SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF
THE EXCHANGE ACT OF 1934
Commission file number: 333-42201
BEAR ISLAND PAPER COMPANY, L.L.C.
(Exact name of registrant as specified in its charter)
Virginia 06-0980835
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
10026 Old Ridge Road
Ashland, VA
(Address of Principal Executive Offices)
23005
(Zip Code)
(804) 227-3394
(Registrant's telephone number, including area code)
Former Name, Former Address and Former Fiscal Year, if
Changed Since Last Report: Not Applicable
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 and
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
--- ---
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: Not Applicable.
<PAGE>
BEAR ISLAND PAPER COMPANY, L.L.C.
INDEX
Page(s)
Part I. Financial Information
Item 1
Condensed Balance Sheets 1
Condensed Statements of Operations 2
Condensed Statements of Cash Flows 3
Notes to Condensed Financial Statements 4
Item 2
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. Other Information
Item 3. Exhibits and Reports on Form 8-K 10
Signatures 11
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
BEAR ISLAND PAPER COMPANY, L.L.C.
CONDENSED BALANCE SHEETS
<CAPTION>
September 30, December 31,
ASSETS 1999 1998
---------------- -----------------
(Unaudited)
Current assets:
<S> <C> <C>
Cash and short-term investments $ 1,448,154 $ 2,130,787
Accounts receivable 12,330,660 13,669,351
Inventories 12,600,965 13,827,824
Other current assets 692,073 570,234
---------------- -----------------
Total current assets 27,071,852 30,198,196
Property, plant and equipment 203,436,969 201,618,960
Less accumulated depreciation 18,831,159 10,841,783
---------------- -----------------
Net property, plant and equipment 184,605,810 190,777,177
---------------- -----------------
Deferred financing costs 7,647,804 8,275,781
---------------- -----------------
Total assets $ 219,325,466 $ 229,251,154
================ =================
LIABILITIES AND MEMBER'S EQUITY
Current liabilities:
Current portion of long-term debt 829,188 1,084,693
Accounts payable and accrued liabilities 9,504,966 10,431,232
Accrued interest payable 3,741,250 1,307,030
---------------- -----------------
Total current liabilities 14,075,404 12,822,955
Long-term debt 171,351,317 183,861,470
---------------- -----------------
Total liabilities 185,426,721 196,684,425
---------------- -----------------
Member's equity:
Contributed capital 40,899,474 28,130,250
Retained earnings (accumulated deficit) (7,000,729) 4,436,479
---------------- -----------------
Total member's equity 33,898,745 32,566,729
---------------- -----------------
Total liabilities and member's equity $ 219,325,466 $ 229,251,154
================ =================
See accompanying notes to the condensed financial statements.
</TABLE>
1
<PAGE>
<TABLE>
BEAR ISLAND PAPER COMPANY, L.L.C.
CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
Three months ended September 30, Nine months ended September 30,
1999 1998 1999 1998
----------------------------------- -----------------------------------
<S> <C> <C> <C> <C>
Net sales $ 26,009,215 $ 31,025,905 $ 78,461,104 $ 92,530,816
Cost of sales 24,536,072 23,721,041 70,541,018 69,667,290
--------------- ---------------- ---------------- ----------------
Gross profit 1,473,143 7,304,864 7,920,086 22,863,526
Selling, general and administrative expenses:
Management fees to Brant-Allen (780,276) (930,777) (2,353,833) (2,775,924)
Other (28,523) (72,811) (303,328) (623,503)
--------------- ---------------- ---------------- ----------------
Income from operations 664,344 6,301,276 5,262,925 19,464,099
Other income (deductions):
Interest expense (4,501,105) (4,571,376) (13,532,428) (14,285,596)
Other income 20,204 65,863 397,197 157,098
--------------- ---------------- ---------------- ----------------
Net income (loss) $ (3,816,557) $ 1,795,763 $ (7,872,306) $ 5,335,601
=============== ================ ================ ================
See accompanying notes to the condensed financial statements.
</TABLE>
2
<PAGE>
<TABLE>
BEAR ISLAND PAPER COMPANY, L.L.C.
CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Nine months ended September 30,
-----------------------------------
1999 1998
Operating activities:
<S> <C> <C>
Net income (loss) $ (7,872,306) $ 5,335,601
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and depletion 8,015,311 7,572,359
Amortization of deferred financing
costs 627,977 514,474
Gain on disposal of property, plant
and equipment (261,706)
Changes in current assets and liabilities:
Accounts receivable 1,338,691 102,825
Inventory 1,226,859 719,235
Other current assets (121,839) (412,695)
Accounts payable and accrued
liabilities 642,958 2,556,330
Accrued interest payable 2,434,220 2,435,969
---------------- ----------------
Cash provided by operating
activities 6,030,165 18,824,098
---------------- ----------------
Investment activities:
Purchases of property, plant and
equipment (2,178,944) (5,332,889)
Proceeds from disposal of property, plant
and equipment 596,706
---------------- ----------------
Net cash used in investing
activities (1,582,238) (5,332,889)
---------------- ----------------
Financing activities:
Proceeds from issuance of long-term
debt 5,000,000
Principal payments on long-term debt (17,765,658) (11,706,346)
Payment of deferred financing costs (525,270)
Tax distribution to parent (3,564,902)
Contributions to capital from parent 11,200,000
---------------- ----------------
Net cash used in financing
activities (5,130,560) (12,231,616)
---------------- ----------------
Net increase (decrease) in cash (682,633) 1,259,593
Cash and short-term investments, beginning
of period 2,130,787 1,353,049
---------------- ----------------
Cash and short-term
investments, end of
period $ 1,448,154 $ 2,612,642
================ ================
Noncash financing activities:
Contributions from Brant-Allen $ 1,569,224 $ 2,067,173
================ ================
See accompanying notes to the condensed financial statements.
</TABLE>
3
<PAGE>
BEAR ISLAND PAPER COMPANY, L.L.C.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. In the opinion of management, the accompanying condensed financial
statements of Bear Island Paper Company, L.L.C. (the "Company") contain all
adjustments necessary to present fairly, in all material respects, the
Company's financial position as of September 30, 1999 and December 31, 1998
and the Company's condensed results of operations for the three and nine
month periods ended September 30, 1999 and 1998 as well as the Company's
condensed cash flows for the nine month periods ended September 30, 1999
and 1998. All adjustments are of a normal and recurring nature. These
condensed financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual
Report on Form 10K filed on March 31, 1999. The December 31, 1998 balance
sheet data was derived from audited financial statements, but does not
include all disclosures required by generally accepted accounting
principles.
The results of operations for the nine month period ended September 30,
1999 should not be regarded as necessarily indicative of the results that
may be expected for the entire year.
2. The Company is a wholly owned subsidiary of Brant-Allen Industries, Inc.
("Brant-Allen"), a Delaware corporation.
A component of selling, general and administrative expenses as shown on the
statements of operations includes aggregate management fees charged by
Brant-Allen. There are restrictions on payment of the management fee.
During the nine months ended September 30, 1999 the Board of Directors of
Brant-Allen contributed the unpaid accrued portion of the management fee
totaling $1,569,224 through September 30, 1999 to the Company's contributed
capital. The corresponding management fee for the period ended September
30, 1998 was $2,067,173. This portion of the management fee is limited as
to payment in cash by the Company to Brant-Allen under the restrictive
covenants to the $100 million principal amount of 10% Senior Secured Notes
due 2007 (the "Notes"). The contribution of this accrued liability has been
reflected as an addition to contributed capital in the accompanying
condensed balance sheet at September 30, 1999. Brant-Allen's board also
agreed that until further action is taken by the board, future accrued fees
(which are not payable in cash because of the Notes' restrictive covenants)
should be contributed to the Company's contributed capital.
There are also certain restrictions on distributions paid to Brant-Allen.
Distributions are allowed for a portion of profits in excess of certain
amounts. In addition, distributions are allowed for amounts necessary to
pay for the tax liabilities of the members resulting from the Company's
operations. During the nine months ended September 30, 1999 $3,564,902 was
paid to Brant-Allen to pay such tax liabilities. No similar amounts were
paid in 1998.
4
<PAGE>
BEAR ISLAND PAPER COMPANY, L.L.C.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
3. No provision for income taxes is required in the financial statements since
the member is individually liable for any income tax that may be payable on
the Company's taxable income.
4. Finished goods and raw materials inventories are valued at the lower of
cost or market, with cost determined on the first-in, first-out ("FIFO")
basis. Stores inventories are valued at the lower of average cost or
market.
Inventories consisted of:
September 30, 1999 December 31, 1998
------------------ -----------------
Raw materials $ 1,807,918 $ 3,908,772
Stores 8,495,141 8,759,809
Finished goods 2,297,906 1,159,243
----------------- -----------------
$ 12,600,965 $ 13,827,824
================= =================
5. Long-term debt consisted of:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Senior Secured Notes $ 100,000,000 $ 100,000,000
Term Loan Facility 63,208,276 69,300,000
Revolving Credit Facility 8,683,040 15,000,000
Long-term purchase obligations 289,189 646,163
------------------ ----------------
172,180,505 184,946,163
Less current portion 829,188 1,084,693
------------------ ----------------
Total long-term debt $ 171,351,317 $ 183,861,470
================== ================
</TABLE>
5
<PAGE>
BEAR ISLAND PAPER COMPANY, L.L.C.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
6. The Company was a party to a wood supply contract with Bear Island
Timberlands Company, L.L.C. ("Timberlands") an affiliate and wholly owned
subsidiary of Brant-Allen, whereby Timberlands guaranteed to supply a
portion of the Company's log and pulp chip requirements at market prices.
Purchases under the wood supply contract approximated $2,137,000 for the
nine months ended September 30, 1998. During the nine months ended
September 30, 1999 all log and pulp chips were purchased from outside
vendors due to the suspension of Timberlands' operations in 1998. The
Company has negotiated a number of fiber supply contracts covering
approximately 183,000 cords of chips and roundwood for periods ranging from
three months to one year. Management anticipates liquidating substantially
all Company and Timberlands owned timberlands and future fiber requirements
will be supplied by independent parties.
The Company charged Timberlands for certain administrative and other
expenses. These charges approximated $ 980,000 and $560,000 during the nine
months ended September 30, 1999 and 1998, respectively.
The Company's receivables and payables and the Company's sales to an
affiliate were as follows:
<TABLE>
<CAPTION>
September 30, 1999 December 31, 1998
------------------ -----------------
<S> <C> <C>
Due from Brant-Allen $ 36,316 $ 53,138
Due from Newsprint Sales 177,558 1,205,553
Due from Dow Jones & Company, Inc. 2,157,304 2,369,136
Due from Timberlands 80,586
Due to Timberlands 200,237
Due from F.F. Soucy, Inc. and Partners 32,868 52,181
Due to F.F. Soucy, Inc. 8,876 78,192
<CAPTION>
Three Months Ended September 30, Nine Months ended September 30,
1999 1998 1999 1998
---------------------------------- -------------------------------
Net sales to Dow Jones & Company, Inc. $ 5,038,687 $ 6,804,271 $ 15,989,005 $ 19,992,012
</TABLE>
Sales to Dow Jones & Company, Inc. represented approximately 19% and 20% of
total sales during the three and nine month periods ended September 30,
1999 respectively and 22% during each of the three and nine month periods
ended September 30, 1998, respectively. The remaining sales were to other
unaffiliated printing and publishing enterprises located primarily in the
eastern United States.
6
<PAGE>
BEAR ISLAND PAPER COMPANY, L.L.C.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
7. Statement of Financial Accounting Standards No. 133 ("SFAS No. 133"),
"Accounting for Derivative Instruments and Hedging Activities," was issued
by the Financial Accounting Standards Board ("FASB") in June 1998, which is
effective for all fiscal quarters of all fiscal years beginning after June
15, 1999. In June 1999, SFAS No. 137 "Accounting for Derivative Instruments
and Hedging Activities-Deferral of the Effective Date of FASB Statement No.
133", was issued by the FASB, postponing SFAS No. 133's effective date one
year to June 15, 2000. SFAS No. 133 establishes accounting and reporting
standards for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities. At the
time of adoption of SFAS No. 133, this standard is not expected to have a
material impact on the financial position or results of operations of the
Company.
8. In May 1999 the Company and Timberlands sold approximately 83,000 acres of
timberland. As required under the debt agreements, proceeds from this sale,
net of tax distributions, were used to retire all debt outstanding on
Timberlands as well as all debt incurred by Brant-Allen in its purchase of
Timberlands. Brant-Allen made a capital contribution to the Company with
the remainder of the proceeds, $7.5 million, which was used to retire a
portion of the debt outstanding under the Company's $70 million 8-year
senior secured term loan facility ("Term Loan Facility") and the Company's
$50 million 6-year senior secured revolving credit facility ("Revolving
Credit Facility"). The Company and Timberlands have entered into a joint
sales agreement to sell approximately 46,000 acres of timberland to two
independent investors. This transaction is expected to close during the
fourth quarter of 1999 or early 2000. The net proceeds, after distributions
for income taxes, will be used to retire debt outstanding under the
Company's Term Loan Facility and the Company's Revolving Credit Facility.
In July and September 1999, Brant-Allen made capital contributions to the
Company of $2.0 million and $1.7 million, respectively, which were used to
retire a portion of the debt outstanding under the Company's Term Loan
Facility and Revolving Credit Facility.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors affecting the results of operations of the Company during the periods
included in the accompanying condensed statements of operations and the changes
in the Company's financial condition since December 31, 1998.
Some of the information contained in this report constitutes forward-looking
comments within the meaning of the Private will not differ materially from
expectations. Factors that could cause actual results to differ from
expectations are Securities Litigation Act of 1995. Although the Company's
management believes its expectations are based on reasonable assumptions within
the bounds of its knowledge of its business and operations, no assurance is
offered that actual results included in the Company's latest Annual Report on
Form 10-K.
General:
The Company manufactures and is dependent on one product, newsprint, which is
used in general printing and the newspaper publishing industry and for
advertising circulars. Accordingly, demand for newsprint fluctuates with the
economy, newspaper circulation and purchases of advertising lineage which
significantly impacts the Company's selling price of newsprint and, therefore,
its revenues and profitability. In addition, variation in the balance between
supply and demand as a result of global capacity additions have an increasing
impact on both selling prices and inventory levels in the North American
markets. Capacity is typically added in large blocks because of the scale of new
newsprint machines.
As a result, the newsprint market is highly cyclical, depending on changes in
global supply, demand and inventory levels. These factors significantly impact
the Company's sales volume and newsprint prices and, therefore, the Company's
revenues and profitability. Given the commodity nature of newsprint, the
Company, like other suppliers to this market, has little influence over the
timing and extent of price changes. Sales are recognized at the time of shipment
from the Company's mill. However, significant fluctuations in revenue can and do
occur as a result of the timing of shipments caused by increases and decreases
in mill inventory levels.
THREE MONTHS ENDED SEPTEMBER 30, 1999, COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998
Net sales decreased by $5.0 million, or 16.1%, to $26.0 million in the third
quarter of 1999, from $31.0 million in the third quarter of 1998. This decrease
was attributable to a 20.8% decrease in the average net selling price of the
Company's products and was offset in part by a 5.7% increase in sales volumes to
approximately 59,450 metric tons ("tonnes") in the third quarter of 1999, from
approximately 56,250 tonnes in the third quarter of 1998. The Company's net
selling price for newsprint decreased to an average of $437 per tonne in the
third quarter of 1999 from an average of $552 per tonne in the third quarter of
1998. The decrease in average net selling price per tonne was primarily caused
by the continued competitive conditions in the industry resulting from excess
capacity.
Cost of sales increased by $0.8 million, or 3.4%, to $24.5 million in the third
quarter of 1999 from $23.7 million in the third quarter of 1998. This increase
was attributable primarily to a 5.7% increase in sales volumes and was offset in
part by a 2.1% decrease in unit manufacturing costs per tonne due the increase
in volumes as discussed above. Cost of sales as a percentage of net sales
increased to 94.2% in the third quarter of 1999, from 76.4% in the third quarter
of 1998, due to depressed newsprint selling prices in the third quarter of 1999.
Selling, general and administrative expenses decreased by $0.2 million, or
20.0%, to $0.8 million in the third quarter of 1999 from $1.0 million in the
third quarter of 1998. This decrease was primarily attributable to a decrease in
management fee to Brant-Allen that resulted from lower net sales and a reduction
of other administrative expenses.
As a result of the above factors, income from operations decreased by $5.6
million to $0.7 million in the third quarter of 1999 from $6.3 million in the
third quarter of 1998.
Interest expense was $4.5 million in the third quarter of 1999 as compared to
$4.6 million in the third quarter of 1998, due to the payments made on the
Revolving Credit Facility and Term Loan Facility offset by the write off of
deferred financing costs related to the payments.
As a result of the above factors, the Company reported a net loss of $3.8
million in the third quarter of 1999 as compared to net income of $1.8 million
in the third quarter of 1998.
NINE MONTHS ENDED SEPTEMBER 30, 1999, COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1998
Net sales decreased by $14.1 million, or 15.2%, to $78.4 million in the first
nine months of 1999, from $92.5 million in the first nine months of 1998. This
decrease was attributable to a 15.2% decrease in the average net selling price
of the Company's products. Sales volumes had no material effect on the decrease
in net sales for the first nine months of 1999. They were approximately 167,100
tonnes in the first nine months of 1999 and approximately 167,400 tonnes in the
first nine months of 1998. The Company's net selling price for newsprint
decreased to an average of $469 per tonne in the first nine months of 1999 from
an average of $553 per tonne in the first nine months of 1998. The decrease in
average net selling price per tonne was primarily caused by the continued
competitive conditions in the industry resulting from excess capacity.
Cost of sales increased by $0.8 million, or 1.2%, to $70.5 million in the first
nine months of 1999 from $69.7 million in the first nine months of 1998. This
increase was attributable primarily to a 1.4% increase in unit manufacturing
costs per tonne. Sales volumes had no material effect on the increase in cost of
sales as stated above. The increase in unit manufacturing cost per tonne was a
result of an overall net cost increase in the manufacturing process and a
nonrecurring charge for severance benefits incurred during the first quarter of
1999. Cost of sales as a percentage of net sales increased to 90.0% in the first
nine months of 1999, from 75.3% in the first nine months of 1998, due to
depressed newsprint selling prices in the first nine months of 1999 and
increased unit costs of manufacturing as noted above.
Selling, general and administrative expenses decreased by $0.7 million, or
20.6%, to $2.7 million in the first nine months of 1999 from $3.4 million in the
first nine months of 1998. This decrease was primarily attributable to a
decrease in management fee to Brant-Allen that resulted from lower net sales and
a reduction of administrative and regulatory expenses.
As a result of the above factors, income from operations decreased by $14.2
million to $5.3 million in the first nine months of 1999 from $19.5 million in
the first nine months of 1998.
Interest expense was $13.5 million in the first nine months of 1999 compared to
$14.3 million in the first nine months of 1998, due to the payments made on the
Revolving Credit Facility and the Term Loan Facility.
8
<PAGE>
Other Income increased to $0.4 million in the first nine months of 1999 compared
to $0.2 million in the first nine months of 1998, due to gain on the sale of
timberlands.
As a result of the above factors, the Company reported a net loss of $7.9
million in the first nine months of 1999 as compared to net income of $5.3
million in the first six months of 1998.
Liquidity and Capital Resources.
The Company's principal liquidity requirements have been for working capital,
capital expenditures and debt service under the Company's loan agreements. These
requirements have been met through cash flows from operations and/or loans under
the Company's Revolving Credit Facility. In addition, the Company received three
capital contributions in the first nine months of 1999, $7.5 million in May,
$2.0 million in July and $1.7 million in September, all representing the excess
proceeds from the sale of timberlands of Bear Island Timberlands Company LLC. In
accordance with security agreements, the capital contribution proceeds were used
to pay down bank debt.
The Company's cash and short-term investments at September 30, 1999 were $1.4
million, representing a decrease of $0.7 million from $2.1 million at December
31, 1998. Net cash provided by operating activities was $6.0 million for the
first nine months ended September 30, 1999. Gross cash provided by financing
activities was $16.2 million and gross cash provided by investing activities was
$0.6 million for the first nine months ended September 30, 1999. In total, $22.8
million was used to cover capital expenditures of $2.2 million, a tax
distribution of $3.6 million and a reduction in long-term debt of $17.8 million.
The Company anticipates that cash provided from operations in the future,
combined with available borrowings under the Revolving Credit Facility will be
sufficient to pay its operating expenses, satisfy debt-service obligations and
fund capital expenditures.
In the first nine months of 1999, the Company's cash provided by operating
activities decreased by 68.1% to $6.0 million from $18.8 million in the first
nine months of 1998, primarily due to lower selling prices and higher costs of
sales resulting in a net loss in the first nine of months 1999 as compared to
net income in nine months 1998.
The Company made capital expenditures of $2.2 million and $5.3 million in the
first nine months of 1999 and the first nine months of 1998, respectively, in
connection with upgrading and maintaining its manufacturing facility. Management
anticipates that the Company's total capital expenditures for the balance of
1999 and 2000 will primarily relate to maintenance of its newsprint facilities
and cost reduction projects, allowing the Company to improve quality and
increase capacity, and, therefore, enhance its competitive position.
At September 30, 1999, the Company had approximately $172.2 million of
indebtedness, consisting of borrowings of $8.7 million under the Revolving
Credit Facility, $63.2 million under the Term Loan Facility, $100 million under
the Notes and approximately $0.3 million in long term purchase obligations. In
addition, $28.6 million was available in unused borrowing capacity under the
Revolving Credit Facility.
Recent Developments
In May 1999, the Company and Timberlands sold approximately 83,000 acres of
timberland. As required under the debt agreements, proceeds from this sale, net
of tax distributions, were used to retire all debt outstanding on Timberlands as
well as all debt incurred by Brant-Allen in its purchase of Timberlands.
Brant-Allen made a capital contribution to the Company with the remainder of the
proceeds, $7.5 million, which was used to retire a portion of the debt
outstanding under the Term Loan Facility and the Revolving Credit Facility. The
Company and Timberlands have entered into a joint sales agreement to sell
approximately 46,000 acres of timberland to two independent investors. This
transaction is expected to close during the fourth quarter of 1999 or early
2000. The net proceeds, after distributions for income taxes, will be used to
retire debt outstanding under the Term Loan Facility and the Revolving Credit
Facility. In July and September 1999, Brant-Allen made capital contribution to
the Company of $2.0 million and $1.7 million respectively, which were used to
retire a portion of the debt outstanding under the Term Loan Facility and
Revolving Credit Facility.
Year 2000 Compliance
The Company has substantially completed the process of modifying, upgrading or
replacing its computer software applications and systems which management
expects will accommodate the "Year 2000" dating changes necessary to permit
correct recording of year dates for 2000 and later years. The Company does not
expect that the final cost of its Year 2000 compliance program will be material
to its financial condition or results of operations. The Company believes that
it will be able to achieve compliance by the end of 1999, and does not currently
anticipate any material disruption in its operations as the result of any
failure by the Company to be in compliance. The Company has had formal
communications with its major suppliers and customers concerning their Year 2000
readiness. At the present time the Company has received no negative responses
from any of the suppliers or customers contacted.
The Company expects that its facilities, equipment, and information systems will
be fully functional and will operate accurately and without interruption both
before and after January 1, 2000. It also expects that its products and services
will be available continuously. However, there is no quarantee that there will
not be a material failure of a critical system or those of a supplier or
customer. A material failure could have an adverse impact on the Company's
business, operations, or financial condition. In consideration of these risks,
the Company has developed plans to address noncompliance of a critical system or
those of a supplier or customer. This includes special staff training,
stockpiling critical raw materials and inventory, and where possible obtaining
alternate sources of supply. As additional information becomes available, the
Company will continually update this plan throughout the remainder of the year.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 3. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27, Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
10
<PAGE>
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, there unto duly authorized.
Date: November 12, 1999 BEAR ISLAND PAPER COMPANY, L.L.C.
By: /s/ Peter M. Brant
---------------------------
Peter M. Brant
President, Chairman of the Board and
Chief Executive Officer
By: /s/ Edward D. Sherrick
---------------------------
Edward D. Sherrick
Vice President of Finance
(Principal Financial Officer and
Chief Accounting Officer)
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 1,448
<SECURITIES> 0
<RECEIVABLES> 12,399
<ALLOWANCES> 68
<INVENTORY> 12,601
<CURRENT-ASSETS> 27,072
<PP&E> 203,437
<DEPRECIATION> 18,831
<TOTAL-ASSETS> 219,325
<CURRENT-LIABILITIES> 14,075
<BONDS> 171,351
0
0
<COMMON> 0
<OTHER-SE> 33,899
<TOTAL-LIABILITY-AND-EQUITY> 219,325
<SALES> 78,461
<TOTAL-REVENUES> 78,461
<CGS> 70,541
<TOTAL-COSTS> 2,657
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,532
<INCOME-PRETAX> (8,269)
<INCOME-TAX> 0
<INCOME-CONTINUING> (8,269)
<DISCONTINUED> 0
<EXTRAORDINARY> 397
<CHANGES> 0
<NET-INCOME> (7,872)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
