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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 0-20704
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 84-1208699
(State of incorporation) (IRS Employer Identification No.)
4455 Table Mountain Drive, Golden, Colorado 80403
(Address of principal executive offices) (Zip Code)
(303) 215-4600
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
None
Name of each exchange on which registered
None
Securities registered pursuant to Section 12(g) of the Act:
$.01 par value Common Stock
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein, and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]
As of March 12, 2001 there were 31,171,969 shares of common stock
outstanding. The aggregate market value of such shares, other than
shares held by persons who may be deemed affiliates of the
Registrant, was $37,753,000.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's Proxy Statement filed in connection with the 2001
Annual Meeting of Shareholders is incorporated by reference into
Part III.
GRAPHIC PACKAGING INTERNATIONAL CORPORATION.
Annual Report on Form 10-K
December 31, 2000
TABLE OF CONTENTS
Page
No.
PART I
Item 1. Business 3
Item 2. Properties 10
Item 3. Legal Proceedings 11
Item 4. Submission of Matters to a Vote of
Security Holders 11
PART II
Item 5. Market for the Registrant's Common
Stock and Related Stockholder Matters 12
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 15
Item 7A. Quantitative and Qualitative Disclosures
About Market Risk 26
Item 8. Financial Statements and Supplementary
Data 27
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 59
PART III
Item 10. Directors and Executive Officers of
the Registrant 59
Item 11. Executive Compensation 59
Item 12. Security Ownership of Certain Beneficial
Owners and Management 59
Item 13. Certain Relationships and Related
Transactions 59
PART IV
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 60
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
PART I
ITEM 1. BUSINESS
Graphic Packaging International Corporation (the Company or
GPC), formerly ACX Technologies, Inc., is a manufacturer of
packaging products used by consumer product companies as primary
packaging for their end-use products. The Company's strategy is
to maximize its competitive position and growth opportunities in
its sole business, folding cartons. The Company's executive
offices are located at 4455 Table Mountain Drive, Golden,
Colorado 80403. The Company's telephone number is (303) 215-
4600.
(a) General Development of Business
The Company was incorporated in Colorado in August 1992 as a
holding company for the packaging, ceramics, aluminum and
developmental businesses formerly owned by Adolph Coors Company
(ACCo). Effective December 27, 1992, ACCo distributed to its
shareholders all outstanding shares of the Company's stock. The
Company's initial years of operation included packaging,
ceramics, aluminum and various developmental businesses. Through
various acquisitions, divestitures, a spin-off and other
transactions, the Company is now strategically focused on the
folding carton segment of the packaging industry.
To better reflect the nature of the Company's new business
focus, the Company changed its ticker symbol on the New York
Stock Exchange to "GPK" and formally changed the Company's name
from ACX Technologies, Inc. to Graphic Packaging International
Corporation in 2000.
CoorsTek Spin-Off
Effective December 31, 1999, the Company distributed to its
shareholders all the outstanding common stock of the ceramics
business, CoorsTek, and its subsidiaries (collectively referred
to as CoorsTek) in a tax-free spin-off transaction. One share of
CoorsTek common stock was distributed for every four shares of
Company common stock owned. The tax basis allocation of costs
for Company shares acquired pre-spin off is: GPC 55.56% and
CoorsTek 44.44%.
Integration and Optimization
The Company acquired Universal Packaging Corporation in 1998
and the packaging business of Fort James Corporation in 1999 in
order to complement the traditional Graphic Packaging Corporation
plants and to strengthen the Company's position in the folding
carton market. These acquisitions brought the advantages of both
expanded capacity and customer relationships with some of the
largest consumer product corporations in the United States. The
year ended December 31, 2000 provided the Company both challenges
and opportunities inherent in the integration of these businesses
and the optimization of the expanded capacity. As discussed
below, the Company proceeded with its restructuring plans and
dispositions of noncore assets during 2000 in order to facilitate
the optimization of its capacity and the integration of its new
facilities.
(b) Financial Information about Industry Segments, Foreign
Operations and Foreign Sales
The table below summarizes information, in thousands, about
reportable segments as of and for the years ended December 31.
Discontinued operations include CoorsTek.
Operating Depreciation
Net Income And Capital
Sales (Loss) Amortization Assets Expenditures
---------- --------- ------------ ---------- ------------
2000
Packaging $1,102,590 $51,223 $83,094 $1,331,450 $30,931
========== ========= ============ ========== ===========
1999
Packaging $805,593 $42,735 $55,406 $1,397,518 $74,273
Other 44,562 2,103 618 19,699 1,568
---------- --------- ------------ ---------- -----------
Segment total 850,155 44,838 56,024 1,417,217 75,841
Corporate --- (10,479) 260 225,954[a] 17
Discontinued
operations,
net assets --- --- 22,711 --- 15,597
---------- --------- ------------ ---------- -----------
Consolidated
total $850,155 $34,359 $78,995 $1,643,171 $91,455
========== ========= ============ ========== ===========
1998
Packaging $623,852 $38,808 $35,924 $539,039 $47,498
Other 67,925 (3,047) 1,270 56,905 3,384
---------- --------- ------------ ---------- -----------
Segment total 691,777 35,761 37,194 595,944 50,882
Corporate --- (8,941) 336 101,359[b] 690
Discontinued
operations,
net assets --- --- 19,977 148,719 26,891
---------- --------- ------------ ---------- -----------
Consolidated
total $691,777 $26,820 $57,507 $846,022 $78,463
========== ========= ============ ========== ===========
[a] Corporate assets for 1999 consist primarily of a $200 million note
receivable from CoorsTek as a result of the spin-off, and debt
issuance costs.
[b] Corporate assets for 1998 include a $60 million note
receivable from the sale of Golden Aluminum, deferred taxes and
certain properties.
Certain financial information regarding the Company's
domestic and foreign operations is included in the following
summary, which excludes discontinued operating segments. Long-
lived assets include plant, property and equipment, intangible
assets, and certain other non-current assets.
Net Long-Lived
(In thousands) Sales Assets
---------- ----------
2000
United States $1,100,491 $1,103,411
Canada 2,099 1,974
Other --- 2,694
---------- ----------
Total $1,102,590 $1,108,079
========== ==========
1999
United States $798,277 $1,189,599
Canada 51,878 3,689
Other --- 2,694
---------- ----------
Total $850,155 $1,195,982
========== ==========
1998
United States $626,715
Canada 57,079
Other 7,983
----------
Total $691,777
==========
(c) Narrative Description of Operating Segments
Packaging
General: The Company develops, manufactures and sells value-
added paperboard packaging products used by manufacturers as
primary packaging for their end-use products. Value-added
packaging has characteristics such as high-impact graphics;
product protection; resistance to abrasion and radiant heat;
microwave management; and barriers to moisture, gas penetration,
solvent penetration and leakage.
The Company began business with a single plant in 1974 as
part of the vertical integration of ACCo's business. Since that
time, the Company has expanded its product capabilities and
geographic presence through plant expansions and acquisitions.
Sales to Coors Brewing Company represented approximately 10% of
the Company's net sales in 2000.
The Company acquired Universal Packaging Corporation in
January 1998 followed by the acquisition of the Fort James
packaging business in August 1999. These two acquisitions added
19 facilities and complemented GPC's capabilities with processes
such as web-fed and sheet-fed printing, electron beam curing of
inks and coatings, rotary die cutting and production of coated
recycled paperboard. The acquisitions have allowed the Company
to expand into several new end-use markets and added to its blue-
chip customer list. Coincident with the acquisitions, GPC sold
its flexible packaging business in September 1999, closed two
folding carton facilities during 2000, and sold a noncore
packaging facility in October 2000. These plant closures are
part of a plan to reduce overhead without impacting effective
capacity. See related discussion regarding asset impairment and
restructuring charges in Management's Discussion and Analysis of
Financial Condition and Results of Operations. As of December 31,
2000, the Company operated 20 manufacturing facilities in the
United States and Canada.
Markets and Products: The fiber-based product packaging
industry includes: paperboard packaging which consists of
corrugated products, folding cartons and rigid fiber boxes and
food service containers such as disposable clam-shells, plates
and cups; and flexible packaging such as printed and laminated
bags, overwraps and labels. GPC competes in the folding carton
segment of the industry.
The U.S. folding carton industry is currently an estimated
$8.4 billion market that experienced an average annual growth
rate from 1987 to 1997 of 2%. Shipments from 1997 to 1998
declined 1% and have been estimated to have grown slightly in
1999 and 2000. Over the last several years, in addition to
growth through acquisitions, the major portion of GPC's revenue
growth has come from sales to Coors Brewing and customers in the
detergent, cereal, premium bar soap, quick service restaurant
markets, dry and frozen food markets, and promotional packaging.
In manufacturing value-added folding cartons, GPC uses,
among other processes, an internally developed, patented
composite packaging technology, Composipac[R] (Composipac), which
provides finished products with high quality graphics that have
enhanced abrasion protection and moisture, air or other special
barrier properties. GPC's Composipac technology is designed to
meet the continuing specialized needs of its beverage, powdered
detergents, soap and promotional packaging customers. This
technology also provides the Company with the unique ability to
cost-effectively produce full web lamination holographic cartons.
The Company believes demand for holographic cartons is growing in
the toothpaste, promotional and other market segments.
In addition, GPC has been a leader in the development and
marketing of microwave packaging technology. The Company's Qwik
Wave[R] susceptor packaging provides browning and crisping
qualities for microwave foods. This is made possible through the
use of an ultra thin layer of aluminum that heats directly when
exposed to microwave power. GPC has added to the Qwik Wave[R]
technology with packaging branded under the Micro-Rite[R] name,
which consists of a series of aluminum circuits applied to
paperboard that provides power distribution for even cooking.
Interactive foil technology allows controlled heating that
results in conventional oven quality in microwave time.
Strategy: The Company's strategy is to maintain its focus
on valued customer relationships and market leadership. It plans
to continue to do so by employing capital and resources to remain
the industry's low-cost producer of folding cartons while
continuing to invest in the future through research and
development. Leveraging its expanded sales force from the
acquisitions of Universal Packaging and the Fort James folding
carton business, GPC emphasizes its ability to provide innovative
products with value-added characteristics that stand out from its
customers' competitors on the supermarket shelves.
Manufacturing and Raw Materials: GPC uses a variety of raw
materials such as paperboard, paper, inks, aluminum foil, plastic
films, plastic resins, adhesives and other materials which are
available from domestic and foreign suppliers. Historically, GPC
has not experienced difficulty in obtaining adequate supplies of
raw materials and difficulty is not anticipated in the future.
While many sources of each of these materials are available, the
Company prefers to develop strategic long-standing alliances with
vendors, including the use of multi-year supply agreements, in
order to provide a guaranteed source of materials that satisfies
customer requirements while obtaining the best quality, service
and price. Business disruptions or financial difficulties of a
sole source supplier, which the Company does not anticipate,
could have an adverse effect by increasing the cost of these
materials and causing delays in manufacturing while other
suppliers are being qualified.
GPC's operating margins were negatively impacted by rising
energy costs in 2000, including energy-related costs such as
transportation. Where available, the Company takes advantage of
forward purchase contracts for its seasonal energy needs in order
to stabilize these expenditures.
Sales and Distribution: Products are sold primarily to well-
recognized consumer product manufacturers in North America.
Sales are made primarily through direct sales employees of GPC
that work from offices located throughout the United States and,
to a lesser degree, through broker arrangements with third
parties. GPC's selling activities are supported by its technical
and development staff.
Most of the Company's sales are made under sales contracts
at prices that are subject to periodic adjustment for market
price changes of raw materials and other costs. Products are
made in accordance with customer specifications. The Company had
approximately $111 million in open orders in March 2001, as
compared to approximately $175 million in March 2000. The
Company expects to ship most of the open orders by the end of the
second quarter of 2001. Total open orders and comparisons vary
because of a number of factors and are not necessarily indicative
of past or future operating results.
Dependence on Major Customers: Sales to Kraft Foods, Inc.
and affiliates under various long-term contracts accounted for
approximately 14%, 20% and 15% of the Company's consolidated
sales for 2000, 1999 and 1998, respectively; however, future
sales may vary from historical levels. In 1999, GPC entered into
a new five-year supply agreement with Kraft Foods to supply one
hundred percent of their folding carton needs for specified
product lines.
Sales to Coors Brewing accounted for approximately 10%, 13%
and 17% of the Company's consolidated sales for 2000, 1999 and
1998, respectively; however, future sales may vary from
historical levels. In 1998, the Company entered into a five-year
supply agreement with Coors Brewing to supply packaging products.
The agreement includes stated quantity commitments and requires
annual repricing. The Company also sold refined corn starch to
Coors Brewing until the disposition of this business on January
31, 1999.
The loss of Kraft Foods or Coors Brewing as a customer in
the foreseeable future would have a material effect on the
Company's results of operations.
Competition: GPC is subject to strong competition in most
markets it serves. The packaging industry continues to
experience intense pricing pressures. The installation of state-
of-the-art equipment by manufacturers has intensified the
competitive pricing situation. A relatively small number of
large competitors hold a significant portion of the folding
carton segment of the paperboard industry. Major U.S.
competitors include Smurfit-Stone Container Corporation, Field
Container Company L.P, The Mead Corporation, Gulf States Paper
Corporation, Westvaco Corporation, Rock-Tenn Company, and
International Paper Company. Mergers and acquisitions have
contributed to a consolidation of the industry.
Product Development: GPC's development staff work directly
with the sales and marketing personnel in meeting with customers
and pursuing new business. The Company's development efforts
include, but are not limited to, extending the shelf life of
customers' products, reducing production costs, enhancing the
heat-managing characteristics of food packaging and refining
packaging appearance through new printing techniques and
materials. Potential new product development efforts are
expected to involve sift-proof cartons, linerless cartons, liquid
containment packaging, enhanced microwavable food containers and
other packaging innovations.
Patents, Proprietary Rights and Licenses: The Company holds
a substantial number of patents and pending patent applications
in the U.S. and in foreign countries. This portfolio primarily
consists of microwave and barrier protection packaging and
manufacturing methods. The patents and processes are significant
to Graphic Packaging's operations and are supported by trademarks
such as Qwik Wave[R], Micro-Rite[R] and Composipac[R]. In
addition, the Company licenses certain technology from third
parties to enhance its technical capabilities. The Company's
policy generally is to pursue patent protection that it
considers necessary or advisable for the patentable inventions
and technological improvements of its business and to defend
its patents against third party infringement. The Company
also relies significantly on its trade secrets, technical
expertise and know-how, continuing technological innovations and
other means such as confidentiality agreements with employees,
consultants and customers to protect and enhance its competitive
positions within its industry.
The Company believes that it owns or has the right to use
the proprietary technology and other intellectual property
necessary to its operations. Except as noted above, the Company
does not believe that its success is materially dependent on the
existence or duration of any individual patent, trademark or
license or related group thereof.
Other Businesses
The Company's other businesses have generally been sold or
reduced to investment holdings. The primary historical areas of
focus of the other businesses have been distribution of solar
electric systems (Golden Genesis); real estate development
(Golden Equities); and corn-wet milling, food additives and other
research and development products (Golden Technologies). The
Company's interest in Golden Genesis was sold on August 3, 1999,
Golden Equities has disposed of the majority of its real estate
holdings, the corn-wet milling operation was sold in January 1999
and the remaining research and development and food additive
businesses were sold in 2000. Therefore, Other segment
information generally represents the final operating results of
businesses disposed of before the end of 1999.
Discontinued Operations
Discontinued operations consist of two businesses: ceramics
(CoorsTek) and aluminum (Golden Aluminum).
CoorsTek (formerly known as Coors Ceramics Company)
develops, manufactures and sells advanced technical products
across a wide range of product lines for a variety of
applications. It has been in business since 1911 and is the
largest U.S. owned, independent manufacturer of advanced
technical ceramics. CoorsTek was spun off as a separate public
company effective December 31, 1999.
Golden Aluminum produced rigid container sheet used in
making can lids, tabs and bodies for the beverage and food can
industry and other flat-rolled aluminum products used principally
in the building industry. The assets of Golden Aluminum were
sold on November 5, 1999.
The Company purchased the Kalamazoo Recycled Paperboard Mill
(the Kalamazoo Mill) on August 2, 1999 as part of the acquisition
of the Fort James packaging business. The Kalamazoo Mill
produces coated recycled paperboard. In December 1999, the Board
of Directors approved a plan to offer the Kalamazoo Mill for
sale. The Kalamazoo Mill was reflected in the Company's
consolidated financial statements as a discontinued operation
from December 1999 through September 30, 2000. The Company has
been unable to sell the Kalamazoo Mill and, accordingly, has
reclassified the results of operations and net assets of the
Kalamazoo Mill into continuing operations for all periods
presented in the Company's consolidated financial statements.
The Company has integrated the Kalamazoo Mill into its packaging
operations and is no longer actively pursuing the sale of the
Kalamazoo Mill.
The following assets, liabilities, and components of
operating income from the Kalamazoo Mill's 1999 results have been
added to continuing operations (in thousands):
Total assets $243,068
========
Total liabilities $18,068
========
Net sales $18,750
========
Operating income $3,243
========
Research and Development
The Company's research and development activities consist of
the development of innovative technology, materials, products and
processes using advanced and cost-efficient manufacturing
processes. Total research and development expenditures for the
Company were $4.7 million, $3.8 million and $3.7 million for
2000, 1999 and 1998, respectively. The Company believes the
expenditures will be adequate to meet the strategic objectives of
its business.
Environmental Matters
The Company's operations are subject to extensive regulation
by various federal, state, provincial and local agencies
concerning compliance with environmental control statutes and
regulations. These regulations impose limitations, including
effluent and emission limitations, on the discharge of materials
into the environment, as well as require the Company to obtain
and operate in compliance with the conditions of permits and
other governmental authorization. Future regulations could
materially increase the Company's capital requirements and
certain operating expenses in future years.
In the ordinary course of business the Company is
continually upgrading and replacing equipment to comply with air
quality and other environmental standards. The estimated capital
expenditures for these types of projects for 2001 total $1.5
million.
Some of the Company's operations have been notified that
they may be potentially responsible parties under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 or similar laws with respect to the remediation of
certain sites where hazardous substances have been released into
the environment. The Company cannot predict with certainty the
total costs of remediation, its share of the total costs, the
extent to which contributions will be available from other
parties, the amount of time necessary to complete the remediation
or the availability of insurance. However, based on the
investigations to date, the Company believes that any liability
with respect to these sites would not be material to the
financial condition or results of operations of the Company,
without consideration for insurance recoveries. There can be no
certainty, however, that the Company will not be named as a
potentially responsible party at additional sites or be subject
to other environmental matters in the future or that the costs
associated with those additional sites or matters would not be
material.
In addition, the Company has received demands arising out of
alleged contamination of various properties currently or formerly
owned by the Company. In management's opinion, none of these
claims will result in liability that would materially affect the
Company's financial position or results of operations.
Employees
As of December 31, 2000, the Company had approximately 4,400
full-time employees. Management considers its employee relations
to be good.
ITEM 2. PROPERTIES
The Company believes that its facilities are well maintained
and suitable for their respective operations. The table below
lists the Company's plants and most other physical properties and
their locations and general character:
Facility Location Character
- -------------------- ------------------------- ----------------------
Company Headquarters Golden, Colorado(1) Office/Administration
Manufacturing Boulder, Colorado(2) Converting Operations
Manufacturing Bow, New Hampshire Converting Operations/
Offices
Manufacturing Centralia, Illinois Converting Operations
Manufacturing Charlotte, North Carolina Converting Operations
Manufacturing Ft. Smith, Arkansas Converting Operations
Manufacturing Garden Grove, California Converting Operations
Manufacturing Golden, Colorado(1) Converting Operations
Manufacturing Gordonsville, Tennessee Converting Operations
Manufacturing Kalamazoo, Michigan Converting Operations
Manufacturing Kalamazoo, Michigan Paperboard Mill
Manufacturing Kendallville, Indiana Converting Operations
Manufacturing Lawrenceburg, Tennessee Converting Operations
Manufacturing Lumberton, North Carolina Converting Operations
Manufacturing Menasha, Wisconsin Converting Operations
Manufacturing Mississauga, Ontario(2) Converting Operations
Manufacturing Mitchell, South Dakota Converting Operations
Manufacturing Newnan, Georgia Converting Operations
Manufacturing Portland, Oregon(3) Converting Operations
Manufacturing Richmond, Virginia Converting Operations
Manufacturing Wausau, Wisconsin Converting Operations
(1) The Company headquarters and Golden, Colorado manufacturing
facility are located in the same building.
(2) Leased facilities.
(3) Two facilities, including one leased facility.
The operating facilities of the Company are not constrained
by capacity issues. From time to time the Company also leases
additional warehouse space and sales offices throughout North
America, on an as-needed basis.
ITEM 3. LEGAL PROCEEDINGS
In the ordinary course of business, the Company's
subsidiaries are subject to various pending claims, lawsuits and
contingent liabilities, including claims by current or former
employees relating to employment. In each of these cases, the
Company is vigorously defending against them. The Company does
not believe that disposition of these matters will have a
material adverse effect on the Company's consolidated financial
position or results of operations. For information regarding
environmental legal proceedings, see Environmental Matters.
In connection with the resale of the aluminum business in
1999, the Company guaranteed accounts receivable owed by the
former owner of these assets. After the resale, the former owner
refused to pay the amounts owed, $2.4 million. Pursuant to the
terms of the resale agreement, the Company paid this amount and
sued the former owner in the United States District Court for the
District of Colorado and claimed an additional $14 million in
overpayment for raw materials to run the business prior to
resale. The former owner counterclaimed for an additional $10
million for certain spare parts. Although this lawsuit is in the
discovery stage, the Company does not believe that the result of
this litigation will have a material adverse effect on the
consolidated financial position or results of operations.
On April 14, 2000 Lemelson Medical, Education & Research
Foundation sued the Company and 75 other defendants in the United
States District Court for the District of Arizona for patent
infringement and unspecified damages. This case has been stayed
pending ruling on a motion for consolidation with three other
similar cases. Concurrently, the plaintiff is being sued by
manufacturers of equipment that utilize the technology. These
manufacturers of equipment are claiming noninfringement.
Although the case is in preliminary stages, the Company does not
believe that the lawsuit will have a material adverse effect on
the Company's financial position or results of operations.
In July 1999, Cinergy Resources, Inc. and the Cincinnati
Gas & Electric company sued Graphic Packaging in Warren County,
Ohio Court of Common Pleas claiming approximately $651,000, plus
interest, fees and costs, for gas supplied to Graphic Packaging's
Franklin, Ohio facility. Cinergy claims that, due to an
improperly installed meter, Graphic Packaging was not billed for
actual gas consumption. Graphic Packaging asserts that it has
paid for all gas supplied. The Company does not believe the
disposition of this matter will have a material adverse effect on
the Company's financial position or results of operation.
In February 1998, a subsidiary of Golden Technologies was
sued for breach of a supply agreement to purchase thermal energy
for the Johnstown, Colorado corn-wet mill. The Company sold the
Johnstown, Colorado corn-wet mill in January 1999. This case was
settled in November 2000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the fourth quarter ended December 31, 2000.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS
The Company's common stock is quoted on the New York Stock
Exchange under the symbol GPK. The historical range of the high
and low sales price per share for each quarter of 2000 and 1999
was as follows:
2000 1999
--------------- ----------------
High Low High Low
----- ----- ------ ------
First Quarter $8.44 $2.56 $15.50 $11.25
Second Quarter $4.50 $2.13 $16.25 $11.50
Third Quarter $3.00 $1.44 $15.94 $9.50
Fourth Quarter $1.94 $1.06 $11.13 $7.63
As a result of the spin-off of CoorsTek on December 31,
1999, the market price of the Company's stock opened on January
3, 2000 at $5.875 per share, versus the closing price of $10.6875
per share on December 31, 1999.
During 2000, 1999 and 1998, no cash dividends were paid by
the Company to its common shareholders. During 2000, the Company
declared $3,806,000 of dividends on its 10% Series B preferred
stock. At this time, the Company anticipates that, except for
the 10% Series B preferred stock dividends, it will retain any
earnings and that the Company will not pay dividends to its
common shareholders in the foreseeable future. Also, the
Company's credit facilities currently prohibit the payment of any
cash dividends, except on the Series B preferred stock, and the
Company expects this limitation to remain in effect through 2001.
On March 12, 2001 there were approximately 2,313
shareholders of record of the Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA
Financial Highlights - Five Year Overview
In thousands, except
per share and
ratio data 2000 1999 1998 1997 1996
---------- -------- -------- -------- --------
Summary of Operations
Net sales [a] $1,102,590 $850,155 $691,777 $426,261 $436,028
---------- -------- -------- -------- --------
Gross profit 138,611 128,805 124,244 93,608 80,393
Selling, general and
administrative
expenses [b] 81,768 86,633 76,033 70,436 57,319
Asset impairment and
restructuring
charges [c] 5,620 7,813 21,391 21,880 34,642
---------- -------- ------- ------- --------
Operating income
(loss) 51,223 34,359 26,820 1,292 (11,568)
---------- -------- ------- ------- --------
Income (loss) from
continuing
operations (6,998)[f] 18,410[f] 5,453 (2,272) (13,793)
---------- -------- -------- ------- --------
Income (loss) from
discontinued
operations [d] --- 9,181 15,812 29,988 (78,231)
---------- -------- -------- ------- --------
Extraordinary loss
on early
extinguishment of
debt, net of tax --- (2,332) --- --- ---
---------- -------- -------- ------- --------
Net income (loss) (6,998) 25,259 21,265 27,716 (92,024)
Preferred stock
dividends declared (3,806) --- --- --- ---
---------- -------- -------- ------- --------
Net income (loss)
attributable to
common shareholders ($10,804) $25,259 $21,265 $27,716 ($92,024)
- ------------------------------------------------------------------------
Per basic share of
common stock:
Continuing
operations ($0.37) $0.65 $0.19 ($0.08) ($0.49)
Discontinued
operations --- 0.32 0.56 1.07 (2.81)
Extraordinary loss --- (0.08) --- --- ---
--------- -------- -------- ------- --------
Net income (loss)
attributable
to common
shareholders ($0.37) $0.89 $0.75 $0.99 ($3.30)
--------- -------- -------- ------- --------
Per diluted share
of common stock:
Continuing
operations ($0.37) $0.64 $0.19 ($0.08) ($0.49)
Discontinued
operations --- 0.32 0.54 1.04 (2.81)
Extraordinary loss --- (0.08) --- --- ---
--------- -------- -------- ------- -------
Net income (loss)
attributable
to common
shareholders ($0.37) $0.88 $0.73 $0.96 ($3.30)
- ------------------------------------------------------------------------
Financial Position
Working capital,
excluding current
maturities of debt $97,813 $292,776 $238,844 $158,551 $154,626
Total assets $1,331,450 $1,643,171[e] $846,022 $642,880 $623,520
Current maturities
of debt $58,500 $400,000[e] $86,300 --- ---
Long-term debt $576,600 $615,500 $183,000 $100,000 $100,000
Shareholders' equity $515,151[g]$423,310 $447,955 $430,531 $397,903
- ------------------------------------------------------------------------
Other Information
Total debt to
capitalization 55% 71% 38% 19% 20%
Net book value per
share of common
stock $16.87 $14.81 $15.76 $15.17 $14.24
- ------------------------------------------------------------------------
[a] Includes sales from ongoing Graphic Packaging folding carton
business (i.e., excluding sales from the flexible packaging
plants sold in 1999) of $1,103 million, $727 million, $504
million, $237 million and $230 million in 2000, 1999, 1998,
1997 and 1996, respectively.
[b] Includes goodwill amortization (in thousands) of $20,634, and
$2,224 for 2000, 1999, 1998, 1997 and 1996, respectively.
[c] Asset impairment and restructuring charges resulted in a loss
per diluted share impact of $0.11, $0.16, $0.44, $0.45 and
$0.73 in 2000, 1999, 1998, 1997 and 1996, respectively.
[d] Discontinued operations include the spin-off of CoorsTek and
the sale of Golden Aluminum Company. The income (loss) per
diluted share for each business is as follows:
2000 1999 1998 1997 1996
---- ------ ----- ----- ------
CoorsTek N/A $0.54 $0.54 $1.04 $0.82
Golden Aluminum Company N/A ($0.22) --- --- ($3.63)
[e] Reduced by $200 million on January 4, 2000 with repayment of
loan and special dividend from the CoorsTek spin-off.
[f] Includes $19.2 million and $30.2 million pre-tax gains
(approximately $11.5 million and $18 million, net of tax)
from sales of businesses in 2000 and 1999, respectively.
[g] Includes $100 million of convertible, redeemable preferred
stock issued in 2000.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
General Overview
The Company is a manufacturer of packaging products used by
consumer product companies as primary packaging for their end-use
products. Over the past several years, and culminating with the
spin-off of CoorsTek on December 31, 1999, the Company has moved
from a diversified group of subsidiaries - each operating in
different markets - to a Company focused on the folding carton
segment of the packaging industry. By strategically disposing of
noncore businesses and underperforming assets; acquiring two
major businesses in the folding carton industry; and executing
rationalization plans, the Company has developed into a prominent
competitor in the folding carton industry.
The Selected Financial Data in Item 6 summarizes the
financial impact that the Company's acquisitions and dispositions
have had on consolidated operating results over the past five
years, and is primarily indicative of Graphic Packaging
Corporation's results after the recent dispositions and spin-off
of CoorsTek. Detailed analysis of Graphic Packaging Corporation's
contribution to the Company's consolidated results over the past
three years is provided in the Results from Continuing Operations
section below.
Total net sales have more than doubled from 1996 to 2000 -
with the most pronounced increases occurring in 1998 (the first
year of the Universal Packaging acquisition) and 2000 (the first
full year of the Fort James packaging business acquisition).
Sales from the Company's ongoing business - folding cartons -
have increased nearly five fold during the same time period.
This is directly due to the increased customer base and capacity
from the recent acquisitions, but also due to the Company's focus
on folding cartons.
Gross profit margins, although reaching 22% in 1997, have
declined to 13% in 2000. Gross profit fluctuations from year-to-
year are generally due to integration issues when adding new
plant locations and customers; changes in product mix; changing
raw material costs (such as rising energy costs in 2000); and
pricing pressures due to increased competition in the folding
carton industry. Delays experienced in bringing the new Golden,
Colorado facility into full production during 1999 and 2000 have
also negatively impacted gross profit margins.
Selling, general and administrative expenses, excluding
goodwill amortization, have declined from 13% of sales in 1996 to
6% in 2000. This is a reflection of the Company's higher
revenue base and restructuring efforts, particularly the
reduction of staff levels and administrative facilities. See
further discussion of the Company's restructuring activities over
the past three years below.
The Company has achieved operating income before asset
impairment and restructuring charges of approximately 6% of net
sales for the last five years despite the significant structural
changes taking place in the packaging industry and a change in
the Company's strategic focus. Deterioration in the Company's
income from continuing operations is significantly due to the
increased interest charges in 1999 and 2000 related to the August
2, 1999 purchase of the Fort James packaging business.
The Company's financial position and liquidity are discussed
in detail below. Generally, the Company's cash flow from
operations has sustained restructuring costs, capital
expenditures and debt service from year-to-year. Interest and
principal from additional borrowings used to finance the
acquisitions of Universal Packaging in 1998 and the Fort James
packaging business in 1999 have been reduced by cash generated
from operations, asset sales, and the sale of $100 million of
preferred stock in August 2000.
This financial review presents the Company's operating
results for each of the three years in the period ended December
31, 2000, and its financial condition at December 31, 2000 and
1999. This review should be read in connection with the
information presented in the Consolidated Financial Statements
and the related notes thereto.
Results from Continuing Operations
Net Sales
Net sales for 2000 totaled $1,102.6 million, an increase of
$252.4 million or 30% over 1999 sales. Net sales for 1999
totaled $850.2 million, an increase of $158.4 million or 23%,
over 1998 sales of $691.8 million. The increase in sales is
primarily the result of the acquisition of the Fort James
packaging business on August 2, 1999. The increase in sales was
offset in part by the sale of flexible packaging plants on
September 2, 1999. 1999 sales for the flexible packaging plants
were $123 million. After adjusting for the Fort James
acquisition and the sale of the flexible packaging plants, sales
for the Company grew approximately 4% in a relatively flat market
primarily because of volume increases with existing customers.
Net sales to Coors Brewing totaled $112.2 million, an
increase of $4.6 million or 4% over 1999 sales. The increase is
due to increased brewery sales in 2000 and the resulting higher
demand for packaging. Net sales to Coors Brewing totaled $107.6
million in 1999, a decrease of $12.3 million or 10%, over net
sales of $119.9 million in 1998. The decrease is due to the
disposition of the Company's corn starch business in early 1999.
The Company's business is largely within the United States,
particularly since the spin-off of CoorsTek. The Company had
sales to customers outside the United States, primarily in
Canada, which accounted for 0.2%, 6% and 9% of total sales during
2000, 1999 and 1998, respectively. The decrease in foreign sales
as a percentage of total sales is attributable to the sale of
several flexible packaging plants in Canada during 1999.
Net sales of the Company's Other segment totaled $44.6
million and $67.9 million in 1999 and 1998, respectively. These
sales accounted for approximately 5% and 10% of the Company's
consolidated sales for the same years. The decreasing sales of
the Other segment are due to the Company's divestiture of the
majority of these businesses by the end of 1999.
Gross Profit
Consolidated gross profit was 13%, 15% and 18% of net sales
in 2000, 1999 and 1998, respectively. The decreases in 2000 and
1999 reflect recent trends in the packaging industry in terms of
changing raw material costs, coupled with pricing pressures due
to increased competition. The decreases in 2000 and 1999 also
reflect the integration costs associated with the Fort James
packaging business acquisition. As discussed below, future
improvements in gross profit will depend upon management's
ability to improve cost efficiencies and to maintain profitable,
long-term customer relationships.
Selling, General and Administrative Expenses
Selling, general and administrative expenses, excluding
goodwill amortization, for 2000, 1999 and 1998 were $61.1
million, $73.4 million and $68.2 million, which represented 6%,
9% and 10% of net sales, respectively. The percentage decreases
in 2000 and 1999 mainly reflect cost savings realized as a result
of the Company's restructuring efforts over the past several
years and the increased revenue base resulting from the Fort
James packaging business and Universal Packaging acquisitions.
Operating Income
Consolidated operating income for 2000, excluding asset
impairment and restructuring charges, increased to $56.8 million,
an increase of $14.6 million over 1999's operating income on the
same basis. The increase is directly due to increased sales.
Consolidated operating income for 1999, excluding asset
impairment and restructuring charges, decreased to $42.2 million,
a decrease of 12% over 1998 operating income of $48.2 million
before asset impairment and restructuring charges. The principal
reasons for the decrease are the increased goodwill amortization
and integration costs associated with the Fort James packaging
business acquisition and declining gross profit margins.
Operating Income from Continuing Operations by Segment
(In millions)
2000 1999 1998
----- ----- -----
Before asset impairment and
restructuring charges:
Packaging $56.8 $50.6 $60.1
Other businesses - 2.1 (3.0)
Corporate - (10.5) (8.9)
----- ----- -----
Operating income before asset
impairment and restructuring
charges 56.8 42.2 48.2
Asset impairment and restructuring
charges:
Packaging (5.6) (7.8) (21.3)
Other businesses --- -- (0.1)
----- ----- -----
Operating income after asset
impairment and restructuring
charges $51.2 $34.4 $26.8
===== ===== =====
Asset Impairment Charges
The Company recorded a total of $5.9 million and $19.4
million in asset impairment charges in 1999 and 1998,
respectively. Goodwill impairment of $5.5 million was included
in the 1998 charge. The remainder of the 1998 charge consisted
of fixed asset impairments. The 1999 charge consisted entirely
of fixed asset impairments as described below.
1999: The Company recorded $5.9 million of asset impairment
charges in 1999 due to decisions to close its Boulder, Colorado
and Saratoga Springs, New York plants. The Boulder, Colorado
plant has been replaced by a new manufacturing facility in
Golden, Colorado, which uses advanced equipment to improve the
production process. Due to certain delays in production
transition to Golden, the Boulder facility remains partially
operational at December 31, 2000, with the expectation that
complete shutdown will occur during 2001. The Saratoga Springs
plant operated at higher overhead levels than other plants and
used gravure press technology. Therefore, the decision was made
to sell the Saratoga Springs property; move the business to other
folding carton plants; and dispose of the gravure presses at
Saratoga Springs. Boulder writedowns totaled $2.9 million and
Saratoga Springs writedowns totaled $3.0 million. The Saratoga
Springs facility shutdown was complete at December 31, 2000. The
plant's property is currently being offered for sale.
1998: The Company recorded $18.5 million in asset impairment
charges in 1998. Deterioration of the performance at certain
flexible packaging facilities and increased competitive
conditions led management to review the carrying amounts of long-
lived assets and goodwill in conjunction with an overall
restructuring plan. Specifically, forecasted operating cash
flows did not support the carrying amount of certain long-lived
assets and goodwill at the Franklin, Ohio operation. In
addition, management decided to offer for sale the Vancouver,
British Columbia operation and close a divisional office in North
Carolina. Therefore, the long-lived assets and related goodwill
were written down to their estimated market values using the
asset held for sale model.
The Company recorded net asset impairment charges of $0.9
million in its other businesses during 1998. These charges
included a $1.0 million asset impairment charge to write down
long-lived assets of Solartec, S.A., a solar electric subsidiary
in Argentina. Since acquiring Solartec in November 1996,
operating cash flows were below original expectations. As a
result, the Company recorded this impairment to reduce the
carrying value of its investment in Solartec to its estimated
fair market value. In addition, the Company recorded a $0.4
million asset impairment charge related to the consolidation and
outsourcing of certain manufacturing activities at its solar
electric distribution business. As a result, certain long-lived
assets became impaired and were written down to their estimated
market value. Also during 1998, the Company sold certain
equipment formerly used in a biodegradable polymer project for
approximately $0.5 million. These assets had been previously
written off as an asset impairment, so the resulting gain on sale
of these assets was netted against the 1998 asset impairment
charge.
Restructuring Charges
The Company recorded restructuring charges totaling $5.6
million, $1.9 million and $2.0 million in 2000, 1999 and 1998,
respectively. In addition, restructuring reserves of $1.3
million related to the closure of the Perrysburg, Ohio plant were
recorded in 2000 as a cost of the Fort James packaging business
acquisition. The following table summarizes accruals related to
these restructurings.
Biodegradable Corn
Polymer Syrup Graphic Graphic
Exit Exit Packaging Packaging
(in millions) Plan Plan Corporate Operations Total
------------- ----- --------- ---------- -----
Balance,
December 31, 1997 $0.4 $0.9 $1.7 --- $3.0
1998 restructuring
charges --- (0.8) --- 2.8 2.0
Cash paid (0.4) (0.1) (1.7) (1.0) (3.2)
----- ---- ---- ----- -----
Balance,
December 31, 1998 --- --- --- 1.8 1.8
1999 restructuring
charges --- --- --- 1.9 1.9
Cash paid --- --- --- (1.8) (1.8)
----- ----- ---- ----- -----
Balance,
December 31, 1999 --- --- --- 1.9 1.9
2000 restructuring
charges --- --- --- 5.6 5.6
2000 restructuring
- Perrysburg --- --- --- 1.3 1.3
Cash paid --- --- --- (3.8) (3.8)
----- ----- ----- ----- -----
Balance,
December 31, 2000 $--- $--- $--- $5.0 $5.0
===== ===== ===== ===== =====
2000: In December 2000 the Company announced a
restructuring plan to reduce fixed-cost personnel. The plan
includes the elimination of approximately 200 non-production
positions across the Company and offers severance packages in
accordance with the Company's policies. The total cost of the
reduction in force is estimated at $5.0 million, of which $3.0
million was recognized in the fourth quarter 2000 results. The
remaining cost of approximately $2.0 million will be recognized
in the first half of 2001 when severance packages are
communicated to employees.
In connection with the announced closure of the Perrysburg,
Ohio plant, restructuring reserves were recorded totaling
approximately $1.3 million. The reserves relate to severance of
approximately 100 production positions and other plant closing
costs. Consistent with the asset impairments related to the
Perrysburg closure, the restructuring costs have been accounted
for as a cost of the Fort James packaging business acquisition,
with a resultant adjustment to goodwill. As of December 31,
2000, approximately $700,000 of the restructuring charges have
been paid relating to the Perrysburg closure.
The Company recorded a restructuring charge of $3.4 million
in the first quarter of 2000 for anticipated severance costs as a
result of the announced closure of the Saratoga Springs, New York
plant. The Saratoga Springs plant was closed pursuant to a plant
rationalization plan approved by the Company's Board of Directors
in the fourth quarter of 1999. The Company has completed the
closure of the Saratoga Springs plant and the transition of the
plant's business to other Company facilities. Approximately $2.0
million of restructuring charges have been paid through the
fourth quarter relating to the Saratoga Springs facility
shutdown.
1999: The Company recorded a $1.9 million restructuring
charge pursuant to a plant rationalization plan approved by the
Company's Board of Directors. The Company instituted this plan
to further its goal of refining its focus on folding carton
packaging and to reduce headcount. All of the 1999 charge
relates to severance, primarily at the Company's Lawrenceburg,
Tennessee manufacturing plant. The Company initially planned to
complete this restructuring plan by the end of 2000. At December
31, 2000, approximately $1.0 million of severance and related
costs have been paid. However, customer needs in both Boulder
and Lawrenceburg, coupled with the timing of the transition of
business to the Company's new Golden, Colorado facility, have
impacted the completion of the restructuring and resulted in the
savings of approximately $800,000 of anticipated restructuring
costs. The 2000 restructuring expense is net of this $800,000
benefit.
1998: During 1998, the Company instituted a restructuring
plan related to certain Graphic Packaging operations and recorded
$2.8 million in restructuring charges. This plan included the
consolidation and realignment of certain administrative functions
and the downsizing of its Franklin, Ohio operation. This plan
resulted in the elimination of approximately 20 administrative
and 65 manufacturing positions with related severance costs of
approximately $2.5 million. This plan also included
approximately $0.3 million in other exit costs relating to the
closure of a divisional office in North Carolina. The Company
made cash payments of $1.0 million in the fourth quarter of 1998
and $1.6 million during 1999. Remaining reserves at December 31,
2000 relate to operating lease obligations in connection with the
divisional office.
Gain from Sale of Businesses and Other Assets
The Company disposed of several noncore assets during 2000,
for which the following pre-tax gains were recognized:
Other
Malvern Intangible Long-lived
(In thousands) Plant Assets Assets Total
------- ---------- ---------- -------
Cash proceeds $35,000 $5,407 $2,600 $43,007
Net book value,
less costs (23,635) --- (200) (23,835)
------- ------ ------ -------
Gain recognized $11,365 $5,407 $2,400 $19,172
======= ====== ====== =======
The Company disposed of two businesses during 1999, for
which the following gains were recognized:
(In thousands) Flexible Golden
Plants Genesis Total
-------- ------- --------
Cash proceeds $105,000 $20,800 $125,800
Net book value, less
costs (82,300) (13,264) (95,564)
-------- ------- --------
Gain recognized $22,700 $7,536 $30,236
======== ======= ========
Interest Expense and Interest Income
Interest expense for 2000, 1999 and 1998 was $83.3 million,
$36.9 million and $22.0 million, respectively. The increase is
due to additional financing to acquire the Fort James packaging
business on August 2, 1999.
Interest expense of $16.0 million and $3.6 million was
allocated to the discontinued operations of CoorsTek in 1999 and
1998, respectively, based upon CoorsTek's $200 million
allocation of total consolidated debt at the time of the spin-off
for 1999 and $50 million of outstanding intercompany debt for
1998.
The Company capitalized interest of $1.1 million, $2.0
million and $0.3 million in 2000, 1999 and 1998, respectively.
The increase in capitalized interest during 1999 is attributable
to the construction of the Company's new Golden, Colorado
facility.
Interest income for 2000, 1999 and 1998 was $1.2 million,
$2.6 million and $5.4 million, respectively. The decreases in
2000 and 1999 relate directly to the use of funds to acquire the
Fort James packaging business and Universal Packaging.
See related discussions about Financial Condition and
Liquidity below.
Income Taxes
The consolidated effective tax rate for the Company in 2000
was 40% compared to 39% in 1999 and 47% in 1998. The higher tax
rate in 1998 resulted from a lower earnings base, which increased
the impact of non-deductible items. The Company expects to
maintain its effective tax rate for future years at the
historical rate of approximately 40%.
Other Segment
Net sales for the Other business segment in 1999 totaled
$44.6 million, a decrease of $23.3 million, or 34%, from 1998 net
sales of $67.9 million. The decrease in net sales is directly
due to the disposition of virtually all the assets and related
businesses of the Other group during 1999.
The Other businesses reported operating income of $2.1
million in 1999, a favorable increase over the operating loss of
$3.0 million in 1998. The improvement was directly due to the
Company's decisions to dispose of the noncore, underperforming
businesses operating in this segment.
As of December 31, 1999, the Company had disposed of
substantially all operating businesses in the Other segment.
Discontinued Operations
Coincident with the Company's strategic folding carton
acquisitions, several noncore businesses and underperforming
assets were selected for sale or other disposition by the Company
during 1999.
CoorsTek Spin-off
On December 31, 1999, the Company distributed 100% of
CoorsTek's shares of common stock to the Company's shareholders
in a tax-free transaction. Shareholders received one share of
CoorsTek stock for every four shares of GPC stock held. CoorsTek
issued a promissory note to the Company on December 31, 1999
totaling $200.0 million in satisfaction of outstanding
intercompany obligations at the time of the spin-off and as a
special one-time dividend. The note was paid in full in January
2000. No gain or loss was recognized by the Company as a result
of the spin-off transaction. The tax basis allocation of costs
for GPC shares acquired pre-spin off is: GPC 55.56% and CoorsTek
44.44%.
Golden Aluminum
In 1996, the Board of Directors adopted a plan to dispose of
the Company's aluminum rigid-container sheet business operated by
Golden Aluminum. In conjunction with this decision, the Company
recorded pre-tax charges of $155.0 million for anticipated losses
upon the disposition and estimated operating losses of the
business through the disposition date. In March of 1997, Golden
Aluminum was sold for $70.0 million, of which $10.0 million was
paid at closing and $60.0 million was due within two years. In
December of 1998, the Company extended the due date on the $60.0
million payment until September 1, 1999. In accordance with the
purchase agreement, the purchaser exercised its right to return
Golden Aluminum to the Company on August 23, 1999 in discharge of
the $60.0 million obligation. The initial payment of $10.0
million was nonrefundable. The Company subsequently sold the
assets of Golden Aluminum to another buyer for approximately $41
million on November 5, 1999. An additional pre-tax charge of
$10.0 million was recorded in 1999 related to the ultimate
disposition of Golden Aluminum.
Kalamazoo Mill
The Company purchased the Kalamazoo Mill on August 2, 1999
as part of the acquisition of the Fort James packaging business.
The Kalamazoo Mill produces coated recycled paperboard. In
December 1999, the Board of Directors approved a plan to offer
the Kalamazoo Mill for sale. The Kalamazoo Mill was reflected in
the Company's consolidated financial statements as a discontinued
operation from December 1999 through September 30, 2000. The
Company has been unable to sell the Kalamazoo Mill and,
accordingly, has reclassified the results of operations and net
assets of the Kalamazoo Mill into continuing operations for all
periods presented in the Company's consolidated financial
statements. The Company has integrated the Kalamazoo Mill into
its packaging operations and is no longer actively pursuing the
sale of the Kalamazoo Mill.
The following assets, liabilities, and components of
operating income from the Kalamazoo Mill's 1999 results have been
added to continuing operations (in thousands):
Total assets $243,068
========
Total liabilities $18,068
========
Net sales $18,750
========
Operating income $3,243
========
Financial Data - Discontinued Operations
Financial data for CoorsTek and Golden Aluminum for the
years ended December 31, in thousands, are summarized as follows:
Golden
1999 CoorsTek Aluminum Total
-------- -------- --------
Net sales $365,061 $--- $365,061
======== ======== ========
Income from operations before
income taxes $25,117 $--- $25,117
Income tax expense 9,480 --- 9,480
-------- -------- --------
Income from operations 15,637 --- 15,637
Loss from disposal before taxes --- (10,000) (10,000)
Income tax benefit --- 3,544 3,544
-------- -------- --------
Net income (loss) $15,637 ($6,456) $9,181
======== ======== ========
Net income per basic share of
common stock:
Income from operations $0.55 $--- $0.55
Loss on disposal --- (0.23) (0.23)
-------- -------- --------
Net income (loss) per basic
share $0.55 ($0.23) $0.32
======== ======== ========
Net income per diluted share of
common stock:
Income from operations $0.54 $--- $0.54
Loss on disposal --- (0.22) (0.22)
-------- -------- --------
Net income (loss) per diluted
share $0.54 ($0.22) $0.32
======== ======== ========
Golden
1998 CoorsTek Aluminum Total
-------- -------- --------
Net sales $296,614 $--- $296,614
======== ======== ========
Income from operations before
income taxes $25,361 $--- $25,361
Income tax expense 9,549 --- 9,549
-------- -------- --------
Net income $15,812 $--- $15,812
======== ======== ========
Net income per basic share $0.56 $--- $0.56
======== ======== ========
Net income per diluted share $0.54 $--- $0.54
======== ======== ========
Financial Resources and Liquidity
The Company's liquidity is generated from both internal and
external sources and is used to fund short-term working capital
needs, capital expenditures and acquisitions. During 2000,
internally generated liquidity is measured by net cash from
operations, as discussed below, and the sale of non-strategic
assets.
On August 2, 1999, the Company entered into a $1.3 billion
revolving credit and term loan agreement (the Credit Agreement)
with a group of lenders, with Bank of America, N.A. as agent.
Subsequent to December 31, 1999, the Company reduced the amount
available under the Credit Agreement by $50.0 million. The
Credit Agreement is comprised of four senior credit facilities
including a $125 million 180-day term facility, a $400 million
one-year facility, a $325 million five-year term loan facility
and a $400 million five-year revolving credit facility
(collectively, the Senior Credit Facilities). Proceeds from the
Senior Credit Facilities were used to finance the August 2, 1999
acquisition of the Fort James packaging business and to prepay
the Company's other outstanding borrowings.
During 1999, approximately $200 million of repayments were
made from the Company's cash flow from operations, the sale of
Golden Aluminum, the sale of the Company's flexible packaging
plants and the sale of the solar electric businesses. Total
borrowings under the Senior Credit Facilities were $1,015.5
million as of December 31, 1999.
During 2000, the Company paid $6.3 million to amend the
Senior Credit Facilities to relax certain financial covenants,
extend the maturity date on the one-year facility to August 15,
2001, reduce the required amortization under the five-year
facility, and to allow cash dividends to be paid on the Company's
Series B preferred stock. The amended Credit Agreement increases
the applicable margin paid over LIBOR, includes a cash recapture
provision in the event of excess availability under the revolver
facility, and imposes further limitations on capital
expenditures, acquisitions and investments. In addition, the
Company agreed to use its best efforts to place at least $50
million of subordinated debt at economically reasonable terms
before August 15, 2001. If the Company does not place this
subordinated debt, the applicable margin over LIBOR will increase
by 75 basis points and the Company will pay an additional fee of
$750,000 to the lenders.
The Company reduced amounts outstanding under its Senior
Credit Facilities in 2000 by $380 million, with total borrowings
of $635.1 million remaining on December 31, 2000. The $380
million in debt repayments was generated from the proceeds of a
note receivable from CoorsTek as a result of the spin-off as
described above ($200 million), the issuance by the Company of
$100 million of Series B preferred stock which carries a 10% cash
dividend, the sale of one of the Company's plants ($35 million)
and operating cash flow. Borrowings under the revolving credit
facility on March 1, 2001 were approximately $275 million,
leaving $125 million available for future borrowing needs.
As of December 31, 2000, the Company's borrowings under the
Senior Credit Facilities were as follows (in thousands):
One-year term facility due August 15, 2001 $33,500
Five-year term facility due August 2, 2004
with required amortization of $6.25
million due March 31, 2001, June 30, 2001,
September 30, 2001 and December 31, 2001 312,500
Five-year revolving credit facility due
August 2, 2004 289,100
--------
Total 635,100
Less: Current maturities 58,500
--------
Long-term maturities $576,600
========
Amounts borrowed under the Senior Credit Facilities bear
interest under various pricing alternatives plus a spread
depending on the Company's leverage ratio. The various pricing
alternatives include (i) LIBOR, or (ii) the higher of the Federal
Funds Rate plus .5% or the prime rate. In addition, the Company
pays a commitment fee that varies based upon the Company's
leverage ratio and the unused portion of the revolving credit
facility. Mandatory prepayments under the Senior Credit
Facilities are required from the proceeds of any significant
asset sale or from the issuance of any debt or equity securities.
In addition, the five-year term loan is due in quarterly
installments. Total installments for 2001 through 2004,
respectively, are $25 million, $35 million, $40 million, and $25
million with the balance of the borrowings due on the maturity
date of August 2, 2004.
The Senior Credit Facilities are collateralized by first
priority liens on all material assets of the Company and all of
its domestic subsidiaries. The Credit Agreement currently limits
the Company's ability to pay dividends other than permitted
dividends on the Series B preferred stock, and imposes
limitations on the incurrence of additional debt, capital
expenditures, acquisitions and the sale of assets. At December
31, 2000, the Company was in compliance with all covenants.
In 2000, quarterly financial covenant levels were revised.
Although there can be no assurance that all of these covenants
will be met, management believes that the Company will remain in
compliance with the revised covenants based upon the Company's
expected performance and debt repayment forecasts. In the event
of a default under the Credit Agreement, the lenders would have
the right to call the Senior Credit Facilities immediately due
and refrain from making further advances to the Company. If the
Company is unable to pay the accelerated payments, the lenders
could elect to proceed against the collateral in order to satisfy
the Company's obligations.
The Company's capital structure also includes $100 million
of Series B preferred stock, issued on August 15, 2000. The
Series B preferred stock is convertible into shares of the
Company's common stock at $2.0625 per share and is entitled to
receive a dividend payable quarterly at an annual rate of 10%.
The Company may redeem the Series B preferred stock beginning on
August 15, 2005 at 105% of par reducing by 1% per year until
August 15, 2010 at which time the Company can elect to redeem the
shares at par. The Series B preferred stock has a liquidation
preference over the Company's common stock and is entitled to one
vote for every two shares held on an as-converted basis.
The Company has entered into contracts to hedge the interest
rates on approximately $575 million of its borrowings. Swap
agreements are in place on $225 million of borrowings and cap
agreements are in place on $350 million of borrowings. The swap
agreements lock in an average LIBOR rate of 6.5%, $150 million of
the caps provide upside protection to the Company if LIBOR moves
above 6.75% and $200 million of the caps provide upside
protection to the Company if LIBOR moves above 8.13%. $100
million of the swaps will expire on September 3, 2002.
The Consolidated Statement of Cash Flows includes the cash
generated or used by the operations shown in the income statement
as discontinued operations, namely Golden Aluminum Company and
CoorsTek. On this basis, net cash provided by operations was
$63.3 million, $135.1 million and $97.3 million for 2000, 1999
and 1998, respectively.
During 2000, 1999 and 1998, net cash from operations was
used to fund capital requirements and acquisitions. Capital
expenditures totaled $30.9 million, $91.5 million and $78.5
million for 2000, 1999 and 1998, respectively.
Capital spending at Graphic Packaging during 2000 was
primarily for an enterprise resource planning system (ERP) and
equipment that improves productivity and reduces costs. The
Company expects its capital expenditures for 2001 to be
approximately $35 million, primarily related to the ERP system
and manufacturing productivity improvements and upgrades to
equipment.
Acquisitions during 1999 included the acquisition of the
Fort James packaging business for approximately $849 million, as
well as acquisitions by CoorsTek for approximately $56 million in
cash primarily in the semiconductor industry. Acquisitions in
1998 utilized $300.8 million in cash, primarily for the
acquisition of Universal Packaging Corporation. The Company is
currently limited by its Senior Credit Facilities to pursue
acquisitions as a growth vehicle and is consequently focused on
utilizing cash flow to reduce its debt.
During 2000, the Company sold a facility in Malvern,
Pennsylvania for $35 million. Other noncore asset sales
generated $8.6 million of additional gross proceeds. Asset sales
during 1999 generated $170.5 million in proceeds and included the
final disposition of the assets of Golden Aluminum Company, the
sale of the Company's flexible packaging plants and the sale of
the solar electric businesses.
The Company currently expects that cash flow from
operations, and borrowings under its current credit facilities
will be adequate to meet the Company's needs for working capital,
temporary financing for capital expenditures and debt repayments.
The Company's working capital position as of December 31, 2000
was $39.3 million.
The impact of inflation on the Company's financial position
and results of operations has been minimal and is not expected to
adversely affect future results.
Environmental
Some of the Company's operations have been notified that
they may be potentially responsible parties under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 or similar laws with respect to the remediation of
certain sites where hazardous substances have been released into
the environment. The Company cannot predict with certainty the
total costs of remediation, its share of the total costs, the
extent to which contributions will be available from other
parties, the amount of time necessary to complete the remediation
or the availability of insurance. However, based on the
investigations to date, the Company believes that any liability
with respect to these sites would not be material to the
financial condition or results of operations of the Company,
without consideration for insurance recoveries. There can be no
certainty, however, that the Company will not be named as a
potentially responsible party at additional sites or be subject
to other environmental matters in the future or that the costs
associated with those additional sites or matters would not be
material.
In addition, the Company has received demands arising out of
alleged contamination of various properties currently or formerly
owned by the Company. In management's opinion, none of these
claims will result in liability that would materially affect the
Company's financial position or results of operations.
New Accounting Standard
Statement of Financial Accounting Standards (SFAS) No. 133,
"Accounting for Derivative Instruments and Hedging Activities,"
was issued in June 1998. This statement, as amended, establishes
accounting and reporting standards for derivative instruments and
for hedging activities. It requires the recognition of all
derivatives as either assets or liabilities in the statement of
financial position at fair value. This statement is effective
for the Company's financial statements for the year ending
December 31, 2001 and the adoption of this standard is expected
to have a cumulative effect on the Company's statement of
financial position of approximately $6 million.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Interest Rate Risk
As of March 12, 2001, the Company's capital structure
includes approximately $625 million of debt that bears interest
based upon an underlying rate that fluctuates with short-term
interest rates, specifically LIBOR. The Company has entered into
interest rate swap agreements that lock in LIBOR at 5.94% on $100
million of borrowings and 6.98% on $125 million of its
borrowings. In addition, the Company has interest rate contracts
that cap the LIBOR interest rate at 8.13% for $200 million of
borrowings and 6.75% for $150 million of borrowings. With the
Company's interest rate protection contracts, a 1% change in
interest rates would impact annual pre-tax results by
approximately $6.2 million.
Factors That May Affect Future Results
Certain statements in this document constitute "forward-
looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors
that may cause the actual results, performance or achievements of
the Company to be materially different from any future results,
performance or achievements expressed or implied by the forward-
looking statements. Specifically, a) revenue projections for
2001 and future years' revenue growth might be reduced because
customers experience lower demand, find alternative suppliers, or
otherwise reduce their demand for our products, or because the
Company, as a result of shutting down two plants, is unable to
efficiently move business or to qualify that business at other
plants, and future revenues are dependent on other factors,
including the strength of the U.S. economy, possible future
government regulations, the Company's ability to execute its
marketing plans and the ability of the Company to capture new
business; b) the new Golden plant startup might continue to have
technical and other challenges and therefore not be able to
achieve increased throughput and efficiency; c) margins might be
reduced due to market conditions for products sold and due to
increases in operating and materials costs, including energy,
recycled fiber and paperboard which might not be able to be
passed through to customers; d) the benefits of restructuring,
reorganization, integration, cost reduction and optimization to
be realized, including the benefits of an effective startup of
the Golden plant, are uncertain because of possible delays and
increases in costs; e) the ability to continue to reduce working
capital, including inventory, is dependent in part on customers'
order and inventory levels, and credit taken by them; f) selling,
general and administrative costs might increase based on adding
more staff and programs, and general cost increases; g) capital
expenditures might be higher than planned due to unexpected
requirements or opportunities; h) debt may not be reduced as
estimated due to lower than expected free cash flow; i) the
Company may be exposed to higher than predicted interest rates on
the unhedged portion of its debt and on any new debt it might
incur; j) if the Company is unable to meet the financial
covenants on its debt, it could be subject to higher interest
rates or possible default; k) the Company might not meet any
other estimates for 2001 as a result of higher integration costs
following the transfer of production within the system and the
transfer from two shutdown plants, market conditions for pricing
products, higher production costs, the inability to realize
savings from cost reduction programs, higher than predicted
interest rates, and other business factors; and l) the Company
might not be able to maintain its effective tax rate at 40% due
to the current and future tax laws, the Company's ability to
identify and use its tax credits and other factors.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements and Supplementary Data
Consolidated Financial Statements: Page(s)
Report of Independent Accountants 28
Consolidated Income Statement for the years
ended December 31, 2000, 1999 and 1998 29
Consolidated Statement of Comprehensive Income
for the years ended December 31, 2000,
1999 and 1998 30
Consolidated Balance Sheet at December 31,
2000 and 1999 31
Consolidated Statement of Cash Flows for
the years ended December 31, 2000,
1999 and 1998 32
Consolidated Statement of Shareholders'
Equity for the years ended
December 31, 2000, 1999 and 1998 33
Notes to Consolidated Financial Statements 34-57
Schedule II - Valuation and Qualifying
Accounts for the years ended
December 31, 2000, 1999 and 1998 58
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of Graphic Packaging
International Corporation:
In our opinion, the consolidated financial statements listed
in the accompanying index present fairly, in all material
respects, the financial position of Graphic Packaging
International Corporation and its subsidiaries at December 31,
2000 and 1999, and the results of their operations and their cash
flows for each of the three years in the period ended December
31, 2000 in conformity with accounting principles generally
accepted in the United States of America. In addition, in our
opinion, the financial statement schedule listed in the
accompanying index presents fairly in all material respects, the
information set forth therein when read in conjunction with the
related consolidated financial statements. These financial
statements and the financial statement schedule are the
responsibility of the Company's management; our responsibility is
to express an opinion on these financial statements and the
financial statement schedule based on our audits. We conducted
our audits of these statements in accordance with auditing
standards generally accepted in the United States of America,
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Denver, Colorado
February 23, 2001
MANAGEMENT'S REPORT TO SHAREHOLDERS
The preparation, integrity and objectivity of the financial
statements and all other financial information included in this
annual report are the responsibility of the management of Graphic
Packaging International Corporation. The financial statements
have been prepared in accordance with generally accepted
accounting principles, applying estimates based on management's
best judgment where necessary. Management believes that all
material uncertainties have been appropriately accounted for and
disclosed.
The established system of accounting procedures and related
internal controls provide reasonable assurance that the assets
are safeguarded against loss and that the policies and procedures
are implemented by qualified personnel.
PricewaterhouseCoopers LLP, the Company's independent
accountants, provide an objective, independent audit of the
consolidated financial statements. Their accompanying report is
based upon an examination conducted in accordance with generally
accepted auditing standards, including tests of accounting
procedures and records.
The Board of Directors, operating through its Audit
Committee composed of outside directors, monitors the Company's
accounting control systems and reviews the results of the
auditing activities. The Audit Committee meets at least
quarterly, either separately or jointly, with representatives of
management, the Company's independent accountants and internal
auditors. To ensure complete independence, the Company's
independent accountants and internal auditors have full and free
access to the Audit Committee and may meet with or without the
presence of management.
GAIL A. CONSTANCIO JOHN S. NORMAN
Chief Financial Officer Corporate Controller
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
CONSOLIDATED INCOME STATEMENT
(in thousands, except per share data)
Year Ended December 31,
2000 1999 1998
Sales $990,390 $742,510 $571,899
Sales to Coors Brewing Company 112,200 107,645 119,878
--------- -------- --------
Total sales 1,102,590 850,155 691,777
Cost of goods sold 963,979 721,350 567,533
--------- -------- --------
Gross profit 138,611 128,805 124,244
Selling, general and
administrative expense 61,134 73,357 68,248
Goodwill amortization 20,634 13,276 7,785
Asset impairment and
restructuring charges 5,620 7,813 21,391
--------- -------- --------
Operating income 51,223 34,359 26,820
Gain from sale of businesses
and other assets 19,172 30,236 ---
Interest expense - net (82,071) (34,240) (16,616)
--------- -------- --------
Income (loss) from continuing
operations before income
taxes and extraordinary loss (11,676) 30,355 10,204
Income tax expense (benefit) (4,678) 11,945 4,751
--------- -------- --------
Income (loss) from continuing
operations before
extraordinary loss (6,998) 18,410 5,453
Discontinued operations,
net of tax
Income from discontinued
operations of CoorsTek --- 15,637 15,812
Loss on disposal of Golden
Aluminum --- (6,456) ---
--------- -------- --------
--- 9,181 15,812
--------- -------- --------
Income (loss) before
extraordinary item (6,998) 27,591 21,265
Extraordinary loss on early
extinguishment of
debt, net of tax of $1,312 --- (2,332) ---
--------- -------- --------
Net income (loss) (6,998) 25,259 21,265
Preferred stock dividends
declared (3,806) --- ---
--------- -------- --------
Income (loss) attributable to
common shareholders ($10,804) $25,259 $21,265
======== ======== ========
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
CONSOLIDATED INCOME STATEMENT
(in thousands, except per share data)
Year Ended December 31,
2000 1999 1998
--------- -------- --------
Net income (loss) attributable
to common shareholders
per basic share of common
stock:
Continuing operations ($0.37) $0.65 $0.19
Discontinued operations --- 0.32 0.56
Extraordinary loss --- (0.08) ---
--------- -------- --------
Net income (loss) attributable
to common shareholders
per basic share ($0.37) $0.89 $0.75
========= ======== ========
Weighted average shares
outstanding - basic 29,337 28,475 28,504
========= ======== ========
Net income (loss) attributable
to common shareholders
per diluted share of common
stock:
Continuing operations ($0.37) $0.64 $0.19
Discontinued operations --- 0.32 0.54
Extraordinary loss --- (0.08) ---
--------- -------- --------
Net income (loss) attributable
to common shareholders
per diluted share ($0.37) $0.88 $0.73
========= ======== ========
Weighted average shares
outstanding - diluted 29,337 28,767 29,030
========= ======== ========
See Notes to Consolidated Financial Statements.
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
(in thousands)
Year Ended December 31,
2000 1999 1998
--------- -------- --------
Net income (loss) ($6,998) $25,259 $21,265
--------- -------- --------
Other comprehensive income:
Foreign currency translation
adjustments:
Adjustments arising during
the period (355) 1,686 (3,218)
Reclassifications for
amounts already included
in net income --- 3,362 ---
Minimum pension liability
adjustment, net of tax
of $178 in 2000, ($354) in
1999 and $459 in 1998 (267) 531 (688)
--------- -------- --------
Other comprehensive income
(loss) (622) 5,579 (3,906)
--------- -------- --------
Comprehensive income (loss) ($7,620) $30,838 $17,359
========= ======== ========
See Notes to Consolidated Financial Statements.
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
CONSOLIDATED BALANCE SHEET
(in thousands, except share data)
December 31,
2000 1999
ASSETS ---------- ----------
Current assets
Cash and cash equivalents $4,012 $15,869
Accounts receivable, less allowance
for doubtful accounts of $2,970 in
2000 and $2,260 in 1999 73,871 69,568
Accounts receivable from Coors
Brewing Company 1,316 2,348
Notes receivable --- 200,000
Inventories 105,228 128,365
Deferred income taxes 14,305 18,026
Other assets 17,329 13,737
---------- ----------
Total current assets 216,061 447,913
Properties, net 480,395 541,164
Goodwill, net 580,299 593,024
Other assets 54,695 61,070
---------- ----------
Total assets $1,331,450 $1,643,171
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $58,500 $400,000
Accounts payable 58,910 63,845
Accrued expenses and other liabilities 59,338 91,292
---------- ----------
Total current liabilities 176,748 555,137
Long-term debt 576,600 615,500
Other long-term liabilities 58,595 44,084
---------- ----------
Total liabilities 811,943 1,214,721
Minority interest 4,356 5,140
Commitments and contingencies (Note 16) --- ---
Shareholders' equity
Preferred stock, 20,000,000 shares
authorized:
Series A, $0.01 par value, no shares
issued or outstanding --- ---
Series B, $0.01 par value, 1,000,000
shares issued and outstanding at
stated value of $100 per share at
December 31, 2000 100,000 ---
Common stock, $0.01 par value
100,000,000 shares authorized;
30,544,449and 28,576,771 issued
and outstanding at December 31,
2000 and 1999 305 286
Paid-in capital 422,327 422,885
Retained earnings (deficit) (6,998) ---
Accumulated other comprehensive income
(loss) (483) 139
---------- ----------
Total shareholders' equity 515,151 423,310
---------- ----------
Total liabilities and shareholders'
equity $1,331,450 $1,643,171
========== ==========
See Notes to Consolidated Financial Statements.
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(in thousands)
Year Ended December 31,
2000 1999 1998
-------- -------- --------
Cash flows from operating
activities:
Net income (loss) ($6,998) $25,259 $21,265
Adjustments to reconcile net
income to net cash
provided by operating
activities:
Asset impairment and
restructuring charges 5,620 7,813 34,488
Gain from sale of
businesses and other
assets (19,172) (30,236) ---
Loss on disposal of
Golden Aluminum --- 10,000 ---
Depreciation 62,460 63,602 48,764
Amortization of goodwill 20,634 15,393 8,743
Amortization of debt
issuance costs 8,865 2,448 ---
Change in net deferred
income taxes 11,676 (908) 7,305
Change in current assets
and current liabilities,
net of effects from
acquisitions
Accounts receivable (3,271) 3,757 2,865
Inventories 23,137 5,664 (1,232)
Other assets (3,592) (6,866) 5,369
Accounts payable (4,935) 29,237 (18,151)
Accrued expenses and
other liabilities (31,954) 20,392 (12,300)
Change in deferred items
and other 828 (10,417) 178
-------- -------- --------
Net cash provided by operating
activities 63,298 135,138 97,294
Cash flows from investing
activities:
Additions to properties (30,931) (91,455) (78,463)
Acquisitions, net of cash
acquired --- (905,069) (300,774)
Collection of note
receivable 200,000 --- ---
Proceeds from sale of assets 43,580 170,526 131,899
Other --- 13,812 (369)
-------- -------- --------
Net cash provided by (used in)
investing activities 212,649 (812,186) (247,707)
Cash flows from financing
activities:
Proceeds from issuance of
preferred stock, net of
stock issuance costs 98,558 --- ---
Proceeds from borrowings 51,500 1,643,116 126,800
Repayment of debt (431,900) (957,200) ---
Debt issuance costs (6,312) (29,716) ---
Preferred stock dividends
paid (1,306) --- ---
Common stock issuance and
other 1,656 10,521 454
-------- -------- --------
Net cash provided by (used in)
financing activities (287,804) 666,721 127,254
Cash and cash equivalents:
Net decrease in cash and
cash equivalents (11,857) (10,327) (23,159)
Balance at beginning of year 15,869 26,196 49,355
-------- -------- --------
Balance at end of year $4,012 $15,869 $26,196
======== ======== ========
Cash flows from discontinued operations of CoorsTek for 1999 and
1998 have not been excluded from the Consolidated Statement of
Cash Flows.
See Notes to Consolidated Financial Statements.
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(in thousands)
Accumu-
lated
Other
Compre-
hensive
Preferred Common Paid-in Earnings Income
Stock Stock Capital (Deficit) (Loss) Total
--------- ------ -------- -------- --------- --------
Balance at --- $284 $451,336 ($19,555) ($1,534) $430,531
December 31, 1997
Exercise of stock
options --- 1 875 --- --- 876
Tax benefit of
option exercise --- --- 480 --- --- 480
Issuance of common
stock --- 1 1,097 --- --- 1,098
Share repurchase
program --- (2) (2,387) --- --- (2,389)
Net income --- --- --- 21,265 --- 21,265
Minimum pension
liability
adjustment --- --- --- --- (688) (688)
Cumulative
translation
adjustment --- --- --- --- (3,218) (3,218)
-------- ------ -------- -------- -------- ---------
Balance at
December 31, 1998 --- 284 451,401 1,710 (5,440) 447,955
Issuance of common
stock --- 2 3,816 --- --- 3,818
Net income --- --- --- 25,259 --- 25,259
CoorsTek dividend --- --- (32,332) (26,969) --- (59,301)
Minimum pension
liability
adjustment --- --- --- --- 531 531
Cumulative
translation
adjustment --- --- --- --- 5,048 5,048
--------- ------ -------- -------- -------- --------
Balance at
December 31, 1999 --- 286 422,885 --- 139 423,310
Issuance of common
stock --- 19 4,690 --- --- 4,709
Issuance of
preferred stock,
net of issuance
costs 100,000 --- (1,442) --- --- 98,558
Net loss --- --- --- (6,998) --- (6,998)
Preferred stock
dividends
declared --- --- (3,806) --- --- (3,806)
Minimum pension
liability
adjustment --- --- --- --- (267) (267)
Cumulative
translation
adjustment --- --- --- --- (355) (355)
--------- ------ -------- -------- -------- --------
Balance at
December 31, 2000 $100,000 $305 $422,327 ($6,998) ($483) $515,151
========= ====== ======== ======== ======== ========
See Notes to Consolidated Financial Statements.
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies
Nature of Operations: Graphic Packaging International
Corporation (the Company or GPC) is a manufacturer of packaging
products used by consumer product companies as primary packaging
for their end-use products. The Company's strategy is to
maximize its competitive position and growth opportunities in its
core business, folding cartons. Toward this end, over the past
several years the Company has acquired two significant folding
carton businesses and has disposed of several noncore businesses
and under-performing assets.
CoorsTek, Inc. (formerly known as Coors Ceramics Company)
develops, manufactures and sells advanced technical products
across a wide range of product lines for a variety of
applications. On December 31, 1999, the Company distributed 100%
of CoorsTek's shares of common stock to the GPC shareholders in a
tax-free transaction. Shareholders received one share of
CoorsTek stock for every four shares of GPC stock held. The
results of operations for CoorsTek have been presented as a
discontinued operation in the accompanying 1999 and 1998
consolidated financial statements. CoorsTek issued a promissory
note to GPC on December 31, 1999 totaling $200.0 million in
satisfaction of outstanding intercompany obligations at the time
of the spin-off and as a one-time, special dividend. The note
was paid in full on January 4, 2000. No gain or loss was
recognized by GPC as a result of the spin-off transaction.
Amounts included in the notes to the consolidated financial
statements pertain to continuing operations only, except where
otherwise noted.
Consolidation: The consolidated financial statements
include the accounts of the Company and its wholly owned and
majority owned subsidiaries. All material intercompany
transactions have been eliminated.
Use of Estimates: The consolidated financial statements
have been prepared in conformity with generally accepted
accounting principles, using management's best estimates and
judgments where appropriate. Management has made significant
estimates with respect to asset impairment and restructuring
charges. Actual results could differ from these estimates
making it reasonably possible that a change in these estimates
could occur in the near term.
Reclassifications: Certain 1999 and 1998 amounts have been
reclassified to conform to the 2000 presentation.
Concentration of Credit Risk: A significant portion of the
Company's net sales consist of sales to Kraft Foods, Inc. and
affiliates under various contracts and Coors Brewing Company as
follows:
2000 1999 1998
---- ---- ----
Kraft Foods, Inc. 14% 20% 15%
Coors Brewing Company 10% 13% 17%
Revenue Recognition: Revenue is generally recognized when
goods are shipped. Shipping and handling costs invoiced to
customers are included in revenue. Associated costs are
recognized as costs of sales.
Inventories: Inventories are stated at the lower of cost or
market. Cost is determined by the first-in, first-out (FIFO)
method.
The classification of inventories, in thousands, at December
31, was as follows:
2000 1999
-------- --------
Finished $61,038 $63,491
In process 13,301 20,466
Raw materials 30,889 44,408
-------- --------
Total inventories $105,228 $128,365
======== ========
Properties: Land, buildings, equipment and purchased
software are stated at cost. The costs of developing internal-
use software are capitalized and amortized when placed in service
over the expected useful life of the software. Real estate
properties are non-operating properties held for sale. For
financial reporting purposes, depreciation is recorded
principally on the straight-line method over the estimated useful
lives of the assets as follows:
Buildings 30 years
Machinery and equipment 3 to 15 years
Building and leasehold improvements The shorter of the
useful life, lease
term or 15 years
Internal-use software 8 years
The cost of properties and related accumulated depreciation,
in thousands, at December 31, consisted of the following:
2000 1999
-------- --------
Land and improvements $17,863 $17,077
Buildings and improvements 122,820 117,605
Machinery and equipment 506,984 471,022
Real estate properties 5,342 5,944
Construction in progress 23,926 79,946
-------- --------
676,935 691,594
Less accumulated depreciation 196,540 150,430
-------- --------
Net properties $480,395 $541,164
======== ========
Accelerated depreciation methods are generally used for
income tax purposes. Expenditures for new facilities and
improvements that substantially extend the capacity or useful
life of an asset are capitalized. Ordinary repairs and
maintenance are expensed as incurred.
Impairment of Long-Lived Assets and Identifiable
Intangibles: The Company periodically reviews long-lived assets,
identifiable intangibles and goodwill for impairment whenever
events or changes in business circumstances indicate the carrying
amount of the assets may not be fully recoverable. Measurement
of the impairment loss is based on the fair value of the asset,
which is generally determined by the discounting of future
estimated cash flows.
Start-Up Costs: Non-construction start-up costs associated
with manufacturing facilities are expensed as incurred.
Goodwill: Goodwill is amortized on a straight-line basis
over the estimated future periods to be benefited, generally 30
years. Goodwill was $617.6 million at December 31, 2000 and
$609.7 million at December 31, 1999, less accumulated
amortization of $37.3 million and $16.7 million, respectively.
Share Repurchase Program: On September 3, 1998, the Board
of Directors authorized the repurchase of up to 5% of the
Company's outstanding common shares on the open market. During
1998, the Company repurchased 181,200 shares for approximately $2
million under this share repurchase program. No shares were
repurchased in 2000 or 1999. Terms of the Credit Agreement
entered into in 1999 currently prohibit additional share
repurchases.
Hedging Transactions: The Company periodically enters into
forward exchange contracts to hedge transactions and firm
commitments denominated in foreign currencies. Gains and losses
on foreign exchange contracts are deferred and recognized in the
basis of the transaction when completed. Through January 1999,
the Company also periodically entered into forward, future and
option contracts for commodities to hedge its exposure to price
fluctuations. The gains and losses on qualified hedge contracts
were deferred and recognized in cost of goods sold as part of the
product cost. The Company also enters into forward purchase
contracts periodically to purchase energy. The Company enters
into these contracts with the expectation of taking delivery of
the energy during the normal course of business. In addition,
the Company has entered into contracts to cap the underlying
interest rate on $350.0 million of borrowings and has also
entered into interest rate swap agreements for $225.0 million of
its borrowings. (See Note 7.) Gains and losses on these
contracts are recognized in interest expense when realized.
Earnings per Share: Following is a reconciliation between
basic and diluted earnings per common share from continuing
operations attributable to common shareholders for each of the
three years ended December 31 (in thousands, except per share
information):
Per
Share
Income Shares Amount
2000 ------- ------ ------
Income (loss) from
continuing perations
attributable to
common shareholders --
basic EPS ($10,804) 29,337 ($0.37)
Other dilutive equity
instruments --- ---
-------- ------
Income (loss) from
continuing operations
attributable to
common shareholders --
diluted EPS ($10,804) 29,337 ($0.37)
======== ====== ======
1999
Income (loss) from
continuing operations
attributable to
common shareholders --
basic EPS $18,410 28,475 $0.65
Other dilutive equity
instruments --- 292
-------- ------
Income (loss) from
continuing operations
attributable to
common shareholders --
diluted EPS $18,410 28,767 $0.64
======== ====== ======
1998
Income (loss) from
continuing operations
attributable to
common shareholders --
basic EPS $5,453 28,504 $0.19
Other dilutive equity
instruments --- 526
-------- ------
Income (loss) from
continuing operations
attributable to
common shareholders --
diluted EPS $5,453 29,030 $0.19
======== ====== ======
The Company's outstanding preferred stock of $100.0 million
is convertible into approximately 48,485,000 shares of common
stock. The conversion of the preferred stock into common stock
is not reflected in the diluted earnings per share calculation as
conversion would be anti-dilutive for 2000. Additional
potentially dilutive securities, in thousands, totaling 6,627,
4,262, and 2,416, were excluded from the historical diluted
income or loss per common share calculations because of their
anti-dilutive effect for 2000, 1999 and 1998, respectively.
Statement of Cash Flows: The Company defines cash
equivalents as highly liquid investments with original maturities
of 90 days or less. Book overdrafts totaling $20.0 million and
$22.5 million at December 31, 2000 and 1999, respectively, have
been included in accounts payable on the accompanying balance
sheet. The Company received a net income tax refund of $7.1
million in 2000 and paid income taxes totaling $2.8 million and
$8.7 million in 1999 and 1998, respectively.
Interest incurred, capitalized, expensed and paid, in
thousands, for the years ended December 31, were as follows:
2000 1999 1998
------- ------- -------
Total interest costs $84,343 $38,856 $22,308
Interest capitalized 1,089 1,973 330
Interest expensed 83,254 36,883 21,978
Interest paid 80,872 35,970 19,454
Non-cash investing and financing activities in 1999 include
the receipt of a $200 million short-term note in connection with
the CoorsTek spin-off, cancellation of a $60.0 million note
receivable when Golden Aluminum was returned to the Company, and
the issuance of shares of common stock valued at $3.2 million in
exchange for compensation and other services. Non-cash investing
and financing activities in 2000 include the issuance of shares
of common stock valued at $4.2 million relating to the 401(k)
employer match.
Environmental Expenditures and Remediation Liabilities:
Environmental expenditures that relate to current operations are
expensed or capitalized as appropriate. Expenditures that relate
to an existing condition caused by past operations, and which do
not contribute to current or future revenue generation, are
expensed. Liabilities are recorded when environmental
assessments and/or remedial efforts are probable and the costs
can be reasonably estimated.
New Accounting Standard: Statement of Financial Accounting
Standards (SFAS) No. 133, "Accounting for Derivative Instruments
and Hedging Activities," was issued in June 1998. This
statement, as amended, establishes accounting and reporting
standards for derivative instruments and for hedging activities.
It requires the recognition of all derivatives as either assets
or liabilities in the statement of financial position at fair
value. This statement is effective for the Company's financial
statements for the year ending December 31, 2001 and the adoption
of this standard is expected to have a cumulative effect on the
Company's statement of financial position of approximately $6
million.
Note 2. Discontinued Operations
The historical operating results and losses on the sale of
the following business segments have been segregated as
discontinued operations on the accompanying Consolidated Income
Statement for the years ended December 31, 1999 and 1998.
Discontinued operations have not been segregated on the
Consolidated Statement of Cash Flows. Asset and business
dispositions which do not constitute the discontinuation of a
business segment are discussed in Note 4. See Note 3 for
discussion of the Kalamazoo Mill, which was reclassified from
discontinued operations to continuing operations in 2000.
CoorsTek Spin-off
On December 31, 1999, the Company distributed 100% of
CoorsTek's shares of common stock to the GPC shareholders in a
tax-free transaction. Shareholders received one share of
CoorsTek stock for every four shares of GPC stock held. CoorsTek
issued a promissory note to GPC on December 31, 1999 totaling
$200.0 million in satisfaction of outstanding intercompany
obligations at the time of the spin-off and as a one-time,
special dividend. The note was paid in full on January 4, 2000.
No gain or loss was recognized by GPC as a result of the spin-off
transaction. Interest expense of $16.0 million and $3.6 million
was allocated to the discontinued operations of CoorsTek in 1999
and 1998, respectively, based upon intercompany debt, plus
CoorsTek's allocation of total consolidated debt at the time of
the spin-off in 1999.
Golden Aluminum
In 1996, the Board of Directors adopted a plan to dispose of
the Company's aluminum rigid-container sheet business operated by
Golden Aluminum. In conjunction with this decision, the Company
recorded pre-tax charges of $155.0 million for anticipated losses
upon the disposition and estimated operating losses of the
business through the disposition date. In March 1997, Golden
Aluminum was sold for $70.0 million, of which $10.0 million was
paid at closing and $60.0 million was due within two years. In
December of 1998, the Company extended the due date on the $60.0
million payment until September 1, 1999. In accordance with the
purchase agreement, the purchaser exercised its right to return
Golden Aluminum to the Company on August 23, 1999 in discharge of
the $60.0 million obligation. The initial payment of $10.0
million was nonrefundable. The Company subsequently sold the
assets of Golden Aluminum to another buyer for approximately $41
million on November 5, 1999. An additional pre-tax charge of
$10.0 million was recorded in 1999 relating to the ultimate
disposition of Golden Aluminum's assets.
Financial Data - Discontinued Operations
Financial data for CoorsTek and Golden Aluminum for the
years ended December 31, in thousands, are summarized as follows:
Golden
1999 CoorsTek Aluminum Total
-------- -------- --------
Net sales $365,061 $--- $365,061
======== ======== ========
Income from operations before
income taxes $25,117 $--- $25,117
Income tax expense 9,480 --- 9,480
-------- -------- --------
Income from operations 15,637 --- 15,637
Loss from disposal before taxes --- (10,000) (10,000)
Income tax benefit --- 3,544 3,544
-------- -------- --------
Net income (loss) $15,637 ($6,456) $9,181
======== ======== ========
Net income per basic share of
common stock:
Income from operations $0.55 $--- $0.55
Loss on disposal --- (0.23) (0.23)
-------- -------- --------
Net income (loss) per basic
share $0.55 ($0.23) $0.32
======== ======== ========
Net income per diluted share of
common stock:
Income from operations $0.54 $--- $0.54
Loss on disposal --- (0.22) (0.22)
-------- -------- --------
Net income (loss) per diluted
share $0.54 ($0.22) $0.32
======== ======== ========
Golden
1998 CoorsTek Aluminum Total
-------- -------- --------
Net sales $296,614 $--- $296,614
======== ======== ========
Income from operations before
income taxes $25,361 $--- $25,361
Income tax expense 9,549 --- 9,549
-------- -------- --------
Net income $15,812 $--- $15,812
======== ======== ========
Net income per basic share $0.56 $--- $0.56
======== ======== ========
Net income per diluted share $0.54 $--- $0.54
======== ======== ========
Note 3. Acquisitions
1999 Acquisitions
Fort James Packaging Business
On August 2, 1999, the Company acquired the assets and
liabilities of the packaging manufacturing business of Fort James
Corporation for cash consideration of approximately $849 million.
The Fort James acquisition, which included 13 operations located
throughout North America, has been accounted for under the
purchase method. Accordingly, the excess of the purchase price
over the fair value of the assets and liabilities acquired of
approximately $454 million is being amortized using the straight-
line method over 30 years. The folding carton business of Fort
James was a major supplier of folding cartons to leading consumer
product companies for packaging food. The folding carton
business of Fort James has been included in the Company's results
since August 2, 1999.
On May 12, 2000, the Company announced the planned closure
of the Perrysburg, Ohio folding carton plant. Costs totaling
$7.85 million to shut down the Perrysburg facility, which was
part of the acquisition of the Fort James packaging business,
have been accounted for as a cost of the acquisition. The
Company has completed the closure of the plant and the transition
of the plant's business to other Company facilities as of
December 31, 2000. The plant's property is currently being
offered for sale.
The Company purchased the Kalamazoo Mill on August 2, 1999
as part of the acquisition of the Fort James packaging business.
The Kalamazoo Mill produces coated recycled paperboard. In
December 1999, the Board of Directors approved a plan to offer
the Kalamazoo Mill for sale. The Kalamazoo Mill was reflected in
the Company's consolidated financial statements as a discontinued
operation from December 1999 through September 30, 2000. The
Company has been unable to sell the Kalamazoo Mill and,
accordingly, has reclassified the results of operations and net
assets of the Kalamazoo Mill into continuing operations for all
periods presented in the Company's consolidated financial
statements. The Company is no longer actively pursuing the sale
of the Kalamazoo Mill.
The following assets, liabilities, and components of
operating income from the Kalamazoo Mill's 1999 results have been
added to continuing operations (in thousands):
Total assets $243,068
========
Total liabilities $18,068
========
Net sales $18,750
========
Operating income $3,243
========
The following unaudited pro forma information for GPC has
been prepared assuming that the Fort James packaging business
acquisition had occurred on January 1, 1998. The pro forma
information includes adjustments for (1) amortization of
goodwill, (2) increased interest expense related to new
borrowings at applicable rates for the purchase, and (3) the net
tax effect of pro forma adjustments at the statutory rate.
CoorsTek and Golden Aluminum are reflected as discontinued
operations in the unaudited pro forma financial information. The
unaudited pro forma financial information is presented for
informational purposes only and may not be indicative of the
results of operations as they would have been had the transaction
actually occurred on January 1, 1998 nor is it necessarily
indicative of the results of operations which may occur in the
future.
PRO FORMA INCLUDING FORT JAMES PACKAGING BUSINESS
Pro Forma Pro Forma
Year Ended Year Ended
December 31, December 31,
1999 1998
(in thousands, except per share data) (Unaudited) (Unaudited)
---------- ----------
Net sales $1,187,781 $1,283,310
========== ==========
Income (loss) from continuing
operations, before
extraordinary loss (2,867) (30,919)
========== ==========
Net income (loss) 3,982 (15,107)
========== ==========
Income (loss) from continuing
operations, before
extraordinary loss per
basic share of common stock ($0.10) ($1.09)
========== ==========
Income (loss) from continuing
operations, before
extraordinary loss per
diluted share of common stock ($0.10) ($1.09)
========== ==========
Net income (loss) per basic
share of common stock $0.14 ($0.53)
========== ==========
Net income (loss) per diluted
share of common stock $0.14 ($0.53)
========== ==========
Edwards Enterprises
On March 1, 1999, CoorsTek acquired all of the outstanding
shares of Edwards Enterprises for approximately $18 million. The
acquisition has been accounted for under the purchase method.
Accordingly, the excess of the purchase price over the fair value
of net assets acquired of $4.2 million is being amortized using
the straight-line method over 20 years. Edwards Enterprises,
located in Newark, California, manufactures precision-machined
parts for the semiconductor industry. The results of Edwards
Enterprises since March 1, 1999 are included in the 1999
discontinued operations of CoorsTek.
Precision Technologies
On March 12, 1999, CoorsTek acquired the net assets of
Precision Technologies for approximately $22 million in cash and
300,000 warrants to receive shares of the Company's common stock
at an exercise price equal to the fair market value at the date
of closing. These warrants were converted into warrants to
purchase shares of CoorsTek stock following the spin-off. The
warrants were recorded as an increase in the purchase price at
their estimated fair value on the date of acquisition using the
Black-Scholes pricing model. The acquisition has been accounted
for under the purchase method of accounting. Accordingly, the
excess of the purchase price over the fair value of net assets
acquired of $20.2 million is being amortized using the straight-
line method over 20 years. Precision Technologies, located in
Livermore, California, manufactures precision-machined parts for
the semiconductor, medical and aircraft industries. The results
of Precision Technologies since March 12, 1999 are included in
the 1999 discontinued operations of CoorsTek.
Doo Young Semitek
In December 1999, CoorsTek acquired all of the outstanding
shares of Doo Young Semitek for $3.6 million. The name of Doo
Young Semitek was subsequently changed to CoorsTek-Korea. The
acquisition has been accounted for under the purchase method of
accounting and goodwill of $2.5 million is being amortized over
15 years. CoorsTek-Korea, located in Kyungbook, South Korea,
manufactures technical ceramic parts for the semiconductor
industry. The results of CoorsTek-Korea since December 1999 are
included in the 1999 discontinued operations of CoorsTek.
1998 Acquisitions
Britton Group
On January 14, 1998, the Company acquired Britton Group plc
pursuant to a cash tender offer of approximately $420 million.
The Britton acquisition has been accounted for under the purchase
method. Accordingly, the estimated excess of purchase price over
the fair value of net assets acquired of approximately $164
million is being amortized using the straight-line method over 30
years. Britton was an international packaging group operating
through two principal divisions: folding cartons and plastics.
The folding cartons division, Universal Packaging, is a
nonintegrated manufacturer of folding cartons in the United
States, with capabilities in design, printing and manufacturing
of multicolor folding cartons. The plastics division of Britton
(Plastics Division), which was disposed of by the Company on
April 20, 1998, operated in the United Kingdom and included the
extrusion, conversion and printing of polyethylene into films and
bags for industrial customers. The results of Universal
Packaging are reflected in the accounts of the Company beginning
January 14, 1998. The Plastics Division was reflected as a
discontinued operation through the April 20, 1998 disposal date.
Filpac
In August 1998, the Company acquired the assets and business
of Filpac, a flexible packaging company, located in Montreal,
Canada for $4.8 million in cash. The acquisition has been
accounted for under the purchase method of accounting and has
been included in the accounts of the Company since the
acquisition date. No goodwill resulted from this acquisition.
Filpac was included in the Company's September 2, 1999 sale of
its flexible packaging plants.
Note 4. Dispositions
2000 Dispositions
Malvern Packaging Plant
On October 31, 2000, the Company sold the net assets of its
Malvern, Pennsylvania packaging plant to Huhtamaki Van Leer for
approximately $35 million in cash. The proceeds from the sale
were used to reduce debt. The Company recorded a pre-tax gain of
$11.4 million on the sale. The after-tax gain on sale was $6.8
million, or $0.23 per basic and diluted share.
Other Assets
The Company sold patents and various other assets of its
former developmental businesses and an airplane for cash
consideration of approximately $8.2 million. A pre-tax gain of
$7.8 million was recognized in 2000 relating to these asset
sales. The after-tax gain on sale was $4.7 million, or $0.16 per
basic and diluted share. A contingent pre-tax gain of
approximately $3 million exists with respect to the sale of these
other assets which may be realized, in whole or in part, in
future periods.
1999 Dispositions
Flexible Packaging Plants
On September 2, 1999, the Company sold its flexible
packaging plants to Sonoco Products Company for approximately
$105 million in cash. The Company used the proceeds from the
sale, less transaction costs, to reduce debt associated with its
recent acquisition of the packaging business of Fort James. The
Company recorded a pre-tax gain of $22.7 million. The after-tax
gain on sale was $13.6 million, or $0.48 per basic share and
$0.47 per diluted share.
Solar Electric Business
On August 3, 1999, the Company sold its majority interest in
a group of solar electric distribution companies to Kyocera
International, Inc., a wholly owned subsidiary of Kyocera
Corporation. The Company realized $30.8 million in cash of which
$20.8 million was consideration for the Company's equity position
and $10.0 million was for the repayment of certain debt owed to
the Company. The Company used the proceeds from the sale, less
transaction costs, to reduce debt associated with its recent
acquisition of the packaging business of Fort James. The pre-tax
gain recorded in conjunction with this transaction totaled $7.5
million while the after-tax gain was $4.5 million. Resultant
earnings per share on a basic and diluted basis for the gain on
this sale were $0.16.
1998 Dispositions
Britton Group Plastics Division
On April 20, 1998, the Company sold the Plastics Division
for approximately pounds 82 million, or $135.0 million, including
pounds 80 million in cash and a pounds 2 million, 5% note
receivable due in 2007 or upon change in control. The majority
of the sale price, less transaction costs, was used to pay down
debt incurred by the Company for the Britton acquisition.
Subsequent to the acquisition date of Britton, the Company
accounted for the Plastics Division as a discontinued operation
held for sale. Therefore, the disposition of the Plastics
Division did not have an impact on the Company's results of
operations. The Plastics Division had net sales for the period
January 14, 1998 through April 20, 1998 of $40.9 million, with
breakeven operating results. The Company allocated $1.8 million
of interest expense related to the acquisition of Britton to the
Plastics Division during the period January 14, 1998 through
April 20, 1998.
Note 5. Asset Impairment and Restructuring Charges
Asset Impairment Charges
The Company recorded a total of $5.9 million and $19.4
million in asset impairment charges in 1999 and 1998,
respectively. Goodwill impairment of $5.5 million was included
in the 1998 charge. The remainder of the 1998 charge consisted
of fixed asset impairments. The 1999 charge consisted entirely
of fixed asset impairments as described below.
1999: The Company recorded $5.9 million of asset impairment
charges in 1999 due to decisions to close its Boulder, Colorado
and Saratoga Springs, New York plants. The Boulder, Colorado
plant has been replaced by a new manufacturing facility in
Golden, Colorado, which uses advanced equipment to improve the
production process. Due to certain delays in production
transition to Golden, the Boulder facility remains partially
operational at December 31, 2000, with the expectation that
complete shutdown will occur during 2001. The Saratoga Springs
plant operated at higher overhead levels than other plants and
used gravure press technology. Therefore, the decision was made
to sell the Saratoga Springs property; move the business to other
folding carton plants; and dispose of the gravure presses at
Saratoga Springs. Boulder writedowns totaled $2.9 million and
Saratoga Springs writedowns totaled $3.0 million. The Saratoga
Springs facility shutdown was complete at December 31, 2000. The
plant's property is currently being offered for sale.
1998: The Company recorded $18.5 million in asset
impairment charges in 1998. Deterioration of the performance at
certain flexible packaging facilities and increased competitive
conditions led management to review the carrying amounts of long-
lived assets and goodwill in conjunction with an overall
restructuring plan. Specifically, forecasted operating cash
flows did not support the carrying amount of certain long-lived
assets and goodwill at Graphic Packaging's Franklin, Ohio
operation. In addition, management decided to offer for sale the
Vancouver, British Columbia operation and close a divisional
office in North Carolina. Therefore, the long-lived assets and
related goodwill were written down to their estimated market
values using the asset held for sale model.
The Company recorded net asset impairment charges of $0.9
million in its Other businesses during 1998. These charges
included a $1.0 million asset impairment charge to write down
long-lived assets of Solartec, S.A., a solar electric subsidiary
in Argentina. Since acquiring Solartec in November 1996,
operating cash flows were below original expectations. As a
result, the Company recorded this impairment to reduce the
carrying value of its investment in Solartec to its estimated
fair market value. In addition, the Company recorded a $0.4
million asset impairment charge related to the consolidation and
outsourcing of certain manufacturing activities at its solar
electric distribution business. As a result, certain long-lived
assets became impaired and were written down to their estimated
market value. Also during 1998, the Company sold certain
equipment formerly used in a biodegradable polymer project for
approximately $0.5 million. These assets had been previously
written off as an asset impairment, so the resulting gain on sale
of these assets was netted against the 1998 asset impairment
charge.
Restructuring Charges
The Company recorded restructuring charges totaling $5.6
million, $1.9 million and $2.0 million in 2000, 1999, and 1998,
respectively. In addition, restructuring reserves of $1.3
million related to the Perrysburg closure were recorded in 2000
as a cost of the Fort James packaging business acquisition. The
following table summarizes accruals related to these
restructurings.
Biodegradable Corn
Polymer Syrup Graphic Graphic
Exit Exit Packaging Packaging
(in millions) Plan Plan Corporate Operations Total
------------- ----- --------- ---------- -----
Balance,
December 31, 1997 $0.4 $0.9 $1.7 --- $3.0
1998 restructuring
charges --- (0.8) --- 2.8 2.0
Cash paid (0.4) (0.1) (1.7) (1.0) (3.2)
----- ----- ----- ----- -----
Balance,
December 31, 1998 --- --- --- 1.8 1.8
1999 restructuring
charges --- --- --- 1.9 1.9
Cash paid --- --- --- (1.8) (1.8)
----- ----- ----- ----- -----
Balance,
December 31, 1999 --- --- --- 1.9 1.9
2000 restructuring
charges --- --- --- 5.6 5.6
2000 restructuring
- Perrysburg --- --- --- 1.3 1.3
Cash paid --- --- --- (3.8) (3.8)
----- ----- ----- ----- -----
Balance,
December 31, 2000 $--- $--- $--- $5.0 $5.0
===== ===== ===== ===== =====
2000: In December 2000 the Company announced a
restructuring plan to reduce fixed-cost personnel. The plan
includes the elimination of approximately 200 non-production
positions across the Company and offers severance packages in
accordance with the Company's policies. The total cost of the
reduction in force is estimated at $5.0 million, of which $3.0
million was recognized in the fourth quarter 2000 results. The
remaining cost of approximately $2.0 million will be recognized
in the first half of 2001 when severance packages are
communicated to employees.
In connection with the announced closure of the Perrysburg,
Ohio plant, restructuring reserves were recorded totaling
approximately $1.3 million. The reserves relate to severance of
approximately 100 production positions and other plant closing
costs. Consistent with the asset impairments related to the
Perrysburg closure, the restructuring costs have been accounted
for as a cost of the Fort James packaging business acquisition,
with a resultant adjustment to goodwill. As of December 31,
2000, approximately $700,000 of the restructuring charges have
been paid relating to the Perrysburg closure.
The Company recorded a restructuring charge of $3.4 million
in the first quarter of 2000 for anticipated severance costs as a
result of the announced closure of the Saratoga Springs, New York
plant. The Saratoga Springs plant was closed pursuant to a plant
rationalization plan approved by the Company's Board of Directors
in the fourth quarter of 1999. The Company has completed the
closure of the Saratoga Springs plant and the transition of the
plant's business to other Company facilities. Approximately $2.0
million of restructuring charges have been paid through the
fourth quarter relating to the Saratoga Springs facility
shutdown.
1999: The Company recorded a $1.9 million restructuring
charge pursuant to a plant rationalization plan approved by the
Company's Board of Directors. The Company instituted this plan
to further its goal of refining its focus on folding carton
packaging and to reduce headcount. All of the 1999 charge
relates to severance, primarily at the Company's Lawrenceburg,
Tennessee manufacturing plant. The Company initially planned to
complete this restructuring plan by the end of 2000. At December
31, 2000, approximately $1.0 million of severance and related
costs have been paid. However, customer needs in both Boulder
and Lawrenceburg, coupled with the timing of the transition of
business to the Company's new Golden, Colorado facility, have
impacted the completion of the restructuring and resulted in the
savings of approximately $800,000 of anticipated restructuring
costs. The 2000 restructuring expense is net of this $800,000
benefit.
1998: During 1998, the Company instituted a restructuring
plan related to certain Graphic Packaging operations and recorded
$2.8 million in restructuring charges. This plan included the
consolidation and realignment of certain administrative functions
and the downsizing of its Franklin, Ohio operation. This plan
resulted in the elimination of approximately 20 administrative
and 65 manufacturing positions with related severance costs of
approximately $2.5 million. This plan also included
approximately $0.3 million in other exit costs relating to the
closure of a divisional office in North Carolina. The Company
made cash payments of $1.0 million in the fourth quarter of 1998
and $1.6 million during 1999. Remaining reserves at December 31,
2000 relate to operating lease obligations in connection with the
divisional office.
Note 6. Indebtedness
As of December 31, 2000, the Company's borrowings under the
Senior Credit Facilities totaled $635.1 million and bore interest
based on LIBOR resulting in a blended rate of approximately
11.1%, including amortization of debt issuance costs. Long-term
debt, in thousands, consisted of the following as of December 31:
2000 1999
-------- ---------
Term loan due August 15, 2001 $33,500 $375,000
Five-year term loan due
August 2, 2004 312,500 325,000
Revolving credit facility due
August 2, 2004 289,100 315,500
-------- ---------
Total debt 635,100 1,015,500
Less current maturities 58,500 400,000
-------- ---------
Total long-term debt $576,600 $615,500
======== =========
On August 2, 1999, the Company entered into a $1.3 billion
revolving credit and term loan agreement (the Credit Agreement)
with a group of lenders, with Bank of America, N.A. as agent.
During the first quarter of 2000, the Company reduced the amount
available under the Credit Agreement by $50 million. The Credit
Agreement is comprised of four senior credit facilities including
a $125 million 180-day term facility, a $400 million one-year
facility, a $325 million five-year term loan facility and a $400
million five-year revolving credit facility (collectively, the
Senior Credit Facilities). Proceeds from the Senior Credit
Facilities were used to finance the August 2, 1999 acquisition of
the Fort James packaging business and to repay the Company's
other outstanding borrowings.
During the first quarter of 2000, the Company utilized the
$200 million of proceeds from the CoorsTek spin-off to reduce
outstanding debt. In addition, in August of 2000, the Company
issued $100 million of convertible preferred stock and reduced
outstanding debt with the proceeds. In conjunction with the
preferred stock issuance, the Senior Credit Facilities were
amended to extend the term of the one-year facility, allow for
the payment of a dividend on the newly issued preferred stock,
and to revise the financial covenants and required amortization
schedule under the five-year term loan.
Amounts borrowed under the Senior Credit Facilities bear
interest under various pricing alternatives plus a spread
depending on the Company's leverage ratio. The various pricing
alternatives include (i) LIBOR, or (ii) the higher of the Federal
Funds Rate plus 0.5% or the prime rate. In addition, the Company
pays a commitment fee that varies based upon the Company's
leverage ratio and the unused portion of the revolving credit
facility. Mandatory prepayments under the Senior Credit
Facilities are required from the proceeds of any significant
asset sale or from the issuance of any debt or equity securities.
In addition, the five-year term loan is due in quarterly
installments beginning with the first quarter of 2000. Total
installments for 2001 through 2004, respectively, are $25
million, $35 million, $40 million and $25 million, with the
remaining balance due on August 2, 2004.
The Senior Credit Facilities are collateralized by first
priority liens on all material assets of the Company and all of
its domestic subsidiaries. The Credit Agreement currently limits
the Company's ability to pay dividends other than permitted
dividends on the preferred stock, and imposes limitations on the
incurrence of additional debt, acquisitions, capital expenditures
and the sale of assets.
Interest expense of $16.0 million and $3.6 million was
allocated to the discontinued operations of CoorsTek in 1999 and
1998, respectively, based upon CoorsTek's $200 million allocation
of total consolidated debt at the time of the spin-off for 1999,
$50 million of outstanding intercompany debt for 1998, and
intercompany interest charges or payments for the usage or
generation of cash from operations for 1998.
The Company incurred debt extinguishment costs in August
1999 of $3.6 million when existing debt instruments were repaid
in connection with the purchase of the Fort James packaging
business through the issuance of new credit facilities.
Note 7. Fair Value of Financial Instruments
The fair value of cash and cash equivalents, notes
receivable and current maturities of long-term debt approximates
carrying value because of the short maturity of these
instruments. For 2000 and 1999, the fair value of the Company's
long-term debt is estimated based on the current rates offered to
the Company for debt of the same remaining maturity and credit
quality. Because the interest rates on the long-term debt are
reset monthly, the carrying value approximates the fair value of
long-term debt.
The Company has entered into interest rate swap agreements
to hedge the underlying interest rates on $100 million of
borrowings at an average fixed interest rate of 5.94% and an
average risk-free rate of 6.98% on $125 million of its
borrowings. In addition, the Company has interest rate contracts
that provide interest rate cap protection on $350 million of its
floating rate debt.
The Company has accounted for the contracts as hedges of its
current borrowings and, as such, the contracts are not marked to
market and any gain or loss upon settlement is netted with the
underlying interest cost of borrowing. The Company is exposed to
credit loss in the event of nonperformance by the commercial
banks that issued the interest rate contracts. However, the
Company does not anticipate nonperformance by these banks. The
fair value of the Company's derivative instruments at December
31, 2000, in thousands, is as follows:
Interest rate swaps ($5,896)
=======
Interest rate caps $26
=======
Note 8. Operating Leases
The Company leases a variety of facilities, warehouses,
offices, equipment and vehicles under operating lease agreements
that expire in various years. Future minimum lease payments, in
thousands, required as of December 31, 2000, under noncancelable
operating leases with terms exceeding one year, are as follows:
2001 $2,054
2002 1,253
2003 973
2004 488
2005 and thereafter 5,686
-------
Total $10,454
=======
Operating lease rentals for warehouse, production, office
facilities and equipment amounted to $3.1 million in 2000,
$4.3 million in 1999 and $2.6 million in 1998.
Note 9. Income Taxes
The sources of income (loss), in thousands, from continuing
operations before income taxes and extraordinary loss were:
Year Ended December 31,
2000 1999 1998
-------- ------- -------
Domestic ($11,228) $25,260 $12,649
Foreign (448) 5,095 (2,445)
-------- ------- -------
Income (loss) from
continuing operations
before income taxes
and extraordinary loss ($11,676) $30,355 $10,204
======== ======= =======
The total provision for income taxes, in thousands, included
the following:
Year Ended December 31,
2000 1999 1998
-------- ------- -------
Current provision:
Federal ($15,011) $13,940 $2,781
State 321 1,741 2,826
Foreign --- 4,347 2,671
-------- ------- -------
Total current tax
expense (benefit) ($14,690) $20,028 $8,278
======== ======= =======
Deferred provision:
Federal $11,229 $800 $8,568
State (1,217) 704 (931)
Foreign --- (4,963) (1,615)
-------- ------- -------
Total deferred tax
expense (benefit) 10,012 (3,459) 6,022
-------- ------- -------
Total income tax expense
(benefit) ($4,678) $16,569 $14,300
======= ======= =======
The total provision for income taxes, in thousands, is
included in the Consolidated Income Statement as follows:
Year Ended December 31,
2000 1999 1998
------- ------- -------
Continuing operations ($4,678) $11,945 $4,751
Discontinued operations --- 5,936 9,549
Extraordinary loss --- (1,312) ---
------- ------- -------
Total income tax expense
(benefit) ($4,678) $16,569 $14,300
======= ======= =======
Temporary differences that gave rise to a significant
portion of deferred tax assets (liabilities), in thousands, at
December 31 were as follows:
2000 1999
-------- --------
Depreciation and other property
related ($37,500) ($32,823)
Amortization of intangibles (7,965) (36)
Pension and employee benefits 11,854 9,123
Tax credits 8,251 15,152
Interest 156 (894)
Inventory 3,061 1,524
Accruals 7,075 12,928
Net operating loss and
contribution carryovers 10,102 1,524
All other 111 108
-------- --------
Gross deferred tax asset
(liability) (4,855) 6,606
Less valuation allowance 338 123
-------- --------
Net deferred tax asset
(liability) ($5,193) $6,483
======== ========
The valuation allowance for deferred tax assets was
increased by $215,000 in 2000 and decreased by $4.2 million in
1999. The decrease in the valuation allowance for 1999 resulted
primarily from the transfer of deferred tax assets and associated
valuation allowances on the sale of a subsidiary. The increase
in 2000 relates to uncertainty surrounding the ultimate
deductibility of a foreign net operating loss carryforward.
At December 31, 2000 the Company had net operating loss
carryforwards of approximately $23 million which will begin to
expire in years after 2020. The Company also has approximately
$8.3 million of alternative minimum tax credits which have an
indefinite carryforward period and $0.4 million in research and
development credits which will begin to expire in years after
2019.
The principal differences between the effective income tax
rate, attributable to continuing operations, and the U.S.
statutory federal income tax rate, were as follows:
Year Ended December 31,
2000 1999 1998
----- ----- -----
Expected tax rate 35.0% 35.0% 35.0%
State income taxes (net of
federal benefit) 3.2 3.2 5.8
Nondeductible expenses and
losses (26.7) 2.4 31.2
Effect of foreign investments 0.1 (3.3) (0.3)
Change in deferred tax asset
valuation allowance (1.8) 0.4 5.8
Benefit of Foreign Sales
Corporation --- --- (4.4)
Research and development and
other tax credits 28.3 --- (30.8)
Other - net 2.0 1.7 4.3
----- ----- -----
Effective tax rate 40.1% 39.4% 46.6%
===== ===== =====
The Internal Revenue Service (IRS) has completed its
examination of the Company's federal income tax returns through
1998. The IRS has not begun its review of the federal income tax
return for 1999. In the opinion of management, adequate accruals
have been provided for all income tax matters and related
interest.
As a result of certain restructuring actions, the
undistributed earnings of foreign subsidiaries previously
considered as being permanently reinvested have been distributed
to the U.S. as a dividend. Foreign tax credits are expected to
be available to eliminate the resulting U.S. income tax liability
on the dividend.
The Company and CoorsTek have executed a tax sharing
agreement that defines the parties' rights and obligations with
respect to deficiencies and refunds of Federal, state and other
taxes relating to the CoorsTek business for tax years prior to
the spin-off and with respect to certain tax attributes of
CoorsTek after the spin-off. In general, the Company is
responsible for filing consolidated Federal and combined or
consolidated state tax returns and paying the associated taxes
for periods through December 31, 1999. CoorsTek will reimburse
the Company for the portion of such taxes relating to the
CoorsTek business. CoorsTek is responsible for filing returns
and paying taxes related to the CoorsTek business for periods
after December 31, 1999.
The tax sharing agreement is designed to preserve the status
of the spin-off as a tax-free distribution. CoorsTek has agreed
that it will refrain from engaging in certain transactions during
the two-year period following the spin-off unless it first
provides the Company with a ruling from the IRS or an opinion of
tax counsel acceptable to the Company that the transaction will
not adversely affect the tax-free nature of the spin-off. In
addition, CoorsTek has indemnified the Company against any tax
liability or other expense it may incur if the spin-off is
determined to be taxable as a result of CoorsTek's breach of any
covenant or representation contained in the tax sharing agreement
or CoorsTek's action in effecting such transactions. By its
terms, the tax sharing agreement will terminate when the statutes
of limitations under applicable tax laws expire.
Note 10. Stock Compensation
The Company has an equity incentive plan that provides for
the granting of nonqualified stock options and incentive stock
options to certain key employees. The equity incentive plan also
provides for the granting of restricted stock, bonus shares,
stock units and offers to officers of the Company to purchase
stock. The number of shares made available for award under the
plan was equal to 4.8 million shares and is being increased
annually by 2% of the Company's outstanding shares on each
preceding December 31 beginning with 1997 and ending with 2001.
Generally, options outstanding under the Company's equity
incentive plan are subject to the following terms: (1) grant
price equal to 100% of the fair value of the stock on the date of
grant; (2) ratable vesting over either a three-year or four-year
service period; and (3) maximum term of ten years from the date
of grant. Officers' 2000 and 1999 options generally provide for
vesting upon attainment of certain stock prices or debt to EBITDA
(earnings before interest, taxes, depreciation and amortization)
ratios, but vest completely after five years.
In conjunction with the spin-off of CoorsTek at December 31,
1999, the Company cancelled options held by CoorsTek employees
and adjusted the remaining options outstanding to reflect the new
ratio of exercise price to market price of the Company's stock
immediately prior and subsequent to the spin-off. The changes
consisted of reducing the exercise price relative to the new
market price and increasing the number of shares underlying the
outstanding options, so as to restore the option holder to the
economic position that existed immediately prior to the spin-off.
Stock option activity for the three years ended December 31,
was as follows (shares in thousands):
2000 1999 1998
--------------- --------------- ---------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
------ -------- ------ -------- ------ --------
Options outstanding
at January 1 4,281 $8.86 2,672 $17.80 2,616 $16.78
Granted 2,523 $1.66 1,912 $13.43 476 $23.19
Exercised --- --- --- --- (148) $15.33
Expired or forfeited (542) $7.88 (177) $17.62 (272) $18.94
Cancellation of
CoorsTek employee
options --- --- (2,036) $15.63 --- ---
GPC employee options
conversion --- --- 1,910 --- --- ---
------ -------- ------ -------- ------ --------
Options outstanding
at December 31 6,262 $6.04 4,281 $8.86 2,672 $17.80
====== ======== ====== ======== ====== ========
Exercisable 2,302 $9.73 2,262 $9.41 1,964 $16.37
====== ======== ====== ======== ====== ========
Available for
future grant 1,458 664 1,529
====== ====== ======
The following table summarizes information about stock
options outstanding at December 31, 2000 (shares in thousands):
Options Outstanding Options Exercisable
- ------------------------------------------------ ---------------------
Weighted
Average Weighted Weighted
Remaining Average Average
Range of Options Contractual Exercise Options Exercise
Exercise Prices Outstanding Life Price Exercisable Price
- ---------------- ----------- ----------- -------- ----------- --------
$1.56 to $7.52 3,170 8.59 years $2.77 493 $7.19
$7.56 to $10.17 2,521 5.72 years $8.74 1,320 $9.81
$10.48 to $13.74 571 6.31 years $12.26 489 $12.08
- ---------------- ----------- ----------- -------- ----------- --------
$1.56 to $13.74 6,262 7.23 years $6.04 2,302 $9.73
================ =========== =========== ======== =========== ========
The Company applies Accounting Principles Board Opinion No.
25 and related interpretations in accounting for its stock-based
compensation plans. Accordingly, no compensation expense has
been recognized for its equity incentive plan and employee stock
purchase plan. If the Company had elected to recognize
compensation cost based on the fair value of the stock options at
grant date as allowed by Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," pre-
tax compensation expense of $1.2 million, $3.5 million and $2.0
million would have been recorded for 2000, 1999 and 1998,
respectively. Net income (loss) attributable to common
shareholders and earnings per share would have been reduced to
the pro forma amounts indicated below:
2000 1999 1998
--------- ------- -------
Net income (loss)
attributable to
common shareholders
in thousands:
As reported ($10,804) $25,259 $21,265
Pro forma ($11,524) $23,159 $20,065
Earnings per share -
basic:
As reported ($0.37) $0.89 $0.75
Pro forma ($0.39) $0.81 $0.70
Earnings per share -
diluted:
As reported ($0.37) $0.88 $0.73
Pro forma ($0.39) $0.81 $0.69
The fair value of each option grant is estimated on the date
of grant using the Black-Scholes option pricing model with the
following assumptions: (1) dividend yield of 0%; (2) expected
volatility of 56.3% in 2000, 30.8% in 1999 and 28.1% in 1998; (3)
risk-free interest rate ranging from 4.2% to 6.4% in 2000, 5.7%
to 6.7% in 1999, and 4.7% to 5.2% in 1998; and (4) expected life
of 3 to 9.91 years in 2000 and 3 to 6.36 years in 1999 and 1998.
The weighted average per-share fair value of options granted
during 2000, 1999 and 1998 was $1.09, $6.82 and $7.42,
respectively.
Note 11. Defined Benefit Plans
The Company maintains several defined benefit pension plans
for the majority of the Company's employees. Benefits are based
on years of service and average base compensation levels over a
period of years. Plan assets consist primarily of equity and
interest-bearing investments. The Company's funding policy is to
contribute annually not less than the minimum funding standards
required by the internal revenue code nor more than the maximum
amount that can be deducted for federal income tax purposes.
Non-union retirement health care and life insurance benefits
are provided to certain employees hired prior to 1999 and
eligible dependents. Eligible employees may receive these
benefits after reaching age 55 with 10 years of service. Prior
to reaching age 65, eligible retirees may receive certain health
care benefits identical to those available to active employees.
The amount the retiree pays is based on age and service at the
time of retirement. These plans are not funded.
In connection with the acquisition of the Fort James
packaging business, the Company assumed an $18.5 million prepaid
pension asset and an $11.3 million postretirement benefit
liability for the Fort James hourly employees as of August 2,
1999.
The following assets (liabilities), in thousands, were
recognized for the combined defined benefit plans of the Company
at December 31:
Pension Benefits Other Benefits
2000 1999 2000 1999
-------- -------- -------- --------
Change in benefit
obligation
Benefit obligation at
beginning of year $103,110 $156,662 $16,778 $20,131
Settlements [a] --- (97,815) --- (13,898)
Service cost 5,094 3,707 633 423
Interest cost 8,434 5,466 1,257 831
Amendments --- 2,088 --- ---
Actuarial loss (gain) 6,755 (15,845) --- ---
Acquisitions [b] --- 49,576 --- 11,270
Change in actuarial
assumptions --- --- --- (1,340)
Benefits paid (1,907) (729) (427) (639)
-------- ------- -------- --------
Benefit obligation
at end of year 121,486 103,110 18,241 16,778
-------- ------- -------- --------
Change in plan assets
Fair value of plan
assets at beginning
of year 112,273 120,519 --- ---
Settlements [a] --- (77,229) --- ---
Actual return on plan
assets 6,534 6,767 --- ---
Acquisitions [b] --- 62,945 --- ---
Company contributions 1,444 --- --- ---
Benefits paid (1,907) (729) --- ---
-------- ------- -------- --------
Fair value of plan
assets at end of year 118,344 112,273 --- ---
-------- ------- -------- --------
Funded status (3,142) 9,163 (18,241) (16,778)
Unrecognized actuarial
loss (gain) 6,181 (2,168) (2,959) (3,408)
Unrecognized prior
service cost 6,254 3,597 (1,688) (2,110)
Unrecognized transition
(asset) liability (72) (141) --- ---
-------- ------- -------- --------
Net prepaid (accrued)
benefit cost $9,221 $10,451 ($22,888) ($22,296)
======== ======= ======== ========
Weighted average
assumptions at
year end
Discount rate 7.75% 7.75% 7.75% 7.75%
Expected return on plan
assets 9.75% 9.75% --- ---
Rate of compensation
increase 5.25% 5.25% --- ---
[a] Reflects the 1999 spin-off of CoorsTek.
[b] Reflects the acquisition of the Fort James packaging business
in 1999.
It is the Company's policy to amortize unrecognized gains
and losses in excess of 10% of the larger of plan assets and the
projected benefit obligation (PBO) over the expected service of
active employees (12-15 years). However, in cases where the
accrued benefit liability exceeds the actual unfunded liability
by more than 20% of the PBO, the amortization period is reduced
to 5 years.
For measurement purposes, a 6.5% and 7.0% annual rate of
increase in the per capita cost of covered health care benefits
was assumed for 2000 and 1999, respectively. The rate was
assumed to decrease by 0.5% per annum to 4.75% and remain at that
level thereafter.
The following, in thousands, excludes CoorsTek from 1999 and
1998:
Pension Benefits Other Benefits
2000 1999 1998 2000 1999 1998
------ ------ ------ ------ ---- -----
Components of net
periodic
benefit cost
Service cost $5,094 $3,707 $2,378 $633 $423 $231
Interest cost 8,434 5,466 3,666 1,257 831 409
Actual return
on plan assets (6,534) (1,805) (1,249) --- --- ---
Amortization of
prior service
cost 552 262 20 (422) (703) (704)
Recognized
actuarial loss
(gain) (4,803) (4,958) (2,382) (448) (385) (639)
Transition asset
amortization (69) (69) --- --- --- ---
------ ------ ------ ------ ---- -----
Net periodic
benefit cost
(gain) $2,674 $2,603 $2,433 $1,020 $166 ($703)
====== ====== ====== ====== ==== =====
Assumed health care cost trend rates have a significant
effect on the amounts reported for the health care plans. A one-
percentage-point change in assumed health care cost trend rates
would have the following effects, in thousands:
1% Point 1% Point
Increase Decrease
-------- --------
Effect on total of service and
interest cost components $235 ($195)
Effect on postretirement benefit
obligation $1,525 ($1,305)
Note 12. Defined Contribution Plan
The Company provides a defined contribution profit sharing
plan for the benefit of its employees, the GPC Savings and
Investment Plan (the Plan). The Plan and its associated trust
are intended to comply with the provisions of the Internal
Revenue Code and ERISA, to qualify as a profit sharing plan for
all purposes of the Code, and to provide a cash or deferred
arrangement that is qualified under Code Section 401(k).
Generally, employees expected to complete at least 1,000 hours of
service per year are immediately eligible to participate in the
Plan upon employment. Effective January 1, 2000, Company
matching was increased to 60% of participant contributions up to
3.6% of participant annual compensation and was denominated in
the Company's common stock. Prior to 2000, the Plan generally
provided for Company matching of 50% of participant
contributions, up to 2.5% of participant annual compensation.
Company expenses related to the matching provisions of the Plan
totaled approximately $4.2 million, $2.4 million and $1.7 million
in 2000, 1999 and 1998, respectively. The Plan also provides for
discretionary matching. The Company did not elect to provide
discretionary matching under this provision in 2000, 1999 or
1998.
Note 13. Shareholders' Rights Plan
On June 1, 2000, the Company effected a dividend
distribution of shareholder rights (the Rights) that carry
certain conversion rights in the event of a significant change in
beneficial ownership of the Company. One right is attached to
each share of the Company's common stock outstanding and is not
detachable until such time as beneficial ownership of 15% or more
of the Company's outstanding common stock has occurred (a
Triggering Event) by a person or group of affiliated or
associated persons (an Acquiring Person). Each Right entitles
each registered holder (excluding the Acquiring Person) to
purchase from the Company one-thousandth of a share of Series A
Junior Participating Preferred Stock, par value $.01 per share,
at a purchase price of $42.00. Registered holders receive shares
of the Company's common stock valued at twice the exercise price
of the Right upon exercise. Upon a Triggering Event, the Company
is entitled to exchange one share of the Company's common stock
for each right outstanding or to redeem the Rights at a price of
$.001 per Right. The Rights will expire on June 1, 2010.
Note 14. Preferred Stock
On August 15, 2000 the Company issued one million shares of
10% Series B Convertible Preferred Stock (the Preferred Stock) at
$100 per share to the Grover C. Coors Trust (the Trust). At the
time of the issuance of the Preferred Stock, the Trust owned 9%
of the Company's outstanding common stock. The Trust's
beneficiaries are members of the Coors family. Individual
members of the Coors family and other Coors family trusts held a
controlling interest in the Company at the time of issuance of
the Preferred Stock. As a condition to the issuance of the
Preferred Stock, a fairness opinion was obtained as to the
consideration received and the value of the Preferred Stock at
issuance was consistent with open market conditions and values
for similar securities.
The Trust, as holder of the Preferred Stock, has the
following rights and preferences:
Conversion Feature
Each share of Preferred Stock is convertible into shares of
the Company's common stock at $2.0625 per share of common stock.
The conversion price of $2.0625 is 125% of the average NYSE
closing price per share of the Company's common stock for the
five trading days prior to August 15, 2000 - which was $1.65.
The Preferred Stock was issued at $100 per share; therefore, a
complete conversion would result in the issuance of 48,484,848
additional shares of the Company's common stock.
The Trust held 2,727,016 shares of the Company's common
stock on December 31, 2000 which represents approximately 9% of
all common shares outstanding (30,544,449). On an as-converted
basis, the Trust would hold 51,211,864 shares of the Company's
common stock on December 31, 2000, which would be approximately
65% of all shares outstanding (79,029,297).
Redemption Features
The Company can redeem the preferred stock at $105 per share
beginning on August 15, 2005, reduced by $1 per share per year
until August 15, 2010.
Initially, the Trust had the right to require redemption of
the preferred stock after ten years at $100 per share, plus any
unpaid dividends. Under the terms of the preferred stock
purchase agreement, the Trust's right to require redemption of
the preferred shares terminated in October 2000 upon the
agreement of Adolph Coors Company to register with the Securities
and Exchange Commission Coors Class B common stock held by the
Trust for resale.
Dividends
Dividends are payable quarterly, beginning October 1, 2000,
at an annual rate of 10%. Dividends are cumulative and hold a
preference to any dividends paid to other shareholders. The
Preferred Stock participates in any common stock dividends on an
as-converted basis. If dividends are not paid for two consecutive
quarters, the Trust may elect one director to the Company's
Board. If dividends are not paid for four consecutive quarters,
the Trust may elect a majority of the directors to the Company's
Board and effectively control the Company.
Liquidation Preference
The Preferred Stock has a liquidation preference over the
Company's common stock at $100 per share, plus unpaid dividends.
The Preferred Stock also participates in any liquidation
distributions to the common shareholders on an as-converted
basis.
Voting and Registration Rights
Every two shares of common stock underlying the Preferred
Stock on an as-converted basis receive one vote. Therefore, the
Trust will now vote 24,242,424 shares, in addition to the
2,727,016 shares of common stock held. The Trust may require the
Company, with certain limitations, to register under the
Securities Act of 1933 the common shares into which the Preferred
Stock may be converted.
Note 15. Related Party Transactions
On December 28, 1992, the Company was spun off from Adolph
Coors Company (ACCo) and since that time ACCo has had no
ownership interest in the Company. However, certain Coors family
trusts have significant interests in both the Company and ACCo.
At the time of spin-off from ACCo, the Company entered into
agreements with Coors Brewing Company, a subsidiary of ACCo, for
the sale of packaging, aluminum, starch products and the resale
of brewery byproducts. The initial agreements had a stated term
of five years and have resulted in substantial revenues to the
Company. The Company continues to sell packaging products to
Coors Brewing. Additionally, the Company sold aluminum products
and refined corn starch to Coors Brewing until the disposition of
these businesses on March 1, 1997 and January 31, 1999,
respectively.
In 1998, the supply agreement between Graphic Packaging and
Coors Brewing was renegotiated. The new five-year agreement
includes stated quantity commitments and requires annual
repricing.
Sales of packaging products and refined corn starch to Coors
Brewing accounted for approximately 10%, 13% and 17% of the
Company's consolidated net sales for 2000, 1999 and 1998,
respectively. The loss of Coors Brewing as a customer in the
foreseeable future could have a material effect on the Company's
results of operations.
A Company subsidiary is a general partner in a limited
partnership in which Coors Brewing is the limited partner. The
partnership owns, develops, operates and sells certain real
estate previously owned directly by Coors Brewing or ACCo.
Distributions were allocated equally between the partners until
late 1999 when Coors Brewing recovered its investment.
Thereafter, distributions are made 80 percent to the general
partner and 20 percent to Coors Brewing. Distributions of
approximately $1.8 million were made to each partner in 1999.
Distributions in 2000 were approximately $800,000 to Coors
Brewing and $3.2 million to the Company.
In connection with the spin-off of CoorsTek at December 31,
1999, GPC and CoorsTek entered into contracts governing certain
relationships between them following the spin-off, including a
tax-sharing agreement, a transitional services agreement and
certain other agreements.
On March 31, 2000 the Company sold the net assets of its GTC
Nutrition subsidiary to an entity controlled by a member of the
Coors family for approximately $700,000. No gain or loss was
recognized as a result of the sale.
In August 2000 the Company issued $100 million of preferred
stock to the Grover C. Coors Trust. See Note 14 for further
discussion.
Note 16. Commitments and Contingencies
It is the policy of the Company generally to act as a self-
insurer for certain insurable risks consisting primarily of
employee health insurance programs. With respect to workers'
compensation, the Company uses a variety of fully or partially
self-funded insurance vehicles. The Company maintains certain
stop-loss and excess insurance policies that reduce overall risk
of financial loss.
In the ordinary course of business, the Company is subject
to various pending claims, lawsuits and contingent liabilities,
including claims by current or former employees. In each of
these cases, the Company is vigorously defending against them.
Although the eventual outcome cannot be predicted, it is
management's opinion that disposition of these matters will not
have a material adverse effect on the Company's consolidated
financial position or results of operations.
The Company is a partner in the Kalamazoo Valley Group, a
partnership formed to develop and operate a landfill for the
partners' disposal of paper residuals from their respective
paperboard mills, and which borrowed $1 million for the
construction of the landfill. Recently, the other parties have
closed their facilities and one minority partner has filed
bankruptcy. The Company is evaluating its alternatives and
liabilities under the partnership agreement and related note.
Some of the Company's operations have been notified that
they may be potentially responsible parties (PRPs) under the
Comprehensive Environmental Response, Compensation and Liability
Act of 1980 or similar state laws with respect to the remediation
of certain sites where hazardous substances have been released
into the environment. The Company cannot predict with certainty
the total costs of remediation, its share of the total costs, the
extent to which contributions will be available from other
parties, the amount of time necessary to complete the remediation
or the availability of insurance. However, based on the
investigations to date, the Company believes that any liability
with respect to these sites would not be material to the
financial condition or results of operations of the Company,
without consideration for insurance recoveries. There can be no
certainty, however, that the Company will not be named as a PRP
at additional sites or be subject to other environmental matters
in the future or that the costs associated with those additional
sites or matters would not be material.
In connection with the sale of various businesses, the
Company has periodically agreed to guarantee the collectibility
of accounts receivable and indemnify purchasers for certain
liabilities for a specified period of time. Such liabilities
include, but are not limited to, environmental matters and the
indemnification periods generally last for 2 to 15 years.
In connection with the resale of the aluminum business in
1999, the Company guaranteed accounts receivable owed by the
former owner of these assets. After the resale, the former owner
refused to pay the amounts owed, $2.4 million. Pursuant to the
terms of the resale agreement, the Company paid this amount and
sued the former owner. The former owner counterclaimed for an
additional $10 million for certain spare parts and the Company
claimed an additional $14 million in overpayment for raw
materials to run the business prior to resale. Although this
lawsuit is in the discovery stage, the Company does not believe
that the result of this litigation will have a material adverse
effect on the consolidated financial position or results of
operations.
Note 17. Segment Information
The Company's reportable segments are based on its method of
internal reporting, which is based on product category. Thus,
the Company's one reportable segment in 2000 is Packaging. The
Company's Other segment in 1999 and 1998 includes a real estate
development partnership, a majority interest in a group of solar
electric distribution companies prior to their August 3, 1999
sale and, prior to March 1999, several technology-based
businesses.
The accounting policies of the segments are the same as
those described in Note 1 and there are generally no intersegment
transactions. In 1999 and 1998, the Company evaluated the
performance of its segments and allocated resources to them based
primarily on operating income.
The table below summarizes information, in thousands, about
reportable segments as of and for the years ended December 31.
Discontinued operations include CoorsTek.
Operating Depreciation
Net Income And Capital
Sales (Loss) Amortization Assets Expenditures
---------- --------- ------------ ---------- ------------
2000
Packaging $1,102,590 $51,223 $83,094 $1,331,450 $30,931
========== ========= ============ ========== ============
1999
Packaging $805,593 $42,735 $55,406 $1,397,518 $74,273
Other 44,562 2,103 618 19,699 1,568
--------- --------- ------------ ---------- ------------
Segment total 850,155 44,838 56,024 1,417,217 75,841
Corporate --- (10,479) 260 225,954 17
Discontinued
operations,
net assets --- --- 22,711 --- 15,597
--------- --------- ------------ ---------- ------------
Consolidated
total $850,155 $34,359 $78,995 $1,643,171 $91,455
========= ========= ============ ========== ============
1998
Packaging $623,852 $38,808 $35,924 $539,039 $47,498
Other 67,925 (3,047) 1,270 56,905 3,384
--------- --------- ------------ ---------- ------------
Segment total 691,777 35,761 37,194 595,944 50,882
Corporate --- (8,941) 336 101,359 690
Discontinued
operations,
net assets --- --- 19,977 148,719 26,891
---------- --------- ------------ ---------- ------------
Consolidated
total $691,777 $26,820 $57,507 $846,022 $78,463
========== ========= ============ ========== ============
Corporate assets for 1999 consist primarily of a $200
million note receivable from CoorsTek as a result of the spin-
off, and debt issuance costs. In 1998, corporate assets include
a $60 million note receivable from the sale of Golden Aluminum,
deferred taxes and certain properties.
Certain financial information regarding the Company's
domestic and foreign operations is included in the following
summary, which excludes discontinued operating segments. Long-
lived assets include plant, property and equipment, intangible
assets, and certain other non-current assets.
Net Long-Lived
(In thousands) Sales Assets
---------- ----------
2000
United States $1,100,491 $1,103,411
Canada 2,099 1,974
Other --- 2,694
---------- ----------
Total $1,102,590 $1,108,079
========== ==========
1999
United States $798,277 $1,189,599
Canada 51,878 3,689
Other --- 2,694
---------- ----------
Total $850,155 $1,195,982
========== ==========
1998
United States $626,715
Canada 57,079
Other 7,983
----------
Total $691,777
==========
Note 18. Quarterly Financial Information (Unaudited)
The following information summarizes selected quarterly
financial information, in thousands except per share data, for
each of the two years in the period ended December 31, 2000,
which excludes discontinued operations.
2000 First Second Third Fourth Year
-------- -------- -------- -------- ----------
Net sales $276,320 $273,189 $283,454 $269,627 $1,102,590
Cost of goods sold 243,424 237,378 245,288 237,889 963,979
-------- -------- -------- -------- ----------
Gross profit 32,896 35,811 38,166 31,738 138,611
Selling, general and
administrative
expense 20,961 21,164 19,438 20,205 81,768
Asset impairment and
restructuring
charges 3,420 --- --- 2,200 5,620
-------- -------- -------- -------- ----------
Operating income 8,515 14,647 18,728 9,333 51,223
Other income
(expense):
Gain from sale of
businesses and
other assets 5,407 --- 2,405 11,360 19,172
Interest expense -
net (19,680) (21,650) (21,702) (19,039) (82,071)
------- -------- -------- -------- ----------
Income (loss) before
income taxes (5,758) (7,003) (569) 1,654 (11,676)
Income tax expense
(benefit) (2,302) (2,742) (288) 654 (4,678)
-------- -------- -------- -------- ----------
Net income (loss) (3,456) (4,261) (281) 1,000 (6,998)
Preferred stock
dividends declared --- --- (1,306) (2,500) (3,806)
-------- -------- -------- -------- ----------
Net income (loss)
attributable
to common
shareholders ($3,456) ($4,261) ($1,587) ($1,500) ($10,804)
======== ======== ======== ======== ==========
Net income (loss)
attributable
to common
shareholders
per basic share ($0.12) ($0.15) ($0.05) ($0.05) ($0.37)
======== ======== ======== ======== ==========
Net income (loss)
attributable
to common
shareholders
per diluted share ($0.12) ($0.15) ($0.05) ($0.05) ($0.37)
======== ======== ======== ======== ==========
1999 First Second Third Fourth Year
-------- -------- -------- -------- ----------
Net sales $165,976 $163,595 $243,617 $276,967 $850,155
Cost of goods sold 135,741 132,272 211,180 242,157 721,350
-------- -------- -------- -------- ----------
Gross profit 30,235 31,323 32,437 34,810 128,805
Selling, general and
administrative
expense 17,974 18,358 21,566 28,735 86,633
Asset impairment and
restructuring
charges --- --- --- 7,813 7,813
-------- -------- -------- -------- ----------
Operating income
(loss) 12,261 12,965 10,871 (1,738) 34,359
Other income
(expense):
Gain from sale of
businesses and
other assets --- --- 30,236 --- 30,236
Interest expense -
net (4,508) (3,786) (9,859) (16,087) (34,240)
-------- -------- -------- -------- ----------
Income (loss) before
income taxes 7,753 9,179 31,248 (17,825) 30,355
Income tax expense
(benefit) 3,245 3,399 12,864 (7,563) 11,945
-------- -------- -------- -------- -----------
Income (loss) from
continuing
operations before
extraordinary loss 4,508 5,780 18,384 (10,262) 18,410
Income (loss) from
discontinued
operations, net
of tax 5,210 5,482 (2,903) 1,392 9,181
Extraordinary loss,
net of tax --- --- (2,332) --- (2,332)
-------- -------- -------- -------- ----------
Net income (loss) $9,718 $11,262 $13,149 ($8,870) $25,259
======== ======== ======== ======== ==========
Net income (loss)
per basic share:
Continuing
operations $0.16 $0.20 $0.64 ($0.35) $0.65
Discontinued
operations 0.18 0.20 (0.10) 0.04 0.32
Extraordinary loss --- --- (0.08) --- (0.08)
-------- -------- -------- -------- ----------
Net income (loss)
[er basic share $0.34 $0.40 $0.46 ($0.31) $0.89
======== ======== ======== ======== ==========
Net income (loss)
per diluted share:
Continuing
operations $0.16 $0.20 $0.64 ($0.36) $0.64
Discontinued
operations 0.18 0.19 (0.10) 0.05 0.32
Extraordinary loss --- --- (0.08) --- (0.08)
-------- -------- -------- -------- ----------
Net income (loss)
perdiluted share $0.34 $0.39 $0.46 ($0.31) $0.88
======== ======== ======== ======== ==========
See Note 5 for detail on asset impairment and restructuring
charges in 2000 and 1999.
SCHEDULE II
GRAPHIC PACKAGING INTERNATIONAL CORPORATION
VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
Allowance for doubtful receivables
(deducted from accounts receivable)
Additions
Balance at Charged to Balance
Beginning Costs and Other Deductions at end
of year Expenses (1) (2) of year
---------- ---------- ------ ---------- -------
Year Ended
December 31,
1998 $1,108 $1,111 $1,232 ($1,311) $2,140
1999 $2,140 $503 $1,250 ($1,633) $2,260
2000 $2,260 $1,425 ($22) ($693) $2,970
(1) The effect of translating foreign subsidiaries' financial
statements into U.S. dollars, the 1998 acquisition of
Universal Packaging, the 1999 acquisition of the Fort James
packaging business, and the 2000 disposition of the Malvern,
Pennsylvania plant.
(2) Write off of uncollectible accounts.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Within the last two years there have been no changes in the
Company's independent accountants or disagreements on accounting
and financial statement disclosure matters.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding the Registrant's Directors is
incorporated by reference to the Proxy Statement in connection
with the 2001 Annual Meeting of Shareholders.
The following executive officers of the Company serve at the
pleasure of the Board:
Gail A. Constancio, 40, Chief Financial Officer of the
Company since December 1999; Chief Financial Officer of Graphic
Packaging Corporation since November 1997; Controller and
Principal Accounting Officer of the Company from May 1994 to
November 1997.
Jeffrey H. Coors, 56, Chairman of the Company since 2000 and
President of the Company since its formation in August 1992;
President of Graphic Packaging Corporation since June 1997 and
Chairman of Graphic Packaging Corporation since 1985; Executive
Vice President of ACCo from 1991 to 1992; President of Coors
Technology Companies from 1989 to 1992; President of ACCo from
1985 to 1989.
David W. Scheible, 44, Chief Operating Officer of the
Company since December 1999 and of Graphic Packaging Corporation
since June 1999. Vice President and General Manager of the
Specialty Tape Division from 1995 to 1999, and Vice President and
General Manager of the Automotive Division from 1993 to 1995, of
Avery Dennison Corporation.
Jill B. W. Sisson, 53, General Counsel and Secretary of the
Company since September 1992; Of Counsel to the Denver law firm
of Bearman Talesnick & Clowdus Professional Corporation from 1984
to 1992.
Marsha Williams, 45, Vice President, Human Resources, of the
Company since April 2000. Vice President, Human Resources,
Safety and Risk Management, of American Medical Response from
June 1998 to April 2000. Vice President, Employee Relations,
from December 1997 to June 1998 and Vice President, Human
Resources and Education, from September 1994 to December 1997 of
US West/Media One Cable.
ITEM 11. EXECUTIVE COMPENSATION
This information is incorporated by reference to the Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
This information is incorporated by reference to the Proxy
Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
This information is incorporated by reference to the Proxy
Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K
(a)
Exhibit
Number Document Description
2.1 Recommended Cash Offers by Baring Brothers International
Limited on behalf of ACX (UK) Limited, a wholly-owned
subsidiary of ACX Technologies, Inc. for Britton Group plc.
(Incorporated by reference to Form 8-K filed on January 29,
1998)
2.2 Asset Purchase Agreement between ACX Technologies and Fort
James Corporation. (Incorporated by reference to Form 8-K
filed August 17, 1999)
2.3 Asset Purchase Agreement between Golden Aluminum Company
and Alcoa Inc. dated November 5, 1999. (Incorporated by
reference to Form 10-K filed on March 29, 2000)
2.4 Distribution Agreement between ACX Technologies, Inc. and
CoorsTek, Inc. (Incorporated by reference to Form 10-K
filed on March 29, 2000)
3.1 Articles of Incorporation of Registrant. (Incorporated by
reference to Form 10 filed on October 6, 1992)
3.1A Articles of Amendment to Articles of Incorporation of
Registrant (Incorporated by reference to Form 8 filed on
December 3, 1992)
3.1B Articles of Amendment to Articles of Incorporation of
Registrant. (Incorporated by reference to Form 10-Q filed
May 15, 2000)
3.2 Bylaws of Registrant, as amended and restated May 9, 2000.
(Incorporated by reference to Form 10-Q filed on May 15,
2000)
4 Form of Stock Certificate of Common Stock. (Incorporated
by reference to Form 10-Q filed August 14, 2000)
4.1 Preferred Stock Purchase Agreement, dated as of August 15,
2000, between the Company and the Grover C. Coors Trust.
(Incorporated by reference to Form 8-K filed August 31,
2000)
4.2 Registration Rights Agreement dated as of August 15, 2000,
between the Company and the Grover C. Coors Trust.
(Incorporated by reference to Form 8-K filed August 31,
2000)
4.3 Statement of Designations, approved by the Company's Board
of Directors on August 14, 2000. (Incorporated by
reference to Form 8-K filed August 31, 2000)
4.4 10% Series B Convertible Preferred Stock Certificate.
(Incorporated by reference to Form 8-K filed August 31,
2000)
4.5 Rights Agreement, dated as of May 31, 2000, between the
Company and Norwest Bank Minnesota, N.A., as Rights Agent.
(Incorporated by reference to Form 8-A filed May 31, 2000)
10.0 Credit Agreement among ACX Technologies, Inc., Bank of
America, as agent, and other financial institutions party
thereto. (Incorporated by reference to Form 8-K filed on
August 17, 1999)
10.0A First Amendment to Revolving Credit and Term Loan
Agreement. (Incorporated by reference to Form 10-Q filed
on May 15, 2000)
10.0B Second Amendment to Revolving Credit and Term Loan
Agreement, dated as of July 28, 2000, among the Company
and its one-year term lenders. (Incorporated by reference
to Form 8-K filed August 31, 2000)
10.0C Third Amendment to Revolving Credit and Term Loan Agreement,
dated as of August 14, 2000, among the Company and its
lenders. (Incorporated by reference to Form 8-K filed
August 31, 2000)
10.1 Supply Agreement between Graphic Packaging Corporation and
Coors Brewing Company. (Incorporated by reference to
Form 8-K filed on November 2, 1998) (Confidential
treatment has been granted for portions of the Exhibit)
10.2 Credit Agreement among ACX Technologies, Inc., Wachovia
Bank, N.A., as agent, and other financial institutions
party thereto. (Incorporated by reference to Form 8-K
filed on September 17, 1999)
10.3 Asset Purchase Agreement between ACX Technologies and
Sonoco Products Company. (Incorporated by reference to
Form 8-K filed on September 17, 1999)
10.4 Tax Sharing Agreement between ACX Technologies, Inc. and
CoorsTek, Inc. (Incorporated by reference to Form 10-K
filed on March 29, 2000)
10.5 Environmental Responsibility Agreement between ACX
Technologies, Inc. and CoorsTek, Inc. (Incorporated by
reference to Form 10-K filed on March 29, 2000)
10.6 Master Transition Materials and Services Agreement between
ACX Technologies, Inc. and CoorsTek, Inc. (Incorporated
by reference to Form 10-K filed on March 29, 2000)
10.8* Form of Officers' Salary Continuation Agreement, as
amended. (Incorporated by reference to Form 10-K filed
on March 20, 1995)
10.9* Graphic Packaging Equity Incentive Plan, as amended.
10.10* Graphic Packaging Equity Compensation Plan for Non-Employee
Directors, as amended.
10.11* ACX Technologies, Inc. Phantom Equity Plan. (Incorporated
by reference to Form 8 filed on November 19, 1992)
10.12* Graphic Packaging Excess Benefit Plan, as restated.
10.13* Graphic Packaging Supplemental Retirement Plan, as
restated.
10.15* ACX Technologies, Inc. Deferred Compensation Plan, as
amended. (Incorporated by reference to Form 10-K filed
on March 7, 1996)
10.16* First Amendment to Graphic Packaging Deferred Compensation
Plan.
10.17* Graphic Packaging Executive Incentive Plan.
10.18* Form of Employment Agreement Entered Into By and Between
the Following Individuals: Jeffrey H. Coors, Jed J.
Burnham, Gail A. Constancio, Dwight H. Kennedy, David W.
Scheible, Jill B. W. Sisson, Donald W. Sturdivant, David
A. Tolley and Marsha C. Williams. (Incorporated by
reference to Form 10-Q/A filed on August 18, 2000)
10.19* Description of Arrangement with Gail A. Constancio dated
as of March 2001.
21 Subsidiaries of Registrant
23 Consent of PricewaterhouseCoopers LLP
99 News Release, dated as of August 15, 2000, announcing the
issuance of preferred stock. (Incorporated by reference
to Form 8-K filed on August 31, 2000)
* Management contracts or compensatory plans, contracts or
arrangements required to be filed as an Exhibit pursuant
to Item 14(c).
The Registrant will furnish to a requesting security holder
any Exhibit requested upon payment of the Registrant's reasonable
copying charges and expenses in furnishing the Exhibit.
(b) Reports on Form 8-K.
No reports were filed on Form 8-K during the quarter ended
December 31, 2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GRAPHIC PACKAGING INTERNATIONAL
CORPORATION
Date: March 23, 2001 By /s/ Jeffrey H. Coors
-------------------------------
Jeffrey H. Coors
President and Chief Executive
Officer
Date: March 23,2001 By /s/ Gail A. Constancio
-------------------------------
Gail A. Constancio
Chief Financial Officer
Date: March 23, 2001 By /s/ John S. Norman
-------------------------------
John S. Norman
Corporate Controller
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the registrant and in the capacities and on
the date indicated.
Date: March 23, 2001 By /s/ Jeffrey H. Coors
-------------------------------
Jeffrey H. Coors
Chairman of the Board of
Directors, President and
Chief Executive Officer
Date: March 23, 2001 By /s/ John D. Beckett
-------------------------------
John D. Beckett
Director
Date: March 23, 2001 By /s/ William K. Coors
-------------------------------
William K. Coors
Director
Date: March 23, 2001 By /s/ John H. Mullin, III
-------------------------------
John H. Mullin, III
Director
Date: March 23, 2001 By /s/ James K. Peterson
-------------------------------
James K. Peterson
Director
Date: March 23, 2001 By /s/ John Hoyt Stookey
-------------------------------
John Hoyt Stookey
Director