsidiary with an unrelated
person; and
(2) we deliver to the trustee:
o with respect to any affiliate transaction or series of
related affiliate transactions involving aggregate
consideration in excess of $1 million, a resolution of the
board of directors set forth in the officers' certificate
certifying that such affiliate transaction complies with
this covenant and that such affiliate transaction has been
approved by a majority of the disinterested members of the
board of directors; and
o with respect to any affiliate transaction or series of
related affiliate transactions involving aggregate
consideration in excess of $10 million, an opinion as to
the fairness to the holders of such affiliate transaction
from a financial point of view issued by an accounting,
appraisal or investment banking firm of national standing.
The following items shall not be deemed to be affiliate
transactions and, therefore, will not be subject to the provisions of the
prior paragraph:
(1) any employment agreement entered into by Mail-Well I
Corporation or any of its restricted subsidiaries in the
ordinary course of business and consistent with the past
practice of Mail-Well I Corporation or such restricted
subsidiary;
(2) indemnification agreements permitted by law entered into by
Mail-Well I Corporation or any of its restricted subsidiaries
with any of its affiliates who are directors, employees or
agents of Mail-Well I Corporation or any of its restricted
subsidiaries;
(3) transactions between or among Mail-Well I Corporation and/or
its restricted subsidiaries;
(4) payment of reasonable directors fees to persons who are not
otherwise our affiliates; and
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(5) restricted payments that are permitted by the provisions of
the indenture described above under the caption "--Restricted
Payments."
ADDITIONAL SUBSIDIARY GUARANTEES
If after the date we sold the old notes Mail-Well I Corporation or
any restricted subsidiary of Mail-Well I Corporation acquires or creates
another restricted subsidiary (other than a special purpose financing
vehicle) and such restricted subsidiary is formed under the laws of a state
of the United States (including the District of Columbia) and has its
principal place of business within the United States, then at such time as
such restricted subsidiary first becomes a significant subsidiary of
Mail-Well I Corporation, that newly acquired or created restricted
subsidiary must become a guarantor and execute a supplemental indenture
satisfactory to the trustee and deliver an opinion of counsel to the trustee
within 10 business days of the date on which it was acquired or created.
DESIGNATION OF RESTRICTED AND UNRESTRICTED SUBSIDIARIES
As of the date we sold the old notes all of the subsidiaries of
Mail-Well I Corporation will be restricted subsidiaries. The board of
directors may designate any subsidiary to be an unrestricted subsidiary if
that designation would not cause a default under the indenture. If a
subsidiary is designated as an unrestricted subsidiary, all outstanding
Investments owned by Mail-Well I Corporation and its subsidiaries in the
subsidiary so designated will be deemed to be an Investment made as of the
time of such designation and will reduce the amount available for restricted
payments under the first paragraph of the covenant described above under the
caption "--Restricted Payments" or permitted Investments, as applicable. All
such outstanding Investments will be valued at their fair market value at
the time of such designation. In addition, such designation will only be
permitted if such restricted payment would be permitted at that time and if
such subsidiary otherwise meets the definition of an unrestricted
subsidiary. The board of directors may redesignate any unrestricted
subsidiary to be a restricted subsidiary if the redesignation would not
cause a default under the indenture.
LIMITATIONS ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS
Mail-Well I Corporation will not permit any of its restricted
subsidiaries that is not a guarantor of the new notes, directly or
indirectly, to guarantee or pledge any assets to secure the payment of any
other indebtedness of Mail-Well I Corporation or Mail-Well, Inc. unless such
restricted subsidiary simultaneously executes and delivers a supplemental
indenture providing for the guarantee of the payment of the new notes by
such restricted subsidiary to the same extent as such guarantee of such
other indebtedness, which guarantee shall be senior to or pari passu with
such restricted subsidiary's guarantee of or pledge to secure such other
indebtedness.
Notwithstanding the provision described in the preceding paragraph,
any guarantee of the new notes will provide by its terms that it will be
automatically and unconditionally released and discharged under the
circumstances described above under the caption "Note Guarantees;
Restrictions on Mail-Well, Inc. and Subsidiaries." The form of the guarantee
will be attached as an exhibit to the indenture.
BUSINESS ACTIVITIES
Mail-Well I Corporation will not, and will not permit any
restricted subsidiary to, engage in any business other than permitted
businesses under the indenture.
ADVANCES TO SUBSIDIARIES
All advances to restricted subsidiaries that are not guarantors
made by Mail-Well I Corporation after the date of the indenture will be
evidenced by intercompany notes in favor of Mail-Well I Corporation. Each
intercompany note will be payable upon demand and will bear interest at the
same rate as the new notes. A form of intercompany note will be attached as
an exhibit to the indenture.
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PAYMENTS FOR CONSENT
Mail-Well I Corporation will not, and will not permit any of its
subsidiaries to, directly or indirectly, pay or cause to be paid any
consideration to or for the benefit of any holder of new notes for or as an
inducement to any consent, waiver or amendment of any of the terms or
provisions of the indenture or the new notes unless such consideration is
offered to be paid and is paid to all holders of the new notes that consent,
waive or agree to amend in the time frame set forth in the solicitation
documents relating to such consent, waiver or agreement.
REPORTS
Whether or not required by the Commission, so long as any new notes
are outstanding, Mail-Well I Corporation will furnish to the holders of new
notes, within the time periods specified in the Commission's rules and
regulations:
(1) all quarterly and annual financial information that would be
required to be contained in a filing with the Commission on
Forms 10-Q and 10-K, if Mail-Well I Corporation were required
to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations"
and, with respect to the annual information only, a report on
the annual financial statements by Mail-Well I Corporation's
certified independent accountants; and
(2) all current reports that would be required to be filed with
the Commission on Form 8-K if Mail-Well I Corporation were
required to file such reports.
The quarterly and annual financial information required by the preceding
paragraph shall include a reasonably detailed presentation, either on the
face of the financial statements or in the footnotes thereto, or in
Management's Discussion and Analysis of Financial Condition and Results of
Operations, of the financial condition and results of operations of
Mail-Well I Corporation and its subsidiary guarantors separate from the
financial condition and results of operations of the other subsidiaries of
Mail-Well I Corporation.
In addition, whether or not required by the Commission, Mail-Well I
Corporation will file a copy of all of the information and reports referred
to in clauses (1) and (2) above with the Commission for public availability
within the time periods specified in the Commission's rules and regulations
(unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request.
The foregoing reporting obligation may be satisfied by reports
prepared and filed by Mail-Well, Inc. on a consolidated basis under the
requirements of the Exchange Act.
REGISTRATION RIGHTS; LIQUIDATED DAMAGES
We entered into a registration rights agreement with the initial
purchasers of the old notes on March 13, 2002. In the registration rights
agreement, we agreed, among other things, to file with the Commission the
registration statement of which this prospectus is a part.
If any of the following occurs:
(1) because of any change in law or applicable interpretations
of the staff of the Commission we are not permitted to effect
this exchange offer;
(2) for any other reason this exchange offer is not consummated
within 210 days of the date on which we sold the old notes;
(3) any initial purchaser so requests with respect to old notes
not eligible to be exchanged for new notes in the exchange
offer by it following consummation of the exchange offer; or
(4) any holder (other than certain dealers) is not eligible to
participate in the exchange offer or in the case of any holder
(other than certain dealers) that participates in the exchange
offer, such
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holder does not receive freely tradeable new notes on the
date of the exchange and any such holder so requests,
then we will, at our cost:
(1) promptly, but in no event later than 30 days after the date of
the request or other event giving rise to the obligation, file
a shelf registration statement covering resales of the old
notes or the new notes, as the case may be, from time to time
and use reasonable best efforts to cause the shelf
registration statement to be declared effective under the
Securities Act no later than 90 days after that date; and
(2) subject to certain customary exceptions, use our reasonable
best efforts to keep the shelf registration statement
continuously effective until all the notes covered by the
shelf registration statement
(a) have been sold pursuant thereto or
(b) are no longer restricted securities (as defined in
Rule 144 under the Securities Act, or any successor
rule thereof).
We will, in the event a shelf registration statement is filed,
among other things, provide to each holder for whom such shelf registration
statement was filed copies of the prospectus which is part of the shelf
registration statement, notify each such holder when the shelf registration
statement has become effective and take certain other actions as are
required to permit unrestricted resales of the old notes or the new notes,
as the case may be. A Holder selling such notes pursuant to the shelf
registration statement generally would be required to be named as a selling
security holder in the related prospectus and to deliver a prospectus to
purchasers, will be subject to certain of the civil liability provisions
under the Securities Act in connection with such sales and will be bound by
the provisions of the registration rights agreement which are applicable to
such holder (including certain indemnification obligations).
For the purposes of the registration rights agreement, "transfer
restricted securities" means each note until the earliest on the date of
which
(1) such note is exchanged in the exchange offer and entitled to
be resold to the public by the holder thereof without
complying with the prospectus delivery requirements of the
Securities Act,
(2) such note has been disposed of in accordance with the shelf
registration statement,
(3) such note is disposed of by a broker-dealer pursuant to the
"Plan of Distribution" herein, or
(4) such note is distributed to the public pursuant to Rule 144
under the Securities Act.
The registration rights agreement provides that
(1) if the registration statement of which this prospectus is part
is not declared effective by the Commission on or prior to the
180th day after the date that we sold the old notes,
(2) if this exchange offer is not consummated on or before the
30th business day after such registration statement is
declared effective,
(3) if obligated to file the shelf registration statement with the
Commission and we fail to do so on or prior to the 30th
business day after such filing obligation arises,
(4) if obligated to file the shelf registration statement and the
shelf registration statement is not declared effective on or
prior to the 90th day after the obligation to file the shelf
registration statement arises (but no earlier than 180 days
after the date on which we sold the old notes), or
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(5) if the registration statement for the exchange offer or the
shelf registration statement, as the case may be, is declared
effective but thereafter ceases to be effective or useable in
connection with resales of the notes, for such time of
non-effectiveness or non-usability,
we agree to pay to each holder of notes affected thereby liquidated damages
in an amount equal to $0.05 per week per $1,000 in principal amount of
affected notes held by such holder for each week or portion thereof that
such registration default continues for the first 90-day period immediately
following the occurrence of the registration default. The amount of the
liquidated damages increases by an additional $0.05 per week per $1,000 in
principal amount of notes at the beginning of and for each subsequent 90-day
period until all registration defaults have been cured, up to a maximum
amount of liquidated damages of $0.50 per week per $1,000 in principal
amount of affected notes. We will not be required to pay liquidated damages
for more than one registration default at any given time. No holder of
affected notes will be entitled to receive liquidated damages pursuant to
the registration rights agreement unless and until such holder has provided
certain information to us for use in connection with the applicable
registration statement. Following the cure of all registration defaults, the
accrual of liquidated damages will cease.
We will pay all accrued liquidated damages to holders entitled
thereto in the same manner as interest payments on the notes on semi-annual
damages payment dates which correspond to interest payment dates for the
notes.
This summary of provisions of the registration rights agreement does
not purport to be complete and is subject to, and is qualified in its entirety
by reference to, all the provisions of the registration rights agreement. A
copy of the registration rights agreement has been filed as an exhibit to
the registration statement of which this prospectus is a part, and we
incorporate the registration rights agreement into this prospectus by this
reference. A copy of the registration rights agreement is available from
Mail-Well I Corporation or the Commission upon request. See "Where You Can
Find More Information."
EVENTS OF DEFAULT AND REMEDIES
Each of the following is an event of default under the indenture:
(1) default for 30 days in the payment when due of interest on,
or liquidated damages with respect to, the new notes;
(2) default in payment when due of the principal of or premium,
if any, on the new notes;
(3) failure by Mail-Well I Corporation or any of its restricted
subsidiaries to comply with the provisions described under the
captions "--Change of Control," "--Asset Sales," "--Restricted
Payments" or "--Incurrence of Indebtedness";
(4) failure by Mail-Well I Corporation or any of its restricted
subsidiaries to comply with any of the other agreements in the
indenture for 60 days after notice to Mail-Well I Corporation
by the trustee or the holders of at least 25% in aggregate
principal amount of the new notes then outstanding;
(5) default under any mortgage, indenture or instrument under
which they may be issued or by which there may be secured or
evidenced any indebtedness for money borrowed by Mail-Well I
Corporation or any of its restricted subsidiaries (or the
payment of which is guaranteed by Mail-Well I Corporation or
any of its restricted subsidiaries) whether such indebtedness
or guarantee now exists, or is created after the date of the
indenture, if that default:
o is caused by a failure to pay principal of or premium,
if any, or interest on such indebtedness prior to the
expiration of the grace period provided in such indebtedness;
or
o results in the acceleration of such indebtedness prior to
its express maturity,
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o and, in each case, the principal amount of any such
indebtedness, together with the principal amount of any
other such indebtedness under which there has been a
payment default or the maturity of which has been so
accelerated, aggregates $25 million or more;
(6) failure by Mail-Well I Corporation or any of its restricted
subsidiaries to pay final judgments aggregating in excess of
$25 million, which judgments are not paid, discharged or
stayed within 60 days following entry of judgment;
(7) except as permitted by the indenture, any guarantee shall be
held in any judicial proceeding to be unenforceable or invalid
or shall cease for any reason to be in full force and effect
or any guarantor, or any person acting on behalf of any
guarantor, shall deny or disaffirm its obligations under its
guarantee; and
(8) certain events of bankruptcy or insolvency with respect to
Mail-Well I Corporation or any restricted subsidiary that is a
significant subsidiary, or any group of restricted
subsidiaries that, taken together, would constitute a
significant subsidiary.
In the case of an event of default arising from certain events of
bankruptcy or insolvency, with respect to Mail-Well I Corporation, any
restricted subsidiary that is a significant subsidiary or any group of
restricted subsidiaries that, taken together, would constitute a significant
subsidiary, all outstanding new notes will become due and payable
immediately without further action or notice. If any other event of default
occurs and is continuing, the trustee or the holders of at least 25% in
principal amount of the then outstanding new notes may declare all the new
notes to be due and payable immediately.
Holders of the new notes may not enforce the indenture or the new
notes except as provided in the indenture. Subject to certain limitations,
holders of a majority in principal amount of the then outstanding new notes
may direct the trustee in its exercise of any trust or power.
The holders of a majority in aggregate principal amount of the new
notes then outstanding by notice to the trustee may on behalf of the holders
of all of the new notes waive any existing default or event of default and
its consequences under the indenture except a continuing default or event of
default in the payment of interest on, or the principal of, the new notes.
We are required to deliver to the trustee annually a statement
regarding compliance with the indenture. Upon becoming aware of any default
or event of default under the indenture, we are required to deliver to the
trustee a statement specifying such default or event of default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND SHAREHOLDERS
No director, officer, employee, incorporator or shareholder of
Mail-Well I Corporation or any guarantor, as such, shall have any liability
for any obligations of Mail-Well I Corporation or the guarantors under the
new notes, the indenture, the note guarantees, or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each holder
of new notes by accepting a note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of the new
notes. The waiver may not be effective to waive liabilities under the
federal securities laws.
SATISFACTION AND DISCHARGE OF THE INDENTURE
We may terminate the obligations of Mail-Well I Corporation and the
guarantors under the new notes, the indenture, and the guarantees when (i)
either (A) all outstanding new notes have been delivered to the trustee for
cancellation or (B) all such new notes not theretofore delivered to the
trustee for cancellation have become due and payable, will become due and
payable within one year or are to be called for redemption within one year
under irrevocable arrangements satisfactory to the trustee for the giving of
notice of redemption by the trustee in our name and at our expense, and we
have irrevocably deposited or caused to be deposited with the trustee funds
in an amount sufficient to
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pay and discharge the entire indebtedness on the new notes not theretofore
delivered to the trustee for cancellation, for principal of (premium, if
any, on) and interest to the date of deposit or stated maturity or date of
redemption; (ii) we have paid or caused to be paid all sums then due and
payable by us under the indenture; and (iii) we have delivered an officers'
certificate and an opinion of counsel relating to compliance with the
conditions set forth in the indenture.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
We may, at our option and at any time, elect to have all of our
obligations discharged with respect to the outstanding new notes, which we
refer to as "legal defeasance," except for:
(1) the rights of holders of outstanding new notes to receive
payments in respect of the principal of, premium, if any, and
interest thereon, and the rights of the holders of old notes
to receive any payments of liquidated damages on any old notes
remaining outstanding when such payments are due from the
trust referred to below;
(2) our obligations with respect to the new notes concerning
issuing temporary new notes, registration of new notes,
mutilated, destroyed, lost or stolen new notes and the
maintenance of an office or agency for payment and money for
security payments held in trust;
(3) the rights, powers, trusts, duties and immunities of the
trustee, and our obligations in connection therewith; and
(4) the legal defeasance provisions of the indenture.
In addition, we may, at our option and at any time, elect to have
our obligations released with respect to certain covenants that are
described in the indenture, which we refer to as "covenant defeasance," and
thereafter any failure to comply with such obligations shall not constitute
a default or event of default with respect to the new notes. In the event
covenant defeasance occurs, certain events (other than nonpayment,
bankruptcy, receivership, rehabilitation and insolvency events) described
under "Events of Default and Remedies" will no longer constitute an event of
default with respect to the new notes.
In order to exercise either legal defeasance or covenant defeasance,
(1) We must irrevocably deposit with the trustee, in trust, for
the benefit of the holders of the new notes, cash in U.S.
dollars, non-callable government securities, or a combination
thereof, in such amounts as will be sufficient, in the opinion
of a nationally recognized firm of independent public
accountants, to pay the principal of, premium, if any, and
interest on all outstanding notes, and liquidated damages on
any outstanding old notes on the stated maturity or on the
applicable redemption date, as the case may be, and we must
specify whether notes are being defeased to maturity or to a
particular redemption date;
(2) in the case of legal defeasance, we must deliver to the
trustee an opinion of counsel in the United States reasonably
acceptable to the trustee confirming that (A) we have received
from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date we sold the old notes,
there has been a change in the applicable federal income tax
law, in either case to the effect that, and based thereon such
opinion of counsel shall confirm that, the holders of the
outstanding new notes will not recognize income, gain or loss
for federal income tax purposes as a result of such legal
defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as
would have been the case if such legal defeasance had not
occurred;
(3) in the case of covenant defeasance, we must deliver to the
trustee an opinion of counsel in the United States reasonably
acceptable to the trustee confirming that the holders of the
outstanding new notes will not recognize income, gain or loss
for federal income tax purposes as a result of such covenant
defeasance and will be subject to federal income tax on the
same
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amounts, in the same manner and at the same times as would
have been the case if such covenant defeasance had not
occurred;
(4) no event of default or default under this indenture shall have
occurred and be continuing on the date of such deposit (other
than an event of default or default resulting from the
borrowing of funds to be applied to such deposit);
(5) such legal defeasance or covenant defeasance will not result
in a breach or violation of, or constitute a default under,
the credit agreement or any other material agreement or
instrument (other than the
indenture) to which Mail-Well I Corporation or any of its
subsidiaries is a party or by which Mail-Well I Corporation
or any of its subsidiaries is bound;
(6) we must have delivered to the trustee an opinion of counsel to
the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any
applicable bankruptcy, insolvency, reorganization or similar
laws affecting creditors' rights generally;
(7) we must deliver to the trustee an officers' certificate
stating that we did not make the deposit with the intent of
preferring the holders of new notes over our other creditors
with the intent of defeating, hindering, delaying or
defrauding such creditors or others; and
(8) we must deliver to the trustee an officers' certificate and an
opinion of counsel, each stating that all conditions precedent
provided for, in the case of the officers' certificate, (1)
through (7) and, in the case of the opinion of counsel,
clauses (2), (3), (5) and (6) of this paragraph relating to
the legal defeasance or the covenant defeasance, as
applicable, have been complied with.
AMENDMENT, SUPPLEMENT AND WAIVER
Without the consent of each holder affected, an amendment or waiver
may not (with respect to any new notes held by a non-consenting holder):
(1) reduce the principal amount of new notes whose holders must
consent to an amendment, supplement or waiver;
(2) reduce the principal of or change the fixed maturity of any
note or alter the provisions with respect to the redemption of
the new notes (other than provisions relating to the covenants
described above under the caption "--Repurchase at the Option
of Holders");
(3) reduce the rate of or change the time for payment of interest
on any note;
(4) waive a default or event of default in the payment of
principal or premium, if any, or liquidated damages or
interest on the new notes or any old notes remaining
outstanding (except a rescission of acceleration of the new
notes by the holders of at least a majority in aggregate
principal amount of the new notes and a waiver of the payment
default that resulted from such acceleration);
(5) make any note payable in money other than that stated in the
new notes;
(6) make any change in the provisions of the indenture relating to
waivers of past defaults or the rights of holders of new notes
to receive payments of principal of or premium, if any, or
liquidated damages or interest on the new notes or any old
notes remaining outstanding;
(7) waive a redemption payment with respect to any note (other
than a payment required by one of the covenants described
above under the caption "--Repurchase at the Option of
Holders");
(8) release any guarantor from any of its obligations under its
guarantee or the indenture, or amend the provisions of the
indenture relating to the release of guarantors, except as set
forth in the indenture; or
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(9) make any change in the preceding amendment and waiver provisions.
Notwithstanding the preceding, without the consent of any holder of
new notes, Mail-Well I Corporation and the trustee may amend or supplement
the indenture or the new notes:
(1) to cure any ambiguity, defect or inconsistency;
(2) to provide for uncertificated new notes in addition to or in
place of certificated new notes;
(3) to provide for the assumption of Mail-Well I Corporation's
obligations to holders of new notes in the case of a merger or
consolidation or sale of all or substantially all of Mail-Well
I Corporation's assets;
(4) to make any change that would provide any additional rights or
benefits to the holders of new notes or that does not
adversely affect the legal rights under the indenture of any
such holder; or
(5) to comply with requirements of the Commission in order to
effect or maintain the qualification of the indenture under
the Trust Indenture Act.
BOOK-ENTRY; DELIVERY AND FORM
The new notes initially will be in the form of one or more
registered "global new notes" without interest coupons. The global notes
will be deposited with, or on behalf of, the Depository Trust Company and
registered in the name of DTC or its nominee, who will be the global notes
holder. Except as set forth below, the global notes may be transferred, in
whole and not in part, only to DTC or another nominee of DTC in limited
circumstances. Investors may hold their beneficial interests in the global
notes directly through DTC if they are participating organizations or
"participants" in such system or indirectly through organizations that are
participants in such system. Except in the limited circumstances described
below, owners of beneficial interests in the global notes will not be
entitled to receive physical delivery of certificated new notes. Such
certificated notes may, unless the global note has previously been exchanged
for certificated notes, be exchanged for an interest in the global note
representing the principal amount of new notes being transferred. In
addition, transfer of beneficial interests in global notes will be subject
to the applicable rules and procedures of DTC and its direct participants or
indirect participants, including, if applicable, those of Euroclear and
CEDEL, which may change from time to time.
The new notes may be presented from registration of transfer and
exchanged at the offices of the registrar.
DEPOSITORY PROCEDURES
The following description of the operations and procedures of DTC
are provided solely as a matter of convenience. These operations and
procedures are solely within the control of the respective settlement
systems and are subject to changes by them from time to time. We take no
responsibility for these operations and procedures and urge investors to
contact the system or their participants directly to discuss these matters.
DTC has advised us that DTC is a limited-purpose trust company that
was created to hold securities for its participants and to facilitate the
clearance and settlement of transactions in such securities between
participants through electronic book-entry changes in accounts of its
participants. The participants include securities brokers and dealers
(including the initial purchasers), banks and trust companies, clearing
corporations and certain other organizations. Access to DTC's system is also
available to other entities such as banks, brokers, dealers and trust
companies, which we refer to as "indirect participants," that clear through
or maintain a custodial relationship with a participant, either directly or
indirectly, persons who are not participants may beneficially own securities
held by or on behalf of DTC only through the participants or the indirect
participants.
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We expect that pursuant to procedures established by DTC (i) upon
deposit of the global notes, DTC will credit the accounts of participants
designated by the initial purchasers with portions of the principal amount
of the global notes and (ii) ownership of the new notes evidenced by the
global notes will be shown on, and the transfer of ownership thereof will be
effected only through, records maintained by DTC (with respect to the
interests of the participants), the participants and the indirect
participants.
Investors in the global notes may hold their interests therein
directly through DTC, if they are participants in such system, or indirectly
through organizations which are participants in such system. Euroclear and
Clearstream Banking will hold interests in the global notes on behalf of
their participants through customers' securities accounts in their
respective names on the books of their respective depositories, which are
Morgan Guaranty Trust Mail-Well I Corporation of New York, Brussels office,
as operator of Euroclear and Citibank, N.A., as operator of Clearstream
Banking. These depositories, in turn, will hold the interests in the global
notes in customer's securities accounts in the depositaries' names on the
books of DTC. All interests in a Global note may be subject to the
procedures and requirements of DTC.
The laws of some states require that certain persons take physical
delivery in definitive form of securities that they own. Consequently, the
ability to transfer beneficial interests in a Global note to such persons
will be limited to that extent. Because DTC can act only on behalf of
participants, which in turn act on behalf of indirect participants and
certain banks, the ability of a person having beneficial interests in a
Global note to pledge such interests to persons or entities that do not
participate in the DTC systems, or otherwise take actions in respect of such
interests, may be affected by the lack of a physical certificate evidencing
such interests.
Except as described below, owners of interest in the global notes
will not have new notes registered in their names, will not receive physical
delivery of new notes in certificated form and will not be considered the
registered owners or "holders" thereof under the indenture for any purpose.
Payments in respect of the principal of, premium, if any, and
interest on a Global note registered in the name of DTC or its nominee will
be payable to DTC in its capacity as the registered holder under the
indenture. Under the terms of the indenture, we and the trustee will treat
the persons in whose names the new notes, including the global notes, are
registered as the owners thereof for the purpose of receiving such payments
and for any and all other purposes whatsoever. Consequently, neither the
trustee nor any agent of us or the trustee has or will have any
responsibility or liability for (1) any aspect of DTC's records or any
participant's or indirect participant's records relating to or payments made
on account of beneficial ownership interests in the global notes, or for
maintaining, supervising or reviewing any of DTC's records or any
participant's or indirect participant's records relating to the beneficial
ownership interests in the global notes or (2) any other matter relating to
the actions and practices of DTC or any of its participants or indirect
participants. DTC has advised us that its current practice, upon receipt of
any payment in respect of securities such as the new notes (including
principal and interest), is to credit the accounts of the relevant
participants with the payment on the payment date, in amounts proportionate
to their respective holdings in the principal amount of beneficial interest
in the relevant security as shown on the records of DTC unless DTC has
reason to believe it will not receive payment on such payment date. Payments
by the participants and the indirect participants to the beneficial owners
of new notes will be governed by standing instructions and customary
practices and will be the responsibility of the participants or the indirect
participants and will not be the responsibility of DTC, the trustee or us.
Neither we nor the trustee will be liable for any delay by DTC or any of its
participants in identifying the beneficial owners of the new notes, and we
and the trustee may conclusively rely on and will be protected in relying on
instructions from DTC or its nominee for all purposes.
Interests in the global notes will trade in DTC's Same-Day Funds
Settlement System and secondary market trading activity in such interests
will, therefore, settle in immediately available funds,
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subject in all cases to the rules and procedures of DTC and its
participants. See "--Same-Day Settlement and Payment."
Transfers between participants in DTC will be effected in
accordance with DTC's procedures, and will be settled in same day funds.
Cross-market transfers between direct participants in DTC, on the
one hand, and indirect participants who hold interests in the new notes
through Euroclear on CEDEL, on the other hand, will be effected by
Euroclear's or CEDEL's respective nominee through DTC in accordance with
DTC's rules on behalf of Euroclear or CEDEL; however, delivery of
instructions relating to crossmarket transactions must be made directly to
Euroclear or CEDEL, as the case may be, by the counterparty in accordance
with the rules and procedures of Euroclear or CEDEL and within their
established deadlines, using Brussels time for Euroclear and U.K. time for
CEDEL. Indirect participants who hold interest in the new notes through
Euroclear and CEDEL may not deliver instructions directly to Euroclear's or
CEDEL's nominee. Euroclear or CEDEL will, if the transaction meets its
settlement requirements, deliver instructions to its respective nominee to
deliver or receive interests on Euroclear's or CEDEL's behalf in the
relevant global note in DTC, and make or receive payment in accordance with
normal procedures for same-day funds settlement applicable to DTC.
Because of time zone differences, the securities of accounts of an
indirect participant who holds an interest in the new notes through
Euroclear or CEDEL purchasing an interest in a global note from a direct
participant in DTC will be credited, and any such crediting will be reported
to Euroclear or CEDEL during the European business day immediately following
the settlement date of DTC in New York. Although recorded in DTC's
accounting records as of DTC's settlement date in New York, Euroclear and
CEDEL customers will not have access to the cash amount credited to their
accounts as a result of a sale of an interest in a global note to a DTC
participant until the European business day for Euroclear or CEDEL
immediately following DTC's settlement date.
DTC has advised us that it will take any action permitted to be
taken by a holder of new notes only at the direction of one or more
participants to whose account DTC has credited the interests in the global
notes and only in respect of such portion of the aggregate principal amount
of the new notes as to which such participant or participants has or have
given such direction. However, if there is an event of default under the new
notes, DTC reserves the right to exchange the global notes for legended new
notes in certificated form, and to distribute such new notes to its
participants.
Although DTC, Euroclear and Clearstream Banking have agreed to the
foregoing procedures to facilitate transfers of interests in the global
notes among participants in DTC, Euroclear and Clearstream Banking, they are
under no obligation to perform or to continue to perform such procedures,
and such procedures may be discontinued at any time. Neither we nor the
trustee nor any of their respective agents will have any responsibility for
the performance by DTC, Euroclear or Clearstream Banking or their respective
participants or indirect participants of their respective obligations under
the rules and procedures governing their operations.
CERTIFICATED SECURITIES
Subject to certain conditions, any person having a beneficial
interest in a global note may, upon request to the trustee, exchange such
beneficial interest for new notes in the form of certificated securities.
Upon any such issuance, the trustee is required to register such
certificated securities in the name of, and cause the same to be delivered
to, such person or persons (or the nominee of any thereof). If:
(a) we notify the trustee in writing that DTC is no longer willing
or able to act as a depositary and we are unable to locate a
qualified successor within 90 days, or
(b) we, at our option, notify the trustee in writing that we elect
to cause the issuance of new notes in the form of certificated
securities under the indenture, then, upon surrender by the
global
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notes holder of its global notes, new notes in such form will
be issued to each person that the global notes holder and DTC
identify as being the beneficial owner of the related new
notes.
Neither we nor the trustee will be liable for any delay by the
global notes holder or DTC in identifying the beneficial owners of new notes
and we and the trustee may conclusively rely on, and will be protected in
relying on, instructions from the global notes holder or DTC for all
purposes.
SAME-DAY SETTLEMENT AND PAYMENT
The indenture will require that payments in respect of the new
notes represented by the global notes (including principal, premium, if any,
and interest) be made by wire transfer of immediately available funds to the
accounts specified by the global notes holder. With respect to certificated
securities, we will make all payments of principal, premium, if any, and
interest by wire transfer of immediately available funds to the accounts
specified by the holders thereof or, if no such account is specified, by
mailing a check to each such holder's registered address.
METHODS OF RECEIVING PAYMENTS ON THE NEW NOTES
If a holder has given wire transfer instructions to us, we will
make all principal, premium and interest payments on those new notes in
accordance with those instructions. All other payments on these new notes
will be made at the office or agency of the payment agent and registrar
within the City and State of New York unless we elect to make interest
payments by check mailed to the holders at their address set forth in the
register of holders.
PAYING AGENT AND REGISTRAR FOR THE NEW NOTES
The trustee will initially act as paying agent and registrar for
the new notes. We may change the paying agent or registrar without prior
notice to the holders of the new notes, and we or any of our subsidiaries
may act as paying agent or registrar.
TRANSFER AND EXCHANGE
A holder may transfer or exchange new notes in accordance with the
indenture. The registrar and the trustee may require a holder, among other
things, to furnish appropriate endorsements and transfer documents and we
may require a holder to pay any taxes and fees required by law or permitted
by the indenture. We are not required to transfer or exchange any senior
note selected for redemption. Also, we are not required to transfer or
exchange any senior note for a period of 15 days before a selection of new
notes to be redeemed.
The registered holder of a senior note will be treated as the owner
of it for all purposes.
CONCERNING THE TRUSTEE
If the trustee becomes a creditor of us, the indenture limits its
right to obtain payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or otherwise. The
trustee will be permitted to engage in other transactions; however, if it
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the Commission for permission to continue or resign.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the indenture.
Reference is made to the indenture for a full disclosure of all such terms,
as well as any other capitalized terms used herein for which no definition
is provided.
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"Acquired Debt" means, with respect to any specified person:
(1) Indebtedness of any other person existing at the time such
other person is merged with or into or became a subsidiary of
such specified person, whether or not such indebtedness is
incurred in connection with, or in contemplation of, such
other person merging with or into, or becoming a subsidiary
of, such specified person; and
(2) Indebtedness secured by a lien encumbering any asset acquired
by such specified person.
"Additional Notes" has the meaning set forth above under the
caption "--Principal, Maturity and Interest."
"Affiliate" of any specified person means any other person directly
or indirectly controlling or controlled by or under direct or indirect
common control with such specified person. For purposes of this definition,
"control," as used with respect to any person, shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of such person, whether through the ownership of
voting securities, by agreement or otherwise; provided that beneficial
ownership of 10% or more of the voting stock of a person shall be deemed to
be control. For purposes of this definition, the terms "controlling,"
"controlled by" and "under common control with" shall have correlative
meanings.
"Asset Sale" means:
(1) the sale, lease, conveyance or other disposition of any assets
or rights, including sales and leasebacks, but excluding sales
of inventory and equipment in the ordinary course of business
consistent with past practices; provided that the sale, lease,
conveyance or other disposition of all or substantially all of
the assets of Mail-Well I Corporation and its restricted
subsidiaries taken as a whole will be governed by the
provisions of the indenture described above under the caption
"--Change of Control", and/or the provisions described above
under the caption "--Merger, Consolidation or Sale of Assets"
and not by the provisions of the asset sale covenant; and
(2) the issuance of equity interests by any of Mail-Well I
Corporation's restricted subsidiaries or the sale of equity
interests in any of its subsidiaries,
Notwithstanding the preceding, the following items shall not be
deemed to be asset sales:
o any single transaction or series of related transactions that:
(a) involves assets having a fair market value of less than $5
million; or (b) results in net proceeds to Mail-Well I
Corporation and its restricted subsidiaries of less than $5
million;
o a transfer of assets between or among Mail-Well I Corporation
and its wholly owned restricted subsidiaries;
o an issuance of equity interests by a wholly owned restricted
subsidiary to Mail-Well I Corporation or to another wholly owned
restricted subsidiary;
o a disposition of assets or stock of Mail-Well Label Company,
MWL U.K. Limited, and Lancer Label Canada, Inc.; and
o a restricted payment that is permitted by the covenant described
above under the caption "--restricted payments."
"Attributable Debt" in respect of a sale and leaseback transaction
means, at the time of determination, the present value of the obligation of
the lessee for net rental payments during the remaining term of the lease
included in such sale and leaseback transaction including any period for
which such lease has been extended or may, at the option of the lessor, be
extended. Such present value shall be calculated using a discount rate equal
to the rate of interest implicit in such transaction, determined in
accordance with GAAP.
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"Beneficial Owner" has the meaning assigned to such term in Rule
l3d-3 and Rule l3d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular "person" (as such term is used in
Section 13(d)(3) of the Exchange Act), such "person" shall be deemed to have
beneficial ownership of all securities that such "person" has the right to
acquire, whether such right is currently exercisable or is exercisable only
upon the occurrence of a subsequent condition.
"Capital Stock" means:
(1) in the case of a corporation, corporate stock;
(2) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents
(however designated) of corporate stock;
(3) in the case of a partnership or limited liability company,
partnership or membership interests (whether general or
limited); and
(4) any other interest or participation that confers on a person
the right to receive a share of the profits and losses of, or
distributions of assets of, the issuing person.
"Change of Control" means the occurrence of any of the following:
(1) the sale, transfer, conveyance or other disposition (other
than by way of merger or consolidation), in one or a series of
related transactions, of all or substantially all of the
assets of Mail-Well I Corporation and its subsidiaries taken
as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than a principal or a
related party of a principal;
(2) the adoption of a plan relating to the liquidation or
dissolution of Mail-Well I Corporation;
(3) the consummation of any transaction (including, without
limitation, any merger or consolidation) the result of which
is that any "person" (as defined above), other than the
principals and their related parties, becomes the beneficial
owner, directly or indirectly, of more than 35% of the voting
stock of Mail-Well I Corporation or Mail-Well, Inc., measured
by voting power rather than number of shares;
(4) the first day on which a majority of the members of the board
of directors of Mail-Well I Corporation or Mail-Well, Inc.
are not continuing directors; or
(5) Mail-Well I Corporation or Mail-Well, Inc. consolidates with,
or merges with or into, any person, or any person consolidates
with, or merges with or into, Mail-Well I Corporation or
Mail-Well, Inc., in any such event pursuant to a transaction
in which any of the outstanding voting stock of Mail-Well I
Corporation or Mail-Well, Inc. is converted into or exchanged
for cash, securities or other property, other than any such
transaction where the voting stock of Mail-Well I Corporation
or Mail-Well, Inc. outstanding immediately prior to such
transaction is converted into or exchanged for voting stock of
the surviving or transferee person constituting a majority of
the outstanding shares of such voting stock of such surviving
or transferee person immediately after giving effect to such
issuance. For the avoidance of doubt, the sales of the assets
or stocks of subsidiaries that Mail-Well I Corporation is
currently holding for sale as part of its strategic plan will
not constitute a change of control.
"Consolidated Cash Flow" means, with respect to any person for any
period, the consolidated net income of such person for such period plus:
(1) an amount equal to any extraordinary loss plus any net loss
realized in connection with an asset sale, to the extent such
losses were deducted in computing such consolidated net
income; plus
(2) provision for taxes based on income or profits of such person
and its subsidiaries for such period, to the extent that such
provision for taxes was deducted in computing such
consolidated net income; plus
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(3) consolidated interest expense of such person and its
subsidiaries for such period, whether paid or accrued and
whether or not capitalized (including, without limitation,
amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component
of any deferred payment obligations, the interest component of
all payments associated with capital lease Obligations,
imputed interest with respect to Attributable Debt,
commissions, discounts and other fees and charges incurred in
respect of letter of credit or bankers' acceptance financings,
and net payments, if any, pursuant to hedging obligations), to
the extent that any such expense was deducted in computing
such consolidated net income; plus
(4) depreciation, amortization (including amortization of goodwill
and other intangibles) and other non-cash expenses of such
person and its subsidiaries for such period to the extent that
such depreciation, amortization and other non-cash expenses
were deducted in computing such consolidated net income; minus
(5) non-cash items increasing such consolidated net income for
such period, other than items that were accrued in the
ordinary course of business, in each case on a consolidated
basis.
Notwithstanding the preceding, the provision for taxes based on the
income or profits of, and the depreciation and amortization and other
non-cash charges of, a subsidiary of Mail-Well I Corporation shall be added
to consolidated net income to compute Consolidated Cash Flow of Mail-Well I
Corporation only to the extent that a corresponding amount would be
permitted at the date of determination to be dividended to Mail-Well I
Corporation by such subsidiary without prior approval (that has not been
obtained), pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that subsidiary or its shareholders.
"Consolidated Net Income" means, with respect to any specified
person for any period, the aggregate of the Net Income of such person and
its restricted subsidiaries for such period, on a consolidated basis,
provided that:
(1) the net income (but not loss) of any person that is not a
restricted subsidiary or that is accounted for by the equity
method of accounting shall be included only to the extent of
the amount of dividends or distributions paid in cash to the
specified person or a wholly owned subsidiary thereof;
(2) the net income of any non-guarantor restricted subsidiary
shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that
non-guarantor restricted subsidiary of that net income is not
at the date of determination permitted without any prior
governmental approval (that has not been obtained) or,
directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that
non-guarantor restricted subsidiary or its shareholders;
(3) the net income of any person acquired in a pooling of
interests transaction for any period prior to the date of such
acquisition shall be excluded;
(4) the net income (but not loss) of any unrestricted subsidiary
shall be excluded, whether or not distributed to the specified
person or one of its subsidiaries; and
(5) any writedowns with respect to, or losses on dispositions of,
subsidiaries and assets held for sale as of the date of the
indenture, and all restructuring charges incurred by
Mail-Well I Corporation, Mail-Well, Inc. and the subsidiaries,
shall be excluded; and
(6) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any person as of
any date, the sum of:
(1) the consolidated equity of the common shareholders of such
person and its consolidated subsidiaries as of such date; plus
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(2) the respective amounts reported on such person's balance sheet
as of such date with respect to any series of preferred stock
that by its terms is not entitled to the payment of dividends
unless such dividends may be declared and paid only out of net
earnings in respect of the year of such declaration and
payment, but only to the extent of any cash received by such
person upon issuance of such preferred stock.
"Continuing Directors" means, as of any date of determination, any
member of the board of directors of Mail-Well I Corporation or Mail-Well,
Inc. who:
(1) was a member of such board of directors on the date we sold
the old notes; or
(2) was nominated for election or elected to such board of
directors with the approval of a majority of the continuing
directors who were members of the board of directors of
Mail-Well, Inc. at the time of such nomination or election.
"Credit Facilities" means, with respect to Mail-Well I Corporation
or any restricted subsidiary, one or more debt facilities or commercial
paper facilities, in each case with banks or other institutional lenders
providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special
purpose entities formed to borrow from such lenders against such
receivables) or other asset securitizations or letters of credit, in each
case, as amended, restated, modified, renewed, refunded, replaced or
refinanced in whole or in part from time to time.
"Default" means any event that is, or with the passage of time or
the giving of notice or both would be, an event of default.
"Equity Interests" mean capital stock and all warrants, options or
other rights to acquire capital stock (but excluding any debt security that
is convertible into, or exchangeable for, capital stock).
"Equity Offering" means any private or underwritten public offering
of common stock of Mail-Well I Corporation or Mail-Well, Inc. in which the
gross proceeds to Mail-Well I Corporation or Mail-Well, Inc., as applicable,
are at least $50 million and, in the case of an offering by Mail-Well, Inc.,
the net proceeds are contributed to Mail-Well I Corporation.
"Exchange Offer Registration Statement" means that certain
registration statement filed by Mail-Well I Corporation with the Commission
to register the exchange offer.
"Exchange Offer" means the offer made to the holders of the new
notes to exchange their new notes for the new notes.
"Exchange Notes" means the new notes.
"Existing Indebtedness" means indebtedness of Mail-Well I
Corporation and its restricted subsidiaries in existence on the date we sold
the old notes.
"Fixed Charges" means, with respect to any person for any period,
the sum, without duplication, of:
(1) the consolidated interest expense of such person and its
restricted subsidiaries for such period, whether paid or
accrued, including, without limitation, amortization of debt
issuance costs and original issue discount, non-cash interest
payments, the interest component of any deferred payment
obligations, the interest component of all payments associated
with capital lease obligations, imputed interest with respect
to attributable debt, commissions, discounts, and other fees
and charges incurred in respect of letter of credit or
bankers' acceptance financings, and net payments, if any,
pursuant to hedging obligations; plus
(2) the consolidated interest expense of such person and its
restricted subsidiaries that was capitalized during such
period; plus
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(3) any interest expense on indebtedness of another person that is
guaranteed by such person or one of its restricted
subsidiaries or secured by a lien on assets of such person or
one of its restricted subsidiaries, whether or not such
guarantee or lien is called upon; plus
(4) cash dividend payments on any series of preferred stock of
such person or any of its restricted subsidiaries.
"Fixed Charge Coverage Ratio" means, with respect to any specified
person for any period, the ratio of the consolidated cash flow of such
person and its restricted subsidiaries for such period to the fixed charges
of such person for such period. In the event that the specified person or
any of its restricted subsidiaries incurs, assumes, guarantees or redeems
any indebtedness or issues or redeems preferred stock subsequent to the
commencement of the period for which the fixed charge coverage ratio is
being calculated but prior to the date on which the event for which the
calculation of the fixed charge coverage ratio is made (the "calculation
date"), then the fixed charge coverage ratio shall be calculated giving pro
forma effect to such incurrence, assumption, guarantee or redemption of
indebtedness, or such issuance or redemption of preferred stock, as if the
same had occurred at the beginning of the applicable four-quarter reference
period; provided, however, borrowings in the ordinary course of business
under any revolving credit agreement shall not be given pro forma effect and
shall be included in the calculation of the fixed charge coverage ratio only
to the extent such borrowings were actually outstanding during the
applicable four-quarter reference period.
In addition, for purposes of calculating the fixed charge coverage
ratio:
(1) acquisitions that have been made by the specified person or
any of its restricted subsidiaries, including through mergers
or consolidations and including any related financing
transactions, during the four-quarter reference period or
subsequent to such reference period and on or prior to the
calculation date shall be deemed to have occurred on the first
day of the four-quarter reference period and consolidated cash
flow for such reference period shall be calculated without
giving effect to clause (3) of the proviso set forth in the
definition of consolidated net income;
(2) the consolidated cash flow attributable to discontinued
operations, as determined in accordance with GAAP, and
operations or businesses disposed of prior to the calculation
date, shall be excluded; and
(3) the fixed charges attributable to discontinued operations, as
determined in accordance with GAAP, and operations or
businesses disposed of prior to the calculation date, shall be
excluded, but only to the extent that the obligations giving
rise to such fixed charges will not be obligations of the
specified person or any of its restricted subsidiaries
following the calculation date.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements, and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant
segment of the accounting profession, which are in effect from time to time.
"Guarantee" means a guarantee other than by endorsement of
negotiable instruments for collection in the ordinary course of business,
direct or indirect, in any manner including, without limitation, by way of a
pledge of assets or through letters of credit or reimbursement agreements in
respect thereof, of all or any part of any indebtedness.
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"Guarantors" means each of:
(1) Mail-Well, Inc.,
(2) each subsidiary guarantor; and
(3) any other subsidiary that executes a note guarantee in
accordance with the provisions of the indenture;
and their respective successors and assigns.
"Hedging Obligations" means, with respect to any person, the
obligations of such person under:
(1) interest rate swap agreements, interest rate cap agreements
and interest rate collar agreements;
(2) other agreements or arrangements designed to protect such
person against fluctuations in interest rates or the value of
foreign currencies purchased or received by such person in the
ordinary course of business; and
(3) any commodity futures or option contract or other similar
commodity hedging contract designed to protect such person
against fluctuations in commodity prices.
"Holder" means the person in whose name a note is registered on the
registrar's books.
"Indebtedness" means, with respect to any specified person, any
indebtedness of such person, whether or not contingent, in respect of:
(1) borrowed money;
(2) evidenced by bonds, new notes, debentures or similar
instruments or letters of credit (or reimbursement agreements
in respect thereof);
(3) banker's acceptances;
(4) representing capital lease obligations;
(5) the balance deferred and unpaid of the purchase price of any
property, except any such balance that constitutes an accrued
expense or trade payable; or
(6) representing any hedging obligations,
if and to the extent any of the preceding items (other than letters of
credit and hedging obligations) would appear as a liability upon a balance
sheet of the specified person prepared in accordance with GAAP. In addition,
the term "indebtedness" includes all indebtedness of others secured by a
lien on any asset of the specified person (whether or not such indebtedness
is assumed by the specified person) and, to the extent not otherwise
included, the guarantee by such person of any indebtedness of any other
person.
The amount of any indebtedness outstanding as of any date shall be:
(1) the accreted value thereof, in the case of any indebtedness
issued with original issue discount; and
(2) the principal amount thereof, together with any interest
thereon that is more than 30 days past due, in the case of any
other indebtedness.
"Intercompany Notes" means the intercompany new notes issued by
restricted subsidiaries of Mail-Well I Corporation that are not guarantors
in favor of Mail-Well I Corporation or a guarantor to evidence advances by
Mail-Well I Corporation or such guarantor, in each case, in the form
attached as Exhibit F to the indenture.
"Investments" means, with respect to any person, all investments by
such person in other persons (including affiliates) in the forms of direct
or indirect loans (including guarantees of indebtedness or
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other obligations), advances or capital contributions (excluding commission,
travel and similar advances to officers and employees made in the ordinary
course of business), purchases or other acquisitions for consideration of
indebtedness, equity interests or other securities, together with all items
that would be classified as investments on a balance sheet prepared in
accordance with GAAP excluding hedging obligations. If Mail-Well I
Corporation or any restricted subsidiary of Mail-Well I Corporation sells or
otherwise disposes of any equity interests of any direct or indirect
restricted subsidiary of Mail-Well I Corporation such that, after giving
effect to any such sale or disposition, such person is no longer a
restricted subsidiary of Mail-Well I Corporation, Mail-Well I Corporation
shall be deemed to have made an investment on the date of any such sale or
disposition equal to the fair market value of the equity interests of such
restricted subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above under the
caption "--Restricted Payments."
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such asset, whether or not filed, recorded or otherwise perfected under
applicable law, including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement to
sell or give a security interest in and any filing of or agreement to give
any financing statement under the Uniform Commercial Code (or equivalent
statutes) of any jurisdiction.
"Net Income" means, with respect to any person, the net income
(loss) of such person and its restricted subsidiaries, determined in
accordance with GAAP and before any reduction in respect of preferred stock
dividends, excluding, however:
(1) any gain (but not loss), together with any related provision
for taxes on such gain (but not loss), realized in connection
with: (a) any asset sale; or (b) the disposition of any
securities by such person or any of its restricted
subsidiaries or the extinguishment of any indebtedness of such
person or any of its restricted subsidiaries; and
(2) any extraordinary or nonrecurring gain or loss, together with
any related provision for taxes on such extraordinary or
nonrecurring gain or loss.
"Net Proceeds" means the aggregate cash proceeds received by
Mail-Well I Corporation or any of its restricted subsidiaries in respect of
any asset sale (including, without limitation, any cash received upon the
sale or other disposition of any non-cash consideration received in any
asset sale), net of the direct costs relating to such asset sale, including,
without limitation, legal, accounting and investment banking fees, and sales
commissions, and any relocation expenses incurred as a result thereof, taxes
paid or payable as a result thereof, in each case after taking into account
any available tax credits or deductions and any tax sharing arrangements and
amounts required to be applied to the repayment of indebtedness secured by a
lien on the asset or assets that were the subject of such asset sale and any
reserve for adjustment in respect of the sale price of such asset or assets
established in accordance with GAAP.
"Non-Recourse Debt" means indebtedness:
(1) as to which neither Mail-Well I Corporation nor any of its
restricted subsidiaries (a) provides credit support of any
kind (including any undertaking, agreement or instrument that
would constitute indebtedness), (b) is directly or indirectly
liable as a guarantor or otherwise, or (c) constitutes the
lender; and
(2) no default with respect to which (including any rights that
the holders thereof may have to take enforcement action
against an unrestricted subsidiary) would permit upon notice,
lapse of time or both any holder of any other indebtedness
(other than the new notes) of Mail-Well I Corporation or any
of its restricted subsidiaries to declare a default on such
other indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity.
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"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable
under the documentation governing any indebtedness.
"Permitted Businesses" means the printing business generally
including the business conducted by Mail-Well I Corporation and its
subsidiaries as of the date we sold the old notes and any other business or
businesses ancillary, complementary or related thereto.
"Permitted Investments" means:
(1) any investment in Mail-Well I Corporation or in a restricted
subsidiary of Mail-Well I Corporation;
(2) any investment in cash equivalents;
(3) any investment by Mail-Well I Corporation or any restricted
subsidiary of Mail-Well I Corporation in a person if as a
result of such investment:
o such person becomes a restricted subsidiary of Mail-Well I
Corporation; or
o such person is merged, consolidated or amalgamated with
or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, Mail-Well I Corporation
or a restricted subsidiary of Mail-Well I Corporation;
(4) any Investment made as a result of the receipt of non-cash
consideration from an asset sale that was made pursuant to
and in compliance with the covenant described above under the
caption "--Repurchase at the Option of Holder--Asset Sales";
(5) investments existing as of the date we sold the old notes;
(6) any acquisition of assets solely in exchange for the issuance
of equity interests of Mail-Well I Corporation;
(7) accounts receivable, endorsements for collection, deposits or
similar investments arising in the ordinary course of business;
(8) any investment by Mail-Well I Corporation or a restricted
subsidiary in assets of a permitted business or assets to be
used in a permitted business;
(9) stock, obligations or securities received in settlement of
debts created in the ordinary course of business and owing to
Mail-Well I Corporation or any subsidiary or in satisfaction
of judgments;
(10) the acceptance of new notes payable from employees of
Mail-Well I Corporation or its subsidiaries in payment for
the purchase of capital stock by such employees; and
(11) any other investment in any person having an aggregate fair
market value (measured on the date each such Investment was
made and without giving effect to subsequent changes in
value), when taken together with all other Investments made
pursuant to this clause (11) since the date of the date we
sold the old notes and existing at the time such Investment
was made, did not exceed $25 million.
"Permitted Liens" means:
(1) liens securing all indebtedness outstanding under credit
facilities and all hedging obligations with respect thereto;
(2) liens in favor of Mail-Well I Corporation or the guarantors;
(3) liens when the new notes are secured by such lien on an equal
and ratable basis unless the obligation secured by any such
lien is subordinate or junior in right of payment to the new
notes, in which case the lien securing such obligation must
be subordinate and junior to the
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lien securing the new notes with the same or lesser relative
priority as such obligation shall have been with respect to
the new notes;
(4) liens on property of a person existing at the time such
person becomes a restricted subsidiary or is merged with or
into or consolidated with Mail-Well I Corporation or any
restricted subsidiary of Mail-Well I Corporation, provided
that such liens were in existence prior to the contemplation
of such acquisition, merger or consolidation and do not
extend to any assets other than those of the person acquired
or merged into or consolidated with Mail-Well I Corporation
or the restricted subsidiary;
(5) liens on property existing at the time of acquisition thereof
by Mail-Well I Corporation or any restricted subsidiary of
Mail-Well I Corporation, provided that such liens were in
existence prior to the contemplation of such acquisition;
(6) liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other
obligations of a like nature incurred in the ordinary course
of business;
(7) liens to secure indebtedness (including capital lease
obligations) permitted by clause (4) of the second paragraph
of the covenant described under the caption "Incurrence of
Indebtedness" covering only the assets acquired with such
indebtedness;
(8) liens existing on the date of the indenture;
(9) liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly
instituted and diligently concluded, provided that any
reserve or other appropriate provision as shall be required
in conformity with GAAP shall have been made therefor;
(10) liens incurred or deposits made in the ordinary course of
business in connection with workers' compensation,
unemployment insurance and other types of social security,
old age pension or public liability obligations or to secure
the payment or performance of bids, tenders, statutory or
regulatory obligations, surety, stay, or appeal bonds,
performance bonds or other obligations of a like nature
incurred in the ordinary course of business;
(11) easements, rights-of-way, restrictions, defects or
irregularities in title and other similar charges or
encumbrances not interfering in any material respect with the
business of Mail-Well I Corporation or any of its
subsidiaries;
(12) purchase money liens (including extensions and renewals
thereof);
(13) liens securing reimbursement obligations with respect to
letters of credit which encumber only documents and other
property relating to such letters of credit and the products
and proceeds thereof;
(14) judgment and attachment liens not giving rise to an event of
default;
(15) liens encumbering deposits made to secure obligations arising
from statutory, regulatory, contractual or warranty
requirements;
(16) liens arising out of consignment or similar arrangements for
the sale of goods;
(17) any interest or title of a lessor in property subject to any
capital lease obligation or operating lease;
(18) statutory liens of landlords and liens of carriers,
warehousemen, mechanics, suppliers, materialmen repairmen and
other liens imposed by law incurred in the ordinary course of
business for sums not, yet delinquent or being contested in
good faith by appropriate proceeding, if such reserve or
other appropriate provision, if any, as shall be required by
GAAP shall have been made in respect thereof;
86
(19) liens upon specific items of inventory or other goods and
proceeds of any person securing such person's obligations in
respect of bankers' acceptances issued or created for the
account of such person to facilitate the purchase, shipment,
or storage of such inventory or other goods;
(20) liens securing hedging obligations that are otherwise permitted
under the indenture;
(21) leases or subleases granted to others that do not materially
interfere with the ordinary course of business of Mail-Well I
Corporation and its subsidiaries;
(22) liens arising from filing Uniform Commercial Code financing
statements regarding leases;
(23) liens in favor of customs and revenue authorities arising as
a matter of law to secure payment of custom duties in
connection with the importation of goods;
(24) liens in favor of collecting or payor banks having a right of
setoff, revocation, refund or chargeback with respect to
money or instruments of Mail-Well I Corporation or any
subsidiary on deposit with or in possession of such bank;
(25) liens to secure non-recourse debt; and
(26) liens to secure any permitted refinancing indebtedness (or
successive permitted refinancing indebtedness) which
refinances as a whole, or in part, any indebtedness secured
by any lien referred to in the foregoing clauses (1), (4),
(5), (7), (8) and (12); provided, however, that:
(A) such new lien shall be limited to all or part of the
same property that secured the original lien (plus
improvements to or on such property) and
(B) the indebtedness secured by such lien at such time is
not increased to any amount greater than the sum of:
(i) the outstanding principal amount or, if greater,
committed amount of the indebtedness secured by
liens described under clauses (1), (4), (5), (7),
(8) or (12) at the time the original lien became a
permitted lien under the indenture and
(ii) an amount necessary to pay any fees and expenses,
including premiums, related to such permitted
refinancing indebtedness; and
(27) liens not otherwise permitted by clauses (1) through (26)
that are incurred in the ordinary course of business of
Mail-Well I Corporation or any subsidiary of Mail-Well I
Corporation with respect to obligations that do not exceed
$10 million at any one time outstanding.
"Permitted Payments to Parent Company" means:
(1) payments to Mail-Well, Inc. in an amount sufficient to permit
Mail-Well, Inc. to pay reasonable and necessary operating
expenses and other general corporate expenses to the extent
such expenses relate or are fairly allocable to Mail-Well I
Corporation and its subsidiaries including any reasonable
professional fees and expenses not in excess of $1 million in
the aggregate during any consecutive 12-month period;
(2) payment to Mail-Well, Inc. to enable Mail-Well, Inc. to pay
foreign, federal, state or local tax liabilities ("tax
payment"), not to exceed the amount of any tax liabilities
that would be otherwise payable by Mail-Well I Corporation
and its subsidiaries to the appropriate taxing authorities if
they filed separate tax returns, to the extent that
Mail-Well, Inc. has an obligation to pay such tax liabilities
relating to the operations, assets or capital of Mail-Well I
Corporation or its subsidiaries; provided, however that (a),
notwithstanding the foregoing, in the case of determining the
amount of a tax payment that is permitted to be paid by
Mail-Well I Corporation and any of its U.S. subsidiaries in
respect of their federal income tax liability, such payment
shall be determined assuming that Mail-Well I Corporation is
the parent company of an affiliated group filing a
consolidated federal income tax return and that
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Mail-Well, Inc. and each such U.S. subsidiary is a member of
such affiliated group and (b) any tax payments shall either
be used by Mail-Well, Inc. to pay such tax liabilities within
90 days of Mail-Well, Inc.'s receipt of such payment or
refunded to the party from whom Mail-Well, Inc. received such
payments.
"Permitted Refinancing Indebtedness" means any indebtedness of
Mail-Well I Corporation or any of its restricted subsidiaries issued in
exchange for, or the net proceeds of which are used to extend, refinance,
renew, replace, defease or refund other indebtedness of Mail-Well I
Corporation or any of its restricted subsidiaries (other than intercompany
indebtedness); provided that:
(1) the principal amount (or accreted value, if applicable) of
such permitted refinancing indebtedness does not exceed the
principal amount of (or accreted value, if applicable), plus
accrued interest on the indebtedness so extended, refinanced,
renewed, replaced, defeased or refunded (plus the amount
reasonable expenses incurred in connection therewith
including premiums paid, if any, to the holder thereof);
(2) such permitted refinancing indebtedness has a final maturity
date either later than the final maturity date of the
indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded or 91 days following the maturity of the
new notes, and has a weighted average life to maturity equal
to or greater than the weighted average life to maturity of,
the indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded;
(3) If the indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded is subordinated in right of
payment to the new notes, such permitted refinancing
indebtedness has a final maturity date later than the final
maturity date of, and is subordinated in right of payment to,
the new notes on terms at least as favorable to the holders
of new notes as those contained in the documentation
governing the indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded; and
(4) such indebtedness is incurred either by Mail-Well I
Corporation or by the restricted subsidiary who is the
obligor on the indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or agency or political subdivision thereof
(including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or
business).
"Principals" means the officers and directors of Mail-Well, Inc. at
the date we sold the old notes, their affiliates (as such term is defined
under the Exchange Act) and Mail-Well, Inc.'s and Mail-Well I Corporation's
Employee Stock Ownership Plan and Trust.
"Registration Rights Agreement" means that certain agreement among
Mail-Well I Corporation, the guarantors and the initial purchasers requiring
Mail-Well I Corporation to file the exchange offer registration statement
and the shelf registration statement.
"Related Party" with respect to any principal means:
(1) any controlling shareholder, 80% or more owned subsidiary, or
spouse or immediate family member (in the case of an
individual) of such principal; or
(2) any trust, corporation, partnership or other entity, the
beneficiaries, shareholders, partners, owners or persons
beneficially holding an 80% or more controlling interest of
which consist of such principal and/or such other persons,
referred to in the immediately preceding clause (1).
"Restricted Investment" means an investment other than a permitted
investment.
"Restricted Subsidiary" of a person means any subsidiary of the
referenced person that is not an unrestricted subsidiary.
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"Shelf Registration Statement" means that certain shelf
registration statement filed by Mail-Well I Corporation with the Commission
to register resales of the old notes or the new notes.
"Significant Subsidiary" means any subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation
S-X, promulgated pursuant to the Securities Act of 1933, as such Regulation
is in effect on the date hereof.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such indebtedness, and shall not include any
contingent obligations to repay, redeem or repurchase any such interest or
principal prior to the date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any person:
(1) any corporation, association or other business entity of
which more than 50% of the total voting power of shares of
capital stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors,
managers or trustees thereof is at the time owned or
controlled, directly or indirectly, by such person or one or
more of the other subsidiaries of that person (or a
combination thereof); and
(2) any partnership (a) the sole general partner or the managing
general partner of which is such person or a subsidiary of
such person or (b) the only general partners of which are
such person or of one or more subsidiaries of such person (or
any combination thereof).
"Unrestricted Subsidiary" means any subsidiary of Mail-Well I
Corporation that is designated by the board of directors as an unrestricted
subsidiary pursuant to a board resolution, but only to the extent that such
subsidiary:
(1) has no indebtedness other than non-recourse debt;
(2) is not a party to any agreement, contract, arrangement or
understanding with Mail-Well I Corporation or any restricted
subsidiary of Mail-Well I Corporation unless the terms of any
such agreement, contract, arrangement or understanding are no
less favorable to Mail-Well I Corporation or such restricted
subsidiary than those that might be obtained at the time from
persons who are not affiliates of Mail-Well I Corporation;
(3) is a person with respect to which neither Mail-Well I
Corporation nor any of its restricted subsidiaries has any
direct or indirect obligation (a) to subscribe for additional
equity interests or (b) to maintain or preserve such person's
financial condition or to cause such person to achieve any
specified levels of operating results;
(4) has not guaranteed or otherwise directly or indirectly
provided credit support for any indebtedness of Mail-Well I
Corporation or any of its restricted subsidiaries; and
(5) has at least one director on its board of directors that is
not a director or executive officer of Mail-Well I
Corporation or any of its restricted subsidiaries and has at
least one executive officer that is not a director or
executive officer of Mail-Well I Corporation or any of its
restricted subsidiaries.
Any designation of a subsidiary of Mail-Well I Corporation as an
unrestricted subsidiary shall be evidenced to the trustee by filing with the
trustee a certified copy of the board resolution giving effect to such
designation and an officers' certificate certifying that such designation
complied with the preceding conditions and was permitted by the covenant
described above under the caption "Certain Covenants--Restricted Payments."
If, at any time, any unrestricted subsidiary would fail to meet the
preceding requirements as an unrestricted subsidiary, it shall thereafter
cease to be an unrestricted subsidiary for purposes of the indenture and any
indebtedness of such subsidiary shall be deemed to be incurred by a
restricted subsidiary of Mail-Well I Corporation as of such date and, if
such indebtedness is not permitted to be incurred as of such date under the
covenant described under the caption
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"Incurrence of Indebtedness," Mail-Well I Corporation shall be in default of
such covenant. The board of directors of Mail-Well I Corporation may at any
time designate any unrestricted subsidiary to be a restricted subsidiary;
provided that such designation shall be deemed to be an incurrence of
indebtedness by a restricted subsidiary of Mail-Well I Corporation of any
outstanding indebtedness of such unrestricted subsidiary and such
designation shall only be permitted if (1) such indebtedness is permitted
under the covenant described under the caption "Certain Covenants--
Incurrence of Indebtedness," calculated on a pro forma basis as if such
designation had occurred at the beginning of the four-quarter reference
period; and (2) no default or event of default would be in existence
following such designation.
"Voting Stock" of any person as of any date means the capital stock
of such person that is at the time entitled to vote in the election of the
board of directors of such person.
"Weighted Average Life to Maturity" means, when applied to any
indebtedness at any date, the number of years obtained by dividing:
(1) the sum of the products obtained by multiplying (a) the
amount of each then remaining installment, sinking fund,
serial maturity or other required payments of principal,
including payment at final maturity, in respect thereof, by
(b) the number of years (calculated to the nearest
one-twelfth) that will elapse between such date and the
making of such payment; by
(2) the then outstanding principal amount of such indebtedness.
"Wholly Owned Restricted Subsidiary" of any person means a
restricted subsidiary of such person all of the outstanding capital stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such person and/or by one or more wholly owned
restricted subsidiaries of such person.
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DESCRIPTION OF CERTAIN INDEBTEDNESS
The following descriptions of certain of our indebtedness do not
purport to be complete and are qualified in their entirety by reference to
the provisions of the various agreements and indentures related thereto,
copies of which have been filed with the SEC and to which reference is
hereby made.
SENIOR CREDIT FACILITY
In February 2000, we entered into a senior credit facility with
Bank of America, N.A. acting as administrative agent for a syndicate of
financial institutions. We have executed five amendments to the senior
credit facility with our lenders, the most recent of which was completed on
February 26, 2002. The senior credit facility originally established a $250
million revolving line of credit, a $300 million Tranche A term loan and a
$250 million Tranche B term loan. The Tranche A and Tranche B term loan
balances are currently $49.7 million and $50.9 million, respectively, and
have been primarily reduced from proceeds from the sale of our former
subsidiary Jen-Coat, Inc., from the sale of Curtis 1000 Inc., the sale of
our label segment, and from the sale of the old notes. The most recent
amendment permanently reduced the amount available under the revolving line
of the senior credit facility to $150 million.
Prior to the application of the proceeds of the sale of the old
notes, we were required to repay $31.4 million in principal on the Tranche A
term loan in 2002, increasing by $7.4 million in each year through 2005 with
a final payment of $13.9 million in 2006. We were also required to pay $.46
million each quarter on the Tranche B term loan through the first quarter of
2006, with four quarterly balloon payments of $43.5 million thereafter. Any
optional prepayments of principal must be applied proportionately between
the Tranche A and B term loans, and the term loan repayment amounts will
adjust to reflect optional principal prepayments. The senior credit facility
also provides a letter of credit subfacility. The subfacility does not
increase the maximum principal amount of the senior credit facility. All
current and future debt outstanding under the senior credit facility will
constitute secured indebtedness as defined in the indenture for the new
notes.
Interest on borrowings under the senior credit facility, which is
payable quarterly, is based on London Interbank Offer Rate ("LIBOR") plus an
applicable margin, as defined in the senior credit facility. The applicable
margin varies based on our total leverage ratio, as defined in the senior
credit facility.
The obligations of Mail-Well I Corporation under the senior credit
facility are guaranteed by Mail-Well, Inc. and by each of our existing or
after-acquired U.S. subsidiaries, as defined in the senior credit facility.
Pursuant to a security agreement, the obligations under the senior credit
facility are further secured by substantially all of our assets and the
assets of Mail-Well, Inc. and our U.S. subsidiaries, including the shares of
capital stock of Mail-Well I Corporation and the U.S. subsidiaries.
The senior credit facility contains covenants and provisions that
restrict, among other things, our ability to:
o incur liens;
o dispose of assets outside the ordinary course of business;
o effect certain mergers, consolidations or bulk asset sales;
o make certain loans or investments, other than investments in
similar businesses that do not otherwise cause a default under
the senior credit facility;
o incur additional secured indebtedness and certain contingent
obligations;
o engage in certain transactions with affiliates;
o pay dividends and other distributions on, and make repurchases
or redemptions of, capital stock; and
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o modify or prepay certain debt.
In addition, the senior credit facility requires us to satisfy
certain financial requirements, including:
o maintaining a certain minimum consolidated net worth of not
less than $300 million plus 75% of our consolidated net income
for each fiscal quarter ending after September 30, 1999, plus
100% of the net proceeds from the sale of equity securities
since such date, less any pre-tax net losses recorded in the
fiscal years ending December 31, 2001 and 2002 resulting from
book losses on dispositions or restructuring charges, up to an
aggregate of $265 million, and less up to $15 million in
deferred financing costs in connection with new debt
issuances;
o not to exceed a total leverage ratio, as defined in the senior
credit facility, of 5.75 to 1.00 for the first and second
fiscal quarters of 2002, and declining on a quarterly or
semi-annual basis to a maximum total leverage ratio of 4.00 to
1.00 for the third fiscal quarter of 2004 and thereafter;
o maintaining a minimum senior leverage ratio, as defined in the
senior credit facility, of 3.50 to 1.00 for the first, second
and third fiscal quarters of 2002, and declining on a
quarterly basis to a minimum senior leverage ratio of 2.50 to
1.00 for the third fiscal quarter of 2003 and thereafter;
o maintaining a minimum fixed charge coverage ratio, as defined
in the senior credit facility, of 1.40 to 1.00 for the first
and second fiscal quarters of 2002 and 1.50 to 1.00
thereafter; and
o maintaining a senior secured debt coverage ratio, as defined
in the senior credit facility, of 1.25 to 1.00 commencing on
September 30, 2002 and thereafter.
The events of default under the senior credit facility include the
following:
o failure to pay interest within five days after it becomes due;
o failure to pay the principal when due;
o breach of any representation or warranty;
o failure to perform any covenant or agreement in the senior
credit facility (in some cases only if the failure continues
for a certain period of time);
o certain defaults under other agreements, debts and other
obligations, including certain contingent obligations;
o imposition of certain judgments or decrees against us;
o certain events of bankruptcy, insolvency or reorganization;
o certain violations of the Employee Retirement Income Security Act;
o certain changes of control; and
o other customary provisions.
8 3/4% SENIOR SUBORDINATED NOTES
We have outstanding $300 million in 8 3/4% senior subordinated
notes issued under an indenture among Mail-Well I Corporation, certain of
its subsidiaries as guarantors, and State Street Bank and Trust Company as
trustee, a copy of which has been filed with the registration statement of
which this prospectus is a part. The $300 million outstanding principal
amount of senior subordinated notes mature on December 15, 2008. Mail-Well,
Inc. has unconditionally guaranteed the due and punctual payment of
principal of (and premium, if any) and interest on the senior subordinated
notes. At the present time, the capital stock of Mail-Well I Corporation is
substantially the only asset of Mail-Well, Inc., and therefore Mail-Well,
Inc.'s guarantee is effectively subordinated to all indebtedness and other
liabilities and commitments of our subsidiaries, as well as to all senior
indebtedness of the Mail-Well, Inc. Certain of our significant subsidiaries
have also unconditionally guaranteed the due and punctual payment of
principal of (and premium, if any) and interest on the senior subordinated
notes. The
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senior subordinated notes may also be guaranteed by one or more of our other
subsidiaries from time to time under certain circumstances. The senior
subordinated notes indenture is subject to and governed by the Trust
Indenture Act of 1939.
The senior subordinated notes are unsecured indebtedness ranking
pari passu with all of our other existing and future senior subordinated
indebtedness. The payment of the principal of, premium, if any, and interest
on the senior subordinated notes is subordinated, as set forth in the senior
subordinated notes indenture, in right of payment to the prior payment in
full in cash and cash equivalents of all of our existing and future senior
indebtedness, including borrowings under the bank credit agreement and the
new notes.
The senior subordinated notes indenture contains certain covenants
which, subject to certain conditions, limitations and exceptions,
(a) restrict our ability:
o to incur additional indebtedness;
o to declare or pay dividends or distributions on shares
of our capital stock; to purchase, redeem, acquire or
retire for value capital stock of Mail-Well I
Corporation or a subsidiary;
o to retire prior to scheduled maturity indebtedness
that is pari passu with or subordinated to the senior
subordinated notes; to make loans, advances or
payments to Mail-Well, Inc. or our employee stock
ownership plan; to guaranty indebtedness of
affiliates; or to make investments;
o to enter into transactions with affiliates;
o to create liens on their property or assets; and
o to effect asset sales;
(b) restrict our ability to merge, consolidate or convey, transfer
or lease its properties and assets substantially as an entirety;
and
(c) restrict the ability of our subsidiaries:
o to issue preferred stock; and
o to guaranty indebtedness without guaranteeing the senior
subordinated notes.
In addition, upon a change of control, we must offer to repurchase the
senior subordinated notes at 101% of their principal amount, plus accrued
interest. In connection with any such offer, we would comply with the
applicable tender offer rules, including Rule 14e-1, under the Exchange Act.
We are currently prohibited by the senior credit facility from making such
an offer to purchase the senior subordinated notes, and failure to do so if
required would constitute a default under the senior subordinated notes
indenture.
Other events of default under the senior subordinated notes
indenture include default on the payment of principal on the senior
subordinated notes when due; default on the payment of interest on the
senior subordinated notes for a period of 30 days after it is due; default
on the payment (or the acceleration) of certain other indebtedness; default
in other covenants under the senior subordinated notes indenture (in certain
cases after the passage of a period of time or the giving of notice by the
holders or the trustee or both); failure to pay certain final judgments or
orders; and certain events of bankruptcy or insolvency.
The senior subordinated notes are redeemable at a premium to par
value on or after December 15, 2003, which premiums decline annually. At any
time on or after December 15, 2006, the senior subordinated notes are
redeemable at par value.
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5% CONVERTIBLE SUBORDINATED NOTES
Mail-Well, Inc. has outstanding $139.1 million in aggregate
principal amount of 5% convertible subordinated notes due November 1, 2002.
The convertible notes are direct, unsecured obligations of Mail-Well, Inc.
The convertible notes may be converted at the option of the holder into one
share of Mail-Well, Inc. stock at a conversion price of $19.00 per share
(equivalent to a conversion rate of 13.1579 shares per $1,000 principal
amount of convertible notes), subject to certain adjustments. The
convertible notes are traded on the New York Stock Exchange under the symbol
"MWL 02." As of May 29, 2002, the closing price of Mail-Well, Inc.'s common
stock was $5.33.
Subject to certain exceptions, the convertible notes are
subordinated to all of our current and future senior debt, which is defined
as indebtedness of Mail-Well, Inc. that is not expressly made, by its
governing instruments, subordinate to or pari passu with the convertible
notes. The convertible notes are also effectively subordinated to all
existing and future indebtedness and liabilities of subsidiaries of
Mail-Well, Inc., including Mail-Well I Corporation. The convertible notes
will be subordinated to the new notes.
The proceeds of the convertible notes were loaned to Mail-Well I
Corporation by Mail-Well, Inc. under a demand note that will be subordinated
to the notes offered hereby.
The convertible notes indenture does not restrict the amount of
senior debt or other indebtedness that may be incurred in the future by
Mail-Well, Inc. or any of its subsidiaries.
In case of any merger or consolidation of Mail-Well, Inc. or the
sale or conveyance by Mail-Well, Inc. of all or substantially all of its
assets, the holder of each outstanding convertible note will have the right
to convert such convertible note into the kind and amount of shares of stock
and other securities and property (including cash) received in such
transaction by a holder of the number of shares of Mail-Well, Inc. stock
into which such convertible note was convertible immediately prior to the
effective date of such transaction.
Mail-Well, Inc. may from time to time reduce the conversion price
of the convertible notes by any amount for any period of at least 20 days,
if the board of directors of Mail-Well, Inc. has made a determination that
such reduction would be in the best interests of Mail-Well, Inc. Mail-Well,
Inc. must give at least 15 days' notice of such reduction.
The events of default under the convertible notes indenture include
the following:
o failure to pay interest upon any convertible note when it
becomes due and payable, and continuance of such default for a
period of 30 days;
o failure to pay the principal of (or premium, if any, on) any
convertible note at its maturity;
o failure to pay the redemption price or the repurchase price
when and as due;
o failure to perform any covenant or agreement in the convertible
notes indenture which continues for 60 days after written notice;
o certain defaults under any mortgage, indenture or instrument
of indebtedness of Mail-Well, Inc. or any of its subsidiaries
(or the payment of which is guaranteed by Mail-Well, Inc. or
any of its subsidiaries);
o imposition of certain judgments or decrees against Mail-Well,
Inc. or any subsidiary; and
o certain events of bankruptcy, insolvency or reorganization
of Mail-Well, Inc. or certain subsidiaries.
The convertible notes may be redeemed at the option of Mail-Well,
Inc., in whole or in part, at any time on or after November 1, 2000, at
specified redemption prices, together with accrued and unpaid interest, if
any, to the date of redemption. The current redemption price is 101% of the
principal amount.
94
Upon the occurrence of certain change of control events described
in the convertible notes indenture, or a termination of trading in
Mail-Well, Inc. stock on national securities exchanges, occurring prior to
the maturity of the convertible notes, each holder of convertible notes will
have the right, at such holder's option, to require Mail-Well, Inc. to
purchase all or part of such holder's convertible notes at a redemption
price equal to 101% of the principal amount thereof, together with accrued
and unpaid interest thereon. The right to require Mail-Well, Inc. to
repurchase convertible notes as a result of a change of control could have
the effect of delaying or preventing a change of control or other attempts
to acquire control of Mail-Well, Inc. unless arrangements have been made to
enable Mail-Well, Inc. to repurchase all the convertible notes.
DESCRIPTION OF CAPITAL STOCK
The capital stock of Mail-Well I Corporation consists of 1,000
shares of common stock, par value $0.01 per share. Holders of the common
stock are entitled to one vote per share at all meetings of stockholders.
Dividends that may be declared on the common stock will be paid in an equal
amount to the holder of each share. No pre-emptive rights are conferred upon
the holders of such stock and there are no liquidation or conversion rights,
nor are there any redemption or sinking fund provisions and there is no
liability to further calls or to assessments by Mail-Well I Corporation. All
of the shares of common stock are issued and outstanding and are held by
Mail-Well, Inc.
95
MATERIAL FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of certain of the expected
material United States federal income tax considerations with respect to the
new notes relevant to each registered holder who, except as noted below, is
a U.S. holder of the old notes, and who:
(1) purchased the old notes from Mail-Well I Corporation for cash,
(2) exchanges the old notes for new notes in this exchange offer,
and
(3) holds the old notes and the new notes as capital assets.
The term "U.S. holder" means a beneficial owner of a new note that
is, for U.S. federal income tax purposes,
(1) an individual who is a citizen or resident of the United States,
(2) a corporation or other entity taxable as a corporation created
or organized in the United States or under the laws of the
United States or of any U.S. state or the District of Columbia,
(3) an estate the income of which is includable in gross income
for U.S. federal income tax purposes regardless of its source,
or
(4) a trust if a U.S. court is able to exercise primary supervision
over the trust's administration and one or more U.S. persons
have authority to control all substantial decisions of such
trust.
This discussion does not purport to deal with the tax consequences
of owning the new notes to all categories of investors, some of which, such
as insurance companies, tax-exempt organizations, financial institutions,
dealers in securities, investors who own 5% or more of our shares, and
investors whose functional currency is not the U.S. dollar, may be subject
to special rules. We advise prospective holders of new notes to consult
their own tax advisors concerning the overall tax consequences arising in
their own particular situations under U.S. federal, state, local or foreign
law of the ownership of the new notes.
FEDERAL INCOME TAX CONSIDERATIONS
This discussion is based on currently existing provisions of the
Internal Revenue Code of 1986, as amended, existing, temporary and proposed
Treasury regulations promulgated under the I.R.C., and administrative and
judicial interpretations of the I.R.C. and the regulations under it, all as
in effect or proposed on the date of this prospectus and all of which are
subject to change, possibly with retroactive effect, or different
interpretations. This discussion does not address the tax consequences to
subsequent purchasers of new notes and is limited to purchasers who hold the
new notes as capital assets within the meaning of section 1221 of the I.R.C.
Moreover, this discussion is for general information only and does not
address all of the tax consequences that may be relevant to particular
registered holders in light of their personal circumstances, including, for
example, persons subject to the alternative minimum tax provisions of the
I.R.C., or to certain types of initial purchasers, such as certain financial
institutions, insurance companies, tax-exempt entities, dealers in
securities, persons holding new notes as part of a hedging or conversion
transaction, straddle or other risk reduction transactions or U.S.
expatriates or persons who have hedged the risk of owning a senior note, and
purchasers whose functional currency is not U.S. dollars. This discussion
also does not address any aspect of foreign, state or local tax law, or U.S.
federal estate and gift tax law.
Holders are urged to consult their own tax advisors as to the
particular tax consequences to them of the exchange, ownership and
disposition of the new notes, including the applicability of any U.S.
federal tax laws or any foreign, state or local tax laws, and any changes or
proposed changes in applicable tax laws or interpretations of them.
96
U.S. FEDERAL INCOME TAXATION OF THE EXCHANGE OF OLD NOTES FOR NEW NOTES
The federal income tax regulations provide that gain or loss is
realized on the sale of property or on the "exchange of property for other
property differing materially, either in kind or in extent." Treas. Reg.
Section 1.1001-1(a). In 1991, the United State Supreme Court reviewed this
regulation in Cottage Savings Association v. Commissioner, 499 U.S. 554
(1991). In Cottage, a savings and loan association engaged in a series of
purchases and sales of mortgage participation interests. In each
transaction, the taxpayer sold mortgage participation interests to another
financial institution and purchased substantially identical mortgage
participation interests from the other institution. Although cast as sales
and purchases, the holders exchanged mortgage participation interests. The
taxpayer treated the exchanges as realization events under section 1001 of
the I.R.C. and claimed losses. The I.R.S. sought to disallow the losses on
the ground that the exchanged properties were economically equivalent and
thus did not differ materially within the meaning of Section 1.1001-1(a) of
the regulations.
The Court held that the taxpayer had realized a loss. After
concluding that Section 1.001-1 of the regulations is a reasonable
interpretation of section 1001(a) of the I.R.C., the Court determined that,
because the participation interests exchanged by the taxpayer were derived
from loans made to different obligors and secured by different homes, the
exchanged interests embodied legally distinct entitlements and therefore
were materially different. Thus, the transaction resulted in a taxable sale
or disposition under section 1001 of the I.R.C.
In response to the issues raised by the Cottage decision, and in an
effort to provide certainty, the I.R.S. issued regulations under section
1001 of the I.R.C. to deal explicitly with the modification of debt
instruments. The regulations define when a modification will be deemed to be
an exchange of the original instrument or a modified instrument that differs
materially either in kind or in extent.
The new regulations are found in Treas. Reg. Section 1.1001-3. Under
the general rule, a "significant modification" of a debt instrument is
treated as an exchange of the original instrument for a modified instrument
that differs materially either in kind or extent. Modifications that are not
significant modifications are not exchanges.
TAXATION OF INTEREST
This discussion assumes that the new notes will be treated as debt,
not equity, for U.S. federal income tax purposes. Interest paid or accrued
on a new note will be taxable to a U.S. holder as ordinary interest income,
generally at the time it is received or accrued, in accordance with such
holder's regular method of accounting for U.S. federal income tax purposes.
We intend to take the position, which generally will be binding on
all U.S. holders, that the new notes are not issued with "OID," or original
issue discount, for U.S. federal income tax purposes and that no amounts
other than stated interest will be treated as interest. This position is
based on the assumption that the price at which the new notes are sold to
the public will equal their face amount, or will be within the de minimis
exception for OID. This position also is based on the view that the
likelihood of the payment of liquidated damages, as of the date the new
notes are issued, is remote. In the unlikely event that liquidated damages
are paid, then such liquidated damages may be treated as OID, includable by
a U.S. holder in income as such interest accrues, in advance of receipt of
any cash payment of such interest.
SALE, REDEMPTION OR RETIREMENT OF THE NEW NOTES
Upon the sale, redemption, retirement at maturity or other taxable
disposition of a new note, a U.S. holder generally will recognize gain or
loss equal to the difference, if any, between
(1) the sum of cash plus the fair market value of all other
property received on disposition, except to the extent such
cash or property is attributable to accrued but unpaid
interest not previously included in income, which will be
taxable as ordinary income, and
97
(2) the U.S. holder's tax basis in the new note, which is generally
its cost.
Gain or loss recognized on the disposition of a new note generally
will be capital gain or loss and will be long-term capital gain or loss if,
at the time of disposition, the new note had been held for more than one
year. In the case of a U.S. holder who is an individual, the maximum
long-term capital gains rate is 20%.
BACKUP WITHHOLDING AND INFORMATION REPORTING
Information reporting requirements may apply to certain payments
made by a U.S. paying agent or other U.S. intermediary of principal,
premium, if any, and interest on a new note and to proceeds of the sale or
other disposition of a new note. In addition, backup withholding at the rate
of 31% may apply to these payments if a U.S. holder fails to furnish its
taxpayer identification number, which is its social security or employer
identification number, certify that the number is correct, certify that the
U.S. holder is not subject to backup withholding or otherwise comply with
the applicable requirements of the backup withholding rules. Certain U.S.
holders, including corporations, generally are not subject to backup
withholding and information reporting. Recently issued Treasury Regulations
modify some of the certification requirements for backup withholding. These
modifications generally will apply to payments made after December 31, 1998.
Any amounts withheld under the backup withholding rules from a payment to a
U.S. holder generally will be allowed as a credit against the U.S. holder's
U.S. federal income tax and may entitle the U.S. holder to a refund,
provided that the required information is furnished to the Internal Revenue
Service.
U.S. FEDERAL INCOME TAXATION OF NON-U.S. HOLDERS
The following discussion is limited to the U.S. federal income tax
consequences relevant to a holder of a new note that is not a U.S. holder.
We refer to these holders as "non-U.S. holders."
PAYMENT OF INTEREST ON NEW NOTES
Payment of interest on the new notes to a non-U.S. holder generally
will be exempt from U.S. federal income and withholding tax if the interest
is not effectively connected with the conduct of a trade or business within
the United States by the non-U.S. holder and the non-U.S. holder:
(1) does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of
Mail-Well I Corporation;
(2) is not a controlled foreign corporation with respect to which
Mail-Well I Corporation is a "related person" within the meaning
of the I.R.C.; and
(3) certifies, under penalties of perjury, that the holder is not
a U.S. person and provides the holder's name and address.
SALE, REDEMPTION OR RETIREMENT OF THE NEW NOTES
A non-U.S. holder generally will not be subject to U.S. federal
income tax, and generally no tax will be withheld, with respect to gain
realized on the sale, redemption, retirement at maturity or other
disposition of a new note unless:
(1) the non-U.S. holder is an individual who is present in the
United States for 183 or more days in the taxable year of
the sale, redemption, retirement at maturity or other
disposition of the new note and certain other conditions
are met; or
(2) the gain is treated as effectively connected with a U.S.
trade or business conducted by the non-U.S. holder.
98
WITHHOLDING, REPORTING AND CERTIFICATION REQUIREMENTS
New regulations effective for payments made after December 31,
1999, do not alter the substantive withholding and incorporation reporting
requirements, but unify current certification procedures regarding
withholding, backup withholding and information reporting on certain amounts
paid to persons other than "United States persons" within the meaning of the
I.R.C. Prospective investors should consult their tax advisors concerning
the effect, if any, of these new regulations on an investment in the new
notes.
THE FOREGOING SUMMARY OF UNITED STATES TAX CONSEQUENCES IS BASED ON THE
APPLICABLE UNITED STATES LAW AND REGULATIONS, ADMINISTRATIVE RULINGS AND
PRACTICES OF THE UNITED STATES, ALL AS THEY EXIST AS OF THE DATE OF THIS
PROSPECTUS. THIS SUMMARY DOES NOT DISCUSS ALL ASPECTS THAT MAY BE RELEVANT
TO PROSPECTIVE INVESTORS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THEIR OWN PARTICULAR CIRCUMSTANCES, INCLUDING THE APPLICABILITY
AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS, ESTATE TAX LAWS AND
PROPOSED CHANGES IN APPLICABLE LAWS.
99
PLAN OF DISTRIBUTION
Each broker-dealer that receives new notes for its own account pursuant
to this exchange offer must acknowledge that it will deliver a prospectus in
connection with any resale of the new notes. A broker-dealer may use this
prospectus, as it may be amended or supplemented from time to time, in
connection with resales of new notes received in exchange for old notes
where such old notes were acquired as a result of market-making activities
or other trading activities. We have agreed to make this prospectus, as
amended or supplemented, available to any broker-dealer for use in
connection with any such resale. In addition, until , 2002,
--------------
all dealers effecting transactions in the new notes may be required to
deliver a prospectus.
We will not receive any proceeds from any sale of new notes by any
broker-dealer. New notes received by broker-dealers for their own account
pursuant to this exchange offer may be sold from time to time in one or more
transactions in the following manners:
o in the over-the-counter market;
o in negotiated transactions;
o through the writing of options on the new notes;
o through a combination of such methods of resale.
The sales may be at any of the following prices:
o market prices prevailing at the time of resale;
o prices related to such prevailing market prices;
o negotiated prices.
Any resale may be made directly to purchasers or to or through
brokers or dealers who may receive compensation in the form of commissions
or concessions from any such broker-dealer or the purchasers of any such new
notes.
Any broker-dealer that resells new notes that were received by it
for its own account pursuant to this exchange offer and any broker or dealer
that participates in a distribution of such new notes may be deemed to be an
"underwriter" within the meaning of the Securities Act. Any profit on any
such resale of new notes and any commissions or concessions received by any
such persons may be deemed to be underwriting compensation under the
Securities Act. The letter of transmittal states that by acknowledging that
it will deliver and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an "underwriter" within the meaning of the
Securities Act.
For a period of 180 days after the expiration date of the exchange
offer, we will promptly send additional copies of this prospectus and any
amendment or supplement to this prospectus to any broker-dealer that
requests such documents in the letter of transmittal. We have agreed to pay
all expenses incident to the exchange offer (including the expenses of one
counsel for the registered holders of the old notes) other than commissions
or concessions of any brokers or dealers, and will indemnify the holders,
including any broker-dealers, against certain liabilities, including
liabilities under the Securities Act.
We have not entered into any arrangements or understandings with
any person to distribute the new notes to be received in this exchange
offer.
There is no existing market for the new notes and although the new
notes will be traded in the over-the-counter market, there can be no
assurance as to the liquidity of any market that may develop for the new
notes, the ability of the holders of the new notes to sell their new notes
or the price at which holders would be able to sell their new notes. Future
trading prices of the new notes will depend on many factors, including,
among other things:
o prevailing interest rates;
100
o our operating results;
o the market for similar securities.
The initial purchasers of the old notes have advised us that they
are making a market in the old notes, and intend to make a market in the new
notes, subject to the limits imposed by the Securities Act and the Exchange
Act; however, they are not obligated to do so, and may discontinue such
market-making at any time without notice. Therefore, no assurance can be
given as to the liquidity of the trading market for the new notes. In
addition, such market-making activities may be limited during the exchange
offer and the pendency of any shelf registration statement relating to the
new notes.
This prospectus does not constitute an offer to purchase or a
solicitation of an offer to sell any of the new notes in any jurisdiction in
which such an offer or a solicitation is unlawful.
LEGAL MATTERS
Faegre & Benson LLP, Denver, Colorado, will pass upon the validity
of the new notes for us.
EXPERTS
The consolidated financial statements of Mail-Well, Inc. as of December
31, 2001 and 2000 and for each of the three years in the period ended
December 31, 2001 included in this prospectus, have been audited by Ernst &
Young LLP, independent auditors, as stated in their report appearing herein.
WHERE YOU CAN FIND MORE INFORMATION
We are subject to the informational requirements of the Exchange Act,
and in accordance with the requirements of the Exchange Act we file reports
and other information with the SEC. You may read and, for a fee, copy any
document that we file with the SEC at the public reference facility
maintained by the SEC at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W.,
Washington, D.C. 20549. Copies of these documents may also be obtained at
prescribed rates from the Public Reference Section of the SEC at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549. You may
also obtain the documents that we file electronically from the SEC's web
site at http://www.sec.gov. While any notes remain outstanding, we will make
available, upon request, to any beneficial owner and any prospective
purchaser of notes the information required pursuant to Rule 144A(d)(4)
under the Securities Act during any period in which we are not subject to
Section 13 or 15(d) of the Exchange Act. Any such request should be directed
to our Secretary at Mail-Well, Inc., 8310 S. Valley Highway, #400,
Englewood, Colorado 80112.
Incorporated by reference in this prospectus are the sections
captioned "Director Compensation," "Compensation Committee Interlocks and
Insider Participation," "Executive Compensation," "Summary Compensation
Table," "2001 Long-Term Equity Incentive Plan," "Option Grants in 2001,"
"Aggregated Option Exercises in 2001 and 2001 Year-End Option Values," "2001
Long-Term Incentive Plans Award in 2001," "Executive Agreements,"
"Compensation Committee Report on Executive Compensation" and "Stock Price
Performance Graph" appearing in our Proxy Statement filed pursuant to
Regulation 14A in connection with our 2002 Annual Meeting of Stockholders.
101
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Auditors............................ F-2
Consolidated Balance Sheets as of March 31, 2002,
December 31, 2001 and December 31, 2000................. F-3
Consolidated Statements of Operations for the three
months ended March 31, 2002 and 2001 and the years
ended December 31, 2001, 2000 and 1999.................. F-4
Consolidated Statements of Cash Flows for the three
months ended March 31, 2002 and 2001 and the years
ended December 31, 2001, 2000 and 1999.................. F-5
Consolidated Statements of Changes in Shareholders'
Equity for the period ended March 31, 2002 and the
years ended December 31, 2001, 2000 and 1999............ F-6
Notes to Consolidated Financial Statements................ F-7
F-1
REPORT OF INDEPENDENT AUDITORS
The Shareholders and Board of Directors
Mail-Well, Inc.
We have audited the accompanying consolidated balance sheets of
Mail-Well, Inc. and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of operations, changes in shareholders'
equity and cash flows for each of the three years in the period ended
December 31, 2001. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated financial
position of Mail-Well, Inc. and subsidiaries at December 31, 2001 and 2000,
and the consolidated results of their operations and their cash flows for
each of the three years in the period ended December 31, 2001, in conformity
with accounting principles generally accepted in the United States.
ERNST & YOUNG LLP
Denver, Colorado
January 23, 2002
F-2
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
MARCH 31, 2002 DECEMBER 31
-------------- --------------------------
(UNAUDITED) 2001 2000
----------- ---------- ----------
Assets
Current assets:
Cash and cash equivalents.......................................... $ 121,331 $ 809 $ 94
Accounts receivable, net........................................... 203,308 207,750 203,968
Inventories, net................................................... 103,484 104,544 131,417
Net assets of discontinued operations.............................. 219,205 246,377 394,215
Net assets held for sale........................................... 61,022 54,073 --
Other current assets............................................... 57,195 67,001 58,026
---------- ---------- ----------
Total current assets............................................. 765,545 680,554 787,720
Property, plant and equipment, net.................................... 361,555 375,415 431,025
Goodwill and other intangible assets, net............................. 348,010 347,061 389,148
Other assets, net..................................................... 51,335 46,094 45,064
---------- ---------- ----------
Total assets.......................................................... $1,526,445 $1,449,124 $1,652,957
========== ========== ==========
Liabilities and shareholders' equity
Current liabilities:
Accounts payable................................................... $ 147,474 $142,521 $127,912
Accrued compensation and related liabilities....................... 45,491 44,310 48,444
Other current liabilities.......................................... 48,139 57,245 57,978
Current maturities of long-term debt............................... 310,372 302,822 40,040
---------- ---------- ----------
Total current liabilities........................................ 551,476 546,898 274,374
Long-term debt........................................................ 658,881 550,177 879,753
Deferred income taxes................................................. 78,484 93,573 86,765
Other liabilities..................................................... 18,528 16,599 26,212
---------- ---------- ----------
Total liabilities..................................................... 1,307,369 1,207,247 1,267,104
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.01 par value; 25,000 shares
authorized, none issued.......................................... -- -- --
Common stock, $0.01 par value; 100,000,000 shares authorized,
48,336,031, 48,325,801 and 47,454,879 shares issued and
outstanding as of March 31, 2002, December 31, 2001 and
December 31, 2000, respectively.................................. 493 483 474
Paid-in capital.................................................... 214,138 214,138 210,067
Retained earnings.................................................. 25,015 46,623 182,840
Deferred compensation.............................................. (3,205) (3,359) --
Accumulated other comprehensive loss............................... (17,355) (16,008) (7,528)
---------- ---------- ----------
Total shareholders' equity....................................... 219,076 241,877 385,853
---------- ---------- ----------
Total liabilities and shareholders' equity............................ $1,526,445 $1,449,124 $1,652,957
========== ========== ==========
See notes to consolidated financial statements.
F-3
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except earnings per share amounts)
THREE MONTHS ENDED
MARCH 31
------------------------
(UNAUDITED) YEAR ENDED DECEMBER 31
------------------------ --------------------------------------
2002 2001 2001 2000 1999
-------- -------- ---------- ---------- ----------
Net sales....................................... $391,729 $432,976 $1,653,471 $1,823,583 $1,533,840
Cost of sales................................... 317,695 345,142 1,324,091 1,438,435 1,182,893
-------- -------- ---------- ---------- ----------
Gross profit.................................... 74,034 87,834 329,380 385,148 350,947
Operating expenses:
Selling, general and administrative.......... 58,676 62,875 238,111 248,808 202,721
Amortization of intangibles.................. 463 3,275 12,663 12,657 9,409
Impairment of assets held for sale........... -- -- 2,945 -- --
Restructuring, asset impairments and
other charges.............................. 13,647 -- 41,845 6,160 1,807
-------- -------- ---------- ---------- ----------
Operating income................................ 1,248 21,684 33,816 117,523 137,010
Other (income) expense:
Interest expense............................. 12,008 14,751 52,751 62,127 40,208
Other (income) expense....................... 254 526 1,790 974 (1,228)
-------- -------- ---------- ---------- ----------
Income (loss) from continuing operations,
before income taxes.......................... (11,014) 6,407 (20,725) 54,422 98,030
Provision (benefit) for income taxes............ (2,749) 2,220 (7,684) 20,213 39,428
-------- -------- ---------- ---------- ----------
Income (loss) from continuing operations........ (8,265) 4,187 (13,041) 34,209 58,602
Income (loss) from discontinued operations...... -- (564) (2,176) (8,038) 5,880
Loss on disposal of discontinued operations..... (8,580) -- (121,000) -- --
-------- -------- ---------- ---------- ----------
Income (loss) before extraordinary items........ (16,845) 3,623 (136,217) 26,171 64,482
Extraordinary items............................. (4,763) -- -- 1,447 --
-------- -------- ---------- ---------- ----------
Net income (loss)............................... $(21,608) $ 3,623 $ (136,217) $ 27,618 $ 64,482
======== ======== ========== ========== ==========
Earnings (loss) per share--basic:
Continuing operations........................ $ (0.17) $ 0.09 $ (0.27) $ 0.70 $ 1.20
Discontinued operations...................... (0.18) (0.01) (2.59) (0.16) 0.12
Extraordinary item........................... (0.10) -- -- 0.03 --
-------- -------- ---------- ---------- ----------
Earnings (loss) per share--basic............. $ (0.45) $ 0.08 $ (2.86) $ 0.57 $ 1.32
======== ======== ========== ========== ==========
Earnings (loss) per share--diluted:
Continuing operations........................ $ (0.17) $ 0.09 $ (0.27) $ 0.69 $ 1.10
Discontinued operations...................... (0.18) (0.01) (2.59) (0.16) 0.10
Extraordinary item........................... (0.10) -- -- 0.03 --
-------- -------- ---------- ---------- ----------
Earnings (loss) per share--diluted........... $ (0.45) $ 0.08 $ (2.86) $ 0.56 $ 1.20
======== ======== ========== ========== ==========
Weighted average shares--basic............... 47,658 47,457 47,562 48,789 48,990
Weighted average shares--diluted............. 47,658 47,457 47,562 56,678 58,154
See notes to consolidated financial statements.
F-4
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
THREE MONTHS ENDED
MARCH 31
-------------------------
(UNAUDITED) YEAR ENDED DECEMBER 31
------------------------- -------------------------------------
2002 2001 2001 2000 1999
--------- --------- --------- ---------- ---------
Cash flows from operating activities:
Income (loss) from continuing operations...... $ (8,265) $ 4,187 $ (13,041) $ 34,209 $ 58,602
Adjustments to reconcile income (loss)
from continuing operations to net cash
provided by operating activities:
Depreciation.............................. 9,823 11,042 40,966 42,855 34,141
Amortization.............................. 1,928 4,776 18,669 17,367 11,653
Extraordinary gain on early
retirement of debt...................... -- -- -- (2,355) --
Noncash portion of restructuring and
impairment charges...................... 6,723 -- 14,022 4,657 --
Deferred income taxes..................... (420) 1,421 2,850 8,121 12,215
Loss (gain) on disposal of assets......... 229 (158) 582 (923) (1,172)
Other noncash charges (credits), net...... 96 (980) 958 902 (1,203)
Changes in operating assets and liabilities,
excluding the effects of acquired
businesses:
Accounts receivable....................... 4,688 7,938 56,316 (12,472) (14,678)
Inventories............................... 745 (6,544) 18,667 (991) (12,388)
Accounts payable and accrued
compensation............................ 1,637 34,355 16,269 24,272 19,019
Income tax payable........................ (4,712) 7,658 (6,094) 26,817 7,748
Other working capital changes............. (9,252) (649) 3,295 (2,672) (3,970)
Other, net................................ 354 (4,988) (1,476) (8,387) (2,763)
--------- --------- --------- ---------- ---------
Net cash provided by operating
activities............................ 3,574 58,058 151,983 131,400 107,204
Cash flows from investing activities:
Acquisitions, net of cash acquired........ (1,003) (3,904) (3,838) (227,044) (130,910)
Capital expenditures...................... (7,952) (4,932) (26,799) (57,772) (65,087)
Proceeds from divestiture................. 31,622 -- -- 110,646 --
Proceeds from sales of property and
equipment............................... 60 1,805 3,777 30,941 7,259
Purchase of investment.................... -- -- (100) (1,500) --
--------- --------- --------- ---------- ---------
Net cash used in investing activities... 22,727 (7,031) (26,960) (144,729) (188,738)
Cash flows from financing activities:
Increase (decrease) in accounts
receivable financing facility........... -- (50,000) (75,000) (73,500) 95,900
Proceeds from exercise of stock
options................................. -- 6 413 335 2,029
Proceeds from issuance of long-term debt.. 569,000 85,367 634,404 1,131,069 386,116
Repayments of long-term debt.............. (459,360) (117,807) (699,188) (879,316) (314,289)
Capitalized loan fees..................... (12,037) (1,841) (4,439) (15,002) (1,481)
Repurchases of common stock............... -- -- -- (10,000) --
Redemption of a nonvoting common
stock of a subsidiary................... -- -- -- (3,508) --
--------- --------- --------- ---------- ---------
Net cash provided by (used in)
financing activities.................. 97,603 (84,275) (143,810) 150,078 168,275
Effect of exchange rate changes on cash and
cash equivalents............................... (322) (24) (60) -- 16
Cash flows from discontinued operations.......... (3,060) 33,707 19,562 (136,925) (86,487)
--------- --------- --------- ---------- ---------
Net increase (decrease) in cash
and cash equivalents.................. 120,522 435 715 (176) 270
Cash and cash equivalents at beginning of year... 809 94 94 270 --
--------- --------- --------- ---------- ---------
Cash and cash equivalents at end of year......... $ 121,331 $ 529 $ 809 $ 94 $ 270
========= ========= ========= ========== =========
See notes to consolidated financial statements.
F-5
MAIL-WELL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(in thousands)
ACCUMULATED
OTHER TOTAL
COMMON PAID-IN RETAINED DEFERRED COMPREHENSIVE SHAREHOLDERS'
STOCK CAPITAL EARNINGS COMPENSATION INCOME (LOSS) EQUITY
------ -------- --------- ------------ ------------- -------------
Balance at December 31, 1998............ $ 488 $217,218 $ 90,740 $ -- $ (9,071) $ 299,375
Comprehensive income:
Net income............................ 64,482 64,482
Other comprehensive income (loss):
Pension liability adjustment,
net of tax of $76................ 122 122
Currency translation adjustment.... 8,768 8,768
Unrealized loss on investment,
net of tax benefit of $11........ (18) (18)
---------
Other comprehensive income............ 8,872
---------
Total comprehensive income......... 73,354
Exercise of stock options............... 4 2,025 2,029
Adjustment to deferred tax asset for:
Pooled entities....................... (168) (168)
Stock options......................... 757 757
Other................................... (37) (37)
----- -------- --------- ------- -------- ---------
Balance at December 31, 1999............ 492 219,795 155,222 -- (199) 375,310
Comprehensive income:
Net income............................ 27,618 27,618
Other comprehensive income (loss):
Pension liability adjustment,
net of tax benefit of $72........ (115) (115)
Currency translation adjustment.... (6,555) (6,555)
Unrealized loss on investments,
net of tax benefit of $412....... (659) (659)
---------
Other comprehensive loss.............. (7,329)
---------
Total comprehensive income......... 20,289
Exercise of stock options............... 1 334 335
Purchase and retirement of
common stock.......................... (18) (9,982) (10,000)
Other................................... (1) (80) (81)
----- -------- --------- ------- -------- ---------
Balance at December 31, 2000............ 474 210,067 182,840 -- (7,528) 385,853
Comprehensive income (loss):
Net loss.............................. (136,217) (136,217)
Other comprehensive income (loss):
Pension liability adjustment,
net of tax benefit of $581....... (928) (928)
Currency translation adjustment.... (8,467) (8,467)
Unrealized loss on investments,
net of tax of $119............... 915 915
---------
Other comprehensive loss.............. (8,480)
---------
Total comprehensive loss........... (144,697)
Exercise of stock options............... 2 411 413
Deferred compensation................... 7 3,679 (3,686) --
Amortization of deferred compensation... 327 327
Other................................... (19) (19)
----- -------- --------- ------- -------- ---------
Balance at December 31, 2001............ $ 483 $214,138 $ 46,623 $(3,359) $(16,008) $ 241,877
Net Loss (unaudited).................... (21,608) (21,608)
Currency translation adjustment
(unaudited)........................... (1,347) (1,347)
---------
Total other comprehensive loss
(unaudited)...................... $ (22,955)
Amortization of deferred compensation
(unaudited)........................... 154 154
----- -------- --------- ------- -------- ---------
Balance at March 31, 2002 (unaudited)... $ 483 $214,138 $ 25,015 $(3,205) $(17,355) $ 219,076
===== ======== ========= ======= ======== =========
See notes to consolidated financial statements.
F-6
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NATURE OF BUSINESS
Mail-Well, Inc. and subsidiaries (collectively, the "Company")
prints and manufactures envelopes in the United States and Canada and is a
leading commercial printer in the United States. The Company, headquartered
in Englewood, Colorado, is organized under Colorado law, and its common
stock is traded on the New York Stock Exchange.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of
Mail-Well, Inc. and its subsidiaries. All significant intercompany accounts
and transactions have been eliminated. Except as otherwise noted, all
amounts and disclosures have been restated to reflect only the Company's
continuing operations (see note 3).
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting periods. Actual results could
differ from those estimates. The accompanying condensed consolidated
financial statements for the periods ended March 31, 2002 and 2001 have been
prepared in accordance with generally accepted accounting principles for
interim financial statements and with the instructions to Form 10-Q and
Article 10 of Regulation S-X and are unaudited. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete 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 three month period ended March 31, 2002 are not necessarily
indicative of the results that may be expected for the year ended December
31, 2002.
REVENUE RECOGNITION
Revenue is recognized at the time product is shipped or title
passes pursuant to the terms of the agreement with the customer, the amount
due from the customer is fixed, and collectibility of the related receivable
is reasonably assured.
SHIPPING AND HANDLING COSTS
Shipping and handling costs are included in cost of sales in the
consolidated statements of operations. Shipping and handling costs billed to
customers are recognized in net sales.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include cash on deposit and investments
with original maturities of three months or less. Cash and cash equivalents
are stated at cost, which approximates fair value.
ACCOUNTS RECEIVABLE
The Company maintains an allowance for doubtful accounts based upon
the expected collectibility of accounts receivable. Allowances for doubtful
accounts of $4.7 million and $4.4 million have been applied as reductions of
accounts receivable at December 31, 2001 and 2000, respectively.
F-7
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
INVENTORIES
Inventory values include all costs directly associated with
manufacturing products: materials, labor and manufacturing overhead. These
values are presented at the lower of cost or market, with cost determined on
a first-in, first-out basis.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. When assets are
retired or otherwise disposed of, the related costs and accumulated
depreciation are removed from the accounts and any resulting gain or loss is
reflected in operations. Expenditures for repairs and maintenance are
charged to expense as incurred, and expenditures that increase the capacity,
efficiency or useful lives of existing assets are capitalized.
For financial reporting purposes, depreciation is calculated using
the straight-line method based on the estimated useful lives of 15 to 45
years for buildings and improvements, 10 to 15 years for machinery and
equipment and three to 10 years for furniture and fixtures. For tax
purposes, depreciation is computed using accelerated methods.
GOODWILL AND OTHER INTANGIBLES
Goodwill represents the excess of acquisition costs over the fair
value of net assets of businesses acquired and was amortized on a
straight-line basis over 40 years prior to January 1, 2002, when the Company
adopted Statements of Financial Accounting Standards ("SFAS") No. 142 ("SFAS
142"). Other intangibles primarily arise from the purchase price allocations
of businesses acquired and are based on independent appraisals or internal
estimates and are amortized on a straight-line basis over appropriate
periods. Accumulated amortization for goodwill and other intangibles was
$47.3 million, $46.9 million and $33.4 million at March 31, 2002,
December 31, 2001 and 2000, respectively.
In accordance with the provisions of SFAS 142, the changes in the
carrying amount of goodwill for the three months ended March 31, 2002 are as
follows (in thousands):
COMMERCIAL
ENVELOPE PRINTING TOTAL
-------- ---------- --------
Balance as of January 1, 2002.......................... $107,334 $213,492 $320,826
Reclassification from other intangibles (1)............ 11,240 -- 11,240
-------- -------- --------
Balance as of March 31, 2002 (unaudited)............. $118,574 $213,492 $332,066
======== ======== ========
(1) Customer relationships and trained workforce that is required to be
included as part of goodwill under SFAS 142.
In accordance with the provisions of SFAS 142, the Company ceased
amortizing goodwill. Had SFAS 142 been in effect in the first quarter of
2001, the Company would not have recorded goodwill amortization expense of
$2.6 million. The following table summarizes reported net income (loss) for
the three months ended March 31, 2002 and March 31, 2001, adjusted to
exclude goodwill amortization
F-8
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
expense, and the related tax effect, that is no longer subject to
amortization (in thousands, except per share amounts):
THREE MONTHS ENDED
----------------------------------------
MARCH 31, 2002 MARCH 31, 2001
-------------- --------------
(UNAUDITED) (UNAUDITED)
----------- -----------
Reported net income (loss)......................................... $(21,608) $3,623
Goodwill amortization, net of tax.................................. -- 1,624
-------- ------
Adjusted net income (loss)......................................... $(21,608) $5,247
======== ======
Basic earnings (loss) per share - as reported...................... $ (0.45) $ 0.08
Basic earnings (loss) per share - adjusted......................... $ (0.45) $ 0.11
Diluted earnings (loss) per share - as reported.................... $ (0.45) $ 0.08
Diluted earnings (loss) per share - adjusted....................... $ (0.45) $ 0.11
The following is a summary of other intangibles (in thousands):
COMMERCIAL
ENVELOPE PRINTING TOTAL
----------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
----------- ----------- -----------
Trademarks........................ $ 8,314 $ -- $ 8,314
Patents........................... 2,054 -- 2,054
Non-compete agreements............ 1,188 1,905 3,093
Other intangibles................. 1,731 752 2,483
------- ------ -------
Balance as of March 31, 2002... $13,287 $2,657 $15,944
======= ====== =======
Other intangible assets are all subject to amortization and have
original estimated useful lives as follows: Trademarks--43 years; Patents--
12 years; Non-compete agreements--5 years; Other Intangibles--Various. The
estimated amortization expense for each of the succeeding five years is as
follows: $2.0 million, $2.0 million, $1.3 million, $1.2 million and $1.2
million.
IMPAIRMENT OF LONG-LIVED ASSETS
Impaired assets are written down to their estimated fair market
value. At December 31, 2001, all long-lived assets, including goodwill and
other intangibles, were evaluated for impairment on the basis of
undiscounted cash flows whenever events or changes in circumstances indicate
that the carrying value of the assets may not be recoverable, as measured by
comparing their net book value to the estimated future undiscounted cash
flows generated by their use.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of subsidiaries operating outside the United
States with a functional currency other than the U.S. dollar are translated
at current exchange rates. Income and expense items are translated at the
average rates for the year. The effects of translation are included as a
component of other comprehensive income. Foreign currency transaction gains
and losses are recorded in income when realized.
NEW ACCOUNTING PRONOUNCEMENTS
In June 2001, the Financial Accounting Standards Board ("FASB")
issued Statements of Financial Accounting Standards ("SFAS") No. 141,
Business Combinations, and SFAS No. 142, Goodwill and Other Intangible
Assets. Statement 141 requires that the purchase method of accounting be
used for all business combinations initiated after June 30, 2001. Statement
141 also includes guidance on the initial
F-9
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
recognition and measurement of goodwill and other intangible assets arising
from business combinations completed after June 30, 2001. Statement 142
prohibits the amortization of goodwill and intangible assets with indefinite
useful lives. Statement 142 requires that these assets be reviewed for
impairment at least annually. Intangible assets with finite lives will
continue to be amortized over their estimated useful lives. Additionally,
Statement 142 requires that goodwill included in the carrying value of
equity method investments no longer be amortized.
Mail-Well began its application of Statement 142 beginning in the
first quarter of 2002. The Company has completed the first step of the
two-step process prescribed in Statement 142 to test goodwill for impairment
and has concluded that a portion of the $213.5 million of goodwill related
to our commercial printing business is impaired. The extent of this
impairment will not be known until we have completed step two of the
process. The Company will recognize the amount of the impairment as a
cumulative effect of a change in accounting principle as of January 1, 2002
when it is determined.
In June 2001, the FASB issued SFAS No. 143, Accounting for Asset
Retirement Obligations. Statement 143 addresses financial accounting and
reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. Mail-Well will
adopt Statement 143 in the first quarter of fiscal year 2003. The Company is
evaluating the impact of the adoption of Statement 143 on the consolidated
financial statements.
In August 2001, the FASB issued SFAS No. 144, Accounting for the
Impairment or Disposal of Long-Lived Assets, which establishes one
accounting model to be used for long-lived assets to be disposed of by sale
and broadens the presentation of discontinued operations to include more
disposal transactions. Statement 144 supercedes SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets to Be Disposed Of and the
accounting and reporting provisions of ABP Opinion No. 30, Reporting the
Results of Operations--Reporting the Effects Of Disposal of a Segment of a
Business, and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions. Mail-Well adopted Statement 144 as of January 1, 2002 and
there was no impact from the adoption of this statement.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with
the current year presentation.
2. ACQUISITIONS
The acquisitions described below have been accounted for as
purchases; accordingly, the assets and liabilities of the acquired companies
have been recorded at their estimated fair values with the excess of the
purchase price over the estimated fair values recorded as goodwill. Certain
of the Company's acquisition agreements provide for deferred payments by the
Company, contingent upon future revenues or profits of the companies
acquired. Such payments are capitalized and recorded as goodwill. The
financial statements reflect the operations of the acquired businesses, from
their respective acquisition dates.
ACQUISITIONS IN THE COMMERCIAL PRINTING SEGMENT
In January 2000, the Company acquired the assets and assumed
certain liabilities of Braceland Brothers, Inc., located in Philadelphia,
Pennsylvania; Atlanta, Georgia; and Steubenville, Ohio, for $13.7 million.
The Philadelphia location has been closed. Goodwill recorded as a result of
this acquisition was $3.1 million.
In May 2000, the Company purchased the stock of Craftsmen Litho, Inc.,
located in Waterbury, Connecticut, for $9.3 million. Goodwill recorded as a
result of this acquisition was $5.5 million.
F-10
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
In June 2000, the Company purchased the stock of Strathmore Press,
Inc., located in Cherry Hill, New Jersey, for $9.3 million. This company has
been consolidated with another operation in the Philadelphia area. Goodwill
recorded as a result of this acquisition was $4.9 million.
During 1999, the Company paid $103.6 million and assumed debt of
$1.6 million to acquire seven commercial printing companies. The goodwill
recorded in connection with these acquisitions was approximately $63.4
million.
ACQUISITIONS IN THE ENVELOPE SEGMENT
In February 2000, the Company acquired American Business Products,
Inc. ("ABP") in a cash tender offer, in which the total value of the
transaction, including the assumption of debt, was approximately $338.5
million. Goodwill recorded as a result of this acquisition was $154.6
million. In September 2000, the Company sold Jen-Coat, the extrusion and
coating laminating business unit of ABP for $110.6 million. In June 2001,
the Company announced its intent to divest Curtis 1000 and Discount Label,
two other business units acquired in the ABP acquisition. Jen-Coat, Curtis
1000 and Discount Label have been included within the discontinued
operations. International Envelope is the only ABP business unit included in
continuing operations. The portion of the ABP purchase price allocated to
International Envelope was $75.9 million including goodwill of $39.1
million.
In July 2000, the Company purchased the stock of CML Industries
Ltd., a supplier of envelopes and converted paper products located in
Ontario and Quebec, Canada, for $20.9 million. Goodwill recorded as a result
of this acquisition was $12.1 million.
In October 1999, the Company purchased the stock of Northeastern
Envelope, located in Braintree, Massachusetts, for $2.6 million. Goodwill
recorded as a result of this acquisition was $1.3 million.
3. DISCONTINUED OPERATIONS
In June 2001, the Company announced plans to sell its Label and
Printed Office Products segments. Management expects to complete these
dispositions by September 30, 2002. These segments have been segregated from
continuing operations and reported as discontinued operations for all
periods presented in the accompanying consolidated financial statements.
The reported loss on disposition of the Label and Printed Office
Products segments includes the write-down to net realizable value based on
estimated proceeds, costs associated with the planned dispositions, the
estimated earnings or losses from operations of the discontinued businesses
through the expected date of these dispositions and the related income tax
expense. Management has based its estimates of the sales proceeds expected
from the divestitures of Label and Printed Office Products on data provided
by its financial advisors and indications of value received from prospective
buyers. The loss will be adjusted if management has information indicating
that the actual sales proceeds are different than the estimates. The accrual
for estimated earnings or losses from the measurement date to December 31,
2001 was not materially different than the actual results.
On February 22, 2001, the Company sold Curtis 1000 Inc., an
operation included in the Printed Office Products segment, for approximately
$40 million. The estimated proceeds from the sale were not significantly
different from the amount used to estimate the loss on disposal.
In September 2000, the Company sold Jen-Coat, the extrusion coating
and laminating business segment of ABP. The operating results of this
business unit were recorded as discontinued operations in the 2000
consolidated statement of operations.
F-11
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
Interest expense has been allocated to the operating results and
the expected earnings included in the calculation of the loss on disposal of
discontinued operations based upon the relative net assets of Jen-Coat,
Label and Printed Office Products. This allocation of interest totaled $6.5
million and $6.8 million for the three months ended March 31, 2002 and 2001,
respectively. This allocation of interest totaled $26.1 million, $30.0
million and $15.0 million for the years ended December 31, 2001, 2000 and
1999, respectively.
Operating results of the discontinued operations for the years
ended December 31, 2001, 2000 and 1999 are summarized as follows (in
thousands):
2001 2000 1999
--------- -------- --------
Net sales:
Label...................................................... $ 219,182 $223,994 $188,008
Printed Office Products.................................... 386,446 377,636 165,382
Jen-Coat................................................... -- 56,036 --
--------- -------- --------
$ 605,628 $657,666 $353,390
========= ======== ========
Income (loss) from operations:
Label...................................................... $ (1,028) $(15,005) $ 3,411
Printed Office Products.................................... (1,058) 3,721 6,389
Jen-Coat................................................... -- 1,721 --
--------- -------- --------
(2,086) (9,563) 9,800
Income tax expense (benefit)............................... 90 (1,525) 3,920
--------- -------- --------
$ (2,176) $ (8,038) $ 5,880
========= ======== ========
Loss on disposal of discontinued operations:
Label...................................................... $ (87,062) $ -- $ --
Printed Office Products.................................... (79,717) -- --
--------- -------- --------
(166,779) -- --
Income tax expense (benefit)............................... (45,779) -- --
--------- -------- --------
$(121,000) $ -- $ --
========= ======== ========
F-12
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
Operating results of the discontinued operations for the three months
ended March 31, 2002 and 2001 are summarized as follows (in thousands):
MARCH 31,
----------------------------
2002 2001
---------- -----------
(UNAUDITED) (UNAUDITED)
---------- -----------
Net sales:
Label............................................. $ 53,276 $ 55,508
Printed Office Products........................... 74,540 100,739
-------- --------
$127,816 $156,247
======== ========
Income (loss) from operations:
Label............................................. $ (365) $ (413)
Printed Office Products........................... (7) 356
-------- --------
(372) (57)
Income tax expense................................ 605 508
-------- --------
(977) (565)
Loss on disposal of discontinued operations:
Label............................................. (3,184) --
Printed Office Products........................... (356) --
-------- --------
(3,540) --
Income tax expense................................ 4,063 --
-------- --------
$ (8,580) $ (565)
======== ========
The assets and liabilities of discontinued operations, which have
been reflected as net assets of discontinued operations in the consolidated
balance sheets, are summarized as follows (in thousands):
MARCH 31, DECEMBER 31,
--------- ------------
2002 2001 2000
-------- -------- --------
(UNAUDITED)
-----------
Label segment:
Current assets.................................. $ 54,409 $ 46,285 $ 59,569
Long-term assets................................ 90,778 97,109 146,969
-------- -------- --------
Total assets................................ 145,187 143,394 206,538
Current liabilities............................. 38,395 40,085 29,751
Long-term liabilities........................... 5,910 3,909 6,092
-------- -------- --------
Total liabilities........................... 44,305 43,994 35,843
-------- -------- --------
Net assets of the Label segment.................... 100,882 99,400 170,695
Printed Office Products segment:
Current assets.................................. 33,989 56,227 65,961
Long-term assets................................ 123,320 158,875 222,313
-------- -------- --------
Total assets................................ 157,309 215,102 288,274
Current liabilities............................. 31,852 49,068 40,319
Long-term liabilities........................... 7,134 19,057 24,435
-------- -------- --------
Total liabilities........................... 38,986 68,125 64,754
-------- -------- --------
Net assets of the Printed Office Products segment.. 118,323 146,977 223,520
-------- -------- --------
Net assets of discontinued operations.......... $219,205 $246,377 $394,215
======== ======== ========
F-13
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
Assets primarily consist of accounts receivable, inventories,
property and equipment and deferred income taxes. Liabilities primarily
consist of accounts payable, accrued expenses, deferred income taxes and
other long-term liabilities. The net assets of discontinued operations
presented in the 2001 consolidated balance sheet include the write-down of
assets to estimated net realizable value, the accrual of obligations
associated with the sale of the two segments and the accrual of estimated
losses to the expected date of disposal. See Note 15, Subsequent Event, for
discussion of the sale of the Label segment.
4. ASSETS HELD FOR SALE
The Company's divestiture plans also include the sale of certain
operations that are not strategic to its Envelope and Commercial Printing
segments. The Company expects to complete the dispositions of these
operations by September 30, 2002. The following table presents the sales and
operating income of these operations for the three months ended March 31,
2002 and 2001 and the years ended December 31, 2001, 2000 and 1999 (in
thousands):
MARCH 31, DECEMBER 31,
--------- ------------
2002 2001 2001 2000 1999
------- ------- -------- -------- -------
(UNAUDITED) (UNAUDITED)
----------- -----------
Sales........................... $26,894 $29,504 $112,626 $120,045 $96,070
Operating income................ 1,434 2,455 9,999 13,189 11,584
Certain of these assets were written down to their fair market
values based on estimated sales proceeds resulting in an impairment charge
of $2.9 million in 2001.
The assets of these operations at March 31, 2002 and December 31,
2001 totaled $67.4 million and $72.4 million, respectively, and are reported
net of $11.4 million and $13.3 million of related liabilities, respectively,
as "Net assets held for sale."
5. SUPPLEMENTAL BALANCE SHEET INFORMATION
INVENTORIES
The Company's inventories by major category are as follows (in
thousands):
MARCH 31, DECEMBER 31,
--------- ------------
2002 2001 2000
-------- -------- --------
(UNAUDITED)
-----------
Raw materials..................................... $ 29,816 $ 29,964 $ 44,083
Work in process................................... 20,314 21,868 27,955
Finished goods.................................... 56,935 56,768 63,695
-------- -------- --------
107,065 108,600 135,733
Reserves.......................................... (3,581) (4,056) (4,316)
-------- -------- --------
$103,484 $104,544 $131,417
======== ======== ========
F-14
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
PROPERTY, PLANT AND EQUIPMENT
The Company's investment in property, plant and equipment consists
of the following (in thousands):
MARCH 31, DECEMBER 31,
--------- ------------
2002 2001 2000
-------- -------- --------
(UNAUDITED)
-----------
Land and land improvements........................ $ 17,677 $ 11,818 $ 19,707
Buildings and improvements........................ 89,444 95,939 104,165
Machinery and equipment........................... 417,478 429,206 447,396
Furniture and fixtures............................ 13,163 13,091 13,259
Construction in progress.......................... 13,087 8,922 9,735
--------- --------- ---------
550,849 558,976 594,262
Accumulated depreciation.......................... (189,294) (183,561) (163,237)
--------- --------- ---------
$ 361,555 $ 375,415 $ 431,025
========= ========= =========
ACCUMULATED OTHER COMPREHENSIVE LOSS
The after-tax components comprising accumulated other comprehensive
loss are as follows (in thousands):
THREE MONTHS ENDED YEAR ENDED
MARCH 31, DECEMBER 31,
--------- ------------
2002 2001 2001 2000
------- -------- -------- -------
(UNAUDITED) (UNAUDITED)
----------- -----------
Currency translation adjustment................ $(1,347) $ (6,513) $(14,934) $(6,467)
Pension liability adjustment................... -- -- (1,074) (146)
Unrealized loss on investments................. -- (3,930) -- (915)
------- -------- -------- -------
$(1,347) $(10,443) $(16,008) $(7,528)
======= ======== ======== =======
F-15
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
6. LONG-TERM DEBT
At March 31, 2002, December 31, 2001 and December 31, 2000,
long-term debt consists of the following (in thousands):
DECEMBER 31,
MARCH 31, ------------
2002 2001 2000
--------- --------- --------
(UNAUDITED)
-----------
Secured Senior Credit Facility:
Tranche A term loan, due 2006.............................. $ 83,448 $ 194,918 $237,586
Tranche B term loan, due 2007.............................. 85,370 192,749 209,603
Revolving loan facility, due 2006.......................... -- 6,000 --
Senior Notes, due 2012.......................................... 350,000 -- --
Senior Subordinated Notes, due 2008............................. 300,000 300,000 300,000
Convertible Subordinated Notes, due 2002........................ 139,063 139,063 139,063
Other........................................................... 11,372 20,269 33,541
--------- --------- --------
969,253 852,999 919,793
Less current maturities......................................... (310,372) (302,822) (40,040)
--------- --------- --------
Long-term debt.................................................. $ 658,881 $ 550,177 $879,753
========= ========= ========
In February 2000, the Company entered into an $800,000,000 Senior
Secured Credit Facility (the "Credit Facility"). The Credit Facility
originally consisted of a $300 million Tranche A term loan, a $250 million
Tranche B term loan and a $250 million revolving loan facility. The Company
is required to repay $33.3 million in principal on the Tranche A term loan
in 2002, increasing $7.8 million each year through 2005 with a final payment
of $14.7 million in 2006. The Company is required to repay $490,000 each
quarter on the Tranche B term loan through the first quarter of 2005, with
four quarterly balloon payments of $46.1 million per quarter thereafter. Any
optional or required prepayments of principal are applied proportionately
between the Tranche A and B term loans. Interest under the Credit Facility,
which is payable quarterly, is based on London Interbank Offered Rate
("LIBOR") plus a margin. At December 31, 2001, the interest rates on Tranche
A and B term loans were 5.56% and 5.77%, respectively, and the interest rate
on the revolving loan facility was 6.75%. The Credit Facility is secured by
substantially all of the Company's domestic property.
In November 1998, the Company issued $300,000,000 of 8.75% Senior
Subordinated Notes (the "Senior Notes"), which are due November 2008.
Interest is payable semi-annually. The Company may redeem the Senior Notes,
in whole or in part, on or after December 15, 2003, at redemption prices
which range from 100% to 104.375%, plus accrued and unpaid interest.
In November 1997, the Company issued $152,050,000 of 5% Convertible
Subordinated Notes due 2002 (the "Convertible Notes"). Interest is payable
semi-annually. The Convertible Notes are convertible at the option of the
holder into shares of the Company's common stock at a conversion price of
$19.00 per share at any time prior to November 1, 2002. In March 2000, the
Company repurchased $12,987,000 of the outstanding Convertible Notes at a
discount and recorded a gain of $2,989,000, which was reported net of tax as
an extraordinary item in the consolidated statements of operations. The
Credit Facility provides for the funds needed for the mandatory retirement
of the Convertible Notes on their due date, subject to meeting applicable
borrowing conditions.
Other long-term debt is primarily term debt with banks with
interest rates which range from 6.0% to 12.0% at December 31, 2001. Other
long-term debt also includes capital lease obligations.
F-16
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
At December 31, 2001, the Company had $131.5 million available on
its existing lines of credit.
In February 2000, the Company wrote off deferred financing costs of
$635,000 capitalized in connection with the bank borrowings, which were
repaid in February 2000. The charge is reported net of tax as an
extraordinary item in the consolidated statements of operations.
The aggregate annual maturities for long-term debt at March 31,
2002 are as follows (in thousands):
2002............................................... $310,372
2003............................................... 21,236
2004............................................... 23,823
2005............................................... 27,019
2006............................................... 68,932
Thereafter......................................... 517,871
--------
$969,253
========
Current maturities include the anticipated retirement of the
Convertible Notes and also include the portion of bank borrowings that will
be paid from the proceeds from planned divestitures pursuant to the terms of
the Credit Facility, net of amounts that would become available as a result
of such repayments under the revolving credit facility due in 2006.
The Credit Facility, Senior Notes and Convertible Notes contain
certain restrictive covenants that, among other things and with certain
exceptions, limit the ability of the Company to incur additional
indebtedness or issue capital stock, prepay subordinated debt, transfer
assets outside of the Company, pay dividends or repurchase shares of common
stock. In addition to these restrictions, the Company is required to satisfy
certain financial covenants. As of December 31, 2001, the Company is in
compliance with all of these covenants.
Cash paid for interest (including interest allocated to
discontinued operations) on long-term debt was $71,494,000, $89,923,000 and
$51,849,000 for the years ended December 31, 2001, 2000 and 1999,
respectively.
The estimated fair value of the Company's Credit Facility, Senior
Notes, Convertible Notes and other long-term debt based on current rates
available to the Company for debt of the same remaining maturity was $793.6
million and $794.2 million at December 31, 2001 and 2000, respectively.
In March 2002, the Company issued $350,000,000 of 9 5/8% Senior
Notes due 2012 ("Senior Notes"). Interest is payable semi-annually. The
Company may redeem the Senior Notes, in whole or in part, on or after March
15, 2007, at a redemption prices from 100% to 104.813%, plus accrued and
unpaid interest. In addition, before March 2005, the Company can redeem up
to 35% of the Senior Notes at 109.625% of the principal amount thereof, plus
accrued and unpaid interest, with the net cash proceeds from certain common
stock offerings. The Company used the proceeds from the sale of the Senior
Notes to repay $197.0 million of its Tranche A and B term loans and $22.0
million of other debt. The remaining proceeds will be used to fund working
capital needs and provide the liquidity needed for the repayment of our
convertible debt due in November 2002. In addition, $20.5 million of the
proceeds received from the sale of Curtis 1000, Inc. were used to repay
the Tranche A and B term loans.
Deferred financing costs of $8.2 million incurred in connection
with the Secured Senior Credit Facility were written off as of March 31,
2002. This write-off represented the pro rata portion of the deferred
financing fees related to the Tranche A and B term loans repaid with the
proceeds from the
F-17
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
sale of the Senior Notes and the sale of Curtis 1000, Inc. The write-off
is reported net of tax as an extraordinary item in the condensed consolidated
statements of operations.
As of March 31, 2002, the Company was in compliance with all of the
covenants of its various debt agreements.
7. ACCOUNTS RECEIVABLE FINANCING FACILITY
In 2000 and until July 2001, the Company utilized an accounts
receivable financing facility which entitled the Company to transfer,
without recourse, certain trade accounts receivable to a special purpose
entity and to receive up to $75 million from a group of unrelated third
party purchasers at a cost of funds equal to commercial paper rates. The
Company continued to service the receivables that were transferred to the
special purpose entity under the facility for which it received a fee as
specified by the facility and considered adequate compensation.
At December 31, 2000, net accounts receivable of $151.1 million had
been transferred to the special purpose entity under the facility. Of the
total transferred, $75.0 million was sold to third party purchasers. The
value of the Company's retained subordinated interest at December 31, 2000
was $75.4 million and is included in accounts receivable in the consolidated
balance sheet. This value was determined by considering the average life of
accounts receivables, which was 45 days, and the rate of expected credit
losses, which was very low due to the collection experience of the Company.
The facility was terminated in July 2001.
8. INCOME TAXES
Because the March 31, 2002 information is not significantly
different than the year-end information, this footnote has not been updated.
Income (loss) from continuing operations for the years ended December 31,
2001, 2000 and 1999 was (in thousands):
2001 2000 1999
-------- ------- -------
Domestic......................................................... $(48,748) $31,721 $77,415
Foreign.......................................................... 28,023 22,701 20,615
-------- ------- -------
Income (loss) from continuing operations before income taxes..... $(20,725) $54,422 $98,030
======== ======= =======
F-18
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
The provision for income taxes on income from continuing operations
for the years ended December 31, 2001, 2000 and 1999 consisted of the
following (in thousands):
2001 2000 1999
-------- ------- -------
Current tax provision (benefit):
Federal..................................................... $(18,293) $ 3,338 $19,063
Foreign..................................................... 9,589 8,421 6,244
State....................................................... (1,830) 333 1,906
-------- ------- -------
(10,534) 12,092 27,213
Deferred provision:
Federal..................................................... 2,234 6,218 9,537
Foreign..................................................... 392 1,281 1,725
State....................................................... 224 622 953
-------- ------- -------
2,850 8,121 12,215
-------- ------- -------
Provision (benefit) for income taxes........................... $ (7,684) $20,213 $39,428
======== ======= =======
A reconciliation of the federal statutory tax rate to the Company's
effective income tax rate is summarized below:
2001 2000 1999
----- ----- -----
Federal statutory tax rate............................................ 35.0% 35.0% 35.0%
State tax, net of federal tax benefit................................. 3.5 3.5 3.5
Nondeductible goodwill amortization................................... (13.0) 4.9 2.2
Nontaxable investment benefit......................................... 10.4 (3.9) (2.0)
Other................................................................. 1.2 (2.4) 1.5
----- ----- -----
Effective income tax rate............................................. 37.1% 37.1% 40.2%
===== ===== =====
F-19
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
Deferred taxes are recorded to give recognition to temporary
differences between the tax basis of assets or liabilities and their
reported amounts in the financial statements. The tax effects of these
temporary differences are recorded as deferred tax assets or deferred tax
liabilities. Deferred tax assets generally represent items that can be used
as a tax deduction or credit in future years. Deferred tax liabilities
generally represent items that have been deducted for tax purposes, but have
not yet been recorded in the consolidated statements of operations.
Valuation allowances are recorded to reduce deferred tax assets when it is
more likely than not that a tax benefit will not be realized. The tax
effects of temporary differences that give rise to significant portions of
the deferred tax assets and deferred tax liabilities at December 31, 2001
and 2000 are presented below (in thousands):
2001 2000
--------- ---------
Deferred tax assets:
Alternative minimum tax credit carryforwards........................... $ 5,563 $ 4,413
Net operating loss carryforwards....................................... 5,626 159
Compensation and benefit related accruals.............................. 15,910 13,326
Restructuring accruals................................................. 8,620 6,179
Accounts receivable.................................................... 1,718 2,986
Other.................................................................. 896 4,566
Valuation allowance.................................................... (254) (275)
-------- --------
Total deferred tax assets................................................. 38,079 31,354
Deferred tax liabilities:
Property, plant and equipment.......................................... 91,349 83,843
Goodwill and other intangibles......................................... 14,850 16,091
Other.................................................................. 3,006 3,173
-------- --------
Total deferred tax liabilities............................................ 109,205 103,107
-------- --------
Net deferred tax liability................................................ $ 71,126 $ 71,753
======== ========
The net deferred income tax liability at December 31, 2001 and 2000
includes the following components (in thousands):
2001 2000
-------- --------
Current deferred tax asset......................................... $ 22,447 $ 15,012
Non-current deferred tax liability................................. (93,573) (86,765)
-------- --------
Total.............................................................. $(71,126) $(71,753)
======== ========
Net operating losses of $14.6 million are being carried forward and
are available to reduce future taxable income. These net operating losses
will expire in 2020. The Company also has tax credit carryforwards of $5.6
million at December 31, 2001, which may be carried forward indefinitely.
Cash payments for income taxes (including the amounts allocated to
discontinued operations) were $2,385,000, $8,813,000 and $21,255,000 in
2001, 2000 and 1999, respectively.
F-20
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
The Company does not provide U.S. income taxes on the unremitted
earnings of its foreign subsidiaries since these earnings are deemed
permanently invested. Unremitted earnings of the Company's foreign
subsidiaries as of December 31, 2001 were $70.9 million.
9. RESTRUCTURING, ASSET IMPAIRMENTS AND OTHER CHARGES
2001 RESTRUCTURING
FIRST QUARTER 2002. As announced in 2001, the Company is
consolidating certain operations to eliminate excess internal capacity
in order to reduce costs and improve its long-term competitive position.
In addition, the Company is significantly reducing the size of certain of
its facilities in response to current market conditions. The restructuring
charge related to these plans totaled $11.7 million in first quarter of
2002. The following table and discussion present the details of this
restructuring charge, as well as other related charges recorded during the
quarter (unaudited):
COMMERCIAL
ENVELOPE PRINTING CORPORATE TOTAL
-------- ---------- --------- -----
(IN THOUSANDS)
Employee separation and related
employee expenses............................... $ -- $ 233 $ -- $ 233
Other exit costs................................... 3,498 -- -- 3,498
Asset impairment charges........................... 4,895 -- -- 4,895
Implementation expenses............................ 3,040 -- -- 3,040
------- ------ ---- -------
Total restructuring costs..................... 11,433 233 -- 11,666
Other charges...................................... 580 774 627 1,981
------- ------ ---- -------
Total restructure and other charges........... $12,013 $1,007 $627 $13,647
======= ====== ==== =======
In addition to the three envelope manufacturing facilities
consolidated in 2001, the envelope business consolidated four facilities in
the first quarter of 2002 and will consolidate four additional operations
during the remainder of 2002. When this consolidation plan is completed the
Company will have closed 11 envelope plants and substantially reduced excess
internal capacity and improved utilization of equipment and resources at the
remaining 27 domestic plants and 12 plants in Canada. In 2001, the Company
accrued the separation and related employee expenses covering the 923
employees expected to be terminated over the course of this project. As of
March 31, 2002, 553 employees had been separated. Other exit costs of $3.5
million in the first quarter of 2002 are primarily training costs and other
incremental expenses incurred in connection with those employees added at
the plants that are absorbing the sales of the plants being closed.
Incremental external implementation expenses were $3.0 million in the first
quarter 2002. Equipment taken out of service during the first quarter of
2002 as a result of the consolidation program was written down $4.9 million
to its fair market value.
Commercial printing completed the consolidation of its operations
in the Philadelphia, Pennsylvania area in 2001. Commercial printing is also
fixed costs at certain of its commercial printing facilities
in response to changes in market conditions. As a result, it reduced
headcount in the first quarter of 2002 by 143 employees and incurred
severance costs of $233,000.
In 2001, the Company initiated several programs to significantly
improve operations and marketing effectiveness. Both the envelope and
commercial printing businesses have programs in place to institute best
practices, install pricing disciplines and align equipment and services to
better serve our customers and markets. We believe these initiatives will
significantly improve the performance of
F-21
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
our businesses; accordingly, we have expedited the implementation of
these programs by investing in outside assistance. The external
incremental cost incurred on these initiatives totaled $2.0 million
during the first quarter of 2002.
The Company expects to complete its restructuring and other
strategic initiatives by the end of 2002 and anticipates further charges of
approximately $35.0 million. Implementation expenses are expected to total
$4 million and training and other exit costs are estimated to be $15 million.
In addition, $16 million of equipment, which will not be sold or redeployed,
will be written-off.
A summary of the activity charged to the restructuring liability
during the three months ended March 31, 2002 was as follows (in thousands):
COMMERCIAL
ENVELOPE PRINTING TOTAL
-------- ---------- -----
Balance, December 31, 2001.............................. $10,126 $ 604 $10,730
Payments for severance............................... (3,124) -- (3,124)
Payments for lease termination costs................. (35) -- (35)
Payments for other exit costs........................ -- (131) (131)
------- ----- -------
Balance, March 31, 2002 (unaudited)..................... $ 6,967 $ 473 $ 7,440
======= ===== =======
2001. In June 2001, the Company announced a new strategic plan,
which includes plans to further consolidate certain operations to eliminate
excess internal capacity in order to reduce costs and improve its long-term
competitive position. The restructuring charge related to these plans
totaled $37.4 million in 2001. The following table presents the details of
this restructuring charge, as well as other charges recorded in 2001 (in
thousands):
COMMERCIAL
ENVELOPE PRINTING CORPORATE TOTAL
-------- ---------- --------- -------
Employee separation and related expenses................... $ 9,042 $ 385 $ -- $ 9,427
Lease termination costs.................................... 1,368 346 -- 1,714
Other exit costs........................................... 13,174 1,632 -- 14,806
Asset impairment charges................................... 8,178 601 -- 8,779
Strategic assessment costs................................. -- -- 2,677 2,677
------- ------ ------ -------
Total restructuring costs............................... 31,762 2,964 2,677 37,403
Other charges.............................................. 1,360 1,482 1,600 4,442
------- ------ ------ -------
Restructuring, asset impairments and other charges...... $33,122 $4,446 $4,277 $41,845
======= ====== ====== =======
The Envelope segment implemented a plan to consolidate nine (the
decision to close two additional plants was made in the first quarter 2002)
of its manufacturing facilities over an 18-month period. This plan will
substantially reduce excess internal capacity and improve utilization of
equipment and resources at the remaining 41 plants. The employee separation
and related expenses cover 923 employees to be terminated over the course of
this project, of which 359 employees have been terminated as of December 31,
2001. Other exit costs include training expenses for those employees at the
plants that are absorbing the sales of the plants being closed and external
assistance in implementing the plant closures. As of December 31, 2001,
plants in Omaha, Nebraska; Allentown, Pennsylvania; and Santa Fe Springs,
California were closed. Equipment taken out of service as a result of these
plant closures was written down $8.2 million to its fair market value.
F-22
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
Commercial Printing consolidated three of its printing operations
in the Philadelphia, Pennsylvania area into one existing facility. This
consolidation was done to improve the cost effectiveness of these operations
and their competitive position in the Philadelphia market. The costs
associated with this consolidation included severance and related expenses
covering the termination of 25 employees all of whom have been terminated.
Other exit costs included expenses incurred to move and reinstall equipment.
Equipment taken out of service was written down $0.6 million to its fair
market value.
In developing the Company's new strategic plan, outside advisors
were engaged to research and evaluate markets, survey customers and assess
existing strategies. Financial advisors were also engaged to evaluate
options for improving the Company's capital structure. The cost of these
advisors was $2.7 million.
The following table is an analysis of the reserve recorded for the
2001 restructuring (in thousands):
COMMERCIAL
ENVELOPE PRINTING TOTAL
-------- ---------- -----
Initial accrual............................................ $13,449 $1,952 $15,401
Payments for severance..................................... (2,962) (381) (3,343)
Payments for lease termination costs....................... (219) (608) (827)
Payments for other exit costs.............................. (142) (45) (187)
Reversal of unused portion................................. -- (314) (314)
------- ------ -------
Balance, December 31, 2001................................. $10,126 $ 604 $10,730
======= ====== =======
The Company launched several initiatives during 2001 to
significantly improve operations and marketing. Both Envelope and Commercial
Printing have programs in place to institute best practices, install pricing
disciplines and align equipment and services to better serve customers and
markets. The Company has invested in outside assistance to expedite the
implementation of these programs. The external incremental cost incurred
totaled $2.1 million in 2001 and is included in other charges.
Other charges also include a $1.6 million write-off of an
investment in a company developing a service to enable online management of
the creative process of a printing job and a $0.7 million write-off in the
envelope segment for the cost of a human resource information system that
will not be implemented.
F-23
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
2000 RESTRUCTURING
In 2000, the Company began the comprehensive review of its operations,
which ultimately led to the new strategy announced in 2001, and identified
certain actions that could be taken at that time. The following table
presents the details of the restructuring and asset impairment charges
recorded in 2000 (in thousands):
COMMERCIAL
ENVELOPE PRINTING TOTAL
-------- ---------- ------
Employee separation and related expenses.............. $ 86 $ 188 $ 274
Lease termination costs............................... -- 428 428
Other exit costs...................................... -- 45 45
Asset impairment charges.............................. -- 749 749
------ ------ ------
Total restructuring costs......................... 86 1,410 1,496
Other asset impairments............................... 1,872 2,036 3,908
------ ------ ------
Restructuring, asset impairments and other charges.... $1,958 $3,446 $5,404
====== ====== ======
Envelope closed a resale operation in Vancouver, Washington. The
employee separation costs covered the severance expenses of 19 employees.
Commercial Printing consolidated two operations in St. Louis, Missouri
into an existing facility and closed its bindery operation in Mexico.
Approximately 165 employees of commercial printing were terminated as a
result of these actions.
The Company also incurred asset impairment charges in 2000 totaling
$3.9 million that were unrelated to the restructuring. These assets were
not in use and could not be redeployed or sold, and therefore were
written-off.
Charges from the 1998 restructuring plan recorded in 2000 and 1999 were
$0.8 million and $1.8 million, respectively. This plan was completed in
2000.
The following table is an analysis of the reserve recorded for the 2000
restructuring (in thousands):
COMMERCIAL
ENVELOPE PRINTING TOTAL
-------- ---------- ------
Balance, December 31, 2000............................ $ 86 $1,485 $1,571
Payments for severance............................ (86) (461) (547)
Payments for property exit costs.................. -- (452) (452)
Payments for other exit activities................ -- (572) (572)
---- ------ ------
Balance, December 31, 2001............................ $ -- $ -- $ --
==== ====== ======
10. STOCK OPTION PLANS
As of March 31, 2002, the Company's stock option plans were not
significantly different than the year-end information, as such, this
footnote has not been updated.
In May 2001, the Company adopted a Long-Term Equity Incentive Plan (the
"Incentive Plan"), which replaced all prior stock option plans (the "Option
Plans"). The Incentive Plan allows the compensation committee of the Board
of Directors to grant stock options, stock appreciation rights ("SARs"),
restricted common stock, performance awards and any other stock-based
awards to officers,
F-24
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
directors and employees of the Company. Under the Incentive Plan, the Board
granted 669,000 Performance-Based Restricted Shares ("PARS") and 3,113,420
stock options in 2001. The stock options vest over 4 1/2 years, at a
vesting rate of 20% annually with the final 20% vesting in December 2005.
Fifty percent of the PARS will vest in June 2006 and the other fifty
percent will vest in June 2007. The Incentive Plan provides for an
acceleration of the vesting of both the stock options and the PARS if the
Company's stock price closes at certain levels for 20 consecutive trading
days as set forth in the following schedule:
STOCK PRICE AT WHICH
AMOUNT OF ACCELERATED VESTING OCCURS
VESTING OPTIONS PARS
--------------------- ------- ------
First one-third.......................... $ 7.50 $ 8.00
Second one-third......................... $10.00 $11.00
Final one-third.......................... $12.50 $14.00
The Company recorded fixed deferred compensation in the amount of
$3,686,000 equal to the value of the PARS on the date of grant. This
deferred compensation is being amortized over the vesting period of six
years; however, the expense will be prorated to the applicable vesting
period if acceleration terms expedite the vesting period. The Company
recorded compensation expense in the amount of $327,000 for the year ended
December 31, 2001. At December 31, 2001, 217,783 stock options were
available for issuance under the Incentive Plan.
Stock options which were granted under the Option Plans, of which
3,015,127 shares are outstanding at December 31, 2001, generally vest over
four or five years and expire ten years from the date granted. Options were
granted at a price equal to the fair market value of the Company's common
stock on the date of grant. At December 31, 2001, no stock options were
available for issuance under the Option Plans.
The following table summarizes the activity and terms of outstanding
options at December 31, 2001, 2000 and 1999:
2001 2000 1999
----------------------- ----------------------- -----------------------
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
OPTIONS PRICE OPTIONS PRICE OPTIONS PRICE
--------- -------- --------- -------- --------- --------
Options outstanding at beginning
of year........................ 3,670,867 $8.71 2,598,119 $8.76 2,619,759 $ 7.37
Granted.......................... 3,265,036 5.45 1,362,659 8.65 466,300 13.54
Exercised........................ (201,922) 2.05 (61,856) 4.99 (388,555) 5.53
Expired/cancelled................ (605,344) 9.83 (228,055) 9.04 (99,385) 6.59
--------- ----- --------- ----- --------- ------
Options outstanding at end of
year........................... 6,128,637 $7.08 3,670,867 $8.75 2,598,119 $ 8.76
========= ===== ========= ===== ========= ======
Options exercisable at end of
year........................... 1,679,137 $8.60 1,289,717 $7.48 820,740 $ 6.35
========= ===== ========= ===== ========= ======
F-25
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
Summary information about the Company's stock options outstanding at
December 31, 2001 is as follows:
WEIGHTED WEIGHTED WEIGHTED
OUTSTANDING AT AVERAGE AVERAGE EXERCISABLE AT AVERAGE
DECEMBER 31, REMAINING LIFE EXERCISE DECEMBER 31, EXERCISE
RANGE OF EXERCISE PRICES 2001 (IN YEARS) PRICE 2001 PRICE
---------------------------- -------------- -------------- -------- -------------- --------
$1.32-$1.42................ 79,411 3.2 $ 1.33 79,411 $ 1.33
$2.19-$4.37................ 243,505 6.5 $ 3.86 155,505 $ 3.71
$4.38-$6.56................ 3,311,500 4.8 $ 5.45 58,000 $ 5.43
$6.57-$8.74................ 1,338,019 5.7 $ 7.52 720,506 $ 7.04
$8.75-$10.93............... 237,200 7.8 $ 9.71 103,734 $ 9.62
$10.94-$13.10............... 581,600 6.4 $12.28 328,154 $12.20
$13.20-$15.30............... 319,402 6.3 $13.82 215,827 $13.76
$21.86...................... 18,000 6.3 $21.86 18,000 $21.86
--------- --- ------ --------- ------
$1.32-$21.86............... 6,128,637 5.4 $ 7.08 1,679,137 $ 8.60
========= === ====== ========= ======
As permitted by SFAS No. 123, Accounting for Stock-Based Compensation,
the Company accounts for the plans under Accounting Principles Board
Opinion No. 25; however, the Company has computed for pro forma disclosure
purposes the value of all options granted during 2001, 2000 and 1999 using
the Black-Scholes option pricing model as prescribed by SFAS No. 123 and
using the following average assumptions:
2001 2000 1999
--------- --------- ---------
Risk-free interest rate....................... 3.5%-7.2% 5.8%-7.2% 5.8%-7.2%
Expected dividend yield....................... 0% 0% 0%
Expected option lives......................... 4-6 years 4-6 years 4-6 years
Expected volatility........................... 33%-68% 33%-68% 33%-68%
The weighted average fair value of options granted in 2001, 2000 and
1999 was $5.45, $5.47 and $8.43, respectively, per option. Had compensation
expense for the plans been determined consistent with the fair value
provisions of SFAS No. 123, the Company's reported and pro forma net income
and earnings per share for the years ended December 31, 2001, 2000 and 1999
would have been as follows (in thousands, except per share data):
2001 2000 1999
--------- ------- -------
Net income (loss):
As reported..................................... $(136,217) $27,618 $64,482
Pro forma....................................... $(140,709) $23,467 $61,481
Earnings per (loss) share--basic:
As reported..................................... $ (2.86) $ 0.57 $ 1.32
Pro forma....................................... $ (2.96) $ 0.48 $ 1.25
Earnings per (loss) share--diluted:
As reported..................................... $ (2.86) $ 0.56 $ 1.20
Pro forma....................................... $ (2.96) $ 0.48 $ 1.15
The effect on 2001, 2000 and 1999 pro forma net income, earnings per
share--basic and earnings per share--diluted of expensing the estimated
fair value of stock options is not necessarily representative of the effect
on reported earnings for future years due to the vesting period of the
stock options and the potential for issuance of additional stock options in
future years.
F-26
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
11. RETIREMENT PLANS
SAVINGS PLANS
The Company sponsors a defined contribution plan to provide
substantially all U.S. salaried and certain hourly employees an opportunity
to accumulate personal funds for their retirement. As determined by the
provisions of the plan, the Company matches a certain percentage of each
employee's voluntary contribution. The plan provides for a minimum
contribution by the Company to the plan for all eligible employees of
1% of their salary. This contribution can be increased at the Company's
discretion. All contributions made by the Company are made in cash and
allocated to the funds selected by the employee. Company contributions to
the plan were approximately $8,979,000, $5,899,000 and $3,970,000 for the
years ending in 2001, 2000 and 1999, respectively.
PENSION PLANS
The Company maintains pension plans for certain of its employees in the
U.S. and Canada under collective bargaining agreements with unions
representing these employees. The Company expects to continue to fund these
plans based on governmental requirements, amounts deductible for income tax
purposes and as needed to ensure that plan assets are sufficient to satisfy
plan liabilities. As of December 31, 2001, plan assets consist primarily of
government bonds, corporate bonds, equity and fixed income funds.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLANS
As a result of the acquisition of ABP, the Company assumed
responsibility for the ABP supplemental executive retirement plans ("SERP")
which provides benefits to certain former directors and executives of ABP.
For accounting purposes, these plans are unfunded; however, ABP had
purchased annuities to cover the benefits for certain participants. In
2001, the Company accelerated the benefit payments to all participants for
whom there was no annuity.
F-27
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
The following table sets forth the financial status of the pension
plans and the SERP and the amounts recognized in the Company's consolidated
balance sheets as of December 31, 2001 and 2000 (in thousands):
PENSION PLANS SERP
-------------------- ---------------------
2001 2000 2001 2000
------- ------- ------- --------
Change in benefit obligation:
Benefit obligation at beginning of year........ $29,613 $28,693 $17,844 $ 18,077
Service cost................................... 1,424 2,000 -- --
Interest cost.................................. 2,137 1,569 853 1,557
Actuarial gains and loss....................... 1,418 3 -- --
Foreign currency exchange rate changes......... (1,056) (733) -- --
Benefits paid.................................. (1,987) (1,919) (9,655) (1,790)
------- ------- ------- --------
Benefit obligation at end of year............ 31,549 29,613 9,042 17,844
------- ------- ------- --------
Change in plan assets:
Fair value of plan assets at beginning of
year......................................... 34,662 34,423 -- --
Foreign currency exchange rate changes......... (1,197) 1,574 -- --
Actual return on plan assets................... (286) (707) -- --
Employer contributions......................... 1,744 1,291 -- --
Benefits paid.................................. (2,208) (1,919) -- --
------- ------- ------- --------
Fair value of plan assets at end of year..... 32,715 34,662 -- --
------- ------- ------- --------
Funded status.................................... 1,166 5,049 (9,042) 17,844
Unrecognized actuarial loss...................... 7,260 3,124 -- --
Unrecognized prior service cost.................. 249 368 -- --
Unrecognized transition asset.................... (4,021) (4,711) -- --
------- ------- ------- --------
Net amount recognized............................ $ 4,654 $ 3,830 $(9,042) $(17,844)
======= ======= ======= ========
Amounts recognized in the consolidated balance
sheets:
Prepaid benefit cost......................... $ 4,283 $ 3,997 $ -- $ --
Accrued benefit liability.................... (1,450) (446) (9,042) (17,844)
Intangible asset............................. 75 42 -- --
Deferred tax asset........................... 672 91 -- --
Accumulated other comprehensive loss......... 1,074 146 -- --
------- ------- ------- --------
Net amount recognized............................ $ 4,654 $ 3,830 $(9,042) $(17,844)
======= ======= ======= ========
The components of the net periodic pension cost for the pension plans
and the SERP were as follows (in thousands):
2001 2000 1999
------- ------- -------
Service cost........................................... $ 1,075 $ 2,000 $ 1,435
Interest cost on projected benefit obligation.......... 2,991 2,789 2,037
Expected return on plan assets......................... (3,017) (2,963) (2,958)
Net amortization and deferral.......................... (396) (400) (423)
Recognized actuarial loss.............................. 36 31 37
Curtailment loss....................................... 129 38 --
------- ------- -------
Net periodic pension expense............................ $ 818 $ 1,495 $ 128
======= ======= =======
F-28
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
The assumptions used in computing the net pension cost and the funded
status were as follows:
2001 2000 1999
------- ------- -------
Weighted average discount rate... 7.25% 7.50% 7.50%
Expected long-term rate of
return on assets............... 8.75-9% 8.75-9% 8.75-9%
Rate of compensation
increase....................... 2-4% 2-4% 2-4%
The aggregate accumulated benefit obligation and aggregate fair value
of plan assets for pension plans with accumulated benefit obligations in
excess of plan assets were $9.0 million and $7.6 million, respectively, as
of December 31, 2001. The aggregate accumulated benefit obligation and
aggregate fair value of plan assets for pension plans with accumulated
benefit obligations in excess of plan assets were $3.1 million and $2.9
million, respectively, as of December 31, 2000.
Certain other U.S. employees are included in multi-employer pension
plans to which the Company makes contributions in accordance with the
contractual union agreements. Such contributions are made on a monthly
basis in accordance with the requirements of the plans and the actuarial
computations and assumptions of the administrators of the plans.
Contributions to multi-employer plans were $2.7 million, $2.6 million, and
$3.6 million for 2001, 2000 and 1999, respectively.
EMPLOYEE STOCK OWNERSHIP PLAN
The Company maintains an Employee Stock Ownership Plan, which was
frozen in December 2000. The Company has not made contributions to this
plan since 1998. At December 31, 2001 and 2000, the Employee Stock
Ownership Plan held 3,896,544 shares of the Company's common stock, all of
which have been allocated to participant accounts.
12. COMMITMENTS AND CONTINGENCIES
As of March 31, 2002, the Company had not entered into any new
significant commitments, as such, this footnote has not been updated.
LEASES
The Company leases buildings and equipment under operating lease
agreements expiring at various dates through 2011. Certain leases include
renewal and purchase options. At December 31, 2001, future minimum annual
payments under non-cancelable lease agreements with original terms in
excess of one year are as follows (in thousands):
2002................................. $ 33,844
2003................................. 29,864
2004................................. 27,049
2005................................. 24,106
2006................................. 18,439
Thereafter........................... 32,066
--------
Total............................ $165,368
========
Aggregate future minimum rentals to be received under noncancelable
subleases as of December 31, 2001 are approximately $4.5 million.
Rent expense for the years ended December 31, 2001, 2000 and 1999 was
$32.7 million, $33.9 million and $24.8 million, respectively.
F-29
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
CONCENTRATIONS OF CREDIT RISK
The Company has limited concentrations of credit risk with respect to
financial instruments. Temporary cash investments and other investments are
placed with high credit quality institutions, and concentrations within
accounts receivable are limited due to the Company's customer base and its
dispersion across different industries and geographic areas.
LITIGATION
The Company is party to various legal actions that are ordinary and
incidental to its business. While the outcome of legal actions cannot be
predicted with certainty, management believes the outcome of these various
proceedings will not have a material adverse effect on the Company's
financial condition or results of operations.
F-30
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
13. EARNINGS PER SHARE
Basic earnings per share exclude dilution and are computed by dividing
net income by the weighted average number of common shares outstanding for
the period. Diluted earnings per share reflect the potential dilution that
could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. A reconciliation of the amounts
included in the computation of basic earnings per share and diluted
earnings per share is as follows (in thousands, except per share amounts):
MARCH 31, DECEMBER 31,
----------------------------- ------------------------------------
2002 2001 2001 2000 1999
----------- ----------- -------- ------- -------
(UNAUDITED) (UNAUDITED)
----------- -----------
Numerator:
Numerator for basic earnings per
share--income (loss) from
continuing operations........... $(8,265) $ 4,187 $(13,041) $34,209 $58,602
Interest on Convertible Notes..... -- -- -- 4,951 5,254
------- ------- -------- ------- -------
Numerator for diluted earnings per
share--income (loss) from
continuing operations after
assumed conversions............. $(8,265) $ 4,187 $(13,041) $39,160 $63,856
======= ======= ======== ======= =======
Denominator:
Denominator for basic earnings per
share--weighted average
shares.......................... 47,658 47,457 47,562 48,789 48,990
Effects of dilutive securities:
Conversion of Convertible
Notes....................... -- -- -- 7,461 8,003
Stock options................. -- 295 -- 404 940
Other......................... -- -- -- 24 221
------- ------- -------- ------- -------
Denominator for diluted earnings
per share--adjusted weighted
average shares and assumed
conversions..................... 47,658 47,752 47,562 56,678 58,154
======= ======= ======== ======= =======
Earnings (loss) per share:
Basic......................... $ (0.17) $ 0.09 $ (0.27) $ 0.70 $ 1.20
======= ======= ======== ======= =======
Diluted....................... $ (0.17) $ 0.09 $ (0.27) $ 0.69 $ 1.10
======= ======= ======== ======= =======
During the year ended December 31, 2001, interest, net of tax, on the
Convertible Notes in the amount of $4,854,000 and shares of 7,319,000 that
would be issued upon assumed conversion of the Convertible Notes were
excluded from the calculation of diluted loss per share due to the
antidilutive effect on loss per share. In 2001, 2000 and 1999, outstanding
options to purchase 6,798,000, 3,266,000 and 1,658,000 common shares,
respectively, were excluded from the calculation of diluted earnings per
share because the effect would be antidilutive.
During the three months ended March 31, 2002 and 2001, interest on the
Convertible Notes in the amount of $1,214,000 and shares of 7,319,000
issued upon assumed conversion were excluded from the calculation of
diluted earnings (loss) per share due to their antidilutive effect on
earnings (loss) per share. In addition, outstanding options to purchase
approximately 6,995,000 and 5,675,000 common shares were excluded from the
calculation of diluted earnings (loss) per share because the effect would
be antidilutive for the quarters ended March 31, 2002 and March 31, 2001,
respectively.
F-31
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
14. SEGMENT INFORMATION
The Company operates in two principal business segments. The Commercial
Printing segment specializes in printing annual reports, brand marketing
collateral, catalogs, brochures, maps and guidebooks, calendars, financial
communications and CD packaging. The envelope segment manufactures
customized and stock envelopes for billing and remittance, direct mail
advertising, filing systems, photo processing, medical records and catalog
orders. The Envelope segment is also a producer of specialty packaging
products and a manufacturer of stock products for the resale market.
Intersegment sales, which were at market prices, totaled $5.7 million and
$4.1 million in 2001 and 2000, respectively. Intersegment sales in 1999
were not significant.
The following tables present certain business segment information for
the periods ended March 31, 2002 and 2001, and the years ended December
31, 2001, 2000 and 1999 (in thousands):
THREE MONTHS ENDED
MARCH 31
-----------------------------
2002 2001
----------- -----------
(UNAUDITED) (UNAUDITED)
----------- -----------
(IN THOUSANDS)
Net external sales:
Commercial Printing......................... $190,754 $211,360
Envelope.................................... 200,975 221,616
-------- --------
Total....................................... $391,729 $432,976
======== ========
Operating income:(a)
Commercial Printing......................... $ (3,463) $ 6,361
Envelope.................................... 7,738 22,975
Corporate................................... (3,027) (7,652)
-------- --------
Total....................................... $ 1,248 $ 21,684
======== ========
F-32
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
2001 2000 1999
---------- ---------- ----------
Net sales:
Commercial Printing........................ $ 817,937 $ 961,780 $ 795,552
Envelope................................... 835,534 861,803 738,288
---------- ---------- ----------
Total...................................... $1,653,471 $1,823,583 $1,533,840
========== ========== ==========
Operating income:
Commercial Printing........................ $ 14,763 $ 54,758 $ 65,108
Envelope................................... 54,168 90,202 90,996
Corporate(a)............................... (35,115) (27,437) (19,094)
---------- ---------- ----------
Total...................................... $ 33,816 $ 117,523 $ 137,010
========== ========== ==========
Restructuring, asset impairments and other
charges:
Commercial Printing........................ $ 4,446 $ 3,658 $ --
Envelope................................... 33,122 2,502 1,807
Corporate.................................. 4,277 -- --
---------- ---------- ----------
Total...................................... $ 41,845 $ 6,160 $ 1,807
========== ========== ==========
Significant other noncash charges:(b)
Commercial Printing........................ $ 3,547 $ 2,785 $ --
Envelope................................... 8,875 1,872 --
Corporate.................................. 1,600 -- --
---------- ---------- ----------
Total...................................... $ 14,022 $ 4,657 $ --
========== ========== ==========
Depreciation and amortization:
Commercial Printing........................ $ 25,396 $ 27,153 $ 22,768
Envelope................................... 20,682 20,633 15,263
Corporate.................................. 7,551 18,047 8,998
---------- ---------- ----------
Total...................................... $ 53,629 $ 65,833 $ 47,029
========== ========== ==========
Capital expenditures:
Commercial Printing........................ $ 13,613 $ 34,902 $ 34,580
Envelope................................... 12,078 20,955 30,133
Corporate.................................. 1,108 1,915 374
---------- ---------- ----------
Total...................................... $ 26,799 $ 57,772 $ 65,087
========== ========== ==========
F-33
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
MARCH 31, DECEMBER 31,
----------- ---------------------------
2002 2001 2000
----------- ---------- ----------
(UNAUDITED)
-----------
Identifiable assets:(c)
Commercial Printing........................ $ 615,538 $ 620,421 $ 685,871
Envelope................................... 518,842 537,747 635,508
Corporate.................................. 111,838 (9,494) (62,637)
---------- ---------- ----------
1,246,218 1,148,674 1,258,742
Net assets of discontinued operations...... 219,205 246,377 394,215
Net assets held for sale................... 61,022 54,073 --
---------- ---------- ----------
Total...................................... $1,526,445 $1,449,124 $1,652,957
========== ========== ==========
--------
(a) Operating income is net of all costs and expenses directly related to the segment involved. Corporate
expenses include corporate general and administrative expenses, lease expense, amortization expense of
other intangible assets and goodwill, gains or losses on disposal of assets and other miscellaneous
expenses.
(b) Represents the noncash portion of restructuring and other asset impairment charges.
(c) Identifiable assets are accumulated by facility within each business segment. Certain operating assets,
which are under lease, are reported as business segment assets for evaluation purposes. The net book
value of these assets has been eliminated by contra assets included with corporate assets in order to
reconcile identifiable assets with the total assets of the Company. Corporate assets consist primarily
of cash and cash equivalents, other receivables, other assets and deferred tax assets.
Geographic information at December 31, 2001 and 2000 and for the years
ended December 31, 2001, 2000 and 1999, is presented below (in thousands):
2001 2000 1999
---------- ---------- ----------
Net sales:
U.S........................................ $1,490,886 $1,668,948 $1,381,338
Canada..................................... 162,585 154,438 151,908
Other foreign.............................. -- 197 594
---------- ---------- ----------
Total...................................... $1,653,471 $1,823,583 $1,533,840
========== ========== ==========
Identifiable assets:
U.S........................................ $1,010,574 $1,106,733
Canada..................................... 138,100 151,582
Other foreign.............................. -- 427
---------- ----------
Total...................................... $1,148,674 $1,258,742
========== ==========
15. SUBSEQUENT EVENT (UNAUDITED)
On May 21, 2002, we consummated the sale of our Label segment to MWL
Acquisition Corp., for approximately $75 million. The Label segment
generated $219 million of sales for the year ended
F-34
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
December 31, 2001, $53 million of sales for the three months ended March
31, 2002 and $56 million of sales for the three months ended March 31,
2001.
16. QUARTERLY FINANCIAL DATA (UNAUDITED)
The following table sets forth certain quarterly financial data for the
periods indicated (in thousands, except per share amounts):
FIRST SECOND THIRD FOURTH
QUARTER(a) QUARTER QUARTER QUARTER
---------- --------- --------- ---------
2001
Net sales..................................... $432,976 $418,278 $411,773 $390,444
Gross profit.................................. 87,834 86,015 77,571 77,960
Income (loss) from continuing operations(b)... $ 4,187 $(14,950) $ (1,668) $ (610)
Discontinued operations....................... (565) (77,575) 105 (45,141)
-------- -------- -------- --------
Net income (loss)............................. $ 3,622 $(92,525) $ (1,563) $(45,751)
======== ======== ======== ========
Earnings (loss) per share--basic:
Income (loss) from continuing
operations.............................. $ 0.08 $ (0.31) $ (0.04) $ (0.01)
Discontinued operations................... -- (1.64) 0.01 (0.95)
-------- -------- -------- --------
Net income (loss) per share--basic........ $ 0.08 $ (1.95) $ (0.03) $ (0.96)
======== ======== ======== ========
Earnings (loss) per share--diluted:
Income (loss) from continuing
operations.............................. $ 0.08 $ (0.31) $ (0.04) $ (0.01)
Discontinued operations................... -- (1.64) 0.01 (0.95)
-------- -------- -------- --------
Net income (loss) per share--diluted...... $ 0.08 $ (1.95) $ (0.03) $ (0.96)
======== ======== ======== ========
FIRST SECOND THIRD FOURTH
QUARTER(a) QUARTER(a) QUARTER(a) QUARTER(a)
---------- ---------- ---------- ----------
2000
Net sales..................................... $434,678 $442,148 $476,300 $470,457
Gross profit.................................. 94,865 92,750 97,316 100,217
Income from continuing operations(c).......... $ 13,877 $ 8,657 $ 10,345 $ 1,330
Discontinued operations....................... 2,459 2,587 (3,622) (9,462)
Extraordinary item............................ 1,447 -- -- --
-------- -------- -------- --------
Net income (loss)............................. $ 17,783 $ 11,244 $ 6,723 $ (8,132)
======== ======== ======== ========
Earnings (loss) per share--basic:
Income from continuing operations......... $ 0.28 $ 0.18 $ 0.21 $ 0.03
Discontinued operations................... 0.05 0.05 (0.07) (0.20)
Extraordinary item........................ 0.03 -- -- --
-------- -------- -------- --------
Net income (loss) per share--basic........ $ 0.36 $ 0.23 $ 0.14 $ (0.17)
======== ======== ======== ========
Earnings (loss) per share--diluted:
Income from continuing operations......... $ 0.26 $ 0.17 $ 0.20 $ 0.03
Discontinued operations................... 0.04 0.05 (0.06) (0.20)
Extraordinary item........................ 0.03 -- -- --
-------- -------- -------- --------
Net income (loss) per share--diluted...... $ 0.33 $ 0.22 $ 0.14 $ (0.17)
======== ======== ======== ========
--------
(a) These results have been restated from those previously reported to reflect discontinued operations.
F-35
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
(b) Includes an impairment loss on assets held for sale of $2.9 million and restructuring, asset impairments
and other charges of $41.8 million, of which $26.5 million occurred in the second quarter, $5.4 million
in the third quarter and $9.9 million in the fourth quarter.
(c) Includes restructuring and impairment charges of $6.2 million that primarily occurred in the fourth
quarter.
17. CONDENSED CONSOLIDATING FINANCIAL INFORMATION
In March 2002, Mail-Well I Corporation ("Issuer" or "MWI"), the
Company's wholly owned subsidiary, and the only direct subsidiary of the
Company, issued $350 million aggregate principal amount of 9 5/8% Senior
Notes ("Senior Notes") due in 2012. The Senior Notes are guaranteed by all
of the U.S. subsidiaries (the "Guarantor Subsidiaries") of MWI, all of
which are wholly owned, and by Mail-Well, Inc. ("Parent Guarantor"). The
guarantees are joint and several, full, complete and unconditional. There
are no material restrictions on the ability of the Guarantor Subsidiaries
to transfer funds to MWI in the form of cash dividends, loans or advances,
other than ordinary legal restrictions under corporate law, fraudulent
transfer and bankruptcy laws.
The following condensed consolidating financial information illustrates
the composition of the Parent Guarantor, Issuer, Guarantor Subsidiaries and
non-guarantor subsidiaries. The Issuer, the Guarantor Subsidiaries and the
non-guarantor subsidiaries comprise all of the direct and indirect
subsidiaries of the Parent Guarantor. Management has determined that
separate complete financial statements would not provide additional
material information that would be useful in assessing the financial
composition of the Guarantor Subsidiaries.
Investments in subsidiaries are accounted for under the equity method,
wherein the investor company's share of earnings and income taxes
applicable to the assumed distribution of such earnings are included in net
income. In addition, investments increase in the amount of permanent
contributions to subsidiaries and decrease in the amount of distributions
from subsidiaries. The elimination entries eliminate the equity method
investment in subsidiaries and the equity in earnings of subsidiaries,
intercompany payables and receivables and other transactions between
subsidiaries.
F-36
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION
March 31, 2002
(unaudited)
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- ---------- ------------ ------------ ----------- ------------
Current assets:
Cash and cash
equivalents.............. $ -- $ 119,948 $ 1,383 $ -- $ -- $ 121,331
Accounts receivable,
net...................... -- 52,375 127,829 23,104 -- 203,308
Inventories, net.......... -- 50,043 40,877 12,564 -- 103,484
Net assets of discontinued
operations............... -- -- 159,193 60,012 -- 219,205
Net assets held for
sale..................... -- 33,575 27,447 -- -- 61,022
Note receivable from
Issuer................... 147,436 -- -- -- (147,436) --
Other current assets...... 197 40,169 13,709 3,120 -- 57,195
-------- ---------- -------- -------- ----------- ----------
Total current assets.... 147,633 296,110 370,438 98,800 (147,436) 765,545
Investment in
subsidiaries............... 217,920 245,694 58,910 -- (522,524) --
Property, plant and
equipment, net............. -- 135,465 173,560 52,530 -- 361,555
Goodwill and other
intangible assets, net..... -- 85,645 216,751 45,614 -- 348,010
Note receivable from
subsidiaries............... -- 722,400 -- -- (722,400) --
Other assets, net........... 783 44,034 21,297 2,992 (17,771) 51,335
-------- ---------- -------- -------- ----------- ----------
Total assets................ $366,336 $1,529,348 $840,956 $199,936 $(1,410,131) $1,526,445
======== ========== ======== ======== =========== ==========
Current liabilities:
Accounts payable.......... $ -- $ 66,482 $ 71,261 $ 9,731 $ -- $ 147,474
Other current
liabilities.............. 6,029 67,032 12,125 8,444 -- 93,630
Intercompany payable
(receivable)............. 2,168 132,960 (184,348) 49,220 -- --
Note payable to Parent.... -- 147,436 -- -- (147,436) --
Current portion of
long-term debt........... 139,063 163,729 7,408 172 -- 310,372
-------- ---------- -------- -------- ----------- ----------
Total current
liabilities............ 147,260 577,639 (93,554) 67,567 (147,436) 551,476
Long-term debt.............. -- 658,881 -- -- -- 658,881
Note payable to Issuer...... -- -- 722,400 -- (722,400) --
Deferred income taxes....... -- 28,287 39,021 11,176 -- 78,484
Other long-term
liabilities................ -- 14,582 21,171 546 (17,771) 18,528
-------- ---------- -------- -------- ----------- ----------
Total liabilities....... 147,260 1,279,389 689,038 79,289 (887,607) 1,307,369
Shareholders' equity........ 219,076 249,959 151,918 120,647 (522,524) 219,076
-------- ---------- -------- -------- ----------- ----------
Total liabilities and
shareholders' equity....... $366,336 $1,529,348 $840,956 $199,936 $(1,410,131) $1,526,445
======== ========== ======== ======== =========== ==========
F-37
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION
December 31, 2001
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- ---------- ------------ ------------ ----------- ------------
Current assets:
Cash and cash
equivalents.............. $ -- $ (1,589) $ 1,613 $ 785 $ -- $ 809
Accounts receivable....... -- 60,039 123,333 24,378 -- 207,750
Inventories, net.......... -- 51,032 41,319 12,193 -- 104,544
Net assets of discontinued
operations............... -- -- 176,879 69,498 -- 246,377
Net assets held for
sale..................... -- 25,852 28,221 -- -- 54,073
Note receivable from
Issuer................... 147,436 -- -- -- (147,436) --
Other current assets...... 295 41,988 21,977 2,741 -- 67,001
-------- ---------- -------- -------- ----------- ----------
Total current assets.... 147,731 177,322 393,342 109,595 (147,436) 680,554
Investment in
subsidiaries............... 240,954 192,164 159,725 -- (592,843) --
Property, plant and
equipment, net............. -- 151,735 170,112 53,568 -- 375,415
Goodwill and other
intangible assets.......... -- 84,881 216,446 45,734 -- 347,061
Note receivable from
subsidiaries............... -- 749,400 -- -- (749,400) --
Other assets, net........... 1,023 42,096 17,754 2,992 (17,771) 46,094
-------- ---------- -------- -------- ----------- ----------
Total assets................ $389,708 $1,397,598 $957,379 $211,889 $(1,507,450) $1,449,124
======== ========== ======== ======== =========== ==========
Current liabilities:
Accounts payable.......... $ -- $ 63,491 $ 70,537 $ 8,493 $ -- $ 142,521
Other current
liabilities.............. 4,291 71,611 11,749 13,904 -- 101,555
Intercompany payable
(receivable)............. 4,477 136,068 (69,090) (71,455) -- --
Note payable to Parent.... -- 147,436 -- -- (147,436) --
Current maturities of
long-term debt........... 139,063 161,850 1,737 172 -- 302,822
-------- ---------- -------- -------- ----------- ----------
Total current
liabilities............ 147,831 580,456 14,933 (48,886) (147,436) 546,898
Long-term debt.............. -- 523,247 17,834 9,096 -- 550,177
Note payable to Issuer...... -- -- 749,400 -- (749,400) --
Deferred income taxes....... -- 28,287 54,062 11,224 -- 93,573
Other liabilities........... -- 24,655 9,167 549 (17,772) 16,599
-------- ---------- -------- -------- ----------- ----------
Total liabilities....... 147,831 1,156,645 845,396 (28,017) (914,608) 1,207,247
Shareholders' equity........ 241,877 240,953 111,983 239,906 (592,842) 241,877
-------- ---------- -------- -------- ----------- ----------
Total liabilities and
shareholders' equity....... $389,708 $1,397,598 $957,379 $211,889 $(1,507,450) $1,449,124
======== ========== ======== ======== =========== ==========
F-38
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
CONSOLIDATING CONDENSED STATEMENT OF FINANCIAL POSITION
December 31, 2000
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- ---------- ------------ ------------ ----------- ------------
Current assets:
Cash and cash
equivalents.............. $ -- $ 9,596 $ (9,566) $ 64 $ -- $ 94
Accounts receivable....... -- 22,168 55,844 125,956 -- 203,968
Inventories, net.......... -- 51,359 65,231 14,827 -- 131,417
Net assets of discontinued
operations............... -- -- 321,424 72,791 -- 394,215
Note receivable from
Issuer................... 147,436 -- -- -- (147,436) --
Other current assets...... 262 25,741 31,934 89 -- 58,026
-------- ---------- ---------- -------- ----------- ----------
Total current assets.... 147,698 108,864 464,867 213,727 (147,436) 787,720
Investment in
subsidiaries............... 385,505 357,592 148,620 -- (891,717) --
Property, plant and
equipment, net............. -- 132,522 237,436 61,067 -- 431,025
Goodwill and other
intangible assets, net..... -- 49,455 289,718 49,975 -- 389,148
Notes receivable from
subsidiaries............... -- 784,400 -- -- (784,400) --
Other assets, net........... 3,481 55,580 845 5,150 (19,992) 45,064
-------- ---------- ---------- -------- ----------- ----------
Total assets................ $536,684 $1,488,413 $1,141,486 $329,919 $(1,843,545) $1,652,957
======== ========== ========== ======== =========== ==========
Current liabilities:
Accounts payable.......... $ -- $ 32,446 $ 87,063 $ 8,403 $ -- $ 127,912
Other current
liabilities.............. 11,768 24,556 54,329 15,769 -- 106,422
Intercompany payable
(receivable)............. -- 100,773 (228,567) 127,794 -- --
Note payable to Parent.... -- 147,436 -- -- (147,436) --
Current maturities of
long-term debt........... -- 30,767 8,121 1,152 -- 40,040
-------- ---------- ---------- -------- ----------- ----------
Total current
liabilities............ 11,768 335,978 (79,054) 153,118 (147,436) 274,374
Long-term debt.............. 139,063 718,147 6,984 15,559 -- 879,753
Notes payable to issuer..... -- -- 784,400 -- (784,400) --
Deferred income taxes....... -- 28,288 46,598 11,879 -- 86,765
Other liabilities........... -- 20,495 24,966 743 (19,992) 26,212
-------- ---------- ---------- -------- ----------- ----------
Total liabilities....... 150,831 1,102,908 783,894 181,299 (951,828) 1,267,104
Shareholders' equity........ 385,853 385,505 357,592 148,620 (891,717) 385,853
-------- ---------- ---------- -------- ----------- ----------
Total liabilities and
shareholders' equity....... $536,684 $1,488,413 $1,141,486 $329,919 $(1,843,545) $1,652,957
======== ========== ========== ======== =========== ==========
F-39
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Quarter Ended March 31, 2002
(unaudited)
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- -------- ------------ ------------ -------- ------------
Net sales....................... $ -- $140,874 $209,403 $41,452 $ -- $391,729
Cost of sales................... -- 113,495 174,914 29,286 -- 317,695
-------- -------- -------- ------- -------- --------
Gross profit.................... -- 27,379 34,489 12,166 -- 74,034
Other operating costs........... 5 19,526 35,298 4,310 -- 59,139
Restructuring and other
charges........................ -- 13,414 233 -- -- 13,647
-------- -------- -------- ------- -------- --------
Operating income (loss)......... (5) (5,561) (1,042) 7,856 -- 1,248
Other expense (income):
Interest expense.............. 1,738 17,662 11,325 -- (18,717) 12,008
Other expense (income)........ (1,977) (16,486) 48 (48) 18,717 254
-------- -------- -------- ------- -------- --------
Income (loss) before income
taxes and equity in
undistributed earnings of
subsidiaries................... 234 (6,737) (12,415) 7,904 -- (11,014)
Provision (benefit) for income
taxes.......................... -- (2,690) (3,335) 3,276 -- (2,749)
-------- -------- -------- ------- -------- --------
Income (loss) before equity in
undistributed earnings of
subsidiaries................... 234 (4,047) (9,080) 4,628 -- (8,265)
Equity in undistributed earnings
of subsidiaries................ (21,842) (12,798) 6,419 -- 28,221 --
-------- -------- -------- ------- -------- --------
Income (loss) before
discontinued operations and
extraordinary items............ (21,608) (16,845) (2,661) 4,628 28,221 (8,265)
Loss on disposal, including
income tax expense............. -- -- (6,144) (2,436) -- (8,580)
Extraordinary item, net of
tax............................ -- (4,763) -- -- -- (4,763)
-------- -------- -------- ------- -------- --------
Net income (loss)............... $(21,608) $(21,608) $ (8,805) $ 2,192 $ 28,221 $(21,608)
======== ======== ======== ======= ======== ========
F-40
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Quarter Ended March 31, 2001
(unaudited)
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- -------- ------------ ------------ -------- ------------
Net sales....................... $ -- $112,823 $271,521 $48,632 $ -- $432,976
Cost of sales................... -- 90,161 219,106 35,875 -- 345,142
------- -------- -------- ------- -------- --------
Gross profit.................... -- 22,662 52,415 12,757 -- 87,834
Other operating costs........... 91 18,102 42,937 5,020 -- 66,150
------- -------- -------- ------- -------- --------
Operating income (loss)......... (91) 4,560 9,478 7,737 -- 21,684
Other expense (income):
Interest expense.............. 1,738 18,768 13,174 1,051 (19,980) 14,751
Other expense (income)........ (1,976) (17,282) (187) (9) 19,980 526
------- -------- -------- ------- -------- --------
Income (loss) before income
taxes and equity in
undistributed earnings of
subsidiaries................... 147 3,074 (3,509) 6,695 -- 6,407
Provision (benefit) for income
taxes.......................... -- 1,346 (1,914) 2,788 -- 2,220
------- -------- -------- ------- -------- --------
Income (loss) before equity in
undistributed earnings of
subsidiaries................... 147 1,728 (1,595) 3,907 -- 4,187
Equity in undistributed earnings
of subsidiaries................ 3,476 1,748 7,960 -- (13,184) --
------- -------- -------- ------- -------- --------
Income before discontinued
operations..................... 3,623 3,476 6,365 3,907 (13,184) 4,187
Loss from discontinued
operations, net of tax......... -- -- (133) (431) -- (564)
------- -------- -------- ------- -------- --------
Net income...................... $ 3,623 $ 3,476 $ 6,232 $ 3,476 $(13,184) $ 3,623
======= ======== ======== ======= ======== ========
F-41
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 2001
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- --------- ------------ ------------ -------- ------------
Net sales...................... $ -- $ 590,082 $886,458 $176,931 $ -- $1,653,471
Cost of sales.................. -- 477,170 721,045 125,876 -- 1,324,091
--------- --------- -------- -------- -------- ----------
Gross profit................... -- 112,912 165,413 51,055 -- 329,380
Operating expenses:
Selling, administrative and
other....................... 378 87,621 144,398 18,377 -- 250,774
Restructuring, asset
impairments and other
charges..................... -- 38,878 6,065 (153) -- 44,790
--------- --------- -------- -------- -------- ----------
Total operating expenses... 378 126,499 150,463 18,224 -- 295,564
Operating income (loss)........ (378) (13,587) 14,950 32,831 -- 33,816
Other (income) expense:
Interest expense............. 7,970 73,260 42,142 5,885 (76,506) 52,751
Other expense (income)....... (8,923) (66,925) 771 361 76,506 1,790
--------- --------- -------- -------- -------- ----------
Income (loss) from continuing
operations, before income
taxes and undistributed
earnings of subsidiaries...... 575 (19,922) (27,963) 26,585 -- (20,725)
Provision for income taxes..... -- (7,670) (9,890) 9,876 -- (7,684)
--------- --------- -------- -------- -------- ----------
Income (loss) from continuing
operations, before
undistributed earnings of
subsidiaries.................. 575 (12,252) (18,073) 16,709 -- (13,041)
Equity in undistributed
earnings of subsidiaries...... (136,792) (113,717) 23,699 -- 226,810 --
--------- --------- -------- -------- -------- ----------
Income from continuing
operations.................... (136,217) (125,969) 5,626 16,709 226,810 (13,041)
Loss from discontinued
operations.................... -- -- (83,186) (39,990) -- (123,176)
--------- --------- -------- -------- -------- ----------
Net income..................... $(136,217) $(125,969) $(77,560) $(23,281) $226,810 $ (136,217)
========= ========= ======== ======== ======== ==========
F-42
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 2000
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- -------- ------------ ------------ -------- ------------
Net sales....................... $ -- $458,560 $1,191,904 $173,119 $ -- $1,823,583
Cost of sales................... -- 363,416 948,192 126,827 -- 1,438,435
------- -------- ---------- -------- -------- ----------
Gross profit.................... -- 95,144 243,712 46,292 -- 385,148
Operating expenses:
Selling, administrative and
other........................ 294 75,804 167,043 18,324 -- 261,465
Restructuring, asset
impairments and other
charges...................... -- 1,146 3,912 1,102 -- 6,160
------- -------- ---------- -------- -------- ----------
Total operating expenses.... 294 76,950 170,955 19,426 -- 267,625
Operating income (loss)......... (294) 18,194 72,757 26,866 -- 117,523
Other (income) expense:
Interest expense.............. 8,035 78,672 49,040 3,908 (77,528) 62,127
Other (income) expense........ (8,846) (66,991) (717) -- 77,528 974
------- -------- ---------- -------- -------- ----------
Income (loss) from continuing
operations, before income taxes
and undistributed earnings of
subsidiaries................... 517 6,513 24,434 22,958 -- 54,422
Provision for income taxes...... -- 2,435 8,075 9,703 -- 20,213
------- -------- ---------- -------- -------- ----------
Income (loss) from continuing
operations, before
undistributed earnings of
subsidiaries................... 517 4,078 16,359 13,255 -- 34,209
Equity in undistributed earnings
of subsidiaries................ 25,263 23,885 17,203 -- (66,351) --
------- -------- ---------- -------- -------- ----------
Income from continuing
operations..................... 25,780 27,963 33,562 13,255 (66,351) 34,209
Loss from discontinued
operations..................... -- -- (7,941) (97) -- (8,038)
------- -------- ---------- -------- -------- ----------
Income before extraordinary
items.......................... 25,780 27,963 25,621 13,158 (66,351) 26,171
Extraordinary items............. 1,838 (391) -- -- -- 1,447
------- -------- ---------- -------- -------- ----------
Net income...................... $27,618 $ 27,572 $ 25,621 $ 13,158 $(66,351) $ 27,618
======= ======== ========== ======== ======== ==========
F-43
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
CONSOLIDATING CONDENSED STATEMENT OF OPERATIONS
Year Ended December 31, 1999
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- -------- ------------ ------------ --------- ------------
Net sales...................... $ -- $366,782 $1,013,401 $153,657 $ -- $1,533,840
Cost of sales.................. -- 284,246 787,411 111,236 -- 1,182,893
------- -------- ---------- -------- --------- ----------
Gross profit................... -- 82,536 225,990 42,421 -- 350,947
Operating expenses:
Selling, administrative and
other....................... 200 61,342 134,297 16,291 -- 212,130
Restructuring, asset
impairments and other
charges..................... -- 1,923 (116) -- -- 1,807
------- -------- ---------- -------- --------- ----------
Total operating expenses... 200 63,265 134,181 16,291 -- 213,937
Operating income (loss)........ (200) 19,271 91,809 26,130 -- 137,010
Other (income) expense:
Interest expense............. 8,543 47,431 7,128 4,679 (27,573) 40,208
Other (income) expense....... (8,846) (19,007) (944) (4) 27,573 (1,228)
------- -------- ---------- -------- --------- ----------
Income (loss) from continuing
operations, before income
taxes and undistributed
earnings of subsidiaries...... 103 (9,153) 85,625 21,455 -- 98,030
Provision for income taxes..... 39 (3,737) 34,883 8,243 -- 39,428
------- -------- ---------- -------- --------- ----------
Income (loss) from continuing
operations, before
undistributed earnings of
subsidiaries.................. 64 (5,416) 50,742 13,212 -- 58,602
Equity in undistributed
earnings of subsidiaries...... 64,418 69,834 18,742 -- (152,994) --
------- -------- ---------- -------- --------- ----------
Income from continuing
operations.................... 64,482 64,418 69,484 13,212 (152,994) 58,602
Income (loss) from discontinued
operations.................... -- -- (3,222) 9,102 -- 5,880
------- -------- ---------- -------- --------- ----------
Net income..................... $64,482 $ 64,418 $ 66,262 $ 22,314 $(152,994) $ 64,482
======= ======== ========== ======== ========= ==========
F-44
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
Three Months Ended March 31, 2002
(unaudited)
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- --------- ------------ ------------ -------- ------------
Cash flows from operating
activities..................... $ 2,309 $ (4,658) $ 644 $ 438 $ 4,841 $ 3,574
Cash flows from investing
activities:
Acquisitions.................. -- (1,003) -- -- -- (1,003)
Capital expenditures.......... -- (391) (7,259) (302) -- (7,952)
Proceeds from divestiture..... -- 31,622 -- -- -- 31,622
Proceeds from the sale of
property and equipment....... -- 34 26 -- -- 60
Investment in subsidiaries.... (2,309) -- -- -- 2,309 --
------- --------- -------- -------- -------- ---------
Net cash provided by (used in)
investing activities......... (2,309) 30,262 (7,233) (302) 2,309 22,727
Cash flows from financing
activities:
Proceeds from issuance of
long-term debt............... -- 569,000 -- -- -- 569,000
Repayments of long-term
debt......................... -- (444,615) (5,745) (94,039) 85,039 (459,360)
Capitalized loan fees......... -- (12,037) -- -- -- (12,037)
Investment by parent.......... -- -- -- 92,189 (92,189) --
------- --------- -------- -------- -------- ---------
Net cash provided by (used in)
financing activities......... -- 112,348 (5,745) (1,850) (7,150) 97,603
Effect of exchange rate changes
on cash........................ -- -- 17 (339) -- (322)
Cash flows from discontinued
operations..................... -- -- (3,240) 180 -- (3,060)
------- --------- -------- -------- -------- ---------
Net change in cash and cash
equivalents.................... -- 137,952 (15,557) (1,873) -- 120,522
Balance at beginning of year.... -- (18,004) 17,568 1,245 -- 809
------- --------- -------- -------- -------- ---------
Balance at end of year.......... $ -- $ 119,948 $ 2,011 $ (628) $ -- $ 121,331
======= ========= ======== ======== ======== =========
F-45
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
Three Months Ended March 31, 2001
(unaudited)
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- --------- ------------ ------------ -------- ------------
Cash flows from operating
activities..................... $ 5,194 $ (39,444) $ 44,667 $ 47,641 $ -- $ 58,058
Cash flows from investing
activities:
Acquisitions.................. -- (3,904) -- -- -- (3,904)
Capital expenditures.......... -- (1,161) (3,300) (471) -- (4,932)
Investment in subsidiaries.... (5) 10,416 -- -- (10,411) --
Other investing activities.... (5,195) (873) 54,548 3,325 (50,000) 1,805
------- --------- --------- -------- -------- ---------
Net cash provided by (used in)
investing activities......... (5,200) 4,478 51,248 2,854 (60,411) (7,031)
Cash flows from financing
activities:
Changes due to accounts
receivable securitization,
net.......................... -- (3,487) (46,513) (50,000) 50,000 (50,000)
Proceeds from exercise of
stock options................ 6 -- -- -- -- 6
Proceeds from long-term
debt......................... -- 82,006 -- 3,361 -- 85,367
Repayments of long-term
debt......................... -- (114,609) (570) (2,628) -- (117,807)
Capitalized loan fees......... -- (1,841) -- -- -- (1,841)
Proceeds from parent
guarantor.................... -- 63,419 (63,419) -- -- --
Investment by parent.......... -- 5 (10,416) -- 10,411 --
Other financing activities.... -- -- 1,047 (1,047) -- --
------- --------- --------- -------- -------- ---------
Net cash provided by financing
activities................... 6 25,493 (119,871) (50,314) 60,411 (84,275)
Effect of exchange rate changes
on cash........................ -- -- 13 (37) -- (24)
Cash flows from discontinued
operations..................... -- -- 33,701 6 -- 33,707
------- --------- --------- -------- -------- ---------
Net change in cash and cash
equivalents.................... -- (9,473) 9,758 150 -- 435
Balance at beginning of year.... -- 9,596 (9,756) 254 -- 94
------- --------- --------- -------- -------- ---------
Balance at end of year.......... $ -- $ 123 $ 2 $ 404 $ -- $ 529
======= ========= ========= ======== ======== =========
F-46
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
December 31, 2001
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- --------- ------------ ------------ --------- ------------
Cash flows from operating
activities.................... $ -- $ 17,692 $(196,738) $ 76,337 $ 254,692 $ 151,983
Cash flows from investing
activities:
Acquisition costs, net of
cash acquired............... -- (3,838) -- -- -- (3,838)
Capital expenditures......... -- (13,187) (11,633) (1,979) -- (26,799)
Purchase of investments...... -- (100) -- -- -- (100)
Investment in subsidiaries... (413) (12,940) 13,353 -- -- --
Other, net................... -- -- (429) 4,206 -- 3,777
----- --------- --------- -------- --------- ---------
Net cash provided by (used
in) investing activities.... (413) (30,065) 1,291 2,227 -- (26,960)
Cash flows from financing
activities:
Decrease in accounts
receivable financing
facility.................... -- -- -- (75,000) -- (75,000)
Proceeds from exercise of
stock options............... 413 -- -- -- -- 413
Proceeds from issuance of
long-term debt.............. -- 628,013 -- 6,391 -- 634,404
Repayments of long-term
debt........................ -- (682,612) (7,400) (9,176) -- (699,188)
Capitalized loan fees........ -- (4,439) -- -- -- (4,439)
Investment by parent......... -- 68,233 69,883 116,576 (254,692) --
----- --------- --------- -------- --------- ---------
Net cash provided by (used
in) financing activities.... 413 9,195 62,483 38,791 (254,692) (143,810)
Effect of exchange rate changes
on cash and cash
equivalents................... -- -- -- (60) -- (60)
Cash flows from discontinued
operations.................... -- -- 43,026 (23,464) -- 19,562
----- --------- --------- -------- --------- ---------
Net increase (decrease) in cash
and cash equivalents.......... -- (3,178) (89,938) 93,831 -- 715
Cash and cash equivalents at
beginning of year............. -- 1,589 (2,233) 738 -- 94
----- --------- --------- -------- --------- ---------
Cash and cash equivalents at
end of year................... $ -- $ (1,589) $ (92,171) $ 94,569 $ -- $ 809
===== ========= ========= ======== ========= =========
F-47
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
December 31, 2000
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- ---------- ------------ ------------ --------- ------------
Cash flows from operating
activities................... $ (3,101) $ (46,036) $ 183,495 $ (2,958) $ -- $ 131,400
Cash flows from investing
activities:
Acquisitions, net of cash
acquired................... -- (2,978) (224,066) -- -- (227,044)
Proceeds from
divestitures............... -- 110,646 -- -- -- 110,646
Capital expenditures........ -- (12,555) (38,823) (6,394) -- (57,772)
Purchase of investments..... (1,500) 1,389 10,756 (12,145) -- (1,500)
Investment in
subsidiaries............... 9,665 (362,584) -- -- 352,919 --
Other, net.................. 14,599 48,004 196,752 84,215 (312,629) 30,941
-------- ---------- --------- -------- --------- ----------
Net cash provided by (used
in) investing activities... 22,764 (218,078) (55,381) 65,676 40,290 (144,729)
Cash flows from financing
activities:
Decrease in accounts
receivable financing
facility................... -- -- -- (73,500) -- (73,500)
Proceeds from exercise of
stock options.............. 335 -- -- -- -- 335
Proceeds from issuance of
long-term debt............. -- 1,121,000 -- 10,069 -- 1,131,069
Repayments of long-term
debt....................... (9,998) (846,782) (4,337) (18,199) -- (879,316)
Repurchase of common stock.. (10,000) -- -- -- -- (10,000)
Capitalized loan fees....... -- (15,002) -- -- -- (15,002)
Other....................... -- (3,508) -- -- -- (3,508)
Investment by parent........ -- (9,665) 31,955 18,000 (40,290) --
-------- ---------- --------- -------- --------- ----------
Net cash provided by (used
in) financing activities... (19,663) 246,043 27,618 (63,630) (40,290) 150,078
Effect of exchange rate
changes on cash and cash
equivalents.................. -- -- -- -- -- --
Cash flows from discontinued
operations................... -- -- (134,602) (2,323) -- (136,925)
-------- ---------- --------- -------- --------- ----------
Net increase (decrease) in
cash and cash equivalents.... -- (18,071) 21,130 (3,235) -- (176)
Cash and cash equivalents at
beginning of year............ -- 27,667 (31,365) 3,968 -- 270
-------- ---------- --------- -------- --------- ----------
Cash and cash equivalents at
end of year.................. $ -- $ 9,596 $ (10,235) $ 733 $ -- $ 94
======== ========== ========= ======== ========= ==========
F-48
MAIL-WELL INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(AMOUNTS AS OF AND FOR THE THREE MONTHS ENDED MARCH 31, 2002
AND 2001 ARE UNAUDITED)
CONSOLIDATING CONDENSED STATEMENT OF CASH FLOWS
December 31, 1999
(in thousands)
COMBINED COMBINED
PARENT GUARANTOR NONGUARANTOR
GUARANTOR ISSUER SUBSIDIARIES SUBSIDIARIES ELIM. CONSOLIDATED
--------- --------- ------------ ------------ --------- ------------
Cash flows from operating
activities.................... $ 4,595 $ (1,707) $ 100,776 $ 3,540 $ -- $ 107,204
Cash flows from investing
activities:
Acquisitions, net of cash
acquired.................... -- (2,628) (128,282) -- -- (130,910)
Capital expenditures......... -- (12,944) (47,339) (4,804) -- (65,087)
Investment in subsidiaries... (2,029) (236,080) 47,574 -- 190,535 --
Loan to subsidiaries......... -- (245,000) -- -- 245,000 --
Other activity with
subsidiary, net............. -- 390,226 (411,749) (95,377) 116,900 --
Other, net................... (4,595) (656) 11,466 1,044 -- 7,259
------- --------- --------- -------- --------- ---------
Net cash used in investing
activities.................. (6,624) (107,082) (528,330) (99,137) 552,435 (188,738)
Cash flows from financing
activities:
Increase in accounts
receivable financing
facility.................... -- 49,519 67,381 95,900 (116,900) 95,900
Proceeds from exercise of
stock options............... 2,029 -- -- -- -- 2,029
Proceeds from issuance long-
term debt................... -- 374,235 -- 11,881 -- 386,116
Repayments of long-term
debt........................ -- (294,798) (7,919) (11,572) -- (314,289)
Capitalized loan............. -- (1,481) -- -- -- (1,481)
Loan from Issuer............. -- -- 245,000 -- (245,000) --
Investment by parent......... -- 2,029 188,506 -- (190,535) --
------- --------- --------- -------- --------- ---------
Net cash provided by
financing activities........ 2,029 129,504 492,968 96,209 (552,435) 168,275
Effect of exchange rate changes
on cash and cash
equivalents................... -- -- -- 16 -- 16
Cash flows from discontinued
operations.................... -- -- (88,079) 1,592 -- (86,487)
------- --------- --------- -------- --------- ---------
Net increase (decrease) in cash
and cash equivalents.......... -- 20,715 (22,665) 2,220 -- 270
Cash and cash equivalents at
beginning of year............. -- 6,952 (8,686) 1,734 -- --
------- --------- --------- -------- --------- ---------
Cash and cash equivalents at
end of year................... $ -- $ 27,667 $ (31,351) $ 3,954 $ -- $ 270
======= ========= ========= ======== ========= =========
F-49
[Mail-Well I Corporation Logo]
DEALER PROSPECTUS DELIVERY OBLIGATION
Until , 2002, all dealers that effect transactions in the
--------------
new notes, whether or not participating in the exchange offer, may be
required to deliver a prospectus. This is in addition to the dealers'
obligation to deliver a prospectus when acting as underwriters and with
respect to their unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS, MANAGERS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL") empowers
a Delaware corporation to indemnify any person who was or is, or is
threatened to be made, a party to any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person is or was a director,
officer, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise.
The indemnity may include expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by
such person in connection with such action, suit or proceeding, if such
person acted in good faith and in a manner such person reasonably believed
to be in or not opposed to the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe such person's conduct was unlawful.
Section 145 of the DGCL also provides that a Delaware corporation may
indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of
the fact that the person is or was a director, officer, employee or agent
of such corporation, or is or was serving at the request of such
corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. The
indemnity may include expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or
settlement of such action or suit if the person acted in good faith and in
a manner the person reasonably believed to be in or not opposed to the best
interests of the corporation and except that no indemnification is
permitted without judicial approval if the person is adjudged to be liable
to the corporation. Where a person is successful on the merits or otherwise
in the defense of any action referred to above, the corporation must
indemnify such person against the expenses which such person actually and
reasonably incurred.
Mail-Well I Corporation's Certificate of Incorporation provides that
Mail-Well I Corporation shall indemnify its officers and directors, and may
indemnify its employees and agents, to the fullest extent permitted by the
DGCL.
Section 102(b)(7) of the DGCL permits a corporation's certificate of
incorporation to include a provision eliminating or limiting the personal
liability of a director to the corporation or its stockholders for monetary
damages for breach of fiduciary duty as a director, provided that such
provision shall not eliminate or limit the liability of a director for: (i)
any breach of the director's duty of loyalty to the corporation or its
stockholders; (ii) acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law; (iii) transactions
under Section 174 of the DGCL (unlawful payment of dividends or unlawful
stock purchases or redemptions) or (iv) any transaction from which the
director derived an improper personal benefit.
Mail-Well I Corporation's Certificate of Incorporation provides that a
director shall not be liable to the corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director, except to the
extent such exemption is not permitted under the DGCL.
II-1
ITEM 21. EXHIBITS
EXHIBIT
NO. DESCRIPTION
------- -----------
3.1 Certificate of Incorporation of Mail-Well Corporation--incorporated by reference from
Mail-Well I Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409).
3.2 Certificate of Amendment of Certificate of Incorporation of Mail-Well Corporation--
incorporated by reference from Mail-Well I Corporation's Form S-4 filed March 15,
1999 (Reg. No. 333-74409).
3.3 Certificate of Correction Filed to Correct Certain Error in the Certificate of
Amendment of Mail-Well I Corporation Filed in the Office of the Secretary of State of
Delaware on September 11, 1995--incorporated by reference from Mail-Well I
Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409).
3.4 Certificate of Change of Registered Agent and Registered Office--incorporated by
reference from Mail-Well I Corporation's Form S-4 filed March 15, 1999 (Reg. No.
333-74409).
3.5 Bylaws of Mail-Well I Corporation--incorporated by reference from Mail-Well I
Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409).
4.1 Form of Indenture between Mail-Well, Inc. and The Bank of New York, as Trustee, dated
November 1997, relating to Mail-Well, Inc.'s $152,050,000 aggregate principal amount
of 5% Convertible Subordinated Notes due 2002--incorporated by reference from Exhibit
4.2 to Mail-Well, Inc.'s Amendment No. 2 to Form S-3 dated November 10, 1997 (Reg.
No. 333-36337).
4.2 Form of Supplemental Indenture between Mail-Well, Inc. and The Bank of New York, as
Trustee, dated November 1997, relating to Mail-Well, Inc.'s $152,050,000 aggregate
principal amount of 5% Convertible Subordinated Notes due 2002 and Form of
Convertible Note--incorporated by reference from Exhibit 4.5 to Mail-Well, Inc.'s
Amendment No. 2 to Form S-3 dated November 10, 1997 (Reg. No. 333-36337).
4.3 Indenture dated as of December 16, 1998 between Mail-Well I Corporation and State
Street Bank and Trust Company, as Trustee, relating to Mail-Well I Corporation's
$300,000,000 aggregate principal amount of 8 3/4% Senior Subordinated Notes due
2008--incorporated by reference from Exhibit 4.4 to Mail-Well, Inc.'s Annual Report
on Form 10-K for the year ended December 31, 1998, File No. 1-12551.
4.4 Form of Senior Subordinated Note--incorporated by reference from Exhibit 4.5 to Mail-
Well, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998, File
No. 1-12551.
4.6 Indenture dated as of March 13, 2002 between Mail-Well I Corporation and State Street
Bank and Trust Company, as Trustee relating to Mail-Well I Corporation's $350,000,000
aggregate principal amount of 9 5/8% Senior Notes due 2012--incorporated by reference
to Exhibit 10.30 to Mail-Well, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2002.
4.7 Form of Senior Note and Guarantee relating to Mail-Well I Corporation's $350,000,000
aggregate principal amount 9 5/8% due 2012--incorporated by reference to Exhibit
10.31 to Mail-Well, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March
31, 2002.
5* Opinion of Faegre & Benson LLP re: legality of Mail-Well I Corporation's $350,000,000
aggregate principal amount of 9 5/8% Senior Notes due 2012.
II-2
EXHIBIT
NO. DESCRIPTION
------- -----------
10.1 Form of Indemnity Agreement between Mail-Well, Inc. and each of its officers and
directors--incorporated by reference from Exhibit 10.17 of Mail-Well, Inc.'s
Registration Statement on Form S-1 dated March 25, 1994.
10.2 Form of Indemnity Agreement between Mail-Well I Corporation and each of its officers
and directors--incorporated by reference from Exhibit 10.18 of Mail-Well, Inc.'s
Registration Statement on Form S-1 dated March 25, 1994.
10.3 Form of M-W Corp. Employee Stock Ownership Plan effective as of February 23, 1994 and
related Employee Stock Ownership Plan Trust Agreement--incorporated by reference from
Exhibit 10.19 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25,
1994.
10.4 Form of M-W Corp. 401(k) Savings Retirement Plan--incorporated by reference from
Exhibit 10.20 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25,
1994.
10.5 Mail-Well, Inc. 1994 Stock Option Plan, as amended on May 7, 1997--incorporated by
reference from Exhibit 10.56 of Mail-Well, Inc.'s Quarterly Report on Form 10-Q for
the quarter ended June 30, 1997.
10.6 Form of Mail-Well, Inc. Incentive Stock Option Agreement--incorporated by reference
from Exhibit 10.22 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated
March 25, 1994.
10.7 Form of Mail-Well, Inc. Nonqualified Stock Option Agreement--incorporated by
reference from Exhibit 10.23 of Mail-Well, Inc.'s Registration Statement on Form S-1
dated March 25, 1994.
10.8 Mail-Well, Inc. 1997 Non-Qualified Stock Option Plan--incorporated by reference from
Exhibit 10.54 of Mail-Well, Inc.'s Form 10-Q for the quarter ended March 31, 1997.
10.9 1997 Non-Qualified Stock Option Agreement--incorporated by reference from Exhibit
10.54 of Mail-Well, Inc.'s Form 10-Q for the quarter ended March 31, 1997.
10.10 Mail-Well, Inc. 1998 Incentive Stock Option Plan--incorporated by reference from
Exhibit 10.58 to the Company's Quarterly report on Form 10-Q for the quarter ended
March 31, 1998.
10.11 Mail-Well, Inc. 1998 Incentive Stock Option Plan Incentive Stock Option Agreement--
incorporated by reference from Exhibit 10.59 to the Company's Quarterly report on
Form 10-Q for the quarter ended March 31, 1998.
10.12 Participation Agreement dated as of December 15, 1997, among Mail-Well I Corporation,
Keybank National Association, as Trustee and other financial institutions party
thereto--incorporated by reference from Exhibit 10.62 to Mail-Well, Inc.'s Form 10-Q
for the quarter ended March 31, 1998.
10.13 Equipment Lease dated as of December 15, 1997 among Mail-Well I Corporation,
Keybank National Association, as Trustee and other financial institutions party
thereto--incorporated by reference from Exhibit 10.63 to Mail-Well, Inc.'s Form 10-Q
for the quarter ended March 31, 1998.
10.14 Guaranty Agreement dated as of December 15, 1997, among Mail-Well, Inc., Graphic Arts
Center, Inc., Griffin Envelope Inc., Murray Envelope Corporation, Shepard Poorman
Communications Corporation, Wisco Envelope Corp., Wisco II, LLC, Wisco III, LLC,
Mail-Well I Corporation, Keybank National Association, as Trustee and other financial
institutions party thereto--incorporated by reference from Exhibit 10.64 to
Mail-Well, Inc.'s Form 10-Q for the quarter ended March 31, 1998.
II-3
EXHIBIT
NO. DESCRIPTION
------- -----------
10.15 Merger Agreement and Plan of Merger by and among American Business Products, Inc.,
Mail-Well, Inc., and Sherman Acquisition Corporation dated January 13, 2000--
incorporated by reference from the Annual Report on Form 10-K for Mail-Well, Inc.
10.16 Change of Control Agreement dated November 15, 1999, between the Company and Paul V.
Reilly--incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1999.
10.17 Change of Control Agreement dated November 15, 1999, between the Company and Robert
Meyer--incorporated by reference from the Company's Annual Report on Form 10-K for
the year ended December 31, 1999.
10.18 Change of Control Agreement dated November 15, 1999, between the Company and Michael
A. Zawalski--incorporated by reference from the Company's Annual Report on Form 10-K
for the year ended December 31, 1999.
10.19 Credit Agreement dated as of February 18, 2000 among Mail-Well I Corporation, Bank of
America, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO
Bank, N.V., as Syndication Agents, the Bank of Nova Scotia, as Documentation Agent
and certain other financial institutions party thereto--incorporated by reference
from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31,
2000.
10.20 Security Agreement dated as of February 18, 2000, by and among Mail-Well I
Corporation, Mail-Well, Inc., certain other affiliates of the Company and Bank of
America, N.A., as agent--incorporated by reference from the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 2000.
10.21 Second Amendment to Credit Agreement dated as of March 28, 2001 among Mail-Well I
Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A.,
as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as
Syndication Agents, the Bank of Nova Scotia, as Documentation Agent and certain other
financial institutions party thereto--incorporated by reference from the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2001.
10.22 Mail-Well, Inc. 2001 Long-Term Equity Incentive Plan--incorporated by reference from
the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.
10.23 Form of Non-Qualified Stock Option Agreement under 2001 Long-Term Equity Incentive
Plan--incorporated by reference from the Company's Quarterly Report on Form 10-Q for
the quarter ended June 30, 2001.
10.24 Form of Incentive Stock Option Agreement under 2001 Long-Term Equity Incentive Plan--
incorporated by reference from the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2001.
10.25 Form of Restricted Stock Award Agreement under 2001 Long-Term Equity Incentive Plan--
incorporated by reference from the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2001.
10.26 First Amendment to Credit Agreement dated as of July 28, 2000 among Mail-Well I
Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A.,
as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as
Syndication Agent, the Bank of Nova Scotia, as Documentation Agent and certain other
financial institutions party thereto--incorporated by reference from the Company's
First Amendment to Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.
II-4
EXHIBIT
NO. DESCRIPTION
------- -----------
10.27 Third Amendment to Credit Agreement dated as of June 29, 2001 among Mail-Well I
Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A.,
as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as
Syndication Agent, the Bank of Nova Scotia, as Documentation Agent and certain other
financial institutions party thereto--incorporated by reference from the Company's
First Amendment to Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.
10.28 Fourth Amendment to Credit Agreement dated as of August 7, 2001 among Mail-Well I
Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A.,
as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as
Syndication Agent, the Bank of Nova Scotia, as Documentation Agent and certain other
financial institutions party thereto--incorporated by reference from the Company's
Current Report on Form 8-K filed August 10, 2001.
10.29 Fifth Amendment to Credit Agreement dated as of February 26, 2002 among Mail-Well I
Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A.,
as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as
Syndication Agent, the Bank of Nova Scotia, as Documentation Agent and certain other
financial institutions party thereto--incorporated by reference to Exhibit 10.33 to
Mail-Well, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002.
10.30* Purchase Agreement dated March 8, 2002, between Mail-Well I Corporation, and Credit
Suisse First Boston, UBS Warburg LLC, Banc of America Securities LLC, U.S. Bancorp
Piper Jaffray Inc., First Union Securities, Inc., and Scotia Capital (USA) Inc., as
Initial Purchasers, relating to Mail-Well I Corporation's $350,000,000 aggregate
principal amount of 9 5/8% Senior Notes due 2012.
10.31 Registration Rights Agreement dated March 13, 2002, between Mail-Well I Corporation,
and Credit Suisse First Boston, UBS Warburg LLC, Banc of America Securities LLC, U.S.
Bancorp Piper Jaffray Inc., First Union Securities, Inc., and Scotia Capital (USA)
Inc., as Initial Purchasers, relating to Mail-Well I Corporation's $350,000,000
aggregate principal amount of 9 5/8% Senior Notes due 2012--incorporated by reference
to Exhibit 10.32 to Mail-Well, Inc.'s Quarterly Report on Form 10-Q for the quarter
ended March 31, 2002.
10.32* Stock Purchase Agreement, dated May 6, 2002, among MWL Acquisition Corp., Mail-Well I
Corporation and Mail-Well, Inc.
10.33* Amendment No. 1 to Stock Purchase Agreement, dated May 21, 2002, among MWL
Acquisition Corp., Mail-Well I Corporation and Mail-Well, Inc.
12* Calculation of ratio of earnings to fixed charges.
21* Subsidiaries of the Registrant.
23.1* Consent of Ernst & Young LLP.
23.2* Consent of Faegre & Benson LLP (included in Exhibit 5).
24* Powers of Attorney--included with signature pages.
25* Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939 of State
Street Bank and Trust Company, as trustee under the indenture, relating to the old
notes and the new notes (separately bound).
99.1* Form of Letter of Transmittal.
99.2* Form of Notice of Guaranteed Delivery.
99.3* Form of letter to Brokers, Dealers, Commercial Banks, Trust Companies and other
Nominees.
99.4* Form of Letter to Clients.
--------
* Filed herewith
II-5
ITEM 22. UNDERTAKINGS
(A) The undersigned registrants hereby undertake:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933 (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this registration statement, or
the most recent post-effective amendment thereof, which,
individually or in the aggregate, represent a fundamental
change in the information set forth in this registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered, if the total
dollar value of securities offered would not exceed that
which was registered, and any deviation from the low or
high end of the estimated maximum offering range may be
reflected in the form of prospectus filed with the
Commission pursuant to Rule 424(b) under the Securities
Act, if, in the aggregate, the changes in volume and price
represent no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement; and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this
registration statement or any material change to such
information in this registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be
deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities
at that time be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain
unsold at the termination of the offering.
(B) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing
provisions, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a
director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted
by such director, officer or controlling person in connection with
the securities being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
(C) The undersigned registrants hereby undertake:
(1) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Item 4, 10(b), 11 or
13 of this Form S-4, within one business day of receipt of such
request, and to send the incorporated documents by first class
mail or other equally prompt means. This includes information
contained in documents filed subsequent to the effective date of
the registration statement through the date of responding to the
request.
(2) To supply by means of a post-effective amendment all information
concerning the merger, and the company being acquired involved
therein, that was not the subject of and included in the
registration statement when it became effective.
II-6
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Englewood, State of Colorado, on the 7th day of June, 2002.
MAIL-WELL I CORPORATION
By /s/ PAUL V. REILLY
------------------------------
Paul V. Reilly
Chairman of the Board,
President &
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact,
each with the power of substitution, for him or her in any and all capacities,
to sign this registration statement and any amendments thereto and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on the 7th day of June, 2002, by the
following persons in the capacities indicated:
/s/ PAUL V. REILLY Chairman of the Board, President &
------------------------------------------- Chief Executive Officer
Paul V. Reilly (Principal Executive Officer)
/s/ MICHEL P. SALBAING Director, Senior Vice President &
------------------------------------------- Chief Financial Officer
Michel P. Salbaing (Principal Financial Officer)
/s/ ROGER WERTHEIMER Director
-------------------------------------------
Roger Wertheimer
/s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller
------------------------------------------- (Principal Accounting Officer)
William W. Huffman, Jr.
II-7
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Englewood, State of Colorado, on the 7th day of June, 2002.
ABP BOOKS, INC.
By /s/ PAUL V. REILLY
------------------------------
Paul V. Reilly
Chairman of the Board,
President &
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact,
each with the power of substitution, for him or her in any and all capacities,
to sign this registration statement and any amendments thereto and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on the 7th day of June, 2002, by the
following persons in the capacities indicated:
/s/ PAUL V. REILLY Chairman of the Board, President &
------------------------------------------- Chief Executive Officer
Paul V. Reilly (Principal Executive Officer)
/s/ MICHEL P. SALBAING Director, Senior Vice President &
------------------------------------------- Chief Financial Officer
Michel P. Salbaing (Principal Financial Officer)
/s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller
------------------------------------------- (Principal Accounting Officer)
William W. Huffman, Jr.
/s/ ROGER WERTHEIMER Director
-------------------------------------------
Roger Wertheimer
II-8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Englewood, State of Colorado, on the 7th day of June, 2002.
DISCOUNT LABELS, INC.
By /s/ PAUL V. REILLY
------------------------------
Paul V. Reilly
Chairman of the Board &
Executive Vice President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact,
each with the power of substitution, for him or her in any and all capacities,
to sign this registration statement and any amendments thereto and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on the 7th day of June, 2002, by the
following persons in the capacities indicated:
/s/ PAUL V. REILLY Chairman of the Board &
------------------------------------------- Executive Vice President
Paul V. Reilly (Principal Executive Officer)
/s/ MICHEL P. SALBAING Director & Senior Vice President
------------------------------------------- (Principal Financial Officer)
Michel P. Salbaing
/s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller
------------------------------------------- (Principal Accounting Officer)
William W. Huffman, Jr.
/s/ ROGER WERTHEIMER Director
-------------------------------------------
Roger Wertheimer
II-9
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Englewood, State of Colorado, on the 7th day of June, 2002.
HILL GRAPHICS, INC.
By /s/ PAUL V. REILLY
------------------------------
Paul V. Reilly
Chairman of the Board &
Executive Vice President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact,
each with the power of substitution, for him or her in any and all capacities,
to sign this registration statement and any amendments thereto and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on the 7th day of June, 2002, by the
following persons in the capacities indicated:
/s/ MICHEL P. SALBAING Director, Senior Vice President--
------------------------------------------- Chief Financial Officer
Michel P. Salbaing (Principal Financial Officer)
/s/ PAUL V. REILLY Chairman of the Board &
------------------------------------------- Executive Vice President
Paul V. Reilly (Principal Executive Officer)
/s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller
------------------------------------------- (Principal Accounting Officer)
William W. Huffman, Jr.
/s/ ROGER WERTHEIMER Director
-------------------------------------------
Roger Wertheimer
II-10
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Englewood, State of Colorado, on the 7th day of June, 2002.
MAIL-WELL, INC.
By /s/ PAUL V. REILLY
------------------------------
Paul V. Reilly
Chairman of the Board,
President &
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact,
each with the power of substitution, for him or her in any and all capacities,
to sign this registration statement and any amendments thereto and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on the 7th day of June, 2002, by the
following persons in the capacities indicated:
/s/ PAUL V. REILLY Chairman of the Board, President &
------------------------------------------- Chief Executive Officer
Paul V. Reilly (Principal Executive Officer)
/s/ MICHEL P. SALBAING Senior Vice President &
------------------------------------------- Chief Financial Officer
Michel P. Salbaing (Principal Financial Officer)
/s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller
------------------------------------------- (Principal Accounting Officer)
William W. Huffman, Jr.
/s/ FRANK P. DIASSI Director
-------------------------------------------
Frank P. Diassi
/s/ Frank J. Hevrdejs Director
-------------------------------------------
Frank J. Hevrdeis
/s/ JANICE C. PETERS Director
-------------------------------------------
Janice C. Peters
/s/ JEROME W. PICKHOLZ Director
-------------------------------------------
Jerome W. Pickholz
/s/ W. THOMAS STEPHENS Director
-------------------------------------------
W. Thomas Stephens
/s/ ALISTER W. REYNOLDS Director
-------------------------------------------
Alister W. Reynolds
II-11
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Englewood, State of Colorado, on the 7th day of June, 2002.
MAIL-WELL COMMERCIAL PRINTING, INC.
By /s/ PAUL V. REILLY
--------------------------------
Paul V. Reilly
Chairman of the Board &
Executive Vice President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact,
each with the power of substitution, for him or her in any and all capacities,
to sign this registration statement and any amendments thereto and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on the 7th day of June, 2002, by the
following persons in the capacities indicated:
/s/ PAUL V. REILLY Chairman of the Board &
------------------------------------------- Executive Vice President
Paul V. Reilly (Principal Executive Officer)
/s/ MICHEL P. SALBAING Director and Senior Vice President
------------------------------------------- (Principal Financial Officer)
Michel P. Salbaing
/s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller
------------------------------------------- (Principal Accounting Officer)
William W. Huffman, Jr.
/s/ ROGER WERTHEIMER Director
-------------------------------------------
Roger Wertheimer
II-12
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Englewood, State of Colorado, on the 7th day of June, 2002.
MAIL-WELL MEXICO HOLDINGS, INC.
By /s/ PAUL V. REILLY
------------------------------
Paul V. Reilly
Chairman of the Board,
President &
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Roger Wertheimer and Russell P. Dawn, and each of them, as
attorneys-in-fact, each with the power of substitution, for him or her in
any and all capacities, to sign this registration statement and any
amendments thereto and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange
Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on the 7th day of June, 2002, by the
following persons in the capacities indicated:
/s/ PAUL V. REILLY Chairman of the Board, President &
------------------------------------------- Chief Executive Officer
Paul V. Reilly (Principal Executive Officer)
/s/ MICHEL P. SALBAING Director, Senior Vice President &
------------------------------------------- Chief Financial Officer
Michel P. Salbaing (Principal Financial Officer)
/s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller
------------------------------------------- (Principal Accounting Officer)
William W. Huffman, Jr.
/s/ ROGER WERTHEIMER Director
-------------------------------------------
Roger Wertheimer
II-13
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Englewood, State of Colorado, on the 7th day of June, 2002.
MAIL-WELL TEXAS FINANCE, L.P.
By /s/ PAUL V. REILLY
------------------------------
Paul V. Reilly
Chairman of the Board,
President &
Chief Executive Officer,
Mail-Well I
Corporation, General Partner
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact,
each with the power of substitution, for him or her in any and all capacities,
to sign this registration statement and any amendments thereto and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on the 7th day of June, 2002, by the
following persons in the capacities indicated:
/s/ PAUL V. REILLY Chairman of the Board, President &
------------------------------------------- Chief Executive Officer
Paul V. Reilly (Principal Executive Officer of the
general partner)
/s/ MICHEL P. SALBAING Director, Senior Vice President &
------------------------------------------- Chief Financial Officer
Michel P. Salbaing (Principal Financial Officer of the
general partner)
/s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller
------------------------------------------- (Principal Accounting Officer of the
William W. Huffman, Jr. general partner)
/s/ ROGER WERTHEIMER Director of the general partner
-------------------------------------------
Roger Wertheimer
II-14
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Englewood, State of Colorado, on the 7th day of June, 2002.
MAIL-WELL SERVICES, INC.
By /s/ PAUL V. REILLY
------------------------------
Paul V. Reilly
Chairman of the Board,
President &
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact,
each with the power of substitution, for him or her in any and all capacities,
to sign this registration statement and any amendments thereto and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on the 7th day of June, 2002, by the
following persons in the capacities indicated:
/s/ PAUL V. REILLY Chairman of the Board, President &
------------------------------------------- Chief Executive Officer
Paul V. Reilly (Principal Executive Officer)
/s/ MICHEL P. SALBAING Director, Senior Vice President &
------------------------------------------- Chief Financial Officer
Michel P. Salbaing (Principal Financial Officer)
/s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller
------------------------------------------- (Principal Accounting Officer)
William W. Huffman, Jr.
/s/ ROGER WERTHEIMER Director
-------------------------------------------
Roger Wertheimer
II-15
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Englewood, State of Colorado, on the 7th day of June, 2002.
MAIL-WELL WEST, INC.
By /s/ PAUL V. REILLY
------------------------------
Paul V. Reilly
Chairman of the Board,
President &
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact,
each with the power of substitution, for him or her in any and all capacities,
to sign this registration statement and any amendments thereto and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on the 7th day of June, 2002, by the
following persons in the capacities indicated:
/s/ PAUL V. REILLY Chairman of the Board, President &
------------------------------------------- Chief Executive Officer
Paul V. Reilly (Principal Executive Officer)
/s/ MICHEL P. SALBAING Director, Senior Vice President &
------------------------------------------- Chief Financial Officer
Michel P. Salbaing (Principal Financial Officer)
/s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller
------------------------------------------- (Principal Accounting Officer)
William W. Huffman, Jr.
/s/ ROGER WERTHEIMER Director
-------------------------------------------
Roger Wertheimer
II-16
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Englewood, State of Colorado, on the 7th day of June, 2002.
NATIONAL GRAPHICS COMPANY
By /s/ PAUL V. REILLY
------------------------------
Paul V. Reilly
Chairman of the Board,
President &
Chief Executive Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact,
each with the power of substitution, for him or her in any and all capacities,
to sign this registration statement and any amendments thereto and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on the 7th day of June, 2002, by the
following persons in the capacities indicated:
/s/ PAUL V. REILLY Chairman of the Board, President &
------------------------------------------- Chief Executive Officer
Paul V. Reilly (Principal Executive Officer)
/s/ MICHEL P. SALBAING Director, Senior Vice President &
------------------------------------------- Chief Financial Officer
Michel P. Salbaing (Principal Financial Officer)
/s/ WILLIAM W. HUFFMAN, JR Vice President & Controller
------------------------------------------- (Principal Accounting Officer)
William W. Huffman, Jr.
/s/ ROGER WERTHEIMER Director
-------------------------------------------
Roger Wertheimer
II-17
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Englewood, State of Colorado, on the 7th day of June, 2002.
POSER BUSINESS FORMS, INC.
By /s/ PAUL V. REILLY
------------------------------
Paul V. Reilly
Chairman of the Board &
Executive Vice President
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact,
each with the power of substitution, for him or her in any and all capacities,
to sign this registration statement and any amendments thereto and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on the 7th day of June, 2002, by the
following persons in the capacities indicated:
/s/ PAUL V. REILLY Chairman of the Board &
------------------------------------------- Executive Vice President
Paul V. Reilly (Principal Executive Officer)
/s/ MICHEL P. SALBAING Senior Vice President
------------------------------------------- (Principal Financial Officer)
Michel P. Salbaing
/s WILLIAM W. HUFFMAN, JR. Vice President & Controller
------------------------------------------- (Principal Accounting Officer)
William W. Huffman, Jr.
/s/ ROGER WERTHEIMER Director
-------------------------------------------
Roger Wertheimer
II-18
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized in the City of
Englewood, State of Colorado, on the 7th day of June, 2002.
WISCO III, L.L.C.
By /s/ PAUL V. REILLY
------------------------------
Paul V. Reilly
Manager & Chief Executive
Officer
POWER OF ATTORNEY
Each person whose signature appears below constitutes and appoints
Roger Wertheimer and Russell P. Dawn, and each of them, as attorneys-in-fact,
each with the power of substitution, for him or her in any and all capacities,
to sign this registration statement and any amendments thereto and to file
the same, with exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed on the 7th day of June, 2002, by the
following persons in the capacities indicated:
/s/ PAUL V. REILLY Manager & Chief Executive Officer
------------------------------------------- (Principal Executive Officer)
Paul V. Reilly
/s/ MICHEL P. SALBAING Manager, Senior Vice President &
------------------------------------------- Chief Financial Officer
Michel P. Salbaing (Principal Financial Officer)
/s/ WILLIAM W. HUFFMAN, JR. Vice President & Controller
------------------------------------------- (Principal Accounting Officer)
William W. Huffman, Jr.
/s/ ROGER WERTHEIMER Manager
-------------------------------------------
Roger Wertheimer
II-19
INDEX OF EXHIBITS
EXHIBIT
NO. DESCRIPTION
------ -----------
3.1 Certificate of Incorporation of Mail-Well Corporation--incorporated by reference from
Mail-Well I Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409).
3.2 Certificate of Amendment of Certificate of Incorporation of Mail-Well Corporation--
incorporated by reference from Mail-Well I Corporation's Form S-4 filed March 15, 1999
(Reg. No. 333-74409).
3.3 Certificate of Correction Filed to Correct Certain Error in the Certificate of Amendment of
Mail-Well I Corporation Filed in the Office of the Secretary of State of Delaware on
September 11, 1995--incorporated by reference from Mail-Well I Corporation's Form S-4 filed
March 15, 1999 (Reg. No. 333-74409).
3.4 Certificate of Change of Registered Agent and Registered Office--incorporated by reference
from Mail-Well I Corporation's Form S-4 filed March 15, 1999 (Reg. No. 333-74409).
3.5 Bylaws of Mail-Well I Corporation--incorporated by reference from Mail-Well I Corporation's
Form S-4 filed March 15, 1999 (Reg. No. 333-74409).
4.1 Form of Indenture between Mail-Well, Inc. and The Bank of New York, as Trustee, dated
November 1997, relating to Mail-Well, Inc.'s $152,050,000 aggregate principal amount of 5%
Convertible Subordinated Notes due 2002--incorporated by reference from Exhibit 4.2 to
Mail-Well, Inc.'s Amendment No. 2 to Form S-3 dated November 10, 1997 (Reg. No. 333-36337).
4.2 Form of Supplemental Indenture between Mail-Well, Inc. and The Bank of New York, as
Trustee, dated November 1997, relating to Mail-Well, Inc.'s $152,050,000 aggregate
principal amount of 5% Convertible Subordinated Notes due 2002 and Form of Convertible
Note--incorporated by reference from Exhibit 4.5 to Mail-Well, Inc.'s Amendment No. 2 to
Form S-3 dated November 10, 1997 (Reg. No. 333-36337).
4.3 Indenture dated as of December 16, 1998 between Mail-Well I Corporation and State Street
Bank and Trust Company, as Trustee, relating to Mail-Well I Corporation's $300,000,000
aggregate principal amount of 8 3/4% Senior Subordinated Notes due 2008--incorporated by
reference from Exhibit 4.4 to Mail-Well, Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1998, File No. 1-12551.
4.4 Form of Senior Subordinated Note--incorporated by reference from Exhibit 4.5 to Mail-Well,
Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998, File No. 1-12551.
4.6 Indenture dated as of March 13, 2002 between Mail-Well I Corporation and State Street Bank
and Trust Company, as Trustee relating to Mail-Well I Corporation's $350,000,000 aggregate
principal amount of 9 5/8% Senior Notes due 2012--incorporated by reference to Exhibit
10.30 to Mail-Well, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31,
2002.
4.7 Form of Senior Note and Guarantee relating to Mail-Well I Corporation's $350,000,000
aggregate principal amount 9 5/8% due 2012--incorporated by reference to Exhibit 10.31 to
Mail-Well, Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002.
5* Opinion of Faegre & Benson LLP re: legality of Mail-Well I Corporation's $350,000,000
aggregate principal amount of 9 5/8% Senior Notes due 2012.
II-20
EXHIBIT
NO. DESCRIPTION
------- -----------
10.1 Form of Indemnity Agreement between Mail-Well, Inc. and each of its officers and
directors--incorporated by reference from Exhibit 10.17 of Mail-Well, Inc.'s Registration
Statement on Form S-1 dated March 25, 1994.
10.2 Form of Indemnity Agreement between Mail-Well I Corporation and each of its officers and
directors--incorporated by reference from Exhibit 10.18 of Mail-Well, Inc.'s Registration
Statement on Form S-1 dated March 25, 1994.
10.3 Form of M-W Corp. Employee Stock Ownership Plan effective as of February 23, 1994 and
related Employee Stock Ownership Plan Trust Agreement--incorporated by reference from
Exhibit 10.19 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25, 1994.
10.4 Form of M-W Corp. 401(k) Savings Retirement Plan--incorporated by reference from Exhibit
10.20 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25, 1994.
10.5 Mail-Well, Inc. 1994 Stock Option Plan, as amended on May 7, 1997--incorporated by
reference from Exhibit 10.56 of Mail-Well, Inc.'s Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997.
10.6 Form of Mail-Well, Inc. Incentive Stock Option Agreement--incorporated by reference from
Exhibit 10.22 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25, 1994.
10.7 Form of Mail-Well, Inc. Nonqualified Stock Option Agreement--incorporated by reference from
Exhibit 10.23 of Mail-Well, Inc.'s Registration Statement on Form S-1 dated March 25, 1994.
10.8 Mail-Well, Inc. 1997 Non-Qualified Stock Option Plan--incorporated by reference from
Exhibit 10.54 of Mail-Well, Inc.'s Form 10-Q for the quarter ended March 31, 1997.
10.9 1997 Non-Qualified Stock Option Agreement--incorporated by reference from Exhibit 10.54 of
Mail-Well, Inc.'s Form 10-Q for the quarter ended March 31, 1997.
10.10 Mail-Well, Inc. 1998 Incentive Stock Option Plan--incorporated by reference from Exhibit
10.58 to the Company's Quarterly report on Form 10-Q for the quarter ended March 31, 1998.
10.11 Mail-Well, Inc. 1998 Incentive Stock Option Plan Incentive Stock Option Agreement--
incorporated by reference from Exhibit 10.59 to the Company's Quarterly report on Form 10-Q
for the quarter ended March 31, 1998.
10.12 Participation Agreement dated as of December 15, 1997, among Mail-Well I Corporation,
Keybank National Association, as Trustee and other financial institutions party thereto--
incorporated by reference from Exhibit 10.62 to Mail-Well, Inc.'s Form 10-Q for the quarter
ended March 31, 1998.
10.13 Equipment Lease dated as of December 15, 1997 among Mail-Well I Corporation, Keybank
National Association, as Trustee and other financial institutions party thereto--
incorporated by reference from Exhibit 10.63 to Mail-Well, Inc.'s Form 10-Q for
the quarter ended March 31, 1998.
10.14 Guaranty Agreement dated as of December 15, 1997, among Mail-Well, Inc., Graphic Arts
Center, Inc., Griffin Envelope Inc., Murray Envelope Corporation, Shepard Poorman
Communications Corporation, Wisco Envelope Corp., Wisco II, LLC, Wisco III, LLC, Mail-Well
I Corporation, Keybank National Association, as Trustee and other financial institutions
party thereto--incorporated by reference from Exhibit 10.64 to Mail-Well, Inc.'s Form 10-Q
for the quarter ended March 31, 1998.
10.15 Merger Agreement and Plan of Merger by and among American Business Products, Inc.,
Mail-Well, Inc., and Sherman Acquisition Corporation dated January 13, 2000--incorporated
by reference from the Annual Report on Form 10-K for Mail-Well, Inc.
II-21
EXHIBIT
NO. DESCRIPTION
------- -----------
10.16 Change of Control Agreement dated November 15, 1999, between the Company and Paul V.
Reilly--incorporated by reference from the Company's Annual Report on Form 10-K for the
year ended December 31, 1999.
10.17 Change of Control Agreement dated November 15, 1999, between the Company and Robert
Meyer--incorporated by reference from the Company's Annual Report on Form 10-K for the year
ended December 31, 1999.
10.18 Change of Control Agreement dated November 15, 1999, between the Company and Michael A.
Zawalski--incorporated by reference from the Company's Annual Report on Form 10-K for the
year ended December 31, 1999.
10.19 Credit Agreement dated as of February 18, 2000 among Mail-Well I Corporation, Bank of
America, N.A., as Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank,
N.V., as Syndication Agents, the Bank of Nova Scotia, as Documentation Agent and certain
other financial institutions party thereto--incorporated by reference from the Company's
Quarterly Report on Form 10-Q for the quarter ended March 31, 2000.
10.20 Security Agreement dated as of February 18, 2000, by and among Mail-Well I Corporation,
Mail-Well, Inc., certain other affiliates of the Company and Bank of America, N.A., as
agent--incorporated by reference from the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 2000.
10.21 Second Amendment to Credit Agreement dated as of March 28, 2001 among Mail-Well I
Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A., as
Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication
Agents, the Bank of Nova Scotia, as Documentation Agent and certain other financial
institutions party thereto--incorporated by reference from the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 2001.
10.22 Mail-Well, Inc. 2001 Long-Term Equity Incentive Plan--incorporated by reference from the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.
10.23 Form of Non-Qualified Stock Option Agreement under 2001 Long-Term Equity Incentive
Plan--incorporated by reference from the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2001.
10.24 Form of Incentive Stock Option Agreement under 2001 Long-Term Equity Incentive Plan--
incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2001.
10.25 Form of Restricted Stock Award Agreement under 2001 Long-Term Equity Incentive Plan--
incorporated by reference from the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 2001.
10.26 First Amendment to Credit Agreement dated as of July 28, 2000 among Mail-Well I
Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A., as
Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication
Agent, the Bank of Nova Scotia, as Documentation Agent and certain other financial
institutions party thereto--incorporated by reference from the Company's First Amendment to
Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.
10.27 Third Amendment to Credit Agreement dated as of June 29, 2001 among Mail-Well I
Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A., as
Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication
Agent, the Bank of Nova Scotia, as Documentation Agent and certain other financial
institutions party thereto--incorporated by reference from the Company's First Amendment to
Quarterly Report on Form 10-Q for the quarter ended June 30, 2001.
II-22
EXHIBIT
NO. DESCRIPTION
------- -----------
10.28 Fourth Amendment to Credit Agreement dated as of August 7, 2001 among Mail-Well I
Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A., as
Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication
Agent, the Bank of Nova Scotia, as Documentation Agent and certain other financial
institutions party thereto--incorporated by reference from the Company's Current Report on
Form 8-K filed August 10, 2001.
10.29 Fifth Amendment to Credit Agreement dated as of February 26, 2002 among Mail-Well I
Corporation, Mail-Well, Inc., certain Mail-Well subsidiaries, Bank of America, N.A., as
Administrative Agent and Letter of Credit Issuing Bank, ABN AMRO Bank, N.V., as Syndication
Agent, the Bank of Nova Scotia, as Documentation Agent and certain other financial
institutions party thereto--incorporated by reference to Exhibit 10.33 to Mail-Well, Inc.'s
Quarterly Report on Form 10-Q for the quarter ended March 31, 2002.
10.30* Purchase Agreement dated March 8, 2002, between Mail-Well I Corporation, and Credit Suisse
First Boston, UBS Warburg LLC, Banc of America Securities LLC, U.S. Bancorp Piper Jaffray
Inc., First Union Securities, Inc., and Scotia Capital (USA) Inc., as Initial Purchasers,
relating to Mail-Well I Corporation's $350,000,000 aggregate principal amount of 9 5/8%
Senior Notes due 2012.
10.31 Registration Rights Agreement dated March 13, 2002, between Mail-Well I Corporation, and
Credit Suisse First Boston, UBS Warburg LLC, Banc of America Securities LLC, U.S. Bancorp
Piper Jaffray Inc., First Union Securities, Inc., and Scotia Capital (USA) Inc., as Initial
Purchasers, relating to Mail-Well I Corporation's $350,000,000 aggregate principal amount
of 9 5/8% Senior Notes due 2012--incorporated by reference to Exhibit 10.32 to Mail-Well
Inc.'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2002.
10.32* Stock Purchase Agreement, dated May 6, 2002, among MWL Acquisition Corp., Mail-Well I
Corporation and Mail-Well, Inc.
10.33* Amendment No. 1 to Stock Purchase Agreement, dated May 21, 2002, among MWL Acquisition
Corp., Mail-Well I Corporation and Mail-Well, Inc.
12* Calculation of ratio of earnings to fixed charges.
21* Subsidiaries of the Registrant.
23.1* Consent of Ernst & Young LLP.
23.2* Consent of Faegre & Benson LLP (included in Exhibit 5).
24* Powers of Attorney--included with signature pages.
25* Statement of Eligibility on Form T-1 under the Trust Indenture Act of 1939 of State Street
Bank and Trust Company, as trustee under the indenture, relating to the old notes and the
new notes (separately bound).
99.1* Form of Letter of Transmittal.
99.2* Form of Notice of Guaranteed Delivery.
99.3* Form of letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees.
99.4* Form of Letter to Clients.
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* Filed herewith
II-23