sv4
As filed with the Securities and
Exchange Commission on June 1, 2010
Registration
No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Form S-4
REGISTRATION
STATEMENT
UNDER THE SECURITIES ACT OF
1933
P. H. Glatfelter
Company
(Exact name of Registrant as
specified in its charter)
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Pennsylvania
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2621
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23-0628360
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(State or other jurisdiction
of
incorporation or organization)
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(Primary standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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96 South George Street,
Suite 500
York, Pennsylvania
17401
(717) 225-4711
(Address and telephone number of
Registrants principal executive offices)
John P. Jacunski
Senior Vice President and Chief
Financial Officer
P. H. Glatfelter
Company
96 South George Street,
Suite 500
York, Pennsylvania
17401
(717) 225-4711
(Name, address and telephone
number of agent for service)
with a copy to:
Bruce Czachor
Shearman & Sterling
LLP
599 Lexington Avenue
New York, New York
10022
(212) 848-4000
Approximate date of commencement of proposed sale to the public:
As soon as practicable after the effective date of this
registration statement.
If the securities being registered on this Form are being
offered in connection with the formation of a holding company
and there is compliance with General Instruction G, check
the following box.
o
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act,
check the following box and list the Securities Act registration
statement number of the earlier effective registration statement
for the same offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
If this Form is a post-effective amendment filed pursuant to
Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of
the earlier effective registration statement for the same
offering.
o
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company. See the definitions of
large accelerated filer, accelerated
filer and smaller reporting company in
Rule 12b-2
of the Exchange Act.
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Large accelerated filer o
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Accelerated filer x
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Non-accelerated filer o
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Smaller reporting company o
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(Do not check if a smaller reporting company)
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If applicable, place an X in the box to designate the
appropriate rule provision relied upon in conducting this
transaction:
Exchange Act
Rule 13e-4(i)
(Cross-Border Issuer Tender
Offer) o
Exchange Act
Rule 14d-1(d)
(Cross-Border Third-Party Tender
Offer) o
CALCULATION
OF REGISTRATION FEE
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Proposed Maximum
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Proposed Maximum
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Title of Each Class of
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Amount to be
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Offering Price
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Aggregate
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Amount of
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Securities to be Registered
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Registered
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Per Unit
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Offering Price (1)
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Registration Fee (2)
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71/8% Notes
due 2016
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$100,000,000
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100%
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$100,000,000
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$7,130
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Guarantees of
71/8%
Notes due 2016
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(1)
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Estimated solely for the purposes of calculating the
registration fee in accordance with Rule 457(f) under the
Securities Act of 1933, as amended.
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(2)
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Calculated based upon the market value of the securities to be
received by the registrants in the exchange in accordance with
Rule 457(f). Pursuant to Rule 457(n), no registration
fee will be paid in connection with the guarantees.
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The Registrant hereby amends this Registration Statement on
such date or dates as may be necessary to delay its effective
date until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a)
of the Securities Act of 1933 or until this Registration
Statement shall become effective on such date as the Commission,
acting pursuant to Section 8(a), may determine.
TABLE OF
ADDITIONAL REGISTRANTS
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Primary Standard
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State or Other
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Industrial
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I.R.S. Employer
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Jurisdiction of
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Classification
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Identification
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Name
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Incorporation
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Code Number
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Number
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PHG Tea Leaves, Inc.
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DE
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2621
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52-2068690
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Mollanvick, Inc.
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DE
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2621
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52-2068900
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Glatfelter Pulp Wood Company
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MD
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2621
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23-1519556
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Glatfelter Holdings, LLC
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DE
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2621
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20-3878695
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The information in
this prospectus is not complete and may be changed. We may not
sell securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus
is not an offer to sell these securities and we are not
soliciting offers to buy these securities in any jurisdiction
where the offer or sale is prohibited.
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Filed pursuant to Rule 424(b)(3)
Registration Number 333-135808
SUBJECT TO COMPLETION, DATED
JUNE 1, 2010
PROSPECTUS
OFFER TO EXCHANGE
all outstanding unregistered
71/8% notes
due 2016
that were issued on February 5, 2010
($100,000,000 aggregate principal amount)
for
71/8%
exchange notes due 2016
that have been registered under the Securities Act of 1933
Fully and
unconditionally guaranteed
as to payment of principal and interest
by the subsidiary guarantors
TERMS OF
THE EXCHANGE OFFER
This prospectus and accompanying letter of transmittal relate to
the proposed offer by P. H. Glatfelter Company to exchange up to
$100,000,000 aggregate principal amount of
71/8%
exchange notes due 2016, which are registered under the
Securities Act of 1933, as amended, for any and all of its
unregistered
71/8% notes
due 2016 that were issued on February 5, 2010. The exchange
notes are guaranteed as to payment of principal and interest by
certain of P. H. Glatfelter Companys domestic subsidiaries
(the subsidiary guarantors). The unregistered notes
have certain transfer restrictions. The exchange notes will be
freely transferable.
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THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME,
ON ,
2010, UNLESS WE EXTEND THE OFFER.
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Tenders of outstanding unregistered notes may be withdrawn at
any time before 5:00 p.m. on the date the exchange offer
expires.
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All outstanding unregistered notes that are validly tendered and
not validly withdrawn will be exchanged.
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The terms of the exchange notes to be issued are substantially
similar to the unregistered notes, except they are registered
under the Securities Act, do not have any transfer restrictions
and do not have registration rights or rights to additional
interest.
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The exchange of unregistered notes for exchange notes will not
be a taxable event for U.S. federal income tax purposes.
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P. H. Glatfelter Company will not receive any proceeds from the
exchange offer.
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The exchange notes will not be listed on any exchange.
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Please see Risk Factors beginning on page 14
for a discussion of certain factors you should consider in
connection with the exchange offer.
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved of these
securities or determined if this prospectus is truthful or
complete. Any representation to the contrary is a criminal
offense.
The date of this prospectus
is ,
2010.
Each holder of an unregistered note wishing to accept the
exchange offer must deliver the unregistered note to be
exchanged, together with the letter of transmittal that
accompanies this prospectus and any other required
documentation, to the exchange agent identified in this
prospectus. Alternatively, you may effect a tender of
unregistered notes by book-entry transfer into the exchange
agents account at The Depository Trust Company
(DTC). All deliveries are at the risk of the holder.
You can find detailed instructions concerning delivery in the
section called The Exchange Offer in this prospectus
and in the accompanying letter of transmittal.
If you are a broker-dealer that receives exchange notes for your
own account, you must acknowledge that you will deliver a
prospectus in connection with any resale of the exchange notes.
The letter of transmittal accompanying this prospectus states
that, by so acknowledging and by delivering a prospectus, you
will not be deemed to admit that you are an
underwriter within the meaning of the Securities
Act. You may use this prospectus, as we may amend or supplement
it in the future, for your resales of exchange notes. We will
make this prospectus available to any broker-dealer for use in
connection with any such resale for a period of 180 days
after the date of consummation of this exchange offer.
TABLE OF
CONTENTS
This prospectus incorporates important business and financial
information about us that is not included in or delivered with
this prospectus. Information incorporated by reference is
available without charge to holders of our unregistered
71/8% notes
due 2016, issued on February 5, 2010, upon written or oral
request to us at P. H. Glatfelter Company, 96 South
George Street, Suite 500, York, Pennsylvania 17401,
Attention: Investor Relations, telephone number
(717) 225-4711.
To obtain timely delivery, security holders must request this
information no later than five (5) business days before the
date they must make their investment decision which would
be ,
2010.
You should rely only on the information contained or
incorporated by reference in this prospectus. We have not
authorized any other person to provide you with different
information. If anyone provides you with different or
inconsistent information, you should not rely on it. We are not
making an offer to sell these securities in any jurisdiction
where the offer or sale is not permitted. You should assume that
the information appearing in this prospectus and the documents
incorporated by reference are accurate only as of their
respective dates. Our business, financial condition, results of
operations and prospects may have changed since these dates.
References to we, us, our,
Glatfelter and the Company are to P. H.
Glatfelter Company and its consolidated subsidiaries unless
otherwise specified or the context otherwise requires.
Whenever we refer in this prospectus to the
71/8% notes
due 2016, issued on February 5, 2010, we will refer to them
as the unregistered notes. Whenever we refer in this
prospectus to the registered
71/8% notes
due 2016 offered hereby, we will refer to them as the
exchange notes. The unregistered notes and the
exchange notes are collectively referred to as the
notes.
PROSPECTUS
SUMMARY
This prospectus summary highlights selected information
appearing elsewhere in this prospectus and may not contain all
of the information that is important to you. You should
carefully read this prospectus in its entirety including the
documents incorporated by reference.
Our
Company
Glatfelter began operations in 1864 and today, we believe we are
one of the worlds leading manufacturers of specialty
papers and fiber-based engineered products. Headquartered in
York, Pennsylvania, we own and operate manufacturing facilities
located in Pennsylvania, Ohio, Canada, Germany, the United
Kingdom, France and the Philippines.
We manufacture a broad and diverse line of products serving
customers in numerous markets. Many of the markets in which we
operate are characterized by higher-value-added products and, in
some cases, by higher growth prospects and lower cyclicality
than commodity paper markets. Examples of some of our markets
and product applications include:
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papers for carbonless and forms products
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filtration papers for the tea and coffee industry
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airlaid non-woven fabric-like materials used in feminine hygiene
and adult incontinence products, specialty wipes and food pads
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book publishing papers
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papers for specialized envelopes
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papers for a wide variety of other specialty products including
postage stamps, playing cards, greeting cards, digital imaging
papers and FDA grades
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metallized papers for packaging and bottled beverage labels
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overlay papers for decorative laminate, flooring and furniture
applications
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We market our products worldwide both through wholesale paper
merchants, brokers and agents and directly to our customers. Our
revenue was $1.2 billion for 2009 and $340.9 million for
the three months ended March 31, 2010.
Recent Developments
On February 12, 2010, we completed the acquisition of
Concert Industries Corp. (Concert), a leading
supplier of airlaid non-woven fabric-like material, for
$235.8 million based on the currency exchange rates on the
closing date. Concert, with approximately 590 employees,
has operations located in Gatineau, Quebec, Canada and
Falkenhagen, Brandenburg, Germany. Annual revenues totaled
$203.0 million in 2009.
Concert manufactures highly absorbent cellulose based airlaid
non-woven material used in products such as feminine hygiene and
adult incontinence products, pre-moistened cleaning wipes,
napkins and tablecloths, food pads and baby wipes.
On April 29, 2010 we entered into a new four-year,
$225.0 million, multi-currency, revolving credit agreement
with a consortium of banks, which we refer to herein as the
credit agreement due May 2014. The new agreement replaces our
existing bank credit agreement and matures May 31, 2014.
See Description of Other Indebtedness Credit
Agreement Due May 2014.
In addition, in April 2010, we received a $54.9 million
federal income tax refund in connection with the filing of our
2009 corporate income tax return which included the benefit of
alternative fuel mixture credits.
1
Acquisitions
Over the past four years we completed the following acquisitions:
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Est.
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Annual
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Purchase
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Revenue
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Primary
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Dollars in millions
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Date
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Price
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Prior to Acquisition
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Products
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Business Location
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Lydney, England
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Mar 06
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$
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65.0
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$
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75.0
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Tea bags & coffee papers
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Chillicothe, Ohio
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Apr 06
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83.3
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440.0
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Carbonless papers & forms
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Caerphilly, Wales
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Nov 07
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12.6
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53.4
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Metallized
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Gatineau, Canada and Falkenhagen, Germany
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Feb 10
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235.8
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203.0
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Airlaid non-woven fabric
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These strategic acquisitions significantly increased and
diversified our revenues and provided us with additional
operating scale, increased production capacity, and an expansion
of our geographic reach.
Our Business Units
We manage our business as three distinct units: (i) the
Specialty Papers business unit, (ii) the Composite Fibers
business unit and (iii) the Advanced Airlaid Materials business
unit. Consolidated net sales and the relative net sales
contribution of each of our business units for the past three
years and the three months ended March 31, 2010 are
summarized below:
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March 31,
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Dollars in thousands
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2007
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2008
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2009
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2010
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Net sales
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$
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1,148,323
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$
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1,263,850
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$
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1,184,010
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$
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337,275
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Business unit contribution
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Specialty Papers
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69.9
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%
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66.0
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%
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66.9
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%
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61.6
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%
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Composite Fibers
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30.1
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34.0
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33.1
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30.1
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Advanced Airlaid Material(1)
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8.3
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Total
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100.0
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%
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100.0
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%
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100.0
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%
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100.0
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%
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(1) |
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Results included since completion of Acquisition on February 12,
2010. |
Net tons sold by each business unit for the past three years and
the three months ended March 31, 2010 were as follows:
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March 31,
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In thousands
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2007
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2008
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2009
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2010
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Specialty Papers
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726.7
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743.8
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738.8
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193.2
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Composite Fibers
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72.9
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85.6
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80.1
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21.3
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Advanced Airlaid Material(1)
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11.1
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Total
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799.6
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829.4
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818.9
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225.6
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(1) |
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Results included since completion of Acquisition on February 12,
2010. |
Specialty Papers Our Specialty Papers
business unit focuses on producing papers for the following
markets:
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Carbonless papers & forms for credit card receipts,
multi-part forms, security papers and other end-user
applications;
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Book publishing papers for the production of high quality
hardbound books and other book publishing needs;
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2
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Envelope and converting papers for the direct mail
market, shopping bags, and other converting
applications; and
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Engineered products for digital imaging, transfer,
casting, release, postal, playing card and other niche specialty
applications.
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The markets in which Specialty Papers competes have undergone
significant and rapid consolidation over the past several years
resulting in fewer, more globally focused producers. Over 80% of
the North American market share is now served by five paper
companies, of which Glatfelter is one. Specialty Papers
revenue composition by market consisted of the following for the
years indicated:
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In thousands
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2007
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2008
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2009
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Carbonless & forms
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$
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345,785
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$
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338,067
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$
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320,088
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Book publishing
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185,343
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201,040
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176,646
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Envelope & converting
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116,797
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138,293
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146,812
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Engineered products
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136,785
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149,372
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143,490
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Other
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17,583
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7,127
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4,879
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Total
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$
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802,293
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$
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833,899
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$
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791,915
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We believe we are one of the leading suppliers of book
publishing papers in the United States and the second leading
carbonless paper producer. Although the market for carbonless
papers in North America is declining approximately 8% to 10% per
year, and in 2009, in part due to the recession, this decline
was greater, we have been successful in executing our strategy
to replace this lost volume with products such as envelope and
converting papers, forms and other products. Specialty Papers
also produces paper that is converted into specialized envelopes
in a wide array of colors, finishes and capabilities. This
market is generally more mature and declining. However, we
compete on our customer service capabilities and have grown our
market share in each of the last three years.
Specialty Papers highly technical engineered products
include those designed for multiple end uses, such as papers for
pressure-sensitive postage stamps, greeting and playing cards,
conical cups, digital imaging applications and for release paper
applications. Such products comprise an array of distinct
business niches that are in a continuous state of evolution.
Many of these products are utilized by demanding, specialized
customer and end-user applications. Some of our products are new
and higher growth while others are more mature and further along
in the product life cycle. Because many of these products are
technically complex and involve substantial customer-supplier
development collaboration, they typically command higher per ton
prices and generally exhibit greater pricing stability relative
to commodity grade paper products.
Composite Fibers Our Composite Fibers
business unit serves customers globally and focuses on
higher-value-added products in the following markets:
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Food & Beverage paper used for tea bags and
coffee pods/pads;
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Metallized products used in the labeling of beer bottles,
innerliners, gift wrap, self-adhesive labels and other consumer
products applications;
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Composite Laminates papers used in production of
decorative laminates, furniture and flooring
applications; and
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Technical Specialties is a diverse line of paper products
used in batteries, medical masks and other highly engineered
applications.
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We believe this business unit maintains a market leadership
position in the tea bag and coffee pods/pads and filters market
and the composite laminates market. Since the completion of the
Caerphilly acquisition, we
3
have the second largest market share for metallized products
globally. Composite Fibers revenue composition by market
consisted of the following for the years indicated:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In thousands
|
|
2007
|
|
|
2008
|
|
2009
|
|
|
|
Food & beverage
|
|
$
|
218,961
|
|
|
|
$
|
252,545
|
|
|
$
|
233,899
|
|
|
|
Metallized
|
|
|
45,426
|
|
|
|
|
85,719
|
|
|
|
81,388
|
|
|
|
Composite laminates
|
|
|
52,972
|
|
|
|
|
58,705
|
|
|
|
46,442
|
|
|
|
Technical specialties and other
|
|
|
28,671
|
|
|
|
|
32,983
|
|
|
|
30,366
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
346,030
|
|
|
|
$
|
429,952
|
|
|
$
|
392,095
|
|
|
|
|
|
Our focus on products made from abaca pulp has made us the
worlds largest producer of tea bag and coffee pods/pads
filter papers. Many of this units papers are technically
sophisticated. Most of the products produced in the Composite
Fibers business unit, except for metallized papers, are
extremely lightweight and require very specialized fibers. Our
engineering capabilities, specialized equipment and customer
orientation position us well to compete in these global markets.
Advanced Airlaid Materials Our Advanced
Airlaid Materials business unit manufactures highly absorbant
cellulose-based airlaid non-woven materials used to manufacture
a diverse range of consumer and industrial products such as
feminine hygiene products, adult incontinence products,
pre-moistened cleaning wipes, food pads, napkins and
tablecloths, and baby wipes. Sales of feminine hygiene products
accounted for approximately 85% of Concerts sales in 2009.
We expect the market for these products collectively to grow at
a compound annual growth rate of approximately 5% over the next
four years.
We believe this business unit is a technology and product
innovation leader in technically demanding segments of the
airlaid market. Its facilities at Gatineau, Quebec, Canada and
Falkenhagen, Germany are among the most modern and flexible
airlaid facilities in the world. This unit uses highly
productive, proprietary
single-lane
rotary festooning technology, which was developed in 2002. We
believe we have leading market positions in the feminine hygiene
and adult incontinence markets served by this unit (based on
2008 capacity). Our in-house technical product and process
expertise, festooning capabilities and rigorous customer
requirements create substantial barriers to entry for new
entrants.
Our Competitive Strengths
Since commencing operations over 145 years ago, we believe
that Glatfelter has developed into one of the worlds
leading manufacturers of specialty papers and fiber-based
engineered products. We believe that the following competitive
strengths have contributed to our success:
|
|
|
|
|
Broad and diverse product portfolio. We
manufacture a large portfolio of
fiber-based
specialized products which diversifies our revenue base which
enables us to access a variety of end-markets and to pursue a
wide range of customers. We have the ability to shift production
in order to capitalize on market opportunities. The breadth and
global reach of our product range help cushion the impact of
external economic influences on us.
|
|
|
|
Leading market positions in higher-value, niche
segments. We have focused our resources to
achieve market-leading positions in certain higher-value, niche
segments. Our products include various highly specialized
products designed for technically demanding end uses.
Consequently, many of our products achieve premium pricing
relative to that of commodity grade products. In each of the
past three years, over 75% of our sales were derived from these
higher-value, niche products. The specialized nature of these
products generally provides greater pricing stability relative
to commodity grade products.
|
|
|
|
Integrated and flexible production. In
Specialty Papers we are a nearly fully integrated producer and
are able to mitigate adverse fluctuations in the costs of
certain raw materials and energy. In Specialty Papers, our
Spring Grove and Chillicothe facilities are vertically
integrated operations producing in excess of 85% of the annual
pulp required for their paper production. Our Spring Grove and
Chillicothe facilities also generate 100% of the steam and
substantially all of the electricity required for their
operations.
|
4
In Composite Fibers, our Philippine mill processes abaca fiber
to produce abaca pulp, a key raw material used by this business
unit. The Philippine mill produces approximately 80% of the
annual abaca pulp required for Composite Fibers production
requirements. However, this unit purchases all of its wood pulp
requirements.
The Advanced Airlaid Materials business unit is not an
integrated producer. However, approximately 80% of this
units sales are subject to raw material cost pass-through
arrangements that help mitigate the risk of input cost increases.
The flexible operating platform within each of our business
units offers the following unique benefits:
|
|
|
|
|
the capability to manufacture a broad and diverse product
portfolio;
|
|
|
|
the ability to shift manufacturing capacity among product lines;
|
|
|
|
the flexibility to maximize manufacturing efficiencies in
response to changing market dynamics; and
|
|
|
|
support for our New Product Development initiatives.
|
|
|
|
|
|
Customer-centric business focus. We offer a
unique and diverse product line that can be customized to serve
the individual needs of our customers. This allows us to develop
close relationships with our key customers and to be adaptable
in our product development, manufacturing, sales and marketing
practices to meet changing customer needs. We believe that this
approach has led to the development of excellent customer
relationships, defensible market positions, and increased
pricing stability relative to commodity producers. Additionally,
our customer-centric focus has been a key driver to our success
in new product development.
|
|
|
|
Significant investment in product
development. In order to keep up with our
customers ever-changing needs, we continually enhance our
product offerings through significant investment in product
development. In each of the past three years, we invested
approximately $8 million in product development activities.
We derive a significant portion of our revenue from products
developed, enhanced or improved as a result of these activities.
Revenue generated from products developed, enhanced or improved
within the five previous years as a result of these activities
represented in excess of 50% of net sales in each of the past
three years ended December 31, 2009.
|
Our Business Strategy
Our vision is to become the global supplier of choice in
specialty papers and engineered products. We are continuously
developing and refining our strategies to strengthen our
business and position it for the future. Execution of our
strategies is dependent on our customer relationships,
technology, operational flexibility and our new product
development efforts. Components of our strategy include:
Specialty Papers The North American
uncoated free sheet market has been challenged by a supply and
demand imbalance, particularly for commodity-like products.
While the industry has narrowed the
supply-demand
gap by eliminating capacity, the imbalance continues. To be
successful in the current market environment, our strategy is
focused on:
|
|
|
|
|
leveraging our flexible operating platform to optimize product
mix by shifting production among facilities to more closely
match output with changing demand trends;
|
|
|
|
employing our new product development capabilities to meet
changing customer demands and to replace declining carbonless
volumes;
|
|
|
|
employing a low-cost approach to our manufacturing activities
and continuously implementing cost reduction
initiatives; and
|
|
|
|
improving business processes and deploying continuous
improvement capabilities to maintain superior customer service.
|
5
Composite Fibers The markets served by
this business unit are characterized by long-term growth
opportunities. To take advantage of this, our strategy is
focused on:
|
|
|
|
|
capturing world-wide growth in Composite Fibers core
markets of food & beverage, composite laminates and
metallized papers;
|
|
|
|
enhancing product mix across all of the business units
markets by utilizing new product development
capabilities; and
|
|
|
|
implementing cost reduction initiatives including, among others,
work-force efficiencies and improved supply chain management.
|
Advanced Airlaid Materials This
business unit competes in a technically demanding segment of the
airlaid market with substantial barriers to entry. To continue
its success, our strategy is focused on:
|
|
|
|
|
maintaining or growing market share in feminine hygiene and
adult incontinence products; and
|
|
|
|
expanding product offerings to diversify the business
units revenue base and improve capacity utilization.
|
Balance Sheet We are focused on prudent
financial management and the maintenance of a conservative
capital structure. By aggressively managing working capital to
maximize cash flow from operations, making disciplined capital
expenditure decisions and monetizing the value of our timberland
assets, we are able to maintain a strong balance sheet, thereby
preserving the flexibility to pursue strategic opportunities
that will benefit our shareholders.
Acquisitions We have a demonstrated
ability to establish leading market positions through the
successful acquisition and integration of complementary
businesses. Since 2006, we have successfully completed four
acquisitions. Our purchase of Concert in February of this year
enables us to grow with the industry leaders in feminine hygiene
and adult incontinence products and complements our long-term
strategy of driving growth in part through acquisitions. In
November 2007, we expanded our growth platform in metallized
products and created a major increase in our European production
scale through our acquisition of Metallised Products Limited and
its facility located in Caerphilly, United Kingdom. Our
acquisition of the carbonless business operations of NewPage
Corporation in April 2006 permitted us to take advantage of that
operations scale and efficient manufacturing environment
to expand our higher-value-added Specialty Papers business unit.
Our acquisition of the Lydney mill from J R Crompton Ltd. in
March 2006 further strengthened our leading position in tea bags
and coffee filter papers.
Company
Information
We are incorporated under the laws of the Commonwealth of
Pennsylvania. Our executive offices are located at 96 South
George Street, Suite 500, York, Pennsylvania 17401. Our
telephone number is
(717) 225-4711.
Our website address is www.glatfelter.com. The information on
our website is not part of this prospectus.
6
Summary
of the Exchange Offer
On February 5, 2010, we issued $100 million aggregate
principal amount of unregistered
71/8% notes
due 2016. The unregistered notes are fully and unconditionally
guaranteed as to payment of principal and interest by each of
the subsidiary guarantors. On the same day, we and the initial
purchasers of the unregistered notes entered into a registration
rights agreement in which we agreed that you, as a holder of
unregistered notes, would be entitled to exchange your
unregistered notes for exchange notes registered under the
Securities Act. This exchange offer is intended to satisfy these
rights. After the exchange offer is completed, you will no
longer be entitled to any registration rights with respect to
the notes. The exchange notes will be our obligation and will be
entitled to the benefits of the indenture relating to the notes.
The exchange notes will also be fully and unconditionally
guaranteed as to payment of principal and interest by each of
the subsidiary guarantors. The form and terms of the exchange
notes are identical in all material respects to the form and
terms of the unregistered notes, except that:
|
|
|
|
|
the exchange notes have been registered under the Securities Act
and, therefore, will contain no restrictive legends;
|
|
|
|
the exchange notes will not have registration rights; and
|
|
|
|
the exchange notes will not have rights to additional interest.
|
For additional information on the terms of this exchange offer,
see The Exchange Offer.
|
|
|
The Exchange Offer |
|
We are offering to exchange any and all of our
71/8%
exchange notes due 2016, which have been registered under the
Securities Act, for any and all of our outstanding unregistered
71/8% notes
due 2016 that were issued on February 5, 2010. As of the
date of this prospectus, $100 million in aggregate
principal amount of these
71/8%
unregistered notes due 2016 are outstanding. |
|
Expiration of the Exchange Offer |
|
The exchange offer will expire at 5:00 p.m., New York City
time,
on ,
2010, unless we decide to extend the exchange offer. |
|
Conditions of the Exchange Offer |
|
We will not be required to accept for exchange any unregistered
notes, and may amend or terminate the exchange offer if any of
the following conditions or events occurs: |
|
|
|
the exchange offer or the making of any exchange by
a holder of unregistered notes violates applicable law or any
applicable interpretation of the staff of the Securities and
Exchange Commission (the SEC);
|
|
|
|
any action or proceeding shall have been instituted
with respect to the exchange offer which, in our reasonable
judgment, would impair our ability to proceed with the exchange
offer; or |
|
|
|
any laws, rules or regulations or applicable
interpretations of the staff of the SEC are issued or
promulgated which, in our good faith determination, do not
permit us to effect the exchange offer. |
|
|
|
We will give oral or written notice of any non-acceptance of the
unregistered notes or of any amendment to or termination of the
exchange offer to the registered holders of the unregistered
notes promptly. We reserve the right to waive any conditions of
the exchange offer. |
|
Resales of the Exchange Notes |
|
Based on interpretative letters of the SEC staff to third
parties unrelated to us, we believe that you can resell and
transfer the exchange notes you receive pursuant to this
exchange offer without |
7
|
|
|
|
|
compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that: |
|
|
|
any exchange notes to be received by you will be
acquired in the ordinary course of your business; |
|
|
|
you are not engaged in, do not intend to engage in
and have no arrangements or understandings with any person to
participate in, the distribution of the unregistered notes or
exchange notes; |
|
|
|
you are not an affiliate (as defined in
Rule 405 under the Securities Act) of ours, or, if you are
such an affiliate, you will comply with the registration and
prospectus delivery requirements of the Securities Act to the
extent applicable; |
|
|
|
if you are a broker-dealer, you have not entered
into any arrangement or understanding with us or any of our
affiliates to distribute the exchange notes; and |
|
|
|
you are not acting on behalf of any person or entity
that could not truthfully make these representations. |
|
|
|
If you wish to participate in the exchange offer, you must
represent to us in writing that these conditions have been met. |
|
|
|
If you are a broker-dealer and you will receive exchange notes
for your own account in exchange for unregistered notes that
were acquired as a result of market-making activities or other
trading activities, you will be required to acknowledge that you
will deliver a prospectus in connection with any resale of the
exchange notes. See Plan of Distribution for a
description of the prospectus delivery obligations of
broker-dealers. |
|
Accrued Interest on the Exchange Notes and Unregistered Notes |
|
The exchange notes will accrue interest from and including
May 1, 2010. We will pay interest on the exchange notes
semiannually in arrears on May 1 and November 1 of
each year, commencing November 1, 2010. |
|
|
|
Holders of unregistered notes that are accepted for exchange
will be deemed to have waived the right to receive any payment
in respect of interest accrued from the date of the last
interest payment date that was made in respect of the
unregistered notes until the date of the issuance of the
exchange notes. Consequently, holders of exchange notes will
receive the same interest payments that they would have received
had they not accepted the exchange offer. |
|
Procedures for Tendering Unregistered Notes |
|
If you wish to participate in the exchange offer: |
|
|
|
You must transmit a properly completed and signed
letter of transmittal, and all other documents required by the
letter of transmittal, to the exchange agent at the address set
forth in the letter of transmittal. These materials must be
received by the exchange agent before 5:00 p.m., New York
City time,
on ,
2010, the expiration date of the exchange offer. You must also
provide physical delivery of your unregistered notes to |
8
|
|
|
|
|
the exchange agents address as set forth in the letter of
transmittal. The letter of transmittal must also contain the
representations you must make to us as described under The
Exchange Offer Procedures for
Tendering; or |
|
|
|
You may effect a tender of unregistered notes
electronically by book-entry transfer into the exchange
agents account at DTC. By tendering the unregistered notes
by book-entry transfer, you must agree to be bound by the terms
of the letter of transmittal. |
|
Special Procedures for Beneficial Owners |
|
If you are a beneficial owner of unregistered notes that are
held through a broker, dealer, commercial bank, trust company or
other nominee and you wish to tender such unregistered notes,
you should contact the registered holder promptly and instruct
them to tender your unregistered notes on your behalf. |
|
Guaranteed Delivery Procedures for Unregistered Notes |
|
If you cannot meet the expiration deadline, or you cannot
deliver on time your unregistered notes, the letter of
transmittal or any other required documentation, or comply on
time with DTCs standard operating procedures for
electronic tenders, you may tender your unregistered notes
according to the guaranteed delivery procedures set forth under
The Exchange Offer Guaranteed Delivery
Procedures. |
|
Withdrawal Rights |
|
You may withdraw the tender of your unregistered notes at any
time prior to 5:00 p.m., New York City time,
on ,
the expiration date. |
|
Consequences of Failure to Exchange |
|
If you are eligible to participate in this exchange offer and
you do not tender your unregistered notes as described in this
prospectus, your unregistered notes will continue to be subject
to transfer restrictions. As a result of the transfer
restrictions and the availability of exchange notes, the market
for the unregistered notes is likely to be much less liquid than
before this exchange offer. The unregistered notes will, after
this exchange offer, bear interest at the same rate as the
exchange notes. |
|
Certain U.S. Federal Income Tax Considerations |
|
The exchange of the unregistered notes for exchange notes
pursuant to the exchange offer will not be a taxable event for
U.S. federal income tax purposes. See Certain U.S.
Federal Income Tax Considerations. |
|
Use of Proceeds |
|
We will not receive any proceeds from the issuance of exchange
notes pursuant to the exchange offer. |
|
Exchange Agent for
Unregistered Notes |
|
HSBC Bank USA, National Association. |
9
Summary
Description of the Exchange Notes
The following is a brief summary of some of the terms of the
exchange notes. For a more complete description of the terms of
the exchange notes, see Description of Notes in this
prospectus.
|
|
|
Issuer |
|
P. H. Glatfelter Company |
|
Exchange Notes |
|
$100,000,000 aggregate principal amount of
71/8%
exchange notes due 2016. |
|
Maturity Date |
|
May 1, 2016. |
|
Interest |
|
71/8% per
annum, payable semi-annually in arrears on May 1 and
November 1, beginning November 1, 2010. |
|
Guarantees |
|
The notes will be guaranteed fully and unconditionally, jointly
and severally, by certain of our current and future domestic
subsidiaries. |
|
Ranking |
|
The notes will be: |
|
|
|
senior unsecured obligations of the Company; |
|
|
|
equal in ranking (pari passu) with all
of our existing and future senior indebtedness; and |
|
|
|
senior in right of payment to our subordinated
indebtedness. |
|
|
|
Secured debt that we may incur in the future and all of our
other secured obligations in effect from time to time will be
effectively senior to the notes to the extent of the value of
the assets securing such debt or other obligations. For a more
detailed description, see Description of Notes
Optional Redemption. |
|
Optional Redemption |
|
Prior to May 1, 2011, we may redeem all, but not less than
all, of the notes at a redemption price equal to 100% of the
principal amount plus accrued and unpaid interest plus a
make-whole premium set forth under Description
of the Notes Optional Redemption. We may
redeem some or all of the notes at any time and from time to
time on or after May 1, 2011, at the redemption prices set
forth under Description of the Notes Optional
Redemption, plus accrued and unpaid interest to the date
of redemption. |
|
Certain Covenants |
|
The indenture governing the notes contains covenants that, among
other things, limit our ability and the ability of certain of
our subsidiaries to: |
|
|
|
incur or guarantee additional indebtedness or issue
certain preferred stock; |
|
|
|
pay dividends on our capital stock or redeem,
repurchase or retire our capital stock or subordinated
indebtedness; |
|
|
|
transfer or sell assets; |
|
|
|
make investments; |
|
|
|
incur liens and enter into sale/leaseback
transactions; |
|
|
|
enter into transactions with our affiliates; and |
10
|
|
|
|
|
merge or consolidate with other companies or
transfer all or substantially all of the assets. |
|
|
|
These covenants are subject to important limitations and
exceptions, which are described in this prospectus. For a more
detailed description, see Description of Notes
Certain Covenants. |
|
Trustee |
|
HSBC Bank USA, National Association |
|
Listing |
|
The exchange notes will not be listed on an exchange. |
|
Use of Proceeds |
|
We will not receive any proceeds from the issuance of exchange
notes pursuant to the exchange offer. |
|
Certain U.S. Federal Income Tax Considerations |
|
The exchange of the unregistered notes for exchange notes
pursuant to the exchange offer will not be a taxable event for
U.S. federal income tax purposes. See Certain U.S.
Federal Income Tax Considerations |
|
Risk Factors |
|
See Risk Factors and the other information in this
prospectus for a discussion of risk factors related to our
business. |
11
Summary
Consolidated Financial Information
You should read the following summary consolidated financial
information in conjunction with Managements
Discussion and Analysis of Financial Condition and Results of
Operations and our consolidated financial statements and
related notes in our Annual Report on
Form 10-K
for the year ended December 31, 2009 and our Quarterly
Report on Form 10-Q for the quarterly period ended
March 31, 2010, each of which is incorporated by reference
herein, and with Selected Consolidated Financial
Data included elsewhere in this prospectus. The summary
consolidated financial information as of December 31, 2008
and 2009 and for each of the three years ended December 31,
2009 is derived from our audited consolidated financial
statements incorporated by reference in this prospectus. The
summary consolidated financial information as of
December 31, 2007 is derived from our audited consolidated
financial statements not included or incorporated by reference
in this prospectus. The summary unaudited consolidated financial
information for the three months ended March 31, 2009 and
2010, and as of March 31, 2010, is derived from our
unaudited condensed consolidated financial statements
incorporated by reference in this prospectus. The unaudited
financial information has been prepared on a basis consistent
with our audited consolidated financial statements and, in our
opinion, reflects all normal, recurring adjustments needed to
present fairly our results for the periods presented. The
historical results are not necessarily indicative of our future
results of operations or financial performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Year Ended December 31
|
|
|
Ended March 31
|
|
|
|
2007(1)
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010(2)
|
|
|
|
In thousands
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
1,148,323
|
|
|
$
|
1,263,850
|
|
|
$
|
1,184,010
|
|
|
$
|
291,552
|
|
|
$
|
337,275
|
|
Energy and related sales net
|
|
|
9,445
|
|
|
|
9,364
|
|
|
|
13,332
|
|
|
|
1,931
|
|
|
|
3,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
1,157,768
|
|
|
|
1,273,214
|
|
|
|
1,197,342
|
|
|
|
293,483
|
|
|
|
340,882
|
|
Costs of products sold
|
|
|
1,001,456
|
|
|
|
1,095,432
|
|
|
|
927,578
|
(3)
|
|
|
250,169
|
|
|
|
296,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
156,312
|
|
|
|
177,782
|
|
|
|
269,764
|
|
|
|
43,314
|
|
|
|
44,216
|
|
Selling, general and administrative expenses
|
|
|
116,144
|
(4)
|
|
|
97,897
|
|
|
|
110,257
|
|
|
|
24,513
|
|
|
|
34,670
|
(5)
|
(Reversals of) shutdown and restructuring charges
|
|
|
35
|
|
|
|
(856
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on disposition of plant, equipment and timberlands, net
|
|
|
(78,685
|
)
|
|
|
(18,468
|
)
|
|
|
(898
|
)
|
|
|
(699
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
118,818
|
|
|
|
99,209
|
|
|
|
160,405
|
|
|
|
19,500
|
|
|
|
9,546
|
|
Other nonoperating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(29,022
|
)
|
|
|
(23,160
|
)
|
|
|
(19,220
|
)
|
|
|
(5,126
|
)
|
|
|
(5,663
|
)
|
Interest income
|
|
|
3,933
|
|
|
|
4,975
|
|
|
|
1,886
|
|
|
|
708
|
|
|
|
170
|
|
Other net
|
|
|
205
|
|
|
|
2
|
|
|
|
75
|
|
|
|
17
|
|
|
|
(3,983
|
)(6)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other nonoperating expense
|
|
|
(24,884
|
)
|
|
|
(18,183
|
)
|
|
|
(17,259
|
)
|
|
|
(4,401
|
)
|
|
|
(9,476
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
93,934
|
|
|
|
81,026
|
|
|
|
143,146
|
|
|
|
15,099
|
|
|
|
70
|
|
Income tax provision
|
|
|
30,462
|
(7)
|
|
|
23,138
|
|
|
|
19,704
|
|
|
|
3,561
|
|
|
|
444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
63,472
|
|
|
$
|
57,888
|
|
|
$
|
123,442
|
|
|
$
|
11,538
|
|
|
$
|
(374
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Year Ended December 31
|
|
|
Ended March 31
|
|
|
|
2007(1)
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010(2)
|
|
|
|
In thousands
|
|
|
Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided (used) by continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
100,332
|
|
|
$
|
53,425
|
|
|
$
|
163,868
|
|
|
$
|
(1,185
|
)
|
|
$
|
20,370
|
|
Investing activities
|
|
|
4,733
|
|
|
|
(33,190
|
)
|
|
|
12,544
|
|
|
|
(4,506
|
)
|
|
|
(239,142
|
)(8)
|
Financing activities
|
|
|
(99,371
|
)
|
|
|
(12,879
|
)
|
|
|
(75,329
|
)
|
|
|
(1,893
|
)
|
|
|
113,074
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data (at end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
29,833
|
|
|
$
|
32,234
|
|
|
$
|
135,420
|
|
|
|
|
|
|
$
|
26,575
|
|
Working capital(10)
|
|
|
175,856
|
|
|
|
201,717
|
|
|
|
333,946
|
|
|
|
|
|
|
|
257,021
|
|
Total assets
|
|
|
1,287,067
|
|
|
|
1,057,309
|
|
|
|
1,190,294
|
|
|
|
|
|
|
|
1,331,104
|
|
Total debt
|
|
|
313,185
|
|
|
|
313,285
|
|
|
|
254,583
|
|
|
|
|
|
|
|
374,749
|
|
Shareholders equity
|
|
|
476,068
|
|
|
|
342,707
|
|
|
|
510,704
|
|
|
|
|
|
|
|
490,785
|
|
|
|
|
(1) |
|
The 2007 income statement data includes the results of
operations of the November 2007 Metallised Products Ltd.
acquisition beginning with the closing of such acquisition. |
|
(2) |
|
The income statement data for the three months ended
March 31, 2010 includes the results of operations of
Concert Industries, prospectively from February 12, 2010,
the date the acquisition was completed. |
|
(3) |
|
During 2009, we recognized $107.8 million of alternative
fuel mixture credits, all of which were recorded as a reduction
to cost of products sold. |
|
(4) |
|
Includes a $26.0 million charge related to the Fox River
environmental remediation matter. |
|
(5) |
|
Includes $8.5 million of acquisition and integration costs
directly related to the Concert acquisition. |
|
(6) |
|
Includes a $3.4 million loss on a series of forward foreign
currency contracts entered into to hedge the Canadian dollar
purchase price of the Concert acquisition, net of realized
currency translation gains. |
|
(7) |
|
Includes a $5.7 million deferred tax benefit related to the
reduction of the German corporate income tax rate in 2007. |
|
(8) |
|
Includes $233.0 million of cash used to purchase Concert,
net of cash acquired. |
|
(9) |
|
Includes $95 million of proceeds from the issuance of the
unregistered notes, before transaction costs. |
|
(10) |
|
Working capital is defined as current assets less current
liabilities. |
13
RISK
FACTORS
You should carefully consider the risks described below. The
risks and uncertainties described below are not the only ones
facing our company. Additional risks and uncertainties not
presently known to us or that we currently deem immaterial may
also adversely affect our business and operations.
If any of the matters included in the following risks were to
occur, our business, financial condition, results of operations,
cash flows or prospects could be materially adversely affected.
In such case, you may lose all or part of your original
investment.
Risks
Relating to Our Business
Our
business and financial performance may be adversely affected by
the adverse global economic environment or downturns in the
target markets that we serve.
Demand for our products in the markets we serve is primarily
driven by demand for our customers products, which has
been affected by general economic conditions. Downturns in our
target markets could result in decreased demand for our
products. Our results could be adversely affected if economic
conditions further weaken or fail to continue to improve. Also,
there may be periods during which demand for our products is
insufficient to enable us to operate our production facilities
in an economical manner. Further, an extended or more severe
global economic downturn may cause customer insolvencies which
may result in their inability to satisfy their financial
obligations to us. These conditions are beyond our ability to
control and may have a significant impact on our sales and
results of operations.
In addition to fluctuations in demand for our products in the
markets we serve, the markets for our products are also
significantly affected by changes in industry capacity and
output levels. There continue to be periods of supply/demand
imbalance in the pulp and paper industry, which have caused pulp
and paper prices to be volatile. The timing and magnitude of
price increases or decreases in the pulp, paper and airlaid
markets have generally varied by region and by product type. A
sustained period of weak demand or excess supply would likely
adversely affect pulp, paper and airlaid prices. This could have
a material adverse affect on our operating and financial results.
The
cost of raw materials and energy used to manufacture our
products could increase and the availability of certain raw
materials could become constrained.
We require access to sufficient and reasonably priced quantities
of pulpwood, purchased pulps, pulp substitutes, abaca fiber and
certain other raw materials. Our Spring Grove and Chillicothe
locations are vertically integrated manufacturing facilities
that generate in excess of 85% of their annual pulp
requirements. However, as a result of selling timberlands over
the past several years, purchased timber represents a larger
source of the total pulpwood used in our operations.
Our Philippine mill purchases abaca fiber to produce abaca pulp,
which we use to manufacture our tea bag and coffee pods/pads
filter paper products at our Gernsbach, Scaër and Lydney
facilities. However, in the past the supply of abaca fiber has
been constrained unexpectedly due to severe weather related
damage to the source crop as well as selection by land owners of
alternative uses of land in lieu of fiber producing activities.
As a result of supply constraints, we have experienced
volatility.
Our Advanced Airlaid Materials business unit requires access to
sufficient quantities of fluff pulp, the supply of which is
subject to availability of certain softwoods. Such availability
can be limited by many factors, including, but not limited to,
weather in regions where softwoods are abundant.
The cost of many of our production materials and costs,
including petroleum based chemicals and freight charges, are
influenced by the cost of oil. In addition, coal is a principal
source of fuel for both the Spring Grove and Chillicothe
facilities and natural gas is used as a source of fuel for our
Chillicothe and Composite Fibers business unit facilities.
Also, in prior years other input costs such as caustic, starch
and others, have exhibited extreme upward pricing pressure. In
addition, our vendors liquidity may be impacted by the
economy creating supply shortages.
14
We may not be able to pass increased raw materials or energy
costs on to our customers if the market will not bear the higher
price or where existing agreements with our customers limit
price increases. If price adjustments significantly trail
increases in raw materials or energy prices our operating
results could be adversely affected.
Our
industry is highly competitive and increased competition could
reduce our sales and profitability.
In recent years, the global paper industry in which we compete
has been adversely affected by paper producing capacity
exceeding the demand for products and by declining uncoated free
sheet demand. As a result, the uncoated free sheet industry has
taken steps to reduce underperforming capacity. However, slowing
demand or increased competition could force us to lower our
prices or to offer additional services at a higher cost to us,
which could reduce our gross margins and net income. In
addition, the greater financial resources of certain of our
competitors may enable them to commit larger amounts of capital
in response to changing market conditions. Certain competitors
may also have the ability to develop product or service
innovations that could put us at a competitive disadvantage.
Some of the factors that may adversely affect our ability to
compete in the markets in which we participate include:
|
|
|
|
|
the entry of new competitors into the markets we serve,
including foreign producers;
|
|
|
|
the willingness of commodity-based paper producers to enter our
specialty markets when they are unable to compete or when demand
softens in their traditional markets;
|
|
|
|
the aggressiveness of our competitors pricing strategies,
which could force us to decrease prices in order to maintain
market share;
|
|
|
|
our failure to anticipate and respond to changing customer
preferences;
|
|
|
|
the impact of emerging electronic-based substitutes for certain
of our products such as book publishing and envelope;
|
|
|
|
our inability to develop new, improved or enhanced
products; and
|
|
|
|
our inability to maintain the cost efficiency of our facilities.
|
If we cannot effectively compete in the markets in which we
operate, our sales and operating results would be adversely
affected.
We may
not be able to continue to develop new products acceptable to
our customers.
Our business strategy is market focused and includes investments
in developing new products to meet the changing needs of our
customers and to maintain or grow our market share. Our success
will depend in large part on our ability to develop and
introduce new and enhanced products that keep pace with
introductions by our competitors and changing customer
preferences. If we fail to anticipate or respond adequately to
these factors, we may lose opportunities for business with both
current and potential customers. The success of our new product
offerings will depend on several factors, including our ability
to:
|
|
|
|
|
anticipate and properly identify our customers needs and
industry trends;
|
|
|
|
price our products competitively;
|
|
|
|
develop and commercialize new products and applications in a
timely manner;
|
|
|
|
differentiate our products from our competitors
products; and
|
|
|
|
invest in research and development activities efficiently.
|
Our inability to develop new products could adversely impact our
business and ultimately harm our profitability.
We are
subject to substantial costs and potential liability for
environmental matters.
We are subject to various environmental laws and regulations
that govern our operations, including discharges into the
environment, and the handling and disposal of hazardous
substances and wastes. We are also subject to laws and
regulations that impose liability and
clean-up
responsibility for releases of hazardous substances into the
environment. To comply with environmental laws and regulations,
we have incurred, and
15
will continue to incur, substantial capital and operating
expenditures. We anticipate that environmental regulation of our
operations will continue to become more burdensome and that
capital and operating expenditures necessary to comply with
environmental regulations will continue, and perhaps increase,
in the future. Because environmental regulations are not
consistent worldwide, our ability to compete globally may be
adversely affected by capital and operating expenditures
required for environmental compliance. In addition, we may incur
obligations to remove or mitigate any adverse effects on the
environment, such as air and water quality, resulting from mills
we operate or have operated. Potential obligations include
compensation for the restoration of natural resources, personal
injury and property damages.
Despite a recent favorable ruling in the pending Fox River
litigation, we continue to have exposure to liability for
remediation and other costs related to the presence of
polychlorinated biphenyls in the lower Fox River on which our
former Neenah, Wisconsin mill was located. There can be no
assurance that we will not be required to ultimately pay
material amounts to resolve our liability in the Fox River
matter. We have financial reserves for environmental matters,
including the Fox River site, but we cannot be certain that
those reserves will be adequate to provide for future
obligations related to these matters, that our share of costs
and/or
damages for these matters will not exceed our available
resources, or that such obligations will not have a long-term,
material adverse effect on our consolidated financial position,
liquidity or results of operations.
Our environmental issues are complicated and should be reviewed
in context; please see a more detailed discussion of these
matters in Item 8 Financial Statements and
Supplementary Data Note 21 in our
Form 10-K
for the year ended December 31, 2009, which is incorporated
by reference herein.
We may
not be able to successfully integrate the Concert acquisition or
realize the potential benefits of the acquisition, which could
have a material adverse effect on our results of
operations.
We may not be able to combine successfully the operations of
Concert with our operations. The integration of Concert with our
operations will require significant attention from management
and may impose substantial demands for other resources.
Acquisitions inherently involve risks, including those
associated with assimilating and integrating different business
operations, corporate cultures, personnel, infrastructures and
technologies or products and increasing the scope, geographic
diversity and complexity of our operations. There may be
additional costs or liabilities that are not currently
anticipated, including unexpected loss of key employees or
customers of Concert and hiring additional management and other
critical personnel. The acquisition may also be disruptive to
our ongoing business and may not be successfully received by our
customers. The purchase of Concert also involved a significant
capital commitment, and the return that we achieve on any
capital invested may be less than the return that we would
achieve on our other projects or investments. Any of these
factors could adversely affect our operations, financial results
and liquidity.
Furthermore, we may not realize the potential benefits of the
acquisition. Historically, Concert has been dependent upon a
limited number of customers and product markets for a
significant portion of its net sales. One customer accounted for
the majority of Concerts net sales for the year ended
December 31, 2009. The loss of a significant customer could
have a material adverse effect on our operating results. In
addition, Concerts sales in the feminine hygiene market
accounted for approximately 85% of its net sales in 2009. A
decline in our sales of feminine hygiene products or in sales of
feminine hygiene products generally could have a material
adverse effect on our operating results. Customers in the
airlaid non-woven fabric material market, including the feminine
hygiene market, may also switch to less expensive products or
otherwise reduce demand for our products, thus reducing the size
of the markets in which we currently sell our products. Any of
the foregoing could result in our failing to realize the
benefits of the acquisition, which could have a material adverse
effect on our financial performance and business prospects.
Our
operations may be impaired and we may be exposed to potential
losses and liability as a result of natural disasters, acts of
terrorism or sabotage or similar events.
Natural disasters, such as earthquakes, flooding or fire, and
acts of terrorism or sabotage affecting our operating activities
and major facilities could materially and adversely affect our
operations, our operating results and financial condition. In
particular, we own and operate four dams in York County,
Pennsylvania that
16
were built to ensure a steady supply of water for the operation
of our paper mill in Spring Grove, Pennsylvania, one of two main
facilities for our Specialty Papers business unit. Each of these
dams is classified as high hazard by the
Commonwealth of Pennsylvania because they are located in close
proximity to inhabited areas and sudden failure would endanger
occupants or residential, commercial or industrial structures.
Failure or breach of any of the dams, including as a result of
natural disaster or act of terrorism or sabotage, could cause
significant personal injuries and damage to residential and
commercial property downstream for which we may be liable. The
failure of a dam could also be extremely disruptive and result
in damage to or the shutdown of our Spring Grove mill. Any
losses or liabilities incurred due to the failure of one of our
dams may not be fully covered by our insurance policies or may
substantially exceed the limits of our policies, and could
materially and adversely affect our operating results and
financial condition.
In addition, many of our paper making operations require a
reliable and abundant supply of water. Such mills rely on a
local water body or water source for its water needs and,
therefore, is particularly impacted by drought conditions or
other natural or manmade interruptions to its water supplies. At
various times and for differing periods, each of our mills has
had to modify operations due to water shortages or low flow
conditions in its principal water supplies. Any interruption or
curtailment of operations at any of our paper mills due to
drought or low flow conditions at the principal water source or
another cause could materially and adversely affect our
operating results and financial condition.
Further, our pulp mill in Lanao del Norte on the Island of
Mindanao in the Republic of the Philippines is located along the
Pacific Rim in the worlds hazard belt. By virtue of its
geographic location, this mill is subject to, among other types
of natural disasters, floods, droughts, cyclones, typhoons,
earthquakes, windstorms and volcanic activity. Moreover, the
area of Lanao del Norte has been a target of terrorist
activities, including bombings, by suspected members of the
al-Qaeda-linked Islamist groups in the Philippines, such as the
Abu Sayyaf and the Rajah Solaiman Group and other Islamic
militant groups, most notably the Moro Islamic Liberation Front.
The most common bomb targets in Lanao del Norte to date have
been power transmission towers. Our pulp mill in Mindanao is
located in a rural portion of the island and is susceptible to
attacks or power interruptions. The Mindanao mill supplies
approximately 80% of the abaca pulp that is used by our
Composite Fibers business unit to manufacture our paper used for
tea bags and coffee pods/pads. Any interruption, loss or
extended curtailment of operations at our Mindanao mill could
materially and adversely affect our operating results and
financial condition.
We
have operations in a potentially politically and economically
unstable location.
Our pulp mill in the Philippines is located in a region that is
unstable and subject to political unrest. As discussed above,
our Philippine pulp mill produces abaca pulp, a significant raw
material used by our Composite Fibers business unit and is
currently our main provider of abaca pulp. There are limited
suitable alternative sources of readily available abaca pulp in
the world. In the event of a disruption in supply from our
Philippine mill, there is no guarantee that we could obtain
adequate amounts of abaca pulp from alternative sources at a
reasonable price or at all. As a consequence, any civil
disturbance, unrest, political instability or other event that
causes a disruption in supply could limit the availability of
abaca pulp and would increase our cost of obtaining abaca pulp.
Such occurrences could adversely impact our sales volumes,
revenues and operating results.
Our
international operations pose certain risks that may adversely
impact sales and earnings.
We have significant operations and assets located in Canada,
Germany, France, the United Kingdom and the Philippines. Our
international sales and operations are subject to a number of
special risks, in addition to the risks in our domestic sales
and operations, including differing protections of intellectual
property, trade barriers, labor unrest, exchange controls,
regional economic uncertainty, differing (and possibly more
stringent) labor regulation, risk of governmental expropriation,
domestic and foreign customs and tariffs, differing regulatory
environments, difficulty in managing widespread operations and
political instability. These factors may adversely affect our
future profits. Also, in some foreign jurisdictions, we may be
subject to laws limiting the right and ability of entities
organized or operating therein to pay dividends or remit
earnings to affiliated
17
companies unless specified conditions are met. Any such
limitations would restrict our flexibility in using funds
generated in those jurisdictions.
Foreign
currency exchange rate fluctuations could adversely affect our
results of operations.
We own and operate production facilities in Canada, Germany,
France, the United Kingdom and the Philippines and as a result
of the recent completion of the Concert acquisition, in Canada.
The majority of our business is transacted in U.S. dollars,
however, a substantial portion of business is transacted in
Euros, British Pound Sterling and Canadian dollars. With respect
to the Euro, we generate substantially greater cash inflow than
we do outflow. However, with respect to the British Pound
Sterling, we have greater outflows than inflows of this
currency. As a result of these positions, we are exposed to
changes in currency exchange rates.
Our ability to maintain our products price competitiveness
is reliant, in part, on the relative strength of the currency in
which the product is denominated compared to the currency of the
market into which it is sold and the functional currency of our
competitors. Changes in the rate of exchange of foreign
currencies in relation to the U.S. dollar, and other
currencies, may adversely impact our results of operations and
our ability to offer products in certain markets at acceptable
prices.
Substantially
lower and more volatile market-based prices for sales of excess
electricity compared to the fixed-price we historically received
may prevent us from achieving the historical margins on our
sales of excess electricity in relation to our coal supply
contract, which could have a material adverse effect on our
consolidated financial position and results of
operations.
Because our Spring Grove facility produces more electricity than
it requires for its operations, we sell the excess energy
produced. Historically, we sold the excess electricity to the
local power company under a fixed-price long-term contract,
which expired March 31, 2010. We now sell our excess
electricity at wholesale market prices prevailing at the time of
sale. Market prices for electricity have historically been
volatile and may continue to be substantially lower than the
price we historically received under the expired contract.
We generate electricity at our Spring Grove facility using a
variety of fuels, including coal. We purchase coal for this
facility under a long-term, fixed price supply contract, which
expires at the end of 2012. Our cost of coal, as well as the
costs incurred for natural gas and other fuels used to generate
electricity, have a major impact on the net revenue and overall
profitability of our Specialty Paper business unit. The
combination market based pricing for energy sales and the fixed
pricing of the coal contract may limit our ability to generate
the level of net revenues from energy sales that we historically
achieved and limit the overall profitability of our Specialty
Papers business unit, which could have a material adverse affect
on our consolidated financial position and results of operations.
The
impairment of financial institutions or sovereign countries may
adversely affect us.
We, our customers and our vendors, have transactions and
borrowing arrangements with U.S. and foreign commercial
banks, and other financial institutions, some of whom may be
exposed to ratings downgrade, bankruptcy, liquidity, default or
similar risks, especially in connection with recent financial
market turmoil. A ratings downgrade, bankruptcy, receivership,
default or similar event involving such institutions may
adversely affect the counterpartys performance under
letters of credit, limit our access to capital, impact the
ability of our suppliers to provide us with raw materials needed
for our production, impact our customers ability to meet
obligations to us, or adversely affect our liquidity position,
future business and results of operations.
An IRS
audit of our 2009 tax return could result in a change in the tax
treatment of the alternative fuel mixture credits we claimed in
2009, which could have a material adverse effect on our results
of operations and financial position.
The U.S. Internal Revenue Code (the Code),
provided a tax credit for companies that used alternative fuel
mixtures to produce energy to operate their businesses on or
prior to December 31, 2009. During 2009, we registered two
of our facilities with the IRS as alternative fuel mixers based
on their use of black liquor as an alternative fuel source. In
April 2010, we received a $54.9 million federal income tax
refund in connection
18
with the filing of our corporate income tax return for the year
ended December 31, 2009, which included the benefit of
alternative fuel mixture credits relating to these facilities.
In the event that the IRS audits our tax return for the year
ended December 31, 2009, the IRS may conclude that some or
all of the credits claimed are subject to federal income taxes,
which would subject us to additional tax liabilities and could
have a material adverse effect on our results of operations and
financial position.
In the
event any of the above risk factors impact our business in a
material way or in combination during the same period, we may be
unable to generate sufficient cash flow to simultaneously fund
our operations, finance capital expenditures, satisfy
obligations and make dividend payments on our common
stock.
In addition to debt service obligations, our business is capital
intensive and requires significant expenditures for equipment
maintenance, new or enhanced equipment, environmental
compliance, including but not limited to the Clean Air Act, and
research and development efforts and to support our business
strategies. We expect to meet all of our near and long-term cash
needs from a combination of operating cash flow, cash and cash
equivalents, borrowings under our credit agreement due May 2014
and other long-term debt. If we are unable to generate
sufficient cash flow from these sources, we could be unable to
meet our near and long-term cash needs or pay dividends.
Risks
Relating to Our Indebtedness
Our
indebtedness could adversely affect our financial health and
prevent us from fulfilling our obligations under the exchange
notes.
We have now and will continue to have, a significant amount of
indebtedness. As of April 30, 2010, we had:
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$200.0 million of indebtedness outstanding under our
71/8% senior
notes due May 2016, issued April 28, 2006;
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$100.0 million of indebtedness outstanding under the
unregistered notes; and
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$36.7 million of indebtedness outstanding under our term
loan facility due January 2013.
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Our indebtedness could materially and adversely affect us in a
number of ways. For example, it could:
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make it more difficult for us to satisfy our obligations with
respect to the exchange notes;
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increase our vulnerability to adverse economic and industry
conditions;
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require us to dedicate a substantial portion of our cash flow
from operations to payments on our indebtedness, thereby
reducing the availability of our cash flow to fund working
capital, capital expenditures and other general corporate
purposes;
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limit our flexibility in planning for, or reacting to, changes
in our business and the industry in which we operate;
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place us at a disadvantage compared to our competitors that have
less debt; and
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limit our ability to borrow additional funds, including for
future acquisitions, to meet our operating expenses and for
other purposes.
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In addition, a portion of our debt, including borrowings, if
any, under our credit agreement due May 2014 and our term loan
facility due January 2013, bears interest at variable rates. If
market interest rates increase, variable-rate debt will create
higher debt service requirements, which could adversely affect
our cash flow. While we may enter into agreements limiting our
exposure to higher interest rates, any such agreements may not
offer complete protection from this risk.
Despite
our current level of indebtedness, we and our subsidiaries may
still be able to incur substantially more debt.
We and our subsidiaries may be able to incur substantial
additional indebtedness in the future. The terms of the
indenture governing the exchange notes offered hereby, the
indenture governing our outstanding senior
19
notes and the credit agreement due May 2014 do not fully
prohibit us from doing so. If new debt is added to our current
level of indebtedness, the risks associated with our
indebtedness discussed above will be increased. See
Description of Other Indebtedness.
To
service our indebtedness, we will require a significant amount
of cash. Our ability to generate cash depends on many factors
beyond our control.
Our ability to make payments on, and to refinance, our
indebtedness, including the exchange notes, and to fund planned
capital expenditures will depend on our ability to generate cash
in the future. This is subject to general economic, financial,
competitive, legislative, regulatory and other factors, many of
which are beyond our control.
Our business may not generate sufficient cash flow from
operations, and we may not have available to us future
borrowings in an amount sufficient to enable us to pay our
indebtedness, including the exchange notes, or to fund our other
liquidity needs. In these circumstances, we may need to
refinance all or a portion of our indebtedness, including the
exchange notes, on or before maturity. Our ability to refinance
our indebtedness or obtain additional financing will depend on,
among other things:
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our financial condition at the time;
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restrictions in the agreements governing our indebtedness,
including the indenture governing the exchange notes; and
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the condition of the financial markets and the industry in which
we operate.
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As a result, we may not be able to refinance any of our
indebtedness, including the exchange notes, on commercially
reasonable terms or at all. Without this financing, we could be
forced to sell assets to make up for any shortfall in our
payment obligations under unfavorable circumstances. The terms
of the indenture governing the exchange notes offered hereby,
the indenture governing our outstanding senior notes and the
credit agreement due May 2014 limit our ability to sell assets
and also restrict the use of proceeds from such a sale. In
addition, we may not be able to sell assets quickly enough or
for sufficient amounts to enable us to meet our obligations,
including our obligations under the exchange notes. Any failure
to make scheduled payments of interest and principal on our
outstanding indebtedness when due would permit the holders of
such indebtedness to declare an event of default and accelerate
the indebtedness, which in turn could lead to cross-defaults
under the instruments governing our other indebtedness,
including the indenture governing the exchange notes offered
hereby, the indenture governing our outstanding senior notes and
the credit agreement due May 2014.
The
agreements that govern the exchange notes offered hereby, our
outstanding senior notes and our credit agreement due May 2014
contain various covenants that limit our discretion in the
operation of our business.
The agreements and instruments that govern the exchange notes
offered hereby, our outstanding senior notes and our credit
agreement due May 2014 contain various restrictive covenants
that, among other things, restrict our ability to:
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incur more debt;
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pay dividends, repurchase company stock or make other
distributions;
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make certain investments;
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create certain liens;
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enter into transactions with affiliates;
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make acquisitions;
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merge or consolidate; and
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transfer or sell assets.
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In addition, the credit agreement due May 2014 contains
covenants that require us to achieve and maintain certain
financial tests or ratios.
20
Our ability to comply with these covenants is subject to various
risks and uncertainties. In addition, events beyond our control
could affect our ability to comply with these covenants. A
failure to comply with these covenants could result in an event
of default under our credit agreement due May 2014, which, if
not cured or waived, could have a material adverse affect on our
business, financial condition and results of operations. In the
event of any default under our credit agreement due May 2014,
the lenders thereunder:
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will not be required to lend any additional amounts to us;
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could elect to declare all of our outstanding borrowings,
together with accrued and unpaid interest and fees, to be
immediately due and payable; and
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could effectively require us to apply all of our available cash
to repay our outstanding borrowings even if they do not
accelerate the borrowings,
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which actions could result in an event of default under the
exchange notes.
If we were unable to repay debt to our secured lenders, these
lenders could also proceed against the collateral securing that
debt. Even if we are able to comply with all applicable
covenants, the restrictions on our ability to manage our
business in our sole discretion could harm our business by,
among other things, limiting our ability to take advantage of
financings, investments, acquisitions and other corporate
transactions that may be beneficial to us.
We may
not have the ability to raise the funds necessary to finance,
and may also be prohibited from making, the change of control
offer required by the indenture governing the exchange notes
offered hereby, the indenture governing our outstanding senior
notes and the credit agreement due May 2014.
Upon the occurrence of certain defined change of control events,
we will be required under the terms of the indenture governing
the exchange notes offered hereby and the indenture governing
our outstanding senior notes to offer to repurchase those
respective notes and, under the terms of our credit agreement
due May 2014, to repay all outstanding indebtedness under that
agreement, plus accrued and unpaid interest, if any. We may not
have sufficient funds at the time of the change of control to
make the required repurchase of notes. In the event a change of
control occurs at a time when we are prohibited from purchasing
the notes and we are unable to obtain consents from our lenders
to repurchase the notes or are unable to refinance such
obligations, we may be unable to repurchase the notes. Any
failure to repurchase the notes under a change of control
situation would constitute an event of default under the
indenture governing the notes which may in turn lead to an event
of default under our credit facilities or agreements governing
our other future indebtedness.
Federal
and state statutes allow courts, under specific circumstances,
to void guarantees and require exchange note holders to return
payments received from our subsidiary guarantors.
If a bankruptcy case or lawsuit is initiated by unpaid creditors
of any subsidiary guarantor, the debt represented by the
guarantees entered into by our subsidiary guarantors may be
reviewed under federal bankruptcy law and comparable provisions
of state fraudulent transfer laws. Under these laws, a guarantee
could be voided, or claims in respect of a guarantee could be
subordinated to other obligations of a subsidiary guarantor if,
among other things, the subsidiary guarantor, at the time it
incurred the indebtedness evidenced by its guarantee:
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received less than reasonably equivalent value or fair
consideration for entering into the guarantee; and
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either:
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was insolvent or rendered insolvent by reason of entering into a
guarantee; or
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was engaged in a business or transaction for which the
subsidiary guarantors remaining assets constituted
unreasonably small capital; or
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21
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intended to incur, or believed that it would incur, debts or
contingent liabilities beyond its ability to pay such debts or
contingent liabilities as they become due.
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The measures of insolvency for purposes of these fraudulent
transfer laws will vary depending upon the law applied in any
proceeding to determine whether a fraudulent transfer has
occurred. Generally, however, a subsidiary guarantor would be
considered insolvent if:
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the sum of its debts, including contingent liabilities, were
greater than the fair saleable value of all of its
assets; or
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the present fair saleable value of its assets were less than the
amount that would be required to pay its probable liability on
its existing debts, including contingent liabilities, as they
become absolute and mature; or
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it could not pay its debts or contingent liabilities as they
become due.
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A court would likely find that a subsidiary guarantor did not
receive reasonably equivalent value or fair consideration for
its guarantee if the subsidiary guarantor did not substantially
benefit directly or indirectly from the issuance of the exchange
notes.
In the event of a finding that a fraudulent conveyance or
transfer has occurred, the court may void, or hold
unenforceable, the subsidiary guarantees, which could mean that
you may not receive any payments under the guarantees and the
court may direct you to repay any amounts that you have already
received from any subsidiary guarantor to such subsidiary
guarantor or a fund for the benefit of such subsidiary
guarantors creditors. Furthermore, the holders of the
notes would cease to have any direct claim against the
applicable subsidiary guarantor. Consequently, the applicable
subsidiary guarantors assets would be applied first to
satisfy the applicable subsidiary guarantors other
liabilities, before any portion of its assets could be applied
to the payment of the exchange notes. Sufficient funds to repay
the exchange notes may not be available from other sources,
including the remaining subsidiary guarantors, if any. Moreover,
voiding a subsidiary guarantee could result in an event of
default with respect to our and our subsidiary guarantors
other debt that in turn could result in acceleration of such
debt (if not otherwise accelerated due to our or our subsidiary
guarantors insolvency or other proceeding).
On the basis of historical financial information, recent
operating history and other factors, we believe that each
subsidiary guarantor, after giving effect to its guarantee of
these exchange notes, will not be insolvent, will not have
unreasonably small capital for the business in which it is
engaged and will not have incurred debts beyond its ability to
pay such debts as they mature. We cannot assure you, however, as
to what standard a court would apply in making these
determinations or that a court would agree with our conclusions
in this regard.
Each subsidiary guarantee will contain a provision intended to
limit the subsidiary guarantors liability to the maximum
amount that it could incur without causing the incurrence of
obligations under its guarantee to be a fraudulent transfer.
This provision may not be effective to protect the guarantees
from being voided under fraudulent transfer laws or may reduce
or eliminate the subsidiary guarantors obligation to an
amount that effectively makes the guarantee worthless.
We may
not have access to the cash flow and other assets of our
non-guarantor subsidiaries that may be needed to make payments
on the exchange notes.
Although much of our business is conducted through our
subsidiaries, not all of our subsidiaries will guarantee the
exchange notes. In addition, under certain circumstances our
subsidiary guarantors may be released from their guarantees. See
Description of the Exchange Notes
Guarantees. Accordingly, our ability to make payments on
the exchange notes may be or become dependent on the earnings
and the distribution of funds from our non-guarantor
subsidiaries. Our subsidiaries will be permitted under the terms
of the indenture with respect to the exchange notes to incur
additional indebtedness that may severely restrict or prohibit
the making of distributions, the payment of dividends or the
making of loans by such subsidiaries to us. We cannot assure you
that the agreements governing the current and future
indebtedness of our non-guarantor subsidiaries will permit these
subsidiaries to provide us with sufficient dividends,
distributions or
22
loans to fund payments on the exchange notes when due. In
addition, to the extent the guarantees of the exchange notes by
our guarantor subsidiaries may be limited or unenforceable, we
may also not be able to access the earnings of those
subsidiaries to help service the exchange notes. See
Federal and state statutes allow courts, under
specific circumstances, to void guarantees and require exchange
note holders to return payments received from our subsidiary
guarantors.
The
exchange notes will be effectively subordinated to all
liabilities and claims of creditors of our current and future
non-guarantor subsidiaries.
The exchange notes will be structurally subordinated to
indebtedness and other liabilities of our non-guarantor
subsidiaries, along with any future subsidiaries that do not
guarantee the exchange notes. Our foreign subsidiaries (none of
which will be guarantors on the exchange date) had aggregate
consolidated liabilities, excluding liabilities owing to us or
any subsidiary guarantor, as of April 30, 2010, of
$230.4 million and revenue for the three months ended
March 31, 2010 of $120.9 million. In the event of a
bankruptcy, liquidation or reorganization of any of our
non-guarantor subsidiaries, these non-guarantor subsidiaries
will pay the holders of their debts, holders of preferred equity
interests and their trade creditors before they will be able to
distribute any of their assets to us.
Risks
Relating to the Exchange Offer
If you
do not properly tender your unregistered notes, your ability to
transfer such outstanding unregistered notes will be adversely
affected.
We will only issue exchange notes in exchange for unregistered
notes that are timely received by the exchange agent, together
with all required documents, including a properly completed and
signed letter of transmittal. Therefore, you should allow
sufficient time to ensure timely delivery of the unregistered
notes and you should carefully follow the instructions on how to
tender your unregistered notes. None of us, the guarantors or
the exchange agent are required to tell you of any defects or
irregularities with respect to your tender of the unregistered
notes. If you do not tender your unregistered notes or if your
tender of unregistered notes is not accepted because you did not
tender your unregistered notes properly, then, after
consummation of the exchange offer, you will continue to hold
unregistered notes that are subject to the existing transfer
restrictions. After the exchange offer is consummated, if you
continue to hold any unregistered notes, you may have difficulty
selling them because there will be fewer unregistered notes
remaining and the market for such unregistered notes, if any,
will be much more limited than it is currently. In particular,
the trading market for unexchanged unregistered notes could
become more limited than the existing trading market for the
unregistered notes and could cease to exist altogether due to
the reduction in the amount of the unregistered notes remaining
upon consummation of the exchange offer. A more limited trading
market might adversely affect the liquidity, market price and
price volatility of such untendered unregistered notes.
If you
are a broker-dealer or participating in a distribution of the
exchange notes, you may be required to deliver prospectuses and
comply with other requirements.
If you tender your unregistered notes for the purpose of
participating in a distribution of the exchange notes, you will
be required to comply with the registration and prospectus
delivery requirements of the Securities Act in connection with
any resale of the exchange notes. If you are a broker-dealer
that receives exchange notes for your own account in exchange
for unregistered notes that you acquired as a result of
market-making activities or any other trading activities, you
will be required to acknowledge that you will deliver a
prospectus in connection with any resale of such exchange notes.
There
may be no active trading market for the exchange notes, and, if
one develops, it may not be liquid.
The exchange notes will constitute new issues of securities for
which there is no established trading market. We do not intend
to list the exchange notes on any national securities exchange.
Although the initial purchaser advised us on the date the
unregistered notes were issued that it intended to make a market
in the exchange notes, it is not obligated to do so and may
discontinue such market making activity at any time without
notice. In addition, market making activity will be subject to
the limits imposed by the Securities Act,
23
and may be limited during the exchange offer. There can be no
assurance as to the development or liquidity of any market for
the exchange notes, the ability of the holders to sell their
exchange notes or the price at which the holders would be able
to sell their exchange notes. Future trading prices of the
exchange notes will depend on many factors, including:
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our operating performance and financial condition;
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our ability to complete the offer to exchange the notes for the
exchange notes;
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the interest of securities dealers in making a market; and
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the market for similar securities.
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Historically, the market for non-investment-grade debt has been
subject to disruptions that have caused substantial volatility
in the prices of securities similar to the exchange notes
offered hereby. The market for the exchange notes may be subject
to similar disruptions. Any such disruptions may adversely
affect the value of your exchange notes.
24
FORWARD-LOOKING
STATEMENTS
Certain statements contained in this prospectus, including the
documents incorporated by reference, that are not purely
historical are forward-looking statements. When used in this
prospectus and the documents incorporated by reference, the
words or phrases expects, will continue,
estimates, we believe and similar
expressions are intended to identify forward-looking statements
and include plans, commitments and objectives of management for
future operations. These forward-looking statements involve
risks and uncertainties and are based on assumptions that may
not be realized. Actual results and outcomes may differ
materially from those discussed or anticipated. The following
important factors, among others, could cause our actual results
to differ from any results that might be projected, forecasted
or estimated in this prospectus and the documents incorporated
by reference:
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variations in demand for our products including the impact of
any unplanned market-related downtime, or variations in product
pricing;
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changes in the cost or availability of raw materials we use, in
particular pulpwood, market pulp, pulp substitutes, caustic soda
and abaca fiber;
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changes in energy-related costs and commodity raw materials with
an energy component;
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our ability to develop new, high value-added Specialty Papers,
Composite Fibers and Advanced Airlaid Materials products;
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the impact of market volatility on the sales of excess
electricity;
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the impact of competition, changes in industry production
capacity, including the construction of new mills, the closing
of mills and incremental changes due to capital expenditures or
productivity increases;
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the impairment of financial institutions and any resulting
impact on us, our customers or our vendors;
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the gain or loss of significant customers
and/or
on-going viability of such customers;
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cost and other effects of environmental compliance, cleanup,
damages, remediation or restoration, or personal injury or
property damages related thereto, such as the costs of natural
resource restoration or damages related to the presence of
polychlorinated biphenyls in the lower Fox River on which our
former Neenah mill was located;
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risks associated with our international operations, including
local economic and political environments and fluctuations in
currency exchange rates;
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geopolitical events, including war and terrorism;
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disruptions in production
and/or
increased costs due to labor disputes;
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enactment of adverse state, federal or foreign tax or other
legislation or changes in government policy or regulation;
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adverse results in litigation; and
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our ability to finance, consummate and integrate current or
future acquisitions.
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25
RATIO OF
EARNINGS TO FIXED CHARGES
Set forth below is information concerning our ratio of earnings
to fixed charges. This ratio shows the extent to which our
business generates enough earnings after the payment of all
expenses other than interest to make required interest payments
on our debt.
For the purposes of calculating the ratio of earnings to fixed
charges, earnings represent income from continuing operations
before income taxes plus fixed charges. Fixed charges consist of
interest expense (including capitalized interest) on all
indebtedness plus amortization of debt issuance costs and the
portion of rental expense that we believe is representative of
the interest component of rental expense.
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Three Months
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Year Ended December 31,
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Ended
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2005
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2006
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2007
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2008
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2009
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March 31, 2010
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Ratio of earnings to fixed charges
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5.3
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x
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(*
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4.1
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x
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4.2
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x
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7.7
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x
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1.0
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* |
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Earnings were insufficient to cover fixed charges by $22.2
million. |
USE OF
PROCEEDS
We will not receive any proceeds from the exchange offer. In
consideration for issuing the exchange notes contemplated by
this prospectus, we will receive unregistered notes in like
principal amount. The unregistered notes surrendered in exchange
for the exchange notes will be retired and canceled and cannot
be reissued. Accordingly, the issuance of the exchange notes
will not result in any change in our indebtedness.
26
CAPITALIZATION
The following table sets forth our cash and cash equivalents,
our long-term debt and our capitalization as of March 31,
2010. You should read this table in conjunction with our audited
consolidated financial statements and related notes and our
condensed consolidated interim financial statements, each
incorporated by reference in this prospectus.
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As of
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March 31,
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2010
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In thousands
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Cash and cash equivalents(1)
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$
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26,575
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Long-term debt:
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Unregistered notes-net of original issue discount
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$
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95,042
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Revolving credit facility due April 2011(2)
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27,953
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Term loan, due April 2011(2)
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10,000
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Term loan, due January 2013
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36,695
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71/8% senior
notes due May 2016, issued April 28, 2006
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200,000
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Shareholders equity:
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Common stock, $0.01 par value
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544
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Capital in excess of par value
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47,472
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Retained earnings
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707,271
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Accumulated other comprehensive income (loss)
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(136,819
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Treasury stock
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(127,683
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Total shareholders equity
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490,785
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Total capitalization
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$
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860,475
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(1) |
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In April 2010, we received a $54.9 million federal income
tax refund in connection with the filing of our 2009 corporate
income tax return which included the benefit of alternative fuel
mixture credits. |
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(2) |
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On April 29, 2010, we entered into a new four-year,
$225 million, multi-currency, revolving credit agreement
maturing May 31, 2014 with a consortium of banks. Prior to
entering into the new credit agreement, we repaid all amounts
outstanding under and terminated our existing $200 million
revolving credit facility and our existing $100 million
term loan facility due 2011. At April 30, 2010, no amounts
were outstanding under our new credit agreement due May 2014.
See Description of Other
Indebtedness Credit Agreement Due
May 2014 for a description of the credit agreement
due May 2014. |
27
UNAUDITED
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
We have derived the following unaudited pro forma consolidated
financial statements by applying pro forma adjustments to our
historical consolidated financial statements incorporated by
reference in this prospectus.
The unaudited pro forma consolidated income statement data for
the year ended December 31, 2009 and the three months ended
March 31, 2010 gives effect to the following transactions,
which we refer to as the Transactions, as if they
had occurred on January 1, 2009:
(1) the acquisition by our wholly owned subsidiary,
Glatfelter Canada Inc., or Glatfelter Canada, of all of the
issued and outstanding shares of Concert from Brookfield Special
Situations Management Limited (f/k/a Tricap Management Limited),
or Brookfield Special Situations, pursuant to the terms of a
Share Purchase Agreement dated January 4, 2010, or the
Share Purchase Agreement, among Glatfelter, Glatfelter Canada
and Brookfield Special Situations, which we refer to as the
Acquisition, and
(2) our incurrence of additional indebtedness under our
revolving credit facility due April 2011, our issuance of
$100 million of
71/8% senior
notes at an original issue discount of 5% and our application of
the net proceeds from such incurrence and issuance plus cash on
hand to fund the Acquisition.
In the unaudited pro forma consolidated financial statements,
the Acquisition is accounted for using the acquisition method of
accounting in accordance with the Financial Accounting Standards
Board Accounting Standards Codification No. 805. Under the
acquisition method of accounting, the total purchase price for
the Acquisition is allocated to the assets acquired and
liabilities assumed based upon estimates of fair value. The
unaudited pro forma adjustments reflected herein are based upon
preliminary available information and assumptions that we
believe are reasonable under the circumstances and which are
described in the accompanying notes. These preliminary estimates
may change upon finalization of appraisals and valuation
studies. Therefore, the final allocations may differ materially
from the estimates used to prepare these pro forma consolidated
financial statements.
The unaudited pro forma consolidated financial statements do not
purport to represent what our results of operations or financial
condition actually would have been if the Transactions occurred
on the date indicated, nor do they purport to represent or
project our results of operations for any future period or our
financial condition as of any future date. You should read the
unaudited pro forma consolidated financial statements in
conjunction with our audited and unaudited consolidated
financial statements and related notes and the audited and
consolidated financial statements of Concert and related notes,
for the year ended December 31, 2009 and the quarterly
period ended March 31, 2010, as applicable.
Unless otherwise indicated, the Concert financial information
included herein is derived from Concerts historical
financial statements, which are prepared in accordance with
accounting principles generally accepted in Canada, or Canadian
GAAP, and are presented in Canadian dollars and reconciled to
accounting principles generally accepted in the United States,
or U.S. GAAP, adjusted for certain reclassifications and
translated into U.S. dollars.
28
Unaudited
Pro Forma Consolidated Income Statement
for the Year Ended December 31, 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
|
Concert
|
|
|
Accounting
|
|
|
|
|
|
Pro Forma for
|
|
|
|
Glatfelter
|
|
|
Historical
|
|
|
and Other
|
|
|
Transaction
|
|
|
the Concert
|
|
|
|
Historical
|
|
|
U.S. GAAP(1)
|
|
|
Adjustments
|
|
|
financing
|
|
|
Acquisition
|
|
|
|
In thousands, except per share data
|
|
|
Net sales
|
|
$
|
1,184,010
|
|
|
$
|
204,110
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
1,388,120
|
|
Energy sales net
|
|
|
13,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,332
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
1,197,342
|
|
|
|
204,110
|
|
|
|
|
|
|
|
|
|
|
|
1,401,452
|
|
Cost of products sold
|
|
|
927,578
|
|
|
|
174,413
|
|
|
|
2,767
|
(2)
|
|
|
|
|
|
|
1,104,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
269,764
|
|
|
|
29,697
|
|
|
|
(2,767
|
)
|
|
|
|
|
|
|
296,694
|
|
Selling, general and administrative expenses
|
|
|
110,257
|
|
|
|
13,237
|
|
|
|
(3,235
|
)(3)
|
|
|
|
|
|
|
120,259
|
|
Gains on disposition of plant, equipment and timberlands, net
|
|
|
(898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(898
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
160,405
|
|
|
|
16,460
|
|
|
|
468
|
|
|
|
|
|
|
|
177,333
|
|
Other nonoperating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(19,220
|
)
|
|
|
(1,112
|
)
|
|
|
1,112
|
(4)
|
|
|
(8,288
|
)(5)
|
|
|
(27,508
|
)
|
Interest income
|
|
|
1,886
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,886
|
|
Other net
|
|
|
75
|
|
|
|
2,605
|
|
|
|
(2,605
|
)(6)
|
|
|
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
(17,259
|
)
|
|
|
1,493
|
|
|
|
(1,493
|
)
|
|
|
(8,288
|
)
|
|
|
(25,547
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
143,146
|
|
|
|
17,953
|
|
|
|
(1,025
|
)
|
|
|
(8,288
|
)
|
|
|
151,786
|
|
Income tax provision
|
|
|
19,704
|
|
|
|
2,201
|
|
|
|
(673
|
)(7)
|
|
|
(2,901
|
)(7)
|
|
|
18,331
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
123,442
|
|
|
$
|
15,752
|
|
|
$
|
(352
|
)
|
|
$
|
(5,387
|
)
|
|
$
|
133,455
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
45,678
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,678
|
|
Diluted
|
|
|
45,774
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,774
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
2.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
2.92
|
|
Diluted
|
|
|
2.70
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.92
|
|
|
|
|
(1) |
|
Represents Concert financial information derived from the
historical Concert financial statements included elsewhere
herein, which are prepared in accordance with Canadian GAAP and
are presented in Canadian dollars and reconciled to
U.S. GAAP, adjusted for certain reclassifications and
translated to U.S. dollars. |
|
(2) |
|
Reflects the following adjustments to depreciation expense due
to a difference in the basis of depreciable assets and a change
in estimated useful life resulting from the application of FASB
ASC 805 Business Combinations to account for the Acquisition: |
|
|
|
|
|
|
|
In thousands
|
|
|
Elimination of Concert historical depreciation
|
|
$
|
(4,187
|
)
|
Depreciation on fair value of acquired fixed assets, translated
to US$
|
|
|
6,954
|
|
|
|
|
|
|
Total depreciation
|
|
$
|
2,767
|
|
|
|
|
|
|
|
|
|
(3) |
|
Reflects the elimination of $3.5 million of non-recurring
expenses included in Glatfelters historical financial
results for the period ended December 31, 2009 that were
directly related to the Acquisition, net of the addition of
$0.3 million of amortization expense for intangible assets
resulting from the application of FASB ASC 805 Business
Combinations to account for the Acquisition. |
|
(4) |
|
Reflects the elimination of Concerts historical interest
expense related to debt that was repaid prior to the closing of
the Acquisition. |
29
|
|
|
(5) |
|
Reflects the following adjustments to interest expense as a
result of the issuance of the unregistered notes: |
|
|
|
|
|
|
|
In thousands
|
|
|
Interest on unregistered notes at an interest rate of 7.125% per
annum
|
|
$
|
7,125
|
|
Accretion of original issue discount on unregistered notes
|
|
|
585
|
|
Interest on additional borrowings under existing revolving
credit facility at an assumed rate of 1.125% per annum
|
|
|
198
|
|
|
|
|
|
|
Interest expense adjustment
|
|
|
7,908
|
|
Amortization of deferred fees and expenses for the unregistered
notes
|
|
|
380
|
|
|
|
|
|
|
Total interest expense adjustments
|
|
$
|
8,288
|
|
|
|
|
|
|
|
|
|
|
|
A change of 0.125% in the assumed interest rate for the
borrowings under the existing revolving credit facility would
have an incremental effect on our annual interest expense of
$22,100. |
|
(6) |
|
Reflects the elimination of $2.6 million of gains included
in Concerts historical financial results for the period
ended December 31, 2009, related to the change in fair
value of derivative instruments that were canceled prior to the
completion of the Acquisition. |
|
(7) |
|
Represents the tax effect of the pro forma adjustments based on
a rate of 27%, which represents the combined applicable German
and Canadian federal and provincial income tax rate, for the
adjustments referred to in notes 2, 4 and 6, 14.67%
reflecting the blended impact of certain non-deductible costs
for the acquisition and integration-related adjustments
discussed in note 3, and 35% for the transaction financing
adjustments discussed in note 5. |
30
Unaudited
Pro Forma Consolidated Income Statement for
the Three Months Ended March 31, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acquisition
|
|
|
|
|
|
|
|
|
|
|
|
|
Concert
|
|
|
Accounting
|
|
|
|
|
|
Pro Forma for
|
|
|
|
Glatfelter
|
|
|
Historical
|
|
|
and Other
|
|
|
Transaction
|
|
|
the Concert
|
|
|
|
Historical
|
|
|
U.S. GAAP(1)
|
|
|
Adjustments
|
|
|
financing
|
|
|
Acquisition
|
|
|
|
In thousands, except per share data
|
|
|
Net sales
|
|
$
|
337,275
|
|
|
$
|
25,649
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
362,924
|
|
Energy sales net
|
|
|
3,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
340,882
|
|
|
|
25,649
|
|
|
|
|
|
|
|
|
|
|
|
366,531
|
|
Cost of products sold
|
|
|
296,666
|
|
|
|
23,133
|
|
|
|
(1,170
|
)(2)
|
|
|
|
|
|
|
318,629
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
44,216
|
|
|
|
2,516
|
|
|
|
1,170
|
|
|
|
|
|
|
|
47,902
|
|
Selling, general and administrative expenses
|
|
|
34,670
|
|
|
|
4,157
|
|
|
|
(10,944
|
)(3)
|
|
|
|
|
|
|
27,883
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income (loss)
|
|
|
9,546
|
|
|
|
(1,641
|
)
|
|
|
12,114
|
|
|
|
|
|
|
|
20,019
|
|
Other nonoperating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(5,663
|
)
|
|
|
(1,124
|
)
|
|
|
1,124
|
(4)
|
|
|
(867
|
)(5)
|
|
|
(6,530
|
)
|
Interest income
|
|
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
170
|
|
Other net
|
|
|
(3,983
|
)
|
|
|
(5,843
|
)
|
|
|
9,274
|
(6)
|
|
|
|
|
|
|
(552
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other income (expense)
|
|
|
(9,476
|
)
|
|
|
(6,967
|
)
|
|
|
10,398
|
|
|
|
(867
|
)
|
|
|
(6,912
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
70
|
|
|
|
(8,608
|
)
|
|
|
22,512
|
|
|
|
(867
|
)
|
|
|
13,107
|
|
Income tax provision (benefit)
|
|
|
444
|
|
|
|
(1,652
|
)
|
|
|
4,847
|
(7)
|
|
|
(303
|
)(7)
|
|
|
3,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
(374
|
)
|
|
$
|
(6,956
|
)
|
|
$
|
17,665
|
|
|
$
|
(564
|
)
|
|
$
|
9,771
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
45,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
45,836
|
|
Diluted
|
|
|
45,836
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46,336
|
|
Earnings (loss) per share
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
0.21
|
|
Diluted
|
|
|
(0.01
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0.21
|
|
|
|
|
(1) |
|
Represents Concert financial information for the period
January 1, 2010 through February 11, 2010, the date
the Acquisition was completed, derived from the historical
Concert financial statements used internally by management,
which are prepared in accordance with Canadian GAAP and are
presented in Canadian dollars and reconciled to U.S. GAAP,
adjusted for certain reclassifications and translated to U.S.
dollars. |
31
|
|
|
(2) |
|
Reflects the following adjustments, all for the period
January 1, 2010 through February 11, 2010, due to a
difference in the basis of inventory and depreciable assets
resulting from the application of FASB ASC 805 Business
Combinations to account for the Acquisition: |
|
|
|
|
|
|
|
In thousands
|
|
|
Elimination of Concert historical depreciation
|
|
$
|
(867
|
)
|
Depreciation on fair value of acquired fixed assets, translated
to US$
|
|
|
921
|
|
Elimination of a non-recurring charge to cost of products sold
for the write up of acquired inventory to fair value, included
in Glatfelters historical results for the three month
period ended March 31, 2010
|
|
|
(1,224
|
)
|
|
|
|
|
|
Total
|
|
$
|
(1,170
|
)
|
|
|
|
|
|
|
|
|
(3) |
|
Reflects the following adjustments: |
|
|
|
|
|
|
|
In thousands
|
|
|
Elimination of non-recurring acquisition and integration costs
included in Glatfelter historical results
|
|
$
|
(8,459
|
)
|
Elimination of non-recurring and integration-related costs
included in Concert historical results for the period
January 1, 2010 through February 11, 2010
|
|
|
(2,521
|
)
|
Amortization of intangibles assets resulting from the
application of FASB ASC 805 Business Combinations to account for
the Concert acquisition
|
|
|
36
|
|
|
|
|
|
|
Total
|
|
$
|
(10,944
|
)
|
|
|
|
|
|
|
|
|
(4) |
|
Reflects the elimination of Concerts historical interest
expense related to debt that was repaid prior to the completion
of the Acquisition. |
|
(5) |
|
Reflects the following adjustments to interest expense as a
result of the issuance of the unregistered notes: |
|
|
|
|
|
|
|
In thousands
|
|
|
Interest on unregistered notes at an interest rate of 7.125% per
annum
|
|
$
|
713
|
|
Accretion of original issue discount on unregistered notes
|
|
|
96
|
|
Interest on additional borrowings under existing revolving
credit facility at an assumed rate of 1.125% per annum
|
|
|
20
|
|
|
|
|
|
|
Interest expense adjustment
|
|
|
829
|
|
Amortization of deferred fees and expenses for the registered
notes
|
|
|
38
|
|
|
|
|
|
|
Total interest expense adjustments
|
|
$
|
867
|
|
|
|
|
|
|
|
|
|
|
|
A change of 0.125% in the assumed interest rate for the
borrowings under the existing revolving credit facility would
have an incremental effect on our annual interest expense of
$5,500. |
|
(6) |
|
Reflects the elimination of a non-recurring loss from a series
of forward foreign currency contracts entered into to hedge the
Concert acquisitions Canadian dollar purchase price, the
change in fair value of certain non-recurring derivative
contracts and the elimination of costs associated with the
settlement of certain derivative contracts included in Concert
historical results for the period January 1, 2010 through
February 11, 2010. Such contracts were cancelled prior to
the completion of the Acquisition and are all non-recurring. |
|
(7) |
|
Represents the tax effect of the pro forma adjustments based on
a rate of 27%, which represents the combined applicable German
and Canadian federal and provincial income tax rate, for
adjustments referred to in notes 2 and 4, 13.2% reflecting
a) the blended impact from the elimination of non-recurring
acquisition and integration costs included in Glatfelter
historical results; b) the amortization of intangibles
assets resulting from the application of FASB ASC 805 Business
Combinations to account for the Concert acquisition; and
c) the elimination of non-recurring and integration-related
costs included in Concert historical results for the period
January 1, 2010 through February 11, 2010, each
discussed in note 3, 35% for the transaction financing
adjustments discussed in note 5, and 30.0% on the
adjustments discussed in note 6. |
32
DESCRIPTION
OF OTHER INDEBTEDNESS
71/8% Senior
Notes Due May 2016, Issued April 28, 2006
The terms of our
71/8% senior
notes due May 2016, issued April 28, 2006, are
substantially similar to those of the notes. For additional
information, see the indenture, dated as of April 28, 2006,
by and between us and SunTrust Bank, as trustee, relating to
71/8% Notes
due 2016, issued April 28, 2006, and the first supplemental
indenture thereto, dated as of September 22, 2006, among
Glatfelter Holdings, LLC, Glatfelter Holdings II, LLC, the
existing subsidiary guarantors named therein and SunTrust Bank,
which are incorporated by reference to our current report on
Form 8-K
filed May 3, 2006 and our Form S-4/A filed
September 22, 2006, respectively. See Where You Can
Find Additional Information.
Credit
Agreement Due May 2014
We, along with certain of our subsidiaries as borrowers and
certain of our subsidiaries as guarantors, are parties to a
credit agreement with certain banks named therein, PNC Bank,
National Association, as administrative agent, PNC Capital
Markets LLC and Citizens Bank of Pennsylvania, as joint lead
arrangers and bookrunners, and Citizens Bank of Pennsylvania, as
syndication agent, providing for a revolving credit facility.
All borrowings under our credit agreement due May 2014 are
unsecured.
Pursuant to our credit agreement due May 2014, we may borrow,
repay and reborrow multi-currency revolving credit loans in an
aggregate principal amount not to exceed $225.0 million
outstanding at any time and may request (i) letters of
credit in an aggregate face amount not to exceed
$20.0 million and (ii) swing loans (as defined in the
credit agreement) in an aggregate principal amount not to exceed
$20.0 million. Borrowings under the credit agreement will
be available in United States dollars, Euros, British Pounds
Sterling, and Canadian dollars. Under the credit agreement, we
have the option to request of PNC Bank, subject to the approval
of the banks, that the maximum principal amount under the
revolving credit facility be increased from $225.0 million
up to a maximum of $300.0 million. Borrowings under the
credit agreement may be used for general corporate purposes,
working capital needs and to finance future permitted
acquisitions.
Borrowing rates for the revolving loans are determined at our
option at the time of each borrowing as follows: for all US
dollar denominated borrowings, the borrowing rate is either,
(a) the banks base rate, plus an applicable spread
based on our corporate credit ratings determined by
Standard & Poors Rating Services (S&P) and
Moodys Investor Service, Inc. (Moodys), which is
equal to the greater of the prime rate, the federal funds rate
plus 50 basis points, or the daily London Interbank Offer
Rate plus 100 basis points; or (b) a Euro-Rate based
generally on the daily London Interbank Offer Rate plus an
applicable margin ranging from 175 basis points to
275 basis points based on our corporate credit ratings
determined by S&P and Moodys. For non-US dollar
denominated borrowings, interest is based on (b) above.
All swing loans will bear interest at a rate to be agreed upon
by PNC Bank and us. In addition, we are required to pay
customary commitment fees in connection with the unused portion
of the revolving credit facility and customary fees for use of
letters of credit.
All principal outstanding under the revolving credit facility
will be due and payable on May 31, 2014. Interest accrued
on outstanding amounts under the revolving credit facility will
be payable at maturity of the respective amount drawn, but in no
event less frequently than quarterly.
We have the right to prepay the revolving credit loans in whole
or in part without premium or penalty, subject to timing
conditions related to the borrowing rate chosen by us.
The credit agreement contains representations, warranties and
covenants customary for financings of this type including,
without limitation, financial covenants under which we are
obligated to maintain a maximum ratio of consolidated total net
debt to consolidated adjusted EBITDA and a minimum ratio of
consolidated EBITDA to consolidated interest expense, and
covenants limiting our ability and the ability of the subsidiary
guarantors to (i) incur debt and guaranty obligations,
(ii) incur liens, (iii) make loans, advances,
investments
33
and acquisitions, (iv) merge or liquidate, (v) sell or
transfer assets, or (vi) engage in transactions with
affiliates.
The credit agreement also contains customary events of default,
including, without limitation, (i) failure to pay
principal, interest or fees when due; (ii) material breach
of representations or warranties, (iii) covenant default,
(iv) cross-default to other debt in excess of an agreed
amount, (v) a change in control, (vi) insolvency or
bankruptcy, and (vii) monetary judgment default in excess
of an agreed amount. If an event of default under the credit
agreement occurs and is continuing, then the administrative
agent may declare outstanding obligations under the credit
agreement immediately due and payable.
Term Loan
Facility Due January 2013
In November 2007, we sold timberlands and as consideration
received a $43.2 million,
20-year
interest bearing note receivable from the timberland buyer,
which we refer to as the 2007 Note Receivable. In
January 2008, we monetized the 2007 Note Receivable. In this
transaction, we entered into a new $36.7 million term loan
agreement, or the term loan facility due January 2013, with a
financial institution. The term loan facility due January 2013
matures in January 2013 and bears interest at a six-month
reserve adjusted LIBOR plus a margin rate of 1.20% per annum.
The facility is secured by, among other assets, the 2007 Note
Receivable, together with a letter of credit issued by The Royal
Bank of Scotland plc (the
L/C
Issuer), in our favor backing the collectability of the
2007 Note Receivable. The term loan facility due January 2013
requires mandatory prepayment in the event that the maturity of
the 2007 Note Receivable is accelerated for any reason.
The term loan facility due January 2013 contains
representations, warranties and covenants customary for
financings of this type. The facility also contains customary
events of default, including, without limitation,
(i) failure to pay principal, interest or other amounts
when due, (ii) material breach of covenants that are not
remedied within 30 days of obtaining knowledge of or
receiving notice of such breach, (iii) false or materially
incorrect representations or warranties, (iv) insolvency or
bankruptcy and (v) a final monetary judgment against GPW
Virginia Timberlands LLC (GPW Virginia), an indirect
wholly-owned and bankruptcy-remote subsidiary of ours. In
addition, the following also constitute events of default under
the term loan facility due January 2013: (i) the occurrence
of certain events related to the 2007 Note Receivable, including
a payment default not cured by drawing under the letter of
credit issued by the L/C Issuer within five days after such
payment default; (ii) a drop in the long-term debt rating
of the L/C Issuer without replacement of the L/C Issuer with an
appropriate substitute or the replacement of the L/C Issuer for
other reasons with an inappropriate substitute; and (iii) a
default under the notes with an aggregate principal amount of
$9,158,000 issued by us in favor of GPW Virginia as security for
the term loan facility due January 2013 (the Company
Notes). Defaults under the Company Notes include, without
limitation, (i) failure to pay principal, interest or other
amounts when due, (ii) material breach of covenants that
are not remedied within 30 days of obtaining knowledge of
or receiving notice of such breach, (iii) false or
materially incorrect representations or warranties,
(iv) insolvency, dissolution or bankruptcy and (v) a
change in control of us. If an event of default under the term
loan facility due January 2013 occurs and is continuing, then
the agent thereunder or the requisite lenders may declare
outstanding obligations under the facility immediately due and
payable.
34
SELECTED
CONSOLIDATED FINANCIAL DATA
You should read the following selected consolidated financial
data in conjunction with Managements Discussion and
Analysis of Financial Condition and Results of Operations
and our consolidated financial statements and related notes in
our Annual Report on Form
10-K for the
year ended December 31, 2009 and our Quarterly Report on
Form 10-Q
for the quarterly period ended March 31, 2010, each of
which is incorporated by reference herein. The following
selected consolidated financial data as of December 31,
2008 and 2009 and for each of the three years ended
December 31, 2009 is derived from our audited consolidated
financial statements incorporated by reference in this
prospectus. The selected consolidated financial data as of
December 31, 2005, 2006 and 2007 and for each of the two
years ended December 31, 2006 is derived from our audited
consolidated financial statements not included or incorporated
by reference in this prospectus. The selected consolidated
financial information for the three months ended March 31,
2009 and 2010, and as of March 31, 2010, is derived from
our unaudited condensed consolidated financial statements
incorporated by reference in this prospectus. The unaudited
financial information has been prepared on a basis consistent
with our audited consolidated financial statements and, in our
opinion, reflects all normal, recurring adjustments needed to
present fairly our results for the periods presented. The
historical results are not necessarily indicative of our future
results of operations or financial performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Year Ended December 31
|
|
|
Ended March 31
|
|
|
|
2005
|
|
|
2006(1)
|
|
|
2007(2)
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010(3)
|
|
|
|
In thousands
|
|
|
Income Statement Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
579,121
|
|
|
$
|
986,411
|
|
|
$
|
1,148,323
|
|
|
$
|
1,263,850
|
|
|
$
|
1,184,010
|
|
|
$
|
291,552
|
|
|
$
|
337,275
|
|
Energy and related sales net
|
|
|
10,078
|
|
|
|
10,726
|
|
|
|
9,445
|
|
|
|
9,364
|
|
|
|
13,332
|
|
|
|
1,931
|
|
|
|
3,607
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenues
|
|
|
589,199
|
|
|
|
997,137
|
|
|
|
1,157,768
|
|
|
|
1,273,214
|
|
|
|
1,197,342
|
|
|
|
293,483
|
|
|
|
340,882
|
|
Costs of products sold
|
|
|
492,023
|
|
|
|
891,843
|
(4)
|
|
|
1,001,456
|
|
|
|
1,095,432
|
|
|
|
927,578
|
(5)
|
|
|
250,169
|
|
|
|
296,666
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
97,176
|
|
|
|
105,294
|
|
|
|
156,312
|
|
|
|
177,782
|
|
|
|
269,764
|
|
|
|
43,314
|
|
|
|
44,216
|
|
Selling, general and administrative expenses
|
|
|
67,633
|
|
|
|
92,481
|
(6)
|
|
|
116,144
|
(7)
|
|
|
97,897
|
|
|
|
110,257
|
|
|
|
24,513
|
|
|
|
34,670
|
(8)
|
(Reversals of) Shutdown and restructuring charges
|
|
|
1,564
|
|
|
|
30,318
|
(9)
|
|
|
35
|
|
|
|
(856
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
Gains on disposition of plant, equipment and timberlands, net
|
|
|
(22,053
|
)
|
|
|
(17,394
|
)
|
|
|
(78,685
|
)
|
|
|
(18,468
|
)
|
|
|
(898
|
)
|
|
|
(699
|
)
|
|
|
|
|
Insurance recoveries
|
|
|
(20,151
|
)
|
|
|
(205
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating income
|
|
|
70,183
|
|
|
|
94
|
|
|
|
118,818
|
|
|
|
99,209
|
|
|
|
160,405
|
|
|
|
19,500
|
|
|
|
9,546
|
|
Other nonoperating income (expense)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
(13,083
|
)
|
|
|
(24,453
|
)
|
|
|
(29,022
|
)
|
|
|
(23,160
|
)
|
|
|
(19,220
|
)
|
|
|
(5,126
|
)
|
|
|
(5,663
|
)
|
Interest income
|
|
|
2,012
|
|
|
|
3,132
|
|
|
|
3,933
|
|
|
|
4,975
|
|
|
|
1,886
|
|
|
|
708
|
|
|
|
170
|
|
Other net
|
|
|
1,028
|
|
|
|
(1,001
|
)(10)
|
|
|
205
|
|
|
|
2
|
|
|
|
75
|
|
|
|
17
|
|
|
|
(3,983
|
)(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other nonoperating expense
|
|
|
(10,043
|
)
|
|
|
(22,322
|
)
|
|
|
(24,884
|
)
|
|
|
(18,183
|
)
|
|
|
(17,259
|
)
|
|
|
(4,401
|
)
|
|
|
(9,476
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
|
|
|
60,140
|
|
|
|
(22,228
|
)
|
|
|
93,934
|
|
|
|
81,026
|
|
|
|
143,146
|
|
|
|
15,099
|
|
|
|
70
|
|
Income tax provision (benefit)
|
|
|
21,531
|
|
|
|
(9,992
|
)
|
|
|
30,462
|
(12)
|
|
|
23,138
|
|
|
|
19,704
|
|
|
|
3,561
|
|
|
|
444
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss)
|
|
$
|
38,609
|
|
|
$
|
(12,236
|
)
|
|
$
|
63,472
|
|
|
$
|
57,888
|
|
|
$
|
123,442
|
|
|
$
|
11,538
|
|
|
$
|
(374
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
|
|
|
|
Year Ended December 31
|
|
|
Ended March 31
|
|
|
|
2005
|
|
|
2006(1)
|
|
|
2007(2)
|
|
|
2008
|
|
|
2009
|
|
|
2009
|
|
|
2010(3)
|
|
|
|
In thousands
|
|
|
Cash Flow Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash provided (used) by continuing operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
42,868
|
|
|
$
|
(28,427
|
)
|
|
$
|
100,332
|
|
|
$
|
53,425
|
|
|
$
|
163,868
|
|
|
$
|
(1,185
|
)
|
|
$
|
20,370
|
|
Investing activities
|
|
|
(8,029
|
)
|
|
|
(181,831
|
)
|
|
|
4,733
|
|
|
|
(33,190
|
)
|
|
|
12,544
|
|
|
|
(4,506
|
)
|
|
|
(239,142
|
)(13)
|
Financing activities
|
|
|
(15,158
|
)
|
|
|
173,388
|
|
|
|
(99,371
|
)
|
|
|
(12,879
|
)
|
|
|
(75,329
|
)
|
|
|
(1,893
|
)
|
|
|
113,074
|
(14)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance Sheet Data
(at end of period):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
57,442
|
|
|
$
|
21,985
|
|
|
$
|
29,833
|
|
|
$
|
32,234
|
|
|
$
|
135,420
|
|
|
|
|
|
|
$
|
26,575
|
|
Working capital(15)
|
|
|
83,679
|
|
|
|
181,748
|
|
|
|
175,856
|
|
|
|
201,717
|
|
|
|
333,946
|
|
|
|
|
|
|
|
257,021
|
|
Total assets
|
|
|
1,044,977
|
|
|
|
1,225,643
|
|
|
|
1,287,067
|
|
|
|
1,057,309
|
|
|
|
1,190,294
|
|
|
|
|
|
|
|
1,331,104
|
|
Total debt
|
|
|
207,073
|
|
|
|
397,613
|
|
|
|
313,185
|
|
|
|
313,285
|
|
|
|
254,583
|
|
|
|
|
|
|
|
374,749
|
|
Shareholders equity
|
|
|
432,312
|
|
|
|
388,368
|
|
|
|
476,068
|
|
|
|
342,707
|
|
|
|
510,704
|
|
|
|
|
|
|
|
490,785
|
|
|
|
|
(1) |
|
The 2006 income statement data includes the results of
operations of the March 2006 Lydney facility acquisition and the
April 2006 Chillicothe facility acquisition beginning with the
closing of the respective acquisitions. |
|
(2) |
|
The 2007 income statement data includes the results of
operations of the November 2007 Metallised Products Ltd.
acquisition beginning with the closing of such acquisition. |
|
(3) |
|
The income statement data for the three months ended
March 31, 2010 includes the results of operations beginning
with the closing of such acquisition on February 12, 2010,
the date the Acquisition was completed. |
|
(4) |
|
Includes $25.4 million of non-cash charges incurred in
connection with the 2006 shutdown of our Neenah facility. |
|
(5) |
|
During 2009, we recognized $107.8 million of alternative
fuel mixture credits, all of which were recorded as a reduction
to cost of products sold. |
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(6) |
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Includes $13.6 million of acquisition integration costs. |
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(7) |
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Includes a $26.0 million charge related to the Fox River
environmental remediation matter. |
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(8) |
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Includes $8.5 million of acquisition and integration costs
directly related to the Acquisition. |
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(9) |
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Includes $29.1 million of charges, $7.7 million of
which were non-cash, incurred in connection with the 2006
shutdown of our Neenah facility in addition to $1.2 million
of charges incurred in connection with our European
Restructuring and Optimization program. |
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(10) |
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Includes $2.9 million of debt redemption premium incurred
in connection with the 2006 refinancing of long-term debt. |
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(11) |
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Includes a $3.4 million loss on a series of forward foreign
currency contracts entered into to hedge the Canadian dollar
purchase price of the Acquisition net of realized currency
translation gains. |
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(12) |
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Includes a $5.7 million deferred tax benefit related to the
reduction of the German corporate income tax rate in 2007. |
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(13) |
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Includes $233.0 million of cash used to purchase Concert,
net of cash acquired. |
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(14) |
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Includes $95 million of proceeds from the issuance of the
unregistered notes, before transaction costs. |
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(15) |
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Working capital is defined as current assets less current
liabilities. |
36
THE
EXCHANGE OFFER
Purpose
and Effect of Exchange Offer; Registration Rights
We sold the unregistered notes to Credit Suisse Securities
(USA) LLC, as the initial purchaser, pursuant to a purchase
agreement dated January 29, 2010. The initial purchaser
resold the unregistered notes in reliance on Rule 144A
under the Securities Act. In connection with the sale of the
unregistered notes, we entered into a registration rights
agreement with the initial purchaser.
Under the registration rights agreement we agreed:
(1) within 120 days after the date on which the
unregistered notes were issued, to file a registration statement
with the SEC with respect to the exchange offer to exchange the
unregistered notes for exchange notes of the Company identical
in all material respects to the unregistered notes (except that
the exchange notes will not contain terms with respect to
transfer restrictions);
(2) to use our reasonable best efforts to cause the
registration statement to be declared effective under the
Securities Act within 180 days after the date on which the
unregistered notes were issued;
(3) as soon as practicable after the effectiveness of the
registration statement to offer the exchange notes in exchange
for surrender of the unregistered notes; and
(4) to use our reasonable best efforts to keep the exchange
offer open for not less than 30 days (or longer if required
by applicable law) after the date notice of the exchange offer
is mailed to the holders of the notes.
For each unregistered note validly tendered to us and not
withdrawn pursuant to the exchange offer, we will issue to the
holder of such unregistered note an exchange note having a
principal amount equal to that of the surrendered unregistered
note. Interest on each exchange note will accrue from the last
interest payment date on which interest was paid on the
unregistered note surrendered in exchange therefor, or, if no
interest has been paid on such unregistered note, from the date
of its original issue.
Under existing SEC interpretations, the exchange notes will be
freely transferable by holders other than our affiliates after
the exchange offer without further registration under the
Securities Act if the holder of the exchange notes represents to
us in the exchange offer that it is acquiring the exchange notes
in the ordinary course of its business, that it has no
arrangement or understanding with any person to participate in
the distribution of the exchange notes and that it is not an
affiliate of the Company, as such terms are interpreted by the
SEC; provided, however, that broker-dealers receiving
exchange notes in the exchange offer will have a prospectus
delivery requirement with respect to resales of such exchange
notes. The SEC has taken the position that such participating
broker-dealers may fulfill their prospectus delivery
requirements with respect to exchange notes (other than a resale
of an unsold allotment from the original sale of the
unregistered notes) with the prospectus contained in the
registration statement.
Under the registration rights agreement, the Company is required
to allow participating broker-dealers and other persons, if any,
with similar prospectus delivery requirements to use the
prospectus contained in the registration statement in connection
with the resale of the exchange notes for 180 days
following the effective date of such registration statement (or
such shorter period during which Participating Broker-Dealers
are required by law to deliver such prospectus).
The exchange offer is not being made to, nor will we accept
tenders for exchange from, holders of unregistered notes in any
jurisdiction in which the exchange offer or the acceptance of
the exchange offer would not be in compliance with the
securities laws or blue sky laws of such jurisdiction.
If a holder is eligible to participate in this exchange offer
and does not tender its unregistered notes as described in this
prospectus, such holder will not have any further registration
rights. In that case, the unregistered notes of such holder will
continue to be subject to restrictions on transfer under the
Securities Act.
37
Shelf
Registration
In the registration rights agreement, we agreed to file a shelf
registration statement in certain circumstances, including if:
(1) applicable interpretations of the staff of the SEC do
not permit us to effect such an exchange offer;
(2) for any other reason we do not consummate the exchange
offer within 220 days of the date on which the unregistered
shares are issued;
(3) an initial purchaser shall notify us following
consummation of the exchange offer that unregistered notes held
by it are not eligible to be exchanged for exchange notes in the
exchange offer; or
(4) certain holders are prohibited by law or SEC policy
from participating in the exchange offer or may not resell the
exchange notes acquired by them in the exchange offer to the
public without delivering a prospectus.
If a shelf registration is required, we will:
(1) promptly file a shelf registration statement with the
SEC covering resales of the unregistered notes or the exchange
notes, as the case may be;
(2) (A) in the case of clause (1) immediately
above, use our reasonable best efforts to cause the shelf
registration statement to be declared effective under the
Securities Act on or prior to the 180th day after the date
on which the unregistered notes were issued and (B) in the
case of clause (2), (3) or (4) above, use our reasonable
best efforts to cause the shelf registration statement to be
declared effective under the Securities Act on or prior to the
40th day after the date on which the shelf registration
statement was required to be filed; and
(3) keep the shelf registration statement effective until
the earliest of (A) the time when the unregistered notes
covered by the shelf registration statement can be sold pursuant
to Rule 144 without any limitations under clauses (c),
(e), (f) and (h) of Rule 144, (B) two years
from the date on which the unregistered notes were issued and
(C) the date on which all notes registered thereunder are
disposed of in accordance therewith.
We will, in the event a shelf registration statement is filed,
among other things, provide to each holder for whom such shelf
registration statement was filed copies of the prospectus which
is a part of the shelf registration statement, notify each such
holder when the shelf registration statement has become
effective and take certain other actions as are required to
permit unrestricted resales of the unregistered notes or the
exchange notes, as the case may be. A holder selling the
unregistered notes or exchange notes pursuant to the shelf
registration statement generally would be required to be named
as a selling security holder in the related prospectus and to
deliver a prospectus to purchasers, will be subject to certain
of the civil liability provisions under the Securities Act in
connection with such sales and will be bound by the provisions
of the registration rights agreement that are applicable to such
holder (including certain indemnification obligations).
We may require each holder requesting to be named as a selling
security holder to furnish to us such information regarding the
holder and the distribution of the unregistered notes or
exchange notes by the holder as we may from time to time
reasonably require for the inclusion of the holder in the shelf
registration statement, including requiring the holder to
properly complete and execute such selling security holder
notice and questionnaires, and any amendments or supplements
thereto, as we may reasonably deem necessary or appropriate. We
may refuse to name any holder as a selling security holder that
fails to provide us with such information.
38
Additional
Interest
We will pay additional cash interest on the unregistered notes,
subject to certain exceptions,
(1) if the we fail to file a registration statement with
the SEC on or prior to the 120th day after the date on
which the unregistered notes were issued,
(2) if the registration statement is not declared effective
by the SEC on or prior to the 180th day after the date on
which the unregistered notes were issued or, if obligated to
file a shelf registration statement pursuant to clause (2)(A)
above, a shelf registration statement is not declared effective
by the SEC on or prior to the 180th day after the date on
which the unregistered notes were issued,
(3) if the exchange offer is not consummated on or before
the 40th day after the registration statement is declared
effective,
(4) if obligated to file the shelf registration statement
pursuant to clause (2)(B) above, we fail to file the shelf
registration statement with the SEC on or prior to the
40th day after the date on which the obligation to file a
shelf registration statement arises,
(5) if obligated to file a shelf registration statement
pursuant to clause (2)(B) above, the shelf registration
statement is not declared effective on or prior to the
40th day after the registration statement was required to
be filed, or
(6) after the registration statement or the shelf
registration statement, as the case may be, is declared
effective, such registration statement or shelf registration
statement thereafter ceases to be effective or usable (subject
to certain exceptions) (each such event referred to in the
preceding clauses (1) through (6), a registration
default);
from and including the date on which any such registration
default shall occur to but excluding the date on which all
registration defaults have been cured.
The rate of the additional interest will be 0.50% per annum
for the first
90-day
period immediately following the occurrence of a registration
default, and such rate will increase by an additional
0.50% per annum with respect to each subsequent
90-day
period until all registration defaults have been cured, up to a
maximum additional interest rate of 1.0% per annum. We will
pay such additional interest on regular interest payment dates.
Such additional interest will be in addition to any other
interest payable from time to time with respect to the
unregistered notes and the exchange notes.
The exchange offer is intended to satisfy our exchange offer
obligations under the registration rights agreement. The
exchange notes will not have rights to additional interest as
set forth above, upon the consummation of the exchange offer.
The above summary of the registration rights agreement is not
complete and is subject to, and qualified by reference to, all
the provisions of the registration rights agreement. A copy of
the registration rights agreement is an exhibit to the
registration statement that includes this prospectus.
Terms of
the Exchange Offer
Upon the terms and subject to the conditions set forth in this
prospectus and in the accompanying letter of transmittal, we are
offering to exchange $1,000 principal amount of exchange notes
for each $1,000 principal amount of unregistered notes. You may
tender some or all of your unregistered notes only in integral
multiples of $1,000. As of the date of this prospectus,
$100,000,000 aggregate principal amount of the unregistered
notes are outstanding.
The terms of the exchange notes to be issued are substantially
similar to the unregistered notes, except that the exchange
notes will have been registered under the Securities Act and,
therefore, the certificates for the exchange notes will not bear
legends restricting their transfer. The exchange notes will not
have registration rights and will not have rights to additional
interest. The exchange notes will be issued under and be
entitled to the benefits of the Indenture (as defined in
Description of the Exchange Notes).
39
In connection with the issuance of the unregistered notes, we
arranged for the unregistered notes to be issued and
transferable in book-entry form through the facilities of DTC,
acting as a depositary. The exchange notes will also be issuable
and transferable in book-entry form through DTC.
There will be no fixed record date for determining the eligible
holders of the unregistered notes that are entitled to
participate in the exchange offer. We will be deemed to have
accepted for exchange validly tendered unregistered notes when
and if we have given oral (promptly confirmed in writing) or
written notice of acceptance to the exchange agent. The exchange
agent will act as agent for the tendering holders of
unregistered notes for the purpose of receiving exchange notes
from us and delivering them to such holders.
If any tendered unregistered notes are not accepted for exchange
because of an invalid tender or the occurrence of certain other
events described herein, certificates for any such unaccepted
unregistered notes will be returned, without expenses, to the
tendering holder thereof promptly after the expiration of the
exchange offer.
Holders of unregistered notes who tender in the exchange offer
will not be required to pay brokerage commissions or fees or,
subject to the instructions in the letter of transmittal,
transfer taxes with respect to the exchange of unregistered
notes for exchange notes pursuant to the exchange offer. We will
pay all charges and expenses, other than certain applicable
taxes, in connection with the exchange offer. It is important
that you read the section Fees and
Expenses below for more details regarding fees and
expenses incurred in the exchange offer.
Any unregistered notes which holders do not tender or which we
do not accept in the exchange offer will remain outstanding and
continue to accrue interest and will be subject to restrictions
on transfer. We will not have any obligation to register such
unregistered notes under the Securities Act. Holders wishing to
transfer unregistered notes would have to rely on exemptions
from the registration requirements of the Securities Act.
Conditions
of the Exchange Offer
You must tender your unregistered notes in accordance with the
requirements of this prospectus and the letter of transmittal in
order to participate in the exchange offer. Notwithstanding any
other provision of the exchange offer, or any extension of the
exchange offer, we will not be required to accept for exchange
any unregistered notes, and may amend or terminate the exchange
offer if:
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the exchange offer, or the making of any exchange by a holder of
unregistered notes, violates applicable law or any applicable
interpretation of the staff of the SEC;
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any action or proceeding shall have been instituted with respect
to the exchange offer which, in our reasonable judgment, would
impair our ability to proceed with the exchange offer; and
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any laws, rules or regulations or applicable interpretations of
the staff of the SEC have been issued or promulgated, which, in
our good faith determination, does not permit us to effect the
exchange offer.
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Expiration
Date; Extensions; Amendment; Termination
The exchange offer will expire 5:00 p.m., New York City
time,
on ,
2010, unless we, in our sole discretion, extend it. In the case
of any extension, we will notify the exchange agent orally
(promptly confirmed in writing) or in writing of any extension.
We will also notify the registered holders of unregistered notes
of the extension no later than 9:00 a.m., New York City
time, on the business day after the previously scheduled
expiration of the exchange offer.
40
To the extent we are legally permitted to do so, we expressly
reserve the right, in our sole discretion, to:
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delay accepting any unregistered note;
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waive any condition of the exchange offer; and
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amend the terms of the exchange offer in any manner.
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We will give oral or written notice of any non-acceptance of the
unregistered notes or of any amendment to the exchange offer to
the registered holders of the unregistered notes promptly. If we
consider an amendment to the exchange offer to be material, we
will promptly inform the registered holders of unregistered
notes of such amendment in a reasonable manner.
If we determine, in our reasonable judgment, that any of the
events or conditions described in Conditions
of the Exchange Offer has occurred, we may terminate the
exchange offer. We may:
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refuse to accept any unregistered notes and return any
unregistered notes that have been tendered to the holders;
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extend the exchange offer and retain all unregistered notes
tendered prior to the expiration of the exchange offer, subject
to the rights of the holders of tendered unregistered notes to
withdraw their tendered unregistered notes; or
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waive the termination event with respect to the exchange offer
and accept all properly tendered unregistered notes that have
not been withdrawn.
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If any such waiver constitutes a material change in the exchange
offer, we will disclose the change by means of a supplement to
this prospectus which will be distributed to each registered
holder of unregistered notes, and we will extend the exchange
offer for a period of five to ten business days, depending upon
the significance of the waiver and the manner of disclosure to
the registered holders of the unregistered notes, if the
exchange offer would otherwise expire during that period.
Any determination by us concerning the events described above
will be final and binding upon the parties. Without limiting the
manner by which we may choose to make public announcements of
any extension, delay in acceptance, amendment or termination of
the exchange offer, we will have no obligation to publish,
advertise, or otherwise communicate any public announcement,
other than by making a timely release to a financial news
service.
Interest
on the Exchange Notes
The exchange notes will accrue interest from and including
May 1, 2010. Interest will be paid on the exchange notes
semiannually on May 1 and November 1 of each year,
commencing on November 1, 2010. Holders of unregistered
notes that are accepted for exchange will be deemed to have
waived the right to receive any payment in respect of interest
accrued from the date of the last interest payment date that was
made in respect of the unregistered notes until the date of the
issuance of the exchange notes. Consequently, holders of
exchange notes will receive the same interest payments that they
would have received had they not accepted the exchange offer.
Resale of
Exchange Notes
Based upon existing interpretations of the staff of the SEC set
forth in several no-action letters issued to third parties
unrelated to us, we believe that the exchange notes issued
pursuant to the exchange offer in exchange for the unregistered
notes may be offered for resale, resold and otherwise
transferred by you without complying with the registration and
prospectus delivery provisions of the Securities Act, provided
that:
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any exchange notes to be received by you will be acquired in the
ordinary course of your business;
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you are not engaged in, do not intend to engage in and have no
arrangements or understandings with any person to participate
in, the distribution of the unregistered notes or exchange notes;
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41
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you are not an affiliate (as defined in
Rule 405 under the Securities Act) of ours or, if you are
such an affiliate, you will comply with the registration and
prospectus delivery requirements of the Securities Act to the
extent applicable;
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if you are a broker-dealer, you have not entered into any
arrangement or understanding with us or any of our
affiliates to distribute the exchange notes; and
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you are not acting on behalf of any person or entity that could
not truthfully make these representations.
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In addition, if you are a broker-dealer and you will receive
exchange notes for your own account in exchange for unregistered
notes that were acquired as a result of market-making activities
or other trading activities, you will be required to acknowledge
that you will deliver a prospectus in connection with any resale
of the exchange notes.
If you wish to participate in the exchange offer, you will be
required to make these representations to us in the letter of
transmittal. If our belief is inaccurate and you transfer any
exchange note without delivering a prospectus meeting the
requirements of the Securities Act or without an exemption from
registration under the Securities Act, you may incur liability
under the Securities Act. We do not assume or indemnify you
against such liability.
If you are a broker-dealer that receives exchange notes in
exchange for unregistered notes held for your own account, as a
result of market-making or other trading activities, you must
acknowledge that you will deliver a prospectus in connection
with any resale of the exchange notes. The letter of transmittal
states that by so acknowledging and by delivering a prospectus,
you will not be deemed to admit that you are an
underwriter within the meaning of the Securities
Act. The prospectus, as it may be amended or supplemented from
time to time, may be used by any broker-dealers in connection
with resales of exchange notes received in exchange for
unregistered notes. We have agreed that, for a period of
180 days after the consummation of the exchange offer, we
will make this prospectus and any amendment or supplement to
this prospectus available to any such broker-dealer for use in
connection with any resale.
Clearing
of the Notes
Upon consummation of the exchange offer, the exchange notes will
have different CUSIP and ISIN numbers from the unregistered
notes.
Procedures
for Tendering
The term holder with respect to the exchange offer
means any person in whose name unregistered notes are registered
on our agents books or any other person who has obtained a
properly completed bond power from the registered holder, or any
person whose unregistered notes are held of record by DTC who
desires to deliver such unregistered notes by book-entry
transfer at DTC.
Except in limited circumstances, only a DTC participant listed
on a DTC securities position listing with respect to the
unregistered notes may tender its unregistered notes in the
exchange offer. To tender unregistered notes in the exchange
offer:
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holders of unregistered notes that are DTC participants may
follow the procedures for book-entry transfer as provided for
below under Book-Entry Transfer and in
the letter of transmittal.
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In addition:
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the exchange agent must receive any corresponding certificate or
certificates representing unregistered notes along with the
letter of transmittal;
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the exchange agent must receive, before expiration of the
exchange offer, a timely confirmation of book-entry transfer of
unregistered notes into the exchange agents account at DTC
according to standard operating procedures for electronic
tenders described below and a properly transmitted agents
message described below; or
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the holder must comply with the guaranteed delivery procedures
described below.
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42
The tender by a holder of unregistered notes will constitute an
agreement between such holder and us in accordance with the
terms and subject to the conditions set forth in this prospectus
and in the letter of transmittal. If less than all the
unregistered notes held by a holder of unregistered notes are
tendered, a tendering holder should fill in the amount of
unregistered notes being tendered in the specified box on the
letter of transmittal. The entire amount of unregistered notes
delivered to the exchange agent will be deemed to have been
tendered unless otherwise indicated.
The method of delivery of unregistered notes, the letter of
transmittal and all other required documents or transmission of
an agents message, as described under
Book Entry Transfer, to the exchange
agent is at the election and risk of the holder. Instead of
delivery by mail, we recommend that holders use an overnight or
hand delivery service. In all cases, sufficient time should be
allowed to assure timely delivery prior to the expiration of the
exchange offer. No letter of transmittal or unregistered notes
should be sent to us but must instead be delivered to the
exchange agent. Delivery of documents to DTC in accordance with
their procedures will not constitute delivery to the exchange
agent.
If you are a beneficial owner of unregistered notes that are
registered in the name of a broker, dealer, commercial bank,
trust company or other nominee and you wish to tender your
unregistered notes, you should contact the registered holder
promptly and instruct the registered holder to tender on your
behalf. If you wish to tender on your own behalf, you must,
prior to completing and executing the letter of transmittal and
delivering your unregistered notes, either:
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make appropriate arrangements to register ownership of the
unregistered notes in your name; or
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obtain a properly completed bond power from the registered
holder.
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The transfer of record ownership may take considerable time and
might not be completed prior to the expiration date.
Signatures on a letter of transmittal or a notice of withdrawal
as described in Withdrawal of Tenders
below, as the case may be, must be guaranteed by a member firm
of a registered national securities exchange or the Financial
Industry Regulatory Authority, Inc., a commercial bank or trust
company having an office or correspondent in the United States
or an eligible guarantor institution within the
meaning of
Rule 17Ad-15
under the Exchange Act, unless the unregistered notes tendered
pursuant thereto are tendered:
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by a registered holder who has not completed the box entitled
Special Registration Instructions or Special
Delivery Instructions in the letter of transmittal; or
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for the account of an eligible institution.
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If the letter of transmittal is signed by a person other than
the registered holder of any unregistered notes listed therein,
the unregistered notes must be endorsed or accompanied by
appropriate bond powers which authorize the person to tender the
unregistered notes on behalf of the registered holder, in either
case signed as the name of the registered holder or holders
appears on the unregistered notes. If the letter of transmittal
or any unregistered notes or bond powers are signed by trustees,
executors, administrators, guardians,
attorneys-in-fact,
officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when
signing and, unless waived by us, evidence satisfactory to us of
their authority to so act must be submitted with the letter of
transmittal.
We will determine in our sole discretion all the questions as to
the validity, form, eligibility (including time of receipt),
acceptance and withdrawal of the tendered unregistered notes.
Our determinations will be final and binding. We reserve the
absolute right to reject any and all unregistered notes not
validly tendered or any unregistered notes the acceptance of
which would, in the opinion of our counsel, be unlawful. We
reserve the absolute right to waive any irregularities or
conditions of tender as to particular unregistered notes. Our
interpretation of the terms and conditions of the exchange offer
(including the instructions in the letter of transmittal) will
be final and binding on all parties. Unless waived, any defects
or irregularities in connection with tenders of unregistered
notes must be cured within such time as we will determine.
Neither we, the exchange agent nor any other person shall be
under any duty to give notification of defects or irregularities
with respect to tenders of unregistered notes nor shall any of
them incur any liability for failure to give such
43
notification. Tenders of unregistered notes will not be deemed
to have been made until such irregularities have been cured or
waived. Any unregistered notes received by the exchange agent
that are not properly tendered and as to which the defects or
irregularities have not been cured or waived will be returned
without cost by the exchange agent to the tendering holder of
such unregistered notes, unless otherwise provided in the letter
of transmittal, as soon as practicable following the expiration
date of the exchange offer.
In addition, we reserve the right in our sole discretion to
(a) purchase or make offers for any unregistered notes that
remain outstanding subsequent to the expiration date, and
(b) to the extent permitted by applicable law, purchase
unregistered notes in the open market, in privately negotiated
transactions or otherwise. The terms of any such purchases or
offers may differ from the terms of the exchange offer.
Book-Entry
Transfer
We understand that the exchange agent will make a request
promptly after the date of this document to establish an account
with respect to the unregistered notes at DTC for the purpose of
facilitating the exchange offer. Any financial institution that
is a participant in DTCs system may make book-entry
delivery of unregistered notes by causing DTC to transfer such
unregistered notes into the exchange agents DTC account in
accordance with DTCs Automated Tender Offer Program
procedures for such transfer. The exchange for tendered
unregistered notes will only be made after a timely confirmation
of a book-entry transfer of the unregistered notes into the
exchange agents account at DTC, and timely receipt by the
exchange agent of an agents message.
The term agents message means a message,
transmitted by DTC and received by the exchange agent and
forming part of the confirmation of a book-entry transfer, which
states that DTC, has received an express acknowledgment from a
participant tendering unregistered notes and that such
participant has received an appropriate letter of transmittal
and agrees to be bound by the terms of the letter of
transmittal, and we may enforce such agreement against the
participant. Delivery of an agents message will also
constitute an acknowledgment from the tendering DTC participant
that the representations contained in the appropriate letter of
transmittal and described above are true and correct.
Guaranteed
Delivery Procedures
Holders who wish to tender their unregistered notes and
(i) whose unregistered notes are not immediately available,
or (ii) who cannot deliver their unregistered notes, the
letter of transmittal, or any other required documents to the
exchange agent prior to the expiration date, or if such holder
cannot complete DTCs standard operating procedures for
electronic tenders before expiration of the exchange offer, may
tender their unregistered notes if:
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the tender is made through an eligible institution;
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before expiration of the exchange offer, the exchange agent
receives from the eligible institution either a properly
completed and duly executed notice of guaranteed delivery in the
form accompanying this prospectus, by facsimile transmission,
mail or hand delivery, or a properly transmitted agents
message in lieu of notice of guaranteed delivery:
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setting forth the name and address of the holder and the
registered number(s), the certificate number or numbers of the
unregistered notes tendered and the principal amount of
unregistered notes tendered;
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stating that the tender offer is being made by guaranteed
delivery; and
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guaranteeing that, within three (3) business days after
expiration of the exchange offer, the letter of transmittal, or
facsimile of the letter of transmittal, together with the
unregistered notes tendered and any other documents required by
the letter of transmittal or, alternatively, a book-entry
confirmation will be deposited by the eligible institution with
the exchange agent; and
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the exchange agent receives the properly completed and executed
letter of transmittal, or facsimile of the letter of
transmittal, as well as all tendered unregistered notes in
proper form for transfer and all
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other documents required by the letter of transmittal or,
alternatively, a book-entry confirmation, within three
(3) business days after expiration of the exchange offer.
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Upon request to the exchange agent, a notice of guaranteed
delivery will be sent to holders who wish to tender their
unregistered notes according to the guaranteed delivery
procedures set forth above.
Withdrawal
of Tenders
Except as otherwise provided herein, tenders of unregistered
notes may be withdrawn at any time prior to 5:00 p.m., New
York City time,
on ,
2010, the expiration date of the exchange offer.
For a withdrawal to be effective:
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the exchange agent must receive a written notice, which may be
by telegram, telex, facsimile transmission or letter, of
withdrawal at the address set forth below under Exchange
Agent; or
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for DTC participants, holders must comply with their respective
standard operating procedures for electronic tenders and the
exchange agent must receive an electronic notice of withdrawal
from DTC.
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Any notice of withdrawal must:
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specify the name of the person who tendered the unregistered
notes to be withdrawn;
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identify the unregistered notes to be withdrawn, including the
certificate number or numbers and principal amount of the
unregistered notes to be withdrawn;
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be signed by the person who tendered the unregistered notes in
the same manner as the original signature on the letter of
transmittal, including any required signature
guarantees; and
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specify the name in which the unregistered notes are to be
re-registered, if different from that of the withdrawing holder.
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If unregistered notes have been tendered pursuant to the
procedure for book-entry transfer described above, any notice of
withdrawal must specify the name and number of the account at
DTC to be credited with the withdrawn unregistered notes and
otherwise comply with the procedures of the facility. We will
determine all questions as to the validity, form and eligibility
(including time of receipt) for such withdrawal notices, and our
determination shall be final and binding on all parties. Any
unregistered notes so withdrawn will be deemed not to have been
validly tendered for purposes of the exchange offer, and no
exchange notes will be issued with respect thereto unless the
unregistered notes so withdrawn are validly re-tendered. Any
unregistered notes which have been tendered but which are not
accepted for exchange will be returned to the holder without
cost to such holder as soon as practicable after withdrawal.
Properly withdrawn unregistered notes may be re-tendered by
following the procedures described above under Procedures
for Tendering at any time prior to the expiration date.
Consequences
of Failure to Exchange
If you do not tender your unregistered notes to be exchanged in
this exchange offer, they will remain restricted
securities within the meaning of Rule 144(a)(3) of
the Securities Act.
Accordingly, they:
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may be resold only if (i) registered pursuant to the
Securities Act, (ii) an exemption from registration is
available or (iii) neither registration nor an exemption is
required by law; and
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shall continue to bear a legend restricting transfer in the
absence of registration or an exemption therefrom.
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As a result of the restrictions on transfer and the availability
of the exchange notes, the unregistered notes are likely to be
much less liquid than before the exchange offer.
45
Exchange
Agent
HSBC Bank USA, National Association has been appointed as the
exchange agent for the exchange of the unregistered notes.
Questions and requests for assistance relating to the exchange
of the unregistered notes should be directed to the exchange
agent addressed as follows:
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By Facsimile:
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By Registered or Certified Mail:
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By Hand/Overnight Delivery:
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718-488-4488
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HSBC Bank USA, National Association
Two Hanson
Place 14th
Floor
Brooklyn, NY 11217-1409
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HSBC Bank USA, National Association
Two Hanson
Place 14th
Floor
Brooklyn, NY 11217-1409
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Confirm by Telephone:
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718-488-4485
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Attn: Corporate Trust & Loan Agency
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Attn: Corporate Trust & Loan Agency
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Fees and
Expenses
We will bear the expenses of soliciting tenders pursuant to the
exchange offer. The principal solicitation for tenders pursuant
to the exchange offer is being made by mail. Additional
solicitations may be made by our officers and regular employees
and our affiliates in person, by telegraph or telephone.
We will not make any payments to brokers, dealers or other
persons soliciting acceptances of the exchange offer. We,
however, will pay the exchange agent reasonable and customary
fees for its services and will reimburse the exchange agent for
its related reasonable
out-of-pocket
expenses and accounting and legal fees. We may also pay
brokerage houses and other custodians, nominees and fiduciaries
the reasonable
out-of-pocket
expenses incurred by them in forwarding copies of this
prospectus, letters of transmittal and related documents to the
beneficial owners of the unregistered notes and in handling or
forwarding tenders for exchange.
We will pay all transfer taxes, if any, applicable to the
exchange of unregistered notes pursuant to the exchange offer.
The tendering holder, however, will be required to pay any
transfer taxes, whether imposed on the registered holder or any
other person, if:
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certificates representing exchange notes or unregistered notes
for principal amounts not tendered or accepted for exchange are
to be delivered to, or are to be registered or issued in the
name of, any person other than the registered holder of
unregistered notes tendered;
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tendered unregistered notes are registered in the name of any
person other than the person signing the letter of
transmittal; or
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a transfer tax is imposed for any reason other than the exchange
of unregistered notes under the exchange offer.
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If satisfactory evidence of payment of such taxes or exemption
therefrom is not submitted with the letter of transmittal, the
amount of such transfer taxes will be billed directly to such
tendering holder.
46
DESCRIPTION
OF THE EXCHANGE NOTES
The unregistered notes were, and the exchange notes will be,
issued under an Indenture (the Indenture), dated
February 5, 2010, among P. H. Glatfelter Company, the
Subsidiary Guarantors and HSBC Bank USA, National Association,
as Trustee. The terms of the notes include those stated in the
Indenture and those made part of the Indenture by reference to
the Trust Indenture Act.
Certain terms used in this description are defined under the
subheading Certain Definitions. In this
description, the words Company, we and
our refer only to P. H. Glatfelter Company and not
to any of its subsidiaries.
The following description is only a summary of the material
provisions of the Indenture. We urge you to read the Indenture
because it, not this description, defines your rights as holders
of the notes. You may request copies of the Indenture at our
address set forth under the heading Where You Can Find
Additional Information.
Brief
Description of the Notes
The notes:
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are unsecured senior obligations of the Company;
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are senior in right of payment to any future Subordinated
Obligations of the Company;
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are pari passu with all existing and future Senior
Indebtedness of the Company, including the Existing Notes; and
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are guaranteed by each Subsidiary Guarantor.
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Principal,
Maturity and Interest
The Company will issue the exchange notes with a maximum initial
aggregate principal amount of $100.0 million. The Company
will issue the exchange notes in minimum denominations of $2,000
and any greater integral multiple of $1,000. The exchange notes
will mature on May 1, 2016. Subject to our compliance with
the covenant described under the subheading
Certain Covenants Limitation on
Indebtedness, we are permitted to issue an unlimited
additional aggregate principal amount of exchange notes from
time to time under the Indenture (the Additional
Notes). The notes and the Additional Notes, if any, are
treated as a single class for all purposes of the Indenture,
including waivers, amendments, redemptions and offers to
purchase. Unless the context otherwise requires, for all
purposes of the Indenture and this Description of the
Notes, references to the notes include any Additional
Notes actually issued.
Interest on the notes accrues at the rate of
71/8% per
annum and is payable semiannually in arrears on May 1 and
November 1, commencing on November 1, 2010. We will
make each interest payment to the holders of record of the notes
on the immediately preceding April 15 and October 15.
We will pay interest on overdue principal at 1% per annum
in excess of the above rate and will pay interest on overdue
installments of interest at such higher rate to the extent
lawful.
Interest on the notes accrues from the date of original
issuance. Interest is computed on the basis of a
360-day year
comprised of twelve
30-day
months.
Optional
Redemption
Except as set forth below, we are not entitled to redeem the
notes at our option prior to May 1, 2011.
On and after May 1, 2011, we will be entitled at our option
to redeem all or a portion of the notes upon not less than 30
nor more than 60 days notice, at the redemption
prices (expressed in percentages of principal amount on the
redemption date), plus accrued interest to the redemption date
(subject to the right of Holders
47
of record on the relevant record date to receive interest due on
the relevant interest payment date), if redeemed during the
12-month
period commencing on May 1 of the years set forth below:
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Period
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Redemption Price
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2011
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103.563%
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2012
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102.375%
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2013
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101.188%
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2014 and thereafter
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100.000%
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Prior to May 1, 2011, we are entitled at our option to
redeem all, but not less than all, of the notes at a redemption
price equal to 100% of the principal amount of the notes plus
the Applicable Premium as of, and accrued and unpaid interest
to, the redemption date (subject to the right of Holders on the
relevant record date to receive interest due on the relevant
interest payment date). Notice of such redemption must be mailed
by first-class mail to each Holders registered address,
not less than 30 nor more than 60 days prior to the
redemption date.
Applicable Premium means with
respect to a note at any redemption date, the greater of
(1) 1.00% of the principal amount of such note and
(2) the excess of (A) the present value at such
redemption date of (i) the redemption price of such note on
May 1, 2011 (such redemption price being described in the
second paragraph in this Optional
Redemption section exclusive of any accrued interest) plus
(ii) all required remaining scheduled interest payments due
on such note through May 1, 2011 (but excluding accrued and
unpaid interest to the redemption date), computed using a
discount rate equal to the Adjusted Treasury Rate, over
(B) the principal amount of such note on such redemption
date.
Adjusted Treasury Rate means, with
respect to any redemption date, (1) the yield, under the
heading which represents the average for the immediately
preceding week, appearing in the most recently published
statistical release designated H.15(519) or any
successor publication which is published weekly by the Board of
Governors of the Federal Reserve System and which establishes
yields on actively traded United States Treasury securities
adjusted to constant maturity under the caption Treasury
Constant Maturities, for the maturity corresponding to the
Comparable Treasury Issue (if no maturity is within three months
before or after May 1, 2011, yields for the two published
maturities most closely corresponding to the Comparable Treasury
Issue shall be determined and the Adjusted Treasury Rate shall
be interpolated or extrapolated from such yields on a straight
line basis, rounding to the nearest month) or (2) if such
release (or any successor release) is not published during the
week preceding the calculation date or does not contain such
yields, the rate per year equal to the semi-annual equivalent
yield to maturity of the Comparable Treasury Issue (expressed as
a percentage of its principal amount) equal to the Comparable
Treasury Price for such redemption date, in each case calculated
on the third Business Day immediately preceding the redemption
date, plus 0.50%.
Comparable Treasury Issue means
the United States Treasury security selected by the Quotation
Agent as having a maturity comparable to the remaining term of
the notes from the redemption date to May 1, 2011, that
would be utilized, at the time of selection and in accordance
with customary financial practice, in pricing new issues of
corporate debt securities of a maturity most nearly equal to
May 1, 2011.
Comparable Treasury Price means,
with respect to any redemption date, if clause (2) of the
definition of Adjusted Treasury Rate is applicable, the average
of three, or such lesser number as is obtained by the Trustee,
Reference Treasury Dealer Quotations for such redemption date.
Quotation Agent means the Reference Treasury
Dealer selected by the Trustee after consultation with the
Company.
Reference Treasury Dealer means Credit Suisse
Securities (USA) LLC and its successors and assigns and two
other nationally recognized investment banking firms selected by
the Company that are primary U.S. Government securities
dealers.
Reference Treasury Dealer Quotations means
with respect to each Reference Treasury Dealer and any
redemption date, the average, as determined by the Trustee, of
the bid and asked prices for the Comparable
48
Treasury Issue, expressed in each case as a percentage of its
principal amount, quoted in writing to the Trustee by such
Reference Treasury Dealer at 5:00 p.m., New York City time,
on the third Business Day immediately preceding such redemption
date.
Selection
and Notice of Redemption
If we are redeeming less than all the notes at any time, the
Trustee will select notes on a pro rata basis to the
extent practicable.
We will redeem notes of $2,000 or less in whole and not in part.
We will cause notices of redemption to be mailed by first-class
mail at least 30 but not more than 60 days before the
redemption date to each holder of notes to be redeemed at its
registered address.
If any note is to be redeemed in part only, the notice of
redemption that relates to that note will state the portion of
the principal amount thereof to be redeemed. We will issue a new
note in a principal amount equal to the unredeemed portion of
the original note in the name of the holder upon cancellation of
the original note. Notes called for redemption become due on the
date fixed for redemption. On and after the redemption date,
interest ceases to accrue on notes or portions of them called
for redemption.
Mandatory
Redemption; Offers to Purchase; Open Market Purchases
We are not required to make any mandatory redemption or sinking
fund payments with respect to the notes. However, under certain
circumstances, we may be required to offer to purchase notes as
described under the captions Change of
Control and Certain
Covenants Limitation on Sales of Assets and
Subsidiary Stock. We may at any time and from time to time
purchase notes in the open market or otherwise.
Guarantees
The Subsidiary Guarantors will jointly and severally guarantee,
on a senior unsecured basis, our obligations under the notes.
The obligations of each Subsidiary Guarantor under its
Subsidiary Guarantee will be limited as necessary to prevent
that Subsidiary Guarantee from constituting a fraudulent
conveyance under applicable law. See Risk
Factors Risks Relating to the Notes and the
Offering Federal and state statutes allow courts,
under specific circumstances, to void guarantees and require
note holders to return payments received from our subsidiary
guarantors.
Each Subsidiary Guarantor that makes a payment under its
Subsidiary Guarantee will be entitled upon payment in full of
all guaranteed obligations under the Indenture to a contribution
from each other Subsidiary Guarantor in an amount equal to such
other Subsidiary Guarantors pro rata portion of
such payment based on the respective net assets of all the
Subsidiary Guarantors at the time of such payment determined in
accordance with GAAP.
If a Subsidiary Guarantee were rendered voidable, it could be
subordinated by a court to all other indebtedness (including
guarantees and other contingent liabilities) of the applicable
Subsidiary Guarantor, and, depending on the amount of such
indebtedness, a Subsidiary Guarantors liability on its
Subsidiary Guarantee could be reduced to zero. See Risk
Factors Risks Relating to the Notes and the
Offering Federal and state statutes allow courts,
under specific circumstances, to void guarantees and require
note holders to return payments received from our subsidiary
guarantors.
Pursuant to the Indenture, (A) a Subsidiary Guarantor may
consolidate with, merge with or into, or transfer all or
substantially all its assets to any other Person to the extent
described below under Certain
Covenants Merger and Consolidation and
(B) the Capital Stock of a Subsidiary Guarantor may be sold
or otherwise disposed of to another Person to the extent
described below under Certain
Covenants Limitation on Sales of Assets and
Subsidiary Stock; provided, however, that in the
case of the consolidation, merger or transfer of all or
substantially all the assets of such Subsidiary Guarantor, if
such other Person is not the Company or a Subsidiary Guarantor,
such Subsidiary Guarantors obligations under its
Subsidiary
49
Guarantee must be expressly assumed by such other Person, except
that such assumption will not be required in the case of:
(1) the sale or other disposition (including by way of
consolidation or merger) of a Subsidiary Guarantor, including
the sale or disposition of Capital Stock of a Subsidiary
Guarantor following which such Subsidiary Guarantor is no longer
a Subsidiary; or
(2) the sale or disposition of all or substantially all the
assets of a Subsidiary Guarantor;
in each case other than to the Company or an Affiliate of the
Company and as permitted by the Indenture, provided that the
Company complies with its obligations under the covenant
described under Certain Covenants
Limitation on Sales of Assets and Subsidiary Stock in
respect of such disposition. Upon any sale or disposition
described in clause (1) or (2) immediately above, the
obligor on the related Subsidiary Guarantee will be released
from its obligations thereunder.
The Subsidiary Guarantee of a Subsidiary Guarantor also will be
released:
(1) upon the designation of such Subsidiary Guarantor as an
Unrestricted Subsidiary;
(2) at such time as such Subsidiary Guarantor does not have
any Indebtedness outstanding that would have required such
Subsidiary Guarantor to enter into a Guarantee Agreement
pursuant to the covenant described under
Certain Covenants Future
Subsidiary Guarantors;
(3) in connection with any sale or other disposition of all
of the Capital Stock of a Subsidiary Guarantor to a Person that
is not the Company or (either before or after giving effect to
such transaction) an Affiliate of the Company, if the sale of
all such Capital Stock of the Subsidiary Guarantor complies with
the covenant described under Certain
Covenants Limitation on Sales of Assets and
Subsidiary Stock; and
(4) if we exercise our legal defeasance option or our
covenant defeasance option as described under
Defeasance or if our obligations under
the Indenture are discharged in accordance with the terms of the
Indenture.
Ranking
Senior
Indebtedness versus Notes
The indebtedness evidenced by the notes and the Subsidiary
Guarantees is unsecured and ranks pari passu in right of
payment to the Senior Indebtedness of the Company and the
Subsidiary Guarantors, as the case may be, including the
Existing Notes. The notes are guaranteed by the Subsidiary
Guarantors.
As of March 31, 2010:
(1) the Companys Senior Indebtedness was
approximately $338.0 million and
(2) the Senior Indebtedness of our Domestic Restricted
Subsidiaries was approximately $338.0 million, which
includes Senior Indebtedness of the Company guaranteed by one or
more Domestic Restricted Subsidiaries.
The notes are unsecured obligations of the Company. Secured debt
that the Company might incur in the future and all other secured
obligations of the Company in effect from time to time will be
effectively senior to the notes to the extent of the value of
the assets securing such debt or other obligations.
Liabilities
of Subsidiaries versus Notes
A portion of our operations are conducted through our
subsidiaries. Some of our subsidiaries are not Guaranteeing the
notes, and, as described above under
Guarantees, Subsidiary Guarantees may be
released under certain circumstances. In addition, our future
subsidiaries may not be required to Guarantee the notes. Claims
of creditors of such non-guarantor subsidiaries, including trade
creditors and creditors holding indebtedness or Guarantees
issued by such non-guarantor subsidiaries, and claims of
preferred stockholders of
50
such non-guarantor subsidiaries, generally will have priority
with respect to the assets and earnings of such non-guarantor
subsidiaries over the claims of our creditors, including holders
of the notes. Accordingly, the notes will be effectively
subordinated to creditors (including trade creditors) and
preferred stockholders, if any, of our non-guarantor
subsidiaries.
Our non-guarantor Foreign Subsidiaries had aggregate
consolidated liabilities, excluding liabilities owing to the
Company or any Subsidiary Guarantor, as of April 30, 2010,
of $230.4 million and revenue for the year ended
December 31, 2009 of $359.2 million and for the three
months ended March 31, 2010 of $120.9 million.
Although the Indenture limits the incurrence of Indebtedness and
preferred stock by certain of our subsidiaries, such limitations
are subject to a number of significant qualifications. Moreover,
the Indenture does not impose any limitation on the incurrence
by such subsidiaries of liabilities that are not considered
Indebtedness under the Indenture. See Certain
Covenants Limitation on Indebtedness.
Change of
Control
Upon the occurrence of any of the following events (each a
Change of Control), unless the Company has exercised
its right to redeem all of the outstanding notes as described
under Optional Redemption, each Holder
shall have the right to require that the Company repurchase such
Holders notes at a purchase price in cash equal to 101% of
the principal amount thereof on the date of purchase plus
accrued and unpaid interest, if any, to the date of purchase
(subject to the right of holders of record on the relevant
record date to receive interest due on the relevant interest
payment date):
(1) any person (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
beneficial owner (as defined in
Rules 13d-3
and 13d-5
under the Exchange Act, except that for purposes of this
clause (1) such person shall be deemed to have
beneficial ownership of all shares that any such
person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time),
directly or indirectly, of more than 35% of the total voting
power of the Voting Stock of the Company;
(2) individuals who on the Issue Date constituted the Board
of Directors (together with any new directors whose election by
such Board of Directors or whose nomination for election by the
shareholders of the Company was approved by a vote of a majority
of the directors of the Company then still in office who were
either directors on the Issue Date or whose election or
nomination for election was previously so approved) cease for
any reason to constitute a majority of the Board of Directors
then in office;
(3) the adoption of a plan relating to the liquidation or
dissolution of the Company; or
(4) the merger or consolidation of the Company with or into
another Person or the merger of another Person with or into the
Company, or the sale of all or substantially all the assets of
the Company (determined on a consolidated basis) to another
Person other than a transaction, following which (A) in the
case of a merger or consolidation transaction, holders of
securities that represented 100% of the Voting Stock of the
Company immediately prior to such transaction (or other
securities into which such securities are converted as part of
such merger or consolidation transaction) own directly or
indirectly at least a majority of the voting power of the Voting
Stock of the surviving Person in such merger or consolidation
transaction immediately after such transaction and in
substantially the same proportion as before the transaction, and
(B) in the case of a sale of assets transaction, each
transferee becomes an obligor in respect of the notes and a
Subsidiary of the transferor of such assets.
Within 30 days following any Change of Control, we will
mail a notice to each Holder with a copy to the Trustee (the
Change of Control Offer) stating:
(1) that a Change of Control has occurred and that such
Holder has the right to require us to purchase such
Holders notes at a purchase price in cash equal to 101% of
the principal amount thereof on the date of purchase, plus
accrued and unpaid interest, if any, to the date of purchase
(subject to the right of Holders of record on the relevant
record date to receive interest on the relevant interest payment
date);
51
(2) the circumstances and relevant facts regarding such
Change of Control (including information with respect to pro
forma historical income, cash flow and capitalization, in
each case after giving effect to such Change of Control);
(3) the purchase date (which shall be no earlier than
30 days nor later than 60 days from the date such
notice is mailed); and
(4) the instructions, as determined by us, consistent with
the covenant described hereunder, that a Holder must follow in
order to have its notes purchased.
We will not be required to make a Change of Control Offer
following a Change of Control if a third party makes the Change
of Control Offer in the manner, at the times and otherwise in
compliance with the requirements set forth in the Indenture
applicable to a Change of Control Offer made by us and purchases
all notes validly tendered and not withdrawn under such Change
of Control Offer.
We will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other
securities laws or regulations in connection with the repurchase
of notes as a result of a Change of Control. To the extent that
the provisions of any securities laws or regulations conflict
with the provisions of the covenant described hereunder, we will
comply with the applicable securities laws and regulations and
shall not be deemed to have breached our obligations under the
covenant described hereunder by virtue of our compliance with
such securities laws or regulations.
The Change of Control purchase feature of the notes may in
certain circumstances make more difficult or discourage a sale
or takeover of the Company and, thus, the removal of incumbent
management. The Change of Control purchase feature is a result
of negotiations between the Company and the Initial Purchaser.
We have no present intention to engage in a transaction
involving a Change of Control, although it is possible that we
could decide to do so in the future. Subject to the limitations
discussed below, we could, in the future, enter into certain
transactions, including acquisitions, refinancings or other
recapitalizations, that would not constitute a Change of Control
under the Indenture, but that could increase the amount of
indebtedness outstanding at such time or otherwise affect our
capital structure or credit ratings. Restrictions on our ability
to Incur additional Indebtedness are contained in the covenants
described under Certain Covenants
Limitation on Indebtedness, Limitation
on Liens and Limitation on
Sale/Leaseback Transactions. Such restrictions can only be
waived with the consent of the holders of a majority in
principal amount of the notes then outstanding. Except for the
limitations contained in such covenants, however, the Indenture
will not contain any covenants or provisions that may afford
holders of the notes protection in the event of a highly
leveraged transaction.
Our Credit Agreement and the indenture governing the Existing
Notes contain, and indebtedness that we may incur in the future
may contain, prohibitions on the occurrence of certain events
that would constitute a Change of Control or require the
repurchase of such indebtedness upon a Change of Control.
Moreover, the exercise by the holders of their right to require
us to repurchase their notes could cause a default under such
indebtedness, even if the Change of Control itself does not, due
to the financial effect of such repurchase on us. Finally, our
ability to pay cash to the holders of notes following the
occurrence of a Change of Control may be limited by our then
existing financial resources. There can be no assurance that
sufficient funds will be available when necessary to make any
required repurchases.
In the event a Change of Control occurs at a time when we are
prohibited by our indebtedness from purchasing notes, we may
seek the consent of the applicable creditors to the purchase of
notes or may attempt to refinance the indebtedness that contains
such prohibition. If we do not obtain such a consent or repay
such indebtedness, we will remain prohibited from purchasing
notes. In such case, our failure to offer to purchase notes
would constitute a Default under the Indenture, which would, in
turn, constitute a default under our other indebtedness.
The definition of Change of Control includes a
disposition of all or substantially all of the assets of the
Company to any Person. Although there is a limited body of case
law interpreting the phrase substantially all, there
is no precise established definition of the phrase under
applicable law. Accordingly, in certain circumstances there may
be a degree of uncertainty as to whether a particular
transaction would involve a
52
disposition of all or substantially all of the
assets of the Company. As a result, it may be unclear as to
whether a Change of Control has occurred and whether a holder of
notes may require the Company to make an offer to repurchase the
notes as described above.
The provisions under the Indenture relative to our obligation to
make an offer to repurchase the notes as a result of a Change of
Control may be waived or modified with the written consent of
the holders of a majority in principal amount of the notes.
Certain
Covenants
The Indenture contains covenants including, among others, those
summarized below. Following the first day (the Suspension
Date) that:
(1) the notes have an Investment Grade Rating from both of
the Rating Agencies, and
(2) no Default has occurred and is continuing under the
Indenture,
the Company and its Restricted Subsidiaries will not be subject
to the provisions of the Indenture summarized below under:
(1) Limitation on Indebtedness,
(2) Limitation on Restricted
Payments,
(3) Limitation on Restrictions on
Distributions from Restricted Subsidiaries,
(4) Limitation on Sales of Assets and
Subsidiary Stock,
(5) clause (3) under Limitation on
Sale/Leaseback Transactions,
(6) clauses (a)(2) and (a)(3) of the first paragraph
under Merger and Consolidation,
(7) Limitation on Affiliate
Transactions and
(8) Future Subsidiary Guarantors
(collectively, the Suspended Covenants). In
addition, the Subsidiary Guarantees of the Subsidiary Guarantors
will also be suspended as of the Suspension Date. In the event
that the Company and its Restricted Subsidiaries are not subject
to the Suspended Covenants for any period of time as a result of
the foregoing, and on any subsequent date (the Reversion
Date) one or both of the Rating Agencies withdraws its
Investment Grade Rating or downgrades the rating assigned to the
notes below an Investment Grade Rating, then the Company and the
Restricted Subsidiaries will thereafter again be subject to the
Suspended Covenants with respect to future events and the
Subsidiary Guarantees will be reinstated. The period of time
between the Suspension Date and the Reversion Date is referred
to in this description as the Suspension Period.
Notwithstanding that the Suspended Covenants may be reinstated,
no default will be deemed to have occurred as a result of a
failure to comply with the Suspended Covenants during the
Suspension Period.
On the Reversion Date, all Indebtedness Incurred during the
Suspension Period will be classified to have been Incurred
pursuant to paragraph (a) of
Limitation on Indebtedness or one of the
clauses set forth in paragraph (b) of
Limitation on Indebtedness (to the
extent such Indebtedness would be permitted to be Incurred
thereunder as of the Reversion Date and after giving effect to
Indebtedness Incurred prior to the Suspension Period and
outstanding on the Reversion Date). To the extent such
Indebtedness would not be so permitted to be Incurred pursuant
to paragraph (a) or (b) of
Limitation on Indebtedness, such
Indebtedness will be deemed to have been outstanding on the
Issue Date, so that it is classified as permitted under
clause (4) of paragraph (b) of
Limitation of Indebtedness. Calculations
made after the Reversion Date of the amount available to be made
as Restricted Payments under Limitation on
Restricted Payments will be made as though the covenant
described under Limitation on Restricted
Payments had been in effect since the Issue Date and
throughout the Suspension Period. Accordingly, Restricted
Payments made during the Suspension Period will reduce the
amount available to be made as Restricted Payments under
paragraph (a) of Limitation on
Restricted Payments and the items specified in
subclauses (3)(A) through (3)(D) of
paragraph (a) of Limitation on
Restricted Payments will increase the amount available to
be made under paragraph (a) thereof.
53
Limitation
on Indebtedness
(a) The Company will not, and will not permit any
Restricted Subsidiary to, Incur, directly or indirectly, any
Indebtedness; provided, however, that the Company and the
Subsidiary Guarantors will be entitled to Incur Indebtedness if,
on the date of such Incurrence and after giving effect thereto
on a pro forma basis, the Consolidated Coverage Ratio
exceeds 2.00 to 1.
(b) Notwithstanding the foregoing paragraph (a), the
Company and the Restricted Subsidiaries will be entitled to
Incur any or all of the following Indebtedness:
(1) Indebtedness Incurred by the Company or any Restricted
Subsidiary pursuant to any Credit Facilities; provided,
however, that, immediately after giving effect to any such
Incurrence, the aggregate principal amount of all Indebtedness
Incurred under this clause (1) and then outstanding does
not exceed the greater of (i) $300 million and
(ii) the sum of (x) 60% of the inventory of the
Company and its Restricted Subsidiaries and (y) 85% of the
book value of the accounts receivables of the Company and its
Restricted Subsidiaries;
(2) Indebtedness owed to and held by the Company or a
Restricted Subsidiary; provided, however, that
(A) any subsequent issuance or transfer of any Capital
Stock which results in any such Restricted Subsidiary ceasing to
be a Restricted Subsidiary or any subsequent transfer of such
Indebtedness (other than to the Company or a Restricted
Subsidiary) shall be deemed, in each case, to constitute the
Incurrence of such Indebtedness by the obligor thereon, (B) if
the Company is the obligor on such Indebtedness, such
Indebtedness is expressly subordinated to the prior payment in
full in cash of all obligations with respect to the notes and
(C) if a Subsidiary Guarantor is the obligor on such
Indebtedness, such Indebtedness is expressly subordinated to the
prior payment in full in cash of all obligations of such
Subsidiary Guarantor with respect to its Subsidiary Guarantee;
(3) the unregistered notes and the exchange notes;
(4) Indebtedness outstanding on the Issue Date (other than
Indebtedness described in clause (1), (2) or
(3) of this covenant) including the Existing Notes;
(5) Indebtedness of a Restricted Subsidiary Incurred and
outstanding on or prior to the date on which such Subsidiary
became a Restricted Subsidiary or was acquired by the Company
(other than Indebtedness Incurred in connection with, or to
provide all or any portion of the funds or credit support
utilized to consummate, the transaction or series of related
transactions pursuant to which such Subsidiary became a
Restricted Subsidiary or was acquired by the Company);
provided, however, that on the date such Subsidiary
became a Restricted Subsidiary or was acquired by the Company
and after giving pro forma effect thereto, the Company
would have been entitled to Incur at least $1.00 of additional
Indebtedness pursuant to paragraph (a) of this
covenant;
(6) Refinancing Indebtedness in respect of Indebtedness
Incurred pursuant to paragraph (a) or pursuant to
clause (3), (4) or (5) or this clause (6);
provided, however, that to the extent such Refinancing
Indebtedness directly or indirectly Refinances Indebtedness of a
Restricted Subsidiary Incurred pursuant to clause (5), such
Refinancing Indebtedness shall be Incurred only by such
Restricted Subsidiary;
(7) Hedging Obligations incurred in the ordinary course of
business with a bona fide intention to limit interest rate risk,
exchange rate risk or commodity price risk;
(8) Indebtedness in respect of workers compensation
claims, self-insurance obligations, bankers acceptances,
performance bonds, bid bonds, appeal bonds and surety bonds or
other similar bonds or obligations, and any Guarantees or
letters of credit functioning as or supporting any of the
foregoing;
(9) Indebtedness arising from any agreement providing for
indemnities, Guarantees, purchase price adjustments, holdbacks,
contingency payment obligations based on the performance of the
acquired or disposed assets or similar obligations (other than
Guarantees of Indebtedness) Incurred by any Person in connection
with the acquisition or disposition of assets;
(10) Indebtedness of Foreign Subsidiaries for purposes of
financing working capital in an aggregate principal amount at
any one time outstanding not to exceed $30.0 million;
54
(11) Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case,
Incurred for the purpose of financing all or any part of the
purchase price, cost of construction or improvement or carrying
cost of assets used in the business of the Company and its
Restricted Subsidiaries and related financing costs, and
Refinancing Indebtedness Incurred to Refinance any Indebtedness
Incurred pursuant to this clause, in an aggregate principal
amount at any one time outstanding not to exceed
$30.0 million;
(12) Indebtedness arising from the honoring by a bank or
other financial institution of a check, draft or similar
instrument drawn against insufficient funds in the ordinary
course of business; provided, however, that such
Indebtedness is extinguished within five Business Days of its
Incurrence;
(13) Indebtedness consisting of the Subsidiary Guarantee of
a Subsidiary Guarantor and any Guarantee by a Subsidiary
Guarantor of Indebtedness Incurred pursuant to
paragraph (a) or pursuant to clause (1), (2),
(3) or (4) or pursuant to clause (6) to the
extent the Refinancing Indebtedness Incurred thereunder directly
or indirectly Refinances Indebtedness Incurred pursuant to
paragraph (a) or pursuant to clause (3) or
(4); and
(14) Indebtedness of the Company or of any Subsidiary
Guarantor in an aggregate principal amount which, when taken
together with all other Indebtedness of the Company and its
Restricted Subsidiaries outstanding on the date of such
Incurrence (other than Indebtedness permitted by
clauses (1) through (13) above or paragraph (a)),
does not exceed the greater of (i) $50 million and
(ii) 5% of Consolidated Net Tangible Assets, as determined
as of the most recent practical date (as adjusted for any
significant dispositions of assets since such date).
(c) Notwithstanding the foregoing, neither the Company nor
any Subsidiary Guarantor will incur any Indebtedness pursuant to
the foregoing paragraph (b) if the proceeds thereof
are used, directly or indirectly, to Refinance any Subordinated
Obligations of the Company or any Subsidiary Guarantor unless
such Indebtedness shall be subordinated to the notes or the
applicable Subsidiary Guarantee to at least the same extent as
such Subordinated Obligations.
(d) For purposes of determining compliance with this
covenant:
(1) any Indebtedness outstanding under the Credit Agreement
on the Issue Date will be treated as Incurred on the Issue Date
under clause (1) of paragraph (b) above;
(2) in the event that an item of Indebtedness (or any
portion thereof) meets the criteria of more than one of the
types of Indebtedness described above, the Company, in its sole
discretion, will classify such item of Indebtedness (or any
portion thereof) at the time of Incurrence and will only be
required to include the amount and type of such Indebtedness in
one of the above clauses;
(3) the Company will be entitled to divide and classify an
item of Indebtedness in more than one of the types of
Indebtedness described above; and
(4) the Company may, at any time, change the classification
of an item of Indebtedness or any portion thereof (except for
Indebtedness Incurred under clause (1) of
paragraph (b) above) to any other clause of
paragraph (b) above or to paragraph (a) above;
provided, however, that the Company or the applicable
Restricted Subsidiary, as the case may be, would be permitted to
Incur such item of Indebtedness or portion thereof pursuant to
such other clause or paragraph (a), as the case may be, at
time of such reclassification.
Limitation
on Restricted Payments
(a) The Company will not, and will not permit any
Restricted Subsidiary, directly or indirectly, to make a
Restricted Payment if at the time the Company or such Restricted
Subsidiary makes such Restricted Payment:
(1) a Default shall have occurred and be continuing (or
would result therefrom);
(2) the Company is not entitled to Incur an additional
$1.00 of Indebtedness pursuant to paragraph (a) of the
covenant described under Limitation on
Indebtedness; or
55
(3) the aggregate amount of such Restricted Payment and all
other Restricted Payments since the Existing Notes Issue Date
would exceed the sum of (without duplication):
(A) 50% of the Consolidated Net Income accrued during the
period (treated as one accounting period) from the beginning of
the fiscal quarter immediately following the fiscal quarter
during which the Existing Notes Issue Date occurred to the end
of the most recent fiscal quarter ending at least 45 days
prior to the date of such Restricted Payment (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such
deficit); plus
(B) 100% of the aggregate Net Cash Proceeds, or the fair
market value of property other than cash, received by the
Company from the issuance or sale of its Capital Stock (other
than Disqualified Stock) subsequent to the Existing Notes Issue
Date (other than an issuance or sale to a Subsidiary of the
Company and other than an issuance or sale to an employee stock
ownership plan or to a trust established by the Company or any
of its Subsidiaries for the benefit of their employees) and 100%
of any cash, or the fair market value of property other than
cash, received as a capital contribution by the Company from its
shareholders subsequent to the Existing Notes Issue Date;
plus
(C) the amount by which Indebtedness of the Company is
reduced on the Companys balance sheet upon the conversion
or exchange subsequent to the Existing Notes Issue Date of any
Indebtedness of the Company convertible or exchangeable for
Capital Stock (other than Disqualified Stock) of the Company
(less the amount of any cash, or the fair value of any other
property, distributed by the Company upon such conversion or
exchange); provided, however, that the foregoing amount
shall not exceed the Net Cash Proceeds received by the Company
or any Restricted Subsidiary from the sale of such Indebtedness
(excluding Net Cash Proceeds from sales to a Subsidiary of the
Company or to an employee stock ownership plan or to a trust
established by the Company or any of its Subsidiaries for the
benefit of their employees); plus
(D) an amount equal to the sum of (i) the net
reduction in the Investments (other than Permitted Investments)
made by the Company or any Restricted Subsidiary in any Person
resulting from repurchases, repayments or redemptions of such
Investments by such Person, proceeds realized on the sale of
such Investment and proceeds representing the return of capital
(excluding dividends and distributions), in each case received
by the Company or any Restricted Subsidiary, subsequent to the
Existing Notes Issue Date and (ii) to the extent such
Person is an Unrestricted Subsidiary, the portion (proportionate
to the Companys equity interest in such Subsidiary) of the
fair market value of the net assets of such Unrestricted
Subsidiary at the time such Unrestricted Subsidiary is
designated a Restricted Subsidiary; provided, however,
that the foregoing sum shall not exceed, in the case of any such
Person or Unrestricted Subsidiary, the amount of Investments
(excluding Permitted Investments) made subsequent to the
Existing Notes Issue Date (and treated as a Restricted Payment)
by the Company or any Restricted Subsidiary in such Person or
Unrestricted Subsidiary.
(b) The preceding provisions will not prohibit:
(1) any Restricted Payment made out of the Net Cash
Proceeds of the substantially concurrent sale of, or made by
exchange for, Capital Stock of the Company (other than
Disqualified Stock and other than Capital Stock issued or sold
to a Subsidiary of the Company or an employee stock ownership
plan or to a trust established by the Company or any of its
Subsidiaries for the benefit of their employees) or a
substantially concurrent cash capital contribution received by
the Company from its shareholders; provided, however,
that (A) such Restricted Payment shall be excluded in the
calculation of the amount of Restricted Payments and
(B) the Net Cash Proceeds from such sale or such cash
capital contribution (to the extent so used for such Restricted
Payment) shall be excluded from the calculation of amounts under
clause (3)(B) of paragraph (a) above;
(2) any purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value of Subordinated
Obligations of the Company or a Subsidiary Guarantor made by
exchange for, or out of the proceeds of the substantially
concurrent Incurrence of, Indebtedness of such Person which is
permitted to
56
be Incurred pursuant to the covenant described under
Limitation on Indebtedness; provided,
however, that such purchase, repurchase, redemption,
defeasance or other acquisition or retirement for value shall be
excluded in the calculation of the amount of Restricted Payments;
(3) dividends paid within 60 days after the date of
declaration thereof if at such date of declaration such dividend
would have complied with this covenant; provided,
however, that at the time of payment of such dividend, no
other Default shall have occurred and be continuing (or result
therefrom); provided further, however, that such dividend
shall be included in the calculation of the amount of Restricted
Payments;
(4) so long as no Default has occurred and is continuing,
the purchase, redemption or other acquisition of shares of
Capital Stock of the Company or any of its Subsidiaries from
employees, former employees, directors or former directors of
the Company or any of its Subsidiaries (or permitted transferees
of such employees, former employees, directors or former
directors), pursuant to the terms of the agreements (including
employment agreements) or plans (or amendments thereto) approved
by the Board of Directors under which such individuals purchase
or sell or are granted the option to purchase or sell, shares of
such Capital Stock; provided, however, that the aggregate
amount of such Restricted Payments (excluding amounts
representing cancellation of Indebtedness) shall not exceed
$1.0 million in any calendar year; provided further,
however, that such repurchases and other acquisitions shall
be excluded in the calculation of the amount of Restricted
Payments;
(5) the declaration and payments of dividends on
Disqualified Stock issued pursuant to the covenant described
under Limitation on Indebtedness;
provided, however, that at the time of payment of such
dividend, no Default shall have occurred and be continuing (or
result therefrom); provided further, however, that such
dividends shall be excluded in the calculation of the amount of
Restricted Payments;
(6) repurchases of Capital Stock deemed to occur upon
exercise of stock options if such Capital Stock represents a
portion of the exercise price of such options; provided,
however, that such Restricted Payments shall be excluded in
the calculation of the amount of Restricted Payments;
(7) cash payments in lieu of the issuance of fractional
shares in connection with the exercise of warrants, options or
other securities convertible into or exchangeable for Capital
Stock of the Company; provided, however, that any such
cash payment shall not be for the purpose of evading the
limitation of the covenant described under this subheading;
provided further, however, that such payments shall be
excluded in the calculation of the amount of Restricted Payments;
(8) in the event of a Change of Control, and if no Default
shall have occurred and be continuing, the payment, purchase,
redemption, defeasance or other acquisition or retirement of
Subordinated Obligations of the Company or any Subsidiary
Guarantor, in each case, at a purchase price not greater than
101% of the principal amount of such Subordinated Obligations,
plus any accrued and unpaid interest thereon; provided,
however, that prior to such payment, purchase, redemption,
defeasance or other acquisition or retirement, the Company (or a
third party to the extent permitted by the Indenture) has made a
Change of Control Offer with respect to the notes as a result of
such Change of Control and has repurchased all notes validly
tendered and not withdrawn in connection with such Change of
Control Offer; provided further, however, that such
payments, purchases, redemptions, defeasances or other
acquisitions or retirements shall be included in the calculation
of the amount of Restricted Payments;
(9) payments of intercompany subordinated Indebtedness, the
Incurrence of which was permitted under clause (2) of
paragraph (b) of the covenant described under
Limitation on Indebtedness; provided,
however, that no Default has occurred and is continuing or
would otherwise result therefrom; provided further,
however, that such payments shall be excluded in the
calculation of the amount of Restricted Payments;
(10) the payment of ordinary quarterly dividends on the
common stock of the Company at a rate no greater than
$0.09 per share (as adjusted for stock splits and other
similar changes to such common stock); provided, however,
the aggregate amount of such dividends in any year shall not
exceed
57
$17.5 million; provided further, however, that such
payments shall be included in the calculation of the amount of
Restricted Payments; and
(11) Restricted Payments in an amount which, when taken
together with all Restricted Payments made pursuant to this
clause (11), does not exceed $35.0 million;
provided, however, that (A) at the time of each such
Restricted Payment, no Default shall have occurred and be
continuing (or result therefrom) and (B) such Restricted
Payments shall be excluded in the calculation of the amount of
Restricted Payments.
Limitation
on Restrictions on Distributions from Restricted
Subsidiaries
The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or
become effective any consensual encumbrance or restriction on
the ability of any Restricted Subsidiary to (a) pay
dividends or make any other distributions on its Capital Stock
to the Company or a Restricted Subsidiary or pay any
Indebtedness owed to the Company, (b) make any loans or
advances to the Company or (c) transfer any of its property
or assets to the Company, except:
(1) with respect to clauses (a), (b) and (c),
(A) any encumbrance or restriction pursuant to an agreement
in effect at or entered into on the Issue Date;
(B) any encumbrance or restriction contained in the terms
of any Indebtedness Incurred pursuant to clause (b)(1) of
the covenant described under Limitation on
Indebtedness or any agreement pursuant to which such
Indebtedness was issued if (i) either (x) the
encumbrance or restriction applies only in the event of and
during the continuance of a payment default or a default with
respect to a financial covenant contained in such Indebtedness
or agreement or (y) the Company determines at the time any
such Indebtedness is Incurred (and at the time of any
modification of the terms of any such encumbrance or
restriction) that any such encumbrance or restriction will not
materially affect the Companys ability to make principal
or interest payments on the notes and any other Indebtedness
that is an obligation of the Company and (ii) the
encumbrance or restriction is not materially more
disadvantageous to the holders of the notes than is customary in
comparable financings or agreements (as determined by the
Company in good faith);
(C) any encumbrance or restriction with respect to a
Restricted Subsidiary pursuant to an agreement relating to any
Indebtedness Incurred by such Restricted Subsidiary on or prior
to the date on which such Restricted Subsidiary was acquired by
the Company (other than Indebtedness Incurred as consideration
in, or to provide all or any portion of the funds or credit
support utilized to consummate, the transaction or series of
related transactions pursuant to which such Restricted
Subsidiary became a Restricted Subsidiary or was acquired by the
Company) and outstanding on such date;
(D) any encumbrance or restriction pursuant to an agreement
effecting a Refinancing of Indebtedness Incurred pursuant to an
agreement referred to in clause (A) or (B) of
clause (1) of this covenant or this clause (D) or
contained in any amendment to an agreement referred to in
clause (A) or (B) of clause (1) of this
covenant or this clause (D); provided, however, that
the encumbrances and restrictions with respect to such
Restricted Subsidiary contained in any such refinancing
agreement or amendment are no less favorable to the Holders than
encumbrances and restrictions with respect to such Restricted
Subsidiary contained in such predecessor agreements;
(E) with respect to any Foreign Subsidiary, any encumbrance
or restriction contained in the terms of any Indebtedness, or
any agreement pursuant to which such Indebtedness was Incurred;
(F) Liens permitted to be incurred under the provisions of
the covenant described under Limitation on
Liens that limit the right of the debtor to dispose of the
assets subject to such Liens;
58
(G) encumbrances or restrictions contained in agreements
entered into in connection with Hedging Obligations permitted
from time to time under the Indenture;
(H) restrictions on cash or other deposits or net worth
requirements imposed by customers or required by insurance,
surety or bonding companies, in each case, under contracts
entered into in the ordinary course of business;
(I) existing under, by reason of or with respect to
applicable law, rule, regulation or order;
(J) with respect to any Person or the property or assets of
a Person acquired by the Company or any of its Restricted
Subsidiaries existing at the time of such acquisition, which
encumbrance or restriction is not applicable to any Person or
the properties or assets of any Person, other than the Person,
or the property or assets of the Person, so acquired and any
amendments, modifications, restatements, renewals, increases,
extensions, supplements, refundings, replacements or
refinancings thereof, provided that the encumbrances and
restrictions in any such amendments, modifications,
restatements, renewals, increases, extensions, supplements,
refundings, replacements or refinancings are, in the reasonable
good faith judgment of the Chief Executive Officer and the Chief
Financial Officer of the Company, no more restrictive, taken as
a whole, than those in effect on the date of the
acquisition; and
(K) any encumbrance or restriction with respect to a
Restricted Subsidiary imposed pursuant to an agreement entered
into for the sale or disposition of all or substantially all the
Capital Stock or assets of such Restricted Subsidiary pending
the closing of such sale or disposition; and
(2) with respect to clause (c) only,
(A) any encumbrance or restriction consisting of customary
nonassignment provisions in leases governing leasehold interests
to the extent such provisions restrict the transfer of the lease
or the property leased thereunder;
(B) any encumbrance or restriction contained in credit
agreements, security agreements or mortgages securing
Indebtedness of a Restricted Subsidiary to the extent such
encumbrance or restriction restricts the transfer of the
property subject to such credit agreements, security agreements
or mortgages; and
(C) customary restrictions contained in asset sale
agreements limiting the transfer of such assets pending the
closing of such sale.
Limitation
on Sales of Assets and Subsidiary Stock
(a) The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, consummate any
Asset Disposition unless:
(1) the Company or such Restricted Subsidiary receives
consideration at the time of such Asset Disposition at least
equal to the fair market value (including as to the value of all
non-cash consideration), as determined in good faith by the
Board of Directors (or, in the case of any sale of timberland
pursuant to a Pre-Approved Timberland Sale Initiative, as
determined in good faith by an executive officer of the
Company), of the shares and assets subject to such Asset
Disposition;
(2) at least 75% of the consideration thereof received by
the Company or such Restricted Subsidiary is in the form of
(A) cash or cash equivalents or (B) Additional
Assets; and
(3) an amount equal to 100% of the Net Available Cash from
such Asset Disposition is applied by the Company (or such
Restricted Subsidiary, as the case may be)
(A) first, to the extent the Company elects, to
acquire Additional Assets within one year from the later of the
date of such Asset Disposition or the receipt of such Net
Available Cash;
(B) second, to the extent of the balance of such Net
Available Cash after application in accordance with
clause (A), to the extent the Company elects (or is
required by the terms of any Indebtedness), to prepay, repay,
redeem or purchase Senior Indebtedness of the Company or
Indebtedness (other than any Disqualified Stock) of a Restricted
Subsidiary (in each case other than
59
Indebtedness owed to the Company or an Affiliate of the Company)
within one year from the later of the date of such Asset
Disposition or the receipt of such Net Available Cash; and
(C) third, to the extent of the balance of such Net
Available Cash after application in accordance with
clauses (A) and (B), to make an offer to the holders of the
notes (and to holders of other Senior Indebtedness of the
Company designated by the Company) to purchase notes (and such
other Senior Indebtedness of the Company) pursuant to and
subject to the conditions contained in the Indenture;
provided, however, that in connection with any
prepayment, repayment or purchase of Indebtedness pursuant to
clause (B) or (C) above (other than with the Net Available
Cash from any Asset Disposition of timberland pursuant to a
Pre-Approved Timberland Sale Initiative), the Company or such
Restricted Subsidiary shall permanently retire such Indebtedness
and shall cause the related loan commitment (if any) to be
permanently reduced in an amount equal to the principal amount
so prepaid, repaid or purchased.
Notwithstanding the foregoing provisions of this covenant, the
Company and the Restricted Subsidiaries will not be required to
apply any Net Available Cash in accordance with this covenant
except to the extent that the aggregate Net Available Cash from
all Asset Dispositions which is not applied in accordance with
this covenant exceeds $25.0 million.
For the purposes of this covenant, the following are deemed to
be cash or cash equivalents:
(1) the assumption or discharge of Indebtedness of the
Company (other than obligations in respect of Disqualified Stock
of the Company) or any Restricted Subsidiary (other than
obligations in respect of Disqualified Stock or Preferred Stock
of a Subsidiary Guarantor) and the release of the Company or
such Restricted Subsidiary from all liability on such
Indebtedness in connection with such Asset Disposition; and
(2) securities received by the Company or any Restricted
Subsidiary from the transferee that are promptly converted by
the Company or such Restricted Subsidiary into cash (including,
in the case of any installment note received by the Company or
any Restricted Subsidiary in respect of any Asset Disposition of
timberland pursuant to a Pre-Approved Timberland Sale
Initiative, the receipt of cash in respect of any loan secured
solely by a pledge of such installment note and, if applicable,
the pledge or assignment of a letter of credit or similar
instrument provided by such transferee), to the extent of cash
received in that conversion.
(b) In the event of an Asset Disposition that requires the
purchase of notes (and other Senior Indebtedness of the Company)
pursuant to clause (a)(3)(C) above, the Company will
purchase notes tendered pursuant to an offer by the Company for
the Notes (and such other Senior Indebtedness) at a purchase
price of 100% of their principal amount (or, in the event such
other Senior Indebtedness of the Company was issued with
significant original issue discount, 100% of the accreted value
thereof) without premium, plus accrued but unpaid interest (or,
in respect of such other Senior Indebtedness of the Company,
such lesser price, if any, as may be provided for by the terms
of such Senior Indebtedness) in accordance with the procedures
(including prorating in the event of oversubscription) set forth
in the Indenture. If the aggregate purchase price of the
securities tendered exceeds the Net Available Cash allotted to
their purchase, the Company will select the securities to be
purchased on a pro rata basis but in round
denominations, which in the case of the notes will be
denominations of $1,000 principal amount or multiples thereof.
The Company shall not be required to make such an offer to
purchase notes (and other Senior Indebtedness of the Company)
pursuant to this covenant if the Net Available Cash available
therefor is less than $10.0 million (which lesser amount
shall be carried forward for purposes of determining whether
such an offer is required with respect to the Net Available Cash
from any subsequent Asset Disposition). Upon completion of such
an offer to purchase, Net Available Cash will be deemed to be
reduced by the aggregate amount of such offer.
(c) The Company will comply, to the extent applicable, with
the requirements of Section 14(e) of the Exchange Act and
any other securities laws or regulations in connection with the
repurchase of notes pursuant to this covenant. To the extent
that the provisions of any securities laws or regulations
conflict with provisions of this covenant, the Company will
comply with the applicable securities laws and regulations and
will not be deemed to have breached its obligations under this
covenant by virtue of its compliance with such securities laws
or regulations.
60
Limitation
on Affiliate Transactions
(a) The Company will not, and will not permit any
Restricted Subsidiary to, enter into or permit to exist any
transaction (including the purchase, sale, lease or exchange of
any property, employee compensation arrangements or the
rendering of any service) with, or for the benefit of, any
Affiliate of the Company (an Affiliate Transaction)
unless:
(1) the terms of the Affiliate Transaction are no less
favorable to the Company or such Restricted Subsidiary than
those that could be obtained at the time of the Affiliate
Transaction in arms-length dealings with a Person who is
not an Affiliate;
(2) if such Affiliate Transaction involves an amount in
excess of $15.0 million, the terms of the Affiliate
Transaction are set forth in writing and a majority of the
non-employee directors of the Company disinterested with respect
to such Affiliate Transaction have determined in good faith that
the criteria set forth in clause (1) are satisfied and have
approved the relevant Affiliate Transaction as evidenced by a
resolution of the Board of Directors; and
(3) if such Affiliate Transaction involves an amount in
excess of $30.0 million, the Board of Directors shall also
have received a written opinion from an Independent Qualified
Party to the effect that such Affiliate Transaction is fair,
from a financial standpoint, to the Company and its Restricted
Subsidiaries or is not less favorable to the Company and its
Restricted Subsidiaries than could reasonably be expected to be
obtained at the time in an arms-length transaction with a
Person who was not an Affiliate.
(b) The provisions of the preceding
paragraph (a) will not prohibit:
(1) any Investment (other than a Permitted Investment) or
other Restricted Payment, in each case permitted to be made
pursuant to (but only to the extent included in the calculation
of the amount of Restricted Payments made pursuant to
paragraph (a)(3) of) the covenant described under
Limitation on Restricted Payments;
(2) any issuance of securities, or other payments, awards
or grants in cash, securities or otherwise pursuant to, or the
funding of, employment arrangements, stock options and stock
ownership plans approved by the Board of Directors;
(3) loans or advances to employees in the ordinary course
of business in accordance with the past practices of the Company
or its Restricted Subsidiaries, but in any event not to exceed
$5.0 million in the aggregate outstanding at any one time;
(4) the payment of fees to directors of the Company and its
Restricted Subsidiaries who are not employees of the Company or
its Restricted Subsidiaries;
(5) any transaction with the Company, a Restricted
Subsidiary or joint venture or similar entity which would
constitute an Affiliate Transaction solely because the Company
or a Restricted Subsidiary owns an equity interest in or
otherwise controls such Restricted Subsidiary, joint venture or
similar entity;
(6) the issuance or sale of any Capital Stock (other than
Disqualified Stock) of the Company;
(7) pledges of Capital Stock of Unrestricted Subsidiaries
for the benefit of lenders of Unrestricted Subsidiaries; and
(8) any agreement as in effect on the Issue Date or any
renewals or extensions of any such agreement (so long as such
renewals or extensions are not less favorable to the Company or
the Restricted Subsidiaries) and the transactions evidenced
thereby.
Limitation
on Liens
The Company will not, and will not permit any Restricted
Subsidiary to, directly or indirectly, Incur or permit to exist
any Lien (the Initial Lien) of any nature whatsoever
on any of its properties (including Capital Stock of a
Restricted Subsidiary), whether owned at the Issue Date or
thereafter acquired, securing any
61
Indebtedness, other than Permitted Liens, without effectively
providing that the notes shall be secured equally and ratably
with (or prior to) the obligations so secured for so long as
such obligations are so secured; provided,
however, that the Company and the Restricted Subsidiaries
will be entitled to Incur other Liens to secure Indebtedness as
long as the amount of outstanding Indebtedness secured by Liens
pursuant to this proviso (including any Attributable Debt) does
not exceed at the time of such incurrence 5% of Consolidated Net
Tangible Assets, as determined as of the most recent practical
date (adjusted for any significant dispositions of assets since
such date) (and any such Liens Incurred pursuant to this proviso
may be permitted to exist).
Any Lien created for the benefit of the Holders of the notes
pursuant to the preceding sentence shall provide by its terms
that such Lien shall be automatically and unconditionally
released and discharged upon the release and discharge of the
Initial Lien.
Limitation
on Sale/Leaseback Transactions
The Company will not, and will not permit any Restricted
Subsidiary to, enter into any Sale/Leaseback Transaction with
respect to any property unless:
(1) the Company or such Restricted Subsidiary would be
entitled to (A) Incur Indebtedness in an amount equal to
the Attributable Debt with respect to such Sale/Leaseback
Transaction pursuant to the covenant described under
Limitation on Indebtedness and
(B) create a Lien on such property securing such
Attributable Debt without equally and ratably securing the Notes
pursuant to the covenant described under
Limitation on Liens;
(2) the net proceeds received by the Company or any
Restricted Subsidiary in connection with such Sale/Leaseback
Transaction are at least equal to the fair market value (as
determined by the Board of Directors) of such property; and
(3) the Company applies the proceeds of such transaction in
compliance with the covenant described under
Limitation on Sale of Assets and Subsidiary
Stock.
Merger
and Consolidation
(a) The Company will not consolidate with or merge with or
into, or convey, transfer or lease, in one transaction or a
series of transactions, directly or indirectly, all or
substantially all its assets to, any Person, unless:
(1) the resulting, surviving or transferee Person (the
Successor Company) shall be a Person organized and
existing under the laws of the United States of America, any
State thereof or the District of Columbia and the Successor
Company (if not the Company) shall expressly assume, by an
indenture supplemental thereto, executed and delivered to the
Trustee, in form satisfactory to the Trustee, all the
obligations of the Company under the notes and the Indenture;
(2) immediately after giving pro forma effect
to such transaction (and treating any Indebtedness which becomes
an obligation of the Successor Company or any Subsidiary as a
result of such transaction as having been Incurred by such
Successor Company or such Subsidiary at the time of such
transaction), no Default shall have occurred and be continuing;
(3) immediately after giving pro forma effect to
such transaction, the Successor Company would be able to Incur
an additional $1.00 of Indebtedness pursuant to
paragraph (a) of the covenant described under
Limitation on Indebtedness; and
(4) the Company shall have delivered to the Trustee an
Officers Certificate and an Opinion of Counsel, each
stating that such consolidation, merger or transfer and such
supplemental indenture (if any) comply with the Indenture.
provided, however, that clause (3) will not
be applicable to (A) a Restricted Subsidiary consolidating
with, merging into or transferring all or part of its properties
and assets to the Company (so long as no Capital
62
Stock of the Company is distributed to any Person) or
(B) the Company merging with an Affiliate of the Company
solely for the purpose and with the sole effect of
reincorporating the Company in another jurisdiction.
For purposes of this covenant, the sale, lease, conveyance,
assignment, transfer or other disposition of all or
substantially all of the properties and assets of one or more
Subsidiaries of the Company, which properties and assets, if
held by the Company instead of such Subsidiaries, would
constitute all or substantially all of the properties and assets
of the Company on a consolidated basis, shall be deemed to be
the transfer of all or substantially all of the properties and
assets of the Company.
The Successor Company will be the successor to the Company and
shall succeed to, and be substituted for, and may exercise every
right and power of, the Company under the Indenture, and the
predecessor Company, except in the case of a lease, shall be
released from the obligation to pay the principal of and
interest on the notes.
(b) The Company will not permit any Subsidiary Guarantor to
consolidate with or merge with or into, or convey, transfer or
lease, in one transaction or a series of transactions, all or
substantially all of its assets to any Person unless:
(1) except in the case of a Subsidiary Guarantor
(x) that has been disposed of in its entirety to another
Person (other than to the Company or an Affiliate of the
Company), whether through a merger, consolidation or sale of
Capital Stock or assets or (y) that, as a result of the
disposition of all or a portion of its Capital Stock, ceases to
be a Subsidiary, in both cases, if in connection therewith the
Company (A) complies with its obligations under the
covenant described under Limitation on Sales
of Assets and Subsidiary Stock in respect of such
disposition, (B) the resulting, surviving or transferee
Person (if not such Subsidiary) shall be a Person organized and
existing under the laws of the jurisdiction under which such
Subsidiary was organized or under the laws of the United States
of America, or any State thereof or the District of Columbia,
and (C) such Person shall expressly assume, by a Guarantee
Agreement, in a form satisfactory to the Trustee, all the
obligations of such Subsidiary, if any, under its Subsidiary
Guarantee;
(2) immediately after giving effect to such transaction or
transactions on a pro forma basis (and treating any
Indebtedness which becomes an obligation of the resulting,
surviving or transferee Person as a result of such transaction
as having been issued by such Person at the time of such
transaction), no Default shall have occurred and be
continuing; and
(3) the Company delivers to the Trustee an Officers
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such Guarantee Agreement,
if any, complies with the Indenture.
Future
Subsidiary Guarantors
The Company will not permit any Domestic Restricted Subsidiary,
directly or indirectly, to Incur any Indebtedness unless:
(1) such Indebtedness is Incurred by such Restricted
Subsidiary pursuant to clause (2), (4), (5), (6) (with
respect to Refinancing Indebtedness of Indebtedness initially
Incurred under clause (4) or (5) only), (7), (8), (9),
(11) or (12) of paragraph (b) of the covenant
described under Limitation on
Indebtedness;
(2) such Restricted Subsidiary is a Subsidiary
Guarantor; or
(3) such Restricted Subsidiary simultaneously executes and
delivers a Subsidiary Guarantee and becomes a Subsidiary
Guarantor.
63
SEC
Reports
The Company will file with the SEC (subject to the next
sentence) and provide the Trustee and Noteholders with such
annual and other reports as are specified in Sections 13
and 15(d) of the Exchange Act and applicable to a
U.S. corporation subject to such Sections, such reports to
be so filed and provided at the times specified for the filings
of such reports under such Sections and containing all the
information, audit reports and exhibits required for such
reports. The Company agrees that it will not take any action for
the purpose of causing the SEC not to accept any such filings.
If, notwithstanding the foregoing, the SEC will not accept such
filings for any reason, the Company will post the reports
specified in the preceding sentence on its website within the
time periods that would apply if the Company were required to
file those reports with the SEC.
At any time that any of the Companys Subsidiaries are
Unrestricted Subsidiaries, then the quarterly and annual
financial information required by the preceding paragraph will
include a reasonably detailed presentation, either on the face
of the financial statements or in the footnotes thereto, and in
Managements Discussion and Analysis of Financial
Condition and Results of Operations, of the financial
condition and results of operations of the Company and its
Restricted Subsidiaries separate from the financial condition
and results of operations of the Unrestricted Subsidiaries of
the Company.
Defaults
Each of the following is an Event of Default:
(1) a default in the payment of interest on the notes when
due, continued for 30 days;
(2) a default in the payment of principal of any note when
due at its Stated Maturity, upon optional redemption, upon
required purchase, upon declaration of acceleration or otherwise;
(3) the failure by the Company to comply with its
obligations in paragraph (a) of the covenant described
above under Certain Covenants
Merger and Consolidation;
(4) the failure by the Company to comply for 30 days
after notice with any of its obligations in the covenants
described above under Change of Control (other than
a failure to purchase notes) or under Certain
Covenants under Limitation on
Indebtedness, Limitation on Restricted
Payments, Limitation on Restrictions on
Distributions from Restricted Subsidiaries,
Limitation on Sales of Assets and Subsidiary
Stock (other than a failure to purchase Notes),
Limitation on Affiliate Transactions,
Limitation on Liens,
Limitation on Sale/Leaseback
Transactions, Certain
Covenants Merger and Consolidation (other than
a failure to comply with paragraph (a) thereof),
Future Subsidiary Guarantors or
SEC Reports;
(5) the failure by the Company or any Subsidiary Guarantor
to comply for 60 days after notice with its other
agreements contained in the Indenture;
(6) Indebtedness of the Company, any Subsidiary Guarantor
or any Significant Subsidiary is not paid within any applicable
grace period after final maturity or is accelerated by the
holders thereof because of a default and the total amount of
such Indebtedness unpaid or accelerated exceeds
$15.0 million (the cross acceleration
provision);
(7) certain events of bankruptcy, insolvency or
reorganization of the Company, a Subsidiary Guarantor or any
Significant Subsidiary (the bankruptcy provisions);
(8) any judgment or decree for the payment of money in
excess of $15.0 million is entered against the Company, a
Subsidiary Guarantor or any Significant Subsidiary, remains
outstanding for a period of 60 consecutive days following such
judgment and is not discharged, waived or stayed (the
judgment default provision); or
(9) a Subsidiary Guarantee ceases to be in full force and
effect (other than in accordance with the terms of the Indenture
or such Subsidiary Guarantee) or a Subsidiary Guarantor denies
or disaffirms its obligations under its Subsidiary Guarantee.
64
However, a default under clauses (4) and (5) will not
constitute an Event of Default until the Trustee or the Holders
of 25% in principal amount of the outstanding notes notify the
Company of the default and the Company does not cure such
default within the time specified after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or
the holders of at least 25% in principal amount of the
outstanding notes may declare the principal of and accrued but
unpaid interest on all the notes to be due and payable. Upon
such a declaration, such principal and interest shall be due and
payable immediately. If an Event of Default relating to certain
events of bankruptcy, insolvency or reorganization of the
Company occurs and is continuing, the principal of and interest
on all the Notes will ipso facto become and be
immediately due and payable without any declaration or other act
on the part of the Trustee or any holders of the notes. Under
certain circumstances, the Holders of a majority in principal
amount of the outstanding notes may rescind any such
acceleration with respect to the notes and its consequences.
Subject to the provisions of the Indenture relating to the
duties of the Trustee, in case an Event of Default occurs and is
continuing, the Trustee will be under no obligation to exercise
any of the rights or powers under the Indenture at the request
or direction of any of the holders of the notes unless such
Holders have offered to the Trustee reasonable indemnity or
security against any loss, liability or expense. Except to
enforce the right to receive payment of principal, premium (if
any) or interest when due, no Holder of a note may pursue any
remedy with respect to the Indenture or the notes unless:
(1) such Holder has previously given the Trustee notice
that an Event of Default is continuing;
(2) Holders of at least 25% in principal amount of the
outstanding notes have requested the Trustee to pursue the
remedy;
(3) such Holders have offered the Trustee reasonable
security or indemnity against any loss, liability or expense;
(4) the Trustee has not complied with such request within
60 days after the receipt thereof and the offer of security
or indemnity; and
(5) holders of a majority in principal amount of the
outstanding notes have not given the Trustee a direction
inconsistent with such request within such
60-day
period.
Subject to certain restrictions, the Holders of a majority in
principal amount of the outstanding notes are given the right to
direct the time, method and place of conducting any proceeding
for any remedy available to the Trustee or of exercising any
trust or power conferred on the Trustee. The Trustee, however,
may refuse to follow any direction that conflicts with law or
the Indenture or that the Trustee determines is unduly
prejudicial to the rights of any other Holder of a note or that
would involve the Trustee in personal liability.
If a Default occurs, is continuing and is known to the Trustee,
the Trustee must mail to each Holder of the notes notice of the
Default within 90 days after it occurs. Except in the case
of a Default in the payment of principal of or interest on any
note, the Trustee may withhold notice if and so long as a
committee of its Trust Officers in good faith determines
that withholding notice is not opposed to the interest of the
holders of the notes. In addition, we are required to deliver to
the Trustee, within 120 days after the end of each fiscal
year, a certificate indicating whether the signers thereof know
of any Default that occurred during the previous year. We are
required to deliver to the Trustee, within 30 days after
the occurrence thereof, written notice of any event which would
constitute certain Defaults, their status and what action we are
taking or propose to take in respect thereof.
Amendments
and Waivers
Subject to certain exceptions, the Indenture may be amended with
the consent of the Holders of a majority in principal amount of
the notes then outstanding (including consents obtained in
connection with a tender offer or exchange for the notes) and
any past default or compliance with any provisions may also be
waived with the consent of the Holders of a majority in
principal amount of the notes then outstanding.
65
However, without the consent of each holder of an outstanding
note affected thereby, an amendment or waiver may not, among
other things:
(1) reduce the amount of notes whose Holders must consent
to an amendment;
(2) reduce the rate of or extend the time for payment of
interest on any note;
(3) reduce the principal of or change the Stated Maturity
of any note;
(4) reduce the amount payable upon the redemption of any
note or change the time at which any note may be redeemed as
described under Optional Redemption
above;
(5) make any note payable in money other than that stated
in the note;
(6) impair the right of any Holder of the notes to receive
payment of principal of and interest on such holders notes
on or after the due dates therefor or to institute suit for the
enforcement of any payment on or with respect to such
Holders notes;
(7) make any change in, the amendment provisions which
require each Holders consent or in the waiver provisions;
(8) make any change in the ranking or priority of any note
that would adversely affect the Noteholders; or
(9) other than in accordance with the Indenture, make any
change in or release any Subsidiary Guarantee that would
adversely affect the Noteholders.
Notwithstanding the preceding, without the consent of any Holder
of the notes, the Company, the Subsidiary Guarantors and Trustee
may amend the Indenture:
(1) to cure any ambiguity, omission, defect or
inconsistency;
(2) to provide for the assumption by a successor
corporation of the obligations of the Company, or any Subsidiary
Guarantor under the Indenture;
(3) to provide for uncertificated notes in addition to or
in place of certificated notes (provided that the uncertificated
notes are issued in registered form for purposes of
Section 163(f) of the Code, or in a manner such that the
uncertificated notes are described in Section 163(f)(2)(B)
of the Code);
(4) to add Guarantees with respect to the notes, including
any Subsidiary Guarantees, or to secure the notes;
(5) to add to the covenants of the Company or a Subsidiary
Guarantor for the benefit of the holders of the notes or to
surrender any right or power conferred upon the Company or a
Subsidiary Guarantor;
(6) to make any change that does not adversely affect the
rights of any Holder of the notes;
(7) to comply with any requirement of the SEC in connection
with the qualification of the Indenture under the Trust
Indenture Act; or
(8) to make any amendment to the provisions of the
Indenture relating to the transfer and legending of notes;
provided, however, that (a) compliance with
the Indenture as so amended would not result in notes being
transferred in violation of the Securities Act or any other
applicable securities law and (b) such amendment does not
materially and adversely affect the rights of Holders to
transfer notes.
The consent of the holders of the notes is not necessary under
the Indenture to approve the particular form of any proposed
amendment. It is sufficient if such consent approves the
substance of the proposed amendment.
After an amendment under the Indenture becomes effective, we are
required to mail to holders of the notes a notice briefly
describing such amendment. However, the failure to give such
notice to all Holders of the notes, or any defect therein, will
not impair or affect the validity of the amendment.
66
Neither the Company nor any Affiliate of the Company may,
directly or indirectly, pay or cause to be paid any
consideration, whether by way of interest, fee or otherwise, to
any Holder for or as an inducement to any consent, waiver or
amendment of any of the terms or provisions of the Indenture or
the notes unless such consideration is offered to all Holders
and is paid to all Holders that so consent, waive or agree to
amend in the time frame set forth in solicitation documents
relating to such consent, waiver or agreement.
Transfer
The notes will be issued in registered form and will be
transferable only upon the surrender of the notes being
transferred for registration of transfer. We may require payment
of a sum sufficient to cover any tax, assessment or other
governmental charge payable in connection with certain transfers
and exchanges.
Satisfaction
and Discharge
When we (1) deliver to the Trustee all outstanding notes
for cancellation or (2) all outstanding notes have become
due and payable, whether at maturity or on a redemption date as
a result of the mailing of notice of redemption, and, in the
case of clause (2), we irrevocably deposit with the Trustee
funds sufficient to pay at maturity or upon redemption all
outstanding notes, including interest thereon to maturity or
such redemption date, and if in either case we pay all other
sums payable under the Indenture by us, then the Indenture
shall, subject to certain exceptions, cease to be of further
effect.
Defeasance
At any time, we may terminate all of our obligations under the
notes and the Indenture (legal defeasance), except
for certain obligations, including those respecting the
defeasance trust and obligations to register the transfer or
exchange of the notes, to replace mutilated, destroyed, lost or
stolen Notes and to maintain a registrar and paying agent in
respect of the notes.
In addition, at any time we may terminate our obligations under
Change of Control and under the
covenants described under Certain
Covenants (other than the covenant described under
Merger and Consolidation), the operation
of the cross acceleration provision, the bankruptcy provisions
with respect to Subsidiary Guarantors and Significant
Subsidiaries and the judgment default provision described under
Defaults above and the limitations
contained in clause (3) of the first paragraph under
Certain Covenants Merger and
Consolidation above (covenant defeasance).
We may exercise our legal defeasance option notwithstanding our
prior exercise of our covenant defeasance option. If we exercise
our legal defeasance option, payment of the notes may not be
accelerated because of an Event of Default with respect thereto.
If we exercise our covenant defeasance option, payment of the
notes may not be accelerated because of an Event of Default
specified in clause (4), (6), (7) (with respect only to
Significant Subsidiaries and Subsidiary Guarantors) or
(8) under Defaults above or because
of the failure of the Company to comply with clause (3) of
the first paragraph under Certain
Covenants Merger and Consolidation above. If
we exercise our legal defeasance option or our covenant
defeasance option, each Subsidiary Guarantor will be released
from all of its obligations with respect to its Subsidiary
Guarantee.
In order to exercise either of our defeasance options, we must
irrevocably deposit in trust (the defeasance trust)
with the Trustee money or U.S. Government Obligations for
the payment of principal and interest on the notes to redemption
or maturity, as the case may be, and must comply with certain
other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the notes will
not recognize income, gain or loss for Federal income tax
purposes as a result of such deposit and defeasance and will be
subject to Federal income tax on the same amounts and in the
same manner and at the same times as would have been the case if
such deposit and defeasance had not occurred (and, in the case
of legal defeasance only, such Opinion of Counsel must be based
on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law).
67
Concerning
the Trustee
HSBC Bank USA, National Association is the Trustee under the
Indenture. We have appointed U.S. Bank National Association (as
successor to SunTrust Bank) as Registrar and Paying Agent with
regard to the notes.
The Indenture contains certain limitations on the rights of the
Trustee, should it become a creditor of the Company, to obtain
payment of claims in certain cases, or to realize on certain
property received in respect of any such claim as security or
otherwise. The Trustee will be permitted to engage in other
transactions; provided, however, if it acquires
any conflicting interest it must either eliminate such conflict
within 90 days, apply to the SEC for permission to continue
or resign.
The Holders of a majority in principal amount of the outstanding
notes will have the right to direct the time, method and place
of conducting any proceeding for exercising any remedy available
to the Trustee, subject to certain exceptions. If an Event of
Default occurs (and is not cured), the Trustee will be required,
in the exercise of its power, to use the degree of care of a
prudent man in the conduct of his own affairs. Subject to such
provisions, the Trustee will be under no obligation to exercise
any of its rights or powers under the Indenture at the request
of any Holder of notes, unless such Holder shall have offered to
the Trustee security and indemnity satisfactory to it against
any loss, liability or expense and then only to the extent
required by the terms of the Indenture.
No
Personal Liability of Directors, Officers, Employees and
Stockholders
No director, officer, employee, incorporator or stockholder of
the Company or any Subsidiary Guarantor will have any liability
for any obligations of the Company or any Subsidiary Guarantor
under the notes, any Subsidiary Guarantee or the Indenture or
for any claim based on, in respect of, or by reason of such
obligations or their creation. Each Holder of the notes by
accepting a note waives and releases all such liability. The
waiver and release are part of the consideration for issuance of
the notes. Such waiver and release may not be effective to waive
liabilities under the U.S. Federal securities laws, and it
is the view of the SEC that such a waiver is against public
policy.
Governing
Law
The Indenture and the notes will be governed by, and construed
in accordance with, the laws of the State of New York.
Certain
Definitions
Additional Assets means:
(1) any property, plant or equipment used in a Related
Business;
(2) the Capital Stock of a Person that becomes a Restricted
Subsidiary as a result of the acquisition of such Capital Stock
by the Company or another Restricted Subsidiary; or
(3) Capital Stock constituting a minority interest in any
Person that at such time is a Restricted Subsidiary;
provided, however, that any such Restricted
Subsidiary described in clause (2) or (3) above is
primarily engaged in a Related Business.
Affiliate of any specified Person means any
other Person, directly or indirectly, controlling or controlled
by or under direct or indirect common control with such
specified Person. For the purposes of this definition,
control when used with respect to any Person means
the power to direct the management and policies of such Person,
directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms
controlling and controlled have meanings
correlative to the foregoing.
Asset Disposition means any sale, lease,
transfer or other disposition (or series of related sales,
leases, transfers or dispositions) by the Company or any
Restricted Subsidiary, including any disposition by means of
68
a merger, consolidation or similar transaction (each referred to
for the purposes of this definition as a
disposition), of:
(1) any shares of Capital Stock of a Restricted Subsidiary
(other than directors qualifying shares or shares required
by applicable law to be held by a Person other than the Company
or a Restricted Subsidiary),
(2) all or substantially all the assets of any division or
line of business of the Company or any Restricted
Subsidiary, or
(3) any other assets of the Company or any Restricted
Subsidiary outside of the ordinary course of business of the
Company or such Restricted Subsidiary;
provided, however, that the following shall not
constitute an Asset Disposition:
(A) a disposition by a Restricted Subsidiary to the Company
or by the Company or a Restricted Subsidiary to a Restricted
Subsidiary;
(B) for purposes of the covenant described under
Certain Covenants Limitation on
Sales of Assets and Subsidiary Stock only, (i) a
disposition that constitutes a Restricted Payment (or would
constitute a Restricted Payment but for the exclusions from the
definition thereof) and that is not prohibited by the covenant
described under Certain Covenants
Limitation on Restricted Payments and (ii) a
disposition of all or substantially all the assets of the
Company in accordance with the covenant described under
Certain Covenants Merger and
Consolidation;
(C) a disposition of assets with a fair market value of
less than $2.5 million;
(D) a disposition of cash or Temporary Cash Investments;
(E) dispositions (including without limitation surrenders
and waivers) of accounts receivable or other contract rights in
connection with the compromise, settlement or collection thereof;
(F) any sale or disposition of any property or equipment
that has become damaged, worn out or obsolete or pursuant to a
program for the maintenance or upgrading of such property or
equipment;
(G) the creation of a Lien (but not the sale or other
disposition of the property subject to such Lien); and
(H) any disposition of assets that constitutes a Change of
Control to the extent the Company has complied with the
provisions under Change of Control.
Attributable Debt in respect of a
Sale/Leaseback Transaction means, as at the time of
determination, the present value (discounted at the interest
rate borne by the notes, compounded annually) of the total
obligations of the lessee for rental payments during the
remaining term of the lease included in such Sale/Leaseback
Transaction (including any period for which such lease has been
extended); provided, however, that if such
Sale/Leaseback Transaction results in a Capital Lease
Obligation, the amount of Indebtedness represented thereby will
be determined in accordance with the definition of Capital
Lease Obligation.
Average Life means, as of the date of
determination, with respect to any Indebtedness, the quotient
obtained by dividing:
(1) the sum of the products of the numbers of years from
the date of determination to the dates of each successive
scheduled principal payment of or redemption or similar payment
with respect to such Indebtedness multiplied by the amount of
such payment by
(2) the sum of all such payments.
Board of Directors means the Board of
Directors of the Company or any committee thereof duly
authorized to act on behalf of such Board.
Business Day means each day which is not a
Legal Holiday.
69
Capital Lease Obligation means an obligation
that is required to be classified and accounted for as a capital
lease for financial reporting purposes in accordance with GAAP,
and the amount of Indebtedness represented by such obligation
shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be
the date of the last payment of rent or any other amount due
under such lease prior to the first date upon which such lease
may be terminated by the lessee without payment of a penalty.
For purposes of the covenant described under
Certain Covenants Limitation on
Liens, a Capital Lease Obligation will be deemed to be
secured by a Lien on the property being leased.
Capital Stock of any Person means any and all
shares, interests (including partnership interests), rights to
purchase, warrants, options, participations or other equivalents
of or interests in (however designated) equity of such Person,
including any Preferred Stock, but excluding any debt securities
convertible into such equity.
Chillicothe Acquisition means the
Companys acquisition of certain assets located in Ohio
from NewPage Corporation pursuant to the terms of an Asset
Purchase Agreement dated February 21, 2006.
Code means the Internal Revenue Code of 1986,
as amended.
Commodity Agreement means any commodity
forward contract, commodities futures contract, commodity swaps,
commodity option or other similar agreement or arrangement.
Consolidated Coverage Ratio as of any date of
determination means the ratio of (a) the aggregate amount
of EBITDA for the period of the most recent four consecutive
fiscal quarters ending at least 45 days prior to the date
of such determination to (b) Consolidated Interest Expense
for such four fiscal quarters; provided, however,
that:
(1) if the Company or any Restricted Subsidiary has
Incurred any Indebtedness since the beginning of such period
that remains outstanding or if the transaction giving rise to
the need to calculate the Consolidated Coverage Ratio is an
Incurrence of Indebtedness, or both, EBITDA and Consolidated
Interest Expense for such period shall be calculated after
giving effect on a pro forma basis to such
Indebtedness as if such Indebtedness had been Incurred on the
first day of such period;
(2) if the Company or any Restricted Subsidiary has repaid,
repurchased, defeased or otherwise discharged any Indebtedness
since the beginning of such period or if any Indebtedness is to
be repaid, repurchased, defeased or otherwise discharged (in
each case other than Indebtedness Incurred under any revolving
credit facility unless such Indebtedness has been permanently
repaid and has not been replaced) on the date of the transaction
giving rise to the need to calculate the Consolidated Coverage
Ratio, EBITDA and Consolidated Interest Expense for such period
shall be calculated on a pro forma basis as if such
discharge had occurred on the first day of such period and as if
the Company or such Restricted Subsidiary had not earned the
interest income actually earned during such period in respect of
cash or Temporary Cash Investments used to repay, repurchase,
defease or otherwise discharge such Indebtedness;
(3) if since the beginning of such period the Company or
any Restricted Subsidiary shall have made any Asset Disposition,
EBITDA for such period shall be reduced by an amount equal to
EBITDA (if positive) directly attributable to the assets which
are the subject of such Asset Disposition for such period, or
increased by an amount equal to EBITDA (if negative), directly
attributable thereto for such period and Consolidated Interest
Expense for such period shall be reduced by an amount equal to
the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid,
repurchased, defeased or otherwise discharged with respect to
the Company and its continuing Restricted Subsidiaries in
connection with such Asset Disposition for such period (or, if
the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary
to the extent the Company and its continuing Restricted
Subsidiaries are no longer liable for such Indebtedness after
such sale);
(4) if since the beginning of such period the Company or
any Restricted Subsidiary (by merger or otherwise) shall have
made an Investment in any Restricted Subsidiary (or any Person
which becomes a Restricted Subsidiary) or an acquisition of
assets, including any acquisition of assets occurring in
connection with a transaction requiring a calculation to be made
hereunder, which constitutes all or
70
substantially all of an operating unit of a business, EBITDA and
Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto
(including the Incurrence of any Indebtedness) as if such
Investment or acquisition had occurred on the first day of such
period; and
(5) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with
or into the Company or any Restricted Subsidiary since the
beginning of such period) shall have made any Asset Disposition,
any Investment or acquisition of assets that would have required
an adjustment pursuant to clause (3) or (4) above if
made by the Company or a Restricted Subsidiary during such
period, EBITDA and Consolidated Interest Expense for such period
shall be calculated after giving pro forma effect thereto
as if such Asset Disposition, Investment or acquisition had
occurred on the first day of such period.
For purposes of this definition, whenever pro forma
effect is to be given to an acquisition of assets, the
amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness
Incurred in connection therewith, the pro forma
calculations shall be determined in good faith by a responsible
financial or accounting Officer of the Company. If any
Indebtedness bears a floating rate of interest and is being
given pro forma effect, the interest on such Indebtedness
shall be calculated as if the rate in effect on the date of
determination had been the applicable rate for the entire period
(taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a
remaining term in excess of 12 months).
If any Indebtedness is incurred under a revolving credit
facility and is being given pro forma effect, the
interest on such Indebtedness shall be calculated based on the
average daily balance of such Indebtedness for the four fiscal
quarters subject to the pro forma calculation to the
extent that such Indebtedness was incurred solely for working
capital purposes.
Consolidated Current Liabilities as of the
date of determination means the aggregate amount of liabilities
of the Company and its consolidated Restricted Subsidiaries
which may properly be classified as current liabilities
(including taxes accrued as estimated), on a consolidated basis,
after eliminating:
(1) all intercompany items between the Company and any
Restricted Subsidiary; and
(2) all current maturities of long-term Indebtedness, all
as determined in accordance with GAAP consistently applied.
Consolidated Interest Expense means, for any
period, the total interest expense of the Company and its
consolidated Restricted Subsidiaries, plus, to the extent not
included in such total interest expense, and to the extent
incurred by the Company or its Restricted Subsidiaries, without
duplication:
(1) interest expense attributable to Capital Lease
Obligations;
(2) amortization of debt discount and debt issuance cost;
(3) capitalized interest;
(4) non-cash interest expense;
(5) commissions, discounts and other fees and charges owed
with respect to letters of credit and bankers acceptance
financing;
(6) net payments pursuant to Hedging Obligations;
(7) dividends accrued in respect of all Disqualified Stock
of the Company and all Preferred Stock of any Restricted
Subsidiary, in each case held by Persons other than the Company
or a Wholly Owned Subsidiary (other than dividends payable
solely in Capital Stock (other than Disqualified Stock) of the
Company); provided, however, that such dividends
will be multiplied by a fraction the numerator of which is one
and the denominator of which is one minus the effective combined
tax rate of the issuer of such Preferred Stock (expressed as a
decimal) for such period (as estimated by the chief financial
officer of the Company in good faith);
71
(8) interest incurred in connection with Investments in
discontinued operations;
(9) interest accruing on any Indebtedness of any other
Person to the extent such Indebtedness is Guaranteed by (or
secured by the assets of) the Company or any Restricted
Subsidiary; and
(10) the cash contributions to any employee stock ownership
plan or similar trust to the extent such contributions are used
by such plan or trust to pay interest or fees to any Person
(other than the Company) in connection with Indebtedness
Incurred by such plan or trust.
Consolidated Net Income means, for any
period, the net income of the Company and its consolidated
Subsidiaries; provided, however, that there shall
not be included in such Consolidated Net Income:
(1) any net income of any Person (other than the Company)
if such Person is not a Restricted Subsidiary, except that:
(A) subject to the exclusion contained in clause (4)
below, the Companys equity in the net income of any such
Person for such period shall be included in such Consolidated
Net Income up to the aggregate amount of cash actually
distributed by such Person during such period to the Company or
a Restricted Subsidiary as a dividend or other distribution
(subject, in the case of a dividend or other distribution paid
to a Restricted Subsidiary, to the limitations contained in
clause (3) below); and
(B) the Companys equity in a net loss of any such
Person for such period shall be included in determining such
Consolidated Net Income;
(2) any net income (or loss) of any Person acquired by the
Company or a Subsidiary in a pooling of interests transaction
(or any transaction accounted for in a manner similar to a
pooling of interests) for any period prior to the date of such
acquisition;
(3) any net income of any Restricted Subsidiary if such
Restricted Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of
distributions by such Restricted Subsidiary, directly or
indirectly, to the Company, except that:
(A) subject to the exclusion contained in clause (4)
below, the Companys equity in the net income of any such
Restricted Subsidiary for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash
actually distributed by such Restricted Subsidiary during such
period to the Company or another Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a
dividend or other distribution paid to another Restricted
Subsidiary, to the limitation contained in this clause); and
(B) the Companys equity in a net loss of any such
Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income;
(4) any gain (or loss) realized upon the sale or other
disposition of any assets of the Company, its consolidated
Subsidiaries or any other Person (including pursuant to any
sale-and-leaseback arrangement) which is not sold or otherwise
disposed of in the ordinary course of business and any gain (or
loss) realized upon the sale or other disposition of any Capital
Stock of any Person;
(5) extraordinary gains or losses; and
(6) the cumulative effect of a change in accounting
principles,
in each case, for such period. Notwithstanding the foregoing,
for the purposes of the covenant described under
Certain Covenants Limitation on
Restricted Payments only, there shall be excluded from
Consolidated Net Income any repurchases, repayments or
redemptions of Investments, proceeds realized on the sale of
Investments or return of capital to the Company or a Restricted
Subsidiary to the extent such repurchases, repayments,
redemptions, proceeds or returns increase the amount of
Restricted Payments permitted under such covenant pursuant to
clause (a)(3)(D) thereof.
72
Consolidated Net Tangible Assets as of any
date of determination, means the total amount of assets (less
accumulated depreciation and amortization, allowances for
doubtful receivables, other applicable reserves and other
properly deductible items) which would appear on a consolidated
balance sheet of the Company and its consolidated Restricted
Subsidiaries, determined on a consolidated basis in accordance
with GAAP, and after giving effect to purchase accounting and
after deducting therefrom Consolidated Current Liabilities and,
to the extent otherwise included, the amounts of:
(1) minority interests in consolidated Subsidiaries held by
Persons other than the Company or a Restricted Subsidiary;
(2) excess of cost over fair value of assets of businesses
acquired, as determined in good faith by the Board of Directors;
(3) any revaluation or other
write-up in
book value of assets subsequent to the Issue Date as a result of
a change in the method of valuation in accordance with GAAP
consistently applied;
(4) unamortized debt discount and expenses and other
unamortized deferred charges, goodwill, patents, trademarks,
service marks, trade names, copyrights, licenses, organization
or developmental expenses and other intangible items;
(5) treasury stock;
(6) cash set apart and held in a sinking or other analogous
fund established for the purpose of redemption or other
retirement of Capital Stock to the extent such obligation is not
reflected in Consolidated Current Liabilities; and
(7) Investments in and assets of Unrestricted Subsidiaries.
Credit Agreement means the Credit Agreement
dated as of April 3, 2006, as amended, entered into by and
among, the Company, certain of its Subsidiaries, the lenders
from time to time a party thereto, PNC Bank, National
Association, as Agent, and Credit Suisse Securities
(USA) LLC, as Syndication Agent, together with the related
documents thereto (including the term loans and revolving loans
thereunder, any guarantees and security documents), as amended,
extended, renewed, restated, supplemented, refunded, replaced,
refinanced or otherwise modified (in whole or in part, and
without limitation as to amount, terms, conditions, covenants
and other provisions) from time to time by one or more credit
facilities, and any agreement (and related document) entered
into in substitution for any credit agreement, in which case,
the credit agreement or similar agreement together with all
other documents and instruments related thereto shall constitute
the Credit Agreement, whether with the same or any
other agent, lender or group of lenders.
Credit Facilities means one or more debt
facilities (including the Credit Agreement (and any hedging
arrangements with the lenders thereunder or Affiliates of such
lenders, secured by the collateral securing the Companys
Obligations under the Credit Agreement, if any), commercial
paper facilities, fiscal agency agreements or indentures, in
each case with banks or other institutional lenders or a
trustee, providing for revolving credit loans, term loans,
receivables financing (including through the sale of receivables
to such lenders or to special purpose entities formed to borrow
from such lenders against such receivables), letters of credit
or issuance of notes, bonds, debentures or other evidences of
Indebtedness, in each case as amended, extended, renewed,
restated, supplemented, refunded, replaced, refinanced or
otherwise modified (in whole or in part, and without limitation
as to amount, terms, conditions, covenants and other provisions)
from time to time by one or more of such facilities or forms of
Indebtedness.
Currency Agreement means in any foreign
exchange contract, currency swap agreement or other similar
agreement with respect to currency values.
Default means any event which is, or after
notice or passage of time or both would be, an Event of Default.
73
Disqualified Stock means, with respect to any
Person, any Capital Stock which by its terms (or by the terms of
any security into which it is convertible or for which it is
exchangeable at the option of the holder) or upon the happening
of any event:
(1) matures or is mandatorily redeemable (other than
redeemable only for Capital Stock of such Person which is not
itself Disqualified Stock) pursuant to a sinking fund obligation
or otherwise;
(2) is convertible or exchangeable at the option of the
holder for Indebtedness or Disqualified Stock; or
(3) is mandatorily redeemable or must be purchased upon the
occurrence of certain events or otherwise, in whole or in part;
in each case on or prior to the first anniversary of the Stated
Maturity of the notes; provided, however, that any
Capital Stock that would not constitute Disqualified Stock but
for provisions thereof giving holders thereof the right to
require such Person to purchase or redeem such Capital Stock
upon the occurrence of an asset sale or change
of control occurring prior to the first anniversary of the
Stated Maturity of the notes shall not constitute Disqualified
Stock if:
(i) the asset sale or change of
control provisions applicable to such Capital Stock are
not more favorable to the holders of such Capital Stock than the
terms applicable to the notes and described under
Certain Covenants Limitation on
Sales of Assets and Subsidiary Stock and
Certain Covenants Change of
Control; and
(ii) any such requirement only becomes operative after
compliance with such terms applicable to the notes, including
the purchase of any notes tendered pursuant thereto.
The amount of any Disqualified Stock that does not have a fixed
redemption, repayment or repurchase price will be calculated in
accordance with the terms of such Disqualified Stock as if such
Disqualified Stock were redeemed, repaid or repurchased on any
date on which the amount of such Disqualified Stock is to be
determined pursuant to the Indenture; provided,
however, that if such Disqualified Stock could not be
required to be redeemed, repaid or repurchased at the time of
such determination, the redemption, repayment or repurchase
price will be the book value of such Disqualified Stock as
reflected in the most recent financial statements of such Person.
Domestic Restricted Subsidiary means any
Restricted Subsidiary that is not a Foreign Subsidiary.
EBITDA for any period means the sum of
Consolidated Net Income, plus the following to the extent
deducted in calculating such Consolidated Net Income:
(1) all income tax expense of the Company and its
consolidated Restricted Subsidiaries;
(2) Consolidated Interest Expense;
(3) depreciation and amortization expense of the Company
and its consolidated Restricted Subsidiaries (excluding
amortization expense attributable to a prepaid item that was
paid in cash in a prior period); and
(4) all other non-cash charges of the Company and its
consolidated Restricted Subsidiaries (excluding any such
non-cash charge to the extent that it represents an accrual of
or reserve for cash expenditures in any future period) less all
non-cash items of income of the Company and its consolidated
Restricted Subsidiaries (other than accruals of revenue by the
Company and its consolidated Restricted Subsidiaries in the
ordinary course of business);
in each case for such period. Notwithstanding the foregoing, the
provision for taxes based on the income or profits of, and the
depreciation and amortization and non-cash charges of, a
Restricted Subsidiary shall be added to Consolidated Net Income
to compute EBITDA only to the extent (and in the same
proportion, including by reason of minority interests) that the
net income or loss of such Restricted Subsidiary was included in
calculating Consolidated Net Income and only if a corresponding
amount would be permitted at the date of determination to be
dividended to the Company by such Restricted Subsidiary without
prior
74
approval (that has not been obtained), pursuant to the terms of
its charter and all agreements, instruments, judgments, decrees,
orders, statutes, rules and governmental regulations applicable
to such Restricted Subsidiary or its stockholders.
Equity Offering means any public or private
sale after the Issue Date of common stock of the Company, other
than public offerings with respect to the Companys common
stock registered on
Form S-8.
Exchange Act means the U.S. Securities
Exchange Act of 1934, as amended.
Exchange Notes means the debt securities of
the Company issued pursuant to the Indenture in exchange for,
and in an aggregate principal amount equal to, the notes, in
compliance with the terms of the Registration Rights Agreement.
Existing Notes means the outstanding
71/8% Senior
Notes due 2016 of the Company issued under an Indenture dated
April 28, 2006, as supplemented, among the Company,
Suntrust Bank, as Trustee, and the Subsidiary Guarantors (as
defined therein).
Existing Notes Issue Date means
April 28, 2006, the date on which the Existing Notes were
originally issued.
Foreign Subsidiary means any Restricted
Subsidiary of the Company that is not organized under the laws
of the United States of America or any State thereof or the
District of Columbia.
GAAP means generally accepted accounting
principles in the United States of America as in effect from
time to time, including those set forth in:
(1) the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified Public
Accountants;
(2) statements and pronouncements of the Financial
Accounting Standards Board;
(3) such other statements by such other entity as approved
by a significant segment of the accounting profession; and
(4) the rules and regulations of the SEC governing the
inclusion of financial statements (including pro forma
financial statements) in periodic reports required to be
filed pursuant to Section 13 of the Exchange Act, including
opinions and pronouncements in staff accounting bulletins and
similar written statements from the accounting staff of the SEC.
Guarantee means any obligation, contingent or
otherwise, of any Person directly or indirectly guaranteeing any
Indebtedness of any Person and any obligation, direct or
indirect, contingent or otherwise, of such Person:
(1) to purchase or pay (or advance or supply funds for the
purchase or payment of) such Indebtedness of such Person
(whether arising by virtue of partnership arrangements, or by
agreements to keep-well, to purchase assets, goods, securities
or services, to take-or-pay or to maintain financial statement
conditions or otherwise); or
(2) entered into for the purpose of assuring in any other
manner the obligee of such Indebtedness of the payment thereof
or to protect such obligee against loss in respect thereof (in
whole or in part);
provided, however, that the term
Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business. The
term Guarantee used as a verb has a corresponding
meaning.
Guarantee Agreement means a supplemental
indenture, in a form reasonably satisfactory to the Trustee,
pursuant to which a Subsidiary Guarantor guarantees the
Companys obligations with respect to the notes on the
terms provided for in the Indenture.
Hedging Obligations of any Person means the
obligations of such Person pursuant to any Interest Rate
Agreement, Currency Agreement or Commodity Agreement.
Holder or Noteholder means
the Person in whose name a note is registered on the
Registrars books.
75
Incur means issue, assume, Guarantee, incur
or otherwise become liable for; provided, however,
that any Indebtedness of a Person existing at the time such
Person becomes a Restricted Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be
Incurred by such Person at the time it becomes a Restricted
Subsidiary. The term Incurrence when used as a noun
shall have a correlative meaning. Solely for purposes of
determining compliance with Certain
Covenants Limitation on Indebtedness:
(1) amortization of debt discount or the accretion of
principal with respect to a non-interest bearing or other
discount security;
(2) the payment of regularly scheduled interest in the form
of additional Indebtedness of the same instrument or the payment
of regularly scheduled dividends on Capital Stock in the form of
additional Capital Stock of the same class and with the same
terms; and
(3) the obligation to pay a premium in respect of
Indebtedness arising in connection with the issuance of a notice
of redemption or making of a mandatory offer to purchase such
Indebtedness
will not be deemed to be the Incurrence of Indebtedness.
Indebtedness means, with respect to any
Person on any date of determination (without duplication):
(1) the principal in respect of (A) indebtedness of
such Person for money borrowed and (B) indebtedness
evidenced by notes, debentures, bonds or other similar
instruments for the payment of which such Person is responsible
or liable, including, in each case, any premium on such
indebtedness to the extent such premium has become due and
payable;
(2) all Capital Lease Obligations of such Person and all
Attributable Debt in respect of Sale/Leaseback Transactions
entered into by such Person;
(3) all obligations of such Person issued or assumed as the
deferred purchase price of property, all conditional sale
obligations of such Person and all obligations of such Person
under any title retention agreement (but excluding any accounts
payable or other liability to trade creditors arising in the
ordinary course of business);
(4) all obligations of such Person for the reimbursement of
any obligor on any letter of credit, bankers acceptance or
similar credit transaction (other than obligations with respect
to letters of credit securing obligations (other than
obligations described in clauses (1) through
(3) above) entered into in the ordinary course of business
of such Person to the extent such letters of credit are not
drawn upon or, if and to the extent drawn upon, such drawing is
reimbursed no later than the tenth Business Day following
payment on the letter of credit);
(5) the amount of all obligations of such Person with
respect to the redemption, repayment or other repurchase of any
Disqualified Stock of such Person or, with respect to any
Preferred Stock of any Subsidiary of such Person, the principal
amount of such Preferred Stock to be determined in accordance
with the Indenture (but excluding, in each case, any accrued
dividends);
(6) all obligations of the type referred to in
clauses (1) through (5) of other Persons and all
dividends of other Persons for the payment of which, in either
case, such Person is responsible or liable, directly or
indirectly, as obligor, guarantor or otherwise, including by
means of any Guarantee;
(7) all obligations of the type referred to in
clauses (1) through (6) of other Persons secured by
any Lien on any property or asset of such Person (whether or not
such obligation is assumed by such Person), the amount of such
obligation being deemed to be the lesser of the fair market
value of such property or assets and the amount of the
obligation so secured; and
(8) to the extent not otherwise included in this
definition, Hedging Obligations of such Person.
Notwithstanding the foregoing, in connection with the purchase
by the Company or any Restricted Subsidiary of any business, the
term Indebtedness will exclude post-closing payment
adjustments to which the seller may become entitled to the
extent such payment is determined by a final closing balance
sheet or such
76
payment depends on the performance of such business after the
closing; provided, however, that, at the time of
closing, the amount of any such payment is not determinable and,
to the extent such payment thereafter becomes fixed and
determined, the amount is paid within 30 days thereafter.
The amount of Indebtedness of any Person at any date shall be
the outstanding balance at such date of all obligations as
described above; provided, however, that in the
case of Indebtedness sold at a discount, the amount of such
Indebtedness at any time will be the accreted value thereof at
such time.
Independent Qualified Party means an
investment banking firm, accounting firm or appraisal firm of
national standing; provided, however, that such
firm is not an Affiliate of the Company.
Initial Purchaser means Credit Suisse
Securities (USA) LLC.
Interest Rate Agreement means any interest
rate swap agreement, interest rate cap agreement or other
financial agreement or arrangement with respect to exposure to
interest rates.
Investment in any Person means any direct or
indirect advance, loan (other than advances to customers in the
ordinary course of business that are recorded as accounts
receivable on the balance sheet of the lender) or other
extensions of credit (including by way of Guarantee or similar
arrangement) or capital contribution to (by means of any
transfer of cash or other property to others or any payment for
property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. If the Company or any
Restricted Subsidiary issues, sells or otherwise disposes of any
Capital Stock of a Person that is a Restricted Subsidiary such
that, after giving effect thereto, such Person is no longer a
Restricted Subsidiary, any Investment by the Company or any
Restricted Subsidiary in such Person remaining after giving
effect thereto will be deemed to be a new Investment at such
time. The acquisition by the Company or any Restricted
Subsidiary of a Person that holds an Investment in a third
Person will be deemed to be an Investment by the Company or such
Restricted Subsidiary in such third Person at such time. Except
as otherwise provided for herein, the amount of an Investment
shall be its fair market value at the time the Investment is
made and without giving effect to subsequent changes in value.
For purposes of the definition of Unrestricted
Subsidiary, the definition of Restricted
Payment and the covenant described under
Certain Covenants Limitation on
Restricted Payments:
(1) Investment shall include the portion
(proportionate to the Companys equity interest in such
Subsidiary) of the fair market value of the net assets of any
Subsidiary of the Company at the time that such Subsidiary is
designated an Unrestricted Subsidiary; provided,
however, that upon a redesignation of such Subsidiary as
a Restricted Subsidiary, the Company shall be deemed to continue
to have a permanent Investment in an Unrestricted
Subsidiary equal to an amount (if positive) equal to
(A) the Companys Investment in such
Subsidiary at the time of such redesignation less (B) the
portion (proportionate to the Companys equity interest in
such Subsidiary) of the fair market value of the net assets of
such Subsidiary at the time of such redesignation; and
(2) any property transferred to or from an Unrestricted
Subsidiary shall be valued at its fair market value at the time
of such transfer, in each case as determined in good faith by
the Board of Directors.
Investment Grade Rating means a rating equal
to or higher than Baa3 (or equivalent) by Moodys and
BBB (or the equivalent) by Standard and Poors, or an
equivalent rating by any other Rating Agency.
Issue Date means the date on which the
unregistered notes were originally issued.
Legal Holiday means a Saturday, a Sunday or a
day on which banking institutions are not required to be open in
the State of New York.
Lien means any mortgage, pledge, security
interest, encumbrance, lien or charge of any kind (including any
conditional sale or other title retention agreement or lease in
the nature thereof).
Moodys means Moodys Investors
Service, Inc. and any successor to its rating agency business.
Net Available Cash from an Asset Disposition
means cash payments received therefrom (including any cash
payments received by way of deferred payment of principal
pursuant to a note or installment receivable
77
or otherwise and proceeds from the sale or other disposition of
any securities received as consideration, but only as and when
received, but excluding any other consideration received in the
form of assumption by the acquiring Person of Indebtedness or
other obligations relating to such properties or assets or
received in any other non-cash form), in each case net of:
(1) all legal, title and recording tax expenses,
commissions and other fees and expenses incurred, and all
Federal, state, provincial, foreign and local taxes required to
be accrued as a liability under GAAP, as a consequence of such
Asset Disposition;
(2) all payments made on any Indebtedness which is secured
by any assets subject to such Asset Disposition, in accordance
with the terms of any Lien upon or other security agreement of
any kind with respect to such assets, or which must by its
terms, or in order to obtain a necessary consent to such Asset
Disposition, or by applicable law, be repaid out of the proceeds
from such Asset Disposition;
(3) all distributions and other payments required to be
made to minority interest holders in Restricted Subsidiaries as
a result of such Asset Disposition;
(4) the deduction of appropriate amounts provided by the
seller as a reserve, in accordance with GAAP, against any
liabilities associated with the property or other assets
disposed in such Asset Disposition and retained by the Company
or any Restricted Subsidiary after such Asset
Disposition; and
(5) any portion of the purchase price from an Asset
Disposition placed in escrow, whether as a reserve for
adjustment of the purchase price, for satisfaction of
indemnities in respect of such Asset Disposition or otherwise in
connection with that Asset Disposition; provided,
however, that upon the termination of that escrow, Net
Available Cash will be increased by any portion of funds in the
escrow that are released to the Company or any Restricted
Subsidiary.
Net Cash Proceeds, with respect to any
issuance or sale of Capital Stock or Indebtedness, means the
cash proceeds of such issuance or sale net of attorneys
fees, accountants fees, underwriters or placement
agents fees, discounts or commissions and brokerage,
consultant and other fees actually incurred in connection with
such issuance or sale and net of taxes paid or payable as a
result thereof.
Obligations means, with respect to any
Indebtedness, all obligations for principal, premium, interest,
penalties, fees, indemnifications, reimbursements, and other
amounts payable pursuant to the documentation governing such
Indebtedness.
Officer means the Chairman of the Board, the
President, any Vice President, the Treasurer or the Secretary of
the Company.
Officers Certificate means a
certificate signed by two Officers.
Opinion of Counsel means a written opinion
from legal counsel who is acceptable to the Trustee. The counsel
may be an employee of or counsel to the Company or the Trustee.
Permitted Investment means an Investment by
the Company or any Restricted Subsidiary in:
(1) the Company, a Restricted Subsidiary or a Person that
will, upon the making of such Investment, become a Restricted
Subsidiary; provided, however, that the primary
business of such Restricted Subsidiary is a Related Business;
(2) another Person if, as a result of such Investment, such
other Person is merged or consolidated with or into, or
transfers or conveys all or substantially all its assets to, the
Company or a Restricted Subsidiary; provided,
however, that such Persons primary business is a
Related Business;
(3) cash and Temporary Cash Investments;
(4) receivables owing to the Company or any Restricted
Subsidiary if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with
customary trade terms; provided, however, that
such trade terms may include such concessionary trade terms as
the Company or any such Restricted Subsidiary deems reasonable
under the circumstances;
78
(5) payroll, travel and similar advances to cover matters
that are expected at the time of such advances ultimately to be
treated as expenses for accounting purposes and that are made in
the ordinary course of business;
(6) loans or advances to employees made in the ordinary
course of business consistent with past practices of the Company
or such Restricted Subsidiary;
(7) stock, obligations or securities received in settlement
of debts created in the ordinary course of business and owing to
the Company or any Restricted Subsidiary or in satisfaction of
judgments;
(8) any Person to the extent such Investment represents the
non-cash portion of the consideration received for (A) an
Asset Disposition as permitted pursuant to the covenant
described under Certain Covenants
Limitation on Sales of Assets and Subsidiary Stock or
(B) a disposition of assets not constituting an Asset
Disposition;
(9) any Person where such Investment was acquired by the
Company or any of its Restricted Subsidiaries (A) in
exchange for any other Investment or accounts receivable held by
the Company or any such Restricted Subsidiary in connection with
or as a result of a bankruptcy, workout, reorganization or
recapitalization of the issuer of such other Investment or
accounts receivable or (B) as a result of a foreclosure by
the Company or any of its Restricted Subsidiaries with respect
to any secured Investment or other transfer of title with
respect to any secured Investment in default;
(10) any Person to the extent such Investments consist of
prepaid expenses, negotiable instruments held for collection and
lease, utility and workers compensation, performance and
other similar deposits made in the ordinary course of business
by the Company or any Restricted Subsidiary;
(11) any Person to the extent such Investments consist of
Hedging Obligations otherwise permitted under the covenant
described under Certain Covenants
Limitation on Indebtedness;
(12) any Person to the extent such Investment existed on
the Existing Notes Issue Date, and any extension, modification
or renewal of any such Investments existing on the Existing
Notes Issue Date, but only to the extent not involving
additional advances, contributions or other Investments of cash
or other assets or other increases thereof (other than as a
result of the accrual or accretion of interest or original issue
discount or the issuance of
pay-in-kind
securities, in each case, pursuant to the terms of such
Investment as in effect on the Existing Notes Issue Date;
(13) Investments in Permitted Joint Ventures, when taken
together with all other Investments made pursuant to this
clause (13), do not exceed $35.0 million;
(14) obligations of one or more officers, directors or
employees of the Company or any of its Restricted Subsidiaries
in connection with such individuals acquisition of shares
of Capital Stock of the Company (and refinancings of the
principal thereof and accrued interest thereon) so long as no
net cash or other assets of the Company and its Restricted
Subsidiaries are paid by the Company or any of its Restricted
Subsidiaries to such individuals in connection with the
acquisition of any such obligations;
(15) Investments in prepaid expenses, negotiable
instruments held for collection or deposit and lease, utility
and workers compensation, performance and similar deposits
entered into as a result of the operations of the business in
the ordinary course of business; and
(16) Persons to the extent such Investments, when taken
together with all other Investments made pursuant to this
clause (16) and outstanding on the date such
Investment is made, do not exceed the greater of
(i) $35 million and (ii) 3.0% of Consolidated Net
Tangible Assets.
Permitted Joint Venture means any joint
venture in which the Company or any Subsidiary thereof holds an
equity interest and that is engaged in a Related Business.
Permitted Liens means, with respect to any
Person:
(1) pledges or deposits by such Person under workers
compensation laws, unemployment insurance laws or similar
legislation, or good faith deposits in connection with bids,
tenders, contracts (other than
79
for the payment of Indebtedness) or leases to which such Person
is a party, or deposits to secure public or statutory
obligations of such Person or deposits of cash or United States
government bonds to secure surety or appeal bonds to which such
Person is a party, or deposits as security for contested taxes
or import duties or for the payment of rent, in each case
Incurred in the ordinary course of business;
(2) Liens imposed by law, such as carriers,
warehousemens and mechanics Liens, in each case for
sums not yet due or being contested in good faith by appropriate
proceedings or other Liens arising out of judgments or awards
against such Person with respect to which such Person shall then
be proceeding with an appeal or other proceedings for review and
Liens arising solely by virtue of any statutory or common law
provision relating to bankers Liens, rights of set-off or
similar rights and remedies as to deposit accounts or other
funds maintained with a creditor depository institution;
provided, however, that (A) such deposit
account is not a dedicated cash collateral account and is not
subject to restrictions against access by the Company in excess
of those set forth by regulations promulgated by the Federal
Reserve Board and (B) such deposit account is not intended
by the Company or any Restricted Subsidiary to provide
collateral to the depository institution;
(3) Liens for taxes, assessments or governmental charges
not yet subject to penalties for non-payment or which are being
contested in good faith by appropriate proceedings;
(4) Liens in favor of issuers of surety bonds or letters of
credit issued pursuant to the request of and for the account of
such Person in the ordinary course of its business;
provided, however, that such letters of credit do
not constitute Indebtedness;
(5) minor survey exceptions, minor encumbrances, easements
or reservations of, or rights of others for, licenses,
rights-of-way,
sewers, electric lines, telegraph and telephone lines and other
similar purposes, or zoning or other restrictions as to the use
of real property or Liens incidental to the conduct of the
business of such Person or to the ownership of its properties
which were not Incurred in connection with Indebtedness and
which do not in the aggregate materially adversely affect the
value of said properties or materially impair their use in the
operation of the business of such Person;
(6) Liens securing Indebtedness Incurred to finance the
construction, purchase or lease of, or repairs, improvements or
additions to, property, plant or equipment of such Person;
provided, however, that the Lien may not extend to
any other property owned by such Person or any of its Restricted
Subsidiaries at the time the Lien is Incurred (other than assets
and property affixed or appurtenant thereto), and the
Indebtedness (other than any interest thereon) secured by the
Lien may not be Incurred more than 180 days after the later
of the acquisition, completion of construction, repair,
improvement, addition or commencement of full operation of the
property subject to the Lien;
(7) Liens to secure Indebtedness permitted under the
provisions described in clause (b)(1) under
Certain Covenants Limitation on
Indebtedness (including, during any Suspension Period,
Indebtedness of the type and in the amounts specified under such
clause);
(8) Liens existing on the Existing Notes Issue Date;
(9) Liens on property or shares of Capital Stock of another
Person at the time such other Person becomes a Subsidiary of
such Person; provided, however, that the Liens may
not extend to any other property owned by such Person or any of
its Restricted Subsidiaries (other than assets and property
affixed or appurtenant thereto);
(10) Liens on property at the time such Person or any of
its Subsidiaries acquires the property, including any
acquisition by means of a merger or consolidation with or into
such Person or a Subsidiary of such Person; provided,
however, that the Liens may not extend to any other
property owned by such Person or any of its Restricted
Subsidiaries (other than assets and property affixed or
appurtenant thereto);
(11) Liens securing Indebtedness or other obligations of a
Subsidiary of such Person owing to such Person or a Restricted
Subsidiary of such Person;
80
(12) Liens securing Hedging Obligations so long as such
Hedging Obligations are permitted to be Incurred under the
Indenture;
(13) Liens to secure Indebtedness permitted under the
provisions described in clause (b)(11) under
Certain Covenants Limitation on
Indebtedness (including, during any Suspension Period,
Indebtedness of the type and in the amounts specified under such
clause); provided, however, such Liens are limited
to the assets that are the subject of such Indebtedness and the
proceeds thereof;
(14) Liens in favor of the Company or any Subsidiary
Guarantor; and
(15) Liens to secure any Refinancing (or successive
Refinancings) as a whole, or in part, of any Indebtedness
secured by any Lien referred to in the foregoing
clause (6), (8), (9), (10) or (13); provided,
however, that:
(A) such new Lien shall be limited to all or part of the
same property and assets that secured or, under the written
agreements pursuant to which the original Lien arose, could
secure the original Lien (plus improvements and accessions to,
such property or proceeds or distributions thereof); and
(B) the Indebtedness secured by such Lien at such time is
not increased to any amount greater than the sum of (i) the
outstanding principal amount or, if greater, committed amount of
the Indebtedness described under clause (6), (8), (9),(10)
or (13) at the time the original Lien became a Permitted
Lien and (ii) an amount necessary to pay any fees and
expenses, including premiums, related to such refinancing,
refunding, extension, renewal or replacement.
Notwithstanding the foregoing, Permitted Liens will
not include any Lien described in clause (6) or
(10) above to the extent such Lien applies to any
Additional Assets acquired directly or indirectly from Net
Available Cash pursuant to the covenant described under
Certain Covenants Limitation on
Sale of Assets and Subsidiary Stock. For purposes of this
definition, the term Indebtedness shall be deemed to
include interest on such Indebtedness.
Person means any individual, corporation,
partnership, limited liability company, joint venture,
association, joint-stock company, trust, unincorporated
organization, government or any agency or political subdivision
thereof or any other entity.
Pre-Approved Timberland Sale Initiative means
any initiative approved by the Board of Directors pursuant to
which the Company has identified timberland to be sold,
transferred or otherwise disposed and pursuant to which the
Board of Directors has authorized management of the Company to
effect the sale, transfer or disposal of such timberland.
Preferred Stock, as applied to the Capital
Stock of any Person, means Capital Stock of any class or classes
(however designated) which is preferred as to the payment of
dividends or distributions, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of
such Person, over shares of Capital Stock of any other class of
such Person.
principal of a note means the principal of
the note plus the premium, if any, payable on the note which is
due or overdue or is to become due at the relevant time.
Rating Agencies means Moodys and
S&P or, if Moodys or S&P or both shall not make
a rating on the Notes publicly available, a nationally
recognized statistical rating agency or agencies, as the case
may be, selected by the Board of Directors, which shall be
substituted for Moodys or S&P or both, as the case
may be.
Refinance means, in respect of any
Indebtedness, to refinance, extend, renew, refund, repay,
prepay, purchase, redeem, defease or retire, or to issue other
Indebtedness in exchange or replacement for, such Indebtedness.
Refinanced and Refinancing shall have
correlative meanings.
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Refinancing Indebtedness means Indebtedness
that Refinances any Indebtedness of the Company or any
Restricted Subsidiary existing on the Issue Date or Incurred in
compliance with the Indenture, including Indebtedness that
Refinances Refinancing Indebtedness; provided,
however, that:
(1) such Refinancing Indebtedness has a Stated Maturity no
earlier than the Stated Maturity of the Indebtedness being
Refinanced;
(2) such Refinancing Indebtedness has an Average Life at
the time such Refinancing Indebtedness is Incurred that is equal
to or greater than the Average Life of the Indebtedness being
Refinanced;
(3) such Refinancing Indebtedness has an aggregate
principal amount (or if Incurred with original issue discount,
an aggregate issue price) that is equal to or less than the
aggregate principal amount (or if Incurred with original issue
discount, the aggregate accreted value) then outstanding (plus
fees and expenses, including any premium and defeasance costs)
under the Indebtedness being Refinanced; and
(4) if the Indebtedness being Refinanced is subordinated in
right of payment to the notes, such Refinancing Indebtedness is
subordinated in right of payment to the notes at least to the
same extent as the Indebtedness being Refinanced;
provided further, however, that Refinancing
Indebtedness shall not include (A) Indebtedness of a
Subsidiary that Refinances Indebtedness of the Company or
(B) Indebtedness of the Company or a Restricted Subsidiary
that Refinances Indebtedness of an Unrestricted Subsidiary.
Registration Rights Agreement means the
Registration Rights Agreement dated February 5, 2010, among
the Company, the Subsidiary Guarantors and the Initial Purchaser.
Related Business means any business in which
the Company or any of the Restricted Subsidiaries was engaged on
the Issue Date and any business related, ancillary or
complementary to such business.
Restricted Payment with respect to any Person
means:
(1) the declaration or payment of any dividends or any
other distributions of any sort in respect of its Capital Stock
(including any payment in connection with any merger or
consolidation involving such Person) or similar payment to the
direct or indirect holders of its Capital Stock (other than
(A) dividends or distributions payable solely in its
Capital Stock (other than Disqualified Stock),
(B) dividends or distributions payable solely to the
Company or a Restricted Subsidiary and (C) pro rata
dividends or other distributions made by a Subsidiary that
is not a Wholly Owned Subsidiary to minority stockholders (or
owners of an equivalent interest in the case of a Subsidiary
that is an entity other than a corporation));
(2) the purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value of any Capital Stock
of the Company held by any Person (other than by a Restricted
Subsidiary) or of any Capital Stock of a Restricted Subsidiary
held by any Affiliate of the Company (other than by a Restricted
Subsidiary), including in connection with any merger or
consolidation and including the exercise of any option to
exchange any Capital Stock (other than into Capital Stock of the
Company that is not Disqualified Stock);
(3) the purchase, repurchase, redemption, defeasance or
other acquisition or retirement for value, prior to scheduled
maturity, scheduled repayment or scheduled sinking fund payment
of any Subordinated Obligations of the Company or any Subsidiary
Guarantor (other than (A) from the Company or a Restricted
Subsidiary or (B) the purchase, repurchase, redemption,
defeasance or other acquisition or retirement of Subordinated
Obligations purchased in anticipation of satisfying a sinking
fund obligation, principal installment or final maturity, in
each case due within one year of the date of such purchase,
repurchase, redemption, defeasance or other acquisition or
retirement); or
(4) the making of any Investment (other than a Permitted
Investment) in any Person.
Restricted Subsidiary means any Subsidiary of
the Company that is not an Unrestricted Subsidiary.
Sale/Leaseback Transaction means an
arrangement relating to property owned by the Company or a
Restricted Subsidiary on the Issue Date or thereafter acquired
by the Company or a Restricted Subsidiary
82
whereby the Company or a Restricted Subsidiary transfers such
property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
SEC means the U.S. Securities and
Exchange Commission.
Securities Act means the U.S. Securities
Act of 1933, as amended.
Senior Indebtedness means with respect to any
Person:
(1) Indebtedness of such Person, whether outstanding on the
Issue Date or thereafter Incurred; and
(2) all other Obligations of such Person (including
interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to such Person whether
or not post-filing interest is allowed in such proceeding) in
respect of Indebtedness described in clause (1) above
unless, in the case of clauses (1) and (2), in the
instrument creating or evidencing the same or pursuant to which
the same is outstanding, it is provided that such Indebtedness
or other Obligations are subordinate in right of payment to the
notes or the Subsidiary Guarantee of such Person, as the case
may be; provided, however, that Senior
Indebtedness shall not include:
(i) any obligation of such Person to the Company or any
Subsidiary of the Company;
(ii) any liability for Federal, state, local or other taxes
owed or owing by such Person;
(iii) any accounts payable or other liability to trade
creditors arising in the ordinary course of business;
(iv) any Indebtedness or other Obligation of such Person
which is subordinate or junior in any respect to any other
Indebtedness or other Obligation of such Person; or
(v) that portion of any Indebtedness which at the time of
Incurrence is Incurred in violation of the Indenture.
Significant Subsidiary means any Restricted
Subsidiary that would be a Significant Subsidiary of
the Company within the meaning of
Rule 1-02
under
Regulation S-X
promulgated by the SEC.
Standard & Poors means
Standard & Poors, a division of The McGraw-Hill
Companies, Inc., and any successor to its rating agency business.
Stated Maturity means, with respect to any
security, the date specified in such security as the fixed date
on which the final payment of principal of such security is due
and payable, including pursuant to any mandatory redemption
provision (but excluding any provision providing for the
repurchase of such security at the option of the holder thereof
upon the happening of any contingency unless such contingency
has occurred).
Subordinated Obligation means, with respect
to a Person, any Indebtedness of such Person (whether
outstanding on the Issue Date or thereafter Incurred) which is
subordinate or junior in right of payment to the notes or a
Subsidiary Guarantee of such Person, as the case may be,
pursuant to a written agreement to that effect.
Subsidiary means, with respect to any Person,
any corporation, association, partnership or other business
entity of which more than 50% of the total voting power of
shares of Voting Stock is at the time owned or controlled,
directly or indirectly, by:
(1) such Person;
(2) such Person and one or more Subsidiaries of such
Person; or
(3) one or more Subsidiaries of such Person.
Subsidiary Guarantor means each Subsidiary of
the Company that executes the Indenture as a guarantor on the
Issue Date and each other Subsidiary of the Company that
thereafter guarantees the notes pursuant to the terms of the
Indenture.
83
Subsidiary Guarantee means a Guarantee by a
Subsidiary Guarantor of the Companys obligations with
respect to the notes.
Temporary Cash Investments means any of the
following:
(1) any investment in direct obligations of the United
States of America or any agency thereof or obligations
guaranteed by the United States of America or any agency thereof;
(2) investments in demand and time deposit accounts,
certificates of deposit and money market deposits maturing
within 180 days of the date of acquisition thereof issued
by a bank or trust company which is organized under the laws of
the United States of America, any State thereof or any foreign
country recognized by the United States of America, and which
bank or trust company has capital, surplus and undivided profits
aggregating in excess of $50.0 million (or the foreign
currency equivalent thereof) and has outstanding debt which is
rated A (or such similar equivalent rating) or
higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities
Act) or any money-market fund sponsored by a registered broker
dealer or mutual fund distributor;
(3) repurchase obligations with a term of not more than
30 days for underlying securities of the types described in
clause (1) above entered into with a bank meeting the
qualifications described in clause (2) above;
(4) investments in commercial paper, maturing not more than
90 days after the date of acquisition, issued by a
corporation (other than an Affiliate of the Company) organized
and in existence under the laws of the United States of America
or any foreign country recognized by the United States of
America with a rating at the time as of which any investment
therein is made of P-1 (or higher) according to
Moodys or
A-1
(or higher) according to Standard & Poors;
(5) investments in securities with maturities of six months
or less from the date of acquisition issued or fully guaranteed
by any state, commonwealth or territory of the United States of
America, or by any political subdivision or taxing authority
thereof, and rated at least A by
Standard & Poors or A by
Moodys; and
(6) investments in money market funds that invest
substantially all their assets in securities of the types
described in clauses (1) through (5) above.
Trustee means HSBC Bank USA, National
Association until a successor replaces it and, thereafter, means
the successor.
Trust Indenture Act means the Trust Indenture
Act of 1939
(15 U.S.C. §§ 77aaa-77bbbb)
as in effect on the Issue Date.
Trust Officer means the Chairman of the
Board, the President or any other officer or assistant officer
of the Trustee assigned by the Trustee to administer its
corporate trust matters.
Unrestricted Subsidiary means:
(1) GPW Virginia Timberlands LLC
(2) any Subsidiary of the Company that at the time of
determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner provided below; and
(3) any Subsidiary of an Unrestricted Subsidiary.
The Board of Directors may designate any Subsidiary of the
Company (including any newly acquired or newly formed
Subsidiary) to be an Unrestricted Subsidiary unless such
Subsidiary or any of its Subsidiaries owns any Capital Stock or
Indebtedness of, or holds any Lien on any property of, the
Company or any other Subsidiary of the Company that is not a
Subsidiary of the Subsidiary to be so designated;
provided, however, that either (A) the
Subsidiary to be so designated has total assets of $1,000 or
less or (B) if such Subsidiary has assets greater than
$1,000, such designation would be permitted under the covenant
described under Certain Covenants
Limitation on Restricted Payments.
84
The Board of Directors may designate any Unrestricted Subsidiary
to be a Restricted Subsidiary; provided, however,
that immediately after giving effect to such designation
(A) the Company could Incur $1.00 of additional
Indebtedness under paragraph (a) of the covenant described
under Certain Covenants Limitation
on Indebtedness and (B) no Default shall have
occurred and be continuing. Any such designation by the Board of
Directors shall be evidenced to the Trustee by promptly filing
with the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an
Officers Certificate certifying that such designation
complied with the foregoing provisions.
U.S. Government Obligations means direct
obligations (or certificates representing an ownership interest
in such obligations) of the United States of America (including
any agency or instrumentality thereof) for the payment of which
the full faith and credit of the United States of America is
pledged and which are not callable at the issuers option.
Voting Stock of a Person means all classes of
Capital Stock of such Person then outstanding and normally
entitled (without regard to the occurrence of any contingency)
to vote in the election of directors, managers or trustees
thereof.
Wholly Owned Subsidiary means a Restricted
Subsidiary all the Capital Stock of which (other than
directors qualifying shares) is owned by the Company or
one or more other Wholly Owned Subsidiaries.
85
CERTAIN
U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion summarizes certain of the
U.S. federal income tax consequences of an exchange of
unregistered notes for exchange notes pursuant to this exchange
offer. This discussion is based upon the provisions of the
Internal Revenue Code of 1986, as amended, the Treasury
Regulations promulgated thereunder, judicial authority and
administrative interpretations, all as of the date hereof and
all of which are subject to change, possibly with retroactive
effect, or different interpretations. This discussion does not
address all of the tax considerations that may be relevant to a
particular holder in light of the holders circumstances,
or to certain categories of holders that may be subject to
special rules. This summary does not consider any tax
consequences arising under U.S. alternative minimum tax
law, U.S. federal gift and estate tax law or under the laws
of any foreign, state, local or other jurisdiction. Each
holder should consult its own independent tax advisor regarding
its particular situation and the federal, state, local and
foreign tax consequences of exchanging the unregistered notes
for exchange notes and purchasing, holding and disposing of the
exchange notes, including the consequences of any proposed
change in applicable laws.
The exchange of unregistered notes for exchange notes in the
exchange offer will not constitute a taxable event for
U.S. federal income tax purposes. Consequently, for such
purposes a holder will not recognize gain upon receipt of an
exchange note in exchange for unregistered notes in the exchange
offer, the holders adjusted tax basis (and adjusted issue
price) in the exchange note received in the exchange offer will
be the same as its adjusted tax basis (and adjusted issue price)
in the corresponding unregistered note immediately before the
exchange, and the holders holding period in the exchange
note will include its holding period in the unregistered note.
86
PLAN OF
DISTRIBUTION
Each broker-dealer that receives exchange notes for its own
account pursuant to the exchange offer must acknowledge that it
will deliver a prospectus in connection with any resale of such
exchange notes. This prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer
in connection with resales of exchange notes received in
exchange for unregistered notes where such unregistered notes
were acquired as a result of market-making activities or other
trading activities. We have agreed that, for a period of
180 days after the consummation of the exchange offer, we
will make this prospectus, as amended or supplemented, available
to any broker-dealer for use in connection with any such resale.
In addition, until 180 days after the date of this
prospectus, all dealers effecting transactions in the exchange
notes may be required to deliver a prospectus.
We will not receive any proceeds from any sale of exchange notes
by broker-dealers. Exchange notes received by broker-dealers for
their own account pursuant to the exchange offer may be sold
from time to time in one or more transactions in the
over-the-counter
market, in negotiated transactions, through the writing of
options on the exchange notes or a combination of such methods
of resale, at market prices prevailing at the time of resale, at
prices related to such prevailing market prices or at negotiated
prices. Any such resale may be made directly to purchasers or to
or through brokers or dealers that may receive compensation in
the form of commissions or concessions from any such
broker-dealer or the purchasers of any such exchange notes. Any
broker-dealer that resells exchange notes that were received by
it for its own account pursuant to the exchange offer and any
broker or dealer that participates in a distribution of such
exchange notes may be deemed to be an underwriter
within the meaning of the Securities Act and any profit on any
such resale of exchange notes and any commission or concessions
received by any such persons may be deemed to be underwriting
compensation under the Securities Act. The letter of transmittal
states that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to
admit that it is an underwriter within the meaning
of the Securities Act.
For a period of 180 days after the date of this prospectus, we
will promptly send additional copies of this prospectus to any
broker-dealer that requests such documents in the letter of
transmittal. We have agreed to pay all expenses incident to the
exchange offer (including the expenses of one counsel for the
holders of the notes) other than commissions or concessions of
any brokers or dealers and will indemnify the holders of the
notes (including any broker-dealers) against certain
liabilities, including liabilities under the Securities Act.
87
LEGAL
MATTERS
Certain legal matters in connection with the notes offered
hereby will be passed upon for us by Shearman &
Sterling LLP, New York, New York and Ballard Spahr Andrews
& Ingersoll LLP, Philadelphia, Pennsylvania.
EXPERTS
The financial statements, and the related financial statement
schedule, incorporated in this Prospectus by reference from the
Companys Annual Report on
Form 10-K
for the year ended December 31, 2009, and the effectiveness
of P. H. Glatfelter Company and subsidiaries internal
control over financial reporting have been audited by
Deloitte & Touche LLP, an independent registered
public accounting firm, as stated in their reports, which are
incorporated herein by reference. Such financial statements and
financial statement schedule have been so incorporated in
reliance upon the reports of such firm given upon their
authority as experts in accounting and auditing.
The audited consolidated financial statements of Concert
Industries Corp. as of December 31, 2009 and 2008, and for
the years ended December 31, 2009 and 2008, included in
this prospectus have been audited by KPMG LLP, Licensed Public
Accountants, as stated in their report appearing therein, and
have been so included in reliance upon the report of such firm
given upon their authority as experts in accounting and auditing.
WHERE YOU
CAN FIND ADDITIONAL INFORMATION
We file annual, quarterly and other reports, proxy statements
and other information with the SEC. You may read and copy any
reports, statements or other information we file with the SEC at
its public reference rooms at 100 F Street, N.E.,
Washington, D.C. 20549. Please call the SEC at
1-800-SEC-0330
for further information on the public reference rooms. Our
filings are also available to the public on the Internet,
through a database maintained by the SEC at http://www.sec.gov.
In addition, you can inspect and copy our reports, proxy
statements and other information at the offices of the New York
Stock Exchange, Inc., 20 Broad Street, New York, New York
10005.
Our subsidiary guarantors do not file separate financial
statements with the SEC and do not independently publish their
financial statements. Instead, our subsidiary guarantors
financial condition, results of operations and cash flows are
consolidated into our financial statements. Condensed
consolidating financial information illustrating our subsidiary
guarantors financial condition, results of operations and
cash flows, on a combined basis, is disclosed in the notes to
our consolidated financial statements.
The SEC allows us to incorporate by reference into this document
the information we filed with it. This means that we can
disclose important business, financial and other information to
you by referring you to other documents separately filed with
the SEC. All information incorporated by reference is part of
this document, unless and until that information is updated and
superseded by the information contained in this document or any
information incorporated later.
We incorporate by reference the documents listed below, except
that we are not incorporating any information included in a
current report on
Form 8-K
that has been furnished (and not filed) with the SEC, unless
such information is expressly incorporated herein by a reference
in a furnished current report on
Form 8-K
or other furnished document.
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1.
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Our current reports on
Form 8-K,
filed January 5, 2010 (excluding Item 7.01),
February 5, 2010, February 12, 2010, May 3, 2010
and May 6, 2010, and our current reports on
Form 8-K/A
filed January 6, 2010 (excluding Item 7.01) and
April 1, 2010;
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2.
|
Our quarterly report on Form
10-Q for the
quarterly period ended March 31, 2010;
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3.
|
Our annual report on
Form 10-K
for the fiscal year ended December 31, 2009.
|
88
Our filings with the SEC, including our annual report on
Form 10-K,
quarterly reports on
Form 10-Q,
current reports on
Form 8-K
and amendments to those reports, are available free of charge on
our website as soon as reasonably practicable after they are
filed with, or furnished to, the SEC. Our Internet website is
located at www.glatfelter.com. The contents of the website are
not incorporated by reference into this prospectus. You also may
request a copy of these filings, at no cost, by contacting us
at: P. H. Glatfelter Company, 96 South George Street,
Suite 500, York, Pennsylvania 17401 (telephone number
(717) 225-4711), Attention: Investor Relations.
We also incorporate by reference all future filings we make with
the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities and Exchange Act of 1934 prior to the termination of
the offering made hereby.
You should rely only on the information contained or
incorporated by reference in this prospectus. We have not
authorized any other person to provide you with different
information. If anyone provides you with different or
inconsistent information you should not rely on it. We are not
making an offer to sell these securities in any jurisdiction
where the offer and sale is not permitted. You should assume
that the information appearing in this prospectus and
information incorporated by reference into this prospectus, is
accurate only as of the date of the documents containing the
information. Our business, financial condition, results of
operation and prospects may have changed since that date.
Any request for documents should be made
by ,
2010 to ensure timely delivery of the documents prior to the
expiration of the exchange offer.
89
AUDITORS
REPORT
To the Board of Directors of Concert Industries Corp.
We have audited the accompanying consolidated balance sheets of
Concert Industries Corp. (the Company) and
subsidiaries as at December 31, 2009 and 2008, and the
related consolidated statements of operations, retained earnings
and accumulated other comprehensive income (loss) and cash flows
for each of the years in the two-year period ended
December 31, 2009. These consolidated financial statements
are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with Canadian generally
accepted auditing standards and United States generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation.
In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the financial
position of the Company and subsidiaries as of December 31,
2009 and 2008 and the results of their operations and their cash
flows for each of the years in the two-year period ended
December 31, 2009 in accordance with Canadian generally
accepted accounting principles.
Canadian generally accepted accounting principles vary in
certain significant respects from U.S. generally accepted
accounting principles. Information relating to the nature and
effect of such differences is presented in Note 19 to the
consolidated financial statements.
/s/ KPMG LLP
Chartered Accountants, Licensed Public Accountants
Ottawa, Canada
May 4, 2010
F-2
CONCERT
INDUSTRIES CORP.
December 31,
2009, with comparative figures for 2008
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|
|
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|
|
|
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|
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2009
|
|
|
2008
|
|
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|
(Expressed in thousands of Canadian dollars)
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ASSETS
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
18,931
|
|
|
$
|
10,263
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|
Accounts receivable
|
|
|
27,527
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|
|
|
30,660
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|
Inventory (note 4)
|
|
|
29,603
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|
|
|
37,151
|
|
Prepaids and deposits
|
|
|
2,327
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|
|
|
2,697
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|
Future income taxes (note 13)
|
|
|
4,584
|
|
|
|
4,905
|
|
|
|
|
|
|
|
|
|
|
|
|
|
82,972
|
|
|
|
85,676
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|
Derivative related asset
|
|
|
2,771
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|
|
|
|
|
Property, plant and equipment (note 5)
|
|
|
105,859
|
|
|
|
92,094
|
|
Future income taxes (note 13)
|
|
|
9,714
|
|
|
|
10,465
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
201,316
|
|
|
$
|
188,235
|
|
|
|
|
|
|
|
|
|
|
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LIABILITIES AND SHAREHOLDERS EQUITY
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Short-term indebtedness (note 6)
|
|
$
|
13,066
|
|
|
$
|
14,700
|
|
Accounts payable and accrued liabilities
|
|
|
23,320
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|
|
|
19,475
|
|
Current portion of long-term debt (note 8)
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|
|
11,735
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|
|
|
8,978
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|
Derivative related liabilities
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|
|
593
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|
|
|
900
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|
Income taxes payable
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|
|
604
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|
|
|
1,514
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|
Shareholder loan (note 7)
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|
|
4,474
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|
|
|
4,474
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|
|
|
|
|
|
|
|
|
|
|
|
|
53,792
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|
|
|
50,041
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|
Derivative related liabilities
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|
|
1,663
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|
|
|
1,529
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|
Long-term debt (note 8)
|
|
|
46,977
|
|
|
|
46,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
102,432
|
|
|
|
98,543
|
|
Shareholders equity:
|
|
|
|
|
|
|
|
|
Share capital (note 9)
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|
|
44,132
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|
|
|
44,132
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Retained earnings
|
|
|
56,200
|
|
|
|
40,650
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|
Accumulated other comprehensive income (loss)
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|
|
(1,448
|
)
|
|
|
4,910
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|
|
|
|
|
|
|
|
|
|
|
|
|
98,884
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|
|
|
89,692
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|
Commitments (note 14)
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|
|
|
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Subsequent events (notes 6, 8, 12, 16 and 20)
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
201,316
|
|
|
$
|
188,235
|
|
|
|
|
|
|
|
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|
|
Approved on behalf of the Board:
Director
Director
See accompanying notes to consolidated financial statements.
F-3
CONCERT
INDUSTRIES CORP.
Year
ended December 31, 2009, with comparative figures for
2008
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2009
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|
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2008
|
|
|
|
(Expressed in thousands of Canadian dollars)
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|
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Revenue
|
|
$
|
230,711
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|
|
$
|
227,037
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|
Cost of sales
|
|
|
182,163
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|
|
|
172,558
|
|
|
|
|
|
|
|
|
|
|
|
|
|
48,548
|
|
|
|
54,479
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|
Expenses:
|
|
|
|
|
|
|
|
|
Administration
|
|
|
12,529
|
|
|
|
11,379
|
|
Amortization
|
|
|
4,692
|
|
|
|
3,113
|
|
Fixed manufacturing, product development and overhead
|
|
|
10,248
|
|
|
|
9,494
|
|
Selling and marketing
|
|
|
2,832
|
|
|
|
2,466
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30,301
|
|
|
|
26,452
|
|
|
|
|
|
|
|
|
|
|
Earnings before the undernoted
|
|
|
18,247
|
|
|
|
28,027
|
|
Interest expense
|
|
|
3,904
|
|
|
|
3,000
|
|
(Gain) loss on derivative instruments
|
|
|
(2,973
|
)
|
|
|
2,149
|
|
|
|
|
|
|
|
|
|
|
Earnings before income taxes
|
|
|
17,316
|
|
|
|
22,878
|
|
Income taxes (reduction) (note 13):
|
|
|
|
|
|
|
|
|
Current
|
|
|
1,138
|
|
|
|
2,386
|
|
Future
|
|
|
628
|
|
|
|
(2,348
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
1,766
|
|
|
|
38
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
|
15,550
|
|
|
|
22,840
|
|
Other comprehensive income (loss), net of taxes:
|
|
|
|
|
|
|
|
|
Unrealized (loss) gain on translating financial statements of
self-sustaining foreign operation
|
|
|
(6,337
|
)
|
|
|
7,218
|
|
Change in fair value of cash flow hedging derivative instruments
|
|
|
(21
|
)
|
|
|
(204
|
)
|
Reclassification to net earnings upon settlement of cash flow
hedging derivatives
|
|
|
|
|
|
|
(246
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive (loss) income
|
|
|
(6,358
|
)
|
|
|
6,768
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
|
|
$
|
9,192
|
|
|
$
|
29,608
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-4
CONCERT
INDUSTRIES CORP.
Year
ended December 31, 2009, with comparative figures for
2008
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Expressed in thousands of
|
|
|
|
Canadian dollars)
|
|
|
Retained earnings, beginning of year
|
|
$
|
40,650
|
|
|
$
|
17,810
|
|
Net earnings
|
|
|
15,550
|
|
|
|
22,840
|
|
|
|
|
|
|
|
|
|
|
Retained earnings, end of year
|
|
$
|
56,200
|
|
|
$
|
40,650
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), beginning of year
|
|
$
|
4,910
|
|
|
$
|
(1,858
|
)
|
Cumulative translation adjustment
|
|
|
(6,337
|
)
|
|
|
7,218
|
|
Accumulated net change in fair value of cash flow hedging
derivative instruments
|
|
|
(21
|
)
|
|
|
(204
|
)
|
Accumulated net change in reclassification of net earnings upon
settlement of cash flow hedging derivatives
|
|
|
|
|
|
|
(246
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
(6,358
|
)
|
|
|
6,768
|
|
|
|
|
|
|
|
|
|
|
Accumulated other comprehensive income (loss), end of year
|
|
$
|
(1,448
|
)
|
|
$
|
4,910
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to consolidated financial statements.
F-5
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
(Expressed in thousands of Canadian dollars)
|
|
|
Cash provided by (used in):
|
|
|
|
|
|
|
|
|
Operations:
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
15,550
|
|
|
$
|
22,840
|
|
Adjustment for non-cash items:
|
|
|
|
|
|
|