Attached files
| file | filename |
|---|---|
| 8-K/A - 8-K - KAPSTONE PAPER & PACKAGING CORP | a11-30308_18ka.htm |
| EX-23.1 - EX-23.1 - KAPSTONE PAPER & PACKAGING CORP | a11-30308_1ex23d1.htm |
| EX-99.1 - EX-99.1 - KAPSTONE PAPER & PACKAGING CORP | a11-30308_1ex99d1.htm |
| EX-99.3 - EX-99.3 - KAPSTONE PAPER & PACKAGING CORP | a11-30308_1ex99d3.htm |
Exhibit 99.2
U.S. CORRUGATED, INC.
INDEX
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Page |
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PART I |
FINANCIAL INFORMATION |
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Item 1. |
Financial Statements (Unaudited) |
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Condensed Consolidated Balance Sheets as of October 1, 2011 and January 1, 2011 |
2 |
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Condensed Consolidated Statements of Operations for the thirty-nine weeks ended October 1, 2011 and October 2, 2010 |
3 |
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Condensed Consolidated Statements of Changes in Shareholders’ Equity for the thirty-nine weeks ended October 1, 2011 |
4 |
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Condensed Consolidated Statements of Cash Flows for the thirty-nine weeks ended October 1, 2011 and October 2, 2010 |
5 |
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Notes to Condensed Consolidated Financial Statements |
6 |
U.S. CORRUGATED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
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October 1, |
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January 1, |
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2011 |
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2011 |
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(Unaudited) |
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ASSETS |
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CURRENT ASSETS: |
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Cash |
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$ |
2,806 |
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$ |
6,262 |
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Trade accounts receivable, net of allowance for doubtful accounts of $1,150 and $1,380 respectively |
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62,565 |
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55,077 |
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Inventories |
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39,986 |
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39,399 |
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Deferred income taxes |
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5,325 |
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5,325 |
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Other current assets |
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15,706 |
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13,353 |
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Total current assets |
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126,388 |
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119,416 |
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PROPERTY AND EQUIPMENT—Net |
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90,699 |
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94,260 |
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GOODWILL |
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33,611 |
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33,611 |
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INTANGIBLE ASSETS |
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15,589 |
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16,867 |
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OTHER ASSETS |
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6,860 |
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8,445 |
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TOTAL |
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$ |
273,147 |
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$ |
272,599 |
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LIABILITIES AND SHAREHOLDERS’ EQUITY |
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CURRENT LIABILITIES: |
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Current maturities of long-term debt |
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$ |
1,712 |
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$ |
1,842 |
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Accounts payable—trade |
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40,940 |
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43,182 |
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Accrued expenses and other current liabilities |
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18,287 |
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15,139 |
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Total current liabilities |
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60,939 |
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60,163 |
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LONG-TERM DEBT—Net of current maturities |
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157,889 |
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157,783 |
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DEFERRED INCOME TAXES |
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21,661 |
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22,702 |
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OTHER LONG-TERM LIABILITIES |
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1,998 |
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2,749 |
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Total liabilities |
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242,487 |
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243,397 |
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SHAREHOLDERS’ EQUITY: |
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Capital stock |
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749 |
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749 |
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Additional paid-in capital |
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37,753 |
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37,614 |
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Retained earnings |
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(8,468 |
) |
(9,971 |
) | ||
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Total shareholders’ equity USC and Subsidiaries |
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30,034 |
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28,392 |
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Non-controlling interest |
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626 |
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810 |
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Total shareholders’ equity |
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30,660 |
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29,202 |
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TOTAL |
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$ |
273,147 |
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$ |
272,599 |
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See notes to condensed consolidated financial statements.
U.S. CORRUGATED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS- Unaudited
(In thousands)
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Thirty-nine weeks ended |
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October 1, 2011 |
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October 2, 2010 |
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NET SALES |
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$ |
433,282 |
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$ |
407,216 |
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COST OF GOODS SOLD Excludes production expense of $95.0 million and $90.8 million for the thirty-nine weeks ended October 1, 2011 and October 2, 2010, respectively. |
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239,345 |
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223,179 |
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GROSS PROFIT |
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193,937 |
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184,037 |
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PRODUCTION AND DISTRIBUTION EXPENSES |
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120,644 |
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113,218 |
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SELLING AND ADMINISTRATIVE EXPENSES |
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58,171 |
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55,946 |
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INCOME FROM OPERATIONS |
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15,122 |
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14,873 |
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OTHER INCOME (EXPENSES): |
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Interest expense |
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(11,540 |
) |
(11,404 |
) | ||
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Amortization of Deferred Financing Costs |
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(1,271 |
) |
(1,151 |
) | ||
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Other—net |
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(9 |
) |
(29 |
) | ||
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Total other expenses |
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(12,820 |
) |
(12,584 |
) | ||
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INCOME BEFORE INCOME TAX EXPENSE |
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2,302 |
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2,289 |
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INCOME TAX EXPENSE |
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(685 |
) |
(687 |
) | ||
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NET INCOME |
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1,617 |
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1,602 |
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LESS: NET INCOME ATTRIBUTABLE TO NON-CONTROLLING INTERESTS |
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114 |
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49 |
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NET INCOME ATTRIBUTABLE TO CONTROLLING INTERESTS |
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$ |
1,503 |
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$ |
1,553 |
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See notes to condensed consolidated financial statements.
U.S. CORRUGATED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN
SHAREHOLDERS’ EQUITY - Unaudited
(in thousands)
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Additional |
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Retained |
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Total Share- |
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Non- |
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Common |
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Paid-in |
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Earnings |
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Holders’ Equity |
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Controlling |
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Stock |
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Capital |
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(Deficit) |
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USC & Subs |
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Interest |
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Total |
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Balance, January 1, 2011 |
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$ |
749 |
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$ |
37,614 |
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$ |
(9,971 |
) |
$ |
28,392 |
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$ |
810 |
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$ |
29,202 |
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Net income for the thirty-nine weeks ended October 1, 2011 |
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— |
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— |
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1,503 |
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1,503 |
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114 |
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1,617 |
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Net distribution from Variable Interest Entity |
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— |
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— |
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— |
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— |
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(298 |
) |
(298 |
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Stock based compensation |
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— |
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139 |
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— |
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139 |
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— |
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139 |
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Balance, October 1, 2011 |
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$ |
749 |
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$ |
37,753 |
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$ |
(8,468 |
) |
$ |
30,034 |
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$ |
626 |
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$ |
30,660 |
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See notes to condensed consolidated financial statements.
U.S. CORRUGATED, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - Unaudited
(in thousands)
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Thirty-nine weeks ended |
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October 1, 2011 |
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October 2, 2010 |
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OPERATING ACTIVITIES: |
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Net income |
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$ |
1,617 |
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$ |
1,602 |
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Adjustments to reconcile net income to net cash provided by operating activities: |
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Depreciation of fixed assets and capitalized software |
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10,920 |
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10,125 |
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Amortization of intangible assets |
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1,643 |
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2,564 |
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Amortization of deferred financing costs |
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1,271 |
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1,151 |
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Gain on sale of fixed assets |
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(74 |
) |
(86 |
) | ||
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Deferred income taxes |
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(1,041 |
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0 |
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Noncash deferred rent |
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(15 |
) |
161 |
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Noncash expense on issuance of stock options |
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139 |
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119 |
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Noncash accretion of discounted notes payable |
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394 |
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411 |
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Reduction of environmental reserve |
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(741 |
) |
0 |
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Changes in assets and liabilities: |
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Accounts receivable |
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(7,488 |
) |
(14,890 |
) | ||
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Inventories |
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(587 |
) |
(11,119 |
) | ||
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Accounts payable |
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(2,242 |
) |
6,538 |
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Other current assets |
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(2,484 |
) |
(2,378 |
) | ||
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Accrued expenses and other long-term liabilities |
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3,155 |
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5,881 |
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Net cash provided by operating activities |
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4,467 |
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79 |
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INVESTING ACTIVITIES: |
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Capital expenditures |
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(6,947 |
) |
(4,731 |
) | ||
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Investment in customer list |
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(365 |
) |
0 |
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Proceeds from the sale of fixed assets |
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106 |
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156 |
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Net cash used in investing activities |
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(7,206 |
) |
(4,575 |
) | ||
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FINANCING ACTIVITIES: |
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Repayment of long-term debt |
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(1,585 |
) |
(2,938 |
) | ||
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Net borrowing activity under line of credit |
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1,266 |
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6,959 |
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Investment in forward contract |
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0 |
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(1,550 |
) | ||
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Distribution by variable interest entity |
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(298 |
) |
0 |
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Repayment of long-term debt, non-controlling interest |
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(100 |
) |
0 |
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Deferred financing costs, non-controlling interest |
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0 |
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(226 |
) | ||
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Capital contributions, non-controlling interest |
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0 |
|
1,776 |
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Proceeds from issuance of long-term debt, non-controlling interest |
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0 |
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6,000 |
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Net cash provided by /(used in) financing activities |
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(717 |
) |
10,021 |
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NET INCREASE (DECREASE) IN CASH |
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(3,456 |
) |
5,525 |
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CASH: |
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Beginning of period |
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6,262 |
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2,197 |
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End of period |
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$ |
2,806 |
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$ |
7,722 |
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION—Cash paid during the period for: |
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Interest |
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$ |
7,730 |
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$ |
7,633 |
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Income taxes |
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$ |
1,655 |
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$ |
374 |
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See notes to condensed consolidated financial statements.
U.S. CORRUGATED, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 1, 2011 AND October 2, 2010
(Unaudited)
1. INTERIM FINANCIAL STATEMENTS
The condensed consolidated balance sheet as of October 1, 2011, the condensed consolidated statements of operations for the thirty-nine weeks ended October 1, 2011 and October 2, 2010, the condensed consolidated statement of changes in shareholders’ equity for the thirty-nine weeks ended October 1, 2011, condensed the consolidated statements of cash flows for the thirty-nine weeks ended October 1, 2011 and October 2, 2010, and related notes are unaudited. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) have been omitted. The accompanying unaudited interim condensed consolidated financial statements and related notes should be read in conjunction with the Company’s audited financial statements and related notes for the fiscal year ended January 1, 2011 (where the condensed consolidated balance sheet as of January 1, 2011 has been derived). The information furnished herein reflects, in the opinion of the management of the Company, all adjustments, consisting of normal recurring accruals, which are necessary to present a fair statement of the results for the interim periods presented.
The interim figures are not necessarily indicative of the results to be expected for the full fiscal year. Certain reclassifications have been made to the prior period financial statements in order to conform to the current period presentation.
2. ORGANIZATION AND STRUCTURE
U.S. Corrugated, Inc. (“USC” or the “Company”), is a wholly owned subsidiary of U.S. Corrugated America, Inc. which is a wholly owned subsidiary of U.S. Corrugated Acquisition Inc., (the “Parent”) which is majority owned by Four M Holdings, LLC (“Four M”). Included in the Company’s condensed consolidated financial statements are the accounts of its wholly owned subsidiary U.S. Display Group, Inc., (“Displays”), Anderson Packaging, Inc. (“Anderson”), Timberline Packaging, Inc. (“Timberline”), MCPH, LLC (“MCPH”) and U.S. Corrugated of Mesquite, LLC (“USCM”), as well as the accounts of 700 N Sam Houston Road Realty, LLC (“700 NSHRR”), a variable interest entity (“VIE”). All intercompany balances and transactions have been eliminated.
3. INVENTORIES
At October 1, 2011 and January 1, 2011, the components of inventory were as follows (in thousands):
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October 1, 2011 |
|
January 1, 2011 |
| ||
|
Raw materials |
|
$ |
30,350 |
|
$ |
30,001 |
|
|
Consumables |
|
1,640 |
|
1,586 |
| ||
|
Finished goods |
|
7,996 |
|
7,812 |
| ||
|
Inventories |
|
$ |
39,986 |
|
$ |
39,399 |
|
4. SUBSEQUENT EVENT: THE SALE OF USC TO KAPSTONE PAPER AND PACKAGING CORPORATION
On September 22, 2011, the Parent signed a definitive agreement to sell its stock to KapStone Paper and Packaging Corporation (“KapStone”), for $330.0 million in cash. The final purchase price is subject to a post-closing target working capital adjustment. KapStone is a public company that owns and operates two virgin-fiber kraft paper mills, a lumber mill and five wood chip mills. Six of USC’s converting facilities (and certain related assets) were disposed of by USC prior to closing and were not acquired by KapStone. The parties consummated the acquisition on October 31, 2011.
As noted above, prior to the sale of USC to KapStone on October 31, 2011, six of USC’s converting facilities (and certain related assets) were disposed of. The converting facilities in Coal Center, PA and Bethesda, OH (Timberline); Lancaster, OH; Cleveland, OH; and Tullahoma, TN (Displays) were sold to certain former owners of USC for $18.9 million. Additionally, the Milwaukee, WI converting facility was sold separately to certain former owners and officers of USC for one dollar plus the assumption of liabilities including contingent liabilities.
In conjunction with the sale on October 31, 2011, all of the Company’s outstanding debt except its capital lease, including the Notes, were repaid in full including accrued interest.