<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
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):
January 12, 1998
----------------
FiberMark, Inc.
------------------------------------------------
Delaware 0-20231 82-0429330
---------------- ---------------- --------------------
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation)
161 Wellington Road, Brattleboro, Vermont 05302
---------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(802) 257-0365
--------------
<PAGE>
Item 2. Acquisition or Disposition of Assets
On January 12, 1997 Zetaphoenicis Beteiligungs GmbH ("Zeta") and
Thetaphoenicis Beteiligungs GmbH ("Theta", toghether with Zeta, the
"Purchasers"), both wholly owned subsidiaries of FiberMark, Inc. (the
"Company"), purchased (the "Share Purchase") all of the outstanding shares of
Steinbeis Gessner GmbH ("Gessner") pursuant to the terms of a Share Purchase
Agreeement, dated as of November 18, 1997 among Steinbeis Holding GmbH
("Holding") and the Purchasers. The aggregate purchase price was $40.0 million
and DM5.315 million in cash, subject to certain post-closing adjustments.
Gessner manufactures crepe masking and specialty tape materials, wet and
dry abrasive papers, filter media for automotive air, oil and gasoline filters
and filter media for automotive cabins and vacuum cleaner bags. The Company
currently intends that the assets of Gessner and its subsidiaries will be used
by the Company in a manner generally consistent with the use of such assets by
Gessner or its subsidiaries immediately prior to the consummation of the Share
Purchase.
The Share Purchase was financed with a portion of the proceeds of the sale
of 1,500,000 shares of the Company's common stock along with borrowings under a
DM54.0 million bank facility provided by Bayerische Vereinsbank AG and an
unsecured note issued by Gessner and guaranteed by the Company to Holding in the
amount of DM8.0 million.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) Financial Statements of Business as Acquired.
See Attached Financial Statements beginning on page F-1 which are
included by reference herein in their entirety.
(b) Pro Forma Financial Information.
See attached Pro Forma Financial Information beginning on page F-15
which is included by reference herein in its entirety.
(c) Exhibits.
2.1(1) Share Purchase Agreement, dated as of November 26, 1997
among Steinbeis Holding GmbH, Zetaphoenicis Beteilgungs GmbH
and Thetaphoenicis Beteiligungs GmbH.
23.1 Consent of Wollert-Elmendorff Deutsche Industrie-Treuhand
GmbH Wirtschaftsprufungsgesellschaft.
99.1 Press Release dated January 13, 1996.
--------------
(1) Incorporated by reference to exhibits filed with the Company's
Registration Statement on Form S-3 (No. 333-40527), as amended,
which became effective on December 15, 1997.
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(a) Financial Statements of Business as Acquired.
INDEX TO FINANCIAL STATEMENTS
STEINBEIS GESSNER GMBH
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Independent Auditors' Report.............................................................................. F-2
Consolidated Balance Sheets at December 31, 1996 and September 30, 1997 (unaudited)....................... F-3
Consolidated Statements of Income and Retained Earnings for the year ended December 31, 1996 and the nine
months ended September 30, 1997 and 1996 (unaudited).................................................... F-5
Consolidated Statements of Cash Flows for the year ended December 31, 1996 and the nine months ended
September 30, 1997 and 1996 (unaudited)................................................................. F-6
Notes to Financial Statements............................................................................. F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
We have audited the accompanying consolidated balance sheet of Steinbeis
Gessner GmbH and subsidiaries as of December 31, 1996, and the related
consolidated statement of income and retained earnings, and of cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audit.
We conducted our audit in accordance with auditing standards generally
accepted in Germany and the United States of America. 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 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Steinbeis
Gessner GmbH and subsidiaries as of December 31, 1996, and the results of their
operations and their cash flows for the year then ended in conformity with
accounting principles generally accepted in the United States of America.
Wollert-Elmendorff
Deutsche Industrie-Treuhand GmbH
Wirtschaftsprufungsgesellschaft
November 4, 1997
F-2
<PAGE>
STEINBEIS GESSNER GMBH
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1997
1996 (UNAUDITED)
------------- ---------------
<S> <C> <C> <C>
(DM 000) (DM 000)
ASSETS
Current assets
Cash..................................................... 475 453
Trade accounts receivable................................ 18,854 20,285
Less allowance for doubtful accounts..................... (2,011) (934)
------ ------
16,843 19,351
Accounts receivable from affiliates...................... 303 0
Other receivables........................................ 474 46
Inventories.............................................. (Note 3) 14,141 16,143
Prepaid expenses......................................... 53 0
------ ------
Total current assets................................... 32,289 35,993
Non-current assets
Property, plant and equipment-net........................ (Note 4) 55,087 56,029
Intangible assets-net.................................... (Note 5) 885 606
------ ------
Total assets............................................... 88,261 92,628
------ ------
------ ------
</TABLE>
See Notes to Financial Statements
F-3
<PAGE>
STEINBEIS GESSNER GMBH
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 30,
DECEMBER 31, 1997
1996 (UNAUDITED)
------------- -------------
<S> <C> <C> <C>
(DM 000) (DM 000)
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Deferred income taxes.................................................... 357 28
Short-term bank debt..................................................... 621 0
Current portion of long-term debt........................................ (Note 6) 4,990 2,746
Trade accounts payable................................................... 2,374 4,101
Due to parent company.................................................... 12,371 12,154
Accrued payroll and employee benefits.................................... 5,099 5,556
Other accrued liabilities................................................ 2,776 3,745
------ ------
Total current liabilities.............................................. 28,588 28,330
Deferred income taxes...................................................... (Note 8) 17,450 16,457
Other non-current liabilities.............................................. 724 418
Accrued pensions........................................................... (Note 11) 15,267 15,730
Long-term debt............................................................. (Note 6) 3,000 3,000
------ ------
Total liabilities...................................................... 65,029 63,935
Minority interest.......................................................... 109 100
Commitments and Contingencies.............................................. (Note 15)
Shareholder's equity
Registered capital......................................................... 6,145 6,145
Retained earnings.......................................................... 16,978 22,448
------ ------
Total shareholder's equity............................................. 23,123 28,593
------ ------
Total liabilities and shareholder's equity................................. 88,261 92,628
------ ------
------ ------
</TABLE>
See notes to Financial Statements
F-4
<PAGE>
STEINBEIS GESSNER GMBH
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
YEAR ENDED ------------------------
DECEMBER 31, 1997 1996
1996 (UNAUDITED) (UNAUDITED)
------------ ----------- -----------
<S> <C> <C> <C> <C>
(DM 000) (DM 000) (DM 000)
Net sales.................................................. (Note 12) 128,740 108,654 96,848
Costs of sales............................................. 98,069 80,478 74,364
------------ ----------- -----------
Gross profit............................................... 30,671 28,176 22,484
Operating Expenses
Selling.................................................. 10,139 8,521 7,540
General administrative and other......................... 10,970 8,560 8,316
Research and development................................. 2,940 2,071 2,186
Restructuring charges.................................... (Note 13) 2,416 -- --
------------ ----------- -----------
Operating income........................................... 4,206 9,024 4,442
Interest income............................................ 16 14 10
Interest expense........................................... 1,065 566 835
Other income............................................... (Note 14) 1,352 806 928
Other expenses............................................. 303 391 232
------------ ----------- -----------
Income before income taxes and minority interest........... 4,206 8,887 4,313
Provision for income taxes................................. (Note 8) 1,487 3,343 1,557
------------ ----------- -----------
Income before minority interest............................ 2,719 5,544 2,756
Minority interest.......................................... 99 74 67
------------ ----------- -----------
Net income................................................. 2,620 5,470 2,689
Retained earnings, beginning of period..................... 17,884 16,978 17,884
Dividends declared......................................... 3,526 -- --
------------ ----------- -----------
Retained earnings, end of period........................... 16,978 22,448 20,573
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
See Notes to Financial Statements
F-5
<PAGE>
STEINBEIS GESSNER GMBH
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30,
YEAR ENDED ------------------------
DECEMBER 31, 1997 1996
1996 (UNAUDITED) (UNAUDITED)
------------- ----------- -----------
<S> <C> <C> <C>
(DM 000) (DM 000) (DM 000)
OPERATING ACTIVITIES:
Net income............................................................... 2,620 5,470 2,689
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization.......................................... 7,328 5,613 5,570
(Gain) loss on disposal of property plant and equipment................ (308) 90 (213)
Changes in assets and liabilities:
Accounts receivable.................................................. (2,345) (2,205) (4,078)
Inventories.......................................................... 1,918 (2,002) 1,480
Prepaid expenses and other current assets............................ (90) 481 308
Deferred income taxes................................................ (1,110) (1,322) (920)
Accounts payable, due to parent and other current liabilities........ (2,990) 2,928 720
Accrued pensions and other non-current liabilities................... 1,151 157 524
------ ----------- -----------
Net cash provided by operating activities................................ 6,174 9,210 6,080
------ ----------- -----------
INVESTING ACTIVITIES:
Proceeds from sales of fixed assets...................................... 317 67 219
Additions to property, plant and equipment............................... (3,784) (6,433) (2,674)
------ ----------- -----------
Net cash used in investing activities.................................... (3,467) (6,366) (2,455)
------ ----------- -----------
FINANCING ACTIVITIES:
Increase (decrease) in short-term debt................................... 621 (621) --
Repayment of long-term debt.............................................. (3,513) (2,245) (3,502)
------ ----------- -----------
Net cash used in financing activities.................................... (2,892) (2,866) (3,502)
------ ----------- -----------
Increase (decrease) in cash.............................................. (185) (22) 123
Cash, beginning of period................................................ 660 475 660
------ ----------- -----------
Cash, end of period...................................................... 475 453 783
------ ----------- -----------
------ ----------- -----------
</TABLE>
See Notes to Financial Statements
F-6
<PAGE>
STEINBEIS GESSNER GMBH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN DM THOUSANDS)
1 DESCRIPTION OF BUSINESS
Steinbeis Gessner GmbH operates in a single segment as a manufacturer of
technical and filter paper and tape. Steinbeis Gessner is headquartered in
Brannenburg, Germany and operates two paper mills in the state of Bavaria.
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Steinbeis Gessner GmbH and its subsidiaries, Leiss-GmbH & Co.-(55.6%) and
Steinbeis GmbH & Co. Grundstucksverwaltungs KG (100%). All significant
intercompany transactions and accounts have been eliminated in consolidation.
b) 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 reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from these
estimates.
c) Inventories
Inventories are stated at the lower of cost or market. Cost is determined
primarily using the average cost method.
d) Property, Plant and Equipment
Property, plant and equipment are stated at cost. Depreciation is recorded
using the straight-line method based upon the useful lives of the assets, which
are primarily 20 to 50 years for buildings and 3 to 20 years for machinery and
equipment. When assets are sold or retired, the cost and accumulated
depreciation are removed from the accounts and any gain or loss is included in
income. Improvements are capitalized and included in property, plant and
equipment while expenditures for maintenance and repairs are charged to expense.
e) Intangible Assets
Intangible assets include certain rights and licenses. Management
periodically evaluates the recoverability of intangibles and measures the amount
of impairment, if any, by assessing current and future levels of income and cash
flows as well as other factors, such as market and economic conditions.
Intangibles are amortized over three to forty years.
f) Research and Development
Research and development costs are expensed as incurred. The costs amounted
to DM 3 million for the year ended December 31, 1996.
g) Income Taxes
The company has a profit pooling management with its parent, Steinbeis
Holding GmbH. The company's statutory pretax profits are transferred to
Steinbeis Holding GmbH. The Company provides for current and deferred taxes as
if it were a separate taxpayer. Deferred income taxes are provided to reflect
F-7
<PAGE>
STEINBEIS GESSNER GMBH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN DM THOUSANDS)
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
future tax consequences attributable to temporary differences between the
financial reporting and tax bases of assets and liabilities using presently
enacted tax rates and laws.
h) Impairment of Long-Lived Assets
Management periodically evaluates the recoverability of long-term assets,
based upon current and anticipated net income and undiscounted future cash
flows.
i) Revenue Recognition
Revenue from sales is recognized when goods are shipped.
j) New Accounting Pronouncements
In June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of
an Enterprise and Related Information", which will be effective for the Company
beginning January 1, 1998. SFAS No. 131 redefines how operating segments are
determined and requires quantitative disclosures of certain financial and
descriptive information about a company's operating segments. The Company has
not yet completed an analysis of whether it will be required to report operating
segments.
k) Interim Financial Statements
The consolidated financial statements as of September 30, 1997 and for the
nine month periods ended September 30, 1996 and 1997 are unaudited, but in the
opinion of the Company all adjustments necessary for a fair presentation of
consolidated results of operations, consolidated financial position, and
consolidated cash flows at the date and for the periods indicated have been
included. The results of such interim periods are not necessarily indicative of
the results for the full year.
Certain information and footnote disclosures included in the consolidated
financial statements normally included in consolidated financial statements
prepared in accordance with generally accepted accounting principles in the
United States of America have been condensed or omitted. These unaudited
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements as of December 31, 1996 and notes thereto.
3 INVENTORIES
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
Raw materials and supplies..................................................................... 6,876
Work in process................................................................................ 486
Finished goods................................................................................. 6,779
------
Total inventories.............................................................................. 14,141
------
------
</TABLE>
F-8
<PAGE>
STEINBEIS GESSNER GMBH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN DM THOUSANDS)
4 PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
Land........................................................................................... 4,755
Buildings...................................................................................... 35,459
Machinery and equipment........................................................................ 97,006
Construction in progress....................................................................... 278
-------
Total property, plant and equipment............................................................ 137,498
Less accumulated deprectiation................................................................. 82,411
-------
Net property plant and equipment............................................................... 55,087
-------
-------
</TABLE>
Depreciation expense was DM 6,798 for the year ended December 31, 1996.
5 INTANGIBLE ASSETS
Intangible assets consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------
<S> <C>
Intangible assets-at cost...................................................................... 2,393
Less accumulated amortization.................................................................. 1,508
-----
Intangible assets-net.......................................................................... 885
-----
-----
</TABLE>
Amortization expense was DM 530 for the year ended December 31, 1996.
F-9
<PAGE>
STEINBEIS GESSNER GMBH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN DM THOUSANDS)
6 LONG-TERM DEBT
Long-term debt is summarized as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------
<S> <C>
Bayerische Vereinsbank, 4.5%-8.95%, due 1997................................................... 4,500
Allianz Lebensversicherungs-AG, 6.2%, due 2000................................................. 3,000
Other.......................................................................................... 490
-----
Total long-term debt......................................................................... 7,990
Less current portion........................................................................... 4,990
-----
Long-term debt, excluding current portion...................................................... 3,000
-----
-----
</TABLE>
The Bayerische Vereinsbank and Allianz Lebensversicherungs-AG debt is
secured by the land and buildings of Steinbeis Gessner GmbH. Interest paid
during 1996 was DM 974.
Payments to be made in the years ending December 31:
<TABLE>
<S> <C>
1997.............................................................. 4,990
2000.............................................................. 3,000
</TABLE>
7 LEASES
The Company has non-cancellable operating leases, primarily with a related
party, for certain machinery, equipment and facilities. Rental expense was DM
284 for the year ended December 31, 1996. As of December 31, 1996, obligations
to make future minimum lease payments in the years ending December 31 were as
follows:
<TABLE>
<S> <C>
1997............................................................... 155
1998............................................................... 110
1999............................................................... 35
2000............................................................... 14
2001............................................................... 5
</TABLE>
F-10
<PAGE>
STEINBEIS GESSNER GMBH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN DM THOUSANDS)
8 INCOME TAXES
All income and income taxes are domestic. The components of the provision
for income taxes are as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-------------------
<S> <C>
Current:
Federal.................................................................. 1,710
Trade.................................................................... 887
-----
Total.................................................................... 2,597
-----
Deferred:
Federal.................................................................. 834
Trade.................................................................... 276
-----
Total.................................................................... 1,110
-----
Provision for income taxes................................................. 1,487
-----
-----
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
------------------------------------
ASSET LIABILITY NET
----- ----------- ----------
<S> <C> <C> <C>
Current deferred income taxes:
Accounts receivable............................................................... 0 250 -250
Inventory reserves................................................................ 0 162 -162
Accrued payroll and employee benefits............................................. 55 0 55
--- ----------- ----------
Total............................................................................. 55 412 -357
--- ----------- ----------
Non-current deferred income taxes:
Special reserve................................................................... 0 1,234 -1,234
Intangible assets................................................................. 64 0 64
Property, plant and equipment..................................................... 0 16,579 -16,579
Pensions.......................................................................... 299 0 299
--- ----------- ----------
Total............................................................................. 363 17,813 -17,450
--- ----------- ----------
Total deferred income taxes......................................................... 418 18,225 -17,807
--- ----------- ----------
--- ----------- ----------
</TABLE>
F-11
<PAGE>
STEINBEIS GESSNER GMBH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN DM THOUSANDS)
8 INCOME TAXES (CONTINUED)
The provision for income taxes at the German federal corporation tax rate of
45% differed from the Company's provision for income taxes for the year ended
December 31, 1996 as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
Expected tax at statutory rate................................................................. 1,893
Corporation tax surcharge...................................................................... 142
Municipal trade taxes on income, net of corporation tax benefit................................ 298
Credit for dividend distribution............................................................... -812
Other.......................................................................................... -34
------
Provision for income taxes..................................................................... 1,487
------
------
Effective income tax rate...................................................................... 35.4%
</TABLE>
Income taxes paid during 1996 were DM 4.
9 FAIR VALUE OF FINANCIAL INSTRUMENTS
Management has determined that the carrying values of cash, accounts
receivable, accounts payable and short-term bank debt approximate fair value at
December 31, 1996 because of immediate or short-term maturities. The carrying
amount reported for long-term debt approximates fair value because the interest
rate of the debt approximates the market rate.
10 RELATED PARTY TRANSACTIONS
The Company paid a management fee of DM 514 for the year ended December 31,
1996. The Company has a management agreement with Steinbeis Verwaltungs-GmbH
which calls for the provision of property administration, legal, taxation and
certain personnel related services. The Company's parent provides financing at
rates which are in accordance with market indicators (interest rate 1996 at
3.25%-5.5%). Interest expense on related party borrowings amounted to DM 392 in
1996. Certain equipment and facilities are leased from Mangfall Kraftwerke AG, a
subsidiary of the Company's parent. 1996 lease expense on such equipment and
facilities were DM 255.
11 RETIREMENT PLANS
The Company maintains non-contributory, defined-benefit pension plans
covering substantially all employees. Benefits for certain salaried employees
are based on salary and years of service, while benefits
F-12
<PAGE>
STEINBEIS GESSNER GMBH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN DM THOUSANDS)
11 RETIREMENT PLANS (CONTINUED)
for other employees are based on a fixed benefit rate and years of service. The
plan is unfunded and the Company accrues for the pension obligation in the
financial statements.
<TABLE>
<CAPTION>
DECEMBER 31, 1996
-----------------
<S> <C>
Actuarial present value of accumulated benefit obligations
Vested................................................................. 14,398
Nonvested.............................................................. 979
------
Accumulated benefit obligation........................................... 15,377
Effect of projected future salary increase............................... 305
------
Projected benefit obligation............................................. 15,682
Unrecognized net loss.................................................... -415
------
Accrued pension cost..................................................... 15,267
------
------
Total pension expense includes the following components:
1996
-------
Service cost............................................................. 356
Interest cost............................................................ 931
------
Net periodic pension expanse............................................. 1,287
------
------
</TABLE>
The benefit obligations as of December 31, 1996 were calculated using a
discount rate of 6.5%. Salary increases, where applicable, were calculated at
3%.
12 SIGNIFICANT BUSINESS CONCENTRATIONS
No customer accounted for more than 10% of its 1996 sales. Approximately 53%
of the Company's total 1996 sales were concentrated in its 10 largest customers.
The Company's sales in 1996 were made to customers located in the following
regions:
Germany 32%
Europe 48%
Rest of world 20%
13 RESTRUCTURING CHARGES
Restructuring charges in 1996 relate primarily to personnel related costs,
including severance benefits and notice period compensation.
F-13
<PAGE>
STEINBEIS GESSNER GMBH
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(IN DM THOUSANDS)
14 OTHER INCOME
Other income consists of the following components:
<TABLE>
<CAPTION>
1996
---------
<S> <C>
Foreign exchange gains, net........................................................... 428
Gain on disposal of property, plant and equipment..................................... 239
Rental income......................................................................... 233
Other................................................................................. 452
---------
Total............................................................................... 1,352
---------
</TABLE>
15 COMMITMENTS AND CONTINGENCIES
A) ENVIRONMENTAL MATTERS
The Company is subject to various federal, state and local environmental
requirements, particularly relating to air and water quality. The Company has
spent substantial sums for pollution control facilities to comply with existing
regulations. While the Company believes it has made sufficient capital
expenditures to maintain compliance with existing laws and regulations, any
failure by the Company to comply with present and future regulations could
subject it to future liability or require the suspension of operations.
B) OTHER MATTERS
The Company is involved in various legal proceedings in the ordinary course
of business. Management believes that the outcome of these proceedings will not
have a material adverse effect on the Company's financial condition, results of
operations or cash flows.
F-14
<PAGE>
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits
(b) Pro forma Financial Information.
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following Unaudited Pro Forma Combined Consolidated Statements of Income
give effect to the Transactions and the Prior Acquisitions as if they had
occurred on January 1, 1996, in the case of the Income Statement Data for the
year ended December 31, 1996, and give effect to the Transactions as if they had
occurred on January 1, 1997, in the case of the Income Statement Data for the
nine months ended September 30, 1997. The unaudited PRO FORMA financial data are
based on the historical consolidated financial statements of the Company, CPG,
Arcon and Gessner and the assumptions and adjustments described in the
accompanying notes. The Unaudited Pro Forma Combined Consolidated Statements of
Income do not (a) purport to represent what the Company's results of operations
actually would have been if the Transactions and the Prior Acquisitions had
occurred as of the dates indicated or what such results will be for any future
periods or (b) give effect to certain non-recurring charges expected to result
from the Transactions and Prior Acquisitions.
The following Unaudited Pro Forma Combined Consolidated Balance Sheet as of
September 30, 1997, was prepared as if the Transactions had occurred on such
date. The Unaudited Pro Forma Combined Consolidated Balance Sheet reflects the
preliminary allocation of the Gessner Acquisition purchase price to the
Company's tangible and intangible assets and liabilities. The final allocation
of such purchase prices, and the resulting amortization expense in the
accompanying Unaudited Pro Forma Combined Consolidated Statements of Income,
will differ from the preliminary estimates due to the final allocation being
based on: (a) actual closing date amounts of assets and liabilities, and (b)
actual values of property, plant and equipment and any identifiable intangible
assets.
The unaudited PRO FORMA financial data are based upon assumptions that the
Company believes are reasonable and should be read in conjunction with the
consolidated financial statements of the Company and the accompanying notes
thereto, the consolidated financial statements of CPG and the accompanying notes
thereto, the consolidated financial statements of Arcon and the accompanying
notes thereto and the consolidated financial statements of Gessner and the
accompanying notes thereto included elsewhere or incorporated by reference in
this Prospectus.
The CPG and Arcon acquisitions took place on October 31, 1996, and,
accordingly, the results of operations for CPG and Arcon are included in the
Company's results of operations subsequent to that date.
F-15
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1997
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
GESSNER
OFFERING ACQUISITION COMPANY
COMPANY GESSNER ADJUSTMENTS ADJUSTMENTS PRO FORMA
-------- ------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Current Assets:
Cash............................................... $ 9,075 $ 258 $ 29,175(a) $ (8,109)(b)(c) $ 30,399
Accounts receivable................................ 24,645 11,058 -- -- 35,703
Inventories........................................ 34,358 9,225 -- -- 43,583
Deferred income taxes.............................. 2,090 -- -- -- 2,090
Other.............................................. 2,862 26 -- -- 2,888
-------- ------- ----------- ----------- ----------
Total current assets........................... 73,030 20,567 29,175 (8,109) 114,663
Property, plant and equipment, net................. 95,730 32,017 -- 12,983(e) 140,730
Organizational, financing and other costs.......... 5,614 346 -- 500(b) 6,460
Goodwill........................................... 45,761 -- -- 5,144(e) 50,905
-------- ------- ----------- ----------- ----------
Total assets................................... $220,135 $52,930 $ 29,175 $ 10,518 $312,758
-------- ------- ----------- ----------- ----------
-------- ------- ----------- ----------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt.................. $ -- $ 1,569 $ -- $ (1,569)(e) $ --
Accounts payable................................... 16,315 2,343 -- -- 18,658
Accrued liabilities................................ 23,846 5,315 -- -- 29,161
Accounts payable--affiliates....................... -- 6,945 -- (6,945)(e) --
-------- ------- ----------- ----------- ----------
Total current liabilities...................... 40,161 16,172 -- (8,514) 47,819
Senior Notes....................................... 100,000 -- -- -- 100,000
Long-term debt..................................... -- 1,714 -- 33,714(b)(c)(d)(e) 35,428
Deferred gain...................................... 11,314 -- -- -- 11,314
Deferred income taxes.............................. 11,510 9,420 -- -- 20,930
Other long-term liabilities........................ -- 9,228 -- 1,714(e) 10,942
-------- ------- ----------- ----------- ----------
Total liabilities.............................. 162,985 36,534 -- 26,914 226,433
Minority interest.................................. -- 57 -- (57)(f) --
Stockholders' Equity:
Common stock....................................... 6 4,278 2(a) (4,278)(f) 8
Preferred stock.................................... -- -- -- -- --
Additional paid in capital......................... 44,802 -- 29,173(a) -- 73,975
Retained earnings.................................. 12,342 12,827 -- (12,827)(f) 12,342
Translation adjustment............................. -- (766) -- 766(f) --
-------- ------- ----------- ----------- ----------
Total stockholders' equity..................... 57,150 16,339 29,175 (16,339) 86,325
-------- ------- ----------- ----------- ----------
Total liabilities and stockholders' equity..... $220,135 $52,930 $ 29,175 $ 10,518 $312,758
-------- ------- ----------- ----------- ----------
-------- ------- ----------- ----------- ----------
</TABLE>
See accompanying notes.
F-16
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
The Pro Forma Combined Consolidated Balance Sheet reflects the Transactions
as if they had occurred as of September 30, 1997 as follows (the Gessner
Acquisition is expected to occur in December 1997; actual amounts will differ
from amounts estimated below):
(a) Reflects the issuance of the Common Stock in the Offering:
<TABLE>
<C> <S> <C>
Issuance of the Common Stock in the Offering.................................. $31,500
Expenses for issuance of the Common Stock in the Offering..................... (2,325)
---------
$29,175
---------
---------
(b) Reflects the following:
Issuance of German bank debt and application of the proceeds therefrom........ $30,857
Debt issuance costs........................................................... 500
---------
$30,357
---------
---------
(c) Represents the cash payment to Gessner's former stockholders.................. $38,466
---------
---------
(d) Reflects the Steinbeis Note................................................... $4,571
---------
---------
</TABLE>
(e) The Gessner Acquisition will be accounted for as a purchase in
accordance with Accounting Principles Based Opinion No. 16,
"Business Combinations." The purchase price is being allocated
first to the tangible and identifiable assets and liabilities of
Gessner based upon preliminary estimates of their fair market
values, with the remainder allocated to goodwill.
<TABLE>
<C> <S> <C> <C>
Purchase price........................................................ $43,037
Book value of net assets as of September 30, 1997..................... 16,396
Net liabilities excluded or eliminated at acquisition:
Land................................................................ (2,171)
Current portion of long-term debt................................... 1,569
Accounts payable-affiliated......................................... 6,945
Long-term debt...................................................... 1,714
---------
Book value of net assets acquired..................................... 24,453 (24,453)
--------- ---------
Increase in basis..................................................... $18,584
---------
---------
Allocation of increase in basis:
Increase in fair value of property, plant and equipment............... $15,154
Increase in other long-term liabilities............................... (1,714)
Increase in goodwill.................................................. 5,144
---------
$18,584
---------
---------
</TABLE>
(f) Reflects the elimination of Gessner equity balances, minority
interest and translation adjustment.
F-17
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
FOR PRIOR ACQUISITION COMPANY
ACQUISITIONS(A) GESSNER(B) ADJUSTMENTS PRO FORMA
---------------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Net sales..................... $227,822 $85,712 $-- $313,534
Cost of sales................. 186,504 65,292 (2,468)(c) 249,328
-------- ---------- ----------- ---------
Gross profit................ 41,318 20,420 2,468 64,206
Selling, general and
administrative expenses..... 15,225 17,620 (103)(d) 32,742
-------- ---------- ----------- ---------
Income from operations...... 26,093 2,800 2,571 31,464
Other (income) expenses,
net......................... (1,030) (709) -- (1,739)
Cogeneration income........... (97) -- -- (97)
Interest expense.............. 9,680 709 1,714(e) 12,103
-------- ---------- ----------- ---------
Income before income
taxes..................... 17,540 2,800 857 21,197
Income tax provision
(benefit)................... 6,831 990 343(f) 8,164
-------- ---------- ----------- ---------
Net income before minority
interest.................. 10,709 1,810 514 13,033
Minority interest............. -- 66 (66)(g) --
-------- ---------- ----------- ---------
Net income................ $ 10,709 $ 1,744 $ 580 $ 13,033
-------- ---------- ----------- ---------
-------- ---------- ----------- ---------
Pro forma earnings per common
and common equivalent
share....................... $ 1.73(h)
---------
---------
Weighted average number of
common and common equivalent
shares outstanding.......... 7,554
---------
---------
</TABLE>
See accompanying notes.
F-18
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The Pro Forma Combined Consolidated Statements of Income for the year ended
December 31, 1996 reflects the Transactions as if they had occurred on January
1, 1996 as follows (the Gessner Acquisition is expected to occur in December
1997; actual amounts will differ from amounts estimated below):
<TABLE>
<C> <S> <C>
(a) The following Pro Forma Combined Consolidated Statements of
Income give effect to the Prior Acquisitions as if they had
occurred on January 1, 1996:
</TABLE>
<TABLE>
<CAPTION>
TEN MONTHS TEN MONTHS
ENDED ENDED
YEAR ENDED OCTOBER 31, OCTOBER
DECEMBER 31, 1996 31, 1996 TOTAL PRO FORMA COMPANY
1996 COMPANY CPG ARCON HISTORICAL ADJUSTMENTS PRO FORMA
------------ ----------- ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales............................... $124,771 $78,875 $ 24,176 $ 227,822 $-- $ 227,822
Cost of sales........................... 101,981 65,662 17,493 185,136 1,368(i) 186,504
------------ ----------- ---------- ---------- ----------- ---------
Gross profit.......................... 22,790 13,213 6,683 42,686 (1,368) 41,318
Selling, general and administrative
expenses.............................. 9,908 5,125 2,600 17,633 (2,408)(ii) 15,225
------------ ----------- ---------- ---------- ----------- ---------
Income from operations................ 12,882 8,088 4,083 25,053 1,040 26,093
Other (income) expenses, net............ (1,030) -- -- (1,030) -- (1,030)
Cogeneration income..................... (97) -- -- (97) -- (97)
Interest expense........................ 1,798 891 1,747 4,436 5,244 (iii) 9,680
------------ ----------- ---------- ---------- ----------- ---------
Income before income taxes............ 12,211 7,197 2,336 21,744 (4,204) 17,540
Income tax provision (benefit).......... 4,697 2,873 1,121 8,691 (1,860)(iv) 6,831
------------ ----------- ---------- ---------- ----------- ---------
Net income before extraordinary
item................................ 7,514 4,324 1,215 13,053 (2,344) 10,709
Extraordinary item...................... (297) -- -- (297) 297(v) --
------------ ----------- ---------- ---------- ----------- ---------
Net income.......................... $ 7,217 $ 4,324 $ 1,215 $ 12,756 $(2,047) $ 10,709
------------ ----------- ---------- ---------- ----------- ---------
------------ ----------- ---------- ---------- ----------- ---------
</TABLE>
- ------------------------
<TABLE>
<C> <S> <C>
(i) Reflects the following:
Conversion of CPG inventory from LIFO to fair value........................ $ 1,177
Additional depreciation expense on increased property basis due to purchase
accounting adjustment...................................................... 1,253
Reduction in headcount and operational expenses due to integration of
Arcon...................................................................... (1,062)
---------
$ 1,368
---------
---------
(ii) Reflects the following:
Reversal of amortization of prior goodwill................................. $ (680)
Reversal of amortization of financing costs relating to debt to be
retired.................................................................... (320)
Reversal of management fees................................................ (84)
Amortization of goodwill acquired.......................................... 1,072
Reversal of deferred compensation expense.................................. (42)
Reduction of headcount and operational expense due to integration of CPG
and Arcon.................................................................. (2,354)
---------
$ (2,408)
---------
---------
</TABLE>
F-19
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED
STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<C> <S> <C>
(iii) Reflects the following:
Interest costs on the Senior Notes due 2006.............................. $ 7,808
Reversal of interest expense............................................. (1,986)
Reversal of warrant accretion............................................ (838)
Reversal of amortization of financing costs relating to debt to be
retired................................................................ (157)
Amortization of financing costs relating to the issuance of the Senior
Notes due 2006......................................................... 417
---------
$ 5,244
---------
---------
(iv) Reflects the net additional income tax provision (benefit) as a result of
the above adjustments, except the goodwill amortization and warrant
accretion adjustments, at an effective tax rate of 40%..................... $ (1,860)
---------
---------
(v) Reflects the reversal of loss on extinguishment of debt.................... $ 297
---------
---------
</TABLE>
<TABLE>
<C> <S> <C>
(b) All income statement amounts are based on a conversion rate of DM1.50 to $1.00
(which was the average rate in effect for the year ended December 31, 1996).
(c) Reflects a reduction in depreciation expense.
(d) Reflects the following:
Amortization of goodwill acquired.............................................. $ 171
Reversal of management fee..................................................... (345)
Amortization of financing costs relating to German bank debt................... 71
---------
$ (103)
---------
---------
(e) Reflects the following:
Interest cost on the German bank debt.......................................... $ 2,157
Interest cost on the Steinebeis Note........................................... 266
Reversal of interest expense................................................... (709)
---------
$ 1,714
---------
---------
(f) Reflects the net additional income tax provision as a result of the above
adjustments at an effective tax rate of 40%.
(g) Reflects the elimination of minority interest.
(h) If the Gessner Acquisition is not consummated, the Company's earnings per share
for the year ended December 31, 1996, giving PRO FORMA effect to the Offering
and to the Prior Acquisitions, would be $1.42.
</TABLE>
F-20
<PAGE>
UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS ENDED SEPTEMBER 30, 1997
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
ACQUISITION COMPANY PRO
COMPANY GESSNER(A) ADJUSTMENTS FORMA
---------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales................................................. $ 176,659 $ 63,392 $ -- $ 240,051
Cost of sales............................................. 142,559 46,953 (1,499)(b) 188,013
---------- ----------- ----------- -----------
Gross profit............................................ 34,100 16,439 1,499 52,038
Selling, general and administrative expenses.............. 12,234 11,173 (77)(c) 23,330
---------- ----------- ----------- -----------
Income from operations.................................. 21,866 5,266 1,576 28,708
Other (income) expenses, net.............................. 218 (250) -- (32)
Interest expense.......................................... 6,900 330 1,488(d) 8,718
---------- ----------- ----------- -----------
Income before income taxes.............................. 14,748 5,186 88 20,022
Income tax provision (benefit)............................ 5,762 1,950 35(e) 7,747
---------- ----------- ----------- -----------
Net income before minority interest..................... 8,986 3,236 53 12,275
Minority interest......................................... -- 43 (43)(f) --
---------- ----------- ----------- -----------
Net income............................................ $ 8,986 $ 3,193 $ 96 $ 12,275
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Pro forma earnings per common and common equivalent
share................................................... $ 1.58(g)
-----------
-----------
Weighted average number of common and common equivalent
shares outstanding...................................... 7,775
-----------
-----------
</TABLE>
See accompanying notes.
F-21
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The Pro Forma Combined Consolidated Statement of Income for the nine months
ended September 30, 1997 reflects the Transactions as if they had occurred on
January 1, 1997 as follows (the Gessner Acquisition is expected to occur in
December 1997; actual amounts will differ from amounts estimated below):
<TABLE>
<C> <S> <C>
(a) All income statement amounts are based on a conversion rate of DM1.71 to $1.00
(which was the average rate in effect for the nine months ended September 30,
1997).
(b) Reflects a reduction in depreciation expense.
(c) Reflects the following:
Amortization of goodwill acquired.............................................. $ 128
Reversal of management fee..................................................... (259)
Amortization of financing costs relating to German bank debt................... 54
---------
$ (77)
---------
---------
(d) Reflects the following:
Interest cost on the German bank debt.......................................... $1,618
Interest cost on the Steinbeis Note............................................ 200
Reversal of interest expense................................................... (330)
---------
$1,488
---------
---------
(e) Reflects the net additional income tax provisions as a result of the above
adjustments at an effective tax rate of 40%.
(f) Reflects the elimination of minority interest.
(g) If the Gessner Acquisition is not consummated, the Company's earnings per
share, giving PRO FORMA effect to the Offering, would be $1.16.
</TABLE>
F-22
<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.
FIBERMARK, INC.
By: /s/ Bruce P. Moore
-----------------------
Bruce P. Moore
Vice President and
Chief Financial Officer
Date: January 28, 1998
<PAGE>
EXHIBIT 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Form 8-K being filed under the Securities
Exchange Act of 1934 of FiberMark, Inc. of our report dated November 4, 1997
(relating to the financial statements of Steinbeis Gessner GmbH as of and for
the year ended December 31, 1996).
We also consent to the incorporation by reference in the registration
statements of FiberMark, Inc. (formerly Specialty Paperboard, Inc.) on
Form S-8 (file no. 33-67088) and Form S-8 (file no. 33-81702) of our report
referred to in the above paragraph.
Wollert-Elmendorff
Deutsche Industrie-Treuhand GmbH
Wirtschaftsprufungsgesellschaft
Munich, Germany
January 27, 1998
<PAGE>
EXHIBIT 99.1
[LOGO]
___________________________________________________
FIBERMARK ANNOUNCES COMPLETION OF STEINBEIS GESSNER
ACQUISITION
BRATTLEBORO, VERMONT (January 13, 1998)---FiberMark, Inc. (NYSE:FMK) today
announced the completion of the purchase of Steinbeis Gessner GmbH, a leading
European specialty fiber-based materials manufacturer headquartered near Munich,
Germany. The effective date of the acquisition is January 1, 1998. The
acquisition was financed with a combination of $30 million of German bank debt
and a public offering of 1.5 million shares of FiberMark's common stock. The
German bank debt amortizes over seven years and carries a fixed interest rate of
6.8%. The common stock offering was completed on December 15, 1997 at a price of
$20.50 per share.
Steinbeis Gessner is a wholly-owned subsidiary of Steinbeis Holding GmbH with
approximately $85 million in annual revenue, headquartered in Bruckmuhl,
Germany. The acquired company manufactures filter media for automotive air
(engine and cabin), oil and gasoline filters and vacuum cleaner bags. The
acquired company's product line also includes specialty tape materials and
wet/dry abrasive papers. These products are manufactured in two production
facilities located near Munich in Feldkirchen and Bruckmuhl. These facilities
include paper machines, saturation and coating capabilities, and advanced
non-woven technology capabilities.
"While this is the fourth acquisition for FiberMark since 1994, it marks the
first overseas manufacturing operations for the company," according to Alex
Kwader, President and Chief Executive Officer. "It fits squarely with our
plans for substantial growth through strategic acquisitions, Kwader added.
"We look forward to the sales, marketing, manufacturing and technical
synergies we expect to achieve from this acquisition."
FiberMark is a leading worldwide producer of specialty fiber-based materials
meeting industrial and consumer needs. Products cover a broad spectrum including
filter materials for the automotive, heavy equipment, beverage and fast food
industries; cover and presentation materials for office and school supplies;
specialty tape base and labels for medical tapes and jeans labels; and technical
specialties such as photographic and graphic arts materials, transformer paper,
and base materials for printed circuit boards, book covers and abrasives. The
company, a leader in the use of recycled materials, now has ten manufacturing
facilities.
THIS PRESS RELEASE CONTAINS FORWARD-LOOKING STATEMENTS. ACTUAL RESULTS MAY
DIFFER DEPENDING ON THE ABILITY OF THE COMPANY TO COMPLETE ITS PUBLIC STOCK
OFFERING, THE ECONOMY, AND OTHER FACTORS DISCUSSED IN THE COMPANY'S FORM 10-K
FILED WITH THE SEC MARCH 31, 1997.
<PAGE>
For further information:
Steinbeis Gessner
Contact:
Janice C. Warren
Corporate Communications Manager
(802) 257-5981
E-mail: [email protected]
