SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended June 30, 1997.
or
__ Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ____________________ to
__________________
FLORIDA COAST PAPER COMPANY, L.L.C. 333-8023
FLORIDA COAST PAPER FINANCE CORP. 333-8023-01
(Exact names of registrants (Commission file number)
as specified in their charters)
Delaware 59-3379704
Delaware 59-3379707
(State or other jurisdiction (I.R.S. employer
of incorporation or organization) identification no.)
600 U.S. Highway 98, Port St. Joe, FL 32456
(Address of principal executive offices) (Zip code)
Registrant's telephone number: (904) 227-1171
Indicate by check mark whether the Registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
As of August 13, 1997, there were 44,101 units of Florida Coast
Paper Company, L.L.C.'s Common Member Interest outstanding and
1,000 shares of Common Stock of Florida Coast Paper Finance Corp.
outstanding.
FLORIDA COAST PAPER COMPANY, L.L.C.
FLORIDA COAST FINANCE CORP.
1997 QUARTERLY REPORT ON FORM 10-Q
FOR THE PERIOD ENDED JUNE 30, 1997
TABLE OF CONTENTS
Part I - Financial Information
Page
Item 1.Financial Statements (Unaudited)
Balance Sheets as of June 30, 1997 and December 31, 1996 2
Statement of Operations for the three months ended June 30,
1997 and the one month ended June 30, 1996 and Statement of
Operations of St. Joe Forest Products Company _ Linerboard Mill
Operations (the "Predecessor") for the two months ended
May 30, 1996 3
Statement of Operations for the six months ended June 30,
1997 and the one month ended June 30, 1996 and the
Predecessor's Statement of Operations for the five months
ended May 30, 1996 4
Statement of Cash Flows for the three months ended June 30,
1997 and one month ended June 30, 1996 and the Predecessor's
Statement of Cash Flows for the two months ended May 30, 1996 5
Statement of Cash Flows for the six months ended June 30,
1997 and the one month ended June 30, 1996 and the
Predecessor's Statement of Cash Flows for the five months
ended May 30, 1996 6
Notes to Financial Statements 7
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K 12
Signatures
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
FLORIDA COAST PAPER COMPANY, L.L.C.
BALANCE SHEET
(dollars in thousands)
June 30,December 31,
1997 1996
Assets
Current assets:
Cash and cash equivalents $667 $8,621
Accounts receivable from
Joint Venture Partners -- 8,643
Other receivables 225 567
Inventories 8,887 13,185
Other 235 681
Total current assets 10,014 31,697
Property, plant and equipment,
net of accumulated depreciation 181,279 184,956
Deferred debt issuance costs 7,432 7,825
Other noncurrent assets 667 997
Total assets $199,392 $225,465
Liabilities and members' equity
Current liabilities:
Accounts payable $2,040 $10,222
Accrued liabilities 4,670 8,567
Accrued interest 1,753 1,753
Total current liabilities 8,463 20,542
Long-term debt:
Senior long-term debt 165,000 165,000
Subordinated debt 11,518 10,791
Subordinated credit facility 4,561 --
Other noncurrent liabilities 3,351 3,076
Commitments and contingencies (Note 6)
Total liabilities 192,893 199,409
Members' equity
Contributed capital 44,101 40,000
Accumulated deficit (37,602) (13,944)
Total members' equity 6,499 26,056
Total liabilities and members' equity $199,392 $225,465
*Unaudited; subject to year-end audit
The accompanying notes are an integral part of these financial
statements.
FLORIDA COAST PAPER COMPANY, L.L.C.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
(dollars in thousands)
Three months One monthTwo months
ended ended ended
June 30, 1997June 30, 1996May 30, 1996
(Florida Coast)(Florida Coast)(Predecessor)
Net sales $782 $14,279 $17,911
Cost of sales 10,770 14,478 23,873
General, selling &
administrative expense 666 259 643
Operating loss (10,654) (458) (6,605)
Interest income 77 24 --
Interest expense (5,889) (1,956) --
Other income, net 11 127 30
Other expense, net (5,801) (1,805) 30
Loss before income taxes (16,455) (2,263) (6,575)
Income tax benefit -- (125) (2,437)
Net loss $(16,455)$(2,138) $(4,138)
Accumulated deficit,
beginning of period (21,147) --
Net loss (16,455) (2,138)
Accumulated deficit, end of period $(37,602)$(2,138)
The accompanying notes are an integral part of these financial
statements.
FLORIDA COAST PAPER COMPANY, L.L.C.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(Unaudited)
(dollars in thousands)
Six months One monthFive months
ended ended ended
June 30, 1997June 30, 1996May 30, 1996
(Florida Coast)(Florida Coast)(Predecessor)
Net sales $42,856 $14,279 $67,670
Cost of sales 54,021 14,478 68,979
General, selling &
administrative expense 1,104 259 1,409
Operating loss (12,269) (458) (2,718)
Interest income 239 24 --
Interest expense (11,700) (1,956) --
Other income, net 72 127 152
Other expense, net (11,389) (1,805) 152
Loss before income taxes (23,658) (2,263) (2,566)
Income tax benefit -- (125) (951)
Net loss $(23,658) $(2,138) $(1,615)
Accumulated deficit,
beginning of period (13,944) --
Net loss (23,658) (2,138)
Accumulated deficit,
end of period $(37,602)$ (2,138)
The accompanying notes are an integral part of these financial
statements.
FLORIDA COAST PAPER COMPANY, L.L.C.
STATEMENT OF CASH FLOWS
(Unaudited)
(dollars in thousands)
Three months One monthTwo months
ended ended ended
June 30, 1997June 30, 1996May 30, 1996
(Florida Coast)(Florida Coast)(Predecessor)
Cash flows from operating activities:
Net loss $(16,455) $(2,138) $(4,138)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation 3,238 1,114 4,094
Other non-cash items 657 169 (98)
Changes in current assets and liabilities:
Receivables 3,246 (8,502) 4,704
Inventories 1,086 (482) 1,633
Other current assets 168 (207) (376)
Accounts payable (8,293) 6,249 4,820
Amounts due to Joint Venture Partners-- 150 --
Accrued liabilities 368 2,679 569
Accrued interest (5,260) 1,787 --
Other assets 273 -- --
Net cash provided (used)
by operating activities (20,972) 819 11,208
Cash flows from financing activities:
Borrowings 8,600 175,500 --
Payments made on debt (4,101) -- --
Capital contribution from
Joint Venture Partners 4,101 40,000 --
Payment of debt issuance costs -- (7,410) --
Change in intercompany accounts -- -- (9,534)
Net cash provided (used)
by financing activities 8,600 208,090 (9,534)
Cash flows from investing activities:
Capital expenditures (818) -- (1,674)
Payments made for business acquired -- (200,284) --
Net cash used in
investing activities (818) (200,284) (1,674)
Net cash flows:
Net increase (decrease) in
cash and cash equivalents (13,190) 8,625 --
Cash and cash equivalents,
beginning of period 13,857 -- --
Cash and cash equivalents,
end of period $ 667 $8,625 $--
The accompanying notes are an integral part of these financial
statements
FLORIDA COAST PAPER COMPANY, L.L.C.
STATEMENT OF CASH FLOWS
(Unaudited)
dollars in thousands)
Six months One monthFive months
ended ended ended
June 30, 1997June 30, 1996May 30, 1996
(Florida Coast)(Florida Coast)(Predecessor
Cash flows from operating activities:
Net loss $(23,658) $(2,138) $(1,615)
Adjustments to reconcile net loss to net cash
provided (used) by operating activities:
Depreciation 6,768 1,114 10,335
Other non-cash items 1,457 169 (198)
Changes in current assets and liabilities:
Receivables 8,985 (8,502) 3,324
Inventories 4,298 (482) 630
Other current assets 446 (207) (304)
Accounts payable (8,182) 6,249 402
Amounts due to Joint Venture Partners-- 150 --
Accrued liabilities (3,897) 2,679 820
Accrued interest -- 1,787 --
Other assets 20 -- --
Net cash provided (used)
by operating activities (13,763) 819 13,394
Cash flows from financing activities:
Borrowings 8,600 175,500 --
Payments made on debt (4,101) -- --
Capital contribution from
Joint Venture Partners 4,101 40,000 --
Payment of debt issuance costs -- (7,410) --
Change in intercompany accounts -- -- (9,234)
Net cash provided (used)
by financing activities 8,600 208,090 (9,234)
Cash flows from investing activities:
Capital expenditures (2,791) -- (4,160)
Payments made for business acquired -- (200,284) --
Net cash used in
investing activities (2,791) (200,284) (4,160)
Net cash flows:
Net increase (decrease)
in cash and cash equivalents (7,954) 8,625 --
Cash and cash equivalents,
beginning of period 8,621 -- --
Cash and cash equivalents,
end of period $667 $8,625$ --
The accompanying notes are an integral part of these financial
statements.
FLORIDA COAST PAPER COMPANY, L.L.C.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1 _ Nature of operations
On May 30, 1996, Florida Coast Paper Company, L.L.C. (the
"Company" or "Florida Coast") purchased a paperboard mill (the
"Mill") from St. Joe Forest Products Company ("SJFP"), a wholly
owned subsidiary of St. Joe Paper Company ("SJPC"). Florida
Coast is a joint venture between Stone Container Corporation
("Stone") and Four M Corporation ("Four M") (together, the "Joint
Venture Partners"). The purchase was accounted for under the
purchase method. Accordingly, the purchase price was allocated
to the net assets acquired based on estimated fair values. Prior
to May 30, 1996 the Mill was owned and operated by SJFP. The
results of operations and cash flows of SJFPLinerboard Mill
Operations (the "Predecessor") for the two and five months ended
May 30, 1996 have been presented for comparative purposes.
Florida Coast Paper Finance Corp. ("Finance Corp.") is a wholly
owned subsidiary of Florida Coast. Finance Corp. does not have
any revenues or expenses, therefore, separate financial
statements of Finance Corp. have not been included in the
financial statements included herein.
Note 2 _ Basis of Presentation
Pursuant to the rules and regulations of the Securities and
Exchange Commission for Form 10-Q, the financial statements,
footnote disclosures and other information normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed. These
financial statements, footnote disclosures and other information
should be read in conjunction with the financial statements and
the notes thereto included in Florida Coast's latest Annual
Report on Form 10-K.
In the opinion of the Company, the accompanying unaudited
financial statements contain all normal recurring adjustments
necessary to fairly present Florida Coast's financial position as
of June 30, 1997 and the results of operations and cash flows for
the three and six months ended June 30, 1997 and the one month
ended June 30, 1996 and SJFPLinerboard Mill Operations results of
operations and cash flows for the two and five months ended May
30, 1996. Results for interim periods are not necessarily
indicative of results for the entire year.
Note 3 _ Facility shutdown
On April 5, 1997, the Company curtailed production at the Mill
due to the unfavorable economic conditions in the linerboard
industry. On July 25, 1997, management announced the Mill will
resume production in September 1997.
Note 4 _ Inventories
Inventories are summarized as follows:
June 30,December 31,
1997 1996
Raw materials $ 621 $ 3,616
Supplies 8,266 8,337
Finished goods and work in process -- 1,232
Total inventories $8,887 $13,185
Note 5 _ Related party transactions
Florida Coast
Pursuant to an Output Purchase Agreement, each of the Joint
Venture Partners has agreed to purchase from the Company one half
of the Mill's entire linerboard production at a price that is $25
per ton below the price of such product published in Pulp & Paper
Week, an industry trade publication, subject to a minimum
purchase price, which minimum purchase price is intended to
generate sufficient funds to cover cash operating costs, cash
interest expense and maintenance capital expenditures. During the
three and six months ended June 30, 1997, the Joint Venture
Partners paid an additional $4.1 and $6.2 million, respectively.
This amount is included in Net Sales to Joint Venture Partners in
the Statement of Operations for the first quarter of 1997. The
second quarter payment of $4.1 million, made during the shutdown
period, was declared a capital contribution. Furthermore, the
Joint Venture Partners have severally agreed to provide the
Company with a $20 million Subordinated Credit Facility. At June
30, 1997 there was $4.6 million outstanding under the
Subordinated Credit Facility.
The Company has entered into a procurement agreement with Stone
pursuant to which Stone will procure wood fiber, at market
values, on behalf of the Company.
St. Joe Forest Products Linerboard Mill Operations
Prior to May 30, 1996, the Mill was owned and operated by SJPC.
The information for the two and five months ended May 30, 1996 is
presented for comparative purposes. The intercompany
transactions described below may or may not be indicative of what
such transactions would have been had SJFPLinerboard Mill
Operations operated either as an unaffiliated entity or in
affiliation with another entity.
An allocation of costs of overhead of SJPC is included in
selling, general and administrative expenses. SJPC provided
services in treasury, taxes, benefits administration and legal
support and other financial systems and support. The Mill was
billed approximately $.2 and $.4 million for the two and five
months ended May 30, 1996, respectively.
Sales to St. Joe Container Company ("SJCC"), a wholly owned
subsidiary of SJFP, amounted to approximately $9.6 and $36.8
million representing approximately 22,000 and 78,000 tons for the
two and five months ended May 30, 1996, respectively. Pricing
for these transactions was based on the Pulp & Paper Week Price
Watch: Paper and Paperboard. In addition, SJFPLinerboard Mill
Operations purchased both linerboard and corrugating medium for
SJCC from outside suppliers. The price paid for this rollstock
was negotiated with each supplier. SJCC was charged for this
rollstock at the prices published in Pulp & Paper Week.
Purchases of pulpwood and wood chips from St. Joseph Land and
Development Company, a wholly owned subsidiary of SJFP, amounted
to approximately $2.7 and $16.9 million representing
approximately 96,000 and 570,000 tons for the two and five months
ended May 30, 1996, respectively.
The Mill shipped the majority of its product via Apalachicola
Northern Railroad, a subsidiary of SJPC. Amounts billed for
freight amounted to approximately $.3 and $1.2 million for the
two and five months ended May 30, 1996, respectively.
Note 6_ Commitments and contingencies
The Company entered into a Wood Fiber Supply Agreement (the
"Fiber Agreement") with St. Joseph Land and Development Company
("St. Joe Land") pursuant to which St. Joe Land will supply a
specified quantity of pulpwood and wood chips to the Company.
The Company and St. Joe Land are currently determining the impact
of the cessation of production on the Fiber Agreement. The
Company will make certain payments pursuant to the Fiber
Agreement during the shutdown period.
In addition, the Company assumed certain natural gas agreements
with St. Joe Natural Gas ("SJNG") (a company not related to the
seller). SJNG is asserting that, as part of such agreements, a
firm commitment payment is due monthly notwithstanding the
shutdown. The Company is currently in discussions with SJNG to
explore possible settlement of pending contractual issues.
FLORIDA COAST PAPER COMPANY L.L.C.
Item 2. Management's Discussion and Analysis of Financial
Condition And Results of Operations
General
The following discussion and analysis should be read in
conjunction with the financial statements of the Company and St.
Joe Forest Products Company_Linerboard Mill Operations (the
"Predecessor") and the notes thereto included elsewhere in this
report.
The linerboard market is highly cyclical and sensitive to changes
in industry capacity and economic conditions, which in turn, will
impact the selling prices for the Company's products. Selling
prices for the Mill's products have historically been the primary
determinant of the Mill's financial performance. During 1996
prices for the Mill's products declined and continue to remain
low as a result of excess industry capacity and weak demand. On
April 5, 1997, the Company curtailed production at the Mill until
market conditions warranted a resumption of linerboard
production. On July 25, 1997, the Company announced that
operations will resume in September 1997.
Results of Operations
Provided below is certain unaudited financial data for the three
and six months ended June 30, 1997 and 1996:
(dollars in thousands)
Three months ended June 30,Six months ended June 30,
1997 1996 1997 1996
Net sales 782 32,190 42,856 81,949
Depreciation expense3,238 5,208 6,768 11,449
Interest expense 5,889 1,956 11,700 1,956
Loss before
income taxes (16,455) (8,838) (23,658) (4,829)
Net loss (16,455) (6,276) (23,658) (3,753)
The decrease in sales from the prior year periods is due to the
cessation of production for substantially all of the second
quarter. Sales for the six month period were also negatively
impacted by a decrease in average selling prices for linerboard.
The depreciation expense decrease in both periods is due to the
differences between the Company's depreciation method and
estimated fixed asset useful lives as compared with the
Predecessor company.
The net loss includes interest expense of $5.9 million and $11.7
million for the three and six months ended June 30, 1997,
respectively. The increase in interest expense over the prior
year is due to the Company's debt being outstanding for only one
month at June 30, 1996.
Financial Condition, Liquidity and Capital Resources
Historically, the Mill has met its liquidity requirements through
cash flows from operations (including the provisions of the
Output Purchase Agreement that provide for a minimum purchase
price as previously described) and, for the period prior to May
30, 1996, through intercompany advances from SJPC.
During the shutdown period the Joint Venture Partners have
committed to fund the Company's cash operating costs, cash
interest expense and maintenance capital expenditures. The
Company's cash decreased due to the semiannual payment of
interest due June 1 in the amount of $10.5 million and the
payment of current liabilities outstanding at the shutdown date.
The Joint Venture Partners advanced $8.6 million under the
Subordinated Credit Facility.
The Company's principal liquidity requirements consist of debt
service and funding of capital expenditures. At June 30, 1997
the Company had outstanding approximately $181 million of
indebtedness, consisting of $165 million 12 3/4% Series B First
Mortgage Notes due June 1, 2004 and $11.5 million of 13 1/4%
Subordinated debt due June 1, 2004 (the "Seller Note"). Pursuant
to the terms of the Seller Note, the Company expects to pay
interest in kind on this Subordinated indebtedness. The Company
also has a $20 million Subordinated Credit Facility provided by
its Joint Venture Partners on which $4.6 million was outstanding
at June 30, 1997.
PART II. OTHER INFORMATION
Item 6. Exhibits And Reports On Form 8-K
(a) Exhibits
2.1 Asset Purchase Agreement, dated as of November 1, 1995,
among the Company, St. Joe Forest Products Company, St. Joe
Container Company, St. Joe Paper Company and Four M
Corporation ("Four M").**
3.1 Certificate of Formation of Florida Coast Paper Company,
L.L.C. (the "Company").**
3.2 Certificate of Incorporation of Florida Coast Paper
Finance Corp. ("Finance Corp.").**
3.7 By-laws of Finance Corp.**
4.1 Indenture, dated as of May 30, 1996, between the Company and
Norwest Bank Minnesota, National Association (the
"Trustee").**
4.2 Form of 12_% Series A and Series B First Mortgage Notes,
dated as of May 30, 1996 (incorporated by reference to
Exhibit 4.1).**
10.1 Output Purchase Agreement, dated as of May 30, 1996, among
the Company, Four M and Stone Container Corporation
("Stone").**
10.2 Mortgage Security Agreement, dated as of May 30, 1996,
between the Company, and the Trustee.**
10.3 Security Agreement, dated as of May 30, 1996, between the
Company and the Trustee.**
10.4 Subordinated Credit Agreement, dated as of May 30, 1996,
among the Company, Four M and Stone.**
10.5 Environmental Indemnity Agreement, dated as of May 30, 1996,
between the Company and Four M.**
10.6 Wood Fiber Procurement and Services Agreement, dated as of
May 30, 1996, between the Company and Four M.**
10.7 Indenture of Lease, dated as of May 30, 1996, between the
Company and Box USA Group, Inc.**
27.1 Financial Data Schedule.*
________________
* Filed herewith.
** Incorporated by reference to the Registration Statement on
Form S-4 of the Company, as amended (the "Registration
Statement"), as filed with the Securities and Exchange
Commission (the "SEC") on July 12, 1996.
(b) Reports On Form 8-K
None
SIGNATURES
Pursuant to the requirements 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.
FLORIDA COAST PAPER COMPANY,L.L.C.
FLORIDA COAST FINANCE CORP.
RANDOLPH C. READ
Randolph C. Read
Chief Financial Officer and
Treasurer
(Principal Accounting Officer
and duly authorized signatory)
Date: August 13, 1997
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<LEGEND>
This schedule contains summary information extracted from Florida Coast Paper
Company, L.L.C.'s June 30, 1997 Balance Sheet and Statement of Operations and
Accumulated Deficit and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
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