SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 1, 1997
CONSOLIDATED PAPERS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 0-1051 39-0223100
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
231 First Avenue North, Wisconsin Rapids, WI 54495-8050
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (715) 422-3111
The Form 8-K Current Report filed by the registrant on October 15, 1997 is
hereby amended as follows:
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
The text of this item as previously filed is hereby restated to read in its
entirety as follows:
(a) Financial statements of business acquired.
Balance Sheet and Other Financial Information of Repap USA, Inc. as of
September 30, 1997 and Financial Statements and Other Financial Information of
Repap USA, Inc. for the year ended December 31, 1996 with Reports of Independent
Auditors.
Unaudited Income Statements and Statements of Cash Flows of Repap USA, Inc.
for the nine-month period ended September 30, 1997 and 1996.
(b) Pro Forma financial information.
Unaudited Combined Pro Forma Consolidated Financial Statements of
Consolidated Papers, Inc. and the acquired business, Repap USA, Inc.
The unaudited consolidated pro forma statements of income have been
prepared to illustrate the estimated effect of the Repap USA, Inc. acquisition
had such acquisition been made as of January 1, 1996. The unaudited pro forma
consolidated balance sheet has been prepared as if the acquisition took place
September 30, 1997. These pro forma statements are based on certain estimates
and assumptions made by management. They are based on historical information
and, therefore, are not necessarily indicative of either the results that would
have occurred had the acquisition been made as of that date or of future
results.
The Repap USA, Inc. acquisition will be accounted for as a purchase and,
accordingly, the assets acquired and liabilities assumed will be stated at their
fair values. The preliminary purchase price allocation reflected in the
unaudited pro forma financial statement is subject to change as management
continues to refine the estimated fair value of the acquired assets and assumed
liabilities.
(c) See Exhibit Index.
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 hereunto duly authorized.
CONSOLIDATED PAPERS, INC.
Date December 15, 1997 By /s/ Richard J. Kenney
---------------------------------
Richard J. Kenney
Its: Senior Vice President, Finance
EXHIBIT INDEX
The text of this Exhibit Index as previously filed is hereby restated to read in
its entirety as follows:
Exhibit No. Description of Document
2(a) Stock Purchase Agreement dated August 8, 1997 among the Registrant
and Repap Enterprises, Inc. (together with a list briefly
identifying the contents of all omitted schedules thereto). The
Registrant agrees to provide copies of such schedules to the
Commission upon request.
4(a) $750,000,000 Credit Agreement among the Registrant and Wachovia
Bank of Georgia, N.A. (together with a list briefly identifying the
contents of all omitted exhibits and Schedules thereto). The
Registrant agrees to provide copies of such exhibits and schedules
to the Commission upon request.
The Registrant has additional long-term debt that does not exceed 10
percent of its total assets. The Registrant agrees to provide copies of
agreements covering such indebtedness to the Commission upon request.
*(23)(a) Consent of Ernst and Young LLP
(99) Additional Exhibits
(a) Press Release dated September 30, 1997 covering the transactions
described in this Form 8-K.
*(b) Financial Statements and other Financial Information of Repap USA,
Inc. for the year ended December 31, 1996 with Reports of
Independent Auditors and Balance Sheet and Other Financial
Information of Repap USA, Inc. as of September 30, 1997.
*(c) Unaudited Statements of Operations and Statements of Cash Flows of
Repap USA, Inc. for the nine-month periods ended September 30,
1997 and 1996.
*(d) Unaudited Pro Forma Combined Financial Statements of Consolidated
Papers, Inc. and the acquired business, Repap USA,
Inc.
- -----------------------
* Filed herewith
EXHIBIT 23.a
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements of
Consolidated Papers, Inc. (Form S-8 No. 2-87423, Form S-8 No. 33-28786, Form S-8
No. 33-37838, Form S-8 No. 33-60263, Form S-8 No. 33-64393) of our report dated
January 14, 1997 (except Notes 11 and 13, as to which the date is September 30,
1997), with respect to the consolidated financial statements of Repap USA, Inc.
as of and for the year ended December 31, 1996, and our report dated October 17,
1997, with respect to the consolidated balance sheet of Repap USA, Inc. as of
September 30, 1997, included in the Current Report on Form 8-K dated December
15, 1997, of Consolidated Papers, Inc.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
December 10, 1997
EXHIBIT 99.b
Consolidated Financial Statements
Repap USA, Inc.
Year ended December 31, 1996
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors
Repap USA, Inc.
We have audited the accompanying consolidated balance sheet of Repap USA, Inc.
(the Company) as of December 31, 1996, and the related consolidated statements
of operations, shareholders' equity and cash flows for the year then ended.
These financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of the Company at
December 31, 1996, and the consolidated results of its operations and its cash
flows for the year then ended, in conformity with generally accepted accounting
principles.
/s/ ERNST & YOUNG LLP
Milwaukee, Wisconsin
January 14, 1997, except for
Notes 11 and 13, as to which
the date is September 30, 1997
<TABLE>
Repap USA, Inc.
Consolidated Balance Sheet
December 31, 1996
(In Thousands, Except Number of Shares)
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash $ 3,443
Accounts receivable, less allowances of $1,781 31,845
Accounts receivable from affiliates 7,487
Inventories 80,877
Other current assets 1,186
Total current assets 124,838
Net property, plant and equipment 469,621
Deferred charges and other assets 82,278
$ 676,737
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 37,684
Accrued liabilities 24,185
Accounts payable to affiliates 4,976
Total current liabilities 66,845
Long-term payables 10,000
Long-term debt 414,609
Deferred income taxes 9,706
Accrued postretirement benefit liability 13,352
Commitments and contingency (Notes 4 and 11)
Redeemable preferred stock of subsidiary 6,405
Preferred stock of subsidiary 91,574
Shareholders' equity:
Common Stock, no par value, 300 shares authorized; 105 shares
issued and outstanding 105,661
Accumulated deficit (41,415)
Total shareholders' equity 64,246
$ 676,737
See accompanying notes.
</TABLE>
<TABLE>
Repap USA, Inc.
Consolidated Statement of Operations
Year ended December 31, 1996
(In Thousands)
<CAPTION>
<S> <C>
Net sales $ 409,322
Cost of sales excluding depreciation and amortization 332,663
Depreciation and amortization 22,687
Selling, general and administrative expenses 27,875
Operating profit 26,097
Interest expense 39,035
Amortization of deferred financing costs 1,692
Other income (5,211)
Loss before income taxes (9,419)
Income tax benefit (6,986)
Net loss $ (2,433)
See accompanying notes.
</TABLE>
<TABLE>
Repap USA, Inc.
Consolidated Statement of Shareholders' Equity
Additional
Common Paid-In Accumulated
Stock Capital Deficit Total
(In Thousands)
<S> <C> <C> <C> <C>
Balance, January 1, 1996 $ 105,661 $ 2,783 $(28,749) $ 79,695
Dividends on Common Stock - (2,783) ( 9,656) (12,439)
Dividends on redeemable
preferred stock of
subsidiary - - ( 577) ( 577)
Net loss - - ( 2,433) ( 2,433)
Balance, December 31, 1996 $ 105,661 $ - $(41,415) $ 64,246
See accompanying notes.
</TABLE>
<TABLE>
Repap USA, Inc.
Consolidated Statement of Cash Flows
Year ended December 31, 1996
(In Thousands)
<CAPTION>
<S> <C>
OPERATING ACTIVITIES
Net loss $( 2,433)
Adjustments to reconcile net loss to net cash provided by
operating activities:
Depreciation and amortization 24,379
Non-cash portion of postretirement benefit expense 802
Deferred income taxes ( 7,135)
Interest income received in form of forward purchase contract ( 4,886)
Changes in operating assets and liabilities:
Accounts receivable 8,411
Inventories 6,221
Inventory deposits 5,669
Other current assets ( 462)
Accounts payable and accrued liabilities (12,979)
Net cash provided by operating activities 17,587
INVESTING ACTIVITIES
Additions to property, plant and equipment (15,738)
Other ( 1,022)
Net cash used in investing activities (16,760)
FINANCING ACTIVITIES
Net borrowings under revolving credit facilities 1,420
Payments of long-term debt ( 26)
Dividends paid on common stock (12,439)
Net cash used in financing activities (11,045)
Net decrease in cash (10,218)
Cash at beginning of year 13,661
Cash at end of year $ 3,443
See accompanying notes.
</TABLE>
Repap USA, Inc.
Notes to Consolidated Financial Statements
(In Thousands, Except shares and Per Share Amounts)
December 31, 1996
1. SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Repap USA, Inc. (the Company) is a wholly owned subsidiary of Repap
Enterprises, Inc. (Repap Enterprises). Through its wholly owned subsidiaries,
Repap Wisconsin, Inc. (Repap Wisconsin) and Repap Sales Corporation (Repap
Sales), the Company manufactures and distributes coated papers.
Repap Wisconsin is a producer of high quality grades of recycled coated
paper and a complete range of coated paper products. Repap Wisconsin's products
are used for magazines, catalogs, brochures, advertising inserts and annual
reports. Repap Wisconsin competes with other U.S., Canadian and European
producers in all of its product lines. Repap Wisconsin sells its products
through Repap Sales on a commission basis, as agent, to end users, third-party
merchants and brokerage distributors. Almost all of Repap Wisconsin's products
are sold to customers in North America. Repap Wisconsin's annual requirements
of softwood and hardwood kraft pulp are supplied by three affiliates, Repap
Enterprises and its wholly owned subsidiaries, Repap British Columbia, Inc.
Repap British Columbia) and Repap New Brunswick, Inc. (Repap New Brunswick) and
by other suppliers that are not affiliated with the Company. In the event that
any of its suppliers are unable to meet Repap Wisconsin's demands, the Company
believes that adequate alternative suppliers or substitute materials are
available.
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the accompanying consolidated
financial statements and notes. Actual results could differ from those
estimates.
INVENTORIES
Inventories are valued at the lower of cost or market with cost determined
on a first-in, first-out basis.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, including interest and
start-up costs related to major assets during construction. Interest and start-
up costs are capitalized until the asset is ready for its intended use.
Property, plant and equipment are depreciated using straight-line and unit-of-
production methods for financial reporting purposes over their estimated useful
lives as follows:
Years
Plant and buildings 12-42
Machinery and equipment 10-36
Accelerated methods and prescribed lives are used for reporting
depreciation for income tax purposes.
DEFERRED CHARGES
Costs incurred in connection with the procurement of financing are deferred
and amortized using the straight-line method over the term of the related
financing.
INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and income tax purposes.
SUPPLEMENTAL CASH FLOWS INFORMATION
Interest and income tax payments during 1996 were $40,007 and $149,
respectively.
2. ADDITIONAL BALANCE SHEET INFORMATION
December 31
1996
Inventories:
Finished goods $ 38,158
Work in process 5,416
Raw materials and supplies 37,303
$ 80,877
Accrued liabilities:
Payroll and payroll related costs $ 5,574
Interest 11,868
Other 6,743
$ 24,185
The Company has forward purchase contracts with Repap British Columbia and
Repap Enterprises for the future delivery of pulp, a raw material. Activity with
regard to the contracts during 1996 and the remaining balances at December 31,
1996 are as follows:
Balance, January 1, 1996 $ 36,000
Interest income received in form of additional
deposits 4,886
Deliveries (5,669)
Balance, December 31, 1996 $ 35,217
The forward purchase contracts will be settled at the market price at the
time of delivery (less volume discounts and interest based on the delivery
dates). The balances under the contracts were scheduled to be delivered during
1996. Because the forward purchase contracts were not settled in 1996, the
contracts specify that the Company receives interest income in the form of
additional future deliveries. At December 31, 1996, the forward purchase
contracts were renegotiated and the remaining balances are scheduled to be
delivered through 1998. The Company does not anticipate any deliveries of pulp
under the contracts in 1997 and, accordingly, the balance is included in other
noncurrent assets in the accompanying consolidated balance sheet. See Notes 7
and 13 for additional information regarding pulp purchases from Repap British
Columbia, Repap New Brunswick and Repap Enterprises and realization of the
forward purchase contracts.
3. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment at December 31, 1996 consist of the
following:
Land, plant and buildings $ 22,098
Machinery and equipment 629,532
651,630
Less accumulated depreciation (195,787)
455,843
Construction in progress 13,778
$ 469,621
4. LONG-TERM DEBT AND LEASE COMMITMENTS
Long-term debt at December 31, 1996 consists of the following:
9-1/4% First Priority Senior Secured Notes $ 250,000
9-7/8% Second Priority Senior Secured Notes 127,000
Revolving credit facility bearing interest at prime
plus 3/4% or LIBOR plus 2% 37,609
$ 414,609
The 9-1/4% First Priority Senior Secured Notes (First Priority Notes) of
Repap Wisconsin mature on February 1, 2002, and the 9-7/8% Second Priority
Senior Secured Notes (Second Priority Notes) of Repap Wisconsin mature on May 1,
2006.
The revolving credit facility provides Repap Wisconsin up to $70,000 of
availability, matures in March 1998 and requires a commitment fee of .375% per
year on the unused portion. Accordingly, borrowings under the revolving credit
facility have been classified as long-term debt in the accompanying consolidated
balance sheet.
Substantially all assets of Repap Wisconsin are pledged as security under
the First and Second Priority Notes and the revolving credit facility. The
indentures for the First and Second Priority Notes include certain covenants
related to Repap Wisconsin that limit additional debt; restrict certain
payments, including stock redemptions, dividends and other distributions; and
limit transactions with affiliates. At December 31, 1996, no amounts were
available for restricted payments.
Future minimum payments under noncancelable operating leases total $31,555
and are due as follows: 1997 - $6,073; 1998 - $5,624; 1999 - $5,322; 2000 -
$4,295; 2001 - $4,235; thereafter - $6,006. Rent expense, including payments
under operating leases, was $5,089 in 1996.
5. REDEEMABLE PREFERRED STOCK OF SUBSIDIARY
Repap Wisconsin has authorized 7,000 shares of Class I Preferred Stock, of
which 5,758.2 shares are issued and outstanding. Holders of the shares are
entitled to receive cumulative annual dividends of $100 per share payable
quarterly. Subject to the restrictions of certain debt covenants, Repap
Wisconsin is required to redeem, at $1,000 per share plus accrued dividends, 50%
of the outstanding shares of Class I Preferred Stock on July 15, 1997 and 100%
of the then outstanding shares on July 15, 1998. At December 31, 1996, accrued
dividends totaled $647.
6. PREFERRED STOCK OF SUBSIDIARY
Repap Wisconsin has authorized 800 shares of Class III Preferred Stock, of
which 432.39 shares are issued and outstanding and held by Repap Enterprises or
its affiliates. Holders of Class III Preferred Stock are entitled to
noncumulative annual dividends of $10,000 per share, as and when declared by the
Board of Directors, subject to restrictions of certain debt covenants. Repap
Wisconsin may redeem the shares at $100,000 per share plus accrued dividends,
subject to the restrictions of certain debt covenants and provided there are no
shares of its Class I Preferred Stock or Class II Preferred Stock (all of which
is held by the Company) outstanding.
In addition, Repap Wisconsin has authorized 700 shares of Class IV
Preferred Stock, of which 483.25 shares are issued and outstanding and held by
Repap Enterprises or its affiliates. The Class IV Preferred Stock is entitled
to noncumulative annual dividends of $10,000 per share, as and when declared by
the Board of Directors, subject to restrictions of certain debt covenants.
Repap Wisconsin may redeem the shares at $100,000 per share plus accrued
dividends, subject to the restrictions of certain debt covenants and provided
there are no shares of its Class I Preferred Stock or Class II Preferred Stock
(all of which is held by the Company) outstanding.
7. RELATED-PARTY TRANSACTIONS
The following summarizes related-party transactions, in addition to those
summarized in previous notes:
1996
Purchases of raw materials and paper from affiliates $ 51,060
Selling, general and administrative expenses
provided by affiliates 13,939
Commissions on sales of paper for Repap New Brunswick 7,707
Purchases of raw materials principally consist of purchases of pulp from
Repap British Columbia, Repap New Brunswick and Repap Enterprises. The
deliveries under the forward purchase contracts discussed in Note 2 are included
in these purchases. Purchases from affiliates also include coated paper from
Repap New Brunswick primarily to facilitate roll rewinding and returns of coated
paper from customers.
The selling, general and administrative expenses provided by affiliates
include charges for services and allocated costs from Repap Enterprises. Repap
Enterprises charges the Company a management fee for services including advice
and assistance concerning the strategy, planning, operations and financing of
the Company. The management fees were $6,050 in 1996.
Repap Enterprises also incurs various costs and expenses, such as research
and development expenses and aircraft expenses, which it allocates to its
subsidiaries, including the Company, based on management's assessment of the
relative benefits received by the respective subsidiaries for which the expenses
were incurred. Management believes that this method of allocation is
reasonable. Total allocated costs charged to the Company by Repap Enterprises
were $2,062.
Repap Sales, as the principal sales agent for Repap New Brunswick, receives
a commission of 2-1/2% of the sales price of coated paper sold by Repap Sales.
These commissions cover expenses relating to the marketing, sale and
distribution of coated paper products. In addition, Repap Sales received
reimbursement from Repap New Brunswick for marketing - related costs of $446 in
1996.
8. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Repap Wisconsin and Repap Sales have three defined benefit postretirement
plans that provide benefits to full-time employees who have worked at least five
years and attained age 57 while in service with Repap Wisconsin or Repap Sales.
One plan provides medical benefits, another provides dental benefits and the
third provides life insurance benefits. The medical plan benefits are provided
under a traditional indemnity arrangement or under an HMO arrangement, at the
participant's option. The medical benefit indemnity arrangement and the dental
plan contain cost-sharing features such as deductibles and coinsurance. The
life insurance plan is contributory.
The accumulated postretirement benefit obligation at December 31, 1996 is
as follows:
Retirees $ 18,295
Fully eligible active participants 5,514
Other active participants 2,892
26,701
Unrecognized transition obligation (21,271)
Unrecognized net gain 7,922
Accrued postretirement benefit liability $ 13,352
The net periodic postretirement benefit cost for 1996 includes the
following:
Service cost for benefits earned during the year $ 964
Interest cost on accumulated postretirement benefit
obligation 1,844
Amortization of net gain ( 1,010)
Amortization of transition obligation 1,329
$ 3,127
The weighted-average annual assumed rate of increase in the per capita cost
of covered benefits (i.e., health care cost trend rate) for the medical benefit
indemnity arrangement is assumed to decrease gradually to 2006 and then remain
at that level thereafter. The range of cost trend rates is 8.6% to 5.25% for
the medical benefit indemnity arrangement. The cost trend rate for the dental
plan is an annual increase of 5.25%. The cost trend rate for the medical
benefit HMO arrangement is an annual increase of 5%.
The health care cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care cost trend
rate by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1996, by $3,025, and the
aggregate of the service and the interest cost components of net periodic
postretirement benefit cost for 1996 by $334.
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.5% at December 31, 1996. The discount rate used for
determining the net periodic postretirement benefit cost was 7.5% for 1996.
9. MAJOR CUSTOMERS
Sales to one customer, in which the Company has an investment in preferred
stock, were 14% of net sales in 1996. Accounts receivable from this customer
were $5,340 at December 31, 1996. Sales to one other customer were 15% of net
sales during 1996. Accounts receivable from this customer were $3,953 at
December 31, 1996.
10. INCOME TAXES
The income tax benefit on loss before income taxes is composed of the
following:
1996
Deferred income tax credit, excluding components
listed below $ 2,963
Benefit of adjustment to operating loss carryforwards 2,943
Effect of change in valuation allowance 1,080
Income tax benefit $ 6,986
The income tax benefit differs from the amount computed by applying the
federal statutory rate of 34% to loss before income taxes as follows:
1996
Income tax benefit at federal statutory rate $ 3,202
State income taxes, net of federal benefit 481
Effect of change in valuation allowance 1,080
Benefit of adjustment to operating loss carryforwards 2,943
Other (720)
Income tax benefit $ 6,986
Significant components of the Company's deferred income tax liabilities and
assets as of December 31, 1996 are as follows:
Deferred income tax liabilities:
Property, plant and equipment $ 54,759
Other 2,245
57,004
Deferred income tax assets:
Accrued liabilities and other items not currently
deductible 8,406
Federal net operating loss carryforwards 35,868
Federal general business credit carryforwards 6,669
Federal alternative minimum tax credit carryforwards 1,413
State net operating loss carryforwards 724
State tax credit carryforwards 8,879
61,959
Valuation allowance for deferred tax assets 14,661
47,298
Net deferred income tax liabilities $ 9,706
Because of the recent cumulative losses, future income has not been assumed
in determining the necessary valuation allowances for the various carryforwards.
At December 31, 1996, the Company has the following carryforwards for
operating losses, general business credits and state tax credits available to
reduce future income taxes:
Federal General
Net Operating Losses Business State Tax
Federal State Credits Credits
Year expires:
1997 $ 9,698 $ - $ 495 $ 585
1998 5,951 - 2,242 735
1999 - - 1,683 717
2000 5,393 - 171 827
2001 10,551 - 283 868
2002 - - - 682
2003 - - 41 788
2004 657 - 929 1,049
2005 14,983 - 822 1,006
2006 19,734 - 2 973
2007 4,630 - 1 939
2008 27,347 - - 1,025
2009 4,732 6,493 - 1,019
2010 1,818 - - 998
2011 - 6,970 - 993
2012 - 426 - 249
$ 105,494 $ 13,889 $ 6,669 $ 13,453
The Company also has alternative minimum tax credit carryforwards of $1,413
that are available to reduce future regular federal income taxes.
11. CONTINGENCY
In 1993, Repap Wisconsin entered into an agreement with Wisconsin Electric
Power Company (WEPCO) to construct a cogeneration facility adjacent to Repap
Wisconsin's mill which would have provided steam for its paper making
operations. In late 1993, the Wisconsin Public Service Commission issued an
order denying WEPCO's application to construct the cogeneration facility. Since
the amount of liability could not be reasonably estimated as of December 31,
1996, the Company has not recorded any estimate at such date. However, at
December 31, 1996, the Company was contingently liable for approximately $4.9
million in engineering costs incurred by WEPCO in the event that the related
engineering costs could not be recovered by WEPCO through a sale of the
equipment owned by WEPCO or in a comparable project in the future. The Company
settled this liability with WEPCO in full in September 1997 for $3.0 million.
12. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at December 31, 1996:
Carrying
Amount Fair Value
Long-term debt(1) $ 414,609 $ 424,293
Redeemable preferred stock of subsidiary 6,405 (2)
Preferred stock of subsidiary 91,574 (2)
(1) The carrying amount of the borrowings under the revolving credit
facility approximates their fair value. The fair values of the First and Second
Priority Notes are based on quoted market prices.
(2) The fair values for the redeemable preferred stock of subsidiary and
preferred stock of subsidiary held by affiliates are not practicable to estimate
because of the lack of quoted market prices.
13. SUBSEQUENT EVENTS
In July 1996, Repap Enterprises engaged investment advisors to explore
strategic alternatives available to Repap Enterprises and its subsidiaries to
maximize shareholder value.
On September 30, 1997, Consolidated Papers, Inc. acquired all of the
outstanding shares of capital stock of the Company pursuant to a stock purchase
agreement between Repap Enterprises and Consolidated Papers, Inc. dated as of
August 8, 1997, for $227 million in cash and the assumption of debt and
postretirement benefits other than pensions. The purchase price is subject to
certain post-closing adjustments based on the September 30, 1997 balance sheet
of the Company.
As discussed in Note 2, the Company's consolidated balance sheet at
December 31, 1996 includes forward purchase contracts with Repap British
Columbia and Repap Enterprises of $24,722 and $10,495, respectively. On March
3, 1997, Repap Enterprises entered into a Restructuring and Settlement Agreement
with certain banks whereby such banks acquired control of Repap British
Columbia. The Restructuring and Settlement Agreement provided for the forward
purchase contract with Repap British Columbia to continue on the same terms.
Repap Enterprises indicated its intention to honor its commitment under its
forward purchase contract. However, as of June 30, 1997, both facilities
discontinued production of pulp. As reopening of either facility is uncertain,
the Company wrote off the forward purchase contracts in the second quarter of
1997.
In addition, the Company's consolidated balance sheet at December 31, 1996
includes an investment in Repap Enterprises preferred stock of $2,934 and an
investment in Repap British Columbia preferred stock of $16,500. In connection
with the stock purchase agreement with Consolidated Papers, Inc., Repap
Enterprises acquired its outstanding shares of preferred stock from the Company
for one dollar. The Company wrote off its investment in Repap British Columbia
preferred stock at the time the banks acquired control of Repap British
Columbia, as discussed above.
Consolidated Balance Sheet
Repap USA, Inc.
September 30, 1997
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors
Repap USA, Inc.
We have audited the accompanying consolidated balance sheet of Repap USA, Inc.
(the Company) as of September 30, 1997. This balance sheet is the
responsibility of the Company's management. Our responsibility is to express an
opinion on this balance sheet based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the balance sheet is free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the balance sheet. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall balance sheet presentation. We believe that our audit
of the balance sheet provides a reasonable basis for our opinion.
In our opinion, the balance sheet referred to above presents fairly, in all
material respects, the consolidated financial position of the Company at
September 30, 1997, in conformity with generally accepted accounting principles.
October 17, 1997 ERNST & YOUNG LLP
<TABLE>
Repap USA, Inc.
Consolidated Balance Sheet
September 30, 1997
(In Thousands, Except Number of Shares)
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash $ 7,634
Accounts receivable, less allowances of $1,261 39,277
Accounts receivable from affiliates 6,780
Inventories 56,807
Other current assets 1,199
Total current assets 111,697
Net property, plant and equipment 457,220
Deferred charges and other assets 13,282
$ 582,199
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Revolving credit facility $ 13,671
Accounts payable 34,068
Accrued liabilities 24,458
Total current liabilities 72,197
Long-term payables 10,000
Long-term debt 377,000
Deferred income taxes 6,023
Accrued postretirement benefit liability 15,058
Commitments (Note 3)
Redeemable preferred stock of subsidiary 6,836
Preferred stock of subsidiary 91,574
Shareholders' equity:
Common stock, no par value, 300 shares authorized;
105 shares issued and outstanding 105,661
Accumulated deficit (102,150)
Total shareholders' equity 3,511
$ 582,199
See accompanying notes.
</TABLE>
Repap USA, Inc.
Notes to Consolidated Balance Sheet
(In Thousands, Except Share and Per Share Amounts)
September 30, 1997
1. SIGNIFICANT ACCOUNTING POLICIES
DESCRIPTION OF BUSINESS
Repap USA, Inc. (the Company) was a wholly owned subsidiary of Repap
Enterprises, Inc. (Repap Enterprises). Through its wholly owned subsidiaries,
Repap Wisconsin, Inc. (Repap Wisconsin) and Repap Sales Corporation (Repap
Sales), the Company manufactures and distributes coated papers. On September
30, 1997, Consolidated Papers, Inc. acquired all of the outstanding shares of
capital stock of the Company pursuant to a stock purchase agreement between
Repap Enterprises and Consolidated Papers, Inc. dated as of August 8, 1997.
Consolidated Papers, Inc. intends to continue the businesses of the Company
under the name Inter Lake Papers, Inc.
Repap Wisconsin is a producer of high quality grades of recycled coated
paper and a complete range of coated paper products. Repap Wisconsin's products
are used for magazines, catalogs, brochures, advertising inserts and annual
reports. Repap Wisconsin competes with other U.S., Canadian and European
producers in all of its product lines. Repap Wisconsin sells its products
through Repap Sales on a commission basis, as agent, to end users, third-party
merchants and brokerage distributors. Almost all of Repap Wisconsin's products
are sold to customers in North America. Combined receivables from two customers
totaled $10,977 at September 30, 1997. The Company's accounts receivable
generally are unsecured.
Repap Wisconsin's annual requirements of softwood and hardwood kraft pulp
are supplied by certain affiliates, including Repap New Brunswick, Inc. (Repap
New Brunswick), a subsidiary of Repap Enterprises, and Repap Enterprises and by
other suppliers not affiliated with the Company. In the event that any of its
suppliers is unable to meet Repap Wisconsin's demands, the Company believes that
adequate alternative suppliers or substitute materials are available.
BASIS OF PRESENTATION
The consolidated balance sheet includes the accounts of the Company and its
wholly owned subsidiaries.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the accompanying consolidated
balance sheet and notes. Actual results could differ from those estimates.
INVENTORIES
Inventories are valued at the lower of cost or market with cost determined
on a first-in, first-out basis.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost, including interest and
start-up costs related to major assets during construction. Interest and start-
up costs are capitalized until the asset is ready for its intended use.
Property, plant and equipment are depreciated using straight-line and unit-of-
production methods for financial reporting purposes over their estimated useful
lives as follows:
Years
Plant and buildings 12-42
Machinery and equipment 10-36
The straight-line method and prescribed lives are used for reporting
depreciation for income tax purposes.
DEFERRED CHARGES
Costs incurred in connection with the procurement of financing are deferred
and amortized using the straight-line method over the term of the related
financing.
INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and income tax purposes.
2. ADDITIONAL BALANCE SHEET INFORMATION
September 30,
1997
Inventories:
Finished goods $ 28,118
Work in process 4,387
Raw materials and supplies 24,302
$ 56,807
Accrued liabilities:
Payroll and payroll related costs $ 6,774
Interest 9,151
Other 8,533
$ 24,458
Property, plant and equipment:
Land, plant and buildings $ 29,562
Machinery and equipment 638,582
668,144
Less accumulated depreciation (212,536)
455,608
Construction in progress 1,612
$ 457,220
3. LONG-TERM DEBT, REVOLVING CREDIT FACILITY AND LEASE COMMITMENTS
Long-term debt at September 30, 1997 consists of the following:
9-1/4% First Priority Senior Secured Notes $ 250,000
9-7/8% Second Priority Senior Secured Notes 127,000
$ 377,000
The 9-1/4% First Priority Senior Secured Notes (First Priority Notes) of
Repap Wisconsin mature on February 1, 2002, and the 9-7/8% Second Priority
Senior Secured Notes (Second Priority Notes) of Repap Wisconsin mature on May 1,
2006.
Repap Wisconsin has a revolving credit facility that provides up to $70,000
of availability, matures in March 1998 and requires a commitment fee of .375%
per year on the unused portion. Borrowings under the revolving credit facility
bear interest at prime plus 3/4% or LIBOR plus 2%.
Substantially all assets of Repap Wisconsin are pledged as security under
the First and Second Priority Notes and the revolving credit facility. The
indentures for the First and Second Priority Notes include certain covenants
that limit additional debt; restrict certain payments, including stock
redemptions, dividends and other distributions; and limit transactions with
affiliates. At September 30, 1997, no amounts were available for restricted
payments.
Future minimum payments under noncancelable operating leases total $20,619
and are due as follows: three months ended December 31, 1997--$1,312; 1998--
$4,707; 1999--$4,396; 2000--$3,351; 2001--$3,080; 2002--$2,498; thereafter--
$1,275.
4. REDEEMABLE PREFERRED STOCK OF SUBSIDIARY
Repap Wisconsin has authorized 7,000 shares of Class I Preferred Stock, of
which 5,758.2 shares are issued and outstanding. The shares are entitled to
receive cumulative annual dividends of $100 per share payable quarterly.
Subject to the restrictions of certain debt covenants, Repap Wisconsin is
required to redeem, at $1,000 per share plus accrued dividends, all outstanding
shares of Class I Preferred Stock on July 15, 1998. At September 30, 1997,
accrued dividends totaled $1,078.
5. PREFERRED STOCK OF SUBSIDIARY
Repap Wisconsin has authorized 800 shares of Class III Preferred Stock, of
which 432.39 shares are issued and outstanding and held by Repap Enterprises or
its affiliates. The Class III Preferred Stock is entitled to noncumulative
annual dividends of $10,000 per share, as and when declared by the Board of
Directors, subject to restrictions of certain debt covenants. Repap Wisconsin
may redeem the shares at $100,000 per share plus accrued dividends, subject to
the restrictions of certain debt covenants and provided there are no shares of
its Class I Preferred Stock or Class II Preferred Stock (all of which is held by
the Company) outstanding.
In addition, Repap Wisconsin has authorized 700 shares of Class IV
Preferred Stock, of which 483.25 shares are issued and outstanding and held by
Repap Enterprises or its affiliates. The Class IV Preferred Stock is entitled
to noncumulative annual dividends of $10,000 per share, as and when declared by
the Board of Directors, subject to restrictions of certain debt covenants.
Repap Wisconsin may redeem the shares at $100,000 per share plus accrued
dividends, subject to the restrictions of certain debt covenants and provided
there are no shares of its Class I Preferred Stock or Class II Preferred Stock
(all of which is held by the Company) outstanding.
6. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
Repap Wisconsin and Repap Sales have three defined benefit postretirement
plans that provide benefits to full-time employees who have worked at least five
years and attained age 57 while in service with Repap Wisconsin or Repap Sales.
One plan provides medical benefits, another provides dental benefits and the
third provides life insurance benefits. The medical plan benefits are provided
under a traditional indemnity arrangement or under an HMO arrangement, at the
participant's option. The medical benefit indemnity arrangement and the dental
plan contain cost-sharing features such as deductibles and coinsurance. The
life insurance plan is contributory.
The accumulated postretirement benefit obligation at September 30, 1997 is
as follows:
Retirees $ 18,513
Fully eligible active participants 6,751
Other active participants 2,299
27,563
Unrecognized transition obligation (20,274)
Unrecognized net gain 7,769
Accrued postretirement benefit liability $ 15,058
The weighted-average annual assumed rate of increase in the per capita cost
of covered benefits (i.e., health care cost trend rate) for the medical benefit
indemnity arrangement is assumed to decrease gradually to 2006 and then remain
at that level thereafter. The range of cost trend rates is 7.7% to 5.25% for
the medical benefit indemnity arrangement. The cost trend rate for the dental
plan is an annual increase of 5.25% per year. The cost trend rate for the
medical benefit HMO arrangement is an annual increase of 5% per year.
The health care cost trend rate assumption has a significant effect on the
amounts reported. For example, increasing the assumed health care cost trend
rate by one percentage point in each year would increase the accumulated
postretirement benefit obligation as of September 30, 1997, by $2,513.
The discount rate used in determining the accumulated postretirement
benefit obligation was 7.5% at September 30, 1997.
7. INCOME TAXES
Significant components of the Company's deferred income tax liabilities and
assets as of September 30, 1997, are as follows:
Deferred income tax liabilities:
Property, plant and equipment $ 58,270
Other 1,924
60,194
Deferred income tax assets:
Accrued liabilities and other items not currently
deductible 8,197
Federal net operating loss carryforwards 50,337
Federal general business credit carryforwards 6,174
Federal alternative minimum tax credit carryforwards 1,413
State net operating loss carryforwards 3,078
State tax credit carryforwards 9,071
78,270
Valuation allowance for deferred tax assets 24,099
54,171
Net deferred income tax liabilities $ 6,023
Because of the recent cumulative losses, future income has not been assumed
in determining the necessary valuation allowances for the various carryforwards.
At September 30, 1997, the Company has the following carryforwards for
operating losses, general business credits and state tax credits available to
reduce future income taxes:
<TABLE>
<CAPTION>
Federal General
Net Operating Losses Business State Tax
Federal State Credits Credits
<S> <C> <C> <C> <C>
Year expires:
1998 $ 9,698 $ - $ 2,242 $ 735
1999 5,951 - 1,683 717
2000 - - 171 827
2001 5,393 - 283 868
2002 10,549 - - 682
2003 - - 41 788
2004 - - 929 1,049
2005 657 - 822 1,006
2006 14,983 - 2 973
2007 19,734 - 1 939
2008 4,630 - - 1,025
2009 27,347 6,630 - 1,019
2010 - - - 998
2011 4,667 5,709 - 993
2012 44,442 46,691 - 1,125
$ 148,051 $ 59,030 $ 6,174 $ 13,744
</TABLE>
The Company also has alternative minimum tax credit carryforwards of $1,413
that are available to reduce future regular federal income taxes.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
The following table presents the carrying amounts and estimated fair values
of the Company's financial instruments at September 30, 1997:
Carrying
Amount Fair Value
Long-term debt(1) $ 390,671 $ 411,468
Redeemable preferred stock of subsidiary 6,836 (2)
Preferred stock of subsidiary 91,574 (2)
(1) The carrying amount of the borrowings under the revolving credit
facility approximates their fair value. The fair values of the First and Second
Priority Notes are based on quoted market prices.
(2) The fair values for the redeemable preferred stock of subsidiary and
preferred stock of subsidiary held by affiliates are not practicable to estimate
because of the lack of quoted market prices.
EXHIBIT 99.c
<TABLE>
Repap USA, Inc.
Unaudited Consolidated Statement of Operations
(In Thousands)
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
<S> <C> <C>
Net sales $ 347,195 $ 298,296
Cost of sales excluding
depreciation and amortization 306,592 239,652
Depreciation and amortization 17,761 16,899
Selling, general and
administrative expenses 20,359 20,831
Operating profit 2,483 20,914
Interest expense 28,976 29,961
Amortization of deferred
financing costs 1,269 1,269
Other (income) expense 36,429 ( 264)
Loss before income taxes (64,191) (10,052)
Income tax benefit ( 4,759) ( 1,751)
Net loss $ (59,432) $ ( 8,301)
</TABLE>
<TABLE>
Repap USA, Inc.
Unaudited Consolidated Statement of Cash Flows
(In Thousands)
<CAPTION>
Nine Months Ended Nine Months Ended
September 30, 1997 September 30, 1996
<S> <C> <C>
Operating activities
Net loss $(59,432) $( 8,301)
Adjustments to reconcile net loss
to net cash provided by
operating activities:
Depreciation and amortization 19,030 18,168
Non-cash portion of
postretirement benefit
expense 1,706 1,463
Write-off of investments and 65,000 -
other assets
Deferred income taxes ( 4,557) ( 1,900)
Changes in operating assets
and liabilities:
Accounts receivable ( 1,770) 6,054
Inventories 24,070 4,781
Inventory deposits - 6,026
Other current assets ( 12) 146
Accounts payable and
accrued liabilities ( 8,614) (25,510)
Net cash provided by operating
activities 35,421 927
Investing activities
Additions to property, plant
and equipment ( 5,561) ( 8,432)
Other ( 1,731) ( 934)
Net cash used in investing
activities ( 7,292) ( 9,366)
Financing activities
Net borrowings under revolving
credit facilities (23,938) 12,379
Payments of long-term debt - ( 26)
Dividends paid on common stock - (12,439)
Net cash used in financing activities $(23,938) $( 86)
Net (increase) decrease in cash 4,191 ( 8,525)
Cash at beginning of period 3,443 13,661
Cash at end of period $ 7,634 $ 5,136
</TABLE>
Exhibit 99.d
<TABLE>
Consolidated Papers, Inc. and Subsidiaries
Unaudited Pro Forma Statement of Income
Year Ended December 31, 1996
<CAPTION>
Consolidated
Papers, Inc.
Consolidated Acquired Pro Forma and Acquired
Papers, Inc. Business(1) Adjustments Business
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $1,545,091 $409,322 $( 964)(2) $1,953,449
Cost of goods sold 1,175,304 355,350 12,591 (3) 1,543,245
Gross profit 369,787 53,972 (13,555) 410,204
Selling, general and
administrative expenses 78,527 27,875 - 106,402
Income from operations 291,260 26,097 (13,555) 303,802
OTHER INCOME (EXPENSE)
Interest expense (15,298) (39,035) (14,210)(4) (68,543)
Interest income 10,999 4,891 - 15,890
Miscellaneous, net 2,209 ( 1,372) 1,692 (5) 2,529
Total ( 2,090) (35,516) (12,518) (50,124)
Income before provision
for income taxes 289,170 ( 9,419) (26,073) 253,678
PROVISION FOR INCOME TAXES 109,885 ( 6,986) ( 6,501)(6) 96,398
Net income $ 179,285 $( 2,433) $(19,572) $ 157,280
Net income per share $ 4.01 $ 3.52
Average number of common
shares outstanding 44,674,982 44,674,982
The accompanying notes to the unaudited pro forma combined statement of income
are an integral part of this statement.
</TABLE>
Notes to Unaudited Pro Forma Combined
Statements of Income for the Year Ended December 31, 1996
(1) Reflects results for the twelve months ended December 31, 1996 for Repap
USA, Inc. Certain income statement accounts of Repap USA, Inc. have been
reclassified to conform with Consolidated Papers, Inc.'s presentation. The
accompanying unaudited pro forma information reflects the preliminary
allocation of the purchase price in the above referenced transaction.
Management is continuing to accumulate additional information to determine
the fair value of assets acquired and liabilities assumed. As a result, the
pro forma disclosures are subject to change.
(2) To eliminate intercompany sales between Repap USA, Inc. and Consolidated
Papers, Inc.
(3) To eliminate intercompany sales, to record depreciation of the write-up to
fair market of plant and equipment, to record other postretirement expense
and to record amortization of intangibles including goodwill.
(4) To record interest expense on debt incurred in the acquisition at an
assumed interest rate of 6.5%, which represents long-term financing costs
at the time of the acquisition and to reflect effective interest expense
due to revaluation of the assumed debt to fair market value.
(5) To eliminate deferred financing expenses.
(6) To adjust provision for income taxes for the effect of the pro forma
adjustments, and to record Repap USA, Inc.'s taxes at a pro forma
Consolidated Papers, Inc. tax rate.
<TABLE>
Consolidated Papers, Inc. and Subsidiaries
Unaudited Pro Forma Statement of Income
Nine Months Ended September 30, 1997
<CAPTION>
Consolidated
Papers, Inc.
Consolidated Acquired Pro Forma and Acquired
Papers, Inc. Business(1) Adjustments Business
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $1,169,611 $347,195 $( 878)(2) $1,515,928
Cost of goods sold 974,131 324,353 10,097 (3) 1,308,581
Gross profit 195,480 22,842 (10,975) 207,347
Selling, general and
administrative expenses 60,275 20,359 - 80,634
Income from operations 135,205 2,483 (10,975) 126,713
OTHER INCOME (EXPENSE)
Interest expense (27,050) (28,976) (10,657)(4) (66,683)
Interest income 19,361 - - 19,361
Miscellaneous, net 5,078 (37,698) 1,269 (5) (31,351)
Total ( 2,611) (66,674) ( 9,388) (78,673)
Income before provision
for income taxes 132,594 (64,191) (20,363) 48,040
PROVISION FOR INCOME TAXES 50,386 ( 4,759) (27,372)(6) 18,255
Net income $ 82,208 $(59,432) $ 7,009 $ 29,785
Net income per share $ 1.83 $ 0.66
Average number of common
shares outstanding 44,831,155 44,831,155
The accompanying notes to the unaudited pro forma combined statement of income
are an integral part of this statement.
</TABLE>
Notes to Unaudited Pro Forma Combined
Statements of Income for the Nine Months Ended September 30, 1997
(1) Reflects results for the nine months ended September 30, 1997 for Repap
USA, Inc. Certain income statement accounts of Repap USA, Inc. have been
reclassified to conform with Consolidated Papers, Inc.'s presentation. The
accompanying unaudited pro forma information reflects the preliminary
allocation of the purchase price in the above referenced transaction.
Management is continuing to accumulate additional information to determine
the fair value of assets acquired and liabilities assumed. As a result,
the pro forma disclosures are subject to change.
(2) To eliminate intercompany sales between Repap USA, Inc. and Consolidated
Papers, Inc.
(3) To eliminate intercompany sales, to record depreciation of the write-up to
fair market of plant and equipment, to record other postretirement expense
and to record amortization of intangibles including goodwill.
(4) To record interest expense on debt incurred in the acquisition at an
assumed interest rate of 6.5%, which represents long-term financing costs
at the time of the acquisition and to reflect effective interest expense
due to revaluation of the assumed debt to fair market value.
(5) To eliminate deferred financing expenses.
(6) To adjust provision for income taxes for the effect of the pro forma
adjustments, and to record Repap USA, Inc.'s taxes at a pro forma
Consolidated Papers, Inc. tax rate.
<TABLE>
Consolidated Papers, Inc.
Unaudited Pro Forma Combined Balance Sheet
September 30, 1997
(In Thousands)
<CAPTION>
Pro Forma
Consolidated
Papers, Inc.
Consolidated Acquired Pro Forma and Acquired
Papers, Inc. Business(1) Adjustments Business
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 6,874 $ 7,634 $ - $ 14,508
Receivables, net 123,321 46,057 ( 197)(2) 169,181
Inventories
Finished stock 46,617 28,118 6,768 (3) 81,503
Unfinished stock 7,504 4,387 1,009 (3) 12,900
Raw materials and
supplies 93,192 24,302 - 117,494
Total inventories 147,313 56,807 7,777 211,897
Prepaid expenses 44,690 1,199 - 45,889
Total current assets 322,198 111,697 7,580 441,475
Investments and other
assets 304,938 13,282 (239,698)(4) 78,522
Restricted cash related
to leases 419,164 - - 419,164
Goodwill 55,754 - 90,890 (5) 146,644
PLANT AND EQUIPMENT
Plant and equipment 2,439,301 668,144 ( 53,144)(6) 3,054,301
Less Accumulated
depreciation 857,768 212,536 (212,536)(6) 857,768
1,581,533 455,608 159,392 2,196,533
Capital additions in
process 126,043 1,612 - 127,655
Total plant and
equiquipment 1,707,576 457,220 159,392 2,324,188
$2,809,630 $ 582,199 $ 18,164 $3,409,993
CURRENT LIABILITIES
Current maturities of
long-term debt $ - $ 13,671 $ - $ 13,671
Accounts Payable 71,653 34,068 ( 197)(2) 105,524
Other 103,620 24,458 - 128,078
Total current liabilities 175,273 72,197 ( 197) 247,273
Long-term debt 484,000 377,000 57,488 (7) 918,488
Capital lease obligations 447,392 - - 447,392
Deferred income taxes 276,138 6,023 29,251 (8) 311,412
Postretirement benefits 105,923 15,058 33,543 (9) 154,524
Other noncurrent
liabilities 16,287 10,000 - 26,287
SHAREHOLDERS' INVESTMENT
Preferred stock,
authorized and unissued - 98,410 ( 98,410) (10) -
Common stock issued and
outstanding 44,975 105,661 (105,661) (10) 44,975
Capital in excess of
par value 89,100 - - 89,100
Cumulative translation
adjustment (2,534) - - (2,534)
Treasury stock, at cost (1,190) - - (1,190)
Reinvested earnings 1,174,266 (102,150) 102,150 (10) 1,174,266
Total shareholders'
investment 1,304,617 101,921 (101,921) 1,304,617
$2,809,630 $582,199 $ 18,164 $3,409,993
The accompanying notes to the unaudited pro forma combined balance sheet are an
integral part of this statement.
</TABLE>
Notes to Unaudited Pro Forma
Combined Balance Sheet as of September 30, 1997
(1) Reflects balances at September 30, 1997 for Repap USA, Inc. Certain
balance sheet accounts of Repap USA, Inc. have been reclassified to conform with
Consolidated Papers, Inc.'s presentation. The accompanying unaudited pro forma
information reflects the preliminary allocation of the purchase price in the
above referenced transaction. Management is continuing to accumulate additional
information to determine the fair value of assets acquired and liabilities
assumed. As a result, the pro forma disclosures are subject to change.
(2) To eliminate intercompany receivables and payables between Consolidated
Papers, Inc. and Repap USA, Inc.
(3) To adjust Repap USA, Inc.'s inventories to estimated fair market value.
(4) To eliminate the advance payment for the acquisition of Repap USA, Inc. as
of September 30, 1997 and to revalue other long-term assets.
(5) To reflect goodwill.
(6) To restate Repap USA, Inc.'s plant and equipment to estimated fair market
value and to reverse prior accumulated depreciation.
(7) To reflect fair value of the assumed Repap USA, Inc. long-term debt and to
record additional borrowings to finance the purchase of Repap USA, Inc.
(8) To record deferred income taxes on the differences between the book and tax
basis of assets acquired and liabilities assumed.
(9) To record postretirement liabilities of Repap USA, Inc. at September 30,
1997.
(10) To eliminate Repap USA, Inc.'s equity.
