SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported):
April 23, 1998
REPAP ENTERPRISES INC.
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(Exact Name of Registrant as Specified in Charter)
CANADA NO. 0-16289 NO. 98-0178526
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
300 ATLANTIC STREET
STAMFORD, CONNECTICUT 06901
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (203) 964-6160
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(Former Name or Former Address, if Changed Since Last Report)
<PAGE>
ITEM 5. OTHER EVENTS.
On April 23, 1998 the registrant reported results for the first quarter
ended March 31, 1998. Repap also announced a major recapitalization
program aimed at extending debt maturities, increasing financial flexibility and
streamlining the corporate structure. The program, which is expected to be
completed in the first half of 1998, includes the following elements:
1. A commitment by Enron Capital & Trade Resources Corp. ("ECT"), a subsidiary
of Enron Corp., to make a private investment of US$45 million in new 6%
Convertible Subordinated Debentures due 2005 convertible into Repap common
stock at the Repap Enterprises (holding company) level.
2. In connection with ECT's investment, Repap and ECT will enter into a
five-year Energy Advisory Services Agreement and, in addition, into a Pulp
and Paper Price Risk Management Program.
3. Repap also intends to pursue a refinancing of Repap New Brunswick's
outstanding US$150 million First Priority Senior Secured Floating Rate
Notes and US$150 million First Priority Fixed Senior Secured Rate Notes,
each maturing in 2000. In connection with the refinancing, Repap expects
that it will conduct a tender offer and consent solicitation for the First
Priority Notes that will be managed by Credit Suisse First Boston. This
refinancing is expected to be funded by a private placement of two series
of Notes similar to the Notes being repaid but with a maturity date of
2004, thereby increasing financial flexibility. The timing and terms of the
refinancing are subject to market conditions and other factors.
4. Finally, Repap will amalgamate its public holding company, Repap
Enterprises Inc. with its wholly-owned subsidiary, Repap New Brunswick Inc.
which is expected to become effective January 1, 1999.
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<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
Exhibit
No. Description
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99.1 Press Release, dated 4/23/98.
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<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 hereunto duly authorized.
REPAP ENTERPRISES INC.
Date: April 28, 1997 By: /s/ TERRY W. MCBRIDE
------------------------------------
Name: Terry W. McBride
Title: Vice President, General
Counsel and Secretary
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<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
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99.1 Press Release, dated 4/23/98.
FOR IMMEDIATE RELEASE
THURSDAY, APRIL 23, 1998
[REPAP LOGO]
PRESS RELEASE
REPAP REPORTS FIRST QUARTER RESULTS AND RECAPITALIZATION PROGRAM
STAMFORD, CT. -- Repap Enterprises Inc. today reported results for the first
quarter ended March 31, 1998. Including the net gain on discontinued operations,
Repap recorded a net income of $17.3 million ($0.02 per share) compared with a
loss of $125.9 million ($1.02 per share) in the first quarter of 1997.
Excluding discontinued operations, Repap's net loss from continuing operations
was $0.8 million compared with a net loss from continuing operations of $42.1
million in the first quarter of 1997.
The first quarter of 1998 included net income from discontinued operations of
$18.1 million, reflecting mainly the net gain on the sale of its Atholville
magnefite pulp operations which was completed in February 1998. During this
first quarter of 1997, a net loss of $83.8 million from discontinued operations
was recorded, reflecting mainly operating losses incurred during that period
related to discontinued operations.
Revenues from continuing operations for the first quarter of 1998 were $163.3
million, up 16% from revenues of $140.9 million in the first quarter of 1997 and
down 1% from revenues of $165.3 million in the fourth quarter of 1997. Revenues
from coated paper were $148.3 million, up $35.8 million or 32% over the first
quarter of 1997 and up $12.1 million or 9% over the fourth quarter, reflecting
increased pricing and shipments. Pulp revenues for the first quarter of 1998
were $9.9 million, down by approximately $13 million from both the first and
fourth quarters of 1997, reflecting lower pricing and shipments.
Repap's operating profit from continuing operations, excluding non-cash hedged
foreign exchange adjustments, ("EBITDA") was $45.1 million for the first quarter
compared to an operating profit of $6.5 million in first quarter of 1997 and to
an operating profit of $36.0 million in the fourth quarter of 1997.
Commenting on the results, Mr. Stephen Larson, President and Chief Executive
Officer, said, "We are pleased with the continuing success of this turnaround.
Noteworthy is the $9 million improvement in EBITDA quarter over quarter and the
breakeven net income achieved by Repap New Brunswick. The 25% improvement in
EBITDA is reflective of the US$60 per ton price increase in coated groundwood
paper implemented in January and continuing improvements in productivity and
costs. The outlook for the lightweight coated groundwood market continues to be
favorable and our order book is good."
RECAPITALIZATION PROGRAM
Repap also announced today a major recapitalization program aimed at extending
debt maturities, increasing financial flexibility and streamlining the corporate
structure. The program, which is expected to be completed in the first half of
1998, includes the following elements:
1. A commitment by Enron Capital & Trade Resources Corp. ("ECT"), a subsidiary
of Enron Corp., to make a private investment of US$45 million in new
Convertible Subordinated Debentures at the Repap Enterprises (holding
company) level, subject to entering into definitive agreements and other
conditions. These 6% Convertible Subordinated Debentures will mature in
June 2005 and will be convertible into Repap common stock at US$0.35 per
share (approximately Cdn $0.50 per share).
Repap intends to use the proceeds of this issue, along with cash on hand,
to redeem, at par value, its outstanding Cdn $75 million, 9% Convertible
Subordinated Debentures maturing June 30, 1998.
<PAGE>
2. In connection with ECT's investment, Repap and ECT will enter into a
five-year Energy Advisory Services Agreement to maximize Repap's energy
flexibility and reduce Repap's energy-related costs and risk exposures. In
addition, Repap and ECT have entered into a Pulp and Paper Price Risk
Management Program to manage Repap's exposure to product price volatility.
3. Repap also intends to pursue a refinancing of Repap New Brunswick's
outstanding US$150 million First Priority Senior Secured Floating Rate
Notes and US$150 million First Priority Fixed Senior Secured Rate Notes,
each maturing in 2000. In connection with the refinancing, Repap expects
that it will conduct a tender offer and consent solicitation for the First
Priority Notes that will be managed by Credit Suisse First Boston. This
refinancing is expected to be funded by a private placement of two series
of Notes similar to the Notes being repaid but with a maturity date of
2004, thereby increasing financial flexibility. The timing and terms of the
refinancing are subject to market conditions and other factors.
4. Finally, Repap will amalgamate its public holding company, Repap
Enterprises Inc. with its wholly-owned subsidiary, Repap New Brunswick Inc.
This amalgamation, which requires bondholder consent, but does not require
shareholder approval, will significantly streamline the corporate legal,
accounting and tax structures while enhancing financial flexibility.
Subject to obtaining the necessary consents, the amalgamation is expected
to become effective January 1, 1999.
Commenting on the program, Mr. Larson said, "The management and Board of
Directors of Repap are pleased to have the opportunity to work with Enron,
a world class, highly innovative company. We believe that Enron's
experience in the energy field will bring additional value to Repap."
Enron is the world's leading integrated natural gas and electricity
company. The company owns approximately $23 billion in energy related
assets and delivers physical commodities and risk management and financial
services to provide energy solutions to customers around the world.
"We are also pleased to announce the proposed refinancing of Repap New
Brunswick and amalgamation with Repap," added Larson. "Both will
significantly enhance our financial flexibility, allowing us to concentrate
our efforts on continued operating improvements."
Repap Enterprises Inc. is a major producer of lightweight coated groundwood
paper with 9% of North American capacity. This high quality paper is utilized in
magazines, catalogs, inserts and commercial printing applications. The Company's
world-class coated paper complex in New Brunswick has two modern paper machines
with an annual design capacity of 492,000 tons, a northern bleached softwood
kraft pulp with an annual capacity of 235,000 metric tons, an integrated
groundwood pulp mill with an annual capacity of 123,000 metric tons and lumber
operations with an annual capacity of 58 mmbf.
The new Convertible Subordinated Debentures and underlying shares of Repap
Enterprises and the new Notes of Repap New Brunswick have not been registered
under the Securities Act of 1933 and may not be offered or sold in the United
States absent registration or an applicable exemption from registration
requirements.
All figures are reported, unless otherwise noted, in Canadian dollars and under
accounting principles generally accepted in Canada.
For more information contact:
Stephen C. Larson Michelle A. Cormier
President & CEO Vice-President, Finance
(203) 964-6163 (203) 964-6168
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<PAGE>
REPAP ENTERPRISES INC.
CONSOLIDATED STATEMENTS OF INCOME
(Millions of Canadian dollars)
<TABLE>
<CAPTION>
Quarter Ended
-----------------------------------------------------------------------------
Mar. 31, 1997 Dec. 31, 1997 Mar. 31, 1998 Q1 vs Q1 Q1 vs Q4
------------- ------------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
REVENUES $ 140.9 $ 165.3 $ 163.3 +16% -1%
Hedged foreign exchange adjustment (1) $ 1.2 $ 1.6 $ 1.2
------------- ------------- -------------
NET REVENUES $ 139.7 $ 163.7 $ 162.1
------------- ------------- -------------
Net sales $ 123.7 $ 147.5 $ 146.9 +19% -0%
Cost of sales $ 108.8 $ 104.0 $ 95.0
Selling, administrative and research $ 9.6 $ 9.1 $ 7.9
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Operating margin $ 5.3 $ 34.4 $ 44.0
Depreciation & amortization $ 12.2 $ 13.1 $ 16.1
------------- ------------- -------------
Operating profit (loss) $ (6.9) $ 21.3 $ 27.9
Interest expense $ 29.9 $ 26.6 $ 26.5
Other expenses (income) $ (0.4) $ 0.5 $ (0.2)
Unusual item $ -- $ -- $ --
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Pre-tax loss $ (36.4) $ (5.8) $ 1.6
Provision for income taxes (2) $ 0.7 $ 0.7 $ 0.8
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LOSS FROM CONTINUING OPERATIONS $ (37.1) $ (6.5) $ 0.8
Provision for accretion of paid-in capital $ 5.0 $ 1.5 $ 1.6
------------- ------------- -------------
LOSS FROM CONTINUING OPERATIONS $ (42.1) $ (8.0) $ (0.8)
Discontinued operations (3) $ (83.8) $ 57.4 $ 18.1
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NET INCOME (TAX) $ (125.9) $ 49.4 $ 17.3
============= ============= =============
Ave common shares outstanding (millions) (4) 123.4 742.5 742.5
Earnings (loss) per share: Continuing $ (0.34) $ (0.01) $ 0.00
Discontinuing $ (0.68) $ 0.08 $ 0.02
------------- ------------- -------------
Total $ (1.02) $ 0.07 $ 0.02
============= ============= =============
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REVOLVING CREDIT FACILITIES (5) $ 226.7 $ 97.5 $ 80.7
CAPITAL EXPENDITURES $ 0.6 $ 9.0 $ 2.7
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CASH FROM (USED BY) CONTINUING OPERATIONS
BEFORE WORKING CAPITAL CHANGES $ (23.7) $ 9.5 $ 15.9
NON-CASH WORKING CAPITAL CHANGES $ 19.1 $ (6.1) $ 23.3
------------- ------------- -------------
CASH FROM (USED BY) CONTINUING OPERATIONS
BEFORE WORKING CAPITAL CHANGES $ (4.6) $ 3.4 $ 39.2
- -----------------------------------------------------------------------------------------------------------------------------------
REVENUES BY SEGMENT (IN MILLIONS)
Coated Paper $ 112.5 $ 136.2 $ 148.2
Pulp 22.1 22.9 9.9
Lumber 6.3 6.2 5.2
Hedged foreign exchange adjustment (1) (1.2) (1.6) (1.2)
------------- ------------- -------------
Total Revenues $ 139.7 $ 163.7 $ 162.1
============= ============= =============
SHIPMENTS (IN THOUSANDS)
Coated Paper (tons) 110 110 112 +2% +2%
Pulp (tonnes) 31 30 13 -58% -57%
Lumber (Mmbf) 13 14 12 -8% -14%
<FN>
(1) Represents non-cash impact of hedged currency exchange losses.
(2) Virtually no deferred income tax provision is currently being recorded in
the accounts.
(3) Discontinued Operations reflect the operations and proceeds from sale of Repap British Columbia, Alcell, Repap USA, Repap
Manitoba and Atholville Magnefite Pulp Mill.
(4) Reflects the issuance of 619.0 million shares in repayment of U.S.$130 million convertible debentures of the parent in Q3'97.
(5) Under Canadian GAAP, prior period balance sheets are not restated for discontinued operations, therefore prior periods include
the revolvers of discontinued operations.
</FN>
</TABLE>
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