Exhibit 99.1
News Release
For Immediate Release
Investor Relations: Andrea Tarbox, CFO 847.441.1805
KapStone Reports First Operating Quarter
· Revenues of $65.4 Million
· Basic and Diluted EPS of $0.28 and $0.21, Respectively
· Cash Flows from Operations of $14.8 Million
NORTHFIELD, IL — May 9, 2007 — KapStone Paper and Packaging Corporation (OTCBB: KPPC) today reported first quarter 2007 net income of $7.1 million ($0.28 and $0.21 per basic and diluted shares, respectively).
On January 2, 2007, KapStone Paper and Packaging Corporation (the Company) completed the acquisition of substantially all of the assets and assumed certain liabilities, of the Kraft Papers Business, or KPB, a division of International Paper Company. The assets include an unbleached kraft paper manufacturing facility in Roanoke Rapids, North Carolina and Ride Rite® Converting, and an inflatable dunnage bag manufacturer located in Fordyce, Arkansas. Prior to the acquisition of KPB, the Company, a special purpose acquisition corporation or “blank check company”, had no operations. For periods prior to the acquisition, KPB is deemed to be the predecessor to the Company. Therefore, in this release, the KapStone results for the first quarter of 2007 are compared to KPB’s first quarter 2006 results.
Total net sales for the 2007 first quarter were $65.4 million, an increase of 2.2% over the same quarter last year. First quarter 2007 net income increased 52.6% to $7.1 million compared to the same period a year ago. Adjusted EBITDA for the 2007 first quarter was $15.6 million, an increase of $3.0 million, or 23.8%, over the same quarter last year. Adjusted basic and diluted EPS were $0.32 and $0.24, respectively, for the 2007 first quarter. Adjusted EBITDA and adjusted basic and diluted EPS exclude a $1.5 million non-cash purchase accounting adjustment made in connection with the KPB acquisition to reflect the sale of inventory acquired at fair value. — See “Non-GAAP Financial Measures” below for a further discussion of adjusted EBITDA and adjusted EPS.
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Operating Highlights
Operating income for the unbleached kraft paper segment approximated $13.0 million in the first quarter, a 57.2% increase over the prior year. The significant improvement reflected higher revenues from favorable pricing and improved product mix and productivity gains. The 2007 results also reflect the effects of purchase accounting, including lower depreciation charges on the reduced depreciable asset base and a $1.2 million non-cash adjustment to reflect the sale of inventory acquired at fair value. Prior period information has been revised to reflect the retrospective application of a change in accounting for planned major maintenance activities. The manufacturing facility typically shuts down for annual maintenance activities in the second quarter. Current accounting guidance requires these costs to be recorded in the period incurred. The previous period was revised to reflect this change.
Operating income for the dunnage bags segment approximated $1.5 million, in the first quarter, a decrease of $0.3 million from the prior year, reflecting primarily a non-cash purchase accounting adjustment for the sale of inventory acquired at fair value.
Roger Stone, KapStone’s chairman and chief executive officer, said, “The operations performed remarkably well as we transitioned into KapStone. Favorable pricing, improving linerboard mix, and productivity gains coupled with great enthusiasm from our workforce contributed momentum for the operations to provide us with an outstanding inaugural quarter.”
Cash Flow and Working Capital
Net cash from operating activities for the 2007 first quarter totaled $14.8 million, compared to $7.5 million a year ago. Capital expenditures of $2.1 million in the quarter were primarily spent on equipment upgrades for the unbleached kraft facility. Working capital at March 31, 2007 was $59.9 million including cash and cash equivalents of $35.2 million.
Conference Call
KapStone has scheduled a conference call at 11 a.m. ET, Thursday, May 10, 2007, to discuss the Company’s financial results for the 2007 first quarter. The conference call will be available via the Internet by accessing the Company’s web site at http://kapstonepaper.com. A replay of the webcast will be available for 30 days following the call.
About the Company
Headquartered in Northfield, IL, KapStone Paper and Packaging Corporation is a leading North American producer of kraft paper and converter of inflatable dunnage bags. The Company is the parent company of KapStone Kraft Paper Corporation which includes a
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paper mill in Roanoke Rapids, NC, and Ride Rite®, an inflatable dunnage bag manufacturer in Fordyce, AR. The business employs approximately 700 people.
Non-GAAP Financial Measures
Investors are cautioned that adjusted EBITDA and adjusted EPS information contained in this press release are not financial measures under U.S. generally accepted accounting principles (GAAP). In addition, they should not be construed as alternatives to any other measures of performance determined in accordance with GAAP. These non-GAAP financial measures are provided to enhance the user’s overall understanding of the Company’s current financial performance and the Company’s prospects for the future. The Company believes that these non-GAAP measures provide useful information to investors because they improve the comparability of the financial results between periods and provide for greater transparency to key measures used to evaluate the performance and liquidity of the Company. Management uses adjusted EBITDA for evaluating the Company’s performance against competitors and as a primary measure for employees’ incentive programs.
Adjusted EBITDA represents earnings before interest, income taxes, depreciation and amortization, and excludes a non-cash purchase accounting adjustment made in connection with the KPB acquisition to reflect the sale of inventory acquired at fair value. Adjusted EBITDA is not a measure of financial performance under GAAP and should not be considered as an alternative to earnings before income taxes (or any other performance measure under GAAP) as a measure of performance or to cash flows from operating, investing or financing activities as an indicator of cash flows or as a measure of liquidity. Adjusted EPS is based on net income excluding the non-cash purchase accounting adjustment made in connection with the KPB acquisition to reflect the sale of inventory acquired at fair value.
Forward-Looking Statements
Statements in this news release that are not historical are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can often be identified by words such as “may,” “will,” “should,” “would,’ “expect,” “project,” “anticipate,” “intend,” “plan,” “believe,” “estimate,” “potential,” “outlook,” or “continue,” the negative of these terms or other similar expressions and include, among others, statements under the caption “Operating Highlights”. These statements reflect management’s current views and are subject to risks, uncertainties and assumptions, many of which are beyond the Company’s control that could cause actual results to differ materially from those expressed or implied in these statements. Factors that could cause actual results to differ materially include, but are not limited to: (1) industry conditions, including changes in cost, competition, changes in the Company’s product mix and demand and pricing for the Company’s products; (ii) market and economic factors, including changes in pension and healthcare costs and natural disasters, such as hurricanes; (iii) results of legal proceedings and compliance costs, including unanticipated expenditures related to the cost of compliance with environmental and other governmental regulations; and (iv) the ability to achieve
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and effectively manage growth; (v) ability to pay the Company’s debt obligations; and (vi) ability to carry out the Company’s strategic initiatives and manage associated costs. Further information on these and other risks and uncertainties is provided under Item 1A “Risk Factors” in the Company’s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q, which is incorporated herein by reference, and elsewhere in reports that the Company files or furnishes with the SEC. These filings can be found on KapStone’s Web site at www.kapstonepaper.com and the SEC’s Web site at www.sec.gov. Forward-looking statements included herein speak only as of the date hereof and the Company disclaims any obligation to revise or update such statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events or circumstances.
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