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Washington, D.C. 20549
Bermuda | 2821 | 98-0650421 | ||
(State or other jurisdiction of incorporation or organization) | (Primary Standard Industrial Classification Code Number) | (I.R.S. Employer Identification No.) |
Robert W. Downes | Kris F. Heinzelman | |
Sullivan & Cromwell LLP | Cravath, Swaine & Moore LLP | |
125 Broad Street | 825 Eighth Avenue | |
New York, New York 10004 | New York, New York 10019 | |
(212)558-4000 | (212) 474-1000 |
Large accelerated filer o | Accelerated filer o | Non-accelerated filer þ | Smaller reporting company o |
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The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted. |
Per Share | Total | |||||||
Initial price to public | $ | $ | ||||||
Underwriting discount | $ | $ | ||||||
Proceeds, before expenses, to Arizona Chemical | $ | $ | ||||||
Proceeds, before expenses, to the selling shareholder | $ | $ |
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EX-23.4 |
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• | Adhesives. We are a leading global supplier of tackifiers to the adhesives industry as measured by sales and the world’s largest producer of tackifier resins from renewable resources in terms of volume. |
• | Inks. We are a major supplier of ink resins to many of the world’s leading printing ink companies for use in publication and packaging inks. |
• | Tires and Rubber. We are a leading supplier of resins and additives from renewable resources to the global tires and rubber industry as measured by sales. |
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• | Roads and Construction. We are a major supplier of resins for use in roadmarking, and we believe there are future opportunities to supply fatty acids and tackifier resins for bitumen applications in the roofing and paving sub-markets. | |
• | Consumer Products. We sell a diverse range of specialty materials used in the formulation of consumer products for the personal care, home care, industrial cleaning and food ingredients sub-markets. |
• | Renewable Energy. We are the largest global producer of tall oil pitch, a second generation, cellulosic biofuel used in municipal heating and industrial power generation, as measured by volume. Further, our TOFA can also be used as a raw material in the manufacture of biodiesel. |
• | Chemical Intermediates. Our TOR, TOFA, dimer acid and DTO chemical intermediates are sold into a diverse range of markets, including, among others, paints and coatings, lubricants, fuel additives, mining and oilfield, paper chemicals and polymers. |
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• | naturally-derived resins used in adhesives, inks and roadmarking applications; | |
• | naturally-derived tackifier resins used in hot melt packaging and bookbinding adhesives; | |
• | naturally-derived tread enhancement resins for passenger car tires; and | |
• | pine-based, non genetically-modified sterols used in food ingredient and nutrient applications through our joint venture, Arboris, LLC. |
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• | adhesive tackifiers designed to enable the use of a higher amount of recycled content in packaging materials; |
• | high solid adhesive dispersions for labels and tapes that allow for higher coating speeds and that lower process energy costs; |
• | heat stable rheology, or HSR, ink resins that reduce formulation complexity for ink manufacturers while improving press performance; |
• | tire tread resins that promote wet grip, fuel economy and tire life; |
• | fuel lubricity improvers that ensure low sulfur targets for diesel fuel can be met; and |
• | emulsions and clear gels for skin and sun care applications. |
Combined | ||||||||||||||||||||
Three Months | Three Months | Year Ended | Year Ended | Year Ended | ||||||||||||||||
Ended | Ended | December 31, | December 31, | December 31, | ||||||||||||||||
March 31, 2010 | March 31, 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
(dollars in thousands) | (Non-GAAP) | |||||||||||||||||||
Net income (loss) | $ | 9,997 | $ | (2,357 | ) | $ | 12,098 | $ | (26,599 | ) | $ | (23,605 | ) | |||||||
Gross margins | 20.6 | % | 8.1 | % | 15.7 | % | 13.3 | % | 11.7 | % | ||||||||||
Adjusted EBITDA | 27,378 | 11,043 | 93,859 | 92,723 | 66,898 | |||||||||||||||
Adjusted EBITDA margins | 13.8 | % | 6.2 | % | 12.2 | % | 9.3 | % | 7.8 | % |
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Issuer | Arizona Chemical Ltd. | |
Common shares offered by the issuer | common shares. | |
Common shares offered by the selling shareholder | common shares. | |
Common shares | Immediately following the consummation of this offering, we will have million common shares outstanding. |
Use of proceeds | Assuming we sell the shares for a per share price equal to $ , the midpoint of the price range set forth on the cover page of this prospectus, will receive net proceeds from this offering of approximately $ million after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds of this offering to make an approximately $12 million distribution to our parent entity, AZ Chem Investments Partners LP, and to pay transaction-related expenses of $ million. We intend to use the remaining net proceeds to repay $ million of indebtedness under our First Lien Credit Agreement, representing 75% of the remaining net proceeds, and to repay $ million of indebtedness outstanding under our Second Lien Credit Agreement, representing 25% of the remaining net proceeds. We will not receive any proceeds from the sale of our common shares by the selling shareholder. |
Dividend policy | Other than the distribution we are making to AZ Chem Investments Partners LP out of the proceeds of this offering, we do not anticipate paying any cash dividends on our common shares for the foreseeable future. We intend to retain all available funds and any future earnings to reduce debt and fund the development and growth of our business. |
NYSE Symbol | “ARZ”. | |
Risk factors | For a discussion of risks relating to our company, our business and an investment in our common shares, see “Risk Factors” and all other information set forth in this prospectus before investing in our common shares. | |
Unless we specifically state otherwise, all information in this prospectus assumes no exercise by the underwriters of their option to purchase an additional shares. |
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FINANCIAL INFORMATION AND OTHER DATA
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Successor | Successor | Successor | Successor | Combined | Successor | Predecessor | ||||||||||||||||||||||
(Non-GAAP) | ||||||||||||||||||||||||||||
Three | Three | March 1, | January 1, | |||||||||||||||||||||||||
Months | Months | Year | Year | Year | 2007 | 2007 | ||||||||||||||||||||||
Ended | Ended | Ended | Ended | Ended | through | through | ||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | December 31, | February 28, | ||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2007 | ||||||||||||||||||||||
(dollars in thousands, except per share data) | ||||||||||||||||||||||||||||
Net sales | $ | 198,051 | $ | 177,934 | $ | 767,465 | $ | 1,001,988 | $ | 855,867 | $ | 723,797 | $ | 132,070 | ||||||||||||||
Cost of goods sold | 157,333 | 163,445 | 646,986 | 868,536 | 755,415 | 642,341 | 113,074 | |||||||||||||||||||||
Gross profit | 40,718 | 14,489 | 120,479 | 133,452 | 100,452 | 81,456 | 18,996 | |||||||||||||||||||||
Selling, general and administrative | 25,673 | 15,464 | 78,200 | 91,936 | 99,583 | 86,684 | 12,899 | |||||||||||||||||||||
Unrealized foreign currency exchange (gains) losses(1) | (4,836 | ) | 367 | (9,347 | ) | 20,304 | — | — | — | |||||||||||||||||||
Restructuring and impairment(2) | 2,047 | 1,035 | 26,395 | 15,513 | 114 | 114 | — | |||||||||||||||||||||
Other operating income(3) | — | (2,043 | ) | (5,537 | ) | — | — | — | — | |||||||||||||||||||
Operating income (loss) | 17,834 | (334 | ) | 30,768 | 5,699 | 755 | (5,342 | ) | 6,097 | |||||||||||||||||||
Interest (expense) income, net | (3,870 | ) | (4,560 | ) | (16,546 | ) | (29,523 | ) | (28,657 | ) | (28,775 | ) | 118 | |||||||||||||||
Loss on interest rate swaps, net | (709 | ) | (600 | ) | (2,541 | ) | (9,311 | ) | (2,275 | ) | (2,275 | ) | — | |||||||||||||||
Other income(4) | 623 | 2,151 | 3,635 | 1,879 | — | — | — | |||||||||||||||||||||
Income (loss) before income tax expense (benefit) | 13,878 | (3,343 | ) | 15,316 | (31,256 | ) | (30,177 | ) | (36,392 | ) | 6,215 | |||||||||||||||||
Income tax expense (benefit) | 3,885 | (836 | ) | 3,831 | (4,277 | ) | (6,299 | ) | (8,913 | ) | 2,614 | |||||||||||||||||
Equity in earnings of affiliate(5) | 4 | 150 | 613 | 380 | 273 | 189 | 84 | |||||||||||||||||||||
Net income (loss) | $ | 9,997 | $ | (2,357 | ) | $ | 12,098 | $ | (26,599 | ) | $ | (23,605 | ) | $ | (27,290 | ) | $ | 3,685 | ||||||||||
Earnings per share(6): | ||||||||||||||||||||||||||||
Basic and diluted | $ | 9,997 | $ | (2,357 | ) | $ | 12,098 | $ | (26,599 | ) | $ | (27,290 | ) | |||||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||||||||||||
Basic and diluted | 1,000 | 1,000 | 1,000 | 1,000 | 1,000 | |||||||||||||||||||||||
As of March 31, 2010 | ||||||||
As Adjusted for | ||||||||
Actual | the Offering(7) | |||||||
(dollars in thousands) | ||||||||
Cash and cash equivalents | $ | 43,057 | $ | |||||
Total assets | 630,275 | |||||||
Total debt | 331,645 | |||||||
Total shareholder’s equity | 101,495 |
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Successor | Successor | Successor | Successor | Combined | Successor | Predecessor | ||||||||||||||||||||||
(Non-GAAP) | ||||||||||||||||||||||||||||
Three | Three | |||||||||||||||||||||||||||
Months | Months | March 1, | January 1, | |||||||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | Year Ended | 2007 through | 2007 through | ||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | December 31, | February 28, | ||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2007 | ||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||
Gross margin(8) | 20.6 | % | 8.1 | % | 15.7 | % | 13.3 | % | 11.7 | % | 11.3 | % | 14.4 | % | ||||||||||||||
Depreciation(8) | $ | 6,599 | $ | 6,872 | $ | 29,781 | $ | 23,311 | $ | 23,790 | $ | 19,693 | $ | 4,097 | ||||||||||||||
Amortization | 2,444 | 2,565 | 10,834 | 10,899 | 9,445 | 9,120 | 325 | |||||||||||||||||||||
Adjusted EBITDA(9) | 27,378 | 11,043 | 93,859 | 92,723 | 66,898 | 54,874 | 12,024 | |||||||||||||||||||||
Adjusted EBITDA margin | 13.8 | % | 6.2 | % | 12.2 | % | 9.3 | % | 7.8 | % | 7.6 | % | 9.1 | % | ||||||||||||||
Free cash flow(10) | $ | (5,424 | ) | $ | 1,845 | $ | 81,803 | $ | (13,452 | ) | $ | 8,446 | $ | 25,132 | $ | (16,686 | ) | |||||||||||
Net cash provided by (used in) operating activities | 2,507 | 11,100 | 117,325 | 20,841 | 32,934 | 45,022 | (12,088 | ) | ||||||||||||||||||||
Net cash used in investing activities | (7,931 | ) | (18,027 | ) | (44,294 | ) | (34,293 | ) | (501,929 | ) | (497,331 | ) | (4,598 | ) | ||||||||||||||
Net cash provided by (used in) financing activities | 2,202 | (1,220 | ) | (63,771 | ) | 12,768 | 498,843 | 488,547 | 10,296 |
(1) | Unrealized foreign currency exchange losses (gains) is primarily related to translation changes in the balance of the Euro-denominated debt under our First Lien Credit Agreement. This is further described in Note 11 of our consolidated financial statements and Note 8 of our unaudited condensed consolidated financial statements appearing at the end of this prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. |
The following table presents unrealized and realized foreign exchange losses (gains) included in our consolidated statement of operations. |
Successor | Successor | Successor | Successor | Combined | Successor | Predecessor | ||||||||||||||||||||||
(Non-GAAP) | ||||||||||||||||||||||||||||
Three | Three | |||||||||||||||||||||||||||
Months | Months | March 1, | January 1, | |||||||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | Year Ended | 2007 through | 2007 through | ||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | December 31, | February 28, | ||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2007 | ||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||
Unrealized translation related foreign currency exchange (gains) losses | $ | (4,836 | ) | $ | 367 | $ | (9,347 | ) | $ | 20,304 | $ | — | $ | — | $ | — | ||||||||||||
Realized transaction related foreign currency exchange (gains) losses — selling, general and administrative | (107 | ) | (1,883 | ) | 214 | 234 | (261 | ) | 238 | (499 | ) | |||||||||||||||||
Realized transaction related foreign currency exchange (gains) losses — cost of goods sold | (205 | ) | 37 | 154 | 65 | 20 | 3 | 17 |
(2) | Restructuring and impairment includes pre-tax restructuring charges primarily related to manufacturing facility closures and employee terminations as part of our cost reduction initiatives. This is further described in Note 9 of our consolidated financial statements and Note 7 of our unaudited condensed consolidated financial statements appearing at the end of this prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. |
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The following table presents details of our restructuring and impairment charges included in our consolidated statement of operations. |
Successor | Successor | Successor | Successor | Combined | Successor | Predecessor | ||||||||||||||||||||||
(Non-GAAP) | ||||||||||||||||||||||||||||
Three | Three | |||||||||||||||||||||||||||
Months | Months | March 1, | January 1, | |||||||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | Year Ended | 2007 through | 2007 through | ||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | December 31, | February 28, | ||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2007 | ||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||
Port St. Joe, Florida | $ | — | $ | — | $ | 5,822 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Gersthofen, Germany | 108 | — | 1,251 | — | — | — | — | |||||||||||||||||||||
Valdosta, Georgia | 97 | — | 874 | — | — | — | — | |||||||||||||||||||||
U.K. facilities | — | — | 339 | 5,369 | — | — | — | |||||||||||||||||||||
Niort, France | 648 | — | — | 1,972 | — | — | — | |||||||||||||||||||||
Dover, Ohio | — | 3 | — | 635 | — | — | — | |||||||||||||||||||||
Pensacola, Florida | — | — | — | 534 | 114 | 114 | — | |||||||||||||||||||||
Sandarne, Sweden | 1,194 | — | — | — | — | — | — | |||||||||||||||||||||
Impairment | — | 1,032 | 18,109 | 7,003 | — | — | — | |||||||||||||||||||||
Total | $ | 2,047 | $ | 1,035 | $ | 26,395 | $ | 15,513 | $ | 114 | $ | 114 | $ | — | ||||||||||||||
(3) | Other operating income of $5.5 million recorded in 2009 included $4.9 million of insurance proceeds related to a fire at our Oulu, Finland manufacturing facility and a gain of $0.7 million on the sale of capital assets realized as a result of the closure of our Bedlington, U.K. manufacturing facility. |
(4) | In 2009, other income included a gain on our acquisition of Abieta of $2.1 million and a gain on settlement with International Paper of $1.3 million, whereas in 2008, other income included a gain of $1.9 million on the extinguishment of a portion of our debt. All of these items were excluded from the calculation of Adjusted EBITDA. In the three months ended March 31, 2010, other income primarily related to insurance proceeds relating to a fire at our Sandarne, Sweden manufacturing facility. |
(5) | Equity in earnings of affiliate relates to our 10% investment in Arboris, LLC, which was formed in 2002 and is accounted for under the equity method of accounting as we have the ability to exercise significant influence. Our share of the earnings from operations in this investment is recorded in our statement of operations. This is further described in Note 3 of our consolidated financial statements appearing at the end of this prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. |
(6) | Prior to the Acquisition, we were an operating division of International Paper. As a result, the capital structure of our predecessor did not include common stock or other forms of equity shares. Accordingly, earnings per share is not available for periods prior to March 1, 2007. Additionally, the information presented regarding earnings per share and weighted average common shares outstanding is that of Arizona Chem Sweden Holdings AB on an actual basis. The earnings per share of Arizona Chemical Ltd. on an as adjusted basis after giving effect to the Reorganization for the three months ended March 31, 2010 and 2009, the years ended December 31, 2009 and 2008 and the ten month period ended December 31, 2007 would have been $ , $ , $ , $ , and $ , respectively, assuming common shares outstanding. |
(7) | Reflects on an adjusted basis the sale of of our common shares in this offering at an assumed initial public offering price of $ per share (the midpoint of the price range set forth on the cover page of this prospectus), and the application of the estimated net proceeds from this offering as described under “Use of Proceeds”, and assumes this offering had been consummated on March 31, 2010. |
(8) | Included in these amounts in 2009 is accelerated depreciation associated with the closure of our Port St. Joe facility in the amount of $1.6 million. Accelerated depreciation had a negative impact on our gross margins of 1.3% in 2009. |
(9) | Adjusted EBITDA represents net income before interest, taxes, depreciation, and amortization and is adjusted for various items as defined in our credit agreements. Adjusted EBITDA presented in the predecessor period was calculated on the same basis as Adjusted EBITDA |
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presented in the successor periods pursuant to our credit agreements. Under the terms of our credit agreements, we use Adjusted EBITDA to calculate our maximum leverage ratio and our minimum interest coverage ratio covenants. See “— Adjusted EBITDA” below. |
(10) | Free cash flow represents net cash provided by operating activities, less purchases of property, plant and equipment, software spending and proceeds from disposals of property, plant and equipment. See “ — Free Cash Flow” below. |
Successor | Successor | Successor | Successor | Combined | Successor | Predecessor | ||||||||||||||||||||||
(Non-GAAP) | March 1, | January 1, | ||||||||||||||||||||||||||
Three months | Three months | Year Ended | Year Ended | Year Ended | 2007 through | 2007 through | ||||||||||||||||||||||
ended March 31, | ended March 31, | December 31, | December 31, | December 31, | December 31, | February 28, | ||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2007(4) | ||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||
Net income (loss) | $ | 9,997 | $ | (2,357 | ) | $ | 12,098 | $ | (26,599 | ) | $ | (23,605 | ) | $ | (27,290 | ) | $ | 3,685 | ||||||||||
Interest expense (income), net | 3,870 | 4,560 | 16,546 | 29,523 | 28,657 | 28,775 | (118 | ) | ||||||||||||||||||||
Income tax expense (benefit) | 3,885 | (836 | ) | 3,831 | (4,277 | ) | (6,299 | ) | (8,913 | ) | 2,614 | |||||||||||||||||
Depreciation and amortization | 9,043 | 9,437 | 40,615 | 34,210 | 33,235 | 28,813 | 4,422 | |||||||||||||||||||||
EBITDA | 26,795 | 10,804 | 73,090 | 32,857 | 31,988 | 21,385 | 10,603 | |||||||||||||||||||||
Unrealized foreign currency exchange (gains) losses | (4,836 | ) | 367 | (9,347 | ) | 20,304 | — | — | — | |||||||||||||||||||
Restructuring and impairment | 2,047 | 1,035 | 26,395 | 15,513 | 114 | 114 | — | |||||||||||||||||||||
Loss on interest rate swaps, net | 709 | 600 | 2,541 | 9,311 | 2,275 | 2,275 | — | |||||||||||||||||||||
Equity in earnings of affiliate | (4 | ) | (150 | ) | (613 | ) | (380 | ) | (273 | ) | (189 | ) | (84 | ) | ||||||||||||||
Transaction costs(1) | — | — | — | 1,316 | 10,271 | 10,271 | — | |||||||||||||||||||||
Management fees (2) | 495 | 351 | 1,538 | 1,990 | 1,295 | 1,295 | — | |||||||||||||||||||||
Transition costs(3) | — | — | — | 2,984 | 6,667 | 6,575 | 92 | |||||||||||||||||||||
Gain on Abieta acquisition | — | (2,151 | ) | (2,151 | ) | — | — | — | — | |||||||||||||||||||
Gain on settlement with International Paper | — | — | (1,316 | ) | — | — | — | — | ||||||||||||||||||||
Selling, general and administrative severance | — | — | — | 3,121 | 2,235 | 2,235 | — | |||||||||||||||||||||
Third-party advisor fees | 2,135 | — | — | 1,573 | — | — | — | |||||||||||||||||||||
Consulting services | — | — | — | 3,794 | 7,616 | 7,616 | — | |||||||||||||||||||||
Gain on debt extinguishment | — | — | — | (1,901 | ) | — | — | — | ||||||||||||||||||||
Other items | 37 | 187 | 3,722 | 2,241 | 4,710 | 3,297 | 1,413 | |||||||||||||||||||||
Adjusted EBITDA | $ | 27,378 | $ | 11,043 | $ | 93,859 | $ | 92,723 | $ | 66,898 | $ | 54,874 | $ | 12,024 | ||||||||||||||
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(1) | Transaction costs were related to the Acquisition. These costs included legal, tax, IT, professional fees and Rhône Capital transaction fees. | |
(2) | Management fees are paid to Rhône Group L.L.C., an affiliate of Rhône Capital, for corporate-level support activities provided to us. These management fees will no longer be paid following the completion of the offering. | |
(3) | Transition costs included fees paid to International Paper in connection with the Acquisition under the transition services agreement (governing interim services provided by International Paper), IT consulting fees, costs for infrastructure build-out (such as IT and phone systems, treasury function setup, HR/payroll) and the cost of a carve-out audit, among other items. |
(4) | Adjusted EBITDA presented in the predecessor period was calculated on the same basis as Adjusted EBITDA presented in the successor periods pursuant to our credit agreements. |
Successor | Successor | Successor | Successor | Combined | Successor | Predecessor | ||||||||||||||||||||||
(Non-GAAP) | March 1, 2007 | January 1, 2007 | ||||||||||||||||||||||||||
Three months | Three months | Year Ended | Year Ended | Year Ended | through | through | ||||||||||||||||||||||
ended March 31, | ended March 31, | December 31, | December 31, | December 31, | December 31, | February 28, | ||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2007 | ||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 2,507 | $ | 11,100 | $ | 117,325 | $ | 20,841 | $ | 32,934 | $ | 45,022 | $ | (12,088 | ) | |||||||||||||
Less: | ||||||||||||||||||||||||||||
Purchases of property, plant and equipment | (4,866 | ) | (6,677 | ) | (22,993 | ) | (34,719 | ) | (22,846 | ) | (18,248 | ) | (4,598 | ) | ||||||||||||||
Software spending | (3,761 | ) | (3,268 | ) | (13,404 | ) | (142 | ) | (1,642 | ) | (1,642 | ) | — | |||||||||||||||
Proceeds from disposals of property, plant and equipment | — | 690 | 875 | 212 | — | — | — | |||||||||||||||||||||
Other | 696 | — | — | 356 | — | — | — | |||||||||||||||||||||
Free cash flow | $ | (5,424 | ) | $ | 1,845 | $ | 81,803 | $ | (13,452 | ) | $ | 8,446 | $ | 25,132 | $ | (16,686 | ) | |||||||||||
Net cash (used in) provided by investing activities | (7,931 | ) | (18,027 | ) | (44,294 | ) | (34,293 | ) | (501,929 | ) | (497,331 | ) | (4,598 | ) | ||||||||||||||
Net cash provided by (used in) financing activities | 2,202 | (1,220 | ) | (63,771 | ) | 12,768 | 498,843 | 488,547 | 10,296 |
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• | potential disruption of our ongoing business and distraction of management; | |
• | unexpected loss of key employees or customers of the acquired company; | |
• | conforming the acquired company’s standards, processes, procedures and controls with our operations; | |
• | coordinating new product and process development; | |
• | hiring additional management and other critical personnel; | |
• | increasing the scope, geographic diversity and complexity of our operations; | |
• | encountering unforeseen obstacles or costs in the integration of acquired businesses; | |
• | the presence of one or more material liabilities of an acquired company that are unknown to us at the time of the acquisition; and | |
• | unfavorable reception to the acquisition by our customers. |
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• | it may limit our ability to obtain additional financing to fund working capital, capital expenditures, product development, dividend payments, debt service requirements, strategic initiatives or other purposes; | |
• | it may limit our flexibility in planning for, or reacting to, changes in our operations or market conditions, and because we are more highly leveraged than some of our competitors, we may be at a competitive disadvantage; | |
• | it may make us more vulnerable to further downturns in our industry or the economy; | |
• | a substantial portion of our cash flow from operations will be dedicated to the repayment of principal and interest on our indebtedness and will not be available for other purposes; | |
• | it may limit our ability to acquire other businesses or assets; and | |
• | it may limit our ability to refinance our current indebtedness. |
• | declare dividends, make distributions or redeem or repurchase common shares; | |
• | prepay, redeem or repurchase other debt; | |
• | incur liens or grant negative pledges; | |
• | make loans and investments and enter into acquisitions and joint ventures; | |
• | incur additional indebtedness; | |
• | amend or otherwise alter or waive any material rights under any organizational document or any permitted debt agreement; | |
• | make capital expenditures; | |
• | engage in mergers, acquisitions and asset sales; | |
• | engage in sale and lease-back transactions; | |
• | conduct transactions with affiliates; |
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• | alter the nature of our business; and | |
• | change our fiscal quarter or fiscal year. |
• | discontinue lending under the revolving credit facility under our First Lien Credit Agreement; | |
• | elect to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be due and payable; | |
• | foreclose on our collateral; and | |
• | force us to file for bankruptcy protection. |
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• | pipeline and storage tank leaks and ruptures; | |
• | explosions and fires; | |
• | inclement weather and natural disasters, including hurricanes in the Southeastern United States and other extreme weather conditions relating to global climate change; | |
• | terrorist attack; | |
• | mechanical failures; and | |
• | chemical spills and other accidental discharges or releases of toxic or hazardous substances or gases. |
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• | difficulty in enforcing agreements through the differing legal systems of the countries in which we operate; | |
• | customers in the various countries in which we operate may have long payment cycles; | |
• | countries in which we operate may impose withholding taxes or otherwise tax our income from our operations, impose tariffs or adopt other restrictions on trade and investment outside, including currency exchange controls; | |
• | restrictions on our ability to repatriate earnings from countries in which we operate; | |
• | difficulty in enforcing intellectual property rights and our ability to protect our intellectual property; | |
• | high rates of inflation; | |
• | fluctuations in exchange rates, including currency devaluation, may affect product demand and may adversely affect our profitability; | |
• | increased costs of transportation or shipping; | |
• | risk of nationalization of private enterprises; | |
• | changes in general economic and political conditions in the countries in which we operate; | |
• | changes in laws or regulatory requirements, including those governing environmental protection, export duties and quotas; | |
• | difficulty with staffing and managing widespread operations; and | |
• | required compliance with laws and regulations of numerous jurisdictions. |
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• | our quarterly operating results; | |
• | future announcements concerning our business; | |
• | changes in financial estimates and recommendations by securities analysts; | |
• | the number of shares to be publicly traded after this offering; | |
• | changes in the availability or cost of raw materials; | |
• | changes in energy costs; | |
• | actions of competitors; | |
• | our involvement in acquisitions, strategic alliances or joint ventures; | |
• | market and industry perception of our success, or lack thereof, in pursuing our growth strategy; | |
• | our ability to develop and market new products on a timely basis; | |
• | commencement of, or our involvement in litigation; | |
• | dilutive issuances of our shares or the shares of our subsidiaries; | |
• | changes in our board or management; | |
• | adoption of new or different accounting standards; | |
• | changes in government regulations, including environmental regulations; | |
• | difficulties in managing international operations and the burden of complying with existing and future domestic and foreign laws; | |
• | arrival and departure of key personnel; | |
• | general market, economic and political conditions; and | |
• | natural disasters, terrorist attacks and acts of war. |
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• | conditions in the global economy and capital markets; | |
• | our dependence on International Paper and other suppliers to perform their obligations to us; | |
• | failure of our suppliers to perform their obligations under long-term supply agreements, or our inability to replace or renew these agreements when they expire, could increase our cost for these materials and interrupt production; | |
• | limited availability or increases in prices of raw materials used in our business; | |
• | our substantial level of indebtedness and the operating and financial restrictions imposed by our debt instruments and related indentures; | |
• | competitive pressures in the specialty chemicals industry; | |
• | our ability to continue technological innovation and successful commercial introduction of new products; | |
• | our ability to protect intellectual property and other proprietary information; | |
• | losses due to liabilities arising out of intellectual property infringement and product liability claims; | |
• | losses due to lawsuits arising out of environmental damage or personal injuries associated with chemical manufacturing; | |
• | our ability to comply with extensive environmental, health and safety laws, including regulation of exposure to chemicals used in our operations, including formaldehyde, nonylphenol and bisphenol A, that could require material expenditures or changes in our operations; | |
• | the risk of accidents that could disrupt our operations or expose us to significant losses or liabilities; | |
• | governmental regulations and trade restrictions; | |
• | exposure to interest rate and currency fluctuations; | |
• | acts of war or terrorism in the United States or worldwide, political or financial instability in the countries where our goods are manufactured and sold; and | |
• | other risks and uncertainties described in this prospectus. |
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• | restrictions in our credit agreements; | |
• | general economic and business conditions; | |
• | our financial condition and results of operations; | |
• | our capital requirements and the capital requirements of our subsidiaries; | |
• | the ability of our operating subsidiaries to pay dividends and make distributions to us; and | |
• | such other factors as our board of directors may deem relevant. |
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As of March 31, 2010 | ||||||||
Actual | As Adjusted(1) | |||||||
(dollars in millions, except share data) | ||||||||
Debt: | ||||||||
Senior credit agreements: | ||||||||
First Lien Term Loan | $ | 211.9 | $ | |||||
Second Lien Term Loan | 115.5 | |||||||
Revolving credit facility | — | — | ||||||
Capital lease obligation | 3.7 | 3.7 | ||||||
Loans related to Abieta | 0.5 | 0.5 | ||||||
Total debt | 331.6 | |||||||
Shareholder’s equity: | ||||||||
Common shares — Arizona Chem Sweden Holdings AB, $14.25 par value per share; 1,000 shares issued and outstanding, actual | 0.0 | — | ||||||
Paid-in capital — Arizona Chem Sweden Holdings AB | 135.7 | — | ||||||
Common shares — Arizona Chemical Ltd., $0.01 par value per share; no shares authorized or issued and outstanding, actual ( shares authorized; shares issued and outstanding, as adjusted) | — | |||||||
Paid-in capital — Arizona Chemical Ltd. | — | |||||||
Accumulated deficit | (31.8 | ) | ||||||
Accumulated other comprehensive income | (2.4 | ) | ||||||
Total shareholder’s equity | 101.5 | |||||||
Total capitalization | $ | 433.1 | $ | |||||
(1) | A $1.00 increase or decrease in the assumed initial public offering price per share would result in an approximately $ million increase or decrease, as applicable, in as adjusted total debt, as adjusted additional paid-in capital, as adjusted total shareholder’s equity and as adjusted total capitalization, assuming the number of shares offered by us, as set forth on the front cover of this prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. |
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Assumed initial public offering price per share | $ | |||||||
Historical net tangible book value per share as of | $ | |||||||
Increase per share attributable to new investors | ||||||||
As adjusted net tangible book value per share after giving effect to this offering | ||||||||
Dilution per share to new investors | $ | |||||||
Total | Average | |||||||||||||||||||
Shares Purchased | Consideration | Price | ||||||||||||||||||
Number | Percent | Amount | Percent | per Share | ||||||||||||||||
Existing shareholders | % | $ | % | $ | ||||||||||||||||
New investors | ||||||||||||||||||||
Total | 100 | % | $ | $ | 100 | % | ||||||||||||||
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Successor | Successor | Successor | Successor | Successor | Predecessor | Predecessor | Predecessor | |||||||||||||||||||||||||
Three | Three | |||||||||||||||||||||||||||||||
months | months | March 1, 2007 | January 1, | |||||||||||||||||||||||||||||
ended | ended | Year Ended | Year Ended | through | 2007 through | Year Ended | Year Ended | |||||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | February 28, | December 31, | December 31, | |||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||
(dollars in thousands, except per share data) | ||||||||||||||||||||||||||||||||
Net sales | $ | 198,051 | $ | 177,934 | $ | 767,465 | $ | 1,001,988 | $ | 723,797 | $ | 132,070 | $ | 767,882 | $ | 692,446 | ||||||||||||||||
Cost of products sold | 157,333 | 163,445 | 646,986 | 868,536 | 642,341 | 113,074 | 645,125 | 600,902 | ||||||||||||||||||||||||
Gross profit | 40,718 | 14,489 | 120,479 | 133,452 | 81,456 | 18,996 | 122,757 | 91,544 | ||||||||||||||||||||||||
Selling, general and administrative | 25,673 | 15,464 | 78,200 | 91,936 | 86,684 | 12,899 | 74,240 | 72,838 | ||||||||||||||||||||||||
Unrealized foreign currency exchange (gains) losses(1) | (4,836 | ) | 367 | (9,347 | ) | 20,304 | — | — | — | — | ||||||||||||||||||||||
Restructuring and impairment(2) | 2,047 | 1,035 | 26,395 | 15,513 | 114 | — | 1,851 | 5,558 | ||||||||||||||||||||||||
Other operating income(3) | — | (2,043 | ) | (5,537 | ) | — | — | — | — | — | ||||||||||||||||||||||
Operating income (loss) | 17,834 | (334 | ) | 30,768 | 5,699 | (5,342 | ) | 6,097 | 46,666 | 13,148 | ||||||||||||||||||||||
Interest (expense) income, net | (3,870 | ) | (4,560 | ) | (16,546 | ) | (29,523 | ) | (28,775 | ) | 118 | 461 | 298 | |||||||||||||||||||
Loss on interest rate swaps, net | (709 | ) | (600 | ) | (2,541 | ) | (9,311 | ) | (2,275 | ) | — | — | — | |||||||||||||||||||
Other income(4) | 623 | 2,151 | 3,635 | 1,879 | — | — | 2,081 | (177 | ) | |||||||||||||||||||||||
Income (loss) before income tax expense (benefit) | 13,878 | (3,343 | ) | 15,316 | (31,256 | ) | (36,392 | ) | 6,215 | 49,208 | 13,269 | |||||||||||||||||||||
Income tax expense (benefit) | 3,885 | (836 | ) | 3,831 | (4,277 | ) | (8,913 | ) | 2,614 | 18,161 | 9,090 | |||||||||||||||||||||
Equity in earnings of affiliate(5) | 4 | 150 | 613 | 380 | 189 | 84 | 2,033 | (187 | ) | |||||||||||||||||||||||
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Successor | Successor | Successor | Successor | Successor | Predecessor | Predecessor | Predecessor | |||||||||||||||||||||||||
Three | Three | |||||||||||||||||||||||||||||||
months | months | March 1, 2007 | January 1, | |||||||||||||||||||||||||||||
ended | ended | Year Ended | Year Ended | through | 2007 through | Year Ended | Year Ended | |||||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | February 28, | December 31, | December 31, | |||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||
(dollars in thousands, except per share data) | ||||||||||||||||||||||||||||||||
Net income (loss) | $ | 9,997 | $ | (2,357 | ) | $ | 12,098 | $ | (26,599 | ) | $ | (27,290 | ) | $ | 3,685 | $ | 33,080 | $ | 3,992 | |||||||||||||
Earnings per share(6): | ||||||||||||||||||||||||||||||||
Basic and diluted | $ | 9,997 | $ | (2,357 | ) | $ | 12,098 | $ | (26,599 | ) | $ | (27,290 | ) | |||||||||||||||||||
Weighted average common shares outstanding: | ||||||||||||||||||||||||||||||||
Basic and diluted | 1,000 | 1,000 | 1,000 | 1,000 | 1,000 | |||||||||||||||||||||||||||
Successor | Successor | Successor | Successor | Successor | Predecessor | Predecessor | Predecessor | |||||||||||||||||||||||||
Three | Three | |||||||||||||||||||||||||||||||
Months | Months | Year | Year | March 1 | January 1 | Year | Year | |||||||||||||||||||||||||
Ended | Ended | Ended | Ended | through | through | Ended | Ended | |||||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | February 28, | December 31, | December 31, | |||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 2,507 | $ | 11,100 | $ | 117,325 | $ | 20,841 | $ | 45,022 | $ | (12,088 | ) | $ | 5,048 | $ | 44,115 | |||||||||||||||
Net cash used in investing activities | (7,931 | ) | (18,027 | ) | (44,294 | ) | (34,293 | ) | (497,331 | ) | (4,598 | ) | (38,131 | ) | (29,228 | ) | ||||||||||||||||
Net cash provided by (used in) financing activities | 2,202 | (1,220 | ) | (63,771 | ) | 12,768 | 488,547 | 10,296 | 28,375 | (10,875 | ) |
As of March 31, 2010 | ||||||||
As Adjusted for | ||||||||
Actual | the Offering(7) | |||||||
(dollars in thousands) | ||||||||
Cash and cash equivalents | $ | 43,057 | $ | |||||
Total assets | 630,275 | |||||||
Total debt | 331,645 | |||||||
Total shareholder’s equity | 101,495 |
Successor | Successor | Successor | Successor | Predecessor | Predecessor | |||||||||||||||||||
March 31, | December 31, | December 31, | December 31, | December 31, | February 28, | |||||||||||||||||||
2010 | 2009 | 2008 | 2007 | 2006 | 2005 | |||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Total assets | $ | 630,275 | $ | 618,009 | $ | 691,084 | $ | 708,322 | $ | 553,390 | $ | 449,672 | ||||||||||||
Total debt | 331,645 | 338,853 | 387,665 | 388,885 | 4,231 | 4,010 | ||||||||||||||||||
Total shareholder’s equity(8) | 101,495 | 97,607 | 95,509 | 104,045 | 382,854 | 297,089 |
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Successor | Successor | Successor | Successor | Successor | Predecessor | Predecessor | Predecessor | |||||||||||||||||||||||||
Three | Three | |||||||||||||||||||||||||||||||
Months | Months | Year | Year | March 1 | January 1 | Year | Year | |||||||||||||||||||||||||
Ended | Ended | Ended | Ended | through | through | Ended | Ended | |||||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | February 28, | December 31, | December 31, | |||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||
Gross margin(9) | 20.6 | % | 8.1 | % | 15.7 | % | 13.3 | % | 11.3 | % | 14.4 | % | 16.0 | % | 13.2 | % | ||||||||||||||||
Depreciation(9) | $ | 6,599 | $ | 6,872 | $ | 29,781 | $ | 23,311 | $ | 19,693 | $ | 4,097 | $ | 22,414 | $ | 29,178 | ||||||||||||||||
Amortization | 2,444 | 2,565 | 10,834 | 10,899 | 9,120 | 325 | 1,353 | 156 | ||||||||||||||||||||||||
Adjusted EBITDA(10) | 27,378 | 11,043 | 93,859 | 92,723 | 54,874 | 12,024 | 78,347 | 62,419 | ||||||||||||||||||||||||
Free cash flow(11) | (5,424 | ) | 1,845 | 81,803 | (13,452 | ) | 25,132 | (16,686 | ) | (33,083 | ) | 14,887 |
(1) | Unrealized foreign currency exchange losses (gains) is primarily related to translation changes in the balance of the Euro-denominated debt under our First Lien Credit Agreement. This is further described in Note 11 of our consolidated financial statements and Note 8 of our unaudited condensed consolidated financial statements appearing at the end of this prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. |
Successor | Successor | Successor | Successor | Successor | Predecessor | Predecessor | Predecessor | |||||||||||||||||||||||||
Three | Three | January 1, | ||||||||||||||||||||||||||||||
months | months | March 1, 2007 | 2007 | |||||||||||||||||||||||||||||
ended | ended | Year Ended | Year Ended | through | through | Year Ended | Year Ended | |||||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | February 28, | December 31, | December 31, | |||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||
Unrealized translation related foreign currency exchange (gains) losses | $ | (4,836 | ) | $ | 367 | $ | (9,347 | ) | $ | 20,304 | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Realized transaction related foreign currency exchange (gains) losses — selling, general and administrative | (107 | ) | (1,883 | ) | 214 | 234 | 238 | (499 | ) | 1,151 | (192 | ) | ||||||||||||||||||||
Realized transaction related foreign currency exchange (gains) losses — cost of goods sold | (205 | ) | 37 | 154 | 65 | 3 | 17 | 24 | 2 |
(2) | Restructuring and impairment includes pre-tax restructuring charges primarily related to manufacturing facility closures and employee terminations as part of our cost reduction initiatives. This is further described in Note 9 of our consolidated financial statements and Note 7 of our unaudited condensed consolidated financial statements appearing at the end of this prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. |
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The following table presents details of our restructuring and impairment charges included in our consolidated statement of operations. |
Successor | Successor | Successor | Successor | Successor | Predecessor | Predecessor | Predecessor | |||||||||||||||||||||||||
Three | Three | March 1, | January 1, | |||||||||||||||||||||||||||||
months | months | 2007 | 2007 | |||||||||||||||||||||||||||||
ended | ended | Year Ended | Year Ended | through | through | Year Ended | Year Ended | |||||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | February 28, | December 31, | December 31, | |||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||
Port St. Joe, FL | $ | — | $ | — | $ | 5,822 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Gersthofen, Germany | 108 | — | 1,251 | — | — | — | — | — | ||||||||||||||||||||||||
Valdosta, GA | 97 | — | 874 | — | — | — | — | — | ||||||||||||||||||||||||
U.K. facilities | — | — | 339 | 5,369 | — | — | — | — | ||||||||||||||||||||||||
Niort, France | 648 | — | — | 1,972 | — | — | — | — | ||||||||||||||||||||||||
Dover, OH | — | 3 | — | 635 | 114 | — | — | — | ||||||||||||||||||||||||
Pensacola, FL | — | — | — | 534 | — | — | — | — | ||||||||||||||||||||||||
Greaker, Norway | — | — | — | — | — | — | — | 4,200 | ||||||||||||||||||||||||
Picayune, MS | — | — | — | — | — | — | — | 2,100 | ||||||||||||||||||||||||
Sandarne, Sweden | 1,194 | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Other | — | — | — | — | — | — | 1,851 | (742 | ) | |||||||||||||||||||||||
Impairments | — | 1,032 | 18,109 | 7,003 | — | — | — | — | ||||||||||||||||||||||||
Total | $ | 2,047 | $ | 1,035 | $ | 26,395 | $ | 15,513 | $ | 114 | $ | — | $ | 1,851 | $ | 5,558 | ||||||||||||||||
(3) | Other operating income of $5.5 million recorded in 2009 included $4.9 million of insurance proceeds related to a fire at our Oulu, Finland manufacturing facility and a gain of $0.7 million on the sale of capital assets realized as a result of the closure of our Bedlington, U.K. manufacturing facility. |
(4) | Other income includes a gain on our acquisition of Abieta Chemie GmbH, which we refer to as “Abieta”, of $2.1 million and a gain on settlement with International Paper of $1.3 million in 2009. In 2008 and 2006, other income included a gain of $1.9 million on the extinguishment of a portion of our debt and a legal settlement of $2.1 million, respectively. In the three months ended March 31, 2010, other income primarily related to insurance proceeds relating to a fire at our Sandarne, Sweden manufacturing facility. |
(5) | Equity in earnings of affiliate relates to our 10% investment in Arboris, LLC, which was formed in 2002 and is accounted for under the equity method of accounting, as we have the ability to exercise significant influence. Our share of the earnings from operations in this investment is recorded in our statement of operations. This is further described in Note 3 of our consolidated financial statements appearing at the end of this prospectus and “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. |
(6) | Prior to the Acquisition, we were an operating division of International Paper. As a result, the capital structure of our predecessor did not include common stock or other forms of equity shares. Accordingly, income (loss) attributable to common shareholders per commons share is not available for periods prior to March 1, 2007. Additionally, the information presented regarding earnings per share and weighted average common shares outstanding is that of Arizona Chem Sweden Holdings AB on an actual basis. The earnings per share of Arizona Chemical Ltd. on an as adjusted basis after giving effect to the Reorganization for the three months ended March 31, 2010 and 2009, the years ended December 31, 2009 and 2008 and the ten month period ended December 31, 2007 would have been $ , $ , $ , $ , and $ , respectively, assuming common shares outstanding. |
(7) | Reflects on an adjusted basis the sale of of our common shares in this offering at an assumed initial public offering price of $ per share (the mid-point of the price range set forth on the cover page of this prospectus), and the application of the estimated net proceeds from this offering as described under “Use of Proceeds”, and assumes this offering had been consummated on March 31, 2010. |
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(8) | In the predecessor period, total shareholder’s equity represents our divisional control account as we were a division of International Paper. |
(9) | Included in these amounts in 2009 is accelerated depreciation associated with of the closure of our Port St. Joe facility in the amount of $1.6 million. Accelerated depreciation had a negative impact on our gross margins of 1.3% in 2009. |
(10) | Adjusted EBITDA represents net income before interest, taxes, depreciation, and amortization and then it is adjusted for various items as defined in our credit agreements. Adjusted EBITDA presented in the predecessor period was calculated on the same basis as Adjusted EBITDA presented in the successor periods pursuant to our credit agreements. Under the terms of our credit agreements, we use Adjusted EBITDA to calculate our maximum leverage ratio and our minimum interest coverage ratio covenants. See “— Adjusted EBITDA” below. |
(11) | Free cash flow represents net cash provided by operating activities, less purchases of property, plant and equipment, software spending, proceeds from disposal of property, plant and equipment, and other items. See “— Free Cash Flow” below. |
Successor | Successor | Successor | Successor | Successor | Predecessor | Predecessor | Predecessor | |||||||||||||||||||||||||
Three | Three | |||||||||||||||||||||||||||||||
months | months | March 1, 2007 | January 1, | |||||||||||||||||||||||||||||
ended | ended | Year Ended | Year Ended | through | 2007 through | Year Ended | Year Ended | |||||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | February 28, | December 31, | December 31, | |||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007(4) | 2006(4) | 2005(4) | |||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||
Net income (loss) | $ | 9,997 | $ | (2,357 | ) | $ | 12,098 | $ | (26,599 | ) | $ | (27,290 | ) | $ | 3,685 | $ | 33,080 | $ | 3,992 | |||||||||||||
Interest expense (income), net | 3,870 | 4,560 | 16,546 | 29,523 | 28,775 | (118 | ) | (461 | ) | (298 | ) | |||||||||||||||||||||
Income tax expense (benefit) | 3,885 | (836 | ) | 3,831 | (4,277 | ) | (8,913 | ) | 2,614 | 18,161 | 9,090 | |||||||||||||||||||||
Depreciation and amortization | 9,043 | 9,437 | 40,615 | 34,210 | 28,813 | 4,422 | 23,767 | 29,335 | ||||||||||||||||||||||||
EBITDA | 26,795 | 10,804 | 73,090 | 32,857 | 21,385 | 10,603 | 74,547 | 42,119 |
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Successor | Successor | Successor | Successor | Successor | Predecessor | Predecessor | Predecessor | |||||||||||||||||||||||||
Three | Three | |||||||||||||||||||||||||||||||
months | months | March 1, 2007 | January 1, | |||||||||||||||||||||||||||||
ended | ended | Year Ended | Year Ended | through | 2007 through | Year Ended | Year Ended | |||||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | February 28, | December 31, | December 31, | |||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007(4) | 2006(4) | 2005(4) | |||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||
Unrealized foreign currency exchange (gains) losses | (4,836 | ) | 367 | (9,347 | ) | 20,304 | — | — | — | — | ||||||||||||||||||||||
Restructuring and impairment | 2,047 | 1,035 | 26,395 | 15,513 | 114 | — | 1,851 | 5,558 | ||||||||||||||||||||||||
Loss on interest rate swaps, net | 709 | 600 | 2,541 | 9,311 | 2,275 | — | — | — | ||||||||||||||||||||||||
Equity in earnings of affiliate | (4 | ) | (150 | ) | (613 | ) | (380 | ) | (189 | ) | (84 | ) | (2,033 | ) | 187 | |||||||||||||||||
Transaction costs(1) | — | — | — | 1,316 | 10,271 | — | — | — | ||||||||||||||||||||||||
Management fees(2) | 495 | 351 | 1,538 | 1,990 | 1,295 | — | — | — | ||||||||||||||||||||||||
Transition costs(3) | — | — | — | 2,984 | 6,575 | 92 | — | — | ||||||||||||||||||||||||
Gain on Abieta acquisition | — | (2,151 | ) | (2,151 | ) | — | — | — | — | — | ||||||||||||||||||||||
Gain on settlement with International Paper | — | — | (1,316 | ) | — | — | — | — | — | |||||||||||||||||||||||
Selling, general and administrative severance | — | — | — | 3,121 | 2,235 | — | — | — | ||||||||||||||||||||||||
Third-party advisor fees | 2,135 | — | — | 1,573 | — | — | — | — | ||||||||||||||||||||||||
Consulting services | — | — | — | 3,794 | 7,616 | — | 2,600 | — | ||||||||||||||||||||||||
Gain on debt extinguishment | — | — | — | (1,901 | ) | — | — | — | — | |||||||||||||||||||||||
Divestiture incentive program | — | — | — | — | — | — | 5,200 | — | ||||||||||||||||||||||||
Environmental remediation | — | — | — | — | — | — | 2,100 | — | ||||||||||||||||||||||||
U.K. land sale | — | — | — | — | — | — | (4,900 | ) | — | |||||||||||||||||||||||
Arboris loan forgiveness | — | — | — | — | — | — | (2,000 | ) | — | |||||||||||||||||||||||
Workers’ compensation | — | — | — | — | — | — | — | 5,100 | ||||||||||||||||||||||||
Hurricane impact | — | — | — | — | — | — | — | 3,400 | ||||||||||||||||||||||||
Oulu, Finland strike | — | — | — | — | — | — | — | 3,100 | ||||||||||||||||||||||||
Other items | 37 | 187 | 3,722 | 2,241 | 3,297 | 1,413 | 982 | 2,955 | ||||||||||||||||||||||||
Adjusted EBITDA | $ | 27,378 | $ | 11,043 | $ | 93,859 | $ | 92,723 | $ | 54,874 | $ | 12,024 | $ | 78,347 | $ | 62,419 | ||||||||||||||||
(1) | Transaction costs were related to the Acquisition. These costs included legal, tax, IT, professional fees, and Rhône Capital transaction fees. | |
(2) | Management fees are paid to Rhône Group L.L.C., an affiliate of Rhône Capital for corporate-level support activities provided to us. We currently expect to terminate the management agreement with Rhône Group L.L.C. in connection with this offering. | |
(3) | Transition costs included fees paid to International Paper under the transition services agreement (governing interim services provided by International Paper), IT consulting fees, costs for infrastructure build-out (such as IT and phone systems, treasury function setup, HR/payroll) and the cost of a carve-out audit, among other items. |
(4) | Adjusted EBITDA presented in the predecessor period was calculated on the same basis as Adjusted EBITDA presented in the successor periods pursuant to our credit agreements. |
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Successor | Successor | Successor | Successor | Successor | Predecessor | Predecessor | Predecessor | |||||||||||||||||||||||||
Three Months | Three Months | March 1, | January 1, | |||||||||||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | 2007 through | 2007 through | Year Ended | Year Ended | |||||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | February 28, | December 31, | December 31, | |||||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2006 | 2005 | |||||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | 2,507 | $ | 11,100 | $ | 117,325 | $ | 20,841 | $ | 45,022 | $ | (12,088 | ) | $ | 5,048 | $ | 44,115 | |||||||||||||||
Less: | ||||||||||||||||||||||||||||||||
Purchase of property, plant and equipment | (4,866 | ) | (6,677 | ) | (22,993 | ) | (34,719 | ) | (18,248 | ) | (4,598 | ) | (38,131 | ) | (29,228 | ) | ||||||||||||||||
Software spending | (3,761 | ) | (3,268 | ) | (13,404 | ) | (142 | ) | (1,642 | ) | — | — | — | |||||||||||||||||||
Proceeds from disposals of property, plant and equipment | — | 690 | 875 | 212 | — | — | — | — | ||||||||||||||||||||||||
Other | 696 | — | — | 356 | — | — | — | |||||||||||||||||||||||||
Free cash flow | $ | (5,424 | ) | $ | 1,845 | $ | 81,803 | $ | (13,452 | ) | $ | 25,132 | $ | (16,686 | ) | $ | (33,083 | ) | $ | 14,887 | ||||||||||||
Net cash used in investing activities | (7,931 | ) | (18,027 | ) | (44,294 | ) | (34,293 | ) | (497,331 | ) | (4,598 | ) | (38,131 | ) | (29,228 | ) | ||||||||||||||||
Net cash provided by (used in) financing activities | 2,202 | (1,220 | ) | (63,771 | ) | 12,768 | 488,547 | 10,296 | 28,375 | (10,875 | ) |
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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Successor | Successor | Combined | ||||||||||
Year Ended | Year Ended | Year Ended | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
(dollars in millions) | ||||||||||||
(Non-GAAP) | ||||||||||||
Savings Achieved | $ | 28.9 | $ | 14.0 | $ | 7.6 |
• | In the third quarter of 2009, we relocated a portion of our rosin upgrading capacity from Valdosta, Georgia to our Savannah, Georgia manufacturing facility, which resulted in manufacturing and operating efficienciesyear-over-year. We expect annual costs savings of approximately $4.2 million resulting from this initiative and have achieved cost savings of approximately $1.9 million in 2009. During 2008 and 2009, we spent approximately $19.3 million in capital expenditures in Savannah to facilitate this relocation. In 2009, we incurred $0.9 million for one-time termination benefits related to terminated employees. |
• | In the second quarter of 2009, we closed our Port St. Joe, Florida manufacturing facility and transferred production to our larger manufacturing facilities in Panama City, Florida and Savannah, Georgia to better optimize our existing capacity. As a result, we recognized restructuring costs of $5.8 million, impairment charges of $16.7 million and accelerated depreciation of $1.6 million in 2009. We expect annual costs savings of approximately $13.7 million resulting from these initiatives and achieved cost savings of approximately $7.3 million in 2009. Additional capital expenditures will be required at both of these manufacturing facilities to increase their respective capacity, if and as required to meet market demands. We incurred $1.8 million for one-time termination benefits related to terminated employees. The announcement also was a triggering event for impairment testing purposes. The test resulted in a $16.7 million charge related to the impairment of long-lived assets. We |
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• | During 2009, we optimized our use of ocean tankers for bulk shipments of products from the United States to Europe. By establishing direct routes and identifying a new carrier, we were able to eliminate costly transloading activities, generating savings of $2.5 million during 2009. | |
• | In the second quarter of 2008, we relocated our polyamide production from our Bedlington, U.K. manufacturing facility to our Dover, Ohio manufacturing facility which resulted in the restructuring of our dimer business, the closure of our Bedlington, U.K. manufacturing facility, a reduction in operations at our Chester-le-Street, U.K. manufacturing facility and the restructuring of certain product lines at our Dover, Ohio manufacturing facility. As a result, we recognized restructuring costs of $8.4 million in 2008. We have achieved cost savings of approximately $6.8 million, including $4.6 million in 2009 and $2.2 million in 2008 as a result of these actions. |
• | In the first quarter of 2008, we relocated a portion of our terpene resin production at our Pensacola, Florida manufacturing facility to our Panama City, Florida manufacturing facility. As a result, we recognized restructuring costs of $1.0 million in 2008. We have achieved cost savings of approximately $0.9 million in 2008 and nominal incremental cost savings in 2009 as a result of this relocation. |
• | During 2008, we reduced our head count at our manufacturing facility in Niort, France. As a result, we recognized restructuring costs of $3.5 million in 2008. We have achieved cost savings of $0.5 million in 2009 and $1.8 million in 2008, as a result of these actions. | |
• | During 2007 and 2008, following the Acquisition, we reduced our selling, general and administrative costs through targeted reductions in staff and management headcount. As a result, we recognized severance costs of $3.1 and $2.2 million in 2008 and 2007, respectively. These initiatives generated savings of approximately $11.2 million, including $5.5 million in 2008 and $5.7 million in 2007. |
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• | Rosin-based tackifiers, which are used to improve adhesion to difficult to bond surfaces such as highly recycled packaging materials; | |
• | Terpene-based tackifiers, which allow our customers to develop and manufacture adhesives that bond to a wide variety of plastic substrates; | |
• | Hot melt polyamides, which are finished adhesives that bond to a wide variety of substrates and offer outstanding resistance to chemicals and oils; and | |
• | Alpha-methyl-styrene (AMS)-based tackifiers, which are hydrocarbon-based tackifiers that are almost water-white and adhere well to difficult to bond materials. |
• | Phenolic rosin esters, which are used in lithographic and publication gravure inks and confer beneficial attributes such as enhanced adhesion, high gloss, improved drying speed, viscosity and color intensity; | |
• | Solution metal resinates, which are used in inks for publication gravure, which is used for high quality, large print run applications such as catalogs and magazines; | |
• | Polyamides, which are resins used in inks for flexible packaging such as bread bags, shrink sleeve labels, high end lamination and snack food packaging; and | |
• | Solvents, which are used primarily in specialty applications such as vegetable oil-based “sheet-fed” printing to improve the solvency power of the vegetable oils. |
• | Polyterpenes, which are used as tire tread enhancement additives to improve the combination of wet grip, fuel economy and tire life; | |
• | Disproportionated and non-disproportionated rosin soaps, which are used as emulsifiers in rubber polymerization; and | |
• | AMS resins, which are hydrocarbon-based resins used as tire tread composition additives to improve the combination of wet grip, fuel economy and tire life. |
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• | Rosin esters and insoluble maleics, which are used in thermoplastic pavement markings; and | |
• | Hot melt polyamides, which are utilized in pre-formed pavement graphics. |
• | Alpha pinene and beta pinene, which are used as building blocks in the manufacture of fragrances, camphor, perfumes, terpineol, terpene resin derivatives and insecticides and are used in the institutional and industrial markets as cleaners, solvents and disinfectants; |
• | Sterols, which are pharmaceutical and food additives used to reduce cholesterol absorption, through our joint venture, Arboris, LLC; |
• | Specialty polymeric gellants, which are used to impart structure, rheology, film forming and wear resistance to a variety of products formulated for the personal care and consumer products markets; and | |
• | Immobilized functional oils, which allow organic liquids to be solidified into temperature resistant, robust, three dimensional objects and are currently sold in the automotive air freshener market in the United States and Europe. |
• | Tall oil rosin, or TOR, which is used in all major rosin applications for the manufacture of resins for adhesives, inks and roadmarking, emulsifiers for rubber size for paper and chewing gum; | |
• | Tall oil fatty acid, or TOFA, which, among its other uses, is used in alkyd paints, primarily for decorative coatings, helping to bring durability and gloss and is a key component in additives used to improve the lubricity of low-sulfur diesel fuel; | |
• | Distilled tall oil, or DTO, which is used as an emulsifier for metalworking fluids; | |
• | Dimer acids, which are used for the production of polyamides for epoxy coatings, flexographic inks, and high performance adhesive applications; and | |
• | Curing agents, which are used to cure (harden) epoxy resins, primarily those used in marine and protective coatings. |
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Net Sales | ||||
% Total Average | ||||
Sales | ||||
First Quarter | 23.6 | % | ||
Second Quarter | 26.4 | % | ||
Third Quarter | 26.0 | % | ||
Fourth Quarter | 24.0 | % |
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Successor | Successor | Successor | Successor | Combined | Successor | Predecessor | ||||||||||||||||||||||
(Non-GAAP) | ||||||||||||||||||||||||||||
Three Months | Three Months | March 1, 2007 | January 1, 2007 | |||||||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | Year Ended | through | through | ||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | December 31, | February 28, | ||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2007 | ||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||
Net sales | $ | 198,051 | $ | 177,934 | $ | 767,465 | $ | 1,001,988 | $ | 855,867 | $ | 723,797 | $ | 132,070 | ||||||||||||||
Cost of goods sold | 157,333 | 163,445 | 646,986 | 868,536 | 755,415 | 642,341 | 113,074 | |||||||||||||||||||||
Gross profit | 40,718 | 14,489 | 120,479 | 133,452 | 100,452 | 81,456 | 18,996 | |||||||||||||||||||||
Gross margin | 20.6 | % | 8.1 | % | 15.7 | % | 13.3 | % | 11.7 | % | 11.3 | % | 14.4 | % | ||||||||||||||
Selling, general and administrative | 25,673 | 15,464 | 78,200 | 91,936 | 99,583 | 86,684 | 12,899 | |||||||||||||||||||||
Unrealized foreign currency exchange | ||||||||||||||||||||||||||||
(gains) losses | (4,836 | ) | 367 | (9,347 | ) | 20,304 | — | — | — | |||||||||||||||||||
Restructuring and impairment | 2,047 | 1,035 | 26,395 | 15,513 | 114 | 114 | — | |||||||||||||||||||||
Other operating income | — | (2,043 | ) | (5,537 | ) | — | — | — | — | |||||||||||||||||||
Operating income (loss) | 17,834 | (334 | ) | 30,768 | 5,699 | 755 | (5,342 | ) | 6,097 | |||||||||||||||||||
Interest (expense) income, net | (3,870 | ) | (4,560 | ) | (16,546 | ) | (29,523 | ) | (28,657 | ) | (28,775 | ) | 118 | |||||||||||||||
Loss on interest rate swaps, net | (709 | ) | (600 | ) | (2,541 | ) | (9,311 | ) | (2,275 | ) | (2,275 | ) | ||||||||||||||||
Other income | 623 | 2,151 | 3,635 | 1,879 | — | — | — | |||||||||||||||||||||
Income (loss) before income tax expense (benefit) | 13,878 | (3,343 | ) | 15,316 | (31,256 | ) | (30,177 | ) | (36,392 | ) | 6,215 | |||||||||||||||||
Income tax expense (benefit) | 3,885 | (836 | ) | 3,831 | (4,277 | ) | (6,299 | ) | (8,913 | ) | 2,614 | |||||||||||||||||
Equity in earnings of affiliate | 4 | 150 | 613 | 380 | 273 | 189 | 84 | |||||||||||||||||||||
Net income (loss) | $ | 9,997 | $ | (2,357 | ) | $ | 12,098 | $ | (26,599 | ) | $ | (23,605 | ) | $ | (27,290 | ) | $ | 3,685 | ||||||||||
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Successor | Successor | |||||||||||||||||||||||
Three Months | Three Months | |||||||||||||||||||||||
Ended | Ended | |||||||||||||||||||||||
March 31, | % of | March 31, | % of | % | ||||||||||||||||||||
2010 | sales | 2009 | sales | Change | Change | |||||||||||||||||||
Net sales | $ | 198,051 | 100.0 | % | $ | 177,934 | 100.0 | % | $ | 20,117 | 11.3 | % | ||||||||||||
Cost of goods sold | 157,333 | 79.4 | 163,445 | 91.9 | (6,112 | ) | (3.7 | ) | ||||||||||||||||
Gross profit | 40,718 | 20.6 | 14,489 | 8.1 | 26,229 | 181.0 | ||||||||||||||||||
Selling, general and administrative | 25,673 | 13.0 | 15,464 | 8.7 | 10,209 | 66.0 | ||||||||||||||||||
Unrealized foreign currency exchange (gains) losses | (4,836 | ) | (2.4 | ) | 367 | 0.2 | (5,203 | ) | (1,417.7 | ) | ||||||||||||||
Restructuring and impairment | 2,047 | 1.0 | 1,035 | 0.6 | 1,012 | 97.8 | ||||||||||||||||||
Other operating income | — | — | (2,043 | ) | (1.1 | ) | 2,043 | — | ||||||||||||||||
Operating income (loss) | 17,834 | 9.0 | (334 | ) | (0.2 | ) | 18,168 | 5,439.5 | ||||||||||||||||
Interest expense, net | (3,870 | ) | (2.0 | ) | (4,560 | ) | (2.6 | ) | 690 | 15.1 | ||||||||||||||
Loss on interest rate swaps, net | (709 | ) | (0.4 | ) | (600 | ) | (0.3 | ) | (109 | ) | (18.2 | ) | ||||||||||||
Other income | 623 | 0.3 | 2,151 | 1.2 | (1,528 | ) | (71.0 | ) | ||||||||||||||||
Income (loss) before income tax expense (benefit) | 13,878 | 7.0 | (3,343 | ) | (1.9 | ) | 17,221 | 515.1 | ||||||||||||||||
Income tax expense (benefit) | 3,885 | 2.0 | (836 | ) | (0.5 | ) | 4,721 | 564.7 | ||||||||||||||||
Equity in earnings of affiliates | 4 | 0.0 | 150 | 0.1 | (146 | ) | (97.3 | ) | ||||||||||||||||
Net income (loss) | $ | 9,997 | 5.0 | % | $ | (2,357 | ) | (1.3 | )% | $ | 12,354 | 524.1 | % | |||||||||||
Price increase | 3.7 | % | ||
Volume increase | 3.4 | % | ||
Favorable impact of foreign currency | 4.2 | % | ||
Total net sales increase | 11.3 | % |
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North America | Europe | |||||||||||||||||||||||
Three Months | Three Months | Three Months | Three Months | |||||||||||||||||||||
Ended | Ended | Ended | Ended | |||||||||||||||||||||
March 31, | March 31, | March 31, | March 31, | |||||||||||||||||||||
Market | 2010 | 2009 | Change | 2010 | 2009 | Change | ||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Adhesives | $ | 30,305 | $ | 26,348 | 15.0 | % | $ | 26,132 | $ | 20,959 | 24.7 | % | ||||||||||||
Inks | 10,599 | 13,638 | (22.3 | )% | 6,716 | 9,162 | (26.7 | )% | ||||||||||||||||
Tires and Rubber | 5,531 | 3,190 | 73.4 | % | 10,182 | 8,801 | 15.7 | % | ||||||||||||||||
Roads and Construction | 6,488 | 5,442 | 19.2 | % | 4,284 | 2,857 | 49.9 | % | ||||||||||||||||
Consumer Products | 3,587 | 3,618 | (0.9 | )% | 4,087 | 1,940 | 110.7 | % | ||||||||||||||||
Renewable Energy | 583 | 632 | (7.8 | )% | 21,123 | 17,006 | 24.2 | % | ||||||||||||||||
Chemical Intermediates | 39,240 | 32,687 | 20.0 | % | 29,194 | 31,654 | (7.8 | )% | ||||||||||||||||
Total net sales | $ | 96,333 | $ | 85,555 | 12.6 | % | $ | 101,718 | $ | 92,379 | 10.1 | % | ||||||||||||
Price decline | (1.1 | )% | ||
Volume increase | 13.7 | |||
Total net sales increase | 12.6 | % |
• | Chemical intermediates net sales increased by $6.6 million driven by increased demand for dimer acids in Asian markets and higher volumes in TOFA sales. |
• | Adhesives net sales increased $4.0 million primarily due to increased market demand for rosin esters. |
• | Inks net sales decreased by $3.0 million driven by loss of share at a major North American customer and demand weakness in publication printing. |
• | Tires and rubber net sales increased $2.3 million due primarily to an increase in orders from a major customer’s North American operations. |
Price increase | 8.1 | % | ||
Volume decline | (6.1 | ) | ||
Favorable impact of foreign currency | 8.1 | |||
Total net sales increase | 10.1 | % |
• | Adhesives net sales increased $5.2 million due to increased market demand for rosin esters resulting from a decline in availability of gum rosin resins. As a result, we were able to increase both volume and price of our rosin esters. |
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• | Renewable energy net sales increased $4.1 million primarily due to higher prices of our pitch by-product. |
• | Price increases across all other markets were partially offset by lower demand for publication printing inks and lower levels of chemical intermediates supply during the three months ended March 31, 2010. |
• | An increase in sales volumes of $2.1 million in the three months ended March 31, 2010 compared to the three months ended March 31, 2009. |
• | Lower raw material costs of $14.5 million which were a result of lower CTO and BLS prices primarily due to energy based pricing on supply contracts which reset every quarter as well as lower pentaerythritol, sulfuric and TETA prices associated with lower commodity prices. |
• | Depreciation and amortization expense included within cost of goods sold for the three months ended March 31, 2010 was $6.6 million, a decrease of $0.5 million compared to $7.1 million in the three months ended March 31, 2009 due primarily to manufacturing facility closures in 2009. |
• | The effect of foreign currency fluctuations resulted in an unfavorable impact on cost of goods sold of $6.9 million for the three months ended March 31, 2010 primarily due to the strengthening of the Swedish Kronor and the Euro against the U.S. dollar. |
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• | Increase in selling prices positively impacted Adjusted EBITDA by $6.6 million. |
• | Sales volumes positively impacted Adjusted EBITDA by $3.9 million. |
• | Lower raw material prices positively impacted Adjusted EBITDA by $14.5 million in the three months ended March 31, 2010 as compared to the three months ended March 31, 2009, primarily due to an environment of lower commodity prices that reduced the cost of CTO and our other raw materials, and our ability to manage our primary raw material costs. |
• | An increase in selling, general and administrative costs negatively impacted Adjusted EBITDA by $7.3 million after taking into account adjustments to Adjusted EBITDA. |
• | Other items totaling $1.2 million also negatively impacted Adjusted EBITDA, which primarily related to the difference of $1.4 million in insurance proceeds related to a fire at our Oulu, Finland manufacturing facility and a gain of $0.7 million on the sale of capital assets realized as a result of the closure of our Bedlington, U.K. manufacturing facility in the three months |
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ended March 31, 2009 and $0.7 million of insurance proceeds relating to a fire at our Sandarne, Sweden manufacturing facility recorded in the three months ended March 31, 2010. |
• | The aggregate effect of foreign currency fluctuations did not have a significant impact on Adjusted EBITDA. |
Successor | Successor | |||||||||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||||||||
December 31, | % of | December 31, | % of | % | ||||||||||||||||||||
2009 | sales | 2008 | sales | Change | Change | |||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Net sales | $ | 767,465 | 100.0 | % | $ | 1,001,988 | 100.0 | % | $ | (234,523 | ) | (23.4 | )% | |||||||||||
Cost of goods sold | 646,986 | 84.3 | 868,536 | 86.7 | (221,550 | ) | (25.5 | ) | ||||||||||||||||
Gross profit | 120,479 | 15.7 | 133,452 | 13.3 | (12,973 | ) | (9.7 | ) | ||||||||||||||||
Selling, general and administrative | 78,200 | 10.2 | 91,936 | 9.2 | (13,736 | ) | (14.9 | ) | ||||||||||||||||
Unrealized foreign currency exchange (gains) losses | (9,347 | ) | (1.2 | ) | 20,304 | 2.0 | (29,651 | ) | (146.0 | ) | ||||||||||||||
Restructuring and impairment | 26,395 | 3.4 | 15,513 | 1.5 | 10,882 | 70.1 | ||||||||||||||||||
Other operating income | (5,537 | ) | (0.7 | ) | — | — | (5,537 | ) | — | |||||||||||||||
Operating gain (loss) | 30,768 | 4.0 | 5,699 | 0.6 | 25,069 | 439.9 | ||||||||||||||||||
Interest expense, net | (16,546 | ) | (2.2 | ) | (29,523 | ) | (2.9 | ) | 12,977 | 44.0 | ||||||||||||||
Loss on interest rate swaps, net | (2,541 | ) | (0.3 | ) | (9,311 | ) | (0.9 | ) | 6,770 | 72.7 | ||||||||||||||
Other income | 3,635 | 0.5 | 1,879 | 0.2 | 1,756 | 93.5 | ||||||||||||||||||
Income (loss) before income tax expense (benefit) | 15,316 | 2.0 | (31,256 | ) | (3.1 | ) | 46,572 | 149.0 | ||||||||||||||||
Income tax expense (benefit) | 3,831 | 0.5 | (4,277 | ) | (0.4 | ) | 8,108 | 189.6 | ||||||||||||||||
Equity in earnings of affiliate | 613 | 0.1 | 380 | 0.0 | 233 | 61.3 | ||||||||||||||||||
Net income (loss) | $ | 12,098 | 1.6 | % | (26,599 | ) | (2.7 | )% | $ | 38,697 | 145.5 | % | ||||||||||||
Price decline | (0.4 | )% | ||
Volume decline | (19.8 | ) | ||
Acquisition of Abieta | 2.0 | |||
Unfavorable impact of foreign currency | (5.2 | ) | ||
Total net sales decrease | (23.4 | )% | ||
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North America | Europe | |||||||||||||||||||||||
Market | 2009 | 2008 | Change | 2009 | 2008 | Change | ||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Adhesives | $ | 104,469 | $ | 129,515 | (19.3 | )% | $ | 92,229 | $ | 109,103 | (15.5 | )% | ||||||||||||
Inks | 54,102 | 69,251 | (21.9 | ) | 31,941 | 51,777 | (38.3 | ) | ||||||||||||||||
Tires and Rubber | 15,724 | 16,049 | (2.0 | ) | 43,937 | 23,093 | 90.3 | |||||||||||||||||
Roads and Construction | 28,762 | 34,990 | (17.8 | ) | 14,911 | 18,847 | (20.9 | ) | ||||||||||||||||
Consumer Products | 26,836 | 18,651 | 43.9 | 13,316 | 12,426 | 7.2 | ||||||||||||||||||
Renewable Energy | 2,815 | 8,577 | (67.2 | ) | 71,456 | 115,580 | (38.2 | ) | ||||||||||||||||
Chemical Intermediates | 146,394 | 215,212 | (32.0 | ) | 120,573 | 178,917 | (32.6 | ) | ||||||||||||||||
Total net sales | $ | 379,102 | $ | 492,245 | (23.0 | )% | $ | 388,363 | $ | 509,743 | (23.8 | )% | ||||||||||||
Price decline | (0.4 | )% | ||
Volume decline | (22.6 | )% | ||
Impact of foreign currency exchange | 0.0 | % | ||
Total net sales decrease | (23.0 | )% | ||
• | Chemical intermediates net sales decreased by $68.8 million from 2008 driven by deteriorating global economic conditions and, in particular, lower demand in housing, automotive, coatings and oilfield applications. | |
• | Adhesives net sales decreased $25.0 million primarily due to lower demand in hot melt packaging, while inks net sales declined $15.1 million driven by demand weakness in publication printing. | |
• | Despite lower demand, we strategically focused on reducing the portion of our sales mix attributable to lower margin products. Consumer products net sales increased by $8.2 million primarily due to shifting our sales mix from certain lower priced adhesive products to higher priced consumer products. | |
• | Roads and construction net sales decreased by $6.2 million, primarily due to a decrease in sales of our rosin resin products as a result of aggressive competitor pricing, which we chose not to match, as we shifted our sales mix to higher priced markets. | |
• | Renewable energy net sales decreased by $5.8 million, primarily due to a decrease in throughput of CTO and a corresponding reduction in the supply of our pitch by-product. |
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Price decline | (0.4 | )% | ||
Volume decline | (17.2 | ) | ||
Acquisition of Abieta | 4.0 | |||
Unfavorable impact of foreign currency | (10.2 | ) | ||
Total net sales decrease | (23.8 | )% | ||
• | Chemical intermediates net sales decreased by $58.3 million due to lower demand in coatings, metal workings and automotive. In addition, prices were negatively impacted by a pricing decline in competing global vegetable oil used in coatings, consistent with the declining pricing environment for oil and biofuels. | |
• | Renewable energy net sales decreased $44.1 million as volume declined primarily due to a decrease in availability of our pitch by-product for sale as a result of lower CTO throughput, and a reduction in oil prices which negatively impacted pricing. | |
• | Tires and rubber net sales increased by $20.8 million primarily due to our acquisition of Abieta. | |
• | Inks and adhesives net sales declined by $19.8 million and $16.9 million, respectively, driven by lower demand in printing ink and hot melt packaging applications, respectively. |
• | Roads and construction net sales decreased by $3.9 million, primarily due to a decline in net sales of our roadmarking products. The roadmarking industry was less impacted by the global economic downturn than some of our other markets as a result of increased government spending, however, our year-over-year sales were lower due to shortened customer order lead times during the peak summer season accompanied by inventory shortages. |
• | We strategically focused on reducing the portion of our sales mix attributable to lower margin products and as a result, our consumer products net sales increased by $0.9 million primarily due to shifting our sales mix to higher priced consumer products. |
• | Declining sales volumes of $113.4 million. | |
• | Declining raw material prices of $40.6 million due primarily to lower CTO and pentaerythritol prices associated with lower oil and commodity prices. | |
• | Favorable energy prices of $11.1 million as compared to 2008 primarily a result of lower natural gas prices in North America of $10.4 million. | |
• | Restructuring initiatives at certain of our manufacturing facilities in the United States and Europe yielded cost savings of $17.6 million in 2009, partially offset by an increase in fixed costs of $5.0 million associated with the addition of the Gersthofen, Germany manufacturing facility from our Abieta acquisition. A focus on cost control and lower production rates as a result of the economic environment further reduced manufacturing fixed costs by $6.4 million. |
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• | Depreciation and amortization included in cost of goods sold for 2009 was $31.3 million, an increase of $6.7 million as compared to $24.6 million for 2008. Depreciation and amortization in 2009 includes $1.8 million of depreciation for the newly acquired Gersthofen, Germany manufacturing facility. | |
• | The effect of foreign currency fluctuations resulted in a favorable impact on cost of goods sold of $44.1 million in 2009 primarily due to the strengthening of the U.S. dollar against the Swedish Kronor. |
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• | Declines in volume and lower selling prices in 2009 as compared to 2008 negatively impacted Adjusted EBITDA by $64.9 million and $4.4 million respectively. | |
• | Raw material prices declined $40.6 million in 2009 as compared to 2008, primarily due to an environment of lower oil prices and commodity prices that reduced the cost of CTO and our other raw materials, and our ability to manage our primary raw material costs. | |
• | Energy prices were $11.1 million lower in 2009 as compared to 2008 primarily due to declining natural gas prices. | |
• | Lower manufacturing fixed costs of $24.0 million were incurred during 2009 as compared to 2008 due to the partial year savings resulting from the closure of our Port St. Joe, Florida manufacturing facility in August 2009 and other cost saving initiatives within both of our reportable segments, partially offset by $5.0 million of increased costs associated with the addition of our Gersthofen, Germany facility from the Abieta acquisition. |
• | Unfavorable foreign currency exchange of $4.8 million and higher selling, general and administration costs of $2.3 million after taking into account adjustments to Adjusted EBITDA. |
• | Favorable impact from the receipt of $4.9 million of insurance proceeds to reimburse us for lost sales and costs incurred during 2008 as a result of a fire at our Oulu, Finland manufacturing facility and other favorable items of $1.9 million. |
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Successor | Combined | |||||||||||||||||||||||
(Non-GAAP) | ||||||||||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||||||||
December 31, | % of | December 31, | % of | |||||||||||||||||||||
2008 | Sales | 2007 | Sales | Change | % Change | |||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Net sales | $ | 1,001,988 | 100.0 | % | $ | 855,867 | 100.0 | % | $ | 146,121 | 17.1 | % | ||||||||||||
Cost of goods sold | 868,536 | 86.7 | 755,415 | 88.3 | 113,121 | 15.0 | ||||||||||||||||||
Gross profit | 133,452 | 13.3 | 100,452 | 11.7 | 33,000 | 32.9 | ||||||||||||||||||
Selling, general and administrative | 91,936 | 9.2 | 99,583 | 11.6 | (7,647 | ) | (7.7 | ) | ||||||||||||||||
Unrealized foreign currency transaction and exchange losses — net | 20,304 | 2.0 | — | — | 20,304 | — | ||||||||||||||||||
Restructuring and impairment | 15,513 | 1.5 | 114 | 0.0 | 15,399 | — | ||||||||||||||||||
Operating gain (loss) | 5,699 | 0.6 | 755 | 0.1 | 4,944 | 654.8 | ||||||||||||||||||
Interest expense, net | (29,523 | ) | (2.9 | ) | (28,657 | ) | (3.3 | ) | (866 | ) | (3.0 | ) | ||||||||||||
Loss on interest rate swaps, net | (9,311 | ) | (0.9 | ) | (2,275 | ) | (0.3 | ) | (7,036 | ) | (309.3 | ) | ||||||||||||
Other income | 1,879 | 0.2 | — | — | 1,879 | — | ||||||||||||||||||
Loss before income tax benefit | (31,256 | ) | (3.1 | ) | (30,177 | ) | (3.5 | ) | (1,079 | ) | (3.6 | ) | ||||||||||||
Income tax benefit | (4,277 | ) | (0.4 | ) | (6,299 | ) | (0.7 | ) | 2,022 | 32.1 | ||||||||||||||
Equity earnings of affiliate | 380 | 0.0 | 273 | 0.0 | 107 | 39.2 | ||||||||||||||||||
Net loss | $ | (26,599 | ) | (2.7 | )% | $ | (23,605 | ) | (2.8 | )% | $ | (2,994 | ) | (12.7 | )% | |||||||||
Price increase | 10.1 | % | ||
Volume increase | 4.6 | |||
Favorable impact of foreign currency | 2.4 | |||
Total net sales increase | 17.1 | % | ||
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North America | Europe | |||||||||||||||||||||||
Combined | Combined | |||||||||||||||||||||||
Non-GAAP | Non-GAAP | |||||||||||||||||||||||
Market | 2008 | 2007 | Change | 2008 | 2007 | Change | ||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||
Adhesives | $ | 129,515 | $ | 130,412 | (0.7 | )% | $ | 109,103 | $ | 102,681 | 6.3 | % | ||||||||||||
Inks | 69,251 | 64,734 | 7.0 | 51,777 | 64,341 | (19.5 | ) | |||||||||||||||||
Tires and Rubber | 16,049 | 13,534 | 18.6 | 23,093 | 23,935 | (3.5 | ) | |||||||||||||||||
Roads and Construction | 34,990 | 20,029 | 74.7 | 18,847 | 12,905 | 46.0 | ||||||||||||||||||
Consumer Products | 18,651 | 18,879 | (1.2 | ) | 12,426 | 12,080 | 2.9 | |||||||||||||||||
Renewable Energy | 8,577 | 8,408 | 2.0 | 115,580 | 62,511 | 84.9 | ||||||||||||||||||
Chemical Intermediates | 215,212 | 176,730 | 21.8 | 178,917 | 144,688 | 23.7 | ||||||||||||||||||
Total net sales | $ | 492,245 | $ | 432,726 | 13.8 | % | $ | 509,743 | $ | 423,141 | 20.5 | % | ||||||||||||
Price increase | 7.8 | % | ||
Volume increase | 6.0 | |||
Impact of foreign currency exchange | 0.0 | |||
Total net sales increase | 13.8 | % | ||
• | Chemical intermediates net sales increased by $38.5 million driven by increased volumes and prices due to increased demand in the PVC stabilizers, oilfield, coatings and metalworking applications. | |
• | Roads and construction net sales increased by $15.0 million, primarily due to increased sales of roadmarking resins. | |
• | Inks net sales increased by $4.5 million, primarily due to volume increases in publication printing ink applications, without a reduction in our pricing. | |
• | Tires and rubber net sales increased $2.5 million due to an introduction of new resins into the tire market. In addition, net sales of upgraded rosins increased due to increased demand for rubber emulsification applications. |
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Price increase | 12.5 | % | ||
Volume increase | 3.1 | |||
Favorable impact of foreign currency | 4.9 | |||
Total net sales increase | 20.5 | % | ||
• | Renewable energy net sales increased by $53.1 million due to an increase in volume, price and a favorable impact of foreign exchange. The volume increase in net sales is attributable to a reduction of inventory levels during 2008, from 2007 highs, in advance of increased prices in the first quarter of 2008. | |
• | Chemical intermediates net sales increased by $34.2 million, primarily due to an increase in TOFA prices driven by the increase in demand and pricing for competing vegetable oils in the renewable energy and coatings market. TOFA volumes declined as a result of a fire that caused a shutdown in 2008 of our Oulu, Finland manufacturing facility. Curing agent and dimer acid prices increased due to higher demand in coatings applications, while DTO prices increased due to stronger demand in the automotive industry combined with improved strategic product positioning. | |
• | Inks net sales decreased by $12.6 million, primarily due to decreases in sales volumes of phenolics for printing inks due to competitive pricing, which we choose not to meet in order to focus on higher margin products in other markets. In 2008 we also exited the solid resinate product line. | |
• | Adhesives net sales increased by $6.4 million, primarily due to increased sales for hot melt packaging. We reduced our prices to defend our market share against foreign competition and imports, due to an unusually strong Euro compared to other foreign currencies. | |
• | Roads and construction net sales increased by $5.9 million, primarily due to increased volumes for roadmarking, which was partially offset by a decline in prices to increase volumes and to respond to opportunistic imports from foreign competitors associated with a stronger Euro. |
• | Increased sales volume of $33.2 million. | |
• | Higher prices for raw materials accounted for $38.8 million of the increase. Raw material price increases for both CTO and our secondary raw materials including pentaerythritol and sulfuric acid were driven by the impact of higher oil and natural gas prices, increased demand and capacity constraints. | |
• | Energy prices increased by $13.3 million from 2007 to 2008, due to increasing natural gas prices and fuel oil prices. | |
• | Depreciation and amortization expense included within cost of goods sold for 2008 was $24.6 million, a decrease of $0.6 million, or 2.4%, as compared to $25.2 million in 2007. | |
• | Manufacturing fixed costs increased $14.4 million in 2008 as compared to 2007 due to increased tank car and storage costs to support increased volumes, as well as higher maintenance and operating costs, partially offset by $6.2 million of savings primarily from restructuring initiatives in Europe. |
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• | During 2008 we incurred $2.3 million of increased raw material, delivery and other operating expenses associated with a fire at our Oulu, Finland manufacturing facility. | |
• | The effect of foreign currency fluctuations provided an unfavorable impact to cost of goods sold of $17.9 million in 2008 as compared to 2007. This decrease was primarily due to the strengthening of the Euro and Swedish Kronor against the U.S. dollar. |
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• | Increases in selling prices from 2007 to 2008 increased Adjusted EBITDA by $86.6 million. Sales volumes positively impacted Adjusted EBITDA by $5.6 million. |
• | Higher raw material prices negatively impacted Adjusted EBITDA by $38.8 million as compared to 2007 due to higher CTO and secondary raw material prices. | |
• | Energy prices increased by $13.3 million from 2007 to 2008 as a result of increasing natural gas and fuel oil prices. |
• | Manufacturing fixed costs increased $8.2 million compared to 2007. The increase was primarily due to higher costs for materials used in the manufacturing process, additional tank car and storage spending, and maintenance costs of $14.4 million, partially offset by $6.2 million of costs savings from restructuring initiatives. |
• | Increased costs associated with a fire at our Oulu, Finland manufacturing facility of $2.3 million and higher selling, general and administrative costs of $5.9 million after taking into account adjustments to Adjusted EBITDA. |
• | Favorable foreign exchange impact of $0.6 million. |
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• | Adjusted EBITDA and EBITDA do not reflect our cash expenditures, or future requirements for capital expenditures or contractual commitments; | |
• | Adjusted EBITDA and EBITDA do not reflect changes in, or cash requirements for, our working capital needs; | |
• | Adjusted EBITDA and EBITDA do not reflect the significant interest expense, or the cash requirements necessary to service interest or principal payments, on our debts; | |
• | Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA and EBITDA do not reflect any cash requirements for such replacements; and | |
• | Other companies in our industry may calculate Adjusted EBITDA and EBITDA differently than we do, limiting its usefulness as a comparative measure. |
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Successor | Successor | Successor | Successor | Combined | Successor | Predecessor | ||||||||||||||||||||||
Three Months | Three Months | (Non-GAAP) | March 1, 2007 | January 1, 2007 | ||||||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | Year Ended | through | through | ||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | December 31, | February 28, | ||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2007(4) | ||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||
Net income (loss) | $ | 9,997 | $ | (2,357 | ) | $ | 12,098 | $ | (26,599 | ) | $ | (23,605 | ) | $ | (27,290 | ) | $ | 3,685 | ||||||||||
Interest (income) expense, net | 3,870 | 4,560 | 16,546 | 29,523 | 28,657 | 28,775 | (118 | ) | ||||||||||||||||||||
Income tax expense (benefit) | 3,885 | (836 | ) | 3,831 | (4,277 | ) | (6,299 | ) | (8,913 | ) | 2,614 | |||||||||||||||||
Depreciation and amortization | 9,043 | 9,437 | 40,615 | 34,210 | 33,235 | 28,813 | 4,422 | |||||||||||||||||||||
EBITDA | 26,795 | 10,804 | 73,090 | 32,857 | 31,988 | 21,385 | 10,603 | |||||||||||||||||||||
Unrealized foreign currency exchange (gains) losses | (4,836 | ) | 367 | (9,347 | ) | 20,304 | — | — | — | |||||||||||||||||||
Restructuring and impairment | 2,047 | 1,035 | 26,395 | 15,513 | 114 | 114 | — | |||||||||||||||||||||
Loss on interest rate swaps | 709 | 600 | 2,541 | 9,311 | 2,275 | 2,275 | — | |||||||||||||||||||||
Equity in earnings of affiliate | (4 | ) | (150 | ) | (613 | ) | (380 | ) | (273 | ) | (189 | ) | (84 | ) | ||||||||||||||
Transaction costs(1) | — | — | — | 1,316 | 10,271 | 10,271 | — | |||||||||||||||||||||
Management fees(2) | 495 | 351 | 1,538 | 1,990 | 1,295 | 1,295 | — | |||||||||||||||||||||
Transition costs(3) | — | — | — | 2,984 | 6,667 | 6,575 | 92 | |||||||||||||||||||||
Gain on Abieta acquisition | — | (2,151 | ) | (2,151 | ) | — | — | — | — | |||||||||||||||||||
Gain on settlement with International Paper | — | — | (1,316 | ) | — | — | — | — | ||||||||||||||||||||
Selling, general and administrative severance | — | — | — | 3,121 | 2,235 | 2,235 | — | |||||||||||||||||||||
Third-party advisor fees | — | — | — | 1,573 | — | — | — | |||||||||||||||||||||
Consulting services | 2,135 | — | — | 3,794 | 7,616 | 7,616 | — | |||||||||||||||||||||
Gain on debt extinguishment | — | — | — | (1,901 | ) | — | — | — | ||||||||||||||||||||
Other items | 37 | 187 | 3,722 | 2,241 | 4,710 | 3,297 | 1,413 | |||||||||||||||||||||
Adjusted EBITDA | $ | 27,378 | $ | 11,043 | $ | 93,859 | $ | 92,723 | $ | 66,898 | $ | 54,874 | $ | 12,024 | ||||||||||||||
(1) | Transaction costs were related to the Acquisition. These costs included legal, tax, IT, professional fees, and Rhône Capital transaction fees. | |
(2) | Management fees are paid to Rhône Group L.L.C., an affiliate of Rhône Capital for certain monitoring and other management services and assistance, including reimbursement of its out-of-pocket expenses. | |
(3) | Transition costs included fees paid to International Paper in connection with the Acquisition under the transition services agreement, IT consulting fees, costs for infrastructure build-out and the cost of a carve-out audit, among other items. |
(4) | Adjusted EBITDA presented in the predecessor period was calculated on the same basis as Adjusted EBITDA presented in the successor periods pursuant to our credit agreements. |
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• | Free cash flow is subject to variability on a quarterly basis as a result of the timing of payments made or received related to accounts receivable, accounts payable and other current operating assets and liabilities. | |
• | Free cash flow may be calculated in a different manner by other companies in our industry, which limits its usefulness as a comparative measure. |
Successor | Successor | Successor | Successor | Combined | Successor | Predecessor | ||||||||||||||||||||||
Three Months | Three Months | (Non-GAAP) | March 1, | January 1, | ||||||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | Year Ended | 2007 through | 2007 through | ||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | December 31, | February 28, | ||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2007 | ||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||
Net cash provided by (used in) by operating activities | $ | 2,507 | $ | 11,100 | $ | 117,325 | $ | 20,841 | $ | 32,934 | $ | 45,022 | $ | (12,088 | ) | |||||||||||||
Less: | ||||||||||||||||||||||||||||
Purchases of property, plant and equipment | (4,866 | ) | (6,677 | ) | (22,993 | ) | (34,719 | ) | (22,846 | ) | (18,248 | ) | (4,598 | ) | ||||||||||||||
Software spending | (3,761 | ) | (3,268 | ) | (13,404 | ) | (142 | ) | (1,642 | ) | (1,642 | ) | — | |||||||||||||||
Proceeds from disposals of property, plant and equipment | — | 690 | 875 | 212 | — | — | — | |||||||||||||||||||||
Other | 696 | — | — | 356 | — | — | — | |||||||||||||||||||||
Free cash flow | $ | (5,424 | ) | $ | 1,845 | $ | 81,803 | $ | (13,452 | ) | $ | 8,446 | $ | 25,132 | $ | (16,686 | ) | |||||||||||
Net cash used in investing activities | (7,931 | ) | (18,027 | ) | (44,294 | ) | (34,293 | ) | (501,929 | ) | (497,331 | ) | (4,598 | ) | ||||||||||||||
Net cash provided by (used in) financing activities | 2,202 | (1,220 | ) | (63,771 | ) | 12,768 | 498,843 | 488,547 | 10,296 |
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Successor | Predecessor | |||||||||||||||||||||||||||
Successor | Successor | Successor | Successor | Combined | March 1, | January 1, | ||||||||||||||||||||||
Three Months | Three Months | (Non-GAAP) | 2007 | 2007 | ||||||||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | Year Ended | through | through | ||||||||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | December 31, | February 28, | ||||||||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | 2007 | 2007 | ||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||
Operating | $ | 2,507 | $ | 11,100 | $ | 117,325 | $ | 20,841 | $ | 32,934 | $ | 45,022 | $ | (12,088 | ) | |||||||||||||
Investing | (7,931 | ) | (18,027 | ) | (44,294 | ) | (34,293 | ) | (501,929 | ) | (497,331 | ) | (4,598 | ) | ||||||||||||||
Financing | 2,202 | (1,220 | ) | (63,771 | ) | 12,768 | 498,843 | 488,547 | 10,296 | |||||||||||||||||||
Effect of foreign exchange | (744 | ) | (4,278 | ) | 3,715 | (3,354 | ) | 1,783 | 1,848 | (65 | ) | |||||||||||||||||
Increase (decrease) in cash and cash equivalents | $ | (3,966 | ) | $ | (12,425 | ) | $ | 12,975 | $ | (4,038 | ) | $ | 31,631 | $ | 38,086 | $ | (6,455 | ) | ||||||||||
• | Net income increased $12.4 million for reasons previously described. |
• | Non-cash items affecting net income increased $1.7 million compared to the three months ended March 31, 2009. |
• | Changes in working capital reduced cash provided by operating activities by $15.7 million in the three months ended March 31, 2010, which is $22.7 million lower than the three months ended March 31, 2009. This reduction of operating cash flows from working capital was primarily driven by the following: |
• | Accounts receivable increased $29.4 million, primarily related to the timing of sales which occurred near the quarter end. |
• | The increase in accounts receivable was partially offset by an increase in accounts payable of $20.3 million as a result of an increase in purchases to support the increase in sales. |
• | Net income increased $38.7 million for reasons previously described. | |
• | Non-cash items affecting net income declined $16.3 million compared to 2008. | |
• | During 2009, we instituted a working capital management program focused on improving our working capital as we managed the impact on our operations of the global economic slowdown. | |
• | Working capital contributed $58.3 million to operating cash flows in 2009, $74.0 million higher than 2008. This contribution of operating cash flows from working capital was primarily driven by the following: |
• | Accounts receivable declined $25.9 million, of which $10.5 million was due to a five day decline in days sales outstanding and the remainder due to lower sales. | |
• | Inventory declined $57.4 million of which $31.2 million was associated with reductions in inventory on hand as the result of our on-going working capital improvement initiatives and in response to lower demand. In addition, $26.1 million of the decline was associated with lower raw material prices. |
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• | The declines in accounts receivable and inventories were partially offset by a decrease in accounts payable of $16.8 million as a result of a decline in purchases and lower purchase prices. |
• | Net income declined $3.0 million for reasons previously described. | |
• | Non-cash items affecting net income increased $45.1 million compared to 2007. | |
• | Working capital consumed $15.7 million of operating cash in 2008, a decrease of $54.2 million compared to 2007. The working capital consumption of operating cash flows related to the following: |
• | Accounts receivable increased $9.6 million associated with higher sales and a six day increase in days sales outstanding. | |
• | Inventory increased $6.2 million due primarily to volume, while accounts payable declined $3.9 million. |
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Interest | ||||||||
Coverage | Leverage | |||||||
Term | Ratio(1) | Ratio(2) | ||||||
March 31, 2010 — March 30, 2011 | 2.25 | 4.50 | ||||||
March 31, 2011 and thereafter | 2.50 | 4.00 |
(1) | Our interest coverage ratio must exceed the amounts illustrated above for the periods shown. | |
(2) | Our leverage ratio must not exceed the amounts illustrated above for the periods shown. |
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Successor | Successor | Combined | Successor | Predecessor | ||||||||||||||||
March 1, | January 1, | |||||||||||||||||||
(Non-GAAP) | 2007 | 2007 | ||||||||||||||||||
Year Ended | Year Ended | Year Ended | through | through | ||||||||||||||||
December 31, | December 31, | December 31, | December 31, | February 28, | ||||||||||||||||
2009 | 2008 | 2007 | 2007 | 2007 | ||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Major maintenance | $ | 10,671 | $ | 21,469 | $ | 21,333 | $ | 17,065 | $ | 4,268 | ||||||||||
Expansion | 12,322 | 13,250 | 1,513 | 1,183 | 330 | |||||||||||||||
Total capital expenditures | $ | 22,993 | $ | 34,719 | $ | 22,846 | $ | 18,248 | $ | 4,598 | ||||||||||
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Years ending December 31, | ||||||||||||||||||||||||||||
Total(1) | 2010 | 2011 | 2012 | 2013 | 2014 | Thereafter | ||||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||||||||||
First Lien Credit Agreement | $ | 218,543 | $ | 3,360 | $ | 2,460 | $ | 2,460 | $ | 210,263 | $ | — | $ | — | ||||||||||||||
Second Lien Credit Agreement | 115,498 | — | — | — | — | 115,498 | — | |||||||||||||||||||||
Other loans(2) | 717 | 575 | 142 | — | — | — | — | |||||||||||||||||||||
Interest expense(3) | 58,875 | 15,356 | 16,419 | 15,095 | 9,950 | 2,055 | — | |||||||||||||||||||||
Payments on interest rate swaps(4) | 2,840 | 2,983 | (73 | ) | (70 | ) | — | — | — | |||||||||||||||||||
Operating leases(5) | 33,562 | 9,842 | 8,708 | 4,046 | 3,743 | 3,691 | 3,532 | |||||||||||||||||||||
Capital lease(6) | 4,095 | 299 | 324 | 341 | 360 | 379 | 2,392 | |||||||||||||||||||||
Post retirement benefits(7) | 4,117 | 4,117 | — | — | — | — | — | |||||||||||||||||||||
Natural gas forward contracts(8) | 4,378 | 4,378 | — | — | — | — | — | |||||||||||||||||||||
Total contractual obligations | $ | 442,625 | $ | 40,910 | $ | 27,980 | $ | 21,872 | $ | 224,316 | $ | 121,623 | $ | 5,924 | ||||||||||||||
(1) | The $60 million revolving credit facility under our First Lien Credit Agreement was not included in the table above as there was no outstanding balance at December 31, 2009. | |
(2) | Other loans primarily relate to the fixed rate debt assumed in our acquisition of Abieta in 2009. | |
(3) | The LIBOR and Euribor rates assumed for future interest payments on our floating rate debt resulted in average interest rates including the spread between 4.70% and 4.20%, respectively, for all future periods presented. Amounts presented are representative of estimated cash payments and do not include amortization of debt issuance costs or other accruals. | |
(4) | Payments on interest rate swaps are based on mark-to-market calculations at year-end, based on the expected rates over the term of the swap agreements. | |
(5) | Operating leases include various operating leases and other rent payments. | |
(6) | Capital leases primarily relate to our office building lease for our Almere, The Netherlands location that includes executive, administrative and research and development functions. | |
(7) | Liabilities for post retirement benefits relate to our foreign and domestic defined benefit and retirement pension plans for the following plan year. As of December 31, 2009, our recorded liability for the U.S. and Non-U.S. pension, early retirement and jubilee plans was $15.5 million. The table above includes contributions we expect to make to the plans in 2010. Contributions for years beyond 2010 were excluded from the table above since we cannot reasonably make estimates of the timing of future payments. | |
(8) | Amounts due in 2010 are based on fixed volume and average fixed price of natural gas forward contracts outstanding at December 31, 2009. |
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• | An interest rate swap with a total notional amount of $165.0 million that fixes the interest rate for a corresponding amount of term loan borrowings under our credit agreements at 4.825%, which expired on February 26, 2010. | |
• | An interest rate swap with a total notional amount of €40.0 million that fixes the interest rate for a corresponding amount of term loan borrowings under our First Lien Credit Agreement at 3.998%, which expired on February 26, 2010. | |
• | An interest rate cap with a total notional amount of $175.0 million that became effective February 26, 2010 and that caps the interest rate for a corresponding amount of term loan borrowings under our credit agreements at 3.0%, expiring on February 28, 2012. | |
• | An interest rate swap with a total notional amount of €53.0 million that became effective February 26, 2010 that fixes the interest rate for a corresponding amount of term loan borrowings under our First Lien Credit Agreement at 2.125%, expiring on February 28, 2012. |
EUR change in carrying | EUR change in Annual | |||||||||||||||||
Change in | value of Long-term Debt | Interest Expense | ||||||||||||||||
EUR vs SEK | EUR | USD(1) | EUR | USD(1) | ||||||||||||||
€ | 0.5 | € | 3.3 | $ | 4.6 | € | 0.1 | $ | 0.2 | |||||||||
1.0 | 6.9 | 9.6 | 0.3 | 0.4 | ||||||||||||||
1.5 | 10.9 | 15.2 | 0.4 | 0.6 | ||||||||||||||
2.0 | 15.4 | 21.5 | 0.6 | 0.9 |
(1) | The rate used to calculate the U.S. dollar impact of the changes was $1.4/€, which is the forecasted exchange rate used in our 2010 budget. |
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Raw Materials | Refine | Upgrade | ||
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2009 Global Tackifier Market by Chemistry | 2009 Global Tackifier Market by Application | |
(Approximately $1.6 billion) | (Approximately $1.6 billion) | |
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• | replacement of mechanical fasteners with adhesives in order to increase production rates, accommodate smaller and thinner devices, reduce weight, and improve strength; | |
• | increasing demand for pre-packaged, ready-made foods which require packaging that can withstand freezer and cooking temperatures and seals tightly to preserve freshness. Adhesive technology bonds the different packaging surfaces such as foil and plastic; and | |
• | increasing environmental awareness and regulatory initiatives relating to sustainable materials are increasing demand for recycled content in packaging, reduced volatile organic content, and reduced use of hydrocarbon-derived materials. We believe pine chemical-derived products are competitive alternatives. |
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2009 Global Ink Sales by Region | 2009 Global Ink Sales by Application | |
($16 billion) | ($16 billion) | |
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Breakdown of Different Roadmarking Coating | Competing Technologies in Thermoplastic | |
Types ($1.5 billion) | Systems | |
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Global Demand for Bitumen by Region | 2009 World Bitumen Demand by Market | |
(Approximately $45 billion) | (120 million metric tonnes) | |
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2008 Tire Market Value by Region | 2008 Tire Market Value by Vehicle & Tire Type | |
($130 billion) | ($130 billion) | |
2009 Synthetic Rubber Sales by Region | 2009 Synthetic Rubber Sales by End-Use | |
($17 billion) | ($17 billion) | |
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• | rheology modifiers, which alter the flow and feel of the product; | |
• | binders, which modify liquids into cakes, sticks and other wax-like solids; | |
• | gelling agents, which modify liquids into hard and soft gels; and | |
• | protective agents, which stabilize oil-water mixtures and improve wear resistance. |
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• | naturally-derived resins used in adhesives, inks and roadmarking applications; | |
• | naturally-derived tackifier resins used in hot melt packaging and bookbinding adhesives; | |
• | naturally-derived tread enhancement resins for passenger car tires; and | |
• | pine-based, non genetically-modified sterols used in food ingredient and nutrient applications through our joint venture, Arboris, LLC. |
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• | adhesive tackifiers designed to enable the use of a higher amount of recycled content in packaging materials; | |
• | high solid adhesive dispersions for labels and tapes that allow for higher coating speeds and that lower process energy costs; | |
• | heat stable rheology, or HSR, ink resins that reduce formulation complexity for ink manufacturers while improving press performance; | |
• | tire tread resins that promote wet grip, fuel economy and tire life; | |
• | fuel lubricity improvers that ensure low sulfur targets for diesel fuel can be met; and | |
• | emulsions and clear gels for skin and sun care applications. |
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Three Months | Three Months | Combined | ||||||||||||||||||
Ended | Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
March 31, | March 31, | December 31, | December 31, | December 31, | ||||||||||||||||
2010 | 2009 | 2009 | 2008 | 2007 | ||||||||||||||||
(Non-GAAP) | ||||||||||||||||||||
(dollars in thousands) | ||||||||||||||||||||
Net income (loss) | $ | 9,997 | $ | (2,357 | ) | $ | 12,098 | $ | (26,559 | ) | $ | (23,605 | ) | |||||||
Gross Margins | 20.6 | % | 8.1 | % | 15.7 | % | 13.3 | % | 11.7 | % | ||||||||||
Adjusted EBITDA | $ | 27,378 | $ | 11,043 | $ | 93,859 | $ | 92,723 | $ | 66,898 | ||||||||||
Adjusted EBITDA margins | 13.8 | % | 6.2 | % | 12.2 | % | 9.3 | % | 7.8 | % |
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• | TOFA is a key component in additives to improve the lubricity of low-sulfur diesel fuel, preventing engine fuel pump wear. | |
• | TOFA enables producers of phosphate and phosphoric acid to run their plants more profitably through use as a flotation reagent in apatite mining. | |
• | TOFA is a component in performance additives to aid the heat resistance of PVC. | |
• | TOFA is used in alkyd paints, primarily for decorative coatings, helping to bring durability and gloss. |
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Properties Servicing our North American Segment | ||||||||||||||
Owned or | Square | |||||||||||||
Location | Leased | Acreage | Footage | Function | Principal Products | |||||||||
Jacksonville, Florida United States | Leased | N/A | 27,592 | Executive and Administrative | — | |||||||||
Panama City, Florida United States | Owned | 37 | 104,854 | Manufacturing | Rosin Resins Dispersions Rosin Soap Terpene Resins | |||||||||
Pensacola, Florida United States | Owned | 21 | 64,109 | Manufacturing | Terpene Phenolics | |||||||||
Valdosta, Georgia United States | Owned | 35 | 81,089 | Manufacturing | Rosin Resins Resins Solutions | |||||||||
Savannah, Georgia United States | Owned | 56 | 115,900 | R&D and Manufacturing | Rosin Resins Solution Resinates | |||||||||
Dover, Ohio, United States | Owned | 153 | 160,249 | Manufacturing | Fatty Acid Dimers Polyamides Fatty Acid Esters Fatty Acid Upgrades Castor Oil Upgrades | |||||||||
Properties Servicing Our European Segment | ||||||||||||||
Owned or | Square | |||||||||||||
Location | Leased | Acreage | Footage | Function | Principal Products | |||||||||
Almere, The Netherlands | Leased | N/A | 42,590 | Executive and Administrative and R&D | — | |||||||||
Oulu, Finland | Owned | 24 | 173,456 | Manufacturing | Rosin Resins Rosin Soap Dispersions | |||||||||
Chester-le-Street, United Kingdom | Owned | 8 | 57,458 | Manufacturing | Dimer Specialty Fatty Acid | |||||||||
Niort, France | Owned | 23 | 186,388 | Manufacturing | Upgrading Adhesives Upgrading Inks | |||||||||
Sandarne, Sweden | Owned | 66 | 293,788 | Manufacturing | Rosin Esters Dispersions | |||||||||
Gersthofen, Germany | Owned | 4 | 39,116 | Manufacturing | Disproportionated Rosin |
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Name | Age | Position | ||||
Leonard Berlik | 62 | Director | ||||
John R. Bolton | 61 | Director | ||||
Petter Johnsson | 36 | Director | ||||
Dr. Jochen Krautter | 67 | Director | ||||
Gerald Marterer | 64 | Director | ||||
Sebastien Mazella di Bosco | 31 | Director | ||||
Eytan Tigay | 42 | Director and Chairman of the Board of Directors | ||||
Cornelis Verhaar | 56 | Director, President and Chief Executive Officer | ||||
Frederic Jung | 46 | Vice President and Chief Financial Officer | ||||
Gary Reed | 50 | Vice President and General Manager — North America | ||||
Juhani Tuovinen | 54 | Vice President and General Manager — Europe | ||||
Dick Stuyfzand | 49 | Vice President and General Counsel | ||||
David Cowfer | 50 | Vice President, Human Resources and Corporate Communications | ||||
Glenda Haynes | 50 | Vice President, Internal Audit | ||||
Gary Garland | 55 | Vice President, Tax | ||||
Kellie Hardee | 41 | Treasurer | ||||
Astrid van der Valk | 54 | Corporate Controller |
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• | the requirement that a majority of a board of directors consist of independent directors; |
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• | the requirement that we have a nominating and corporate governance committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; | |
• | the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee’s purpose and responsibilities; and | |
• | the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees. |
• | selecting, hiring and compensating our independent registered public accounting firm, and pre-approving the audit and non-audit services to be performed by our independent registered public accounting firm; | |
• | reviewing the independent public accounting firm’s qualifications, independence and performance; | |
• | reviewing the performance of the internal audit services function; | |
• | discussing the scope and results of the audit with the independent registered public accounting firm and reviewing with management and the independent registered public accounting firm our interim and year-end operating results; | |
• | reviewing the adequacy and effectiveness of our internal control policies and procedures; | |
• | preparing the Audit Committee report and any other disclosures required by the SEC to be included in our annual proxy statement; | |
• | monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements; | |
• | setting policies regarding the hiring of current and former employees of the independent registered public accounting firm; | |
• | discussing types of information to be disclosed in earnings press releases and provided to analysts and rating agencies; |
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• | establishing procedures for receipt, retention and treatment of complaints received by the Company regarding accounting or internal controls and the submission of anonymous employee concerns regarding accounting; | |
• | reviewing and discussing any reports concerning material violations submitted to it by our attorneys or outside counsel pursuant to the SEC attorney professional responsibility rules; | |
• | discussing with our general counsel legal matters having an impact on financial statements; and | |
• | reviewing the policy with respect to related party transactions and approving or rejecting proposed related party transactions. |
• | reviewing and approving corporate goals and objectives relevant to compensation of our chief executive officer and making recommendations to the board with respect to the compensation of other members of management; | |
• | recommending, when appropriate, changes to our compensation philosophy and principles; | |
• | evaluating overall compensation and benefits programs; | |
• | overseeing regulatory compliance with respect to compensation matters; | |
• | recommending to our board any changes in our incentive compensation and equity-based plans that are subject to board approval and overseeing the activities of individuals and committees responsible for administering these plans; | |
• | reviewing and discussing with management, prior to the filing of the proxy statement or annual report, the disclosures prepared regarding the operations of the committee and our compensation policies, including the CD&A and compensation tables (in addition to preparing a report on executive compensation for the proxy statement); and | |
• | overseeing our management development and succession planning programs and making recommendations to the board with respect to any aspects of such programs that are subject to board approval. |
• | assisting our board of directors in identifying prospective director nominees, and recommending nominees for each annual meeting of shareholders to the board of directors; | |
• | reviewing developments in corporate governance practices and developing and recommending governance principles applicable to our board of directors; | |
• | reviewing our code of business conduct and ethics, recommending any appropriate changes to the code to the board and reviewing requests for waivers from the code; |
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• | overseeing the evaluation of our board of directors and management; and | |
• | recommending members for each board committee of our board of directors. |
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Est. 2009 MIP Pool | $ 4.8 | |||||||||||
Adjusted EBITDA Payout % | 60 | % | ||||||||||
Adjusted EBITDA Portion of MIP Pool (at Target) | $ 2.9 | |||||||||||
2009 EBITDA Target | $80.0 | |||||||||||
Payment Threshold | $75.0 | |||||||||||
Above Target | 4.0 | x | Award Point Multiplier | |||||||||
Below Target | 2.5 | x | Award Point Multiplier |
Payout % of | Adjusted EBITDA | Payout % of | ||||||||||||||||||
% of | Adjusted EBITDA | Portion of | Total | |||||||||||||||||
Adjusted EBITDA | Target | Portion | Payout | MIP Pool | ||||||||||||||||
Target | 80.0 | 100 | % | 100.00 | % | 2.88 | 60.00 | % | ||||||||||||
Achieved | 93.7 | 117 | % | 168.65 | % | 4.86 | 101.19 | % |
WC Days of Sales Payout % | 20 | % | ||
WC Portion of MIP Pool (at Target) | $ | 1.0 | ||
2009 Working Capital Target | 59 | |||
Payment Threshold | 62 |
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Quarter Calc. | ||||||||||||||||||||
Working Capital | ||||||||||||||||||||
Working | Cash Flow | % of | Working Capital | Payout % of | ||||||||||||||||
Capital | to Company | Cash | Portion of | Total | ||||||||||||||||
Days of Sales | Since Dec. 08 | Target | Payout | MIP Pool | ||||||||||||||||
Target | 59 | 30.6 | 100.00 | % | $ | 0.96 | 20.00 | % | ||||||||||||
Achieved | 54 | 41.2 | 137.44 | % | $ | 2.40 | 49.95 | % |
Personal Objective Payout % | 20 | % | ||
Personal Objective Portion of MIP Pool (at Target) | $ | 1.0 |
Goal | Result | |||
Cornelis Verhaar | Financial Leadership in meeting corporate financial targets; implement cost improvement process | Exceeded | ||
Customer Focus Provide leadership in achieving growth of sales at key customers | Achieved | |||
Organization Coordinate establishment of global business processes and structure; develop culture focused on speed of execution and openness | Achieved | |||
Strategic Initiatives Prepare strategic plan; establish growth programs and goals; review IT infrastructure and capabilities | Achieved | |||
Cost Reduction Identify and implement initiatives to reduce costs | Exceeded | |||
Frederic Jung | Cash Management Leadership in meeting corporate Free Cash Flow and Net Working Capital Days targets | Exceeded | ||
Savings Initiative Implement process to achieve 2009 Cost Savings target | Exceeded | |||
Project APEX:ERP (SAP financial system implementation) On time, on budget | Achieved | |||
Financial Reporting Ensure accuracy/ consistency; redesign/implement cost structure and allocations; redesign transfer pricing; improve forecasting of P&L, cash flow | Achieved | |||
Finance Organization Evaluate finance team, redesign finance organization, implement foundations of global shared service center, continuous benchmark | Achieved | |||
Risk Management Develop/implement strategies for interest rate, foreign exchange and energy fluctuation protections | Achieved | |||
IT Strategy Deliver strategic plan of IT strategy and capability including benchmarking for long term; complete 2009 improvements | Not Achieved |
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Goal | Result | |||
Juhani Tuovinen | Financial Performance Lead European organization to achieve 2009 targets | Achieved | ||
Leadership Provide leadership to achieve corporate 2009 financial targets | Exceeded | |||
Operation Excellence Lead European organization to achieve 2009 operational targets | Achieved | |||
People Lead European organization to secure skills and competencies to achieve business targets | Achieved | |||
Financial Results — longer term Lead European organization to achieve targeted long-term results | Achieved | |||
Customer Focus Lead European organization to achieve targeted service level and growth results | Not Achieved | |||
Gary Reed | Financial Performance Assist Arizona Chemical to meet North American 2009 fiscal targets, 2009 working capital targets and global 2009 financial targets | Exceeded | ||
Operational Excellence Achieve step change in safety performance while maintaining environmental performance | Not Achieved | |||
People Develop organizational capability via people development and performance management; renegotiate expiring labor agreements | Achieved | |||
Customer Focus Improve customer satisfaction in North America and achieve growth objectives | Achieved | |||
Dick Stuyfzand | Reinforce Legal and IP functions Build internal working relationships and across the business | Achieved | ||
Board Set up and facilitate support function, organize agendas and meetings of board of directors of AZ Chem Investments LLC | Achieved | |||
Organization (Legal and IP) Manage and evaluate legal and IP teams and prepare recommendations re: structure, costs and budget; evaluate and build relationship with outside counsel network | Achieved | |||
Governance and Compliance Develop and start implementing governance and internal controls strategy and framework for initial public offering | Exceeded |
Payout % of | Adjusted | |||||||||||||||
Adjusted | EBITDA | Payout % of | ||||||||||||||
% of | EBITDA | Portion of | Total | |||||||||||||
Target | Portion | Payout | MIP Pool | |||||||||||||
Target | 100 | % | 100.00 | % | $ | 0.96 | 20.00 | % | ||||||||
Achieved | 100 | % | 100.00 | % | $ | 0.96 | 20.00 | % | ||||||||
Payout | 171.14 | % | ||||||||||||||
of target award |
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Non-Equity | Change in | |||||||||||||||||||||||||||
Share | Incentive Plan | Pension | All Other | |||||||||||||||||||||||||
Salary | Awards | Compensation | Value | Compensation | Total | |||||||||||||||||||||||
Name and Principal Position | Year | ($) | ($)(4) | ($)(5) | ($) | ($)(6) | ($) | |||||||||||||||||||||
Cornelis Verhaar | 2009 | 574,012 | 8,245 | 731,865 | 128,880 | 38,011 | 1,480,013 | |||||||||||||||||||||
President and Chief Executive Officer | ||||||||||||||||||||||||||||
Frederic Jung(1) | 2009 | 285,000 | 41,518 | 290,700 | — | 195,074 | 812,292 | |||||||||||||||||||||
Vice President & Chief Financial Officer | ||||||||||||||||||||||||||||
Juhani Tuovinen(2) | 2009 | 315,707 | 7,500 | 305,261 | 26,841 | 70,808 | 726,117 | |||||||||||||||||||||
Vice President & General Manager — Europe | ||||||||||||||||||||||||||||
Gary Reed | 2009 | 250,000 | 7,000 | 245,140 | — | 21,760 | 523,900 | |||||||||||||||||||||
Vice President & General Manager — North America | ||||||||||||||||||||||||||||
Dick Stuyfzand(3) | 2009 | 222,430 | 10,602 | 159,541 | 34,381 | 26,322 | 453,276 | |||||||||||||||||||||
Vice President & General Counsel |
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(1) | Mr. Jung joined us as Chief Financial Officer on December 1, 2008. He was transferred from the United States to The Netherlands on August 1, 2009. All compensation he received in Euros has been converted to U.S. dollars at an exchange rate of 1.43503 (exchange rate as of December 31, 2009). | |
(2) | Mr. Tuovinen’s compensation was paid in Euros, but for the purposes of this table his compensation has been converted to U.S. dollars at an exchange rate of 1.43503 (exchange rate as of December 31, 2009). | |
(3) | Mr. Stuyfzand joined us on January 19, 2009. His compensation was paid in Euros, but for the purposes of this table his compensation has been converted to U.S. dollars at an exchange rate of 1.43503 (exchange rate as of December 31, 2009). | |
(4) | Amounts in the “Share Awards” column above reflect the grant date fair value (as determined in accordance with FASB ASC Topic 718 — Stock Compensation), based on the assumptions set forth in Note 17 of our consolidated financial statements appearing at the end of this prospectus. | |
(5) | Amounts disclosed in the “Non-Equity Incentive Plan Compensation” column represent amounts earned under our MIP. | |
(6) | See following table titled “All Other Compensation” for details regarding amounts disclosed in the “All Other Compensation” column for fiscal year 2009. |
Contributions | ||||||||||||||||||||||||
to Defined | ||||||||||||||||||||||||
Auto | Contribution | Housing | Relocation | |||||||||||||||||||||
Allowance | Savings Plan | Assistance | Assistance | Total | ||||||||||||||||||||
Name and Principal Position | Year | ($)(1) | ($)(2) | ($)(3) | ($)(4) | ($) | ||||||||||||||||||
Cornelis Verhaar | 2009 | 38,011 | — | — | — | 38,011 | ||||||||||||||||||
President and Chief Executive Officer | ||||||||||||||||||||||||
Frederic Jung | 2009 | 30,820 | 6,840 | 18,648 | 138,766 | 195,074 | ||||||||||||||||||
Vice President & Chief Financial Officer | ||||||||||||||||||||||||
Juhani Tuovinen | 2009 | 24,780 | — | 46,028 | — | 70,808 | ||||||||||||||||||
Vice President & General Manager — Europe | ||||||||||||||||||||||||
Gary Reed | 2009 | — | 21,760 | — | — | 21,760 | ||||||||||||||||||
Vice President & General Manager — North America | ||||||||||||||||||||||||
Dick Stuyfzand | 2009 | 26,322 | — | — | — | 26,322 | ||||||||||||||||||
Vice President & General Counsel |
(1) | Represents the incremental cost to us relating to Messrs. Verhaar, Tuovinen, Jung and Stuyfzand’s personal use of our provided and owned automobiles which incremental cost is equal to the sum of the lease payments and insurance premium payments made during the applicable fiscal year for each automobile provided to Messrs. Verhaar, Tuovinen, Jung and Stuyfzand, respectively. | |
(2) | Represents Company contributions made on behalf of the indicated executive officer to the Arizona Chemical Company Employee Savings Plan, a tax-qualified retirement plan forU.S.-based employees of the Company, including Messrs. Jung and Reed. | |
(3) | Represents payments to cover eligible housing expenses incurred by Mr. Tuovinen and Mr. Jung in connection with their personal residences in The Netherlands. | |
(4) | Represents eligible expenses incurred by Mr. Jung in connection with his relocation from Chicago, Illinois to Almere, The Netherlands. |
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All Other Share-Based | ||||||||||
Grant | Awards: Number of | Grant Date Fair Value of | ||||||||
Name and Principal Position | Date | Units (#)(1) | Share-Based Awards ($)(5) | |||||||
Cornelis Verhaar | 8/31/09 | 8,245 | (2) | $ | 8,254 | |||||
President and Chief Executive Officer | ||||||||||
Frederic Jung | 8/31/09 | 41,518 | (3) | $ | 41,518 | |||||
Vice President & Chief Financial Officer | ||||||||||
Juhani Tuovinen | 8/31/09 | 7,500 | (2) | $ | 7,500 | |||||
Vice President & General Manager — Europe | ||||||||||
Gary Reed | 8/31/09 | 7,000 | (2) | $ | 7,000 | |||||
Vice President & General Manager — North America | ||||||||||
Dick Stuyfzand | 8/31/09 | 10,602 | (4) | $ | 10,602 | |||||
Vice President & General Counsel |
(1) | Represents awards of common profits interests. | |
(2) | Annual performance based grant. |
(3) | Initial grant for joining the plan (40,825) plus partial year performance grant (693). |
(4) | Initial grant only. | |
(5) | As described above under “Grants of Common Profits Interests in MIV I and MIV II”, the 2009 grants were in the form of common profits interests, which entitle the recipient to future profit allowances but generally have $0 value upon grant. |
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Number of Units | Market Value of Units | |||||||||||
Grant | That Have Not | That Have Not | ||||||||||
Name and Principal Position | Date | Vested (#)(1) | Vested ($)(2) | |||||||||
Cornelis Verhaar | 9/1/08 | 98,666 | $ | 0 | ||||||||
President and Chief Executive Officer | 8/31/09 | 8,245 | ||||||||||
Frederic Jung | 8/31/09 | 41,518 | $ | 0 | ||||||||
Vice President & Chief Financial Officer | ||||||||||||
Juhani Tuovinen | 2/28/08 | 38,205 | $ | 0 | ||||||||
Vice President & General | 9/1/08 | 9,551 | $ | 0 | ||||||||
Manager — Europe | 8/31/09 | 7,500 | $ | 0 | ||||||||
Gary Reed | 2/28/08 | 38,205 | $ | 0 | ||||||||
Vice President & General | 9/1/08 | 9,551 | $ | 0 | ||||||||
Manager — North America | 8/31/09 | 7,000 | $ | 0 | ||||||||
Dick Stuyfzand | 8/31/09 | 10,602 | $ | 0 | ||||||||
Vice President & General Counsel |
(1) | Represents common profits interests. | |
(2) | As described above under “Grants of Common Profits Interests in MIV I and MIV II”, the 2009 grants were in the form of common profits interests, which entitle the recipient to future profit allowances but generally have $0 value upon grant. Although the grants are vested, there is no liquidity unless there is a distribution. |
Payments | ||||||||||
Number of | Present Value of | During | ||||||||
Years of | Accumulated | the Last | ||||||||
Credited | Benefit | Fiscal Year | ||||||||
Name and Principal Position | Plan Name | Service (#) | ($)(1) | ($) | ||||||
Cornelis Verhaar | ZwitserLeven Contract GN 2595 | 1 year and 5 months | $ | 159,972 | — | |||||
President and Chief Executive Officer | ||||||||||
Juhani Tuovinen | ZwitserLeven Contract GN 2595 | 3 years and 6 months | $ | 224,413 | — | |||||
Vice President & General Manager — Europe | ||||||||||
Finnish Managing Directors of AZC OY in Finland and EU | 3 years and 1 month | $ | 41,776 | — | ||||||
Dick Stuyfzand | ZwitserLeven Contract GN 2595 | 1 Year | $ | 34,381 | — | |||||
Vice President & General Counsel |
(1) | Pension benefits under the ZwitserLeven Contract GN 2595 and the Finnish Managing Directors of AZC OY in Finland and EU accrue in Euros, but for purposes of this table the present value of accumulated benefits under those pension plans have been converted to U.S. dollars based on the exchange rate in effect on December 31, 2009 (1.43503 U.S. dollars per Euro). |
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Cash-Out Value of | ||||||||||||||||
Equity Based Awards | ||||||||||||||||
Severance | that Vest Upon | Value of Benefits | ||||||||||||||
Triggering Event | Payment | Triggering Event | Continuation | Total | ||||||||||||
By Company for cause or resignation by Executive | — | $ | 448,013 | (3) | — | $ | 448,013 | |||||||||
By Company without cause, pursuant to Company’s election not to extend the employment term | $ | 1,198,006 | (1) | $ | 500,000 | (2) | $ | 40,000 | (7) | $ | 1,738,006 | |||||
Permanent Disability | $ | 1,018,305 | (5) | $ | 500,000 | (2) | $ | 95,429 | (6) | $ | 1,613,734 | |||||
Death | $ | 99,833 | (4) | $ | 500,000 | (2) | $ | 66,801 | (6) | $ | 666,634 |
(1) | Represents the continuation of base salary for 24 months. | |
(2) | Represents total value of personal investment in equity plan, which would be restored without penalty. |
(3) | Represents total value of personal investment in equity plan, which may be restored without penalty at the discretion of the general partner, but most likely would be restored minus loan interest. |
(4) | Represents two months of salary, paid to spouse or beneficiary. | |
(5) | Fully-insured disability benefit equivalent to 100% of one-year’s salary and 70% of a second year’s salary. | |
(6) | Represents the annual value of benefit continuation in the event of permanent disability (for two years for the executive and his spouse) and death (for two years for the executive’s spouse). |
(7) | Represents 24 months of continued family medical and dental coverage. |
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Cash-Out Value of | ||||||||||||||||
Equity Based Awards | ||||||||||||||||
Severance | that Vest Upon | Value of Benefits | ||||||||||||||
Triggering Event | Payment | Triggering Event | Continuation | Total | ||||||||||||
By Company for cause or resignation by Executive | — | $ | 232,644 | (4) | — | $ | 232,644 | |||||||||
By Company without cause, pursuant to Company’s election not to extend the employment term, or resignation by Executive for good reason | $ | 456,000 | (1) | $ | 250,000 | (3) | $ | 13,114 | (2) | $ | 719,114 | |||||
Disability | — | $ | 250,000 | (6) | $ | 170,976 | (7) | $ | 420,976 | |||||||
Death | $ | 23,750 | (8) | $ | 250,000 | (6) | $ | 570,000 | (5) | $ | 843,750 |
(1) | Represents 12 months of salary and annual bonus at target (full year). | |
(2) | Represents 12 months of continued family medical and dental coverage. | |
(3) | Represents total value of personal investment in equity plan, which would be restored without penalty. |
(4) | Represents total value of personal investment in equity plan, which may be restored without penalty at the discretion of the general partner, but most likely would be restored minus loan interest. |
(5) | Represents life insurance lump sum payment of two times annual salary, plus one month of salary. | |
(6) | Represents payment for death and disability provision of equity plan agreement. | |
(7) | Annual disability benefit under the Company’s Long-Term Disability Plan (U.S. only), a fully-insured benefit. | |
(8) | Death benefit of one-month’s salary is paid to the spouse or beneficiary. |
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Cash-Out Value of | ||||||||||||||||
Equity Based Awards | ||||||||||||||||
Severance | that Vest Upon | Value of Benefits | ||||||||||||||
Triggering Event | Payment | Triggering Event | Continuation | Total | ||||||||||||
By Company for cause or resignation by executive without good reason | — | $ | 205,681(3 | ) | — | $ | 205,681 | |||||||||
By Company without cause, pursuant to Company’s election not to extend the employment term, or resignation by Executive for good reason | $ | 1,291,308 | (1) | $ | 260,000(2 | ) | — | $ | 1,551,308 | |||||||
Disability | $ | 506,402 | (6) | $ | 260,000(4 | ) | $ | 71,397 | (7) | $ | 837,799 | |||||
Death | $ | 54,942 | (5) | $ | 260,000(4 | ) | $ | 49,978 | (7) | $ | 364,920 |
(1) | Represents a severance payment based on the Dutch court formula described above. |
(2) | Represents total value of personal investment in equity plan, which would be restored without penalty. |
(3) | Represents total value of personal investment in equity plan, which may be restored at the discretion of the general partner, but most likely would be restored minus loan interest. |
(4) | Represents payment for death and disability provision of equity plan agreement. | |
(5) | Represents two months of salary, paid to spouse or beneficiary. | |
(6) | Fully-insured disability benefit equivalent to 100% of one-year’s salary and 70% of a second year’s salary. | |
(7) | Represents the annual value of benefit continuation in the event of permanent disability (for two years for the executive and his spouse) and death (for two years for the executive’s spouse). |
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Cash-Out Value of | ||||||||||||||||
Equity Based Awards | ||||||||||||||||
Severance | that Vest Upon | Value of Benefits | ||||||||||||||
Triggering Event | Payment | Triggering Event | Continuation | Total | ||||||||||||
By Company for cause or resignation by Executive | — | $ | 158,216 | (4) | — | $ | 158,216 | |||||||||
By Company without cause, pursuant to Company’s election not to extend the employment term | $ | 414,430 | (1) | $ | 200,000 | (3) | $ | 6,557 | (2) | $ | 620,987 | |||||
Disability | N/A | $ | 200,000 | (6) | $ | 150,020 | (7) | $ | 350,020 | |||||||
Death | $ | 20,833 | (8) | $ | 200,000 | (6) | $ | 520,833 | (5) | $ | 741,666 |
(1) | Represents service-related severance of two weeks’ pay for each year or partial year of service and annual bonus at full year target. |
(2) | Represents six months of continued family medical and dental coverage. |
(3) | Represents total value of personal investment in equity plan, which would be restored without penalty. |
(4) | Represents total value of personal investment in equity plan, which may be restored without penalty at the discretion of the general partner, but most likely would be restored minus loan interest. |
(5) | Represents life insurance lump sum payment of two times annual salary, plus one month of salary. | |
(6) | Represents payment for death and disability provision of equity plan agreement. | |
(7) | Annual disability benefit under our Long-Term Disability Plan (U.S. only), a fully-insured benefit. | |
(8) | Death benefit of one-month salary is paid to spouse or beneficiary. |
Cash-Out Value of | ||||||||||||||||
Equity Based Awards | ||||||||||||||||
Severance | that Vest Upon | Value of Benefits | ||||||||||||||
Triggering Event | Payment | Triggering Event | Continuation | Total | ||||||||||||
By Company for cause or resignation by Executive | — | $ | 96,102 | (3) | — | $ | 96,102 | |||||||||
By Company without cause or pursuant to Company’s election not to extend the employment term | $ | 161,319 | (1) | $ | 100,000 | (2) | — | $ | 261,319 | |||||||
Disability | $ | 394,867 | (6) | $ | 100,000 | (4) | $ | 59,092 | (7) | $ | 553,959 | |||||
Death | $ | 38,712 | (5) | $ | 100,000 | (4) | $ | 41,356 | (7) | $ | 180,068 |
(1) | Represents a severance payment based on the Dutch court formula described above. |
(2) | Represents total value of personal investment in equity plan, which would be restored without penalty. |
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(3) | Represents total value of personal investment in equity plan, which may be restored without penalty at the discretion of the general partner, but most likely would be restored minus loan interest. |
(4) | Represents payment for death and disability provision of equity plan agreement. | |
(5) | Represents two months of salary, paid to spouse or beneficiary. |
(6) | Fully-insured disability benefit equivalent to 100% of one year’s salary and 70% of a second year’s salary. |
(7) | Represents the annual value of benefit continuation in the event of permanent disability (for two years for the executive and his spouse) and death (for two years for the executive’s spouse). |
Change in | ||||||||||||||||||||||||||||
Pension Value | ||||||||||||||||||||||||||||
and | ||||||||||||||||||||||||||||
Fees | Nonqualified | |||||||||||||||||||||||||||
Earned or | Non-equity | Deferred | ||||||||||||||||||||||||||
Paid in | Stock | Option | Incentive Plan | Compensation | All Other | |||||||||||||||||||||||
Cash | Awards | Awards | Compensation | Earnings | Compensation | Total | ||||||||||||||||||||||
Name | ($) | ($) | ($) | ($) | ($) | ($) | ($) | |||||||||||||||||||||
Leonard Berlik(1) | 50,000 | N/A | N/A | N/A | N/A | N/A | 50,000 | |||||||||||||||||||||
John R. Bolton(2) | — | N/A | N/A | N/A | N/A | N/A | — | |||||||||||||||||||||
Petter Johnsson(3) | — | N/A | N/A | N/A | N/A | N/A | — | |||||||||||||||||||||
Dr. Jochen Krautter | 50,000 | N/A | N/A | N/A | N/A | N/A | 50,000 | |||||||||||||||||||||
Gerald Marterer | 50,000 | N/A | N/A | N/A | N/A | N/A | 50,000 | |||||||||||||||||||||
Sebastien Mazella di Bosco(3) | — | N/A | N/A | N/A | N/A | N/A | — | |||||||||||||||||||||
Andrew Oliver(3)(4) | — | N/A | N/A | N/A | N/A | N/A | — | |||||||||||||||||||||
Eytan Tigay(3) | — | N/A | N/A | N/A | N/A | N/A | — | |||||||||||||||||||||
Cornelis Verhaar(3) | — | N/A | N/A | N/A | N/A | N/A | — |
(1) | In connection with his services as a member of the board of managers of AZ Chem Investments LLC during the one year period ended February 28, 2009, Mr. Berlik received “phantom interests” in AZ Chem Investments Partners LP reflecting the economic equivalent of a $50,000 investment in AZ Chem Investments Partners LP. In connection with his services as a member of the board of managers of AZ Chem Investments LLC during the one year period ended February 28, 2010, Mr. Berlik received $50,000 cash compensation. | |
(2) | Mr. Bolton became a director in 2010. |
(3) | Directors who are employees or affiliates of Arizona Chemical are not entitled to receive any compensation for serving on the board of directors. |
(4) | Andrew Oliver ceased to be a director effective as of May 21, 2010. |
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• | First, a special preferred distribution to the Rhône Funds in respect of their special preferred interests. The Rhône Funds received these special preferred interests in 2008 in respect of anin-kind capital contribution to AZ Chem Investments Partners LP of $9.5 million of loans issued under our Second Lien Credit Agreement, which were purchased by the Rhône Funds in the secondary market. These loans were contributed by AZ Chem Investments Partners LP to us, and were then extinguished by us. |
• | Second, to the limited partners, including the Rhône Funds, International Paper, MIV I and MIV II, in respect of their preferred interests in AZ Chem Investments Partners LP, which includes a preferred return that accumulates in respect of the preferred interests. The initial investment by each limited partner in MIV I and MIV II was allocated between a preferred interest, which accounted for 90% of the investment and accumulates a 10% annual preferred return, and a common interest, which accounted for 10% of the investment and receives distributions as described below. AZ Chem Investments Partners LP intends to distribute the net proceeds from its sale of our common shares in connection with this offering in respect of a portion of the preferred interests. |
• | Third, to the limited partners, including the Rhône Funds, International Paper, MIV I and MIV II, in respect of the capital represented by their common interests. |
• | Fourth, to MIV I and MIV II in respect of their common profits interests. The amount distributed in respect of the common profits interests will depend on the amount of common profits interests outstanding at that time, which will be based upon a number of factors, including, among others, the amount of common profits interests vested at such time and any subsequent repurchases thereof. In addition, if each limited partner in AZ Chem Investments Partners LP will have achieved an internal rate of return on capital contributed to AZ Chem Investments Partners LP of 30% or more, in certain circumstances, these distributions on common profits interests are made at 150% of the amount otherwise distributable. After taking into account the further grant of common profits interests made in the first half of 2010, the common profits interests represent an approximately 5.8% common percentage in AZ Chem Investments Partners LP and entitle the holders of those interests to up to 8.7% of any distributions made in accordance with this priority level (if the 30% internal rate of return on capital contributed to AZ Chem Investments Partners LP has been achieved). |
• | Fifth, to the limited partners, including the Rhône Funds, International Paper, MIV I and MIV II, in respect of their common percentages, which is calculated based upon the sum of the common interests and the common profits interests, each as described above, including the receipt of 150% of the amount otherwise distributable on common profits interests in certain circumstances. |
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• | shares covered by an award will be counted as used only to the extent they are actually delivered on exercise or settlement of an award; |
• | to the extent that an award is terminated by expiration, forfeiture, cancellation or otherwise without the issuance of the shares subject to the award or settled in cash in lieu of shares or exchanged pursuant to the administrator’s permission, prior to the issuance of shares, then the shares covered by that award will be available for future grants under the 2010 Plan; |
• | to the extent shares are tendered or withheld to satisfy any exercise price or tax withholding obligation with respect to an award under the 2010 Plan, such tendered or withheld shares will be available for future grants under the 2010 Plan; |
• | to the extent any SAR is exercised and settled in shares, the difference between the total shares exercised and the net shares delivered will again be available for future grants under the 2010 plan; and |
• | the payment of dividend equivalents in cash in conjunction with any outstanding awards will not be counted against the shares available for issuance under the 2010 Plan. |
• | Share options/share appreciation rights: No more than common shares covered by share options and share appreciation rights, |
• | Restricted share/restricted share units: No more than restricted shares or restricted share units, |
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• | Performance shares/units: No more than shares (if payable in shares) or the value of $ if payable in cash, |
• | Cash-based awards: No more than $ , and |
• | Other share-based awards: No more than shares. |
• | Nonqualified Share Options, or NQSOs, will provide for the right to purchase our common shares at a specified price which may not be less than fair market value on the date of grant and usually will become exercisable (at the discretion of the administrator) in one or more installments after the grant date, subject to the participant’s continued employment or service with usand/or subject to the satisfaction of corporate performance targets and individual performance targets established by the administrator. NQSOs may be granted for any term specified by the administrator, but may not exceed ten years. |
• | Incentive Share Optionswill be designed in a manner intended to comply with the provisions of Section 422 of the Internal Revenue Code and will be subject to specified restrictions contained in the Internal Revenue Code. Among those restrictions, ISOs must have an exercise price of not less than the fair market value of a common share on the date of grant, may only be granted to employees, must not be exercisable after a period of ten years measured from the date of grant and will retain their ISO status so long as they are exercised within 90 days after termination of employment (or within one year after a disability termination). In the case of an ISO granted to an individual who owns (or is deemed to own) at least 10% of the total combined voting power of all classes of our common shares, the 2010 Plan provides that the exercise price must be at least 110% of the fair market value of a common share on the date of grant and the ISO must not be exercisable after a period of five years |
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measured from the date of grant. Up to of our common shares under the 2010 Plan may be granted under ISOs. |
• | Share Appreciation Rightsmay be granted in connection with share options or other awards, or separately. SARs granted in connection with share options or other awards typically will provide for payments to the holder based upon increases in the price of our common shares over a set exercise price. The exercise price of any SAR granted under the 2010 Plan must be at least 100% of the fair market value of a common share on the date of grant. The term of a SAR shall not exceed 10 years. Except as required by Section 162(m) of the Internal Revenue Code with respect to a SAR intended to qualify as performance-based compensation as described in Section 162(m) of the Internal Revenue Code, there are no restrictions specified in the 2010 Plan on the exercise of SARs or the amount of gain realizable therefrom, although restrictions may be imposed by the administrator in the SAR agreements. |
• | Restricted Sharesmay be granted to any eligible individual and made subject to such restrictions as may be determined by the administrator. Restricted shares, typically, may be forfeited for no consideration or repurchased by us at the original purchase price (if any) if the conditions or restrictions on vesting are not met. In general, restricted shares may not be sold, or otherwise transferred, until restrictions are removed or expire. Recipients of restricted shares, unlike recipients of options, will have voting rights and may receive dividends paid prior to the time when the restrictions lapse. |
• | Restricted Share Unitsmay be awarded to any eligible individual, typically without payment of consideration, but subject to vesting conditions based on continued employment or service or on performance criteria established by the administrator. Like restricted shares, restricted share units may not be sold, or otherwise transferred or hypothecated, until vesting conditions are removed or expire. Unlike restricted shares, shares underlying restricted share units will not be issued until the restricted share units have vested, and recipients of restricted share units will not have any voting rights prior to the time when vesting conditions are satisfied. |
• | Performance Awardsmay be granted by the administrator in the form of performance units or performance shares. Generally, these awards will be based upon specific performance targets and may be paid in cash or in common shares or in a combination of both. After the applicable performance period has ended, the holder of performance units or performance shares shall be entitled to receive a payout on the value and number of performance units or performance shares earned by the participant over the performance period, to be determined as a function of the extent to which the corresponding performance goals have been achieved. |
• | Other Awardsmay be granted by the Compensation Committee, either in the form of equity-based, equity-related, or cash-based. If the Compensation Committee exercises its discretion to establish performance goals, the numberand/or value of cash-based awards or other share-based awards that will be paid out to the recipient will depend on the extent to which the performance goals are met. |
• | Dividend Equivalentsmay be granted by the Compensation Committee. Such dividend equivalents will be converted to cash or additional shares by such formula and at such time and subject to such limitations as may be determined by the Compensation Committee. The Compensation Committee may not grant dividend equivalents based on the dividends declared on shares that are subject to an options, ISO, or SAR award; and furthermore, no dividend or dividend equivalents will be paid out with respect to any unvested performance awards. |
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• | the acquisition by any person of beneficial ownership of 30% or more of either our then outstanding shares or the combined voting power of our then outstanding voting securities; |
• | individuals who constitute the continuing directors cease to constitute at least a majority of the board; |
• | consummation of a reorganization, amalgamation, merger, consolidation, or business combination involving us, directly or indirectly, other than a merger, consolidation, reorganization or business combination which results in our outstanding voting securities immediately before the transaction continuing to represent a majority of the voting power of the acquiring company’s outstanding voting securities and after which no person or group beneficially owns 20% or more of the outstanding voting securities of the surviving entity immediately after the transaction; |
• | the sale, exchange, or transfer of all or substantially all of our assets; or |
• | shareholder approval of our liquidation or dissolution. |
• | the aggregate number and type of shares subject to the 2010 Plan; |
• | the terms and conditions of outstanding awards (including, without limitation, any applicable performance targets or criteria with respect to such awards and the number of shares underlying outstanding awards); and |
• | the grant or exercise price per share of any outstanding awards under the 2010 Plan. |
• | to increase the number of shares available under the 2010 Plan (other than in connection with certain corporate events, as described above); |
• | to grant options with an exercise price that is below 100% of the fair market value of our common shares on the grant date; |
• | to extend the exercise period for an option beyond ten years from the date of grant; or |
• | to the extent required by applicable law, rule or regulation (including any applicable stock exchange rule). |
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Shares Beneficially | Shares Beneficially | |||||||||||||||||||||||||||
Shares Beneficially | Owned After this | Owned After this | ||||||||||||||||||||||||||
Owned Before this | Shares | Offering Without | Offering with Exercise | |||||||||||||||||||||||||
Name and Address of | Offering | Offered | Exercise of Option | of Option | ||||||||||||||||||||||||
Beneficial Owner | Number | Percent | Hereby | Number | Percent | Number | Percent | |||||||||||||||||||||
AZ Chem Investments Partners LP(1)(2)(3)(4) | 100 | % | % | % | ||||||||||||||||||||||||
c/o Rhône Capital III, L.P. 630 5th Avenue, New York, New York 10111 |
(1) | AZ Chem Investments Partners LP is controlled by AZ Chem Investments LLC, its general partner, which is managed by a board the members of which are designated by Rhône Partners III L.P., Rhône Coinvestment Partners III L.P. and Rhône Offshore Partners III L.P (together, the “Rhône Funds”). The Rhône Funds are managed by Rhône Capital III L.P., which is the general partner of each Rhône Fund. Rhône Capital III L.P. is managed by Rhône Holdings III LLC, its general partner, which is managed by Rhône Capital, its sole member. Each of AZ Chem Investments LLC, the Rhône Funds, Rhône Capital III L.P., Rhône Holdings III LLC and Rhône Capital disclaim beneficial ownership of the shares held by AZ Chem Investments Partners LP. | |
(2) | The Rhône Funds, International Paper and AZ Chem MIV I Ltd. and AZ Chem MIV II LP are limited partners in AZ Chem Investments Partners LP. Prior to this offering, the Rhône Funds held a % limited partnership interest in AZ Chem Investments Partners LP, while International Paper held a % limited partnership interest and members of our management, through their interests in AZ Chem MIV I Ltd. and AZ Chem MIV II LP, held a % limited partnership interest. |
(3) | For information regarding the Acquisition, pursuant to which Rhône Capital acquired Arizona Chemical from International Paper, see “Business — Transactions with Rhône Capital and International Paper”. For information regarding transactions with Rhône Capital subsequent to the Acquisition, see “Certain Relationships and Related Party Transactions — Relationship with Rhône Capital” and “Certain Relationships and Related Party Transactions — Shareholders Agreement”. |
(4) | AZ Chem Investments Partners LP is an affiliate of Rhône Group Advisors LLC, a broker-dealer, and certifies that it bought the securities in the ordinary course of business, and at the time of the |
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purchase of the securities to be resold it had no agreements or understandings, directly or indirectly, with any person to distribute the securities. |
• | each of our named executive officers; |
• | each of our directors and each director nominee; and |
• | all of our executive officers, directors and director nominees as a group. |
Shares Beneficially | Shares Beneficially | |||||||||||||||||||||||||||
Shares Beneficially | Owned After this | Owned After this | ||||||||||||||||||||||||||
Owned Before this | Shares | Offering Without | Offering with Exercise | |||||||||||||||||||||||||
Name and Address of | Offering | Offered | Exercise of Option | of Option | ||||||||||||||||||||||||
Beneficial Owner | Number | Percent | Hereby | Number | Percent | Number | Percent | |||||||||||||||||||||
Cornelis Verhaar(1) | — | — | % | — | — | — | % | — | — | % | ||||||||||||||||||
Frederic Jung(1) | — | — | % | — | — | — | % | — | — | % | ||||||||||||||||||
Juhani Tuovinen(1) | — | — | % | — | — | — | % | — | — | % | ||||||||||||||||||
Gary Reed(1) | — | — | % | — | — | — | % | — | — | % | ||||||||||||||||||
Dick Stuyfzand(1) | — | — | % | — | — | — | % | — | — | % | ||||||||||||||||||
Leonard Berlik(1)(2) | — | — | % | — | — | — | % | — | — | % | ||||||||||||||||||
John R. Bolton | — | — | % | — | — | — | % | — | — | % | ||||||||||||||||||
Petter Johnsson | — | — | % | — | — | — | % | — | — | % | ||||||||||||||||||
Jochen Krautter(1) | — | — | % | — | — | — | % | — | — | % | ||||||||||||||||||
Gerald Marterer(1) | — | — | % | — | — | — | % | — | — | % | ||||||||||||||||||
Sebastien Mazella di Bosco | — | — | % | — | — | — | % | — | — | % | ||||||||||||||||||
Eytan Tigay | — | — | % | — | — | — | % | — | — | % | ||||||||||||||||||
All executive officers and directors as a group: | — | — | % | — | — | — | % | — | — | % |
(1) | For a discussion of interests certain members of our management and board of directors have in AZ Chem MIV I Ltd. and AZ Chem MIV II LP, see “Executive Compensation — Compensation Discussion and Analysis — Components of Direct Compensation — AZ Chem MIV I Ltd. and AZ Chem MIV II LP” and “Executive Compensation — Other Compensation Matters — MIV I and MIV II”. |
(2) | In connection with his services as a member of the board of managers of AZ Chem Investments LLC for the one year periods ended February 28, 2008 and February 28, 2009, Mr. Berlik received “phantom interests” in AZ Chem Investments Partners LP reflecting the economic equivalent of a $100,000 investment in AZ Chem Investments Partners LP. |
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• | 100% of the net cash proceeds of all asset sales and dispositions by Arizona Chem Sweden Holdings AB and its subsidiaries, subject to certain exceptions; | |
• | 100% of the net cash proceeds from any payment received by Arizona Chem Sweden Holdings AB and its subsidiaries in respect of any casualty insurance claim or condemnation proceeding, subject to certain exceptions; | |
• | 100% of the net cash proceeds of issuances of certain debt obligations by Arizona Chem Sweden Holdings AB and its subsidiaries; |
• | 50% of the net cash proceeds from capital contributions to and equity issuances by Arizona Chem Sweden Holdings AB or any of its subsidiaries, including a step-down to 25% of net cash proceeds where our leverage ratio is equal to or less than 3.5x for the relevant period, provided that with respect to cash proceeds relating to this offering, we are required to prepay outstanding term loans in an amount equal to 75% of the net cash proceeds; and |
• | 50% of Arizona Chem Sweden Holdings AB and its subsidiaries’ annual excess cash flow (as defined in the First Lien Credit Agreement) minus certain voluntary prepayments during such period, including a step-down to 25% of excess cash flow with respect to any period to the extent our leverage ratio is equal to or less than 3.5x for such period. |
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• | declare dividends, make distributions or redeem or repurchase capital stock; | |
• | prepay, redeem or repurchase other debt; | |
• | incur liens or grant negative pledges; | |
• | make loans and investments and enter into acquisitions and joint ventures; | |
• | incur additional indebtedness; | |
• | amend or otherwise alter or waive any material rights under any organizational document, certain transaction documents relating to the Acquisition or any permitted debt agreements; | |
• | make capital expenditures; | |
• | engage in mergers, acquisitions and asset sales; | |
• | engage in sale and lease-back transactions; | |
• | conduct transactions with affiliates; | |
• | alter the nature of our businesses; or | |
• | change our fiscal quarter or our fiscal year. |
• | our failure to pay principal, interest, fees, reimbursement in respect of any drawing under a letter of credit, or other amounts under the First Lien Credit Agreement when due (taking into account any applicable grace period); | |
• | any representation or warranty proving to have been materially incorrect when made or deemed made; | |
• | with respect to certain covenants, covenant defaults (taking into account any applicable grace period); | |
• | bankruptcy events; | |
• | a cross-default or, in certain circumstances, cross-acceleration to certain other debt; | |
• | unsatisfied final judgments over certain specified thresholds; |
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• | a change of control; | |
• | certain ERISA defaults; and | |
• | the invalidity or impairment of any loan document or any security interest in relation to the First Lien Credit Agreement. |
• | the agreement does not establish a revolving credit facility, nor does it includesub-facilities for swing line loans and letters of credit or require payment of any related fees; | |
• | no scheduled amortization payments are required; | |
• | the incremental term loan facility is for an amount of up to only $25 million in the aggregate; |
• | mandatory prepayments are required only at such time as all amounts outstanding under the First Lien Credit Agreement have been paid and all commitments thereunder have been terminated, or otherwise with the consent of the first lien lenders, provided that we are required to prepay the indebtedness outstanding under our Second Lien Credit Agreement in an amount equal to 25% of the net proceeds received from this offering; |
• | the agreement does not require maintenance of a specified interest coverage ratio although it does require maintenance of a specified leverage ratio fixed at a level 0.25% higher than the leverage ratio specified in the First Lien Credit Agreement; and | |
• | the borrowings are guaranteed by, and secured by the assets of, certain of our U.S. subsidiaries but not by Holdings, the European borrower, or any of our other European subsidiaries. |
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• | restrictions in our credit agreements; | |
• | general economic and business conditions; | |
• | our financial condition and results of operations; | |
• | our capital requirements and the capital requirements of our subsidiaries; | |
• | the ability of our operating subsidiaries to pay dividends and make distributions to us; and | |
• | such other factors as our board of directors may deem relevant. |
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• | By a procedure under the Companies Act 1981 known as a “scheme of arrangement”. A scheme of arrangement could be effected by obtaining the agreement of the Company and of holders of common shares, representing in the aggregate a majority in number and at least 75% in value of the common shareholders present and voting at a court ordered meeting held to consider the scheme or arrangement. The scheme of arrangement must then be sanctioned by the Bermuda Supreme Court. If a scheme of arrangement receives all necessary agreements and sanctions, upon the filing of the court order with the Registrar of Companies in Bermuda, all holders of common shares could be compelled to sell their shares under the terms of the scheme or arrangement. | |
• | If the acquiring party is a company it may compulsorily acquire all the shares of the target company, by acquiring pursuant to a tender offer 90% of the shares or class of shares not already owned by, or by a nominee for, the acquiring party (the offeror), or any of its subsidiaries. If an offeror has, within four months after the making of an offer for all the shares or class of shares not owned by, or by a nominee for, the offeror, or any of its subsidiaries, obtained the approval of the holders of 90% or more of all the shares to which the offer relates, the offeror may, at any time within two months beginning with the date on which the approval was obtained, require by notice any nontendering shareholder to transfer its shares on the same terms as the original offer. In those circumstances, nontendering shareholders will be compelled to sell their shares unless the Supreme Court of Bermuda (on application made within a one-month period from the date of the offeror’s notice of its intention to acquire such shares) orders otherwise. | |
• | Where one or more parties holds not less than 95% of the shares or a class of shares of a company, such holder(s) may, pursuant to a notice given to the remaining shareholders or class of shareholders, acquire the shares of such remaining shareholders or class of shareholders. When this notice is given, the acquiring party is entitled and bound to acquire the shares of the remaining shareholders on the terms set out in the notice, unless a remaining shareholder, within one month of receiving such notice, applies to the Supreme Court of Bermuda for an appraisal of the value of their shares. This provision only applies where the acquiring party offers the same terms to all holders of shares whose shares are being acquired. |
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common shares. Of these shares, common shares to be sold in this offering, or common shares if the underwriters exercise their option to purchase additional shares in full, will be freely tradable without restriction or further registration under the Securities Act, unless the shares are held by any of our affiliates, as that term is defined in Rule 144 of the Securities Act. All remaining shares were issued and sold by us in private transactions and are eligible for public sale only if registered under the Securities Act or sold in accordance with Rule 144, which is discussed below.
• | one percent of the number of common shares then outstanding, which will equal approximately shares immediately after this offering; and | |
• | the average weekly trading volume of the common shares on the New York Stock Exchange during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale. |
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• | a dealer in securities; | |
• | a trader in securities that elects to use amark-to-market method of accounting for securities holdings; | |
• | a tax-exempt organization; | |
• | a financial institution; | |
• | a life insurance company; | |
• | a person liable for alternative minimum tax; | |
• | a person that actually or constructively owns 10% or more of our voting shares; | |
• | a person that holds shares as part of a straddle or a hedging or conversion transaction; | |
• | a U.S. expatriate; or | |
• | a U.S. Holder (as defined below) whose functional currency is not the U.S. dollar. |
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• | a citizen or resident of the United States; | |
• | a domestic corporation; | |
• | an estate whose income is subject to United States federal income tax regardless of its source; or | |
• | a trust if it (i) is subject to the primary supervision of a court within the United States and one or more United States persons have the authority to control all substantial decisions of the trust or (ii) has a valid election in effect under applicable United States Treasury regulations to be treated as a United States person. |
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• | the gain is “effectively connected” with your conduct of a trade or business in the United States, and the gain is attributable to a permanent establishment that you maintain in the United States if that is required by an applicable income tax treaty as a condition for subjecting you to United States taxation on a net income basis; or | |
• | you are an individual, you are present in the United States for 183 or more days in the taxable year of the sale and certain other conditions exist. |
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• | dividend payments or other taxable distributions made to you within the United States; and | |
• | the payment of proceeds to you from the sale of shares effected at a United States office of a broker. |
• | fails to provide an accurate taxpayer identification number; | |
• | is notified by the Internal Revenue Service that you have failed to report all interest and dividends required to be shown on your federal income tax returns; or | |
• | in certain circumstances, fails to comply with applicable certification requirements. |
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• | dividend payments made to you outside the United States by us or anothernon-United States payor and | |
• | other dividend payments and the payment of the proceeds from the sale of shares effected at a United States office of a broker, as long as the income associated with such payments is otherwise exempt from United States federal income tax; and: |
• | the payor or broker does not have actual knowledge or reason to know that you are a United States person and you have furnished the payor or broker: |
• | an Internal Revenue ServiceForm W-8BEN or an acceptable substitute form upon which you certify, under penalties of perjury, that you are anon-United States person; or | |
• | other documentation upon which it may rely to treat the payments as made to anon-United States person in accordance with U.S. Treasury regulations; or |
• | you otherwise establish an exemption. |
• | the proceeds are transferred to an account maintained by you in the United States; | |
• | the payment of proceeds or the confirmation of the sale is mailed to you at a United States address; or | |
• | the sale has some other specified connection with the United States as provided in U.S. Treasury regulations; |
• | a United States person; | |
• | a controlled foreign corporation for United States tax purposes; | |
• | a foreign person 50% or more of whose gross income is effectively connected with the conduct of a United States trade or business for a specified three-year period; or | |
• | a foreign partnership, if at any time during its tax year: |
• | one or more of its partners are “U.S. persons”, as defined in U.S. Treasury regulations, who in the aggregate hold more than 50% of the income or capital interest in the partnership; or | |
• | such foreign partnership is engaged in the conduct of a United States trade or business; |
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Number of | ||||
Underwriters | Shares | |||
Goldman, Sachs & Co. | ||||
Total |
Full | ||||||||
Paid by the Company | No Exercise | Exercise | ||||||
Per Share | $ | $ | ||||||
Total | $ | $ |
Full | ||||||||
Paid by the Selling Shareholder | No Exercise | Exercise | ||||||
Per Share | $ | $ | ||||||
Total | $ | $ |
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• | to legal entities which are authorized or regulated to operate in the financial markets or, if not so authorized or regulated, whose corporate purpose is solely to invest in securities; | |
• | to any legal entity which has two or more of (1) an average of at least 250 employees during the last financial year, (2) a total balance sheet of more than €43,000,000 and (3) an annual net turnover of more than €50,000,000, as shown in its last annual or consolidated accounts; | |
• | to fewer than 100 natural or legal persons (other than qualified investors as defined in the Prospectus Directive) subject to obtaining the prior consent of the representatives for any such offer; or | |
• | in any other circumstances which do not require the publication by the Issuer of a prospectus pursuant to Article 3 of the Prospectus Directive. |
• | it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the FSMA) received by it in connection with the issue or sale of the shares in circumstances in which Section 21(1) of the FSMA does not apply to the issuer; and | |
• | it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares in, from or otherwise involving the United Kingdom. |
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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page | ||||
Audited Consolidated Financial Statements | ||||
F-2 | ||||
F-4 | ||||
F-5 | ||||
F-6 | ||||
F-7 | ||||
F-8 | ||||
Unaudited Condensed Consolidated Financial Statements | ||||
F-45 | ||||
F-46 | ||||
F-47 | ||||
F-48 |
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F-2
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Arizona Chemical Company
Jacksonville, Florida
August 10, 2007 (March 9, 2010 as to the financial statements schedule)
F-3
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December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 47,023 | $ | 34,048 | ||||
Accounts receivable, less allowance for doubtful accounts of $1,000 and $1,279, respectively | 99,702 | 121,714 | ||||||
Inventory | 89,124 | 135,075 | ||||||
Deferred income taxes | 3,038 | 5,769 | ||||||
Prepaid expenses and other current assets | 12,863 | 11,830 | ||||||
Total current assets | 251,750 | 308,436 | ||||||
Property, plant and equipment, net | 224,945 | 223,234 | ||||||
Intangible assets, net | 113,540 | 135,179 | ||||||
Investment in affiliate | 11,583 | 11,192 | ||||||
Other assets | 16,191 | 13,043 | ||||||
Total assets | $ | 618,009 | $ | 691,084 | ||||
Liabilities and shareholder’s equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 82,826 | $ | 106,706 | ||||
Accrued liabilities | 42,888 | 40,132 | ||||||
Current portion of long-term debt | 3,935 | 2,786 | ||||||
Total current liabilities | 129,649 | 149,624 | ||||||
Deferred income taxes | 39,645 | 42,001 | ||||||
Long-term debt | 330,823 | 380,619 | ||||||
Capital lease obligations | 3,796 | 3,983 | ||||||
Other liabilities | 16,489 | 19,348 | ||||||
Total liabilities | 520,402 | 595,575 | ||||||
Commitments and contingencies (Note 15) | ||||||||
Shareholder’s equity: | ||||||||
Common shares, $14.25 par value — issued and outstanding 1,000 shares | 14 | 14 | ||||||
Paid-in capital | 135,661 | 137,338 | ||||||
Accumulated deficit | (41,791 | ) | (53,889 | ) | ||||
Accumulated other comprehensive income | 3,723 | 12,046 | ||||||
Total shareholder’s equity | 97,607 | 95,509 | ||||||
Total liabilities and shareholder’s equity | $ | 618,009 | $ | 691,084 | ||||
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Successor | Predecessor | ||||||||||||||||
March 1 | January 1 | ||||||||||||||||
Year Ended | Year Ended | through | through | ||||||||||||||
December 31, | December 31, | December 31, | February 28, | ||||||||||||||
2009 | 2008 | 2007 | 2007 | ||||||||||||||
Net sales | $ | 767,465 | $ | 1,001,988 | $ | 723,797 | $ | 132,070 | |||||||||
Cost of goods sold | 646,986 | 868,536 | 642,341 | 113,074 | |||||||||||||
Gross profit | 120,479 | 133,452 | 81,456 | 18,996 | |||||||||||||
Operating expenses (income): | |||||||||||||||||
Selling, general and administrative | 78,200 | 91,936 | 86,684 | 12,899 | |||||||||||||
Unrealized foreign currency exchange (gains) losses | (9,347 | ) | 20,304 | — | — | ||||||||||||
Restructuring and impairment | 26,395 | 15,513 | 114 | — | |||||||||||||
Other operating income | (5,537 | ) | — | — | — | ||||||||||||
Total operating expenses (income) | 89,711 | 127,753 | 86,798 | 12,899 | |||||||||||||
Operating income (loss) | 30,768 | 5,699 | (5,342 | ) | 6,097 | ||||||||||||
Interest (expense) income, net | (16,546 | ) | (29,523 | ) | (28,775 | ) | 118 | ||||||||||
Loss on interest rate swaps, net | (2,541 | ) | (9,311 | ) | (2,275 | ) | — | ||||||||||
Other income | 3,635 | 1,879 | — | — | |||||||||||||
Income (loss) before income tax expense (benefit) and equity in earnings of affiliates, net of taxes | 15,316 | (31,256 | ) | (36,392 | ) | 6,215 | |||||||||||
Income tax expense (benefit) | 3,831 | (4,277 | ) | (8,913 | ) | 2,614 | |||||||||||
Equity in earnings of affiliates net of taxes of $356, $218, $114, and $51, respectively | 613 | 380 | 189 | 84 | |||||||||||||
Net income (loss) | $ | 12,098 | $ | (26,599 | ) | $ | (27,290 | ) | $ | 3,685 | |||||||
Earnings per share: | |||||||||||||||||
Basic and diluted | $ | 12,098 | $ | (26,599 | ) | $ | (27,290 | ) | |||||||||
Weighted average common shares outstanding | 1,000 | 1,000 | 1,000 |
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Accumulated | ||||||||||||||||||||||||
Other | ||||||||||||||||||||||||
Paid-in | Accumulated | Comprehensive | ||||||||||||||||||||||
Shares | Amount | Capital | Deficit | Income | Total | |||||||||||||||||||
(In thousands, except per share amounts) | ||||||||||||||||||||||||
PREDECESSOR | ||||||||||||||||||||||||
Balance of Divisional Control Account at January 1, 2007 | $ | 362,854 | ||||||||||||||||||||||
Net income | 3,685 | |||||||||||||||||||||||
Foreign currency translation adjustment | (1,364 | ) | ||||||||||||||||||||||
Comprehensive income (net of benefits distributed through group tax sharing agreement with International Paper) | 2,321 | |||||||||||||||||||||||
Funding provided to International Paper | (2,032 | ) | ||||||||||||||||||||||
Change in cumulative translation adjustment due to International Paper | 41 | |||||||||||||||||||||||
Balance of Divisional Control Account at February 28, 2007 | $ | 363,184 | ||||||||||||||||||||||
SUCCESSOR | ||||||||||||||||||||||||
Balance at March 1, 2007 | 1,000 | $ | 14 | $ | 129,986 | $ | — | $ | — | $ | 130,000 | |||||||||||||
Net loss | — | — | — | (27,290 | ) | — | (27,290 | ) | ||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | (297 | ) | (297 | ) | ||||||||||||||||
Net gain from pension plans, net of tax | — | — | — | — | 1,632 | 1,632 | ||||||||||||||||||
Comprehensive loss | (25,955 | ) | ||||||||||||||||||||||
Balance at December 31, 2007 | 1,000 | 14 | 129,986 | (27,290 | ) | 1,335 | 104,045 | |||||||||||||||||
Contribution of debt by Rhône Capital | — | — | 7,352 | — | — | 7,352 | ||||||||||||||||||
Net loss | — | — | — | (26,599 | ) | — | (26,599 | ) | ||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | 12,755 | 12,755 | ||||||||||||||||||
Net loss from pension plans, net of tax | — | — | — | — | (2,044 | ) | (2,044 | ) | ||||||||||||||||
Comprehensive loss | (15,888 | ) | ||||||||||||||||||||||
Balance at December 31, 2008 | 1,000 | 14 | 137,338 | (53,889 | ) | 12,046 | 95,509 | |||||||||||||||||
Distribution to parent | — | — | (1,677 | ) | — | — | (1,677 | ) | ||||||||||||||||
Net income | — | — | — | 12,098 | — | 12,098 | ||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | (5,902 | ) | (5,902 | ) | ||||||||||||||||
Net loss from pension plans, net of tax | — | — | — | — | (2,421 | ) | (2,421 | ) | ||||||||||||||||
Comprehensive income | 3,775 | |||||||||||||||||||||||
Balance at December 31, 2009 | 1,000 | $ | 14 | $ | 135,661 | $ | (41,791 | ) | $ | 3,723 | $ | 97,607 | ||||||||||||
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Successor | Predecessor | ||||||||||||||||
March 1 | January 1 | ||||||||||||||||
Year Ended | Year Ended | through | through | ||||||||||||||
December 31, | December 31, | December 31, | February 28, | ||||||||||||||
2009 | 2008 | 2007 | 2007 | ||||||||||||||
(In thousands) | |||||||||||||||||
Operating activities | |||||||||||||||||
Net income (loss) | $ | 12,098 | $ | (26,599 | ) | $ | (27,290 | ) | $ | 3,685 | |||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||||||||
Depreciation and amortization | 40,615 | 34,210 | 28,813 | 4,422 | |||||||||||||
Change in fair value of interest rate swaps | (5,715 | ) | 5,183 | 3,417 | — | ||||||||||||
(Gain) loss on unrealized foreign exchange | (9,347 | ) | 20,304 | — | — | ||||||||||||
Impairment loss | 18,109 | 7,003 | — | — | |||||||||||||
Gain on extinguishment of debt | — | (2,150 | ) | — | — | ||||||||||||
Loss (gain) on disposal of property, plant and equipment | 63 | (75 | ) | 22 | — | ||||||||||||
Gain on acquisition | (2,142 | ) | — | — | — | ||||||||||||
Amortization of debt issuance costs | 2,520 | 2,896 | 2,237 | — | |||||||||||||
Deferred income tax expense (benefit) | 2,920 | (4,191 | ) | (10,710 | ) | (119 | ) | ||||||||||
Provision for bad debts | 144 | 567 | 240 | — | |||||||||||||
Equity in undistributed earnings of investment in affiliate | (395 | ) | (598 | ) | (303 | ) | — | ||||||||||
Other, net | 115 | — | — | (853 | ) | ||||||||||||
Voluntary non-US pension plan contribution | — | — | — | (9,152 | ) | ||||||||||||
Change in assets and liabilities: | |||||||||||||||||
Accounts receivable | 25,858 | (9,608 | ) | 10,383 | 14,115 | ||||||||||||
Inventory | 57,414 | (6,235 | ) | 12,353 | (10,974 | ) | |||||||||||
Prepaid expenses and other current assets | 1,078 | (1,861 | ) | 3,227 | 779 | ||||||||||||
Other assets | (5,426 | ) | 2,787 | 4,539 | (390 | ) | |||||||||||
Accounts payable | (16,793 | ) | (3,917 | ) | 20,573 | (14,117 | ) | ||||||||||
Accrued liabilities | (1,623 | ) | 7,951 | 875 | — | ||||||||||||
Other liabilities | (2,168 | ) | (4,826 | ) | (3,354 | ) | 516 | ||||||||||
Net cash provided by (used in) operating activities | 117,325 | 20,841 | 45,022 | (12,088 | ) | ||||||||||||
Investing activities | |||||||||||||||||
Acquisition of business — net of cash acquired of $1,101 and $9,259, in 2009 and the ten months ended December 31, 2007 | (8,772 | ) | — | (477,441 | ) | — | |||||||||||
Proceeds from disposals of property, plant and equipment | 875 | 212 | — | — | |||||||||||||
Dividends received from equity investment | — | 356 | — | — | |||||||||||||
Additions to property, plant and equipment | (22,993 | ) | (34,719 | ) | (18,248 | ) | (4,598 | ) | |||||||||
Capitalized software costs | (13,404 | ) | (142 | ) | (1,642 | ) | — | ||||||||||
Net cash used in investing activities | (44,294 | ) | (34,293 | ) | (497,331 | ) | (4,598 | ) | |||||||||
Financing activities | |||||||||||||||||
Issuance of common stock | — | — | 130,000 | — | |||||||||||||
Proceeds from long-term and short-term obligations | 17,731 | 69,811 | 384,399 | — | |||||||||||||
Repayments of long-term and short-term obligations | (75,971 | ) | (56,767 | ) | (11,347 | ) | — | ||||||||||
Debt issuance costs | (490 | ) | — | (14,300 | ) | — | |||||||||||
Repayment of capital lease obligation | (276 | ) | (276 | ) | (205 | ) | (78 | ) | |||||||||
Settlement of MIV loans | (3,088 | ) | — | — | — | ||||||||||||
Distribution to parent | (1,677 | ) | — | — | — | ||||||||||||
Collections from notes from International Paper | — | — | — | 12,406 | |||||||||||||
Funding provided to International Paper | — | — | — | (2,032 | ) | ||||||||||||
Net cash (used in) provided by financing activities | (63,771 | ) | 12,768 | 488,547 | 10,296 | ||||||||||||
Effect of foreign exchange rate changes on cash and cash equivalents | 3,715 | (3,354 | ) | 1,848 | (65 | ) | |||||||||||
Increase (decrease) in cash and cash equivalents | 12,975 | (4,038 | ) | 38,086 | (6,455 | ) | |||||||||||
Cash and cash equivalents at beginning of period | 34,048 | 38,086 | — | 17,506 | |||||||||||||
Cash and cash equivalents at end of period | $ | 47,023 | $ | 34,048 | $ | 38,086 | $ | 11,051 | |||||||||
Supplemental cash flows information: | |||||||||||||||||
Cash paid during the period for: | |||||||||||||||||
Interest (net of amounts capitalized) | $ | 22,188 | $ | 29,126 | $ | 25,094 | $ | 693 | |||||||||
Income taxes | $ | 2,181 | $ | 2,355 | $ | 2,480 | $ | 195 | |||||||||
Noncash investing and financing activities: | |||||||||||||||||
Contribution by Rhône capital/debt retirement | $ | — | $ | 7,352 | $ | — | $ | — | |||||||||
Purchases of property, plant and equipment in accounts payable | $ | 5,683 | $ | 407 | $ | 905 | $ | — |
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1. | Organization |
Accounts receivable | $ | 127.1 | ||
Inventory | 149.6 | |||
Other current assets | 6.5 | |||
Plant, property and equipment | 219.9 | |||
Intangible assets(1) | 153.7 | |||
Investment in affiliate | 11.3 | |||
Other assets | 3.3 | |||
Total assets acquired | 671.4 | |||
Accounts payable | 87.3 | |||
Accrued liabilities | 33.3 | |||
Deferred income taxes | 58.2 | |||
Long-term debt | 9.4 | |||
Other liabilities | 5.7 | |||
Total liabilities | 193.9 | |||
Less cash acquired | (9.2 | ) | ||
Total liabilities assumed | 184.7 | |||
Net assets acquired | $ | 486.7 | ||
(1) | See Note 8 Intangible Assets |
F-8
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2. | Basis of Presentation |
3. | Summary of Significant Accounting Policies |
F-9
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F-10
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F-11
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Years | ||
Buildings | 20–40 | |
Machinery and equipment | 1–15 | |
Software | 3–6 | |
Leasehold improvements | Over the shorter of the term of the lease or the useful life of the improvements |
F-12
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Years | ||
Trade names | Indefinite | |
Customer relationships | 6–15 | |
Supply agreements | 7–20 | |
Core/developed technology | 10–15 | |
Favorable leaseholds | 39 | |
Internally developed software | 3 |
F-13
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F-14
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4. | Recent Accounting Pronouncements |
F-15
Table of Contents
5. | Fair Value of Financial Instruments |
2009 | 2008 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Asset (Liability) | Amount | Value | Amount | Value | ||||||||||||
Cash and cash equivalents | $ | 47,023 | $ | 47,023 | $ | 34,048 | $ | 34,048 | ||||||||
Long-term debt | $ | (334,758 | ) | $ | (319,868 | ) | $ | (383,405 | ) | $ | (383,405 | ) | ||||
Interest rate swaps | $ | (2,879 | ) | $ | (2,879 | ) | $ | (8,588 | ) | $ | (8,588 | ) | ||||
Interest rate cap | $ | 1,028 | $ | 1,028 | — | — |
F-16
Table of Contents
Asset Derivatives | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Balance Sheet | Fair | Balance Sheet | Fair | |||||||||||||
Location | Value | Location | Value | |||||||||||||
Interest rate cap | Other assets | $ | 1,028 | — | $ | — | ||||||||||
Total | $ | 1,028 | $ | — | ||||||||||||
Liability Derivatives | ||||||||||||||||
2009 | 2008 | |||||||||||||||
Balance Sheet | Fair | Balance Sheet | Fair | |||||||||||||
Location | Value | Location | Value | |||||||||||||
Interest rate swaps | Accrued liabilities | $ | 2,303 | Accrued liabilities | $ | 7,417 | ||||||||||
Interest rate swaps | Other liabilities | 576 | Other liabilities | 1,171 | ||||||||||||
Total | $ | 2,879 | $ | 8,588 | ||||||||||||
F-17
Table of Contents
Amount of Gain (Loss) Recognized in Income | ||||||||||||||
Derivatives Not | Location of Gain | Year ended | Year ended | March 1 through | ||||||||||
Designated as Hedging | (Loss) Recognized in | December 31, | December 31, | December 31, | ||||||||||
Instruments | Income | 2009 | 2008 | 2007 | ||||||||||
Interest rate swaps | Loss on interest rate swaps, net | $ | 5,738 | $ | (5,242 | ) | $ | (3,438 | ) | |||||
Interest rate cap | Loss on interest rate swaps, net | (22 | ) | — | — | |||||||||
Total | $ | 5,716 | $ | (5,242 | ) | $ | (3,438 | ) | ||||||
F-18
Table of Contents
Derivative | ||||||||||||||||
Financial | Fair Value Measurements Using | |||||||||||||||
Instruments | Level 1 | Level 2 | Level 3 | |||||||||||||
As of December 31, 2009: | ||||||||||||||||
Interest rate swap | $ | (2,879 | ) | $ | — | $ | (2,879 | ) | $ | — | ||||||
Interest rate cap | $ | 1,028 | $ | — | $ | 1,028 | $ | — | ||||||||
As of December 31, 2008: | ||||||||||||||||
Interest rate swap | $ | (8,588 | ) | $ | — | $ | (8,588 | ) | $ | — |
6. | Inventory |
2009 | 2008 | |||||||
Raw materials | $ | 35,352 | $ | 49,980 | ||||
Finished goods | 53,772 | 85,095 | ||||||
Total | $ | 89,124 | $ | 135,075 | ||||
7. | Property, Plant and Equipment, Net |
2009 | 2008 | |||||||
Land | $ | 14,392 | $ | 14,695 | ||||
Buildings | 42,188 | 34,546 | ||||||
Machinery and equipment | 203,769 | 191,381 | ||||||
Construction in progress | 7,693 | 17,058 | ||||||
Software | 24,877 | 9,089 | ||||||
Total | 292,919 | 266,769 | ||||||
Less accumulated depreciation | (67,974 | ) | (43,535 | ) | ||||
Property, plant and equipment, net | $ | 224,945 | $ | 223,234 | ||||
F-19
Table of Contents
8. | Intangible Assets, Net |
2009 | 2008 | |||||||||||||||||||||||
Gross | Net | Gross | Net | |||||||||||||||||||||
Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying | |||||||||||||||||||
Amount | Amortization | Amount | Amount | Amortization | Amount | |||||||||||||||||||
Trade names | $ | 24,910 | $ | — | $ | 24,910 | $ | 27,418 | $ | — | $ | 27,418 | ||||||||||||
Customer relationships | 44,614 | (5,602 | ) | 39,012 | 43,762 | (3,366 | ) | 40,396 | ||||||||||||||||
Supply agreements | 41,379 | (12,796 | ) | 28,583 | 51,864 | (8,415 | ) | 43,449 | ||||||||||||||||
Core/developed technology | 25,388 | (5,127 | ) | 20,261 | 26,547 | (3,394 | ) | 23,153 | ||||||||||||||||
Favorable leaseholds | 825 | (59 | ) | 766 | 737 | (37 | ) | 700 | ||||||||||||||||
Internally developed software | 170 | (162 | ) | 8 | 171 | (108 | ) | 63 | ||||||||||||||||
Total intangible assets | $ | 137,286 | $ | (23,746 | ) | $ | 113,540 | $ | 150,499 | $ | (15,320 | ) | $ | 135,179 | ||||||||||
Amortization | ||||
Years Ending December 31 | Expense | |||
2010 | $ | 8,466 | ||
2011 | $ | 8,457 | ||
2012 | $ | 8,457 | ||
2013 | $ | 8,457 | ||
2014 | $ | 6,672 |
F-20
Table of Contents
9. | Restructuring and Impairment |
F-21
Table of Contents
Termination | ||||||||||||||||||||
Benefits to Employees | Other Qualified Costs | |||||||||||||||||||
North America | Europe | North America | Europe | Total | ||||||||||||||||
Balance — February 28, 2007 | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
Costs accrued | 103 | — | 11 | — | 114 | |||||||||||||||
Payments | (103 | ) | — | (11 | ) | — | (114 | ) | ||||||||||||
Balance — December 31, 2007 | — | — | — | — | — | |||||||||||||||
Costs accrued | 992 | 5,001 | 177 | 2,340 | 8,510 | |||||||||||||||
Payments | (954 | ) | (4,120 | ) | (177 | ) | (1,949 | ) | (7,200 | ) | ||||||||||
Currency exchange | — | (676 | ) | — | (201 | ) | (877 | ) | ||||||||||||
Balance — December 31, 2008 | 38 | 205 | — | 190 | 433 | |||||||||||||||
Costs accrued | 2,650 | 1,250 | 4,048 | 339 | 8,287 | |||||||||||||||
Payments | (2,326 | ) | (611 | ) | (3,250 | ) | (538 | ) | (6,725 | ) | ||||||||||
Currency exchange | — | (12 | ) | — | 27 | 15 | ||||||||||||||
Balance — December 31, 2009 | $ | 362 | $ | 832 | $ | 798 | $ | 18 | $ | 2,010 | ||||||||||
2009 | 2008 | |||||||
Land | $ | 1,211 | $ | — | ||||
Machinery and equipment | 15,568 | 3,431 | ||||||
Buildings | 576 | 2,252 | ||||||
Construction in progress | 754 | — | ||||||
CPI project | — | 1,098 | ||||||
Software | — | 222 | ||||||
Total | $ | 18,109 | $ | 7,003 | ||||
F-22
Table of Contents
10. | Accrued Liabilities |
2009 | 2008 | |||||||
Payroll and related accruals | $ | 21,029 | $ | 21,049 | ||||
Accrued taxes — other than income taxes | 3,173 | 2,592 | ||||||
Accrued rebates | 979 | 2,081 | ||||||
Accrued environmental remediation | 4,062 | 3,120 | ||||||
Short-term swap liability | 2,303 | 1,171 | ||||||
Other | 11,342 | 10,119 | ||||||
Total | $ | 42,888 | $ | 40,132 | ||||
11. | Debt |
2009 | 2008 | |||||||
First lien term loan | $ | 218,543 | $ | 238,603 | ||||
Second lien term loan | 115,498 | 115,498 | ||||||
Revolving credit facility | — | 29,304 | ||||||
Bank loan | 717 | — | ||||||
Total | 334,758 | 383,405 | ||||||
Less current portion | (3,935 | ) | (2,786 | ) | ||||
Long-term debt | $ | 330,823 | $ | 380,619 | ||||
F-23
Table of Contents
Years Ending December 31, | ||||
2010 | $ | 3,935 | ||
2011 | 2,602 | |||
2012 | 2,460 | |||
2013 | 210,263 | |||
2014 | 115,498 | |||
Thereafter | — | |||
Total | $ | 334,758 | ||
F-24
Table of Contents
12. | Income Taxes |
Successor | Predecessor | ||||||||||||||||
March 1 | January 1 | ||||||||||||||||
Year ended | Year ended | through | through | ||||||||||||||
December 31, | December 31, | December 31, | February 28, | ||||||||||||||
2009 | 2008 | 2007 | 2007 | ||||||||||||||
U.S. federal | $ | 89 | $ | (56 | ) | $ | — | $ | 1,405 | ||||||||
U.S. state | 158 | 49 | 207 | 194 | |||||||||||||
International | 664 | (78 | ) | 1,590 | 953 | ||||||||||||
Current | 911 | (85 | ) | 1,797 | 2,552 | ||||||||||||
U.S. federal | 200 | 2,925 | (9,714 | ) | 258 | ||||||||||||
U.S. state | (52 | ) | 207 | (708 | ) | 35 | |||||||||||
International | 2,772 | (7,324 | ) | (288 | ) | (231 | ) | ||||||||||
Deferred | 2,920 | (4,192 | ) | (10,710 | ) | 62 | |||||||||||
Income tax expense (benefit) | $ | 3,831 | $ | (4,277 | ) | $ | (8,913 | ) | $ | 2,614 | |||||||
F-25
Table of Contents
Successor | Predecessor | ||||||||||||||||
March 1 | January 1 | ||||||||||||||||
Year Ended | Year Ended | through | through | ||||||||||||||
December 31, | December 31, | December 31, | February 28, | ||||||||||||||
2009 | 2008 | 2007 | 2007 | ||||||||||||||
United States | $ | 1,299 | $ | 8,753 | $ | (33,120 | ) | $ | 4,935 | ||||||||
International | 14,017 | (40,009 | ) | (3,272 | ) | 1,280 | |||||||||||
Total income (loss) before income tax expense (benefit) | $ | 15,316 | $ | (31,256 | ) | $ | (36,392 | ) | $ | 6,215 | |||||||
Successor | Predecessor | ||||||||||||||||
March 1 | January 1 | ||||||||||||||||
Year Ended | Year Ended | through | through | ||||||||||||||
December 31, | December 31, | December 31, | February 28, | ||||||||||||||
2009 | 2008 | 2007 | 2007 | ||||||||||||||
Statutory income tax rate | 26.3 | % | 28.0 | % | 28.0 | % | 35.0 | % | |||||||||
Tax on income of foreign subsidiaries and rate differential | (2.3 | ) | (2.1 | ) | 10.8 | 4.4 | |||||||||||
Nondeductible transaction costs | — | — | (5.8 | ) | — | ||||||||||||
Permanent differences | (15.5 | ) | 4.6 | — | — | ||||||||||||
Tax credits | — | 0.5 | 0.7 | — | |||||||||||||
Change in valuation allowance | 16.2 | (15.8 | ) | (7.0 | ) | — | |||||||||||
Reduction in Swedish tax rate | — | 1.4 | — | — | |||||||||||||
Increase in U.S. state tax rate | — | (1.2 | ) | — | 2.4 | ||||||||||||
Other — net | 0.3 | (1.7 | ) | (2.2 | ) | 0.3 | |||||||||||
Effective tax rate | 25.0 | % | 13.7 | % | 24.5 | % | 42.1 | % | |||||||||
F-26
Table of Contents
2009 | 2008 | |||||||
Deferred tax assets: | ||||||||
Accrued liabilities | $ | 734 | $ | 1,052 | ||||
Property, plant and equipment | 4,136 | 5,319 | ||||||
Inventory | 2,180 | 2,715 | ||||||
Tax credit and net operating loss carryforwards | 51,313 | 46,686 | ||||||
Pension | 2,549 | 2,314 | ||||||
Derivative instruments | 957 | 2,761 | ||||||
Other | 2,037 | 2,449 | ||||||
Gross deferred tax assets | 63,906 | 63,296 | ||||||
Less valuation allowance | (45,305 | ) | (41,167 | ) | ||||
Net deferred tax assets | 18,601 | 22,129 | ||||||
Deferred tax liabilities: | ||||||||
Intangible assets | (34,997 | ) | (42,346 | ) | ||||
Property, plant and equipment | (19,672 | ) | (15,434 | ) | ||||
Other | (539 | ) | (580 | ) | ||||
Gross deferred tax liabilities | (55,208 | ) | (58,360 | ) | ||||
Net deferred tax liabilities | $ | (36,607 | ) | $ | (36,231 | ) | ||
F-27
Table of Contents
Successor | Predecessor | |||||||||||||||
Year Ended | Year Ended | March 1 through | January 1 through | |||||||||||||
December 31, | December 31, | December 31, | February 28, | |||||||||||||
2009 | 2008 | 2007 | 2007 | |||||||||||||
Unrecognized Tax Benefit — Beginning of Year | $ | 530 | $ | 329 | $ | 224 | $ | 224 | ||||||||
Gross increases — tax positions in prior period | — | — | — | — | ||||||||||||
Gross decreases — tax positions in prior period | (13 | ) | (48 | ) | — | — | ||||||||||
Gross increases — tax positions in current period | 171 | 249 | 105 | — | ||||||||||||
Settlement | — | — | — | — | ||||||||||||
Lapse in Statute of Limitations | (264 | ) | — | — | — | |||||||||||
Unrecognized Tax Benefit — End of Year | $ | 424 | $ | 530 | $ | 329 | $ | 224 | ||||||||
13. | Retirement Plans |
March 1 | ||||||||||||
Year Ended | Year Ended | through | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Service cost | $ | 790 | $ | 817 | $ | 706 | ||||||
Interest cost | 226 | 142 | 58 | |||||||||
Expected return on plan assets | (9 | ) | (12 | ) | — | |||||||
Actuarial loss recognized | — | 4 | — | |||||||||
Amortization of prior service cost | 108 | 112 | 92 | |||||||||
Amortization of net loss | 17 | — | — | |||||||||
Curtailment expense | 206 | — | — | |||||||||
Net periodic benefit cost | $ | 1,338 | $ | 1,063 | $ | 856 | ||||||
F-28
Table of Contents
2009 | 2008 | |||||||
Prior service cost | $ | (830 | ) | $ | (1,028 | ) | ||
Net loss | (169 | ) | (354 | ) | ||||
Total accumulated other comprehensive income at end of year | (999 | ) | (1,382 | ) | ||||
Less: Income taxes | 367 | 477 | ||||||
Net accumulated other comprehensive income at end of year | $ | (632 | ) | $ | (905 | ) | ||
2009 | 2008 | 2007 | ||||||||||
Prior service cost arising during the year | $ | (42 | ) | $ | (518 | ) | $ | (1,213 | ) | |||
Net gain arising during the year | 168 | 4 | 160 | |||||||||
Prior service cost (credit) recognized during the year | 132 | (19 | ) | — | ||||||||
Amortization of prior service cost | 108 | 112 | 92 | |||||||||
Amortization of net loss | 17 | — | — | |||||||||
Total recognized in other comprehensive income | 383 | (421 | ) | (961 | ) | |||||||
Less: Income taxes | (140 | ) | 155 | 353 | ||||||||
Net amount recognized in other comprehensive income | $ | 243 | $ | (266 | ) | $ | (608 | ) | ||||
2010 | ||||
Amortization of: | ||||
Net loss | $ | — | ||
Prior service cost | $ | 106 |
2009 | 2008 | |||||||
Change in projected benefit obligation: | ||||||||
Projected benefit obligation at beginning of year | $ | 3,293 | $ | 1,817 | ||||
Service cost | 790 | 817 | ||||||
Interest cost | 226 | 142 | ||||||
Amendments | 42 | 19 | ||||||
Actuarial (gain) loss | (178 | ) | 510 | |||||
Benefits paid | (77 | ) | (12 | ) | ||||
Special termination benefits | 74 | — | ||||||
Projected benefit obligation at end of year | 4,170 | 3,293 |
F-29
Table of Contents
2009 | 2008 | |||||||
Change in plan assets: | ||||||||
Fair value of plan assets at beginning of year | 584 | 10 | ||||||
Actual return on plan assets | (1 | ) | 3 | |||||
Employer contributions | 1,898 | 583 | ||||||
Benefits paid | (77 | ) | (12 | ) | ||||
Fair value of plan assets at end of year | 2,404 | 584 | ||||||
Funded status | $ | (1,766 | ) | $ | (2,709 | ) | ||
2009 | 2008 | |||||||
Noncurrent liabilities | $ | (1,766 | ) | $ | (2,709 | ) | ||
2009 | 2008 | |||||||
Discount rate | 5.95 | % | 6.14 | % | ||||
Rate of compensation increase | N/A | N/A |
March 1 | ||||||||||||
Year Ended | Year Ended | through | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Discount rate | 5.95 | % | 6.25 | % | 5.75 | % | ||||||
Expected long-term rate of return on plan assets | 7.00 | % | 7.00 | % | N/A | |||||||
Rate of compensation increase | N/A | N/A | N/A |
F-30
Table of Contents
Fair Value Measurements at December 31, 2009 | ||||||||||||||||
Quoted Prices in | Significant | Significant | ||||||||||||||
Active Market for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
Total | (Level 1) | (Level 2) | (Level 3) | |||||||||||||
Federated Investors Prime Obligation Fund | $ | 2,404 | $ | 2,404 | — | — |
Years Ending December 31, | ||||
2010 | $ | 97 | ||
2011 | $ | 126 | ||
2012 | $ | 171 | ||
2013 | $ | 219 | ||
2014 | $ | 269 | ||
2015-2019 | $ | 2,132 |
Successor | Predecessor | ||||||||||||||||
March 1 | January 1 | ||||||||||||||||
Year Ended | Year Ended | through | through | ||||||||||||||
December 31, | December 31, | December 31, | February 28, | ||||||||||||||
2009 | 2008 | 2007 | 2007 | ||||||||||||||
Service cost | $ | 1,095 | $ | 1,745 | $ | 1,707 | $ | 347 | |||||||||
Interest cost | 2,917 | 2,510 | 2,513 | 501 | |||||||||||||
Expected return on plan assets | (2,416 | ) | (2,594 | ) | (2,511 | ) | — | ||||||||||
Amortization of net (gain) loss | (165 | ) | (97 | ) | 17 | — | |||||||||||
Settlement | (248 | ) | — | — | — | ||||||||||||
Net periodic benefit cost | $ | 1,183 | $ | 1,564 | $ | 1,726 | $ | 848 | |||||||||
F-31
Table of Contents
2009 | 2008 | |||||||
Prior service cost | $ | (76 | ) | $ | — | |||
Net (loss) gain | (1,505 | ) | 734 | |||||
Total accumulated other comprehensive income at end of year | (1,581 | ) | 734 | |||||
Income tax expense (benefit) | (611 | ) | (816 | ) | ||||
Net Accumulated other comprehensive income at end of year | $ | (2,192 | ) | $ | (82 | ) | ||
2009 | 2008 | 2007 | ||||||||||
Prior service cost arising during the year | $ | (74 | ) | $ | — | $ | — | |||||
Net gain (loss) arising during the year | 260 | (2,098 | ) | 1,513 | ||||||||
Prior service cost recognized during the year | — | (103 | ) | — | ||||||||
Amortization of net (gain) loss | (2,581 | ) | — | 16 | ||||||||
Exchange rate loss recognized during the year | 245 | — | — | |||||||||
Total recognized in other comprehensive income | (2,150 | ) | (2,201 | ) | 1,529 | |||||||
Less: Income taxes | (514 | ) | 423 | 711 | ||||||||
Net amount recognized in other comprehensive income | $ | (2,664 | ) | $ | (1,778 | ) | $ | 2,240 | ||||
2010 | ||||
Amortization of: | ||||
Net gain | $ | (108 | ) | |
Prior service cost | $ | 5 |
F-32
Table of Contents
Non U.S. Plan | ||||||||
2009 | 2008 | |||||||
Change in projected benefit obligation: | ||||||||
Projected benefit obligation at beginning of year | $ | 43,640 | $ | 59,367 | ||||
Service cost | 1,095 | 1,745 | ||||||
Interest cost | 2,917 | 2,510 | ||||||
Employee contributions | 291 | 458 | ||||||
Plan amendments | 74 | — | ||||||
Actuarial loss (gain) | 5,633 | (5,901 | ) | |||||
Settlement | (248 | ) | — | |||||
Acquisition | 2,950 | — | ||||||
Benefits paid | (1,722 | ) | (1,673 | ) | ||||
Actual expenses | (75 | ) | — | |||||
Foreign currency exchange rate changes | 3,654 | (12,866 | ) | |||||
Projected benefit obligation at end of year | 58,209 | 43,640 | ||||||
Change in plan assets: | ||||||||
Fair value of plan assets at beginning of year | 35,304 | 51,109 | ||||||
Actual return on plan assets | 5,893 | (5,026 | ) | |||||
Employer contributions | 2,564 | 2,099 | ||||||
Plan participants’ contributions | 291 | 458 | ||||||
Benefits paid | (1,722 | ) | (1,673 | ) | ||||
Actual expenses | (75 | ) | — | |||||
Foreign currency exchange rate changes | 2,935 | (11,663 | ) | |||||
Fair value of plan assets at end of year | 45,190 | 35,304 | ||||||
Funded status | $ | (13,019 | ) | $ | (8,336 | ) | ||
2009 | 2008 | |||||||
Noncurrent assets | $ | 700 | $ | 102 | ||||
Current liabilities | (333 | ) | (168 | ) | ||||
Noncurrent liabilities | (13,386 | ) | (8,270 | ) | ||||
Total asset/(liability) | $ | (13,019 | ) | $ | (8,336 | ) | ||
2009 | 2008 | |||
Discount rates | 4.50% - 5.75% | 5.75% - 6.50% | ||
Rate of compensation increase | 2.00% - 4.00% | 2.00% - 4.00% |
F-33
Table of Contents
Successor | Predecessor | ||||||||||
March 1 | January 1 | ||||||||||
Year Ended | Year Ended | through | through | ||||||||
December 31, | December 31, | December 31, | February 28, | ||||||||
2009 | 2008 | 2007 | 2007 | ||||||||
Discount rate | 5.75% – 6.50% | 5.25% – 5.80% | 4.25% – 5.80% | 4.74% | |||||||
Expected long-term rate of return on plan assets | 3.50% – 7.00% | 3.50% – 7.00% | 1.75% – 6.8% | 6.53% | |||||||
Rate of compensation increase | 2.00% – 4.00% | 2.00% – 4.35% | 2.00% – 4.35% | 3.25% |
2009 | 2008 | |||||||
Asset category: | ||||||||
Cash or cash equivalents | 0 | % | 0 | % | ||||
Equities | 38 | % | 42 | % | ||||
Fixed income | 40 | % | 40 | % | ||||
Insurance contracts | 21 | % | 18 | % | ||||
Other | 1 | % | 0 | % |
Years Ending December 31 | ||||
2010 | $ | 1,607 | ||
2011 | $ | 1,652 | ||
2012 | $ | 1,715 | ||
2013 | $ | 1,803 | ||
2014 | $ | 1,868 | ||
2015-2019 | $ | 11,345 |
F-34
Table of Contents
Fair Value Measurements at December 31, 2009 | ||||||||||||||||
Quoted Prices in | Significant | Significant | ||||||||||||||
Active Market for | Observable | Unobservable | ||||||||||||||
Identical Assets | Inputs | Inputs | ||||||||||||||
Asset Category | Total | (Level 1) | (Level 2) | (Level 3) | ||||||||||||
Cash or cash equivalents | $ | 17,473 | $ | 17,473 | $ | — | $ | — | ||||||||
Equities(i) | 17,762 | 17,762 | — | — | ||||||||||||
Fixed income | — | — | — | — | ||||||||||||
Insurance contracts(ii) | 9,441 | — | — | 9,441 | ||||||||||||
Other | 514 | 514 | — | — | ||||||||||||
Total | $ | 45,190 | $ | 35,749 | $ | — | $ | 9,441 | ||||||||
(i) | This category comprises low-cost equity index funds that are valued based on market prices. |
(ii) | This category represents insurance contracts that are valued by reference to the value of bonds with similar maturities. Our third party pension administrator uses these loan amounts and the agreed future interest profit amount and discounts them using government issued yield curves to determine fair value. |
Rollforward of level 3 plan assets: | ||||
Balance at beginning of year | $ | 6,457 | ||
Benefits paid | (212 | ) | ||
Realized and unrealized gain recognized in other comprehensive income | 1,217 | |||
Purchases | 1,771 | |||
Actual expenses | (75 | ) | ||
Exchange rates | 283 | |||
Balance at end of year | $ | 9,441 | ||
(c) | 401(k) Savings Plan (U.S.) |
(d) | Long-term Service Award Plan |
F-35
Table of Contents
Service | Extra Holiday | Benefit | ||||
25 years | 6 days | 1/12 of yearly salary | ||||
40 years | 6 days | 2/12 of yearly salary | ||||
50 years | 11 days | 3/12 of yearly salary |
Interest rate | 5.25 | % | ||
Salary increase | 3.00 | % | ||
Fluctuation rate | 2.00 | % |
2010 | $ | 16 | ||
2011 | $ | 23 | ||
2012 | $ | 32 | ||
2013 | $ | 22 | ||
2014 | $ | — | ||
2015 – 2019 | $ | 13 |
(e) | Early Retirement and Post-employment Programs |
Interest rate | 5.25 | % | ||
Salary increase | 3.00 | % | ||
Fluctuation rate | 2.00 | % |
2010 | $ | 182 | ||
2011 | $ | 215 | ||
2012 | $ | 122 | ||
2013 | $ | — | ||
2014 | $ | — | ||
2015 – 2019 | $ | — |
F-36
Table of Contents
14. | Related Party Transactions |
F-37
Table of Contents
15. | Commitments and Contingencies |
Years Ending December 31, | ||||
2010 | $ | 9,842 | ||
2011 | 8,708 | |||
2012 | 4,046 | |||
2013 | 3,743 | |||
2014 | 3,691 | |||
Thereafter | 3,532 | |||
Total | $ | 33,562 | ||
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Table of Contents
16. | Acquisition of Businesses |
Accounts receivable | $ | 0.5 | ||
Inventory | 7.9 | |||
Property, plant and equipment | 10.4 | |||
Intangible assets | 3.9 | |||
Other assets | 0.8 | |||
Total assets acquired | 23.5 | |||
Accounts payable | 0.6 | |||
Pensions | 2.3 | |||
Bank loan | 6.0 | |||
Deferred taxes | 0.1 | |||
Other liabilities | 3.6 | |||
Total liabilities | 12.6 | |||
Less cash acquired | (1.1 | ) | ||
Total liabilities assumed | 11.5 | |||
Less gain on Acquisition | 2.1 | |||
Net assets acquired | $ | 9.9 | ||
Remaining | ||||||
Economic Life | ||||||
Intangible Assets Valued | Fair Value | (Years) | ||||
Trade name | $ | 395 | Indefinite | |||
Developed technology | 1,052 | 10 | ||||
Customer relationships | 2,499 | 6 | ||||
Total identifiable intangible assets | $ | 3,946 | ||||
17. | Share-Based Compensation |
F-39
Table of Contents
18. | Shareholder’s Equity |
19. | Segment Information |
F-40
Table of Contents
Successor | ||||||||||||||||||||||||||||||||
Year Ended | Year Ended | |||||||||||||||||||||||||||||||
December 31, 2009 | December 31, 2008 | |||||||||||||||||||||||||||||||
North America | Europe | Eliminations | Total | North America | Europe | Eliminations | Total | |||||||||||||||||||||||||
Sales to external customers | $ | 379,102 | $ | 388,363 | $ | — | $ | 767,465 | $ | 492,245 | $ | 509,743 | $ | — | $ | 1,001,988 | ||||||||||||||||
Intersegment sales | 62,622 | 4,222 | (66,844 | ) | — | 90,379 | 2,506 | (92,885 | ) | — | ||||||||||||||||||||||
Depreciation and amortization | 22,430 | 18,184 | — | 40,614 | 22,362 | 11,848 | — | 34,210 | ||||||||||||||||||||||||
Impairment loss | 18,109 | — | — | 18,109 | — | 7,003 | — | 7,003 | ||||||||||||||||||||||||
Interest expense, net | (11,438 | ) | (5,108 | ) | — | (16,546 | ) | (20,861 | ) | (8,662 | ) | — | (29,523 | ) | ||||||||||||||||||
Income tax expense (benefit) | 307 | 3,387 | 137 | 3,831 | 3,808 | (7,439 | ) | (646 | ) | (4,277 | ) | |||||||||||||||||||||
Equity in earnings of affiliates, net of taxes | 613 | — | — | 613 | 380 | — | — | 380 | ||||||||||||||||||||||||
Net income (loss) | 1,170 | 10,643 | 285 | 12,098 | 7,017 | (32,892 | ) | (724 | ) | (26,599 | ) | |||||||||||||||||||||
Investment in affiliate | 11,512 | 71 | — | 11,583 | 11,127 | 65 | — | 11,192 | ||||||||||||||||||||||||
Total assets | 314,062 | 303,947 | — | 618,009 | 371,063 | 320,021 | — | 691,084 | ||||||||||||||||||||||||
Additions to property, plant and equipment | 16,242 | 6,695 | — | 22,937 | 21,833 | 12,886 | — | 34,719 | ||||||||||||||||||||||||
Software expeditures | 9,362 | 4,042 | — | 13,404 | 136 | 6 | — | 142 |
F-41
Table of Contents
Successor | Predecessor | ||||||||||||||||||||||||||||||||||||
March 1 through | January 1 through | ||||||||||||||||||||||||||||||||||||
December 31, 2007 | February 28, 2007 | ||||||||||||||||||||||||||||||||||||
North America | Europe | Eliminations | Total | North America | Europe | Eliminations | Total | ||||||||||||||||||||||||||||||
Sales to external customers | $ | 366,292 | $ | 357,505 | $ | — | $ | 723,797 | $ | 66,434 | $ | 65,636 | $ | — | $ | 132,070 | |||||||||||||||||||||
Intersegment sales | 38,878 | 2,653 | (41,531 | ) | — | 8,914 | 596 | (9,510 | ) | — | |||||||||||||||||||||||||||
Depreciation and amortization | 18,813 | 10,000 | — | 28,813 | 2,669 | 1,753 | — | 4,422 | |||||||||||||||||||||||||||||
Impairment loss | — | — | — | — | — | — | — | — | |||||||||||||||||||||||||||||
Interest (expense) income, net | (22,808 | ) | (5,967 | ) | — | (28,775 | ) | 1 | (119 | ) | — | (118 | ) | ||||||||||||||||||||||||
Income tax expense (benefit) | (10,135 | ) | 1,222 | — | (8,913 | ) | 1,893 | 721 | — | 2,614 | |||||||||||||||||||||||||||
Equity in earnings of affiliates, net of taxes | 189 | — | — | 189 | 84 | — | — | 84 | |||||||||||||||||||||||||||||
Net income (loss) | (22,061 | ) | (4,788 | ) | (441 | ) | (27,290 | ) | (5,805 | ) | 9,490 | — | 3,685 | ||||||||||||||||||||||||
Additions to property, plant and equipment | 13,147 | 5,101 | — | 18,248 | 3,585 | 1,013 | — | 4,598 | |||||||||||||||||||||||||||||
Software expenditures | 1,627 | 15 | — | 1,642 | — | — | — | — |
December 31, | ||||||||
2009 | 2008 | |||||||
U.S. | $ | 195,378 | $ | 228,710 | ||||
Germany | 14,044 | — | ||||||
Sweden | 62,029 | 61,030 | ||||||
Great Britain | 3,317 | 2,365 | ||||||
Finland | 43,034 | 42,698 | ||||||
France | 12,681 | 16,667 | ||||||
Netherlands | 8,002 | 6,943 | ||||||
Total | $ | 338,485 | $ | 358,413 | ||||
F-42
Table of Contents
Successor | Predecessor | ||||||||||||||||
March 1 | January 1 | ||||||||||||||||
Year Ended | Year Ended | through | through | ||||||||||||||
December 31, | December 31, | December 31, | February 28, | ||||||||||||||
2009 | 2008 | 2007 | 2007 | ||||||||||||||
Net Sales | |||||||||||||||||
U.S. | $ | 312,249 | $ | 397,158 | $ | 301,535 | $ | 54,869 | |||||||||
Germany | 81,443 | 99,009 | 83,534 | 15,956 | |||||||||||||
Sweden | 83,833 | 116,102 | 57,132 | 11,278 | |||||||||||||
Great Britain | 45,160 | 57,728 | 42,925 | 6,960 | |||||||||||||
France | 27,465 | 34,318 | 28,437 | 6,723 | |||||||||||||
Italy | 30,948 | 37,271 | 26,862 | 4,684 | |||||||||||||
Mexico | 17,662 | 22,238 | 14,411 | 2,745 | |||||||||||||
Finland | 13,219 | 26,025 | 12,542 | 1,921 | |||||||||||||
Other | 155,486 | 212,139 | 156,419 | 26,934 | |||||||||||||
Total | $ | 767,465 | $ | 1,001,988 | $ | 723,797 | $ | 132,070 | |||||||||
Successor | Predecessor | ||||||||||||||||
March 1 | January 1 | ||||||||||||||||
Year Ended | Year Ended | through | through | ||||||||||||||
December 31, | December 31, | December 31, | February 28, | ||||||||||||||
2009 | 2008 | 2007 | 2007 | ||||||||||||||
Net sales | |||||||||||||||||
Adhesives | $ | 196,698 | $ | 238,618 | $ | 191,089 | $ | 42,004 | |||||||||
Inks | 86,043 | 121,028 | 110,616 | 18,459 | |||||||||||||
Tires and rubber | 59,661 | 39,142 | 32,075 | 5,394 | |||||||||||||
Roads and construction | 43,673 | 53,837 | 28,836 | 4,098 | |||||||||||||
Consumer products | 40,152 | 31,077 | 26,752 | 4,207 | |||||||||||||
Renewable energy | 74,271 | 124,157 | 58,257 | 12,662 | |||||||||||||
Chemical intermediates | 266,967 | 394,129 | 276,172 | 45,246 | |||||||||||||
Total net sales | $ | 767,465 | $ | 1,001,988 | $ | 723,797 | $ | 132,070 | |||||||||
20. | Subsequent Events |
F-43
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F-44
Table of Contents
(Dollars in thousands, except share and per share amounts)
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 43,057 | $ | 47,023 | ||||
Accounts receivable, less allowance for doubtful accounts of $384 and $1,000, respectively | 126,011 | 99,702 | ||||||
Inventory | 86,411 | 89,124 | ||||||
Deferred income taxes | 1,798 | 3,038 | ||||||
Prepaid expenses and other current assets | 16,224 | 12,863 | ||||||
Total current assets | 273,501 | 251,750 | ||||||
Property, plant and equipment, net | 220,337 | 224,945 | ||||||
Intangible assets, net | 109,270 | 113,540 | ||||||
Investment in affiliate | 11,497 | 11,583 | ||||||
Other assets | 15,670 | 16,191 | ||||||
Total assets | $ | 630,275 | $ | 618,009 | ||||
Liabilities and shareholder’s equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 98,029 | $ | 82,826 | ||||
Accrued liabilities | 39,581 | 42,888 | ||||||
Current portion of long-term debt | 3,622 | 3,935 | ||||||
Total current liabilities | 141,232 | 129,649 | ||||||
Deferred income taxes | 43,250 | 39,645 | ||||||
Long-term debt | 324,308 | 330,823 | ||||||
Capital lease obligations | 3,431 | 3,796 | ||||||
Other liabilities | 16,559 | 16,489 | ||||||
Total liabilities | 528,780 | 520,402 | ||||||
Commitments and contingencies (Note 10) | ||||||||
Shareholder’s equity: | ||||||||
Common shares, $14.25 par value — issued and outstanding 1,000 shares | 14 | 14 | ||||||
Paid-in capital | 135,661 | 135,661 | ||||||
Accumulated deficit | (31,794 | ) | (41,791 | ) | ||||
Accumulated other comprehensive income | (2,386 | ) | 3,723 | |||||
Total shareholder’s equity | 101,495 | 97,607 | ||||||
Total liabilities and shareholder’s equity | $ | 630,275 | $ | 618,009 | ||||
F-45
Table of Contents
(Dollars in thousands, except share and per share amounts)
Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
Net sales | $ | 198,051 | $ | 177,934 | ||||
Cost of goods sold | 157,333 | 163,445 | ||||||
Gross profit | 40,718 | 14,489 | ||||||
Operating expenses (income): | ||||||||
Selling, general and administrative | 25,673 | 15,464 | ||||||
Unrealized foreign currency exchange (gains) losses | (4,836 | ) | 367 | |||||
Restructuring and impairment | 2,047 | 1,035 | ||||||
Other operating income | — | (2,043 | ) | |||||
Total operating expenses (income) | 22,884 | 14,823 | ||||||
Operating income (loss) | 17,834 | (334 | ) | |||||
Interest expense, net | (3,870 | ) | (4,560 | ) | ||||
Loss on interest rate swaps, net | (709 | ) | (600 | ) | ||||
Other income | 623 | 2,151 | ||||||
Income (loss) before income tax expense (benefit) and equity in earnings of affiliates, net of taxes | 13,878 | (3,343 | ) | |||||
Income tax expense (benefit) | 3,885 | (836 | ) | |||||
Equity in earnings of affiliates net of taxes of $2 and $87, respectively | 4 | 150 | ||||||
Net income (loss) | $ | 9,997 | $ | (2,357 | ) | |||
Earnings per share: | ||||||||
Basic and diluted | $ | 9,997 | $ | (2,357 | ) | |||
Weighted average common shares outstanding | 1,000 | 1,000 |
F-46
Table of Contents
(Dollars in thousands)
Three Months Ended March 31, | ||||||||
2010 | 2009 | |||||||
Operating activities | ||||||||
Net income (loss) | $ | 9,997 | $ | (2,357 | ) | |||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 9,043 | 9,437 | ||||||
Change in fair value of interest rate swaps | (787 | ) | (928 | ) | ||||
Loss (gain) on unrealized foreign exchange | (4,836 | ) | 367 | |||||
Impairment loss | — | 1,032 | ||||||
(Gain) loss on disposal of property, plant and equipment | 13 | (671 | ) | |||||
Proceeds from insurance recovery on facility fire | (696 | ) | — | |||||
Gain on acquisition | — | (2,151 | ) | |||||
Amortization of debt issuance costs | 651 | 630 | ||||||
Deferred income tax expense (benefit) | 5,406 | (1,286 | ) | |||||
Provision for bad debts | (619 | ) | 178 | |||||
Equity in undistributed earnings of investment in affiliate | (4 | ) | (150 | ) | ||||
Change in assets and liabilities: | ||||||||
Accounts receivable | (29,427 | ) | 16,701 | |||||
Inventory | 855 | 9,027 | ||||||
Prepaid expenses and other current assets | (3,609 | ) | (3,199 | ) | ||||
Other assets | (3,546 | ) | 191 | |||||
Accounts payable | 20,256 | (7,716 | ) | |||||
Accrued liabilities | (69 | ) | (6,942 | ) | ||||
Other liabilities | (121 | ) | (1,063 | ) | ||||
Net cash provided by operating activities | 2,507 | 11,100 | ||||||
Investing activities | ||||||||
Acquisition of business — net of cash acquired of $1,101 in 2009 | — | (8,772 | ) | |||||
Proceeds from disposals of property, plant and equipment | — | 690 | ||||||
Proceeds from insurance recovery on facility fire | 696 | — | ||||||
Additions to property, plant and equipment | (4,866 | ) | (6,677 | ) | ||||
Capitalized software costs | (3,761 | ) | (3,268 | ) | ||||
Net cash used in investing activities | (7,931 | ) | (18,027 | ) | ||||
Financing activities | ||||||||
Proceeds from long-term and short-term obligations | — | 16,011 | ||||||
Repayments of long-term and short-term obligations | (686 | ) | (17,004 | ) | ||||
Debt issuance costs | — | (163 | ) | |||||
Repayment of capital lease obligation | (75 | ) | (64 | ) | ||||
Settlement of MIV loans | 2,963 | — | ||||||
Net cash provided by (used in) financing activities | 2,202 | (1,220 | ) | |||||
Effect of foreign exchange rate changes on cash and cash equivalents | (744 | ) | (4,278 | ) | ||||
Decrease in cash and cash equivalents | (3,966 | ) | (12,425 | ) | ||||
Cash and cash equivalents at beginning of period | 47,023 | 34,048 | ||||||
Cash and cash equivalents at end of period | $ | 43,057 | $ | 21,623 | ||||
Supplemental cash flows information: | ||||||||
Cash paid during the period for: | ||||||||
Interest (net of amounts capitalized) | $ | 4,319 | $ | 5,497 | ||||
Income taxes | $ | 239 | $ | 337 | ||||
Noncash investing and financing activities: | ||||||||
Purchases of property, plant and equipment in accounts payable | $ | 1,294 | $ | 2,464 |
F-47
Table of Contents
(Unaudited)
(In thousands of U.S. dollars unless otherwise stated)
1. | Organization and Basis of Presentation |
2. | Recent Accounting Pronouncements |
F-48
Table of Contents
(Unaudited)
3. | Fair Value of Financial Instruments |
March 31, 2010 | December 31, 2009 | |||||||||||||||
Carrying | Fair | Carrying | Fair | |||||||||||||
Asset (Liability) | Amount | Value | Amount | Value | ||||||||||||
Cash and cash equivalents | $ | 43,057 | $ | 43,057 | $ | 47,023 | $ | 47,023 | ||||||||
Long-term debt | $ | (327,930 | ) | $ | (318,619 | ) | $ | (334,758 | ) | $ | (319,868 | ) | ||||
Interest rate swaps | $ | (1,370 | ) | $ | (1,370 | ) | $ | (2,879 | ) | $ | (2,879 | ) | ||||
Interest rate cap | $ | 322 | $ | 322 | $ | 1,028 | $ | 1,028 |
F-49
Table of Contents
(Unaudited)
Asset Derivatives | ||||||||||||||||
March 31, 2010 | December 31, 2009 | |||||||||||||||
Balance Sheet | Fair | Balance Sheet | Fair | |||||||||||||
Location | Value | Location | Value | |||||||||||||
Interest rate cap | Other assets | $ | 322 | Other assets | $ | 1,028 | ||||||||||
Total | $ | 322 | $ | 1,028 | ||||||||||||
Liability Derivatives | ||||||||||||||||
March 31, 2010 | December 31, 2009 | |||||||||||||||
Balance Sheet | Fair | Balance Sheet | Fair | |||||||||||||
Location | Value | Location | Value | |||||||||||||
Interest rate swaps | Accrued liabilities | $ | — | Accrued liabilities | $ | 2,303 | ||||||||||
Interest rate swaps | Other liabilities | 1,370 | Other liabilities | 576 | ||||||||||||
Total | $ | 1,370 | $ | 2,879 | ||||||||||||
Amount of Gain (Loss) Recognized in Income | ||||||||||||
Derivatives Not | Location of Gain | Three Months Ended | Three Months Ended | |||||||||
Designated as Hedging | (Loss) Recognized in | March 31, | March 31, | |||||||||
Instruments | Income | 2010 | 2009 | |||||||||
Interest rate swaps | Loss on interest rate swaps, net | $ | 1,428 | $ | 881 | |||||||
Interest rate cap | Loss on interest rate swaps, net | (706 | ) | — | ||||||||
Total | $ | 722 | $ | 881 | ||||||||
F-50
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(Unaudited)
Derivative | ||||||||||||||||
Financial | Fair Value Measurements Using | |||||||||||||||
Instruments | Level 1 | Level 2 | Level 3 | |||||||||||||
As of March 31, 2010: | ||||||||||||||||
Interest rate swap | $ | (1,370 | ) | $ | — | $ | (1,370 | ) | $ | — | ||||||
Interest rate cap | $ | 322 | $ | — | $ | 322 | $ | — | ||||||||
As of December 31, 2009: | ||||||||||||||||
Interest rate swaps | $ | (2,879 | ) | $ | — | $ | (2,879 | ) | $ | — | ||||||
Interest rate cap | $ | 1,028 | $ | — | $ | 1,028 | $ | — |
4. | Inventory |
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
Raw materials | $ | 32,316 | $ | 35,352 | ||||
Finished goods | 54,095 | 53,772 | ||||||
Total | $ | 86,411 | $ | 89,124 | ||||
F-51
Table of Contents
(Unaudited)
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
Land | $ | 15,954 | $ | 14,392 | ||||
Buildings | 38,845 | 42,188 | ||||||
Machinery and equipment | 201,781 | 203,769 | ||||||
Construction in progress | 10,264 | 7,693 | ||||||
Software | 25,493 | 24,877 | ||||||
Total | 292,337 | 292,919 | ||||||
Less accumulated depreciation | (72,000 | ) | (67,974 | ) | ||||
Property, plant and equipment, net | $ | 220,337 | $ | 224,945 | ||||
6. | Intangible Assets, Net |
March 31, 2010 | December 31, 2009 | |||||||||||||||||||||||
Gross | Net | Gross | Net | |||||||||||||||||||||
Carrying | Accumulated | Carrying | Carrying | Accumulated | Carrying | |||||||||||||||||||
Amount | Amortization | Amount | Amount | Amortization | Amount | |||||||||||||||||||
Trade names | $ | 24,381 | $ | — | $ | 24,381 | $ | 24,910 | $ | — | $ | 24,910 | ||||||||||||
Customer relationships | 43,344 | (6,289 | ) | 37,055 | 44,614 | (5,602 | ) | 39,012 | ||||||||||||||||
Supply agreements | 41,378 | (13,640 | ) | 27,738 | 41,379 | (12,796 | ) | 28,583 | ||||||||||||||||
Core/developed technology | 24,830 | (5,445 | ) | 19,385 | 25,388 | (5,127 | ) | 20,261 | ||||||||||||||||
Favorable leaseholds | 772 | (61 | ) | 711 | 825 | (59 | ) | 766 | ||||||||||||||||
Internally developed software | 167 | (167 | ) | — | 170 | (162 | ) | 8 | ||||||||||||||||
Total intangible assets | $ | 134,872 | $ | (25,602 | ) | $ | 109,270 | $ | 137,286 | $ | (23,746 | ) | $ | 113,540 | ||||||||||
F-52
Table of Contents
(Unaudited)
Amortization | ||||
Years Ending December 31 | Expense | |||
2010 | $ | 8,466 | ||
2011 | $ | 8,457 | ||
2012 | $ | 8,457 | ||
2013 | $ | 8,457 | ||
2014 | $ | 6,672 |
7. | Restructuring and Impairment |
Termination | ||||||||||||||||||||
Benefits to Employees | Other Qualified Costs | |||||||||||||||||||
North America | Europe | North America | Europe | Total | ||||||||||||||||
Balance — December 31, 2009 | $ | 362 | $ | 832 | $ | 798 | $ | 18 | $ | 2,010 | ||||||||||
Costs accrued | 97 | 1,950 | — | — | 2,047 | |||||||||||||||
Payments | (97 | ) | (151 | ) | (501 | ) | — | (749 | ) | |||||||||||
Currency exchange | — | (74 | ) | — | (1 | ) | (75 | ) | ||||||||||||
Balance — March 31, 2010 | $ | 362 | $ | 2,557 | $ | 297 | $ | 17 | $ | 3,233 | ||||||||||
F-53
Table of Contents
(Unaudited)
8. | Debt |
March 31, | December 31, | |||||||
2010 | 2009 | |||||||
First lien term loan | $ | 211,895 | $ | 218,543 | ||||
Second lien term loan | 115,498 | 115,498 | ||||||
Revolving credit facility | — | — | ||||||
Bank loan | 537 | 717 | ||||||
Total | 327,930 | 334,758 | ||||||
Less current portion | (3,622 | ) | (3,935 | ) | ||||
Long-term debt | $ | 324,308 | $ | 330,823 | ||||
F-54
Table of Contents
(Unaudited)
9. | Retirement Plans |
Three Months | Three Months | |||||||
Ended | Ended | |||||||
March 31, | March 31, | |||||||
2010 | 2009 | |||||||
Service cost | $ | 204 | $ | 212 | ||||
Interest cost | 63 | 22 | ||||||
Expected return on plan assets | (53 | ) | — | |||||
Amortization of prior service cost | 27 | 28 | ||||||
Net periodic benefit cost | $ | 241 | $ | 262 | ||||
Three Months Ended | Three Months Ended | |||||||
March 31, | March 31, | |||||||
2010 | 2009 | |||||||
Service cost | $ | 323 | $ | 274 | ||||
Interest cost | 768 | 616 | ||||||
Expected return on plan assets | (648 | ) | (556 | ) | ||||
Amortization of prior service cost | 1 | — | ||||||
Amortization of net (gain) loss | (26 | ) | (37 | ) | ||||
Net periodic benefit cost | $ | 418 | $ | 297 | ||||
F-55
Table of Contents
(Unaudited)
(c) | 401(k) Savings Plan (U.S.) |
(d) | Long-term Service Award Plan |
(e) | Early Retirement and Post-employment Programs |
(f) | Collective Bargaining Agreements |
F-56
Table of Contents
(Unaudited)
10. | Commitments and Contingencies |
11. | Segment Information |
F-57
Table of Contents
(Unaudited)
Three Months Ended | Three Months Ended | |||||||||||||||||||||||||||||||
March 31, 2010 | March 31, 2009 | |||||||||||||||||||||||||||||||
�� | North America | Europe | Eliminations | Total | North America | Europe | Eliminations | Total | ||||||||||||||||||||||||
Sales to external customers | $ | 96,333 | $ | 101,718 | $ | — | $ | 198,051 | $ | 85,555 | $ | 92,379 | $ | — | $ | 177,934 | ||||||||||||||||
Intersegment sales | 18,227 | 65,124 | (83,351 | ) | — | 14,215 | 1,338 | (15,553 | ) | — | ||||||||||||||||||||||
Depreciation and amortization | 4,795 | 4,248 | — | 9,043 | 5,459 | 3,978 | — | 9,437 | ||||||||||||||||||||||||
Impairment loss | — | — | — | — | 1,032 | — | — | 1,032 | ||||||||||||||||||||||||
Interest expense, net | (2,780 | ) | (1,090 | ) | — | (3,870 | ) | (2,834 | ) | (1,726 | ) | — | (4,560 | ) | ||||||||||||||||||
Income tax expense (benefit) | 4,554 | (669 | ) | — | 3,885 | (1,156 | ) | 203 | 117 | (836 | ) | |||||||||||||||||||||
Equity in earnings of affiliates, net of taxes | 4 | — | — | 4 | 150 | — | — | 150 | ||||||||||||||||||||||||
Net income (loss) | 9,451 | 546 | — | 9,997 | (3,212 | ) | 618 | 237 | (2,357 | ) | ||||||||||||||||||||||
Additions to property, plant and equipment | (1,885 | ) | (2,981 | ) | — | (4,866 | ) | (4,863 | ) | (1,814 | ) | — | (6,677 | ) | ||||||||||||||||||
Software expenditures | (2,088 | ) | (1,673 | ) | — | (3,761 | ) | (2,685 | ) | (583 | ) | — | (3,268 | ) |
March 31, 2010 | December 31, 2009 | |||||||||||||||||||||||||||||||
North America | Europe | Eliminations | Total | North America | Europe | Eliminations | Total | |||||||||||||||||||||||||
Investment in affiliate | $ | 11,427 | $ | 70 | $ | — | $ | 11,497 | $ | 11,512 | $ | 71 | $ | — | $ | 11,583 | ||||||||||||||||
Total assets | 331,644 | 298,631 | — | 630,275 | 314,062 | 303,947 | — | 618,009 |
12. | Subsequent Events |
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Item 13. | Other Expenses of Issuance and Distribution |
Securities and Exchange Commission registration fee | $ | 8,912.50 | ||
Financial Industry Regulatory Authority, Inc. filing fee | $ | 13,000.00 | ||
New York Stock Exchange listing fee | ||||
Printing and engraving expenses | ||||
Legal fees and expenses | ||||
Accounting fees and expenses | ||||
Transfer agent and registrar fees and expenses | ||||
Blue Sky fees and expenses | ||||
Miscellaneous | �� | |||
Total | ||||
Item 14. | Indemnification of Directors and Officers |
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Item 15. | Recent Sales of Unregistered Securities |
Item 16. | Exhibits and Financial Statement Schedules |
SCHEDULE I
CONDENSED FINANCIAL INFORMATION (Parent Company Only)
BALANCE SHEETS
(dollars in thousands)
December 31, | December 31, | |||||||
2009 | 2008 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 13 | $ | 13 | ||||
Total current assets | 13 | 13 | ||||||
Investment in subsidiaries | 97,615 | 95,515 | ||||||
Total assets | $ | 97,628 | $ | 95,528 | ||||
Liabilities and shareholder’s equity | ||||||||
Current liabilities: | ||||||||
Intercompany payables | $ | 21 | $ | 17 | ||||
Income tax payable | — | 2 | ||||||
Total current liabilities | 21 | 19 | ||||||
Shareholder’s equity: | ||||||||
Common shares, $14.25 par value — issued and outstanding 1,000 shares | 14 | 14 | ||||||
Paid-in Capital | 135,661 | 137,338 | ||||||
Accumulated Deficit | (41,791 | ) | (53,889 | ) | ||||
Accumulated other comprehensive income | 3,723 | 12,046 | ||||||
Total shareholder’s equity | 97,607 | 95,509 | ||||||
Total liabilities and shareholder’s equity | $ | 97,628 | $ | 95,528 | ||||
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SCHEDULE I
CONDENSED FINANCIAL INFORMATION (Parent Company Only)
STATEMENTS OF OPERATIONS
(dollars in thousands)
Successor | ||||||||||||
March 1 | ||||||||||||
Year Ended | Year Ended | through | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Net sales | $ | — | $ | — | $ | — | ||||||
Cost of goods sold | — | — | — | |||||||||
Gross profit | — | — | — | |||||||||
Operating expenses (income): | ||||||||||||
Selling, general and administrative | 2 | 7 | (9 | ) | ||||||||
Equity in net (income) loss of subsidiaries | (12,099 | ) | 26,574 | 27,297 | ||||||||
Unrealized foreign exchange (gain) loss | (1 | ) | 19 | — | ||||||||
Total operating expenses (income) | (12,098 | ) | 26,600 | 27,288 | ||||||||
Income (loss) before income tax expense (benefit) | 12,098 | (26,600 | ) | (27,288 | ) | |||||||
Income tax (benefit) expense | — | (1 | ) | 2 | ||||||||
Net income (loss) | $ | 12,098 | $ | (26,599 | ) | $ | (27,290 | ) | ||||
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SCHEDULE I
CONDENSED FINANCIAL INFORMATION (Parent Company Only)
STATEMENTS OF SHAREHOLDER’S EQUITY AND COMPREHENSIVE INCOME (LOSS)
(dollars in thousands)
Retained | Accumulated | |||||||||||||||||||||||
Earnings | Other | |||||||||||||||||||||||
Paid-in | (Accumulated | Comprehensive | ||||||||||||||||||||||
Shares | Amount | Capital | Deficit) | Income | Total | |||||||||||||||||||
Balance at March 1, 2007 | 1,000 | $ | 14 | $ | 129,986 | $ | — | $ | — | $ | 130,000 | |||||||||||||
Net loss | — | — | — | (27,290 | ) | — | (27,290 | ) | ||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | (297 | ) | (297 | ) | ||||||||||||||||
Net gain from pension plans, net of tax | — | — | — | — | 1,632 | 1,632 | ||||||||||||||||||
Comprehensive loss | (25,955 | ) | ||||||||||||||||||||||
Balance at December 31, 2007 | 1,000 | 14 | 129,986 | (27,290 | ) | 1,335 | 104,045 | |||||||||||||||||
Contribution of debt by Rhône Capital | — | — | 7,352 | — | — | 7,352 | ||||||||||||||||||
Net loss | — | — | — | (26,599 | ) | — | (26,599 | ) | ||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | 12,755 | 12,755 | ||||||||||||||||||
Net loss from pension plans, net of tax | — | — | — | — | (2,044 | ) | (2,044 | ) | ||||||||||||||||
Comprehensive loss | (15,888 | ) | ||||||||||||||||||||||
Balance at December 31, 2008 | 1,000 | 14 | 137,338 | (53,889 | ) | 12,046 | 95,509 | |||||||||||||||||
Distribution to Parent | — | — | (1,677 | ) | — | — | (1,677 | ) | ||||||||||||||||
Net income | — | — | — | 12,098 | — | 12,098 | ||||||||||||||||||
Foreign currency translation adjustment | — | — | — | — | (5,902 | ) | (5,902 | ) | ||||||||||||||||
Net loss from pension plans, net of tax | — | — | — | — | (2,421 | ) | (2,421 | ) | ||||||||||||||||
Comprehensive income | 3,775 | |||||||||||||||||||||||
Balance at December 31, 2009 | 1,000 | $ | 14 | $ | 135,661 | $ | (41,791 | ) | $ | 3,723 | $ | 97,607 | ||||||||||||
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SCHEDULE I
CONDENSED FINANCIAL INFORMATION (Parent Company Only)
STATEMENTS OF CASH FLOWS
(dollars in thousands)
Successor | ||||||||||||
March 1 | ||||||||||||
Year Ended | Year Ended | through | ||||||||||
December 31, | December 31, | December 31, | ||||||||||
2009 | 2008 | 2007 | ||||||||||
Operating activities | ||||||||||||
Net income (loss) | $ | 12,098 | $ | (26,599 | ) | $ | (27,290 | ) | ||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||
Equity in undistributed earnings of subsidiaries | (12,099 | ) | 26,574 | 27,297 | ||||||||
Change in assets and liabilities: | ||||||||||||
Intercompany payable | 4 | (474 | ) | 491 | ||||||||
Income tax payable | (2 | ) | — | 2 | ||||||||
Net cash provided by (used in) operating activities | 1 | (499 | ) | 500 | ||||||||
Investing activities | ||||||||||||
Net cash provided by (used in) investing activities | — | — | — | |||||||||
Financing activities | ||||||||||||
Net cash provided by (used in) financing activities | — | — | — | |||||||||
Effect of foreign exchange rate changes on cash and cash equivalents | (1 | ) | (5 | ) | 17 | |||||||
Increase (decrease) in cash and cash equivalents | — | (504 | ) | 517 | ||||||||
Cash and cash equivalents at beginning of period | 13 | 517 | — | |||||||||
Cash and cash equivalents at end of period | $ | 13 | $ | 13 | $ | 517 | ||||||
Supplemental cash flows information: | ||||||||||||
Cash paid during the period for: | ||||||||||||
Income taxes | $ | 2 | $ | 2 | $ | — | ||||||
Noncash investing and financing activities: | ||||||||||||
Contribution by Rhône Capital/debt retirement | $ | — | $ | 7,352 | $ | — |
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AS OF AND FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008,
AND THE TEN MONTH PERIOD ENDED DECEMBER 31, 2007
1. | BASIS OF PRESENTATION |
2. | DEBT |
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Charged to | ||||||||||||||||||||
Balance, | (Recovery of) | |||||||||||||||||||
Beginning of | and Costs | Charged to | Balance, End of | |||||||||||||||||
Year | Expenses | Other Accounts | Deductions | Year | ||||||||||||||||
Deferred Tax Asset | ||||||||||||||||||||
Valuation Allowances | ||||||||||||||||||||
Predecessor: | ||||||||||||||||||||
2 months ended February 28, 2007 | $ | 27,682 | $ | 816 | $ | — | $ | — | $ | 28,498 | ||||||||||
Successor: | ||||||||||||||||||||
10 months ended December 31, 2007 | 41,364 | 2,570 | — | — | 43,934 | |||||||||||||||
Year ended December 31, 2008 | 43,934 | 4,918 | (7,685 | ) | — | 41,167 | ||||||||||||||
Year ended December 31, 2009 | 41,167 | 2,476 | 1,662 | — | 45,305 | |||||||||||||||
Environmental Costs and Obligations | ||||||||||||||||||||
Environmental Liabilities | ||||||||||||||||||||
Predecessor: | ||||||||||||||||||||
2 months ended February 28, 2007 | $ | 416 | $ | — | $ | — | $ | (7 | ) | $ | 409 | |||||||||
Successor: | ||||||||||||||||||||
10 months ended December 31, 2007 | 409 | 2,985 | — | — | 3,394 | |||||||||||||||
Year ended December 31, 2008 | 3,394 | 441 | — | (642 | ) | 3,193 | ||||||||||||||
Year ended December 31, 2009 | 3,193 | 1,980 | — | (1,036 | ) | 4,137 |
Item 17. | Undertakings |
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By: | /s/ Cornelis Verhaar |
By: | /s/ Frederic Jung |
Signature | Title | |||
* Cornelis Verhaar | Director, President and Chief Executive Officer (Principal Executive Officer) | |||
* Frederic Jung | Vice President and Chief Financial Officer (Principal Financial Officer) | |||
* Astrid van der Valk | Corporate Controller (Controller) | |||
* Eytan Tigay | Director, Chairman | |||
* Leonard Berlik | Director | |||
* John R. Bolton | Director | |||
* Jochen Krautter | Director | |||
* Petter Johnsson | Director | |||
* Gerald Marterer | Director |
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Signature | Title | |||
* Sebastien Mazella di Bosco | Director | |||
*By: | /s/ Cornelis Verhaar Cornelis Verhaar Attorney-in-Fact |
By: | /s/ Pamela J. Simmons |
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Exhibit No. | Description | |||
1 | .1 | Form of Underwriting Agreement.* | ||
3 | .1 | Certificate of Incorporation and Memorandum of Association.** | ||
3 | .2 | Form of Bye-laws.* | ||
4 | .1 | Form of Shareholders Agreement.* | ||
4 | .2 | Form of Certificate for Common Shares.* | ||
5 | .1 | Opinion of Conyers Dill and Pearman Limited, Bermuda.* | ||
8 | .1 | Tax Opinion of Conyers Dill and Pearman Limited, Bermuda.* | ||
8 | .2 | Tax Opinion of Sullivan & Cromwell LLP.* | ||
10 | .1 | Second Amended and Restated CTO/BLS Supply Agreement dated as of November 17, 2009, by and between International Paper Company and Arizona Chemical Company, LLC.** | ||
10 | .2 | Second Amended and Restated CST Supply Agreement dated as of November 17, 2009, by and between International Paper Company and Arizona Chemical Company, LLC.** | ||
10 | .3 | First Lien Credit and Guaranty Agreement dated as of February 28, 2007, among AZ Chem US Inc., as U.S. Borrower, Proserpina 1073 AB (under change of name to Arizona Chem Sweden AB), as European Borrower, Proserpina 1072 AB (under change of name to Arizona Chem Sweden Holdings AB) and certain subsidiaries of Arizona Chem Sweden Holdings AB, as Guarantors, various lenders, Goldman Sachs Credit Partners L.P., as Lead Arranger, Bookrunner, Syndication Agent, Administrative Agent and Collateral Agent, and Bank of America, N.A., as Documentation Agent. | ||
10 | .4 | First Amendment to First Lien Credit and Guaranty Agreement dated as of July 1, 2008, by and among AZ Chem US Inc., Arizona Chemical AB, Goldman Sachs Credit Partners L.P., as Administrative Agent, and for purposes of Section IV thereof, the guarantors listed on the signature pages thereto.** | ||
10 | .5 | Second Amendment to First Lien Credit and Guaranty Agreement dated as of July 24, 2008, by and among AZ Chem US Inc., Arizona Chemical AB, Goldman Sachs Credit Partners L.P., as Administrative Agent, and for purposes of Section IV thereof, the guarantors listed on the signature pages thereto. | ||
10 | .6 | Third Amendment to First Lien Credit and Guaranty Agreement dated as of November 14, 2008 by and among AZ Chem US Inc., Arizona Chemical AB, Goldman Sachs Credit Partners L.P., as Administrative Agent, and for purposes of Section IV thereof, the guarantors listed on the signature pages thereto.** | ||
10 | .7 | First Lien Pledge and Security Agreement dated as of February 28, 2007 between each of the Grantors party thereto and Goldman Sachs Credit Partners L.P., as Collateral Agent.** | ||
10 | .8 | Second Lien Credit and Guaranty Agreement dated as of February 28, 2007, among AZ Chem US Inc., as Borrower, AZ Chem US Holdings Inc. and certain subsidiaries of AZ Chem US Holdings Inc., as Guarantors, various lenders, Goldman Sachs Credit Partners L.P., as Lead Arranger, Bookrunner and Syndication Agent, and CapitalSource Finance LLC, as Administrative Agent and Collateral Agent. | ||
10 | .9 | First Amendment to Second Lien Credit and Guaranty Agreement dated as of July 24, 2008 by and among AZ Chem US Inc., CapitalSource Finance LLC, as Administrative Agent, Goldman Sachs Credit Partners L.P., as Syndication Agent, for purposes of Section IV thereof, and the guarantors listed on the signature pages thereto. | ||
10 | .10 | Second Lien Pledge and Security Agreement dated as of February 28, 2007 between each of the Grantors party thereto and CapitalSource Finance LLC, as Collateral Agent.** | ||
10 | .11 | Lease Agreement dated as of February 28, 2007, between International Paper Company and Arizona Chemical Company.** | ||
10 | .12 | Employment Agreement dated August 18, 2008, between Arizona Chemical B.V. and Cornelis Verhaar.** |
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Exhibit No. | Description | |||
10 | .13 | Letter of Understanding for Frederic Jung — International Assignment in Almere, The Netherlands dated August 28, 2009 between Arizona Chemical LLC and Frederic Jung.** | ||
10 | .14 | Employment Agreement dated November 27, 2008 between Arizona Chemical B.V. and Dick Stuyfzand.** | ||
10 | .15 | Employment Agreement dated June 30, 2006 between Arizona Chemical B.V. and Juhani Tuovinen.** | ||
10 | .16 | 2010 Long-Term Incentive Plan.* | ||
10 | .17 | Amended and Restated Arizona Chemical Company, LLC U.S. Salaried Employee Severance Plan and Summary Plan Description dated February 10, 2010.** | ||
10 | .18 | Fourth Amendment to First Lien Credit and Guaranty Agreement dated as of May 28, 2010 by and among AZ Chem US Inc., Arizona Chemical AB, Goldman Sachs Credit Partners L.P., as Administrative Agent, and, for purposes of Section V thereof, the guarantors listed on the signature pages thereto. | ||
10 | .19 | Second Amendment to Second Lien Credit and Guaranty Agreement dated as of May 28, 2010 by and among AZ Chem US Inc., CapitalSource Finance LLC, as Administrative Agent, Goldman Sachs Credit Partners L.P., as Syndication Agent, and, for purposes of Section V thereof, the guarantors listed on the signature pages thereto. | ||
21 | .1 | Subsidiaries of Arizona Chemical Ltd. | ||
23 | .1 | Consent of Conyers Dill & Pearman, Bermuda.* | ||
23 | .2 | Consent of Deloitte & Touche LLP. | ||
23 | .3 | Consent of Deloitte & Touche LLP. | ||
23 | .4 | Consent of Arthur D. Little Benelux S.A./N.V. | ||
24 | .1 | Power of Attorney** |
* | To be filed by amendment. |
** | Previously filed. |