ITEM 1. BUSINESS
Shorewood Packaging Corporation and its subsidiaries (collectively, "Shorewood" or the "Company") print and manufacture high quality paperboard packaging for the cosmetics, home video, music, software, tobacco and toiletries and general consumer markets in the United States and Canada. Shorewood was incorporated in November 1967. The Company's principal executive offices are located at 277 Park Avenue, New York, New York 10172 and its telephone number is (212)371-1500.
Shorewood's strategic objectives are (i) the maintenance of its position as a leading paperboard packager to the tobacco industry and the home entertainment market, which includes the music and video industries; (ii) the further expansion of the Company's markets in the CD-ROM computer software and games industry and in the cosmetics and toiletries, food, liquor, consumer electronics, film and hosiery industries; and (iii) the identification of other areas in the general consumer packaging industry that can most benefit from the Company's ability to produce graphically enhanced high quality packaging. To achieve these objectives, the Company intends to continue expanding its printing, packaging and graphic arts capabilities, including the development and application of advanced manufacturing technologies.
PACKAGING PRODUCTS
The Company produces high quality specialized packaging, principally folding cartons and set up boxes, for its customers in the United States and Canada that require sophisticated precision graphic packaging for their products, including customers in the home entertainment industry, the tobacco industry, the software industry, the personal care, cosmetic and toiletries industries and in such consumer industries as the food, liquor, film, hosiery, consumer electronics and pharmaceutical industries.
The Company is a principal supplier of printed packaging products for the tobacco industry, producing the hard flip-top cigarette packages as well as the traditional slide and shell packages. These products are used to package many of the leading tobacco brands. The Company believes that it is the primary carton supplier to the Canadian tobacco industry and a leading manufacturer of paperboard packaging for the tobacco industry in the United States. See "Tobacco Industry". In the 52 week period ended April 27, 1996 ("fiscal 1996"), Philip Morris, one of Shorewood's tobacco industry customers, accounted for approximately 20% of the Company's consolidated net sales. In addition, two other customers, who may be deemed to be affiliated with each other, accounted in the aggregate for approximately 16% of the Company's fiscal 1996 consolidated net sales, albeit neither alone accounted for more than 10% of the Company's consolidated net sales in such fiscal year. Although Shorewood believes that its relationships with these customers are excellent, the Company does not have long-term supply agreements with them and there can be no assurance that their packaging requirement in the future will continue at the same levels as in fiscal 1996.
For its music and home entertainment industry customers, the Company manufactures compact disc packaging (including folders, booklets and liners), prerecorded cassette packaging (including folders and sleeves), and other printed material and paperboard packaging for all video cassette formats (including VHS and 8 millimeter). The Company's music industry customers include most of the major music production and distribution companies in the United States. The Company has long standing relationships with many of these companies and in certain cases also has agreements, typically for three to five years, to supply their packaging products.
The Company is a supplier of paperboard packaging for the cosmetics and toiletries industry and also produces a wide range of consumer packaging products. Additionally, the Company manufactures and provides rigid set-up boxes, principally for customers in the cosmetics industry.
Page 2 of 43 The Company has started to expand into the CD-ROM computer software and games industry. The Company has constructed a manufacturing facility in the Pacific Northwest (the "Oregon Facility"), home of many leading software manufacturers, to better serve this market. See "Item 2.
ITEM 2. PROPERTIES
The Company owns offices and manufacturing facilities as follows, representing an aggregate of 1.2 million square feet of office and manufacturing space:
LaGrange, Georgia Andulusia, Alabama Roanoke, Virginia Springfield, Oregon Danville, Virginia Williamsburg, Virginia Smiths Falls, Ontario Brockville, Ontario Scarborough, Ontario
The Company also leases office, manufacturing and warehousing facilities at the following locations with leases that expire at various times ending in the year 2006, at an annual aggregate net rental cost of approximately $4.2 million for a total of 621 thousand square feet:
Pittsford, New York Farmingdale, New York New York, New York Waterbury, Connecticut Greenwich, Connecticut Redwood City, California Los Angeles, California Brockville, Ontario Montreal, Canada Toronto, Ontario LaGrange , Georgia Palatine , Illinois Charlotte, North Carolina
The Company has vacated the manufacturing facility in Pittsford, New York whose lease expires in 1996, and utilizes a portion of the Farmingdale, New York facility as its corporate administrative offices and sublets the remaining portion of the building. The Farmingdale lease expires in 1999.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
1. Shorewood Packaging Corporation of Connecticut and Shorewood Packaging Corporation v. Heminway Packaging Corporation, et al.
In April 1995, the Company and its wholly-owned subsidiary, Shorewood Packaging Corporation of Connecticut ("SPCC") commenced a civil action in the Supreme Court of the State of New York, New York County, against Heminway and certain of its affiliates seeking compensatory and punitive damages and other relief with regard to the acquisition of the Heminway Business. See "Acquisitions". The suit contended that Heminway and the other defendants misrepresented the financial condition and operational
Page 6 of 43 capabilities of the Heminway Business. In June 1995, Heminway filed an answer, affirmative defenses and counterclaim against the Company and SPCC's complaint. In April 1996 the Company settled all actions related to these suits for the receipt of a cash payment of $100 thousand and the reduction in future rent payments payable to the former owners of the Heminway Business.
2. Bradley Jacobs v. Shorewood Packaging Corporation [sic], 95 Civ. 9414 (DC)
In November 1995, an action against the Company was filed in the United States District Court of the Southern District of New York. The amended complaint alleges that the Company's 1995 proxy statement violates Section 14A of the 1934 Act and Section 14A-9 of the regulations promulgated thereunder because, inter alia, the "1995 Performance Bonus Plan was vaguely and inadequately described" in the proxy and because the proxy omitted material information concerning the bonus plan. The amended complaint also alleges that the Proxy "failed to disclose the material terms" or " performance goals" of the Bonus Plan which Plaintiff alleges was required by Section 162(m) of the Internal Revenue Code. Plaintiff seeks a declaration that the proxy violated Section 14A and regulations promulgated thereunder and an injunction preventing the Company from making awards under the Bonus Plan until additional disclosures are made and the shareholders approve the Plan. No awards were earned under the Plan for the 1996 fiscal year. Plaintiff also seeks his costs and attorneys' fees incurred in bringing the action.
The Company answered the amended complaint in December 1995 and denied the material allegations. In February 1996, the Company moved for summary judgment dismissing the action. All discovery in the action was stayed by the district judge pending determination of that motion, which was submitted in March 1996 and is still sub judice.
3. Other
The Company is not presently a party to any other material litigation. On a continuing basis, the Company monitors its compliance with applicable environmental laws and regulations. As part of this process, the Company cooperates with appropriate governmental authorities to perform any necessary testing and compliance procedures. The Company is not aware of any environmental compliance proceeding that will have a material effect on its consolidated financial statements. During 1996 and 1995, the Company has been involved, at various locations, in the correction of certain violations of applicable environmental laws, rules or regulations. Amounts paid during fiscal 1996 and fiscal 1995 to all governmental agencies aggregated less than $100 thousand.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There was no vote of security holders during the fourth quarter of the fiscal year covered by this report.
Page 7 of 43 PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
(a) Market Information. The Company's Common Stock is traded in the over-the-counter market on the NASDAQ National Market System under the symbol SHOR. The following table sets forth, for the fiscal periods indicated, the high and low sales prices for the Common Stock on the National Market System, as reported by NASDAQ.
The last sale price of the Company's Common Stock on July 1, 1996 was $15.25.
In January 1993, the Company's Board of Directors authorized the purchase of up to 2.0 million shares of the Company's common stock and in December 1995, the Board of Directors authorized the purchase of up to an additional 2.0 million shares from time to time in the open market, subject to the terms of the Company's new credit agreement. As of April 27, 1996, approximately 1.7 million shares are authorized for purchase under existing Board of Directors resolutions. Under the terms of its senior term notes and long-term revolver agreements, the Company is limited with respect to the number of shares of its Common Stock it can repurchase.
(b) Holders. There were 262 record holders of the Company's Common Stock as of July 1, 1996. The Company believes that, as of such date, there were in excess of 1,000 beneficial holders of the Company's Common Stock, including those stockholders whose shares were held of record by certain depository companies.
(c) Cash Dividends. The Company has not paid any cash dividend on its Common Stock during either of its two most recent fiscal years. The Company anticipates that its earnings for the foreseeable future will be utilized to reduce debt, to fund acquisitions or to purchase shares of its Common Stock, or will be retained for use in its business. Accordingly, the Company believes that it is now unlikely that any cash dividends will be paid on its Common Stock in the near future.
The Company's senior term notes and long-term revolver agreements restrict the amount of retained earnings available for the payment of dividends (other than dividends payable in the Company's Common Stock). At April 27, 1996, there were no retained earnings available for dividends.
Page 8 of 43 ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
The selected consolidated financial information set forth below for and as of the fiscal year ended April 27, 1996 and for and as of the end of each of the four preceding fiscal years is derived from, and qualified by reference to, the audited consolidated financial statements of Shorewood Packaging Corporation and Subsidiaries. The report of Deloitte & Touche LLP, independent auditors, on the consolidated financial statements as of April 27, 1996 and April 29, 1995 and for the 52 week periods ended April 27, 1996, April 29, 1995 and April 30, 1994 is included elsewhere herein. Except for the special dividend of $3.25 per Common Share paid on July 2, 1991, cash dividends were not paid on the Company's Common Stock in any of the periods indicated below.
SUMMARY FINANCIAL DATA (In thousands, except per share amounts)
- ------------------------------ (1) 53 week period
Page 9 of 43 ITEM 7.
ITEM 7. MANAGEMENT'S' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
In January 1994, the Company acquired certain operating assets of the Premium Packaging Group of Cascades Paperboard International, Inc. (the "Premium Group") and the Heminway Business (collectively referred to as the "Acquired Companies"). The Premium Group's and the Heminway Business's operations are reflected in the results of operations for the entire periods ended April 27, 1996 and April 29, 1995. The Acquired Companies' operations are included in the consolidated results of operations of the Company for the period ended April 30, 1994 since the date of the respective acquisitions.
RESULTS OF OPERATIONS
Net Sales
Net sales for the 13 and 52 weeks ended April 27, 1996 were $105.4 million and $394.4 million compared to net sales of $89.6 million and $357.0 million for the corresponding prior periods, respectively, an increase of 17.7% and 10.5%, respectively. The Company's new facility in Oregon effectively began production during the third quarter of fiscal 1996. Sales for the Company's Oregon facility were approximately $1.8 million for the fourth quarter, and approximately $3.0 million for the 52 weeks ended April 27, 1996.
In addition to accelerating sales growth in Oregon, the Company continues to penetrate its existing markets by expanding product lines within existing customer bases, and adding new customers. In fiscal 1996 the Company entered into certain contracts with existing customers whereby the customer has agreed to provide the Company with minimum levels of sales, normally for a five year period. In addition to these agreements, the Company's tobacco business continues to expand. A large portion of the packaging produced by the Company for the tobacco industry is sold to North American tobacco companies for ultimate sale in the export market. That market continues to expand and provides the Company with a source of revenue growth.
The Company believes that future sales growth will be generated through continued penetration of its existing markets, and the expanding market of CD ROM products. The Company believes that its Oregon facility will provide additional sales growth in 1997.
Net sales for the 52 week period ended April 29, 1995 were $357.0 million compared to net sales of $216.5 million for the corresponding prior period, an increase of 64.9%. Included in fiscal 1995 and 1994 are sales of approximately $177.6 million and $47.7 million, respectively, produced by facilities of the Acquired Companies.
Cost of Sales
Cost of sales as a percentage of sales for the 13 and 52 weeks ended April 27, 1996 were 79.6% and 79.1% as compared to 78.3% and 77.3% for the corresponding prior periods, respectively. The Company's Oregon facility was not operating at anticipated capacity, and as such, had a negative impact on the Company's overall margin in both the 13 and 52 week periods ended April 27, 1996. Further, the 52 week period ended April 27, 1996 was negatively impacted by increasing raw material costs, manufacturing inefficiencies experienced at one of the Company's major facilities, softness in the music industry and poor weather conditions. The third quarter was adversely impacted due to the significant snowfalls and icing conditions which occurred on the East Coast of the United States, causing shut downs at four plants and reduced activity for the Company's trucking operations. The second quarter was adversely impacted by Hurricane Opal which caused downtime at two of the Company's facilities due to power interruptions and other consequences of local weather conditions.
Page 10 of 43 The Company's margins have been affected by increases in certain raw material costs in fiscal 1996 as compared to the prior year, some of which could not be reflected in the selling price to the customer. Recently the Company has experienced a decline in certain raw material costs which had a favorable impact during the fourth quarter of fiscal 1996, and is expected to favorably impact fiscal 1997 operations. The Company remains sensitive to price competitiveness in the markets that it serves, and in the areas that are targeted for growth. It believes that the installation of state-of- the-art printing and manufacturing equipment (and related labor and production efficiencies) enables it to compete effectively.
Cost of sales as a percentage of sales was 77.3% in the 52 week period ended April 29, 1995 as compared with 77.2% for the corresponding prior period. Cost of sales in fiscal 1995 was adversely affected by increased raw material costs which were unable to be immediately reflected in the selling price of the Company's products. In addition, the Company experienced some inefficiencies related to the installation of new production capacity in certain of its facilities.
Selling, General and Administrative Expenses
Selling, general and administrative expenses as a percentage of sales for the 13 and 52 week periods ended April 27, 1996 were 10.1% and 10.3% as compared to 10.1% and 10.0%, respectively, for the corresponding prior periods. The increase in selling, general and administrative expenses as a percentage of sales is largely due to additional costs associated with the integration of the Premium Group's operations, including additional professional fees, and increased occupancy and operating costs associated with the Company's corporate offices. In addition, selling, general and administrative expenses as a percentage of sales are higher at the Company's Oregon facility as a result of its early operations, but are expected to decline as a percentage of sales as production at that facility increases.
Selling, general and administrative expenses for the 52 week period ended April 29, 1995 increased as compared to the corresponding prior period due to the inclusion of these expenses for the Acquired Companies.
Investment and Other Income
Investment and other income, net, for the 52 week period ended April 27, 1996 was primarily related to gains on the disposal of certain fixed assets recorded in 1996 approximating $364 thousand. In addition, approximately $339 thousand of investment income was recorded in fiscal 1996. Foreign exchange gains/losses were not significant in 1996.
Investment and other income, net for the 52 week period ended April 29, 1995 was comprised primarily of investment income of $320 thousand, offset by foreign exchange losses of approximately $270 thousand and losses on the disposal of certain fixed assets.
Investment and other income, net, for the 52 week period ended April 30, 1994 was comprised primarily of investment income of $320 thousand, foreign exchange gains of approximately $234 thousand and approximately $354 thousand of gains on the disposal of certain fixed assets
The Company's exposure to foreign exchange transaction gains or losses relate to the Company's Canadian facilities which have U.S. dollar denominated net current assets. The Company believes that fluctuations in foreign exchange rates will not have a material impact on the operations or liquidity of the Company, based upon current and historical levels of working capital at the Canadian facilities.
Page 11 of 43 Interest Expense
Interest expense for the 13 and 52 week periods ended April 27, 1996 was $2.1 million and $8.3 million as compared to $2.2 million and $9.0 million, respectively, for the corresponding prior periods. The reduction in interest expense for the 52 week period resulted from the conversion into common stock of $17.5 million of convertible subordinated debentures in September 1994, partially offset by an increase in interest rates. Interest costs capitalized for the 13 and 52 week periods ended April 27, 1996 relating to the construction of plant and equipment (including the Company's Oregon facility) amounted to $178 thousand and $1.1 million, respectively. Interest costs capitalized for the 13 and 52 week periods ending April 29, 1995 were $342 thousand and $377 thousand, respectively. As a result of its Oregon facility becoming operational in 1996, the Company anticipates that the amount of interest to be capitalized in fiscal 1997 will be significantly less than the amounts previously capitalized.
In October 1994, the Company assigned to a bank an interest rate swap agreement relating to $42.0 million of its debt for cash proceeds of approximately $1.3 million. The proceeds have been recorded as a deferred credit which is being amortized as a reduction of interest expense (amounting to $109 thousand and $510 thousand for the 13 and 52 week periods ended April 27, 1996, respectively, and $154 thousand and $371 thousand for the corresponding prior periods). At April 27, 1996, $403 thousand of deferred gain remains which will be amortized: $289 thousand in fiscal 1997; and $114 thousand in fiscal 1998.
The Company has used, and may continue to use, interest rate swaps and caps to manage its exposure to fluctuating interest rates under its debt agreements.
Income Taxes
The effective income tax rate for the 13 and 52 week periods ended April 27, 1996 was 37.6% and 37.9% compared to 37.9% and 37.8% for the corresponding prior periods, respectively. These rates reflect a blend of domestic and foreign taxes.
Restructuring Charges/Plant Closings/Extraordinary Items
In order to streamline the Company's operations and increase productivity, the Company closed the Pittsford, New York plant during fiscal 1996, and transferred the equipment located there to other Company facilities. The costs associated with closing this redundant facility had previously been included in the final allocation of the purchase price of the Premium Group. As of April 27, 1996 substantially all of the costs associated with this plant closing had been paid.
As a result of the discontinued use of the long-box as a packaging medium for compact discs and the related diminished level of sales, the Company decided at the end of the third quarter of fiscal 1994 to close its Farmingdale, New York facility effective as of April 30, 1994. In connection with the closing of this facility and the restructuring of the Company's operations relating thereto, the Company recorded a restructuring charge before provision for income taxes amounting to $3.4 million during the third quarter of fiscal 1994. Included in this charge were amounts provided for the termination of leases, disposal of equipment, severance payments and other related restructuring items. The impact on net earnings related to the restructuring charge was a loss of approximately $2.1 million or $.12 per share. As of April 29, 1995, substantially all of the costs associated with this restructuring were paid.
In connection with the establishment of the new credit facility (as discussed below), the Company recorded an extraordinary charge representing the write-off of previously deferred finance costs incurred in connection with the prior facility of approximately $1.4 million (net of tax benefit of $.8 million). In connection with the purchase of the Premium Group in 1994, the Company prepaid $31.9 million of Senior Notes. As a result of the prepayment, the Company recorded an extraordinary charge in the 52 week period ended April 30, 1994 of approximately $3.1 million (after the related income tax benefit of $1.9 million) consisting of prepayment penalties and the write-off of deferred finance costs.
Page 12 of 43 LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents at April 27, 1996 were $4.5 million as compared to $4.1 million at April 29, 1995, and working capital was $30.8 million as compared to $31.9 million as of the same dates respectively. The current ratio at April 27, 1996 and April 29, 1995 was approximately 1.5 to one. The Company's cash balances remain relatively constant as a result of the Company's cash management program whereby collection of accounts receivable are used to retire revolver obligations, and payments of accounts payable and accrued expenses are funded through the revolver obligations.
Cash flow from operating activities for the 52 weeks ended April 27, 1996 was $38.0 million before changes in operating assets and liabilities. Cash flows from operations as well as borrowings under the Company's credit facilities were used to support $37.4 million in capital expenditures and $17.3 million in purchases of treasury stock. In connection with a planned expansion of the Company's facilities, the Company anticipates investing approximately $22.0 million in a new plant and equipment in Oregon, of which $21.0 million has been disbursed as of April 27, 1996. Funds for the expansion are to be provided from the Company's credit facility.
In January 1993, the Company's Board of Directors authorized the purchase of up to 2.0 million shares of the Company's common stock and in December 1995, the Board of Directors authorized the purchase of up to an additional 2.0 million shares from time to time in the open market, subject to the terms of the Company's new credit agreement. As of April 27, 1996, approximately 1.7 million shares are authorized for purchase under existing Board of Directors resolutions.
To effectuate its Board authorization, the Company entered into a new credit facility with its lending banks increasing its line of credit by approximately $41.0 million to $185 million. The new facility consists of $120.0 million of senior term notes and $65.0 million of a long-term revolver which bear interest, at the discretion of the Company, at either the Bank's prime rate or LIBOR plus between 75 to 125 basis points depending upon certain financial ratios. The senior term notes will be repaid in various quarterly installments through May 7, 2000 at which time the revolver will mature.
The loan agreement contains covenants related to levels of debt to cash flow, current assets to current liabilities, fixed charge coverage, net worth and investments (including investments in the Company's own common stock), and restricts the amount of retained earnings available for payment of dividends. The Loan Agreement requires the Company to prepay the term notes to the extent of 50% of excess cash flow as defined. To date, no prepayments have been required.
The Board and management of the Company believe the long-term outlook for the Company to be promising and that the Company's common stock represents an attractive investment opportunity. The treasury stock purchases will be made from time to time as market conditions permit.
The Company expects that cash flow from operations together with the borrowing capacity under the revolving credit facility will be sufficient to meet the needs of the business. The Company has, as described above, a $65.0 million long-term revolving credit facility for its working capital requirements. Borrowings under this facility are limited to the sum of 80% of accounts receivable and 50% of inventories. At April 27, 1996, the Company had borrowings under this facility of $32.6 million and additional credit availability under this facility of $22.3 million.
In the second quarter of 1996, the Company recorded approximately $5.0 million of contingent consideration for the acquisition of the Premium Group, since the criteria for payment of this consideration had been met based upon the attainment of previously established thresholds. This payment was made to the former owners of the Premium Group in May, 1996.
Page 13 of 43 In February 1996, the Company invested $1.1 million in exchange for a 25% interest in a company that develops and manufactures holographic images on film. The agreement provides the Company with an option to acquire up to 51% of the investee under certain conditions, and provides the Company with the right of first refusal to acquire the remaining 49%. The financial condition and results of operations of the company are not material to the financial statements of the Company.
Page 14 of 43 ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page 15 of 43 INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of Shorewood Packaging Corporation
We have audited the accompanying consolidated balance sheets of Shorewood Packaging Corporation and subsidiaries as of April 27, 1996 and April 29, 1995 and the related consolidated statements of earnings, stockholders' equity and cash flows for the 52 weeks ended April 27, 1996, April 29, 1995 and April 30, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Shorewood Packaging Corporation and subsidiaries as of April 27, 1996 and April 29, 1995 and the results of their operations and their cash flows for the 52 weeks ended April 27, 1996, April 29, 1995 and April 30, 1994 in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
/s/ DELOITTE & TOUCHE LLP
New York, New York June 7, 1996
Page 16 of 43 SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except share data)
The accompanying notes are an integral part of these financial statements.
Page 17 of 43 SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (In thousands except per share data)
The accompanying notes are an integral part of these financial statements.
Page 18 of 43 SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
The accompanying notes are an integral part of these financial statements.
Page 19 of 43 SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (In thousands except share data)
The accompanying notes are an integral part of these financial statements.
Page 20 of 43 SHOREWOOD PACKAGING CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (In thousands except share data)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) Principles of consolidation
The consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are wholly-owned. All significant intercompany balances and transactions have been eliminated in consolidation.
(b) Recognition of revenue
The Company reports revenue, with the related costs, in the accounting period in which goods are shipped to the customer.
(c) Statement of cash flows
The Company considers all highly liquid temporary investments with original maturities of three months or less to be cash equivalents.
(d) Inventories
Inventories are valued at the lower of cost or market. Cost is determined principally on the first-in, first-out (FIFO) method. Components of inventory include materials, labor and overhead costs.
(e) Depreciation and amortization
The Company computes depreciation and amortization of property, plant and equipment substantially by the straight line method over the shorter of the estimated useful lives or lease periods of the respective assets. The excess of purchase price over the fair value of net assets of businesses acquired is amortized over periods ranging from 10 to 40 years on a straight line basis.
The Company periodically evaluates the possible impairment of the excess of cost over the fair value of net assets acquired and recorded amounts of property, plant and equipment by comparing the estimated future undiscounted cash flows from the acquired operations or the related assets, respectively, to the net carrying value of the related asset.
(f) Income taxes
The Company and its domestic subsidiaries file a consolidated Federal income tax return. Deferred taxes are provided for the income tax effects of temporary differences in reporting transactions for financial reporting and tax reporting purposes.
The Company records income taxes under the liability method as required by Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes". Under the liability method, deferred tax assets and liabilities are determined based on the differences between the financial accounting and tax basis of assets and liabilities. Deferred tax assets or liabilities at the end of each period are determined using the currently enacted tax rate.
Page 21 of 43 United States ("U.S.") income taxes with respect to the undistributed earnings of the Company's foreign subsidiaries have not been provided since it is the intention of management that the undistributed earnings will be reinvested or transferred to the Company without giving rise to U.S. tax liabilities. The total amount of unremitted earnings of non-U.S. subsidiaries was approximately $35.8 million at April 27, 1996.
(g) Foreign currency translation
Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at fiscal period-end exchange rates and revenues and expenses are translated on a monthly basis at weighted average exchange rates for the respective month. Gains and losses arising from translation are recorded as foreign currency translation adjustments, a component of stockholders' equity. Foreign currency transaction gains and losses are included in determining net earnings.
(h) Share information
Weighted average common and common equivalent shares outstanding include the dilutive effect of outstanding stock options and warrants for all periods presented. Fully diluted earnings per share has not been presented as it is not materially different from primary earnings per share. Weighted average common and common equivalent shares for the 1996 and 1995 periods include the effect of the shares issued upon conversion of the Company's Convertible Subordinated Debentures since the date of conversion.
(i) Financial Instruments
Derivative financial instruments are used by the Company in the management of its interest rate exposures and are accounted for on the accrual basis. Income and expense are recorded as a component of interest expense. Gains realized on the termination of interest rate swaps contracts (accounted for as hedges) are deferred and amortized over the remaining terms of the original swap agreements. Costs of interest rate cap contracts are amortized over the lives of the contracts.
(j) Use of Estimates in the Preparation of Financial Statements
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
(k) Business segment
The Company and its subsidiaries operate in one business segment, providing printed packaging products to the entertainment, cosmetic, tobacco and other consumer product industries.
(l) Fiscal periods
Reference to 1996, 1995 and 1994 in the accompanying notes to the consolidated financial statements refer to the fiscal periods ending April 27, 1996, April 29, 1995 and April 30, 1994, respectively.
(m) Reclassifications
Certain reclassifications have been made to the prior years balances to conform with the current year's presentation.
Page 22 of 43 2. BUSINESS ACQUISITIONS AND INVESTMENTS
Premium Group Acquisition
Effective January 1, 1994, the Company purchased certain of the United States and Canadian assets of the Premium Packaging Group of Cascade Paperboard International, Inc. (the "Premium Group") for a cash purchase price of approximately $96.9 million plus the assumption of approximately $9.9 million of liabilities (primarily accounts payable) and transaction expenses. In addition, the Company was contingently liable for an additional $5.0 million of consideration if certain earnings levels related to the combined operations during the four year period following the consummation of the transaction were attained. The Company issued to the seller a warrant, subject to the same contingency, for 35,000 shares of the Company's common stock at an exercise price of $13.50 per share. During 1996 the earnings levels related to this contingency were reached. Accordingly, the warrant is now exerciseable and the Company has recorded the $5.0 million liability to the seller (included in accrued expenses at April 27, 1996 and paid in May 1996 using funds from the Company's revolving line of credit).
At the time of the closing of the Premium Group acquisition transaction, the Company prepaid a total of $31.9 million of Senior Notes. The transaction and prepayment of the Company's Senior Notes were financed with senior credit facilities including $120 million in five-year term loans and $24.0 million of borrowings under a $50.0 million five year revolving credit facility. In connection with the prepayment of the Senior Notes, the Company recorded, in the third quarter of 1994, an extraordinary charge of $3.1 million (after related income tax benefit of $1.9 million) consisting of prepayment penalties and the write-off of deferred finance costs. In December 1995, the Company entered into a new credit agreement with its banks (Note 6).
The Premium Group is a leading supplier of high value-added folding cartons primarily for the tobacco and cosmetic industries in the United States and Canada.
Heminway Acquisition
On January 17, 1994 the Company purchased the operating assets of Heminway Packaging Corporation ("Heminway") for a cash purchase price of $3.7 million plus transaction expenses. Heminway produces rigid set-up boxes primarily for the cosmetics industry, including packaging for perfumes and beauty products. This transaction was financed with funds from the Company's revolving credit facility referred to above.
The Premium Group and Heminway acquisitions were recorded using the purchase method of accounting and accordingly, the results of their operations are included in the consolidated results of operations of the Company since the dates of their respective acquisitions. The excess of cost over the estimated fair value of the net assets acquired approximated $2.2 million at April 30, 1994. During 1995, the Company completed its determination of the allocation of the purchase price with respect to the acquisitions. The result was to increase the excess of cost over the fair value of net assets acquired by $12.5 million, increase accrued expenses by $3.4 million and reduce property, plant and equipment by $9.1 million. Included in the final allocation of the purchase price was an estimate of the cost associated with closing one of the Premium Group's facilities.
Other Investment
In 1996, the Company acquired, for approximately $1.1 million, a 25% interest in a company that develops and manufactures holographic images on film. The agreement provides the Company with an option to acquire up to 51% of the investee under certain conditions, and provides the Company with the right of first refusal to acquire the remaining 49%. This investment was funded through the Company's revolving line of credit. The operations of this investee are not material to the operations of the Company.
Page 23 of 43 The investment was recorded using the equity method of accounting and accordingly, the Company has recorded its proportionate share of the net results of the investee since the date of the investment. In connection with the investment, the Company recorded approximately $830 thousand representing the excess of cost over the Company's portion of the fair value of the net assets of the investee at the date of the investment.
3. INVENTORIES
4. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are recorded at historical cost. Depreciation and amortization of property, plant and equipment was $13.4 million, $12.8 million and $9.8 million in 1996, 1995 and 1994, respectively. Capitalized interest costs related to the construction of plant and equipment were $1.1 million, $377 thousand and $131 thousand in 1996, 1995, and 1994, respectively.
5. ACCRUED EXPENSES
Page 24 of 43 6. LONG-TERM DEBT/FINANCE AGREEMENTS
(a) In connection with the acquisition of the Premium Group and the repayment of certain obligations, the Company entered into term note agreements (totaling $96.0 million in the U.S. and the Canadian equivalent of $24.0 million in Canada) with a syndicate of Banks.
In December 1995, the Company entered into a new senior credit facility. The new facility increased the amount available under the Company's previous credit facility by $41.0 million to $185.0 million. The new facility consists of $120.0 million of senior term notes and $65.0 million of a long-term revolver which bear interest, at the discretion of the Company, at either the Bank's prime rate (8.25% at April 27, 1996) or at the LIBOR rate (one, three, or six-month terms ranging from 5.44% to 5.56% at April 27, 1996) plus between 75 to 125 basis points depending upon certain financial ratios. The effective interest rate on the senior term notes was 6.44% and 6.40% in 1996 and 1995, respectively. The senior term notes will be repaid in quarterly installments through May 7, 2000. The Company has pledged as collateral for the entire facility 100% and 66% respectively, of the outstanding shares of its domestic and foreign subsidiaries. The increased credit facility was made available to facilitate the Company's programs to purchase shares of its common stock as more fully described in Note 8.
In connection with the establishment of the new credit facility, the Company recorded, in the third quarter, an extraordinary charge representing the write-off of previously deferred finance costs incurred in connection with the prior facility of approximately $1.4 million (net of tax benefit of $.8 million).
(b) Borrowings under this $65.0 million revolving credit facility are limited to the sum of 80% of accounts receivable and 50% of inventories (the "Borrowing Base"). The Company has outstanding letters of credit against the revolving line of credit of approximately $1.3 million. At April 27, 1996, the Company has approximately $22.3 million available under the revolving line of credit. The interest rate on these borrowings ranged from 5.94% to 8.25% at April 27, 1996.
The underlying loan agreement for the borrowings referred to in (a) and (b) above includes covenants related to levels of debt to cash flow, current assets to current liabilities, fixed charge coverage, net worth and investments (including investments in the Company's own common stock), and restricts the amount of retained earnings available for payment of dividends. At April 27, 1996, there were no retained earnings available for dividends. The agreement requires the Company to prepay the term notes to the extent of 50% of excess cash flow as defined. Through April 27, 1996, no repayment was required under this provision of the agreement.
Based upon the borrowing rates currently available to the Company for bank loans with similar terms, the fair value of the senior long-term debt approximates the carrying value.
In September 1994, 100% of the Company's $17.5 million of convertible subordinated notes were converted at $13.00 per share into approximately 1.35 million shares of common stock.
Page 25 of 43 Aggregate maturities of long-term debt are as follows:
Interest Rate Swap/Cap Agreements
At April 27, 1996, the Company had an outstanding intermediate-term interest rate swap agreement relating to approximately $33.0 million of its senior term notes. Under the agreement, the Company pays a fixed rate of 6.45% and receives a floating rate based on LIBOR, as determined in one-month intervals (ranging from 5.34% to 6.06% for 1996). The transaction effectively changes a portion of the Company's interest rate exposure from a floating-rate to a fixed-rate basis. The fair value of the interest rate swap agreement at April 27, 1996 was immaterial to the Company. The agreement terminates in February, 1997.
At April 27, 1996, the Company had an outstanding interest rate cap agreement relating to approximately $17.0 million of its senior term notes. Under the agreement, the maximum LIBOR rate is 8.5%. The Company paid $71 thousand for this agreement, which is being amortized over the life of the agreement. The fair value of the interest rate cap agreement at April 27, 1996 was immaterial to the Company. The agreement terminates in February, 1997.
In October 1994, the Company assigned to a bank an interest rate swap agreement relating to $42.0 million of its senior term notes for cash proceeds of approximately $1.3 million. The proceeds have been recorded as a deferred credit on the accompanying balance sheet which is being amortized as a reduction of interest expense over the remaining life of the related swap agreement. At April 27, 1996, $403 thousand of deferred gain remains which will be amortized: $289 thousand in fiscal 1997; and $114 thousand in fiscal 1998.
7. INCOME TAXES
Earnings before provision for income taxes and extraordinary item is comprised of the following:
Page 26 of 43 The provision for income taxes is comprised of the following:
The Company's effective tax rate differs from the statutory U. S. Federal income tax rate as a result of the following:
The tax effects of significant items comprising the Company's net deferred tax liability are as follows:
The valuation allowance has been provided against state net operating loss and investment tax credit carryforwards to reduce them to an amount that will more likely than not be realized.
Page 27 of 43 8. COMMITMENTS AND CONTINGENCIES
(a) Lease Agreements
The Company is committed for annual rentals under noncancellable operating leases for production and office facilities expiring on various dates through 2010. Several leases include one year renewal options. The minimum future rental commitments under noncancellable leases, exclusive of taxes and utilities, are as follows:
Rent expense under operating leases approximated $3.2 million, $3.5 million and $2.4 million in 1996, 1995 and 1994, respectively.
(b) Treasury Stock
In January 1993, the Company's Board of Directors authorized the purchase of up to 2.0 million shares of the Company's common stock and in December 1995, the Board of Directors authorized the purchase of up to an additional 2.0 million shares from time to time in the open market, subject to the terms of the Company's new credit agreement. As of April 27, 1996, approximately 1.7 million shares are authorized for purchase under existing Board of Directors resolutions.
(c) New Facility
In connection with a planned expansion of the Company's facilities, the Company anticipates investing approximately $22.0 million in a new plant and equipment, of which approximately $21.0 million has been disbursed as of April 27, 1996. Funds for this expansion are to be provided from the Company's credit facility.
(d) Legal Matters
In January 1995, the Company commenced a civil action in the Supreme Court of the State of New York against Heminway and certain of its affiliates seeking compensatory and punitive damages and other relief in connection with the January 1994 acquisition by the Company of certain of Heminway's assets. In June 1995, the defendants filed an answer and a counterclaim against the Company's complaint, seeking compensatory damages and sought a declaratory judgment and damages with respect to certain escrowed rents. In April 1996 the Company settled all actions related to these suits for the receipt of a cash payment of $100 thousand and the reduction in future rent payments payable to the former owners of Heminway.
Page 28 of 43 (e) Other Matters
On a continuing basis, the Company monitors its compliance with applicable environmental laws and regulations. As part of this process the Company cooperates with appropriate governmental authorities to perform any necessary testing and compliance procedures. The Company is not currently aware of any environmental compliance matters that it believes will have a material effect on the consolidated financial statements.
9. STOCKHOLDERS' EQUITY
(a) Stock Incentive Plans
In August 1986, the Company established a non-qualified stock option plan (the "1986 Plan") and authorized the issuance of options to purchase an aggregate 847,500 shares of common stock to key employees, officers and directors at the market price at the date of the grant. In October 1990, the Company made available for future grant options to acquire an additional 600,000 shares of common stock under a nonqualified stock option plan. In July 1993, the Company established the 1993 Incentive Program (the "1993 Program"). The 1993 Program permits the granting of any or all of the following types of awards: (i) stock options, including incentive stock options ("ISO's"), (ii) stock appreciation rights ("SAR's"), in tandem with stock options or freestanding, (iii) restricted stock, (iv) director's options to be issued pursuant to a prescribed formula, and (v) restored options. Under the 1993 Program, an additional 1.0 million shares were made available for grant. Options granted prior to fiscal 1996 become exerciseable over four years from the date of grant at a rate of 25% each year, and expire five years from the date of grant. Grants made subsequent to April 29, 1995 are exerciseable over five years from the date of grant at the rate of 20% of the grant each year, and will expire 10 years from the date of grant.
A summary of changes in stock options and awards follows:
At April 27, 1996, options to purchase 506,058 shares were exerciseable at prices ranging from $7.00 to $20.25 per share. During 1996 and 1995 the Company issued a net 6,759 and 114,497 shares of restricted stock, respectively, to certain key employees. A portion or all of the shares may vest at the end of fiscal 1997 based upon the market performance of the Company's common stock. Any shares that do not vest at
Page 29 of 43 such time will otherwise vest at the end of fiscal 2002 if the employee continues to be employed by the Company.
(b) Common Stock Purchase Warrants
During the second quarter of 1996, the Company issued warrants to purchase 400,000 shares of its common stock to a customer who concurrently entered into a long-term supply agreement with the Company. The warrant is exerciseable immediately at $17.13 per share and expires September 1, 2000. At such time as the customer may exercise the warrant, any cash volume discount previously paid to the customer based upon minimum levels of purchases will be refunded to the Company and included in additional paid-in-capital.
During 1993 and the fourth quarter of 1994, the Company issued warrants to purchase 300,000 shares and 100,000 shares of its common stock at exercise prices of $6.88 and $13.50 per share, respectively, to a customer who concurrently entered into long-term supply agreements with the Company (the " Agreements"). The customer has the choice of either exercising the warrants or receiving a cash volume discount based upon certain minimum levels of purchases from the Company during the terms of the Agreements. The warrants are exerciseable immediately whereas the cash volume rebate, if any, is payable after the expiration of the Agreements. The warrants expire August 22, 1997 and August 31, 1998, respectively. At such time as the customer may choose to exercise either of the warrants, the related accrued cash rebate will be transferred to additional paid-in capital. The fair values of the warrants at their dates of issuance were determined to be $855 thousand and $502 thousand, respectively, and are included in the balance sheet net of a deferred contra account in like amount. As of April 27, 1996, the Company continues to believe that the customer will exercise the 300,000 share warrant.
Effective February 1, 1996, the Agreements and the 100,000 share warrant were cancelled and replaced by a new five year supply agreement pursuant to which the customer will receive a cash volume discount based upon certain minimum levels of purchases from the Company during the term of the agreement. In connection with the new agreement, the Company will issue to the customer warrants to purchase 200,000 shares of its common stock at an exercise price equal to the market value on the date of grant. The warrants will be exerciseable immediately upon issuance and expire concurrently with the supply agreement. Upon issuance, the fair value of the warrant will be amortized on a straight line basis over the term of the supply agreement.
(c) Reserved Shares
At April 27, 1996, there were 2,472,435 common shares reserved for issuance under the stock incentive plans and outstanding warrants.
(d) Preferred Stock Purchase Rights
On May 4, 1995, the Board of Directors declared a dividend of one preferred share purchase right (a "Right") for each outstanding share of common stock. Each Right entitles the holder to purchase from the Company one one-hundredth of a share of Series B Junior Participating Preferred Stock at a price of $17.00 per one one-hundredth of a preferred share. The Rights are exerciseable only if an acquiring person acquires, or announces the intention to acquire, 25% or more beneficial ownership of the outstanding common shares. The effect of the Rights plan is to provide to the Company's stockholders the right, upon the occurrence of an acquisition, tender offer or business combination transaction, to exchange the preferred shares for common stock at a fraction of the then-current market price of the common stock. The Rights expire on June 14, 2005 unless extended. The Rights are subject to other restrictions and terms as described in the Rights Agreement.
Page 30 of 43 (e) Related Party Transactions
CIGNA Corporation and its affiliates ("CIGNA"), was the holder of $15.0 million of the Company's debentures, which upon conversion represented 1.15 million shares of common stock. Accordingly, CIGNA has been considered a beneficial owner of more than 5% of the outstanding stock of the Company for the 1995 and 1994 periods presented. Amounts paid to CIGNA for interest and insurance costs for 1995 and 1994 were $685 thousand and $2.9 million, respectively. In addition, in connection with the financing of the acquisition of the Premium Group in January, 1994, the Company prepaid $16.9 million of senior notes due to CIGNA, and incurred a pre-tax prepayment penalty to CIGNA of $2.3 million. This penalty is included in the 1994 financial statements as a part of the total extraordinary item of approximately $3.1 million (after income tax benefit of $1.9 million).
In connection with the acquisition of the Premium Group and related financing, the Company paid a fee of $1.5 million to a firm whose president and principal shareholder is a director of the Company. In addition, the firm exercised options to purchase 14,821 common shares of the Company at an exercise price of $5.02 per share. In connection with the payment of the contingent consideration discussed in Note 2, this firm received an additional $75 thousand fee. In connection with the other investment described in Note 2, this firm received an option to purchase 25,000 shares of the Company's common stock at an exercise price of $13.50.
In May 1995, the Company loaned $2.0 million (included in other assets) to its then Vice Chairman of the Board and President (the "Executive"). The loan is due on May 4, 2000, and bears interest payable quarterly equal to the Applicable Federal Rate as defined (5.23% at April 27, 1996), adjusted monthly. Mandatory prepayments of this loan are required if the Executive's compensation exceeds certain thresholds. In March, 1996 the Company loaned an additional $800 thousand to the Executive, pursuant to a promissory note bearing interest at 6.5% which is due on September 11, 1996.
10. RESTRUCTURING CHARGE
As a result of the discontinued use of the long-box as a packaging medium for compact discs and the related diminished level of sales, the Company decided at the end of the third quarter of fiscal 1994 to close its Farmingdale, New York facility effective as of April 30, 1994. In connection with the closing of this facility and the restructuring of the Company's operations relating thereto, the Company recorded a restructuring charge before provision for income taxes amounting to $3.4 million during 1994. Included in this charge are amounts provided for the termination of leases ($530 thousand), disposal of equipment ($1.0 million), severance payments ($750 thousand), and other related restructuring items ($1.1 million). With the exception of the lease commitments, all of the respective cash outlays related to the closing of the facility were made by the end of 1995.
11. EMPLOYEE BENEFIT PLANS
(a) Defined Contribution Plans
The Company has profit sharing plans as well as employee savings plans. Based upon the provisions of each employee savings plan, the Company matches a portion of the employees' voluntary contributions. The amounts contributed to the profit sharing plan in the United States were at the discretion of the Board of Directors, whereas the amounts contributed to the profit sharing plans in Canada are at the percentages provided for by the respective plans. Total provisions with respect to defined contribution plans approximated $2.2 million, $1.6 million and $977 thousand in 1996, 1995 and 1994, respectively.
Page 31 of 43 (b) Defined Benefit Plans
In connection with the acquisitions of the Premium Group and Heminway, the Company assumed the obligations related to two defined benefit pension plans covering union employees. In addition, the Company established a frozen plan to accept assets to be transferred from a Premium Group defined benefit pension plan, which assets relate to non-union employees who have been transferred to and are now employees of the Company.
The following table sets forth the funded status of the Plans as of April 27, 1996 and April 29, 1995:
(c) 1995 Performance Bonus Plan
In July 1995, the Board of Directors approved the 1995 Performance Bonus Plan (the "Plan"), applicable to its then Vice Chairman of the Board and President only. Under the Plan, for each of the five fiscal years of the Company commencing with fiscal year 1996, the Executive will be entitled to a graduated bonus (the "Performance Bonus") based upon a comparison of the Company's earnings from operations plus depreciation and amortization (the "Performance Measure") in that award year with the immediately preceding fiscal year. The size of the Performance Bonus is tied to the level of the Company's performance, as measured by the Performance Measure, with the larger bonuses available only in the case of truly superior results. The maximum Performance Bonus payable in respect of any award year under the Plan is $2.0 million. No bonus was paid under the terms of this plan for 1996.
A shareholder of the Company has brought a suit in the United States District court, Southern District of New York, seeking to enjoin payment of Performance Bonuses under the 1995 Performance Bonus Plan described above. The Company believes that the suit is without merit and expects to pay Performance Bonuses under the Plan when and if earned. A motion for summary judgment has been filed on behalf of the Company, which is currently pending.
12. MAJOR CUSTOMER AND CREDIT CONCENTRATIONS
Approximately 20% and 16% of net sales during 1996 were derived from sales to two customers and their affiliates. Approximately 17% and 13% of net sales during 1995 were derived from sales to two customers and their affiliates. No one customer accounted for more than 10% of net sales during 1994.
The Company's customers are primarily large entertainment, tobacco and other consumer products companies who produce products in the United States and Canada. At April 27, 1996, approximately 39% and 13% of accounts receivable related to customers in the tobacco and music industries, respectively. Approximately 22% of accounts receivable are due from Canadian companies.
Page 32 of 43 13. GEOGRAPHIC OPERATIONS
The Company's foreign operations are conducted in Canada.
Page 33 of 43 ITEM 9.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None
Page 34 of 43 PART III
Pursuant to instruction G(3) to Form 10-K, the information required in Items 10-13 is incorporated by reference from the Company's definitive proxy statement for the October 30, 1996 annual meeting of stockholders.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a)(1) Financial Statements. See "Index to Financial Statements and Supplementary Data" in Item 8.
(a)(2) Financial Statements Schedules. The financial statement schedules have not been included because they are not applicable or the information is included in financial statements or notes thereto.
(a)(3) Exhibits
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Page 39 of 43 SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SHOREWOOD PACKAGING CORPORATION
By: /s/ Marc P. Shore --------------------------------------------- Marc P. Shore Chairman of the Board and President and Chief Executive Officer
Date: July 18, 1996
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 Company and in the capacities and on the dates indicated.
Page 40 of 43 EXHIBIT INDEX
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