DALLAS--(BUSINESS WIRE)--Nov. 15, 1999-- - Company to Consider Possible Sale of Williamhouse Division -
Bank Credit Agreement Default Precludes Subordinated Debt Interest Payment -
Company Engages Lazard Freres & Co. LLC as Strategic and Financial Advisors -
American Pad & Paper Company (OTC BB:AMPP - news; AP&P) today announced financial results for the third quarter and
nine months ended September 30, 1999. AP&P also announced that a default of its bank credit agreement will preclude
payment of its November 15, 1999 interest payment to its subordinated debt holders and that it has engaged Lazard Freres &
Co. LLC to investigate and pursue various strategic and financial alternatives, including the possible sale of the Williamhouse
division.
Third Quarter and Year-to-Date Results
For the third quarter, the Company reported a net loss of $9.2 million or 33 cents per share, compared to a net loss of $13.4
million, or 48 cents per share in the third quarter of 1998. The third quarter 1999 results include previously announced plant
rationalization costs totaling $1.8 million net that negatively impacted quarterly performance by 6 cents per share. Third quarter
1999 net sales were $144.7 million versus net sales of $174.2 million in the third quarter of 1998.
AP&P posted EBITDA performance of $10.5 million in the third quarter as measured by the Company's bank credit
agreement, meeting the bank financial covenant requirements.
Year to date, the Company reported a net loss of $36.2 million, or $1.30 per share, compared to a net loss of $71.4 million, or
$2.58 per share, in the first nine months of 1998. Results for the first nine months of 1999 include the negative impact of net
plant rationalization costs totaling $6.6 million, or 24 cents per share. Net sales for the first nine months of 1999 were $416.4
million versus net sales of $482.5 million for the first nine months of 1998.
''Our plant rationalization efforts and operational improvements through the first nine months of this year have created
significant cost savings,'' said James W. Swent III, Chief Executive Officer. ''However, revenue performance is tracking below
our plan due to general softness in both our retail and paper merchant sales channels and continued inventory level reductions
with our retail customers. Profitability has also been negatively impacted by customer and product mix as well as multiple paper
price increases experienced during the year.''
Bank Credit Agreement Default Precludes Subordinated Debt Interest Payment
On Friday November 12, 1999 the Company was notified by its banking group of a default of its revolving credit facility. The
default stems from the formation of new subsidiaries in December 1997 related to a reorganization of the Company's corporate
structure without proper notification to the banks. The reorganization was implemented primarily for state tax purposes and
included the transfer of assets between existing entities and transfers to the new subsidiaries. Certain of these subsidiaries own
assets for which the banks' security interest may not have been perfected, resulting in a default under the revolving credit facility.
The banks' default notice prevents the Company from making the scheduled November 15, 1999 interest payment to its
subordinated debt holders. AP&P has a 30-day grace period under the subordinated debt indenture to cure this payment
default. The Company has been in discussions with its bank group and intends to continue to work with them to attempt to
resolve the credit facility default during this grace period.
Company Engages Lazard Freres & Co. LLC as Strategic and Financial Advisors
''The Company has engaged Lazard Freres to analyze our strategic and financial alternatives, including the possible sale of the
Williamhouse division,'' Mr. Swent stated. ''Williamhouse is a well-run operation that has benefited from our recent
rationalization program. It has a well-established customer base, significant market share and a highly respected name in the
industry. The main reason for considering this option is that at the proper valuation, the proceeds from the sale of the
Williamhouse division would make significant progress toward reducing our debt. Lazard will also look at other actions that
would also allow us to address our debt structure.''
''The goal of having Lazard as advisors is to strengthen the Company's financial position as we pursue various strategic and
financial options to reduce our debt,'' said Mr. Swent. ''Our customers will continue to receive the same high quality products
and service they have come to expect from us as we move forward.''
American Pad & Paper Co., which invented the legal pad in 1888, is a leading manufacturer and marketer of paper-based
office products in North America. Product offerings include envelopes, writing pads, file folders, machine papers, greeting
cards and other office products. The key operating divisions of the Company are Williamhouse, AMPAD, and Creative Card.
Company revenues in 1998 were $662 million. Additional information is available on the Company's Website at
americanpad.com.
This release contains forward-looking statements relating to future results. Actual results may differ significantly as a result of
factors over which the Company has no control, including, but not limited to the following: changing economic conditions,
slower than anticipated sales growth, price and product competition and changes in raw material costs. Additional information,
which could affect the Company's financial results, is included in the Company's filings with the Securities and Exchange
Commission.
AMERICAN PAD & PAPER COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share amounts)
(Unaudited)
Three months ended Nine Months ended
September 30, September 30,
--------------------- ---------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
Net sales $ 144,717 $ 174,160 $ 416,398 $ 482,479
Cost of sales 131,984 156,462 382,230 441,962
---------- ---------- ---------- ----------
Gross profit 12,733 17,698 34,168 40,517
Operating expenses:
Selling and marketing 5,590 5,569 15,844 15,762
General and
administrative 5,026 9,608 18,269 24,313
Restructuring charges (1,999) 5,741 (1,999) 5,741
Loss on sales of
accounts receivable 836 858 2,286 2,319
Amortization of
intangible assets 1,282 1,327 3,853 4,522
Write-down of
intangible assets -- -- -- 41,000
Management fees
and services 375 595 1,125 1,655
---------- ---------- ---------- ----------
Income (loss) from
operations 1,623 (6,000) (5,210) (54,795)
Other income (expense):
Interest (10,912) (11,929) (32,632) (33,735)
Other income, net 88 192 2,418 207
---------- ---------- ---------- ----------
Loss before income taxes (9,201) (17,737) (35,424) (88,323)
Benefit from
income taxes -- 4,343 -- 16,907
---------- ---------- ---------- ----------
Loss before cumulative
effect of a change in
accounting principle (9,201) (13,394) (35,424) (71,416)
Cumulative effect
of a change in
accounting principle -- -- (726) --
---------- ---------- ---------- ----------
Net loss $ (9,201) $ (13,394) $ (36,150) $ (71,416)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Basic loss per share:
Loss before cumulative
effect of a change
in accounting
principle $ (0.33) $ (0.48) $ (1.27) $ (2.58)
Cumulative effect of
a change in accounting
principle -- -- (0.03) --
---------- ---------- ---------- ----------
Net loss $ (0.33) $ (0.48) $ (1.30) $ (2.58)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Weighted average shares
outstanding:
Basic 27,829 27,724 27,760 27,713
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
AMERICAN PAD & PAPER COMPANY
CONSOLIDATED BALANCE SHEETS
(in thousands, except per share amounts)
(Unaudited)
September 30, December 31,
1999 1998
----------------- ------------------
ASSETS
Current assets:
Cash $ 1,545 $ 1,371
Accounts receivable 36,915 60,660
Inventories 117,408 112,169
Income taxes receivable 132 1,700
Prepaid expenses and other
current assets 2,206 1,240
Deferred income taxes 40 40
----------------- ------------------
Total current assets 158,246 177,180
Property, plant and equipment 148,938 152,198
Goodwill and intangible assets 179,205 185,805
Other 2,502 2,654
----------------- ------------------
Total assets $ 488,891 $ 517,837
----------------- ------------------
----------------- ------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of
long-term debt $ 247,610 $ 1,236
Accounts payable 48,455 49,598
Accrued expenses 49,107 47,078
Income taxes payable 300 300
Restructuring reserve 2,200 5,660
----------------- ------------------
Total current liabilities 347,672 103,872
----------------- ------------------
Long-term debt 137,871 373,675
Deferred income taxes 16,364 16,972
Other 1,102 1,288
----------------- ------------------
Total liabilities 503,009 495,807
----------------- ------------------
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, 150,000
shares authorized, no shares
issued and outstanding, -- --
Common stock, voting, $.01
par value, 75,000,000
shares authorized,
27,926,405 and 27,724,405
shares issues and
outstanding, respectively 279 277
Additional paid-in capital 301,287 301,287
Accumulated deficit (315,684) (279,534)
----------------- ------------------
Total stockholders'
equity (deficit) (14,118) 22,030
----------------- ------------------
Total liabilities and
stockholders' equity $ 488,891 $ 517,837
----------------- ------------------
----------------- ------------------
Contact:
American Pad & Paper Company
Mark Lipscomb, 972/733-5415 |
