-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QEssZQoLxpV9lH0YaMHzGLPUtTVrxKPLVjtqXruBrRnGa4ATZseTILEHV8jz7u1e hG09YRN5aXdh6iWWjceudg== 0000929624-99-001317.txt : 19990719 0000929624-99-001317.hdr.sgml : 19990719 ACCESSION NUMBER: 0000929624-99-001317 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990709 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990716 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CROWN VANTAGE INC CENTRAL INDEX KEY: 0000948073 STANDARD INDUSTRIAL CLASSIFICATION: PAPER MILLS [2621] IRS NUMBER: 541752384 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-13868 FILM NUMBER: 99666087 BUSINESS ADDRESS: STREET 1: 300 LAKESIDE DR STREET 2: 14TH FL CITY: OAKLAND STATE: CA ZIP: 94612-3592 BUSINESS PHONE: 5108743400 MAIL ADDRESS: STREET 1: 300 LAKESIDE DR STREET 2: 14TH FLOOR CITY: OAKLAND STATE: CA ZIP: 94612-3592 8-K 1 FORM 8-K FOR CROWN VANTAGE SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) July 9, 1999 ------------------ CROWN VANTAGE INC. ------------------ (Exact name of registrant as specified in its charter) Virginia 1-13868 54-1752384 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 300 Lakeside Drive, Oakland CA 94612-3592 ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (510) 874-3400 -------------------- Not Applicable - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) Item 2. Disposition of Assets. On July 9, 1999 Crown Vantage Inc. completed the sale of its pulp and paper mills in Berlin and Gorham, New Hampshire to American Tissue Inc. for $45 million cash and the assumption of certain liabilities. See Exhibit 99.2 for copy of news release. Item 7. Financial Statements and Exhibits. (b) Pro forma financial information See Exhibit 99.1 for Unaudited Pro Forma Condensed Financial Statements as of March 28, 1999, for the three months ended March 28, 1999 and for the year ended December 27, 1998. (c) Exhibits Exhibit No. Description - ------------------- --------------------------------------------------------- 99.1 Unaudited Pro Forma Condensed Financial Statements as of March 28, 1999, for the three months ended March 28, 1999 and for the year ended December 27, 1998. 99.2 News release announcing successful completion of sale of the Company's pulp and paper mills in Berlin and Gorham, New Hampshire to American Tissue Inc. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. CROWN VANTAGE INC. July 16, 1999 /s/ Michael J. Hunter ----------------------------------------------- Michael J. Hunter Senior Vice President, Chief Accounting Officer EX-99.1 2 UNAUDITED PRO FORMA FINANCIAL STATEMENTS EXHIBIT 99.1 CROWN VANTAGE INC. UNAUDITED PRO FORMA FINANCIAL STATEMENTS SALE OF BERLIN-GORHAM FACILITIES The following Unaudited Pro Forma Condensed Statements of Income for the three months ended March 28, 1999 and for the year ended December 27, 1998 and the Unaudited Pro Forma Condensed Balance Sheet as of March 28, 1999 give effect to Crown Vantage Inc.'s (the "Company") sale of its pulp and paper mills in Berlin and Gorham, New Hampshire ("Berlin-Gorham") to American Tissue Inc. ("American Tissue"). Proceeds from the sale of Berlin-Gorham to American Tissue totaled $45 million in cash plus the assumption by American Tissue of certain liabilities. The pro forma information is based on the historical consolidated statements of the Company after giving effect to the pro forma adjustments described in the Notes to the Unaudited Pro Forma Condensed Financial Statements. The pro forma financial data are not necessarily indicative of the results that actually would have occurred had the sale of Berlin-Gorham to American Tissue been consummated on the dates indicated or that may be obtained in the future. CROWN VANTAGE INC. UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME 12 MONTHS ENDED DECEMBER 27, 1998 (amounts in 000's except per share amounts)
HISTORICAL HISTORICAL CROWN BERLIN- PRO-FORMA VANTAGE GORHAM (a) ADJUSTMENTS PRO-FORMA ---------- ----------- ----------- ----------- Net Sales $ 850,994 $ (162,873) $ 19,981 (b) $ 708,102 Cost of Goods Sold 796,935 (176,202) 17,583 (b) 2,074 (c) 640,390 ---------- ----------- ----------- ----------- Gross Margin 54,059 13,329 324 67,712 Asset Impairment and Other Charges 163,834 (143,632) 20,202 Selling and Administrative Expenses 62,360 (4,115) (d) (640) (e) (2,300) (f) 55,305 ---------- ----------- ----------- ----------- Operating Income (Loss) (172,135) 156,961 7,379 (7,795) Interest Expense (64,672) 2,479 (g) (62,193) Other Income, net 1,400 (85) 1,315 ----------- ----------- ----------- ----------- Income (Loss) Before Income Taxes and extraordinary item (235,407) 156,876 9,858 (68,673) Income Tax Provision (Benefit) (75,912) 77,903 (h) 1,991 ----------- ----------- ----------- ----------- Net Income (Loss) before extraordinary item $ (159,495) $ 156,876 $ (68,045) $ (70,664) =========== =========== =========== =========== Loss per share before extraordinary item $ (16.79) $ (7.44) Average common stock and common stock equivalents 9,502 9,502
CROWN VANTAGE INC. UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME 3 MONTHS ENDED MARCH 28, 1999 (amounts in 000's except per share amounts)
HISTORICAL HISTORICAL CROWN BERLIN- PRO-FORMA VANTAGE GORHAM (a) ADJUSTMENTS PRO-FORMA ---------- ----------- ----------- ----------- Net Sales $ 201,165 $ (40,125) $ 5,037 (b) $ 166,077 Cost of Goods Sold 193,043 (38,293) 4,432 (b) 468 (c) 159,650 ----------- ----------- ----------- ----------- Gross Margin 8,122 (1,832) 137 6,427 Asset Impairment and Other Charges 16,175 (16,175) Property Tax Accrual Reversal (8,957) 8,957 Selling and Administrative Expenses 15,424 (981) (d) (160) (e) (575) (f) 13,708 ----------- ----------- ----------- ----------- Operating Income (Loss) (14,520) 5,386 1,853 (7,281) Interest Expense (15,552) 620 (g) (14,932) Other Income, net 142 (21) 121 ----------- ----------- ----------- ----------- Income (Loss) Before Income Taxes (29,930) 5,365 2,473 (22,092) Income Tax Provision 432 (42) (h) 390 ----------- ----------- ----------- ----------- Net Income (Loss) $ (30,362) $ 5,365 $ 2,515 $ (22,482) =========== =========== =========== =========== Loss per share $ (2.93) $ (2.17) Average common stock and common stock equivalents 10,351 10,351
CROWN VANTAGE INC. UNAUDITED PRO FORMA CONDENSED BALANCE SHEET MARCH 28, 1999 (amounts in 000's)
HISTORICAL CROWN PRO FORMA VANTAGE ADJUSTMENTS PRO FORMA ---------------- ----------------- --------------- ASSETS Current Assets Cash $ 11,230 $ 11,230 Inventory 72,775 72,775 Asset held for sale 45,000 $(45,000) (a) Other current assets 56,531 56,531 ---------------- ----------------- --------------- Total current assets 185,536 (45,000) 140,536 PP&E, net 378,664 378,664 Other assets 80,288 80,288 ---------------- ----------------- --------------- Total assets $ 644,488 $(45,000) $ 599,488 ================ ================= =============== LIABILITIES Current liabilities $ 97,520 $(17,000) (g) $ 80,520 Long-Term liabilities Long-term debt 585,423 (28,000) (g) 557,423 Post retirement benefits 85,084 85,084 Other long-term liabilities 45,336 45,336 ---------------- ----------------- --------------- Total liabilities 813,363 (45,000) 768,363 Shareholders' Equity (Deficit) Common stock and other 45,831 45,831 Retained deficit (214,706) (214,706) ---------------- ----------------- --------------- Total liabilities and deficit $ 644,488 $(45,000) $ 599,488 ================ ================= ===============
CROWN VANTAGE INC. NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS (a) Elimination of Berlin-Gorham's historical income statement and net assets held for sale on the balance sheet. The Unaudited Pro Forma Condensed Income Statements are presented assuming the sale occurred at the beginning of the periods presented. The Unaudited Pro Forma Condensed Balance Sheet is presented assuming the sale occurred on the balance sheet date. (b) Effective with the sale of Berlin-Gorham, the Company entered into a three year Strategic Alliance Agreement ("SAA") with American Tissue that provides that the Company retains the rights to certain grades of paper critical to its uncoated printing and publishing papers strategy. Berlin- Gorham will continue to manufacture these papers on behalf of the Company. The Company will market these grades (a minimum of 20,000 tons per year) and collect a commission based on the net sales price of these grades. The pro forma adjustment was calculated by applying the contractual commission to actual net sales of these grades for the periods presented. (c) Effective with the sale of Berlin-Gorham, the Company entered into a three year Pulp Purchase Agreement ("PPA") that provides for the purchase of 40,000 tons of pulp from Berlin-Gorham at a discount off of quoted market prices. The pro forma adjustment reflects the estimated cost difference between the historical transfer costs of pulp from Berlin-Gorham to the Company's other mills and the estimated costs under the PPA. (d) Effective with the sale of Berlin-Gorham, the Company entered into a three year Paper Brokerage Agreement ("PBA") that provides for the Company to continue marketing and selling certain uncoated freesheet papers manufactured by Berlin-Gorham not covered under the SAA (estimated at 130,000 tons annually). The Company will collect a commission on these sales based on the net sales price. The pro forma adjustment was calculated by applying the contractual commission to actual net sales of these grades for the periods presented. (e) As a result of the sale, management estimates that average accounts receivable eligible for sale under its securitization facility would have been reduced by approximately $8 million for the periods presented. The estimated reduction is approximately the same for all periods presented. This will result in a corresponding decrease in selling and administrative expenses associated with this facility. (f) The Company has agreed to provide certain transition services for Berlin- Gorham. The transition services agreement provides for reimbursement to the Company for certain general and administrative costs. The reimbursement is contractually set at a rate per month based on the estimated costs to the Company to perform these services. (g) Reduction in interest expense reflects the pay down of term and revolver debt based on the estimated net proceeds from the sale. Net proceeds available for debt reduction is estimated to be $28 million with a minimum prepayment of $10 million to Term Loan B and the remainder to the Revolving Credit Facility. The amount of net cash proceeds available for debt reduction would not have materially varied for the periods presented. Cash proceeds of $45 million from the sale are reduced by transaction costs and certain current liabilities of Berlin-Gorham retained by the Company. Net proceeds available for debt reduction are calculated as follows (amounts in millions): Cash proceeds $45.0 Transaction fees 1.8 Accounts payable and accrued liabilities 15.2 ----- Total $28.0 ===== (h) The pro forma adjustment gives income statement effect to a valuation allowance against deferred tax benefits recognized for the period ended December 27, 1998. The adjustment also eliminates state and value-added taxes pertaining to Berlin-Gorham. EX-99.2 3 NEWS RELEASE DATED JULY 9, 1999 Exhibit 99.2 Crown Vantage Completes Sale of New Hampshire Mills To American Tissue Corp. for $45 Million Highlights of the Transaction: . Reduces debt . Improves liquidity and cash flow . Eliminates Berlin-Gorham's historical losses . Focuses management and capital on specialized papers OAKLAND, Calif., July 9, 1999 - Crown Vantage Inc. (OTCBB:CVAN) said today it has completed the sale of its pulp and paper mills in Berlin and Gorham, N.H., to a subsidiary of American Tissue Corp. for approximately $45 million. Crown Vantage will continue to outsource from ATC the production of its branded printing papers made at the mills under a strategic marketing alliance announced previously. "In evaluating our business opportunities, we determined that the Berlin and Gorham operations were not consistent with our current strategic direction," said Crown Vantage President and Chief Executive Officer Robert A. Olah. "We are now focusing our efforts more intensively on specialized, value- added papers used in printing, publishing and packaging, where we expect our strongest growth, and have exited the market pulp and commodity white papers markets. "This divestiture is in keeping with our strategy to reduce debt and improve cash flow and liquidity. It also allows us to more fully concentrate on the success of our remaining nine mills and to better focus our capital and human resources on continuing the shift from a manufacturing-oriented business to a marketing-driven organization. With the completion of this transaction, we are now reviewing various recapitalization options to further strengthen our financial position," Olah said. The company will apply net proceeds from the sale to pay down debt stemming from its origin as a spin-off company from the former James River Corporation in 1995. Crown Vantage said it will apply a minimum of $10 million as a permanent reduction to its senior secured term loan with the balance funding reduction in its Page 2 -- Crown Vantage Mill Sale revolving loan and certain retained liabilities related to the Berlin-Gorham facilities. The revolving commitment from Crown Vantage lenders has not been reduced, resulting in improved liquidity. A $5 million (net) letter of credit will be terminated as part of the transaction and thus available as part of the revolving commitment. Company Anticipates Improved Financial Performance The company said it believes that operating results going forward will be stronger without the New Hampshire operations, based on 1998 pro forma data. The combined operations at Berlin and Gorham accounted for nearly 20 percent of Crown Vantage net sales of $851 million in 1998. However, on a pro forma basis Crown Vantage gross margins without the two mills would have been about 25 percent higher. The company's operating profit for 1998 before special charges would have been about $11.5 million, compared to an operating loss of $8.3 million on an actual basis. Additional pro forma information will be filed on a Form 8-K within 15 days as required by the Securities and Exchange Commission. "In addition to eliminating the historical losses experienced by these facilities, we will avoid major capital expenditures that would have been required, particularly in the environmental area," Olah said. "We now can refocus management and capital on those operations and market niches that have strategic importance for us. All in all, we believe this is a major step toward regaining profitability for Crown Vantage." The company continues to own and operate nine papermaking facilities in the United States and Scotland with 26 paper machines and a variety of coating, waxing, embossing, calendering and sheeting equipment dedicated to producing high value-added specialty papers. Annual manufacturing capacity continues to exceed 750,000 tons of paper. Additionally, Crown Vantage will continue to market and sell about 150,000 tons a year of printing and publishing papers made at the Gorham paper mill for a period of at least three years. To facilitate execution of the ongoing marketing and outsourcing agreement, Crown Vantage will retain a manager on site at Berlin-Gorham. Breaking New Ground With Strategic Marketing Alliance "We're breaking new ground for our industry as we launch our marketing and Page 3 -- Crown Vantage Mill Sale outsourcing alliance with ATC," Olah said. "That opens the possibility for us to produce and commercialize our brands with even greater flexibility, enhancing our ability to match capacity to the changing needs of the marketplace." Crown Vantage is pursuing an ongoing strategy to increase sales and target- market share by focusing its business in value-added areas. These include its high quality premium printing paper brands such as Graphika!(R), King James(R) Cast Coat, Squire(R) lightweight opaque papers, and the Curtis(R) Collection of text, cover and writing papers. They also include coated groundwood publishing papers for magazines, catalogs and commercial printing, and customized specialty packaging and converting papers that are developed and produced for specific customer end-use products such as coated label papers, disposable medical garments, paper plates, sandwich wrappings, coffee filters and others. Separately, the company said it expects to report improved operating results due to stronger sales volume and improving market conditions when it releases its second quarter results during the fourth week of July. More information about Crown Vantage is available on the Internet at www.crownvantage.com. Forward-Looking Statements as Required by the Private Securities Litigation Reform Act of 1995. This news release contains certain forward-looking statements concerning Crown Vantage's positioning for the future. As required by the Private Securities Litigation Reform Act of 1995, the company advises that forward- looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those stated or inferred. These could include the failure of Crown Vantage to improve financial results despite the sale of the New Hampshire mills or to maintain liquidity following application of proceeds to its debt and revolving loan. The company may determine that recapitalization of its assets should not be pursued. There is also a risk that the company may not succeed in executing its value-added marketing strategy. Crown Vantage Profile After Sale Of New Hampshire Facilities Businesses: Printing and Publishing Papers Specialty Papers Manufacturing Sites: Adams, Mass. Parchment, Port Huron and Ypsilanti, Mich. St. Francisville, La. Milford, N.J. Richmond, Va. St. Andrews and Penicuik, Scotland Paper Manufacturing Capacity: 750,000 tons per year Pulp Manufacturing Capacity: A groundwood pulp mill and a kraft pulp mill at St. Francisville, La., combine to manufacture 350,000 tons per year, used internally for full integration of the St. Francisville paper mill. Strategy: To increase sales and target-market share by focusing its businesses in markets and niches for value-added printing, publishing and specialty papers while continuing to reduce debt and improve liquidity of the corporation. -----END PRIVACY-ENHANCED MESSAGE-----