ITEM 1. BUSINESS
GENERAL
Ivex Packaging Corporation, a Delaware corporation (the "Company" or "Ivex"), is a vertically integrated specialty packaging company that designs and manufactures value-added plastic and paper-based flexible packaging products for the consumer and technical packaging markets. Ivex focuses on niche markets which management believes provide attractive margins and growth and where the Company's integrated manufacturing capabilities can enhance its competitive position. Ivex serves a variety of markets, providing packaging for food, medical devices and electronic goods and protective packaging for industrial products.
MARKETS
Consumer Packaging. The Consumer Packaging product group designs and manufactures plastic and paper-based products for food and consumer packaging applications. The Company produces a broad array of items, including plastic containers for prepared foods, produce and baked goods; specialty paper products such as fluted baking cups and liners for cookies and other baked goods; and microwaveable packaging materials. The Consumer Packaging product group markets its products to a variety of end users, including national wholesale bakeries, supermarket chains, foodservice distributors, fast-food chains and major agricultural growers. The Company also manufactures a variety of plastic sheet and film products from several different resins for internal use and sales to third party converters. Ivex is the leading producer of oriented polystyrene ("OPS") sheet in North America. The Consumer Packaging product group represented approximately 61% of the Company's net sales and 69% of the Company's Adjusted EBITDA during the year ended December 31, 1999. The Company's Consumer Packaging product group is hereinafter sometimes referred to as "Consumer Packaging".
Technical Packaging. The Technical Packaging product group manufactures and coats film, paper and foil products for protective packaging and manufactures plastic-based products for applications in the medical and electronics industries. These products are marketed primarily to consumer durable goods manufacturers, automotive companies, other industrial manufacturers, integrated paper producers, medical equipment suppliers and electronics manufacturers. The Company produces products for some of the fastest growing applications in the protective packaging industry, including film and paper maskings and self-sealing coated packaging applications. The Company also manufactures a variety of recycled kraft paper made from post-consumer and post-industrial fibers. The Technical Packaging product group represented approximately 39% of the Company's net sales and 31% of the Company's Adjusted EBITDA during the year ended December 31, 1999. The Company's Technical Packaging product group is hereinafter sometimes referred to as "Technical Packaging".
The Company's principal operating subsidiary is IPC, Inc. ("IPC") and IPC's principal domestic operating subsidiaries are Kama of Illinois Corporation, Plastofilm Industries, Inc., Ultra Pac, Inc. and Ivex Paper Mill Corporation and principal foreign operating subsidiaries are Ivex Corporation, Ivex Holdings, Ltd. and Ivex Plastic Packaging B.V. The following trademarks used herein are owned by the Company or one of its affiliates: Ivex(R), Kama(R), Plastofilm(R), Ultra Pac(R) M&R(TM), Jet-Pak(R), Jet-Lite(R) and Jet-Cor(TM).
On October 6, 1997, the Company completed its initial public offering of 9,660,000 shares of its common stock (the "1997 Common Stock Offering") pursuant to which the Company received net proceeds of $117.3 million which it used, together with the proceeds of a $475.0 million amended and restated credit facility, to redeem all of its then outstanding 13 1/4% Senior Discount Debentures and all of IPC's then outstanding 12 1/2% Senior Subordinated Notes. On May 27, 1998, the Company completed a secondary offering of 4,000,000 shares of its common stock pursuant to which the Company sold 500,000 shares of common stock for net proceeds of $10,707,000. The Company used these net proceeds to reduce borrowings under its revolving credit facility. On November 20, 1998, the Company contributed certain paper assets to Packaging Holdings, L.L.C., in return for a non-consolidated 48.2% joint venture interest.
The Company's principal executive offices are located at 100 Tri-State Drive, Suite 200, Lincolnshire, Illinois 60069, and its telephone number is (847) 945-9100.
GENERAL DESCRIPTION
The following table illustrates the products that Ivex manufactures:
CONSUMER PACKAGING
General. The Consumer Packaging product group is an integrated manufacturer of plastic and paper products for use in a wide array of food applications. The food packaging products are typically used for items sold in supermarkets, wholesale and retail bakeries, fast-food restaurants and institutional foodservice outlets.
Products. Consumer Packaging's products consist primarily of thermoformed plastic containers and paper products used in food packaging applications. Thermoformed plastic packaging includes hinged and two-piece containers, trays for delicatessen foods, salads, cookies, cakes and other items. Paper products consist of single face corrugated paper liners for cookies and other baked goods, microwaveable materials, fluted cups for baking and other specialty paper products.
As part of its integrated operations, Ivex manufactures OPS sheet and also produces OPS film, high impact polystyrene ("HIPS") sheet, polyethylene terephthelate ("PET") sheet, polypropylene ("PP") sheet, high density polyethylene ("HDPE") sheet and polyvinyl chloride ("PVC") sheet. OPS sheet is widely used in packaging applications where clarity, rigidity and material yield are significant considerations. HIPS sheet is used in similar applications where clarity is not as important, but where additional stress or crack resistance is required. PET, PP, HDPE and PVC sheet are also typically used in applications that require stress or crack resistance. OPS film is a thinner gauge version of OPS sheet with applications primarily in windows for envelopes and folding cartons as well as labels. The Company's OPS sheet and film, HIPS sheet, PET sheet, PP sheet, HDPE sheet and PVC sheet are marketed under the Company's Kama(R) brand name.
Markets. The principal markets for Ivex's food packaging products include supermarkets, particularly in-store bakery, delicatessen and prepared food sections; national wholesale bakeries; and food service outlets, particularly fast-food restaurants and institutions such as schools, hospitals and corporate cafeterias.
Ivex employs a national sales force to service each of the specific market segments that it targets. Approximately half of the packaging customers are serviced through distributors, with the balance serviced directly by the Company's national account sales representatives. The Company also markets to end-users served by its distributors, such as small and regional supermarkets and convenience food outlets. Brokers are also used to further penetrate specific geographic markets and access prospective customers.
Manufacturing. The Company's plastic packaging products are manufactured internally at the Company's two polystyrene polymerization, nine extrusion and eleven thermoforming facilities. Polystyrene polymerization is the process of converting liquid styrene monomer into polystyrene through heat and agitation under high pressure. The Company produces high quality polystyrene as measured by the polystyrene's low residual monomer levels.
Extrusion is the process of converting plastic resin into plastic sheet and film used in the thermoforming process. The Company is one of only two OPS producers that have polystyrene polymerization manufacturing facilities.
Ivex's plastic thermoforming and paper converting operations are principally conducted in thirteen facilities located throughout North America and Europe.
TECHNICAL PACKAGING
General. The Technical Packaging product group is an integrated manufacturer and coater of a variety of film, paper and foil products for protective packaging, a manufacturer and coater of various grades of papers and a manufacturer of plastic products used for medical and electronics packaging applications.
Products. Protective packaging products include protective paper and film maskings; self-sealing coated packaging papers, films and corrugated paper; heavy-duty mailing envelopes marketed under the brand names Jet-Lite(R), Jet-Cor(TM) and Jet-Pak(R); sterility packaging for medical applications; and cushioning products for the electronics industry. The Company's manufactured papers include post-consumer and post-industrial recycled paper products (including lightweight kraft paper for grocery and food bags and heavyweight crepe kraft paper for bag closures). The Company's coated papers include water-activated gummed papers used for postage stamps, labels, and envelopes, release papers used for high-pressure decorative laminates, and laminations used for lottery ticket stock and decorative labels. The Company's medical packaging products typically are used by the major medical supply companies for sterility packaging and its electronics packaging products generally are used as cushioning materials.
Markets. The Company's technical packaging products are used in a wide variety of commercial and industrial applications.
Ivex believes that it is one of the largest producers of industrial protective masking materials in North America. The Company's products in this market range from adhesive coated paper and films to coextruded films with adhesive properties. These paper and film maskings are used to protect surfaces during manufacturing, handling, storage and shipping. The Company's products must meet specifications for a broad array of surfaces requiring protection, including glass, plastic, wood, polished and painted metals, automotive trim, plastic laminates, furniture and marble.
Ivex applies adhesive and cohesive coatings to paper, films and single face corrugated paper products for high-speed, high-volume, self-sealing packaging applications. A cohesive package is designed to stick to itself and not to the contents. The Company uses proprietary formulations of adhesive and cohesive materials to meet specialized customer requirements. Typical end-users of self-sealing packaging systems are the major U.S. automotive parts manufacturers and book publishers. The Company also produces water-activated gummed printing papers used for labels, commercial and postage stamps and business forms and release papers that are used in the manufacture of high pressure decorative laminates.
All of Ivex's low density polyethylene film is used internally in the production of its film masking and self-sealing packaging products and approximately 19% of the Company's recycled kraft paper is used internally in the production of single face corrugated paper, cohesive coated paper and mailing envelopes. Principal third-party markets for the Company's manufactured paper products are food packaging, industrial packaging, bag converting and industrial converting, including grocery and food bags; envelopes; and bag closures in pet food, seed, and fertilizer packaging. These markets require high service levels, including fast delivery and the ability to produce a variety of colors, weights and formulations. Customers for the Company's manufactured paper products include large, integrated paper producers as well as packaging companies.
The principal markets for the Company's medical and electronics packaging include medical device and supply manufacturers and electronics manufacturers.
Manufacturing. Ivex's primary raw materials for protective packaging products, principally low density polyethylene, specialty chemicals, paper and extruded plastic sheet, are obtained from external sources as well as from the Company's low density polyethylene extrusion facility, recycled paper mill operations and other extrusion facilities.
Ivex's coating and paper converting operations are conducted at ten facilities throughout the U.S. and Canada while medical and electronics packaging is manufactured at six facilities in North America, Europe and Southeast Asia.
All of the paper produced at the Company's three paper mills is made entirely from post-consumer and post-industrial fibers, including old corrugated containers ("OCC") and double-lined kraft ("DLK"). The Company was among the first to use 100% recycled post-industrial fibers at one of its mills.
COMPETITION
The Company operates in markets that are highly competitive and faces substantial competition throughout all of its product lines from numerous national and regional companies. Many of these competitors are considerably larger than the Company and have substantially greater financial and other resources than the Company, while others are significantly smaller with lower fixed costs and greater operating flexibility. In addition to price, competition with respect to many of the Company's products is based on quality, supplier response time, service and timely and complete order fulfillment.
The Company's main competitor in the supermarket and foodservice segments is Pactiv Corporation. In the bakery area, the Company competes primarily with Detroit Forming Inc. in plastic products and Fort James Corporation in paper products. The Company competes with several manufacturers of OPS sheet, including Detroit Forming and Plastic Suppliers, Inc. In the medical and electronics markets, the Company competes with many regional thermoformers, including Prent Corporation and Placon Corp. The Company competes primarily with Dow Chemical Company in the OPS film market. Ivex's major competitors in protective masking include a joint venture between Minnesota Mining and Manufacturing Company and Sealed Air Corporation, American Biltrite, Inc. and Main Tape Company, Inc. The Company competes primarily with Sealed Air Corporation and AVI Products, Inc. in the mailing envelope market.
EMPLOYEES
As of December 31, 1999, the Company had 34 employees at its Lincolnshire, Illinois corporate headquarters and had 4,350 employees at plant locations, of which 964 were salaried and 3,386 were hourly. Of the hourly workers, approximately 1,205 were members of unions. The Company has collective bargaining agreements with nine unions in effect with respect to certain hourly employees at the Company's Joliet, Peoria, Chagrin Falls, Troy, Newton, Avenel, Grove City, Elyria, Newcastle, Wakefield and Laval facilities. There have been no significant interruptions or curtailments of operations due to labor disputes in the last five years, and the Company believes that relations with its employees are good. The collective bargaining agreements at the Company's facilities in Elyria, Joliet, Peoria and Laval will expire in 2000; the collective bargaining agreement at the Company's facilities in Grove City, Newcastle and Wakefield will expire in 2001; and the collective bargaining agreement at the Company's facilities in Avenel, Newton, Troy and Chagrin Falls will expire in 2002.
RAW MATERIALS
Styrene monomer, polystyrene, polyethylene, polypropylene, polyvinyl chloride and various paper-based commodities (primarily recycled fiber) constitute the principal raw materials used in the manufacture of the Company's products. Generally, these raw materials are readily available from a wide variety of suppliers. Costs for all of the significant raw materials used by the Company tend to fluctuate with various economic factors which generally affect the Company and its competitors. The availability of raw materials was adequate during 1999 although prices for certain items such as styrene monomer, polystyrene, OCC and DLK have been volatile and may continue to fluctuate, in some instances adversely to the Company.
TRADEMARKS, PATENTS AND LICENSES
While the Company has registered and unregistered trademarks for many of its product lines, these trademarks, other than the Company's rights to the trademarks "Ivex(R)", "Ultra Pac(R)", "Plastofilm(R)" and "Kama(R)", are not considered material to the conduct of the Company's business. The Company owns or licenses a number of patents but such patents and licenses are not considered material to the conduct of the Company's business and the Company does not believe that any of its businesses are substantially dependent on patent protection. The Company's material proprietary technologies are considered by the Company to be trade secrets and know-how and are not protected by patents or licenses.
CUSTOMERS, SALES AND BACKLOG
No material portion of the Company's business is dependent upon a single or very few customers, except that the Company's extruded OPS film is sold principally to one customer with which the Company believes that it has a good relationship. No one customer accounted for more than 10% of the Company's aggregate net sales for the fiscal year ended December 31, 1999. In general, the backlog of orders is not significant or material to an understanding of the Company's businesses.
ENVIRONMENTAL MATTERS AND GOVERNMENT REGULATION
The past and present business operations of the Company and the past and present ownership and operations of real property by the Company are subject to extensive and changing federal, state, local and foreign environmental laws and regulations pertaining to the discharge of materials into the environment, the handling and disposition of wastes (including solid and hazardous wastes) or otherwise relating to the protection of the environment. As is the case with manufacturers in general, if a release of hazardous substances occurs on or from the Company's properties or any associated offsite disposal location, or if contamination from prior activities is discovered at any of the Company's properties, the Company may be held liable. From time to time, the Company is involved in regulatory proceedings and inquiries relating to compliance with environmental laws, permits and other environmental matters.
The Company is currently involved with environmental remediation and on-going maintenance at certain of its facilities. The Company believes that the costs of such remediation have been adequately reserved for and that such costs are unlikely to have a material adverse effect on the Company. No assurance can be given, however, that additional environmental issues relating to the presently known remediation matters or identified sites or to other sites or matters will not require additional investigation, assessment or expenditures. The Company has a reserve of approximately $1.6 million as of December 31, 1999 for its known future environmental remediation costs. Because an environmental reserve is not established until a liability is determined to be probable and reasonably estimable, all potential future remedial costs may not be covered by this reserve. The Company has made and will continue to make capital expenditures to maintain compliance with environmental requirements. The Company does not expect its 2000 and 2001 spending on environmental capital projects to be material.
During 1991, the Company responded to an information request regarding the Global Landfill, New Jersey site and since such time has not received any further notifications regarding such site. During 1993, the Company was named a PRP at the Delta Chemicals, Pennsylvania Superfund site and in 1995 the Company paid a de minimis settlement of less than $20,000 at that site. During 1995, the Company paid $500 in connection with a de minimis consent order relating to the American Chemical Service site. In addition, over the past few years, the Company has received notices of potential liability relating to three Superfund sites for which the Company believes a former owner of the facilities subject to such notices will be responsible, and the Company has forwarded such notices to such former owner and has had no further involvement at those sites. In addition, during 1996 the Company answered a complaint regarding the Huth Oil, Ohio Superfund site and during 1997 this claim was voluntarily dismissed by the plaintiffs in the action. In addition, during 1998, the Company received a notice for potential liability relating to the Pfohl Brothers Cheektowaga, New York landfill site but to date has not received any further notifications regarding such site, and during 1999, the Company received a request for information regarding wastewater discharges to the Fox River and the Green Bay, but to date has not received any further notifications regarding such site. Although the Company endeavors to carefully manage its waste, because Superfund liability is strict and retroactive, it is possible that in the future the Company may be identified as a PRP with respect to other waste disposal sites.
The plastics industry, in general, and the Company also are subject to existing and potential federal, state, local and foreign legislation designed to reduce solid wastes by requiring, among other things, plastics to be degradable in landfills, minimum levels of recycled content, various recycling requirements, disposal fees and limits on the use of plastic products. In addition, various consumer and special interest groups have lobbied from time to time for the implementation of these and other such similar measures. Although the Company believes that the legislation promulgated to date and such initiatives to date have not had a material adverse effect on the Company, there can be no assurance that any such future legislative or regulatory efforts or future initiatives would not have a material adverse effect on the Company.
The United States Food and Drug Administration (the "FDA") regulates the content of direct-contact food containers and packages, including containers and packages made from recycled OPS and paper products. The FDA currently limits the amount of recycled materials that can be used in such containers and packages. To comply with these regulations, the Company has instituted various compliance programs.
FINANCIAL INFORMATION ABOUT SEGMENTS
The Company's financial information about industry segments will be set forth in the Company's Annual Report to Stockholders relating to the Annual Meeting of Stockholders to be held on April 26, 2000.
FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS
The Company's financial information about geographic areas will be set forth in the Company's Annual Report to Stockholders relating to the Annual Meeting of Stockholders to be held on April 26, 2000.
ITEM 2.
ITEM 2. PROPERTIES
The Company and its subsidiaries use various owned and leased plants, warehouses and other facilities in their operations. The facilities are considered to be suitable and adequate for the conduct of the businesses involved although the machinery, plant and equipment at such facilities are, from time to time, subject to scheduled and unscheduled maintenance. As of March 1, 2000, the Company had thirty-four non-warehouse facilities and, except as noted below, all are owned by IPC or a subsidiary of IPC. With certain limited exceptions, all of the owned real estate is subject to mortgages securing IPC's indebtedness under the Company's existing credit facility.
(1) Leased facility, with its lease expiring on December 31, 2003, subject to IPC's right to extend the lease for two successive five-year periods upon IPC's written notice to the lessor thereof not more than 12 nor less than 6 months prior to the end of the then current lease term.
(2) Leased facility, with its lease expiring on January 8, 2003.
(3) Leased facility, with its lease expiring on September 30, 2001, subject to IPC's right to extend the lease for an additional five-year period and, upon specified terms and conditions, to purchase the property.
(4) This facility is held subject to an installment sales contract with Grove City Industrial Development Corporation that holds title to the facility.
(5) Leased facility, with its lease expiring on October 4, 2003, subject to IPC's right to extend the lease for one successive five-year period upon IPC's written notice to lessor not more than 24 nor less than 6 months prior to the end of the lease term.
(6) Leased facility, with its lease expiring on April 30, 2004, subject to the Company's right to extend the lease for three additional five-year periods upon written notice thereof at least 120 days prior to the end of the then existing lease term.
(7) Leased facility, with its lease expiring on December 5, 2001, with three one-year options to extend.
(8) A portion of this facility is leased with the three leases expiring on January 1, 2002, February 1, 2010 and February 1, 2010. Each of these three leases contains a three-year extension option and an option, upon specified terms and conditions, to purchase the portion of the facility subject to such lease.
(9) Leased facility, with its lease expiring on April 30, 2000.
(10) Leased facility, with its lease expiring on May 10, 2016.
(11) Leased facility, with its lease expiring on March 31, 2000.
(12) Leased facility, with its lease expiring on December 31, 2000.
(13) Leased facility, with three leases, one expiring on December 31, 2001 and two expiring on December 31, 2002.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
From time to time the Company and its subsidiaries are involved in various litigation matters arising in the ordinary course of business. The Company believes that none of the matters in which the Company or its subsidiaries are currently involved, either individually or in the aggregate, is material to the Company.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
EXECUTIVE OFFICERS OF THE COMPANY
Set forth below are the name, age, positions and offices held (as of the date hereof) and a brief account of the business experience for each executive officer of the Company.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock trades on the New York Stock Exchange and the Chicago Stock Exchange, under the ticker symbol IXX. The high and low sales prices for the common stock by quarter during 1998 and 1999 as reported by the New York Stock Exchange are shown below.
PRICES PRICES 1999 ---------------------- 1998 -------------------- QUARTERS QUARTERS ENDED HIGH LOW ENDED HIGH LOW -------------- ---------- ---------- ------------------------- ---------- 12/31/99 12 7/8 6 7/8 12/31/98 23 3/8 13 1/2 9/30/99 22 1/2 9 3/4 9/30/98 24 1/8 13 5/8 6/30/99 22 13 3/4 6/30/98 29 1/2 21 3/31/99 26 1/8 13 5/8 3/31/98 25 1/4 19 5/8
The approximate number of shareholders of record of the Company's common stock as of March 1, 2000 was 228 holders. The Company has never paid cash dividends on its common stock. Any payment of cash dividends in the future will be at the discretion of the Company's Board of Directors and will depend upon the financial condition, capital requirements and earnings of the Company as well as other factors that the Company's Board of Directors may deem relevant. In addition, the Company's senior credit facility prohibits the payment of dividends on the Company's common stock.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Information regarding the Company's selected financial data will be set forth in the Company's Annual Report to Stockholders relating to the Annual Meeting of Stockholders to be held on April 26, 2000 and, to the extent required, is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Information regarding management's discussion and analysis of financial condition and results of operation will be set forth in the Company's Annual Report to Stockholders relating to the Annual Meeting of Stockholders to be held on April 26, 2000 and, to the extent required, is incorporated herein by reference.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain statements herein constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 (the "Reform Act") and are identified by the use of forward looking words and phrases, such as "estimates," "plans," "expects," "to continue," "subject to," "target" and such other similar phrases. These forward looking statements are based on the current expectations of the Company. Because forward looking statements involve risks and uncertainties, the Company's plans, actions and actual results could differ materially. Among the factors that could cause plans, actions and results to differ materially from current expectations are: (i) changes in consumer demand and prices resulting in a negative impact on revenues and margins; (ii) raw material substitutions and increases in the costs of raw materials, utilities, labor and other supplies (see "Business-Raw Materials"); (iii) increased competition in the Company's product lines (see "Business-Competition"); (iv) changes in capital availability or costs; (v) workforce factors such as strikes or labor interruptions; (vi) the ability of the Company and its subsidiaries to develop new products, identify and execute capital programs and efficiently integrate acquired businesses; (vii) the cost of compliance with applicable governmental regulations and changes in such regulations, including environmental regulations (see "Business-Environmental Matters and Government Regulations"); (viii) the general political, economic and competitive conditions in markets and countries where the Company and its subsidiaries operate, including currency fluctuations and other risks associated with operating in foreign countries (see "Management's Discussion and Analysis of Financial Condition and Results of Operations-Quantitative and Qualitative Disclosures about Market Risk"); (ix) the timing and occurrence (or non-occurrence) of transactions and events which may be subject to circumstances beyond the control of the Company and its subsidiaries; and (x) the Company's actual performance and highly leveraged financial condition (see Management's Discussion and Analysis of Financial Conditions and Results of Operation-Liquidity and Capital Resources").
ITEM 7A.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
FOREIGN EXCHANGE. The Company uses primarily foreign exchange forward contracts to hedge its exposure from adverse changes in foreign exchange rates. A 10% unfavorable movement in the foreign exchange rates would not expose the Company to material losses in earnings or cash flows.
INTEREST RATES. The Company uses interest rate swaps and collars to modify its exposure to interest rate movements and to reduce borrowing costs. The Company's net exposure to interest rate risk consists of floating rate debt instruments that are benchmarked to LIBOR. As of December 31, 1999 the Company had $320 million notional value of interest rate derivatives outstanding (described below). A 10% unfavorable movement in LIBOR rates would not expose the Company to material losses of earnings or cash flows.
The Company has entered into interest rate swap agreements with a group of banks having notional amounts totaling $160.0 million and various maturity dates through November 5, 2002. These agreements effectively fix the Company's LIBOR base rate for $160.0 million of the Company's indebtedness at rates from 5.33% to 6.12% during this period. The Company has entered into no cost interest rate collar agreements with a group of banks having notional amounts totaling $100.0 million through November 5, 2002. These collar agreements effectively fix the LIBOR base rate for $100.0 million of the Company's indebtedness at a maximum of 7.00% and allow for the Company to pay the market LIBOR from a floor of 5.55% to the maximum rate. If LIBOR falls below 5.55%, the Company is required to pay the floor rate of 5.55%. The Company has also entered into no cost interest rate collar agreements with a group of banks having notional amounts totaling $60.0 million through November 5, 2001. These collar agreements effectively fix the LIBOR base rate for $60.0 million of the Company's indebtedness at a maximum of 5.31% and allow for the Company to pay the market LIBOR from a floor of 4.47% to the maximum rate. If LIBOR falls below 4.47%, the Company is required to pay the floor rate of 4.47%. Income or expense related to settlements under these agreements is recorded as adjustments to interest expense in the Company's financial statements. The fair market value of the Company's derivative instruments outlined above approximates a gain of $5.5 million as of December 31, 1999 and is based upon the amount at which it could be settled with a third party, although the Company has no current intention to trade any of these instruments and plans to hold them as hedges for the Senior Credit Facility.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Company's financial statements, supplementary data, financial information about segments and financial information about geographic areas will be set forth in the Company's Annual Report to Stockholders relating to the Annual Meeting of Stockholders to be held on April 26, 2000 and is incorporated herein by reference.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None.
PART III
With respect to Items 10 through 13, the Company will file with the Securities and Exchange Commission, within 120 days of the close of its fiscal year, a definitive proxy statement pursuant to Regulation 14-A under the Securities Exchange Act of 1934 (the "Proxy Statement").
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding directors of the Company will be set forth in the Company's Proxy Statement relating to the Annual Meeting of Stockholders to be held on April 26, 2000 and, to the extent required, is incorporated herein by reference. Information regarding executive officers of the Company is set forth under the caption "Executive Officers."
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
Information regarding executive compensation will be set forth in the Company's Proxy Statement relating to the Annual Meeting of Stockholders to be held on April 26, 2000 and, to the extent required, is incorporated herein by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information regarding security ownership of certain beneficial owners and management will be set forth in the Company's Proxy Statement relating to the Annual Meeting of Stockholders to be held on April 26, 2000 and, to the extent required, is incorporated herein by reference.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information regarding certain relationships and related transactions will be set forth in the Company's Proxy Statement relating to the Annual Meeting of Stockholders to be held on April 26, 2000 and, to the extent required, is incorporated herein by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) The following financial statements of the Company will be set forth in the Company's Annual Report to Securityholders relating to the Annual Meeting of Stockholders to be held on April 26, 2000 and, to the extent required, are incorporated herein by reference:
All other schedules of the Company for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required, are inapplicable or have been disclosed in the notes to the consolidated financial statements and therefore have been omitted.
(A)(3) EXHIBITS.
* Filed herewith.
(1) Management contact or compensatory plan or arrangement required to be filed as an Exhibit to this Form 10-K pursuant to Item 14(c) of this report.
(b) Reports on Form 8-K.
None
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 ON MARCH __, 2000.
IVEX PACKAGING CORPORATION
By: /s/ George V. Bayly ------------------- Name: George V. Bayly Title: President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature to this Report appears below hereby constitutes and appoints G. Douglas Patterson as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution for such person and in such person's name, place and stead, in any and all capacities, to sign and to file with the Securities and Exchange Commission any and all amendments to this Report, with exhibits thereto and other documents in connection therewith, hereby ratifying and confirming all that said attorney-in-fact and agent, or any substitute therefore, may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED ON MARCH __, 2000.
SIGNATURE TITLE ------------------- ----------------------------------------
/s/ George V. Bayly Director, Chairman of the Board, ------------------- President and Chief Executive Officer George V. Bayly (Principal Executive Officer)
/s/ Frank V. Tannura Director, Executive Vice President and Chief -------------------- Financial Officer (Principal Financial Frank V. Tannura Officer)
/s/ David E. Wartner Vice President and Corporate Controller -------------------- (Principal Accounting Officer) David E. Wartner
/s/ Glenn R. August Director ------------------- Glenn R. August
/s/ Anthony P. Scotto Director --------------------- Anthony P. Scotto
/s/ William J. White Director -------------------- William J. White
/s/ R. James Comeaux Director -------------------- R. James Comeaux
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of Ivex Packaging Corporation
Our audits of the consolidated financial statements referred to in our report dated January 27, 2000, appearing on page 55 of the 1999 Annual Report to Stockholders of Ivex Packaging Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedules listed in Item 14 (a) of this Form 10-K. In our opinion, these Financial Statement Schedules present fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements.
/s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP
Chicago, Illinois January 27, 2000
IVEX PACKAGING CORPORATION
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
BALANCE SHEETS (DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
DECEMBER 31, 1999 1998 -------- --------
ASSETS Current Assets: Cash and cash equivalents $ 9 $ 9 -------- --------- Total current assets 9 9 Investment in subsidiary 73,418 73,418 Due from IPC, Inc. 23,515 24,475 -------- --------- Total assets $ 96,942 $ 97,902 ======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity: Common stock, $.01 par value - 45,000,000 shares authorized 20,793,469 and 20,931,268 shares issued and outstanding $ 209 $ 209 Paid in capital in excess of par value 339,354 339,098 Treasury stock (1,216) -------- --------- Accumulated deficit (241,405) (241,405) -------- --------- Total stockholders' equity 96,942 97,902 -------- --------- Total liabilities and stockholders' equity $ 96,942 $ 97,902 ======== =========
See Notes to Consolidated Financial Statements in Item 8.
IVEX PACKAGING CORPORATION
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS)
FOR THE YEARS ENDED DECEMBER 31, ------------------------------------ 1999 1998 1997 ------- ------- -------- Interest expense $ $ $ 11,447 ------- ------- -------- Loss before extraordinary loss (11,447) Extraordinary loss (22,297) ------- ------- -------- Net loss $ $ $(33,744) ======= ======= ========
See Notes to Consolidated Financial Statements in Item 8.
IVEX PACKAGING CORPORATION
SCHEDULE I -- CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
See Notes to Consolidated Financial Statements in Item 8.
IVEX PACKAGING CORPORATION SCHEDULE I -- CONDENSED FINANCIAL INFORMATION (PARENT COMPANY ONLY)
STATEMENTS OF CASH FLOWS (DOLLARS IN THOUSANDS)
See Notes to Consolidated Financial Statements in Item 8.
IVEX PACKAGING CORPORATION
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS AND RESERVES (DOLLARS IN THOUSANDS)
(1) Reflects additions of $328, $388 and $107 associated with acquisitions for the years ended December 31, 1999, 1998 and 1997, respectively.
(2) Accounts charged off, less recoveries.
(3) Includes $261 as a result of the disposition of the Company's Detroit paper mill.
(4) Reflects the utilization of net operating loss carryovers for a portion of 1997 and the reversal of $13,200 of valuation allowance during the third quarter of 1997.
EXHIBIT INDEX
(1) Management contract or compensatory plan or arrangement required to be filed as an Exhibit to this Form 10-K pursuant to Item 14(c) of this report.
* Filed herewith.