Delaware
(State
or other jurisdiction of incorporation or organization)
|
|
82-0429330
(I.R.S.
Employer
Identification
No.)
|
Condensed
Consolidated Statements of Operations
Three
Months Ended September 30, 2005 and 2004
(In
thousands, except per share amounts)
Unaudited
|
|||||||
2005
|
2004
|
||||||
Net
sales
|
$
|
106,979
|
$
|
107,748
|
|||
Cost
of sales
|
93,949
|
93,289
|
|||||
Gross
profit
|
13,030
|
14,459
|
|||||
Selling,
general and administrative expenses
|
9,117
|
10,037
|
|||||
Restructuring
and facility closure expense (reversal)
|
11,446
|
(209
|
)
|
||||
Gain
on disposal of assets
|
(317
|
)
|
-
|
||||
Asset
impairment charge
|
46,557
|
-
|
|||||
Income
(loss) from operations
|
(53,773
|
)
|
4,631
|
||||
Foreign
exchange transaction gain
|
(292
|
)
|
(211
|
)
|
|||
Other
(income) expense, net
|
(209
|
)
|
225
|
||||
Interest
expense, net (excluding post-petition contractual interest of
$8,525
in
both 2005 and 2004)
|
327
|
549
|
|||||
Reorganization
expense
|
4,098
|
6,477
|
|||||
Loss
before income taxes
|
(57,697
|
)
|
(2,409
|
)
|
|||
Income
tax expense
|
1,940
|
2,248
|
|||||
Net
loss
|
$
|
(59,637
|
)
|
$
|
(4,657
|
)
|
|
Basic
loss per share
|
$
|
(8.44
|
)
|
$
|
(0.66
|
)
|
|
Diluted
loss per share
|
$
|
(8.44
|
)
|
$
|
(0.66
|
)
|
|
Weighted
average basic shares outstanding
|
7,066
|
7,066
|
|||||
Weighted
average diluted shares outstanding
|
7,066
|
7,066
|
|||||
See
accompanying notes to condensed consolidated financial
statements.
|
Condensed
Consolidated Statements of Operations
Nine
Months Ended September 30, 2005 and 2004
(In
thousands, except per share amounts)
Unaudited
|
|||||||
2005
|
2004
|
||||||
Net
sales
|
$
|
337,337
|
$
|
331,187
|
|||
Cost
of sales
|
289,481
|
277,263
|
|||||
Gross
profit
|
47,856
|
53,924
|
|||||
Selling,
general and administrative expenses
|
31,451
|
33,983
|
|||||
Restructuring
and facility closure expense (reversal)
|
11,540
|
(209
|
)
|
||||
Gain
on disposal of assets
|
(2,222
|
)
|
-
|
||||
Asset
impairment charge
|
46,557
|
-
|
|||||
Income
(loss) from operations
|
(39,470
|
)
|
20,150
|
||||
Foreign
exchange transaction gain
|
(144
|
)
|
(482
|
)
|
|||
Other
expense, net
|
376
|
1,159
|
|||||
Interest
expense, net (excluding post-petition contractual interest of $25,575
and
$17,142
in 2005 and 2004, respectively)
|
1,435
|
10,159
|
|||||
Reorganization
expense
|
12,733
|
20,419
|
|||||
Loss
before income taxes
|
(53,870
|
)
|
(11,105
|
)
|
|||
Income
tax expense
|
9,472
|
9,812
|
|||||
Net
loss
|
$
|
(63,342
|
)
|
$
|
(20,917
|
)
|
|
Basic
loss per share
|
$
|
(8.96
|
)
|
$
|
(2.96
|
)
|
|
Diluted
loss per share
|
$
|
(8.96
|
)
|
$
|
(2.96
|
)
|
|
Weighted
average basic shares outstanding
|
7,066
|
7,066
|
|||||
Weighted
average diluted shares outstanding
|
7,066
|
7,066
|
|||||
See
accompanying notes to condensed consolidated financial
statements.
|
Condensed
Consolidated Balance Sheets
(In
thousands, except share and per share amounts)
Unaudited
|
|||||||
|
September
30,
2005
|
December
31,
2004
|
|||||
ASSETS
|
|||||||
Current
assets:
|
|||||||
Cash
|
$
|
13,624
|
$
|
1,194
|
|||
Accounts
receivable, net of allowances
|
62,301
|
61,116
|
|||||
Inventories
|
68,570
|
73,650
|
|||||
Prepaid
expenses
|
3,964
|
4,339
|
|||||
Total
current assets
|
148,459
|
140,299
|
|||||
Property,
plant and equipment, net
|
173,844
|
248,853
|
|||||
Goodwill
|
8,253
|
9,167
|
|||||
Other
intangible assets, net
|
3,007
|
2,629
|
|||||
Other
long-term assets
|
5,718
|
4,858
|
|||||
Total
assets
|
$
|
339,281
|
$
|
405,806
|
|||
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|||||||
Current
liabilities:
|
|||||||
Revolving
credit line
|
$
|
5,613
|
$
|
2,628
|
|||
Accounts
payable
|
24,447
|
24,063
|
|||||
Accrued
liabilities
|
27,138
|
21,269
|
|||||
Accrued
income taxes payable
|
18,802
|
15,458
|
|||||
Deferred
income taxes
|
247
|
279
|
|||||
Total
current liabilities not subject to compromise
|
76,247
|
63,697
|
|||||
Long-term
liabilities:
|
|||||||
Deferred
income taxes
|
17,786
|
28,497
|
|||||
Other
long-term liabilities
|
47,208
|
48,788
|
|||||
Total
long-term liabilities not subject to compromise
|
64,994
|
77,285
|
|||||
Liabilities
subject to compromise
|
366,573
|
366,700
|
|||||
Total
liabilities
|
507,814
|
507,682
|
|||||
Stockholders’
deficit:
|
|||||||
Preferred
stock, par value $.001 per share;
|
|||||||
2,000,000
shares authorized, and none issued
|
-
|
-
|
|||||
Series
A Junior participatory preferred stock, par value $.001;
|
|||||||
7,066
shares authorized, and none issued
|
-
|
-
|
|||||
Common
stock, par value $.001 per share; 20,000,000 shares
authorized
|
|||||||
7,070,026
shares issued and 7,066,226 shares outstanding in 2005 and
2004
|
7
|
7
|
|||||
Additional
paid-in capital
|
65,496
|
65,496
|
|||||
Accumulated
deficit
|
(238,050
|
)
|
(174,708
|
)
|
|||
Accumulated
other comprehensive income
|
4,049
|
7,364
|
|||||
Less
treasury stock, 3,800 shares at cost in 2005 and 2004
|
(35
|
)
|
(35
|
)
|
|||
Total
stockholders’ deficit
|
(168,533
|
)
|
(101,876
|
)
|
|||
Total
liabilities and stockholders’ deficit
|
$
|
339,281
|
$
|
405,806
|
|||
See
accompanying notes to condensed consolidated financial
statements.
|
Condensed
Consolidated Statements of Cash Flows
Nine
Months Ended September 30, 2005 and 2004
(In
thousands)
Unaudited
|
|||||||
2005
|
2004
|
||||||
Cash
flows from operating activities:
|
|||||||
Net
loss
|
$
|
(63,342
|
)
|
$
|
(20,917
|
)
|
|
Adjustments
to reconcile net loss to net cash provided by operating
activities:
|
|||||||
Depreciation
and amortization
|
14,968
|
13,234
|
|||||
Amortization
of bond discount
|
-
|
42
|
|||||
Gain
on disposal of assets
Asset
impairment charges
|
(2,222)
55,884
|
(482)
-
|
|||||
Deferred
income taxes
|
76
|
2
|
|||||
Reorganization
expense
|
12,733
|
20,419
|
|||||
Net
cash used for reorganization items
|
(8,382
|
)
|
(8,760
|
)
|
|||
Changes
in operating assets and liabilities:
|
|||||||
Accounts
receivable
|
(5,723
|
)
|
(11,598
|
)
|
|||
Inventories
|
1,852
|
(5,465
|
)
|
||||
Prepaid
expenses
|
340
|
(1,515
|
)
|
||||
Other
long-term assets
|
(1,063
|
)
|
(138
|
)
|
|||
Accounts
payable
|
2,228
|
3,897
|
|||||
Accrued
liabilities
|
2,653
|
13,986
|
|||||
Accrued
income taxes payable
|
5,297
|
(2,540
|
)
|
||||
Other
long-term liabilities
|
5,090
|
372
|
|||||
Net
cash provided by operating activities
|
20,389
|
537
|
|||||
|
|||||||
Cash
flows used for investing activities:
|
|||||||
Additions
to property, plant and equipment
|
(7,396
|
)
|
(8,859
|
)
|
|||
Increase
in other intangible assets
|
(248
|
)
|
-
|
||||
Proceeds
from sale of assets
|
2,662
|
683
|
|||||
Net
cash used in investing activities
|
(4,982
|
)
|
(8,176
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Net
borrowings under revolving credit line
|
2,985
|
6,776
|
|||||
Repayment
of debt
|
(3,142
|
)
|
(3,012
|
)
|
|||
Debt
issuance costs
|
(1,272
|
)
|
(772
|
)
|
|||
Debt
issuance costs due to reorganization
|
-
|
(75
|
)
|
||||
Net
cash provided by (used in) financing activities
|
(1,429
|
)
|
2,917
|
||||
Effect
of exchange rate changes on cash
|
(1,548
|
)
|
(457
|
)
|
|||
Net
increase (decrease) in cash
|
12,430
|
(5,179
|
)
|
||||
Cash
at beginning of period
|
1,194
|
6,111
|
|||||
Cash
at end of period
|
$
|
13,624
|
$
|
932
|
|||
Supplemental
cash flow information:
|
|||||||
Interest
paid
|
$
|
1,111
|
$
|
1,390
|
|||
Income
taxes paid, net of refunds
|
$
|
3,651
|
$
|
12,011
|
|||
See
accompanying notes to condensed consolidated financial
statements.
|
1. |
Bankruptcy
Filing
|
2. |
Basis
of Presentation
|
3. |
Changes
in Accounting Principles and Recently Issued
Standards
|
4. |
Earnings
(Loss) Per Common Share
|
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Numerator:
|
|||||||||||||
Loss
available to common shareholders used in basic diluted loss per
share
|
$
|
(59,637
|
)
|
$
|
(4,657
|
)
|
$
|
(63,342
|
)
|
$
|
(20,917
|
)
|
|
Denominator:
|
|||||||||||||
Denominator
for basic loss per share:
|
|||||||||||||
Weighted
average shares
|
7,066,226
|
7,066,226
|
7,066,226
|
7,066,226
|
|||||||||
Effect
of dilutive securities:
|
|||||||||||||
Fixed
stock options
|
*
|
*
|
*
|
*
|
|||||||||
Denominator
for diluted loss per share:
|
|||||||||||||
Adjusted
weighted average shares
|
7,066,226
|
7,066,226
|
7,066,226
|
7,066,226
|
|||||||||
Basic
loss per share
|
$
|
(8.44
|
)
|
$
|
(0.66
|
)
|
$
|
(8.96
|
)
|
$
|
(2.96
|
)
|
|
Diluted
loss per share
|
$
|
(8.44
|
)
|
$
|
(0.66
|
)
|
$
|
(8.96
|
)
|
$
|
(2.96
|
)
|
*
|
The
average closing stock price of our common stock during the three
months
ended September 30, 2005 and 2004 and the nine months ended September
30,
2005 and 2004, was less than the exercise price on all options outstanding
during those periods. Therefore, there were no incremental shares
to be
considered in the diluted loss per share calculation for the three
months
ended September 30, 2005 and 2004, and the nine months ended September
30,
2005 and 2004. In the periods where losses were incurred, no incremental
shares were included because the effect would be
anti-dilutive.
|
5. |
Stock-Based
Compensation
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Net
loss, as reported
|
$
|
(59,637
|
)
|
$
|
(4,657
|
)
|
$
|
(63,342
|
)
|
$
|
(20,917
|
)
|
|
Total
stock based employees compensation
determined under fair
value method
|
$
|
(62
|
)
|
$
|
(112
|
)
|
$
|
(188
|
)
|
$
|
(336
|
)
|
|
Net
loss, pro forma
|
$
|
(59,699
|
)
|
$
|
(4,769
|
)
|
$
|
(63,530
|
)
|
$
|
(21,253
|
)
|
|
Basic
loss per share, as reported
|
$
|
(8.44
|
)
|
$
|
(0.66
|
)
|
$
|
(8.96
|
)
|
$
|
(2.96
|
)
|
|
Basic
loss per share, pro forma
|
$
|
(8.45
|
)
|
$
|
(0.67
|
)
|
$
|
(8.99
|
)
|
$
|
(3.01
|
)
|
|
Diluted
loss per share, as reported
|
$
|
(8.44
|
)
|
$
|
(0.66
|
)
|
$
|
(8.96
|
)
|
$
|
(2.96
|
)
|
|
Diluted
loss per share, pro forma
|
$
|
(8.45
|
)
|
$
|
(0.67
|
)
|
$
|
(8.99
|
)
|
$
|
(3.01
|
)
|
6. |
Comprehensive
Loss
|
|
Three
Months Ended
September
30,
|
Nine
Months Ended
September
30,
|
|||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Net
loss
Minimum
pension liability adjustment
|
$
|
(59,637)
529
|
$
|
(4,657)
-
|
$
|
(63,342)
529
|
$
|
(20,917)
-
|
|||||
Currency
translation adjustment, net
|
(534
|
)
|
(1,379
|
)
|
(3,844
|
)
|
(2,572
|
)
|
|||||
Comprehensive
loss
|
$
|
(59,642
|
)
|
$
|
(6,036
|
)
|
$
|
(66,657
|
)
|
$
|
(23,489
|
)
|
7. |
Inventories
|
|
September
30,
2005 |
December
31,
2004 |
|||||
Raw
material
|
$
|
18,164
|
$
|
20,745
|
|||
Work
in progress
|
25,183
|
25,048
|
|||||
Finished
goods
|
18,135
|
20,159
|
|||||
Finished
goods on consignment
|
3,059
|
3,443
|
|||||
Stores
inventory
|
2,934
|
2,920
|
|||||
Operating
supplies
|
1,095
|
1,335
|
|||||
Total
inventories
|
$
|
68,570
|
$
|
73,650
|
8. |
Goodwill
and Other Intangible Assets
|
|
Gross
Carrying Value
|
Accumulated
Amortization
|
|||||||||||
|
September
30,
2005
|
December
31,
2004
|
September
30,
2005
|
December
31,
2004
|
|||||||||
Amortizable
intangible assets:
|
|||||||||||||
Debt
issue costs
|
$
|
4,409
|
$
|
2,380
|
$
|
2,934
|
$
|
1,561
|
|||||
Acquired
technology
|
846
|
846
|
116
|
84
|
|||||||||
Other
|
1,746
|
1,930
|
944
|
882
|
|||||||||
Total
amortizable intangible assets
|
$
|
7,001
|
$
|
5,156
|
$
|
3,994
|
$
|
2,527
|
9. |
Segment
Information:
|
|
Three
Months Ended September 30, 2005
|
Three
Months Ended September 30, 2004
|
|||||||||||||||||
|
Operating
Segments
|
Operating
Segments
|
|||||||||||||||||
German
Operations
|
North
American
Operations
|
Total
|
German
Operations
|
North
American
Operations
|
Total
|
||||||||||||||
Net
sales
|
|||||||||||||||||||
Product
family
|
|||||||||||||||||||
Office
products
|
$
|
-
|
$
|
20,122
|
$
|
20,122
|
$
|
-
|
$
|
20,616
|
$
|
20,616
|
|||||||
Publishing
and packaging
|
-
|
24,576
|
24,576
|
-
|
24,938
|
24,938
|
|||||||||||||
Technical
specialties
|
50,557
|
11,724
|
62,281
|
47,924
|
14,270
|
62,194
|
|||||||||||||
$
|
50,557
|
$
|
56,422
|
$
|
106,979
|
$
|
47,924
|
$
|
59,824
|
$
|
107,748
|
|
Nine
Months Ended September 30, 2005
|
Nine
Months Ended September 30, 2004
|
|||||||||||||||||
|
Operating
Segments
|
Operating
Segments
|
|||||||||||||||||
|
German
Operations
|
North
American
Operations
|
Total
|
German
Operations
|
North
American
Operations
|
Total
|
|||||||||||||
Net
sales
|
|||||||||||||||||||
Product
family
|
|||||||||||||||||||
Office
products
|
$
|
-
|
$
|
58,609
|
$
|
58,609
|
$
|
-
|
$
|
58,587
|
$
|
58,587
|
|||||||
Publishing
and packaging
|
-
|
73,184
|
73,184
|
-
|
75,369
|
75,369
|
|||||||||||||
Technical
specialties
|
169,185
|
36,359
|
205,544
|
156,096
|
41,135
|
197,231
|
|||||||||||||
$
|
169,185
|
$
|
168,152
|
$
|
337,337
|
$
|
156,096
|
$
|
175,091
|
$
|
331,187
|
Three
Months Ended September 30, 2005
|
Three
Months Ended September 30, 2004
|
||||||||||||||||||
|
Operating
Segments
|
Operating
Segments
|
|||||||||||||||||
|
German
Operations
|
North
American
Operations
|
Total
|
German
Operations
|
North
American
Operations
|
Total
|
|||||||||||||
Total
sales
|
$
|
50,557
|
$
|
56,422
|
$
|
106,979
|
$
|
47,163
|
$
|
58,865
|
$
|
106,028
|
|||||||
Less:
inter-segment net sales
|
-
|
-
|
-
|
761
|
959
|
1,720
|
|||||||||||||
Total
net sales
|
$
|
50,557
|
$
|
56,422
|
$
|
106,979
|
$
|
47,924
|
$
|
59,824
|
$
|
107,748
|
|||||||
Income
(loss) from operations
|
$
|
4,322
|
$
|
(58,095
|
)
|
$
|
(53,773
|
)
|
$
|
6,048
|
$
|
(1,417
|
)
|
$
|
4,631
|
||||
Depreciation
and amortization
|
$
|
1,563
|
$
|
3,139
|
$
|
4,702
|
$
|
1,243
|
$
|
3,113
|
$
|
4,356
|
Nine
Months Ended September 30, 2005
|
Nine
Months Ended September 30, 2004
|
||||||||||||||||||
|
Operating
Segments
|
Operating
Segments
|
|||||||||||||||||
|
German
Operations
|
North
American
Operations
|
Total
|
German
Operations
|
North
American
Operations
|
Total
|
|||||||||||||
Total
sales
|
$
|
169,203
|
$
|
168,152
|
$
|
337,355
|
$
|
156,096
|
$
|
175,197
|
$
|
331,293
|
|||||||
Less:
inter-segment net sales
|
(18
|
)
|
-
|
(18
|
)
|
-
|
(106
|
)
|
(106
|
)
|
|||||||||
Total
net sales
|
$
|
169,185
|
$
|
168,152
|
$
|
337,337
|
$
|
156,096
|
$
|
175,091
|
$
|
331,187
|
|||||||
Income
(loss) from operations
|
$
|
24,016
|
$
|
(63,486
|
)
|
$
|
(39,470
|
)
|
$
|
24,890
|
$
|
(4,740
|
)
|
$
|
20,150
|
||||
Depreciation
and amortization
|
$
|
4,802
|
$
|
10,166
|
$
|
14,968
|
$
|
3,762
|
$
|
9,472
|
$
|
13,234
|
10. |
Restructuring
and Asset Impairment
|
|
2001
Provision
|
2005
Provision
|
2005
Charges
and Expenditures
|
Charges
and Uses Since Inception
|
Balance
September 30, 2005
|
|||||||||||
2005
North American cost reduction initiative:
|
||||||||||||||||
Employee-related
expenses:
|
||||||||||||||||
Severance
|
$ |
-
|
$ |
1,813
|
$ |
(94
|
)
|
$ |
(94
|
)
|
$ |
1,719
|
||||
Other benefits
|
-
|
559
|
(106
|
)
|
(106
|
)
|
453
|
|||||||||
Asset
write-offs
|
-
|
9,327
|
(9,327
|
)
|
(9,327
|
)
|
-
|
|||||||||
Other
consolidation costs
|
-
|
205
|
(205
|
)
|
(205
|
)
|
-
|
|||||||||
-
|
11,904
|
(9,732
|
)
|
(9,732
|
)
|
2,172
|
||||||||||
2001
Fitchburg Closure:
|
||||||||||||||||
Contractual
obligations
|
740
|
-
|
(364
|
)
|
(513
|
)
|
227
|
|||||||||
$ |
740
|
$ |
11,904
|
$ |
(10,096
|
)
|
$ |
(10,245
|
)
|
$ |
2,399
|
Summary
of restructuring and facility closure expense (reversal) (in
thousands):
|
|||||||||||||
|
Three
Months Ended
September
30
|
Nine
Months Ended
September
30
|
|||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Provision
for 2005 North American cost reduction initiative
|
$ |
11,810
|
$ |
-
|
$ |
11,904
|
$ |
-
|
|||||
Changes
to 2001 facility closure
|
(364
|
)
|
-
|
(364
|
)
|
-
|
|||||||
Changes
to 2003 North American restructuring
|
-
|
(209
|
)
|
-
|
(209
|
)
|
|||||||
$ |
11,446
|
$ |
(209
|
)
|
$ |
11,540
|
$ |
(209
|
)
|
Three
Months Ended September 30,
|
|||||||||||||
|
Pension
Benefits
|
Post-Retirement
Benefits
|
|||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Service
cost
|
$
|
324
|
$
|
337
|
$
|
104
|
$
|
91
|
|||||
Interest
cost
|
512
|
732
|
205
|
195
|
|||||||||
Return
on assets
|
(225
|
)
|
(339
|
)
|
-
|
-
|
|||||||
Net
amortization & deferrals:
|
|||||||||||||
Unrecognized
transition obligation
|
-
|
-
|
-
|
-
|
|||||||||
Unrecognized
prior service cost
|
(131
|
)
|
103
|
(18
|
)
|
1
|
|||||||
Unrecognized
net loss
|
401
|
271
|
54
|
38
|
|||||||||
Recognized
settlement loss
|
-
|
190
|
-
|
-
|
|||||||||
Net
periodic benefit cost
|
$
|
881
|
$
|
1,294
|
$
|
345
|
$
|
325
|
Nine
Months Ended September 30,
|
|||||||||||||
Pension
Benefits
|
Post-Retirement
Benefits
|
||||||||||||
2005
|
2004
|
2005
|
2004
|
||||||||||
Service
cost
|
$
|
985
|
$
|
1,015
|
$
|
311
|
$
|
274
|
|||||
Interest
cost
|
2,056
|
2,212
|
615
|
586
|
|||||||||
Return
on assets
|
(974
|
)
|
(1,017
|
)
|
-
|
-
|
|||||||
Net
amortization & deferrals:
|
|||||||||||||
Unrecognized
transition obligation
|
-
|
1
|
-
|
-
|
|||||||||
Unrecognized
prior service cost
|
75
|
309
|
(52
|
)
|
4
|
||||||||
Unrecognized
net loss
|
1,321
|
818
|
162
|
111
|
|||||||||
Recognized
settlement loss
|
-
|
570
|
-
|
-
|
|||||||||
Net
periodic benefit cost
|
$
|
3,463
|
$
|
3,908
|
$
|
1,036
|
$
|
975
|
|
Three
Months Ended
September
30, 2005
|
Three
Months
Ended September
30, 2004
|
|||||
Professional
fees
|
$
|
1,365
|
$
|
4,720
|
|||
Employee
retention, retirement and severance
costs
|
2,733
|
1,155
|
|||||
Rejection
of contractual obligations
|
-
|
602
|
|||||
Reorganization
expenses
|
$
|
4,098
|
$
|
6,477
|
|
Nine
Months
Ended September
30, 2005
|
Nine
Months
Ended September
30, 2004
|
|||||
Professional
fees
|
$
|
9,670
|
$
|
7,638
|
|||
Employee
retention, retirement and severance
costs
|
3,063
|
2,187
|
|||||
Write-off
of unamortized bond discount
|
-
|
1,217
|
|||||
Write-off
of deferred financing costs
|
-
|
8,775
|
|||||
Rejection
of contractual obligations
|
-
|
602
|
|||||
Reorganization
expenses
|
$
|
12,733
|
$
|
20,419
|
Three
Months Ended September 30, 2005 |
Three
Months Ended
September
30, 2004
|
||||||
Net
sales
|
$
|
51,566
|
$
|
55,737
|
|||
Cost
of sales
|
46,847
|
49,405
|
|||||
Gross
profit
|
4,719
|
6,332
|
|||||
Selling,
general and administrative expenses
|
5,966
|
8,336
|
|||||
Restructuring
and facility closure expense
(reversal)
|
11,446
|
(209
|
)
|
||||
Gain
on disposal of assets
|
(314
|
)
|
-
|
||||
Asset
impairment charge
|
46,557
|
-
|
|||||
Loss
from operations
|
(58,936
|
)
|
(1,795
|
)
|
|||
Foreign
exchange transaction loss
|
7
|
-
|
|||||
Other
(income) expense, net
|
(121
|
)
|
148
|
||||
Equity
in income from subsidiaries
|
(3,324
|
)
|
(3,909
|
)
|
|||
Interest
expense, net
|
41
|
146
|
|||||
Reorganization
expense
|
4,098
|
6,477
|
|||||
Loss
before income taxes
|
(59,637
|
)
|
(4,657
|
)
|
|||
Income
tax expense
|
-
|
-
|
|||||
Net
loss
|
$
|
(59,637
|
)
|
$
|
(4,657
|
)
|
|
Nine
Months Ended
September 30, 2005 |
Nine
Months Ended
September
30, 2004
|
|||||
Net
sales
|
$
|
154,581
|
$
|
163,630
|
|||
Cost
of sales
|
142,919
|
144,159
|
|||||
Gross
profit
|
11,662
|
19,471
|
|||||
Selling,
general and administrative expenses
|
21,200
|
25,484
|
|||||
Restructuring
and facility closure expense
(reversal)
|
11,540
|
(209
|
)
|
||||
Gain
on disposal of assets
|
(2,291
|
)
|
-
|
||||
Asset
impairment charge
|
46,557
|
-
|
|||||
Loss
from operations
|
(65,344
|
)
|
(5,804
|
)
|
|||
Foreign
exchange transaction gain
|
(9
|
)
|
-
|
||||
Other
expense, net
|
599
|
1,221
|
|||||
Equity
in income from subsidiaries
|
(15,804
|
)
|
(15,864
|
)
|
|||
Interest
expense, net
|
479
|
9,337
|
|||||
Reorganization
expense
|
12,733
|
20,419
|
|||||
Loss
before income taxes
|
(63,342
|
)
|
(20,917
|
)
|
|||
Income
tax expense
|
-
|
-
|
|||||
Net
loss
|
$
|
(63,342
|
)
|
$
|
(20,917
|
)
|
ASSETS
|
September
30, 2005
|
December
31, 2004
|
|||||
Current
assets:
|
|||||||
Cash
|
$
|
-
|
$
|
-
|
|||
Accounts
receivable, net of allowances
|
19,792
|
19,618
|
|||||
Inventories
|
41,333
|
41,946
|
|||||
Prepaid
expenses
|
3,515
|
3,733
|
|||||
Total
current assets
|
64,640
|
65,297
|
|||||
Property,
plant and equipment, net
|
75,082
|
138,115
|
|||||
Intercompany
receivables
|
3,731
|
3,583
|
|||||
Investment
in subsidiaries
|
102,797
|
107,151
|
|||||
Other
intangible assets, net
|
2,002
|
1,581
|
|||||
Other
long-term assets
|
4,113
|
3,064
|
|||||
Total
assets
|
$
|
252,365
|
$
|
318,791
|
|||
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
|||||||
Current
liabilities:
|
|||||||
Revolving
credit line
|
$
|
5,613
|
$
|
2,628
|
|||
Accounts
payable
|
9,340
|
10,047
|
|||||
Accrued
liabilities
|
18,727
|
12,608
|
|||||
Accrued
income taxes payable
|
227
|
323
|
|||||
Total
current liabilities not subject to compromise
|
33,907
|
25,606
|
|||||
Long-term
liabilities:
|
|||||||
Intercompany
payables
|
231
|
-
|
|||||
Deferred
income taxes
|
1,698
|
-
|
|||||
Other
long-term liabilities
|
18,489
|
28,361
|
|||||
Total
long-term liabilities not subject to compromise
|
20,418
|
28,361
|
|||||
Liabilities
subject to compromise
|
366,573
|
366,700
|
|||||
Total
liabilities
|
420,898
|
420,667
|
|||||
Stockholders’
deficit
|
(168,533
|
)
|
(101,876
|
)
|
|||
Total
liabilities and stockholders’ deficit
|
$
|
252,365
|
$
|
318,791
|
|
Nine
Months Ended September 30, 2005 |
Nine
Months Ended
September
30, 2004
|
|||||
Net
cash provided by (used in) operating activities
|
$
|
1,676
|
$
|
(3,419
|
)
|
||
Net
cash used for reorganization items
|
(8,382
|
)
|
(8,760
|
)
|
|||
Net
cash provided by (used in) investing activities
|
582
|
(1,088
|
)
|
||||
Net
cash provided by financing activities
|
6,429
|
14,262
|
|||||
Effect
of exchange rates on cash
|
(305
|
)
|
(995
|
)
|
|||
Increase
in cash and cash equivalents
|
-
|
-
|
|||||
Cash
at beginning of period
|
-
|
-
|
|||||
Cash
at end of period
|
$
|
-
|
$
|
-
|
September
30, 2005
|
December
31, 2004
|
||||||
Accounts
payable
|
$
|
6,903
|
$
|
6,861
|
|||
Accrued
liabilities (including accrued interest)
|
16,525
|
16,129
|
|||||
Long-term
debt
|
336,863
|
340,005
|
|||||
Other
long-term liabilities
|
6,282
|
3,705
|
|||||
Liabilities
subject to compromise
|
$
|
366,573
|
$
|
366,700
|
15. |
Consolidating
Financial Statements
|
CONSOLIDATING
STATEMENTS OF OPERATIONS
|
Three
Months Ended September 30, 2005
|
||||||||||||
|
Guarantor |
Non-Guarantor
|
Eliminations
|
Consolidated
FiberMark, Inc.
|
|||||||||
Net
sales
|
$
|
56,422
|
$
|
50,557
|
$
|
-
|
$
|
106,979
|
|||||
Cost
of sales
|
50,397
|
43,552
|
-
|
93,949
|
|||||||||
Gross
profit
|
6,025
|
7,005
|
-
|
13,030
|
|||||||||
Selling,
general and administrative expenses
|
6,431
|
2,686
|
-
|
9,117
|
|||||||||
Restructuring
and facility closure expense
|
11,446
|
-
|
-
|
11,446
|
|||||||||
Gain on disposal of assets | (314 | ) | (3 | ) | - | (317 | ) | ||||||
Asset
impairment charge
|
46,557
|
-
|
-
|
46,557
|
|||||||||
Income
(loss) from operations
|
(58,095
|
)
|
4,322
|
-
|
(53,773
|
)
|
|||||||
Foreign
exchange transaction (gain) loss
|
3
|
(295
|
)
|
-
|
(292
|
)
|
|||||||
Other
income, net
|
(120
|
)
|
(89
|
)
|
-
|
(209
|
)
|
||||||
Equity
in subsidiary income
|
(2,793
|
)
|
-
|
2,793
|
-
|
||||||||
Interest
expense, net
|
124
|
203
|
-
|
327
|
|||||||||
Reorganization
expense
|
4,098
|
-
|
-
|
4,098
|
|||||||||
Income
(loss) before income taxes
|
(59,407
|
) |
4,503
|
(2,793
|
) |
(57,697
|
) | ||||||
Income
tax expense
|
230
|
1,710
|
-
|
1,940
|
|||||||||
Net
income (loss)
|
$
|
(59,637
|
) |
$
|
2,793
|
$
|
(2,793
|
) |
$
|
(59,637
|
) |
CONSOLIDATING
STATEMENTS OF OPERATIONS
|
Three
Months Ended September 30, 2004
|
||||||||||||
|
Guarantor
|
Non-Guarantor
|
Eliminations
|
Consolidated
FiberMark, Inc.
|
|||||||||
Net
sales
|
$
|
59,824
|
$
|
47,924
|
$
|
-
|
$
|
107,748
|
|||||
Cost
of sales
|
53,527
|
39,762
|
-
|
93,289
|
|||||||||
Gross profit
|
6,297
|
8,162
|
-
|
14,459
|
|||||||||
Selling, general and administrative expenses | 7,923 | 2,114 | - | 10,037 | |||||||||
Restructuring
and facility closure reversal
|
(209
|
)
|
-
|
-
|
(209
|
)
|
|||||||
Income
(loss) from operations
|
(1,417
|
)
|
6,048
|
-
|
4,631
|
||||||||
Foreign
exchange transaction gain
|
-
|
(211
|
)
|
-
|
(211
|
)
|
|||||||
Other
(income) expense, net
|
245
|
(20
|
)
|
-
|
225
|
||||||||
Equity
in subsidiary income
|
(3,755
|
)
|
-
|
3,755
|
-
|
||||||||
Interest
expense, net
|
235
|
314
|
-
|
549
|
|||||||||
Reorganization
expense
|
6,477
|
-
|
-
|
6,477
|
|||||||||
Income
(loss) before income taxes
|
(4,619
|
)
|
5,965
|
(3,755
|
)
|
(2,409
|
)
|
||||||
Income
tax expense
|
38
|
2,210
|
-
|
2,248
|
|||||||||
Net
income (loss)
|
$
|
(4,657
|
)
|
$
|
3,755
|
$
|
(3,755
|
)
|
$
|
(4,657
|
)
|
CONSOLIDATING
STATEMENTS OF OPERATIONS
|
Nine
Months Ended September 30, 2005
|
||||||||||||
Guarantor
|
Non-Guarantor
|
Eliminations
|
Consolidated
FiberMark, Inc.
|
||||||||||
Net
sales
|
$
|
168,152
|
$
|
169,185
|
$
|
-
|
$
|
337,337
|
|||||
Cost
of sales
|
153,117
|
136,364
|
-
|
289,481
|
|||||||||
Gross
profit
|
15,035
|
32,821
|
-
|
47,856
|
|||||||||
Selling,
general and administrative expenses
|
22,715
|
8,736
|
-
|
31,451
|
|||||||||
Restructuring
and facility closure expense
|
11,540
|
-
|
-
|
11,540
|
|||||||||
(Gain) loss on disposal of assets | (2,291 | ) | 69 | - | (2,222 | ) | |||||||
Asset
impairment charge
|
46,557
|
-
|
-
|
46,557
|
|||||||||
Income
(loss) from operations
|
(63,486
|
)
|
24,016
|
-
|
(39,470
|
)
|
|||||||
Foreign
exchange transaction gain
|
(18
|
)
|
(126
|
)
|
-
|
(144
|
)
|
||||||
Other
(income) expense, net
|
599
|
(223
|
)
|
-
|
376
|
||||||||
Equity
in subsidiary income
|
(14,661
|
)
|
-
|
14,661
|
-
|
||||||||
Interest
expense, net
|
714
|
721
|
-
|
1,435
|
|||||||||
Reorganization
expense
|
12,733
|
-
|
-
|
12,733
|
|||||||||
Income
(loss) before income taxes
|
(62,853
|
)
|
23,644
|
(14,661
|
)
|
(53,870
|
)
|
||||||
Income
tax expense
|
489
|
8,983
|
-
|
9,472
|
|||||||||
Net
income (loss)
|
$
|
(63,342
|
)
|
$
|
14,661
|
$
|
(14,661
|
)
|
$
|
(63,342
|
)
|
CONSOLIDATING
STATEMENTS OF OPERATIONS
|
Nine
Months Ended September 30, 2004
|
||||||||||||
Guarantor
|
|
Non-Guarantor
|
|
Eliminations
|
|
Consolidated
FiberMark, Inc.
|
|||||||
Net sales | $ | 175,091 | $ | 156,096 | $ | - | $ | 331,187 | |||||
Cost
of sales
|
154,597
|
122,666
|
-
|
277,263
|
|||||||||
Gross
profit
|
20,494
|
33,430
|
-
|
53,924
|
|||||||||
Selling, general and administrative expenses | 25,443 | 8,540 | - | 33,983 | |||||||||
Restructuring
and facility closure reversal
|
(209
|
)
|
-
|
-
|
(209
|
)
|
|||||||
Income
(loss) from operations
|
(4,740
|
)
|
24,890
|
-
|
20,150
|
||||||||
Foreign
exchange transaction gain
|
-
|
(482
|
)
|
-
|
(482
|
)
|
|||||||
Other
(income) expense, net
|
1,311
|
(152
|
)
|
-
|
1,159
|
||||||||
Equity
in subsidiary income
|
(15,385
|
)
|
-
|
15,385
|
-
|
||||||||
Interest
expense, net
|
9,608
|
551
|
-
|
10,159
|
|||||||||
Reorganization
expense
|
20,419
|
-
|
-
|
20,419
|
|||||||||
Income
(loss) before income taxes
|
(20,693
|
)
|
24,973
|
(15,385
|
)
|
(11,105
|
)
|
||||||
Income
tax expense
|
224
|
9,588
|
-
|
9,812
|
|||||||||
Net
income (loss)
|
$
|
(20,917
|
)
|
$
|
15,385
|
$
|
(15,385
|
)
|
$
|
(20,917
|
)
|
CONSOLIDATING
BALANCE SHEETS
|
September
30, 2005
|
||||||||||||
|
Guarantor
|
Non-Guarantor
|
Eliminations
|
Consolidated
FiberMark,
Inc.
|
|||||||||
ASSETS
|
|||||||||||||
Current
assets:
|
|||||||||||||
Cash
|
$
|
1,701
|
$
|
11,923
|
$
|
-
|
$
|
13,624
|
|||||
Accounts
receivable, net of allowances
|
24,561
|
37,740
|
-
|
62,301
|
|||||||||
Inventories
|
43,889
|
24,681
|
-
|
68,570
|
|||||||||
Prepaid
expenses
|
3,811
|
153
|
-
|
3,964
|
|||||||||
Total
current assets
|
73,962
|
74,497
|
-
|
148,459
|
|||||||||
Property,
plant and equipment, net
|
76,802
|
97,042
|
-
|
173,844
|
|||||||||
Goodwill
|
2,377
|
5,876
|
-
|
8,253
|
|||||||||
Investment
in subsidiaries
|
94,821
|
-
|
(94,821
|
)
|
-
|
||||||||
Other
intangible assets, net
|
2,002
|
1,005
|
-
|
3,007
|
|||||||||
Other
long-term assets
|
4,113
|
1,605
|
-
|
5,718
|
|||||||||
Intercompany
accounts receivables
|
51
|
-
|
(51
|
)
|
-
|
||||||||
Total
assets
|
$
|
254,128
|
$
|
180,025
|
$
|
(94,872
|
)
|
$
|
339,281
|
||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY (DEFICIT)
|
|||||||||||||
Current
liabilities:
|
|||||||||||||
Revolving
credit line
|
$
|
5,613
|
$
|
-
|
$
|
-
|
$
|
5,613
|
|||||
Accounts
payable
|
10,434
|
14,013
|
-
|
24,447
|
|||||||||
Accrued
liabilities
|
19,174
|
7,964
|
-
|
27,138
|
|||||||||
Accrued
income taxes payable
|
500
|
18,302
|
-
|
18,802
|
|||||||||
Deferred
income taxes
|
-
|
247
|
-
|
247
|
|||||||||
Total
current liabilities not subject to compromise
|
35,721
|
40,526
|
76,247
|
||||||||||
Long-term
liabilities:
|
|||||||||||||
Intercompany
accounts payable
|
-
|
51
|
(51
|
)
|
-
|
||||||||
Deferred
income taxes
|
1,879
|
15,907
|
-
|
17,786
|
|||||||||
Other
long-term liabilities
|
18,488
|
28,720
|
-
|
47,208
|
|||||||||
Total
long-term liabilities not subject to compromise
|
20,367
|
44,678
|
(51
|
)
|
64,994
|
||||||||
Liabilities
subject to compromise
|
366,573
|
-
|
-
|
366,573
|
|||||||||
Total
liabilities
|
422,661
|
85,204
|
(51
|
)
|
507,814
|
||||||||
Stockholders’
equity (deficit):
|
|||||||||||||
Preferred
stock
|
-
|
-
|
-
|
-
|
|||||||||
Common
stock
|
7
|
33
|
(33
|
)
|
7
|
||||||||
Additional
paid-in capital
|
65,496
|
3,791
|
(3,791
|
)
|
65,496
|
||||||||
Accumulated
earnings (deficit)
|
(238,050
|
)
|
85,121
|
(85,121
|
)
|
(238,050
|
)
|
||||||
Accumulated
other comprehensive income
|
4,049
|
5,876
|
(5,876
|
)
|
4,049
|
||||||||
Less
treasury stock
|
(35
|
)
|
-
|
-
|
(35
|
)
|
|||||||
Total
stockholders’ equity (deficit)
|
(168,533
|
)
|
94,821
|
(94,821
|
)
|
(168,533
|
)
|
||||||
Total
liabilities and stockholders’ equity (deficit)
|
$
|
254,128
|
$
|
180,025
|
$
|
(94,872
|
)
|
$
|
339,281
|
CONSOLIDATING
BALANCE SHEETS
|
|||||||||||||
December
31, 2004
|
|||||||||||||
ASSETS
|
Guarantor
|
Non-Guarantor
|
Eliminations
|
Consolidated
FiberMark, Inc.
|
|||||||||
Current
assets:
|
|||||||||||||
Cash
(overdraft)
|
$
|
(239
|
)
|
$
|
1,433
|
$
|
-
|
$
|
1,194
|
||||
Accounts
receivable, net of allowances
|
22,804
|
38,312
|
-
|
61,116
|
|||||||||
Inventories
|
44,517
|
29,133
|
-
|
73,650
|
|||||||||
Prepaid
expenses
|
3,930
|
409
|
-
|
4,339
|
|||||||||
Intercompany
accounts receivables
|
-
|
226
|
(226
|
)
|
-
|
||||||||
Total
current assets
|
71,012
|
69,513
|
(226
|
)
|
140,299
|
||||||||
Property,
plant and equipment, net
|
140,193
|
108,660
|
-
|
248,853
|
|||||||||
Goodwill
|
2,542
|
6,625
|
-
|
9,167
|
|||||||||
Investment
in subsidiaries
|
99,453
|
-
|
(99,453
|
)
|
-
|
||||||||
Other
intangible assets, net
|
1,581
|
1,048
|
-
|
2,629
|
|||||||||
Other
long-term assets
|
3,064
|
1,794
|
-
|
4,858
|
|||||||||
Total
assets
|
$
|
317,845
|
$
|
187,640
|
$
|
(99,679
|
)
|
$
|
405,806
|
||||
LIABILITIES
AND STOCKHOLDERS' EQUITY (DEFICIT)
|
|||||||||||||
Current
liabilities:
|
|||||||||||||
Revolving
credit line
|
$
|
2,628
|
$
|
-
|
$
|
-
|
$
|
2,628
|
|||||
Accounts
payable
|
8,048
|
16,241
|
(226
|
)
|
24,063
|
||||||||
Accrued
liabilities
|
13,112
|
8,157
|
-
|
21,269
|
|||||||||
Accrued
income taxes payable
|
761
|
14,697
|
-
|
15,458
|
|||||||||
Deferred
income taxes
|
-
|
279
|
-
|
279
|
|||||||||
Total
current liabilities not subject to compromise
|
24,549
|
39,374
|
(226
|
)
|
63,697
|
||||||||
Long-term
liabilities:
|
|||||||||||||
Deferred
income taxes
|
10,564
|
17,933
|
-
|
28,497
|
|||||||||
Other
long-term liabilities
|
17,908
|
30,880
|
-
|
48,788
|
|||||||||
Total
long-term liabilities not subject to compromise
|
28,472
|
48,813
|
-
|
77,285
|
|||||||||
Liabilities
subject to compromise
|
366,700
|
-
|
-
|
366,700
|
|||||||||
Total
liabilities
|
419,721
|
88,187
|
(226
|
)
|
507,682
|
||||||||
Stockholders’
equity (deficit):
|
|||||||||||||
Preferred
stock
|
-
|
-
|
-
|
-
|
|||||||||
Common
stock
|
7
|
33
|
(33
|
)
|
7
|
||||||||
Additional
paid-in capital
|
65,496
|
3,791
|
(3,791
|
)
|
65,496
|
||||||||
Accumulated
earnings (deficit)
|
(174,708
|
)
|
78,318
|
(78,318
|
)
|
(174,708
|
)
|
||||||
Accumulated
other comprehensive income
|
7,364
|
17,311
|
(17,311
|
)
|
7,364
|
||||||||
Less
treasury stock
|
(35
|
)
|
-
|
-
|
(35
|
)
|
|||||||
Total
stockholders’ equity (deficit)
|
(101,876
|
)
|
99,453
|
(99,453
|
)
|
(101,876
|
)
|
||||||
Total
liabilities and stockholders’ equity (deficit)
|
$
|
317,845
|
$
|
187,640
|
$
|
(99,679
|
)
|
$
|
405,806
|
CONSOLIDATING
STATEMENTS OF CASH FLOWS
|
Nine
Months Ended September 30, 2005
|
||||||||||||
|
Guarantor
|
Non-Guarantor
|
Eliminations
|
Consolidated
FiberMark, Inc.
|
|||||||||
Cash
flows from operating activities:
|
|||||||||||||
Net income (loss)
|
$
|
(63,342
|
)
|
$
|
14,661
|
$
|
(14,661
|
)
|
$
|
(63,342
|
)
|
||
Adjustments to reconcile net income (loss) to net cash provided by
(used
in) operating activities:
|
|
||||||||||||
Depreciation and amortization
|
10,166
|
4,802
|
-
|
14,968
|
|||||||||
(Gain) loss on disposal of assets
|
(2,291
|
)
|
69
|
-
|
(2,222
|
)
|
|||||||
Equity in subsidiary income
Asset impairment
|
(14,661)
55,884
|
-
-
|
14,661
-
|
-
55,884
|
|||||||||
Deferred income taxes
|
76
|
-
|
-
|
76
|
|||||||||
Reorganization expense
|
12,733
|
-
|
-
|
12,733
|
|||||||||
Net cash used for reorganization items
|
(8,382
|
)
|
-
|
-
|
(8,382
|
)
|
|||||||
Changes in operating assets and liabilities:
|
|||||||||||||
Accounts receivable
|
(1,757
|
)
|
(3,966
|
)
|
-
|
(5,723
|
)
|
||||||
Inventories
|
628
|
1,224
|
-
|
1,852
|
|||||||||
Prepaid expenses
|
119
|
221
|
-
|
340
|
|||||||||
Other long-term assets
|
(1,049
|
)
|
(14
|
)
|
-
|
(1,063
|
)
|
||||||
Accounts payable
|
2,397
|
(169
|
)
|
-
|
2,228
|
||||||||
Accrued liabilities
|
1,883
|
770
|
-
|
2,653
|
|||||||||
Accrued income taxes payable
|
(261
|
)
|
5,558
|
-
|
5,297
|
||||||||
Other long-term liabilities
|
3,686
|
1,404
|
-
|
5,090
|
|||||||||
Intercompany accounts, net
|
(19
|
)
|
19
|
-
|
-
|
||||||||
Net cash provided by (used in) operating activities
|
(4,190
|
)
|
24,579
|
-
|
20,389
|
||||||||
Cash
flows from investing activities:
|
|||||||||||||
Additions to property, plant and equipment
|
(1,903
|
)
|
(5,493
|
)
|
-
|
(7,396
|
)
|
||||||
Increase in other intangible assets
|
-
|
(248
|
)
|
-
|
(248
|
)
|
|||||||
Proceeds from sale of assets
|
2,610
|
52
|
-
|
2,662
|
|||||||||
|
|||||||||||||
Net cash provided by (used in) investing activities
|
707
|
(5,689
|
)
|
-
|
(4,982
|
)
|
|||||||
Cash
flows from financing activities:
|
|||||||||||||
Net borrowings under revolving credit line
|
2,985
|
-
|
-
|
2,985
|
|||||||||
Repayment of debt
|
(3,142
|
)
|
-
|
-
|
(3,142
|
)
|
|||||||
Dividend, net
|
7,858
|
(7,858
|
)
|
-
|
-
|
||||||||
Debt issuance costs
|
(1,272
|
)
|
-
|
-
|
(1,272
|
)
|
|||||||
Net cash provided by (used in) financing activities
|
6,429
|
(7,858
|
)
|
-
|
(1,429
|
)
|
|||||||
Effect
of exchange rate changes in cash
|
(1,006
|
)
|
(542
|
)
|
-
|
(1,548
|
)
|
||||||
Net increase in cash
|
1,940
|
10,490
|
-
|
12,430
|
|||||||||
Cash
(overdraft) at beginning of period
|
(239
|
)
|
1,433
|
-
|
1,194
|
||||||||
Cash
at end of period
|
$
|
1,701
|
$
|
11,923
|
$
|
-
|
$
|
13,624
|
|||||
CONSOLIDATING
STATEMENTS OF CASH FLOWS
|
Nine
Months Ended September 30, 2004
|
||||||||||||
Guarantor
|
Non-Guarantor
|
|
Eliminations
|
|
Consolidated
FiberMark, Inc.
|
||||||||
Cash
flows from operating activities:
|
|||||||||||||
Net
income (loss)
|
$
|
(20,917
|
)
|
$
|
15,385
|
$
|
(15,385
|
)
|
$
|
(20,917
|
)
|
||
Adjustments
to reconcile net income (loss) to net cash provided by (used in)
operating
activities:
|
|||||||||||||
Depreciation and amortization
|
9,472
|
3,762
|
-
|
13,234
|
|||||||||
Amortization of bond discount
Gain on disposal of assets
|
42
(411
|
)
|
-
-
|
-
(71
|
)
|
42
(482
|
)
|
||||||
Equity in subsidiary income
|
(15,385
|
)
|
-
|
15,385
|
-
|
||||||||
Deferred income taxes
|
2
|
-
|
-
|
2
|
|||||||||
Reorganization expense
|
20,419
|
-
|
-
|
20,419
|
|||||||||
Net cash used for reorganization items
|
(8,760
|
)
|
-
|
-
|
(8,760
|
)
|
|||||||
Changes
in operating assets and liabilities:
|
|||||||||||||
Accounts
receivable
|
(6,494
|
)
|
(5,104
|
)
|
-
|
(11,598
|
)
|
||||||
Inventories
|
(4,940
|
)
|
(525
|
)
|
-
|
(5,465
|
)
|
||||||
Prepaid expenses
|
(1,345
|
)
|
(170
|
)
|
-
|
(1,515
|
)
|
||||||
Other long-term assets
|
101
|
(239
|
)
|
-
|
(138
|
)
|
|||||||
Accounts payable
|
5,093
|
(1,196
|
)
|
-
|
3,897
|
||||||||
Accrued liabilities
|
12,579
|
1,407
|
-
|
13,986
|
|||||||||
Accrued income taxes payable
|
(425
|
)
|
(2,115
|
)
|
-
|
(2,540
|
)
|
||||||
Other long-term liabilities
|
(85
|
)
|
457
|
-
|
372
|
||||||||
Net cash provided by (used in) operating activities
|
(11,054
|
)
|
11,662
|
(71
|
)
|
537
|
|||||||
Cash
flows from investing activities:
|
|||||||||||||
Additions to property, plant and equipment
Proceeds from sale of assets
|
(2,448)
1,358
|
(7,157)
-
|
746
(675
|
)
|
(8,859
683
|
)
|
|||||||
Net cash provided by (used in) investing activities
|
(1,090
|
)
|
(7,157
|
)
|
71
|
(8,176
|
)
|
||||||
Cash
flows from financing activities:
|
|||||||||||||
Net
borrowings (repayments) under revolving credit line
|
(2,753
|
)
|
9,529
|
-
|
6,776
|
||||||||
Repayment
of debt
|
(3,012
|
)
|
-
|
-
|
(3,012
|
)
|
|||||||
Net
borrowings (repayments) under intercompany notes
|
8,823
|
(8,574
|
)
|
(249
|
)
|
-
|
|||||||
Dividend,
net
|
12,051
|
(11,503
|
)
|
(548
|
)
|
-
|
|||||||
Debt
issuance costs
|
(772
|
)
|
-
|
-
|
(772
|
)
|
|||||||
Debt
issuance costs due to reorganization
|
(75
|
)
|
-
|
-
|
(75
|
)
|
|||||||
Net cash provided by (used in) financing activities
|
14,262
|
(10,548
|
)
|
(797
|
)
|
2,917
|
|||||||
Effect
of exchange rate changes in cash
|
(1,086
|
)
|
(168
|
)
|
797
|
(457
|
)
|
||||||
Net increase (decrease) in cash
|
1,032
|
(6,211
|
)
|
-
|
(5,179
|
)
|
|||||||
Cash
(overdraft) at beginning of period
|
(986
|
)
|
7,097
|
-
|
6,111
|
||||||||
Cash
at end of period
|
$
|
46
|
$
|
886
|
$
|
-
|
$
|
932
|
· |
Income
from operations declined by $58.4 million. Lower gross profit ($1.5
million decline) was partially offset by a $0.9 million decline in
SG&A expenses. A restructuring and facility closure charge of $11.4
million was recorded for costs associated with the closure of one
facility
and a paper machine in another facility, including a $9.3 million
non-cash
asset impairment charge in accordance with SFAS 144, compared with
a $0.2
million reversal in 2004.
|
· |
Also
effecting the decline in income from operations were non-cash asset
impairment charges of $46.6 million recorded in accordance with SFAS
144.
|
· |
Reorganization
expenses related to chapter 11 decreased by $2.4 million to $4.1
million
in 2005, from $6.5 million in 2004. The decrease was largely due
to lower
professional fees, which were partially offset by an increase in
employee
retention, retirement and severance
costs.
|
· |
Raw
material and energy cost increases of $2.4 million, including $1.3
million
in higher costs for latex and chemicals, higher energy costs of $0.9
million, and a small increase in pulp
costs
|
· |
Additional
depreciation expenses of $0.8 million largely due to accelerated
depreciation of manufacturing software that will be removed from
service
by the end of 2005
|
· |
Lower
volume, which reduced margins by $0.2
million
|
· |
Price
increases and stronger product mix, which increased margins by $0.5
million
|
· |
Manufacturing
cost decreases of $1.8 million
|
· |
Income
from operations declined by $59.7 million, as lower gross profit
($6.0
million decline) was partially offset by $2.2 million in gains on
disposal
of assets and lower selling, general and administrative expenses
($2.5
million decrease). Restructuring and facility closure expenses, net
of
reversals in 2004, increased by $11.6 million, including a non-cash
asset
impairment charge of $9.3 million. Asset impairment charges (non-cash)
of
$46.6 million were recorded in accordance with SFAS
144.
|
· |
Interest
expense decreased by $8.8 million, primarily due to the cessation
of
interest expense accruals on the senior notes pending the outcome
of the
bankruptcy process
|
· |
Reorganization
expenses related to chapter 11 decreased by $7.7 million to $12.7
million
in 2005, from $20.4 million in 2004. The decrease was primarily due
to
write-offs in 2004, particularly of $10.0 million in deferred financing
and bond discount costs, which were partially offset by higher
professional fees and employee retention, retirement and severance
costs
in 2005.
|
· |
Increased
cost of key inputs, including pulp cost increases of $1.3 million,
energy
increases of $2.3 million, and other raw material increases, especially
latices and resins, of $3.5 million
|
· |
Additional
depreciation expenses of $2.3 million largely due to accelerated
depreciation of manufacturing software that will be removed from
service
by the end of 2005
|
· |
Inventory
effects of $0.8 million to reserve for potentially obsolete
inventory
|
· |
Price
increases and a stronger product mix, offset by lower volume, increased
margins by $3.9 million
|
· |
Foreign
currency benefits of $0.8 million due to favorable translation of
German
and U.K. profits
|
Net
cash provided by (used in):
|
Nine
Months Ended
September
30, 2005
|
Nine
Months Ended
September
30, 2004
|
|||||
Operating
activities
|
$
|
20,389
|
$
|
537
|
|||
Investing
activities
|
(4,982
|
)
|
(8,176
|
)
|
|||
Financing
activities
|
(1,429
|
)
|
2,917
|
||||
Effect
of exchange rates on cash
|
(1,548
|
)
|
(457
|
)
|
|||
Net
increase (decrease) in cash
|
$
|
12,430
|
$
|
(5,179
|
)
|
· |
Net
losses in 2005 were $63.3 million compared to $20.9 million in 2004,
increasing by $42.4 million. The increase was largely due to an asset
impairment charges of $55.9 million offset by lower reorganization
expense
of $7.7 million and reduced interest expense of $8.8 million, both
due to
the chapter 11 process.
|
· |
Accounts
receivable in the first nine months increased by $5.7 million in
2005 and
$11.6 million in 2004 due to seasonally strong third quarter sales
in
Germany and North America compared with relatively weak fourth quarter
sales. Overall accounts receivable quality remains high.
|
· |
Non-cash
items also included depreciation and amortization of $15.0 million
in 2005
and $13.2 million in 2004, the increase largely due to the accelerated
depreciation of manufacturing software that will be removed from
service
in 2005.
|
· |
Accounts
payable decreased by $2.2 million in 2005 mainly due to decreased
German
spending in December 2004. Accounts payable decreased by $3.9 million
in
2004.
|
· |
Net
borrowings under the revolving credit facility were $3.0
million
|
· |
The
company repaid $3.1 million of long-term debt
|
· | Debt issuance costs for credit facilities were $1.3 million |
· |
Net
borrowings under the revolving credit facility were $6.8 million
|
· |
The
company repaid $3.0 million of long-term
debt
|
· | Debt issuance costs for credit facilities were $0.8 million |
2005
|
(1)
|
2006-2008
|
2009-2011
|
Thereafter
|
Total
|
|||||||||||
Long-term
debt (2)
|
$
|
0.8
|
$
|
104.9
|
$
|
230.0
|
$
|
-
|
$
|
335.7
|
||||||
Letters
of credit
|
9.8
|
-
|
-
|
-
|
9.8
|
|||||||||||
Operating
leases
|
0.6
|
2.7
|
0.1
|
0.1
|
3.5
|
|||||||||||
Sale-leaseback
(2)
|
1.2
|
-
|
-
|
-
|
1.2
|
|||||||||||
Forward
purchase contracts
|
0.5
|
-
|
-
|
-
|
0.5
|
|||||||||||
Benefit
plan obligations (3)
|
0.6
|
9.0
|
11.0
|
11.6
|
32.2
|
|||||||||||
$
|
13.5
|
$
|
116.6
|
$
|
241.1
|
$
|
11.7
|
$
|
382.9
|
|
North
America*
|
Germany
|
Combined
|
|||||||
Borrowing
base
|
$
|
23.7
|
$
|
40.0
|
$
|
63.7
|
||||
Less:
reserves
against availability
|
(4.6
|
)
|
-
|
(4.6
|
)
|
|||||
Net
availability
|
19.1
|
40.0
|
59.1
|
|||||||
Less:
outstanding
borrowings
|
(5.6
|
)
|
-
|
(5.6
|
)
|
|||||
letters
of credit
|
(9.8
|
)
|
-
|
(9.8
|
)
|
|||||
Unused
borrowing capacity
|
$
|
3.7
|
$
|
40.0
|
$
|
43.7
|
Borrowing
Source
|
Base
Rate Index
|
Margin
Over Index
|
U.S.
|
LIBOR
|
3.25%
|
U.S.
|
Prime
Rate
|
1.75%
|
U.S.
|
Unused
Line Fee
|
0.50%
|
Borrowing
Source
|
Base
Rate Index
|
Margin
Over Index
|
Germany
|
Euribor
|
2.50%
|
Germany
|
Euro
Index
|
4.00%
|
Germany
|
Unused
Line Fee
|
0.50%
|
31.1
|
Certification
of Chief Executive Officer and Chief Financial Officer pursuant to
18
U.S.C. Section 1350 dated November 14, 2005
|
32.1
|
Certification
of Principal Executive Officer pursuant to Rules 12a-14 and 15d-14
under
the Securities Exchange Act of 1934, as adopted pursuant to Section
302 of
the Sarbanes-Oxley Act of 2002.
|
32.2
|
Certification
of Principal Financial Officer pursuant to Rules 12a-14 and 15d-14
under
the Securities Exchange Act of 1934, as adopted pursuant to Section
302 of
the Sarbanes-Oxley Act of 2002.
|
|
|
|
|
FiberMark,
Inc.
|
|
|
|
|
Date:
November 14, 2005
|
By:
|
/s/
John E. Hanley
|
|
||
|
John
E. Hanley
Vice
President and Chief Financial Officer
(Principal
Financial Officer and Duly Authorized
Officer)
|
Number
|
Description
|
|
31.1
|
Certification
of Chief Executive Officer and Chief Financial Officer dated November
14,
2005 pursuant
to 18 U.S.C. Section 1350.
|
|
32.1
|
Certification
of Principal Executive Officer pursuant to Rules 12a-14 and 15d-14
under
the Securities Exchange Act of 1934, as adopted pursuant to Section
302 of
the Sarbanes-Oxley Act of 2002.
|
|
32.2
|
Certification
of Principal Financial Officer pursuant to Rules 12a-14 and 15d-14
under
the Securities Exchange Act of 1934, as adopted pursuant to Section
302 of
the Sarbanes-Oxley Act of 2002.
|
Date:
November 14, 2005
|
/s/ Alex
Kwader
|
|
|
|
Alex
Kwader
Chairman
and Chief Executive Officer
|
Date:
November 14, 2005
|
/s/ John
E. Hanley
|
|
|
|
John
E. Hanley
Vice
President and Chief Financial
Officer
|
1.
|
I
have reviewed this Quarterly Report on Form 10-Q of FiberMark,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
b)
|
[Not
applicable]
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
|
d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
November 14, 2005
|
/s/ Alex
Kwader
|
|
|
|
Alex
Kwader
Chairman
and Chief Executive Officer
|
1.
|
I
have reviewed this Quarterly Report on Form 10-Q of FiberMark,
Inc.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement
of a
material fact or omit to state a material fact necessary to make
the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects
the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
|
a)
|
Designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to
ensure
that material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is
being
prepared;
|
b)
|
[Not
applicable]
|
c)
|
Evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness
of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation; and
|
d)
|
Disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely
to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting,
to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
a)
|
All
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
b)
|
Any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Date:
November 14, 2005
|
/s/ John
E. Hanley
|
|
|
|
John
E. Hanley
Vice
President and Chief Financial Officer
(Principal
Financial Officer)
|