Subsequent Events
In January 2001, we initiated a plan to close our paperboard mill located in Chicago, Illinois and will record a pretax restructuring charge to operations of approximately $4.4 million in the first quarter of 2001. We expect that the first quarter earnings per share impact of this charge will be approximately $0.10. This mill contributed $12.6 million in net sales in 1999 and $13.4 million in net sales in 2000 and incurred operating losses of $2.6 million in 1999 and $1.5 million in 2000. We expect the proceeds from the sale of the real estate, which is prime waterfront real estate in downtown Chicago, to more than offset the pretax charge.

Also in January 2001, we initiated a plan to consolidate the operations of our Salt Lake City, Utah carton plant into our Denver, Colorado carton plant and will record a pretax restructuring charge to operations of approximately $2.1 million in the first quarter of 2001. We expect that the first quarter earnings per share impact of this charge will be approximately $0.05. We expect that future cost savings will more than offset the pretax charge in 2001.

In February 2001, we announced that we would reduce our first quarter dividend by one-half to $0.09 per issued and outstanding common share. We decided to reduce the quarterly dividend to preserve our financial flexibility in light of difficult industry conditions. As discussed below, the new debt agreements contain certain limitations on our ability to pay future dividends.

On March 22, 2001, we obtained commitments and executed an agreement for the issuance of $285.0 million of 9 7/8% senior subordinated notes due April 1, 2011 and $29.0 million of 7 1/4% senior notes due May 1, 2010. These senior subordinated notes and senior notes were issued at a discount to yield effective interest rates of 10.5% and 9.4%, respectively. Under the terms of the agreement, we received aggregate proceeds, net of issuance costs, of approximately $291.4 million on March 29, 2001. These proceeds were used to repay borrowings outstanding under our senior credit facility and 7.74% senior notes. In connection with the repayment of the 7.74% senior notes, we incurred a repayment penalty of approximately $3.6 million. The difference between issue price and principal amount at maturity of our newly issued 7 1/4% senior and 9 7/8% senior sobordinated notes will be accreted each year as interest expense in our financial statements. These newly issued notes are unsecured, but are guaranteed, on a joint and several basis, by all of our domestic subsidiaries, other than one that is not wholly owned.

On March 29, 2001, we obtained a new credit facility that provides for a revolving line of credit in the principal amount of $75.0 million for a term of three years, including subfacilities for swingline loans and letters of credit. No borrowings were outstanding under the facility as of March 30, 2001, although certain letter of credit obligations outstanding under our former credit facility will be transferred to the new credit facility. We intend to use the facility for working capital, capital expenditures and other general corporate purposes. Although the facility is unsecured, our obligations under the facility are unconditionally guaranteed, on a joint and several basis, by all of our existing and subsequently acquired wholly owned domestic subsidiaries.

Borrowings under the new facility will bear interest at a rate equal to, at our option, either (1) the base rate (which is equal to the greater of the prime rate most recently announced by the administrative agent under the facility or the federal funds rate plus one-half of 1%) or (2) the adjusted Eurodollar Interbank Offered Rate, in each case plus an applicable margin determined by reference to our leverage ratio (which is defined under the facility as the ratio of our total debt to our total capitalization). The initial applicable margins are 2.0% for Eurodollar rate loans and 0.75% for base rate loans. The initial margins are subject to reduction beginning six months after closing based on our leverage ratio. Additionally, the undrawn portion of the facility is subject to a facility fee at an initial rate per annum of 0.5%, again subject to reduction after six months based on our leverage ratio.

The facility contains covenants that restrict, among other things, our ability and our subsidiaries’ ability to create liens, merge or consolidate, dispose of assets, incur indebtedness and guarantees, pay dividends, repurchase or redeem capital stock and indebtedness, make certain investments or acquisitions, enter into certain transactions with affiliates, make capital expenditures or change the nature of our business. The facility also contains several financial maintenance covenants, including covenants establishing a maximum leverage ratio (as described above), minimum tangible net worth and a minimum interest coverage ratio.

The facility contains events of default including, but not limited to nonpayment of principal or interest, violation of covenants, incorrectness of representations and warranties, corss-default to other indebtedness, bankruptcy and other insolvency events, material judgments, certain ERISA events, actual or asserted invalidity of loan documentation and certain changes of control of our company.

Georgia-Pacific Litigation
We are currently litigating with Georgia-Pacific, formerly our largest gypsum facing paper customer, over its refusal to continue purchasing its requirements of gypsum facing paper for certain plants pursuant to the terms of a long-term supply contract. The contract was executed in April 1996 and terminates on August 20, 2005, unless extended. We believe that the express language of the contract requires Georgia-Pacific to purchase from us all paper products used in wallboard manufacturing at the Georgia-Pacific wallboard plants designated in the contract, and the parties generally had performed their respective obligations under the contract in accordance with this requirement since inception. In the third quarter of 2000, Georgia-Pacific asserted the position that the contract does not include certain grades of facing paper and that Georgia-Pacific would manufacture these grades for itself. By the end of the third quarter, Georgia-Pacific’s purchases fell by more than 80% from the 7,000 tons per month that prevailed in the first half of 2000. Shipments to Georgia-Pacific in the fourth quarter of 2000 fell below 300 tons per month and are expected to continue at such levels. As a result of this loss in volume, we closed our Camden paperboard mill and lost volume amounting to approximately 40% of the capacity of our Buffalo paperboard mill.

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