Exhibit 1
JSG FUNDING PLC
UNAUDITED PRO FORMA FINANCIAL STATEMENTS
The unaudited pro forma condensed consolidated balance sheet gives pro forma effect to the sale of the specialty paper and tissue operations of Munksjö and the application of the net proceeds therefrom, as if those transactions had occurred on December 31, 2004. The unaudited pro forma condensed consolidated statement of operations gives pro forma effect to the sale of the Munksjö specialty paper and tissue operations and the application of the net proceeds therefrom, as if those transactions had occurred on January 1, 2004. The sale of the Munksjö specialties business was completed on March 1, 2005. The sale of the Munksjö tissue business is subject to customary closing conditions.
The unaudited pro forma financial statements exclude (i) the impact of the issuance and sale by JSG Funding plc ("JSG Funding") of its 7.75% senior subordinated notes due 2015 and (ii) the application of the net proceeds from such offering to fund the purchase of JSG Funding's 15.5% subordinated notes due 2013 pursuant to a tender offer, which was completed on February 14, 2005, and to pay related fees and expenses.
The unaudited pro forma financial statements are for informational purposes only and should not be considered indicative of actual results that would have been achieved had the sale of the Munksjö specialty paper and tissue operations been completed on the date or for the period presented, and does not purport to indicate consolidated balance sheet data or statement of operations data as of any future date or for any future period. The unaudited pro forma financial statements should be read in conjunction with the consolidated financial statements and accompanying notes included in JSG Funding's Annual Report on Form 20-F for the year ended December 31, 2004.
Unless otherwise indicated, the pro forma financial statements are presented by applying the SEC’s rules with regard to pro forma financial information to historical financial statements prepared under Irish GAAP and using the euro as the functional currency. Irish GAAP differs in certain significant respects from U.S. GAAP. For a discussion of the most significant differences between Irish GAAP and U.S. GAAP, see note 37 to the historical audited consolidated financial statements included in JSG Funding's Annual Report on Form 20-F for the year ended December 31, 2004.
JSG Funding plc
Unaudited Pro Forma Condensed Consolidated Balance Sheet
December 31, 2004
(euro in thousands)
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| Munksjö |
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| Specialties |
| Pro Forma |
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| JSG Funding plc |
| Disposal (a) |
| JSG Funding plc (b) |
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ASSETS |
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Current assets: |
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Cash |
| € | 248,033 |
| € | (9,400 | ) | € | 238,633 |
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Accounts receivable and prepayments |
| 925,048 |
| (68,143 | ) | 856,905 |
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Inventories |
| 452,166 |
| (70,303 | ) | 381,863 |
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Total current assets |
| 1,625,247 |
| (147,846 | ) | 1,477,401 |
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Investments |
| 81,895 |
| — |
| 81,895 |
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Property, plant and equipment |
| 2,334,858 |
| (277,078 | ) | 2,057,780 |
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Intangible assets |
| 1,455,130 |
| (126,900 | ) | 1,328,230 |
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Amounts due from affiliates |
| 263,575 |
| — |
| 263,575 |
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Total assets |
| € | 5,760,705 |
| € | (551,824 | ) | € | 5,208,881 |
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LIABILITIES, MINORITY INTERESTS AND SHAREHOLDERS’ EQUITY |
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Current liabilities: |
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Bank loans, overdrafts and other borrowing |
| € | 104,841 |
| € | (4,516 | ) | € | 100,325 |
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Current maturity of long term debt |
| 4,470 |
| — |
| 4,470 |
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Accrued payable and accrued liabilities |
| 1,060,361 |
| (86,317 | ) | 974,044 |
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Total current liabilities |
| 1,169,672 |
| (90,833 | ) | 1,078,839 |
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Long term debt |
| 3,051,468 |
| (444,000 | ) | 2,607,468 |
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Deferred debt issuance costs |
| (91,628 | ) | 11,100 |
| (80,528 | ) | |||
Provisions for liabilities and charges |
| 632,640 |
| (61,225 | ) | 571,415 |
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Capital grants deferred |
| 14,260 |
| (19 | ) | 14,241 |
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Minority interests (equity interests) |
| 115,192 |
| — |
| 115,192 |
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Total long term liabilities and minority interests |
| 3,721,932 |
| (494,144 | ) | 3,227,788 |
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Total shareholders’ equity |
| 869,101 |
| 33,153 |
| 902,254 |
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Total liabilities, minority interests and shareholders’ equity |
| € | 5,760,705 |
| € | (551,824 | ) | € | 5,208,881 |
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See accompanying notes to the unaudited pro forma condensed consolidated balance sheet
JSG Funding plc
Notes to the Unaudited Pro Forma Condensed Consolidated Balance Sheet
December 31, 2004
(euro in thousands)
(a) This pro forma adjustment represents the disposal of the specialty paper and tissue operations of Munksjö and the receipt of the net proceeds from these sales. The sale of our Munksjö specialties business to The EQT III Fund was completed on March 1, 2005. The sale of our Munskjö tissue business is subject to customary closing conditions. The sales are expected to yield aggregate net proceeds of €444,000.
(b) Irish GAAP differs in certain significant respects from U.S. GAAP. A detailed discussion of those differences from a historical perspective is included in note 37 to JSG Funding’s audited consolidated financial statements for the year ended December 31, 2004, which are included in JSG Funding’s Annual Report on Form 20-F for the year ended December 31, 2004. In addition, the following pro forma adjustments will be impacted:
Debt issuance costs are classified as a reduction to the debt liability balances under Irish GAAP, but are classified as part of other assets for U.S. GAAP purposes.
The following table presents a reconciliation from Irish GAAP to U.S. GAAP for pro forma debt and shareholders’ equity balances at December 31, 2004:
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| Gross Debt |
| Shareholders’ Equity |
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Per Irish GAAP |
| € | 2,712,263 | (1) | € | 902,254 |
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Reconciling items: |
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Reclassify fair value of currency swaps |
| (126,144 | ) | — |
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Other reconciling items (2) |
| — |
| (137,542 | ) | ||
Per U.S. GAAP |
| € | 2,586,119 |
| € | 764,712 |
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(1) The balance is net of €126,144 in fair value of related currency swaps on certain outstanding indebtedness.
(2) See note 37 to the historical financial statements included in JSG Funding's Annual Report on Form 20-F for the year ended December 31, 2004.
JSG Funding plc
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2004
(euro in thousands)
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| Munksjö |
| Pro Forma |
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| Specialties |
| JSG |
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| JSG Funding plc |
| Disposal |
| Funding plc |
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Net sales |
| € | 4,805,082 |
| € | (511,542 | ) | € | 4,293,540 |
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Cost of sales |
| 3,435,374 |
| (378,761 | ) | 3,056,613 |
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Goodwill amortization |
| 37,925 |
| (3,254 | ) | 34,671 |
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Gross profit |
| 1,331,783 |
| (129,527 | ) | 1,202,256 |
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Net operating expenses |
| 1,010,564 |
| (71,799 | ) | 938,765 |
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Reorganization and restructuring costs |
| 39,430 |
| — |
| 39,430 |
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Operating income subsidiaries - continuing |
| 281,789 |
| (57,728 | ) | 224,061 |
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Share of associates’ operating income |
| 12,611 |
| — |
| 12,611 |
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Total operating income |
| 294,400 |
| (57,728 | ) | 236,672 |
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Income on sale of operations |
| 22,173 |
| — |
| 22,173 |
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Interest income |
| 8,335 |
| (1,249 | ) | 7,086 |
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Interest expense |
| (299,338 | ) | 50,394 | (a) | (248,944 | ) | |||
Other financial expense |
| (15,718 | ) | — |
| (15,718 | ) | |||
Share of associates’ net interest |
| (1,301 | ) | — |
| (1,301 | ) | |||
Income before taxes and equity minority interests |
| 8,551 |
| (8,583 | ) | (32 | ) | |||
Taxes on income |
| (26,973 | ) | 12,771 |
| (14,202 | ) | |||
Income before equity minority interests and preferred dividends |
| (18,422 | ) | 4,188 |
| (14,234 | ) | |||
Equity minority interests |
| (16,067 | ) | — |
| (16,067 | ) | |||
Net loss available to ordinary shareholders |
| € | (34,489 | ) | € | 4,188 |
| € | (30,301 | ) |
JSG Funding plc
Notes to the Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 2004
(euro in thousands)
(a) To record the change in interest expense for JSG Funding on a pro forma basis:
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| Year Ended |
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| December 31, 2004 |
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Revolving credit facility (unused portion @ 0.75%) |
| € | 3,188 |
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Term Loan A (unused portion @ 0.50%) |
| 935 |
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Term Loan B (€351,521 @ 6.28%) |
| 22,076 |
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Term Loan C (€373,899 @ 6.77%) |
| 25,313 |
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Senior notes (€350,000 @ 10.13%) |
| 35,438 |
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Senior notes ($750,000 @ 9.53%) |
| 58,671 |
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6.75% notes due 2005 remaining (€171,794 @ 7.09%)(1) |
| 12,180 |
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7.50% debentures due 2025 remaining (€243,589 @ 8.25%)(1) |
| 17,704 |
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Capitalised leases remaining (€17,400 @ 6.50%) |
| 1,131 |
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Securitization notes (€210,000 @ 4.30%) |
| 9,030 |
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PIK Units (€289,848 @ 15.5%)(2) |
| 44,539 |
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Subsidiary debt remaining (€76,000 @ 5.97%) |
| 4,239 |
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Other annual financing fees |
| 500 |
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Cash interest expense |
| 234,944 |
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Amortization of deferred financing costs |
| 14,000 |
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Effect of Munksjö proceeds |
| (21,033 | ) | |
Eliminate historical interest |
| (278,305 | ) | |
Pro forma adjustment to interest expense |
| € | (50,394 | ) |
(1) These amounts include €28,994 in fair value of related currency swaps. The assumed interest rates are based on an estimated effective rate.
(2) These amounts do not reflect the purchase of the 15.5% subordinated notes due 2013 pursuant to a tender offer, which was completed on February 14, 2005. All of the 15.5% euro subordinated notes were tendered in the tender offer. We intend to redeem the .01% of the 15.5% dollar subordinated notes not tendered pursuant to the tender offer in accordance with the terms and conditions of the indenture governing the 15.5% dollar subordinated notes. JSG Funding applied the net proceeds from the issuance and sale of its 7.75% senior subordinated notes due 2015, also not reflected above, to fund the purchase of the 15.5% subordinated notes pursuant to the tender offer and to pay related fees and expenses.
The amortization of the deferred financing costs was estimated using the straight-line method over an estimated average term of approximately 6.5 years. Actual amortization will be computed using the effective interest method based on an allocation to each individual debt instrument. The above interest amounts on the variable rate revolver and term loans are based on December 31, 2004 three-month LIBOR interest rates plus an applicable spread. Assuming a 1/8 of one percent variance in these LIBOR rates, the aggregate effect on pro forma interest expense would be €1,843 for the year ended December 31, 2004.