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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): August 17, 1999
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BOWATER INCORPORATED
(Exact name of registrant as specified in its charter)
Delaware 1-8712 62-0721803
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification
incorporation) No.)
55 East Camperdown Way
P.O. Box 1028
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (864) 271-7733
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(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On August 17, 1999, Bowater Incorporated ("Bowater") sold all of the
stock of its wholly-owned subsidiary Great Northern Paper, Inc. ("GNP") to
Inexcon Maine, Inc. ("Inexcon"). The sale was made pursuant to a Stock Purchase
Agreement dated May 18, 1999, by and between Bowater and Inexcon, as amended on
August 17, 1999. The aggregate consideration of $250 million (consisting of
cash, a note and the assumption of certain liabilities) was determined by
arms-length negotiation between the parties. GNP operates pulp and paper mills
in Millinocket and East Millinocket, Maine, and owns approximately 400,000 acres
of timberlands and an extensive hydroelectric system.
A copy of the related press release issued by Bowater on August 17,
1999, is attached hereto as Exhibit 99.1 and is incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
Financial statements of businesses acquired:
Not applicable.
Pro forma financial information:
The required pro forma financial information is filed
herewith.
Exhibits
Exhibit No. Description
----------- -----------
2.1 Stock Purchase Agreement dated as of May 18, 1999, by
and between Inexcon Maine, Inc. and the Company.
Schedules and other attachments have been omitted but
will be furnished supplementally to the Commission
upon request.
2.1.1 Amendment No. 1 dated August 17, 1999, to Stock
Purchase Agreement dated May 18, 1999, between Inexcon
Maine, Inc. and the Company. Attachments have been
omitted but will be furnished supplementally to the
Commission upon request.
99.1 Press release dated August 17, 1999.
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BOWATER INCORPORATED
PRO FORMA CONDENSED FINANCIAL STATEMENTS OF BOWATER INCORPORATED
The following unaudited proforma condensed financial statements give effect to
the sale of Great Northern Paper ("GNP") which occurred August 17, 1999. The
unaudited pro forma condensed income statements were prepared as if the sale had
occurred as of the beginning of the periods presented (i.e. January 1, 1998),
and the unaudited pro forma condensed balance sheet was prepared as if the sale
occurred as of June 30, 1999. These statements do not purport to represent what
the results of operations or financial position of Bowater would actually have
been if the sale had occurred on the dates referred to above or to be indicative
of the future results of operations or financial position of Bowater. The
unaudited pro forma condensed financial statements should be read together with
the audited financial statements and notes thereto as included in the Bowater
Incorporated 1998 Annual Report on Form 10-K and the unaudited 1999 Quarterly
Reports on Form 10-Q.
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BOWATER INCORPORATED
PRO FORMA CONDENSED BALANCE SHEET - UNAUDITED
JUNE 30, 1999
($ in millions, except per share amounts)
Bowater (1) Pro Forma
As Reported GNP Adjustments Pro Forma
------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 36.5 $ (0.1) $ 39.5 (1) $ 75.9
Marketable securities 2.1 - - 2.1
Accounts receivable, net 301.0 (33.1) 10.0 (1),(2) 277.9
Inventories 187.4 (28.6) - 158.8
Other current assets 71.3 (4.9) - 66.4
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Total current assets 598.3 (66.7) 49.5 581.1
Timber and timberlands 372.0 (24.3) - 347.7
Fixed assets 2,722.8 (139.3) - 2,583.5
Goodwill 889.9 - - 889.9
Other assets 141.5 (3.4) - 138.1
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Total assets $ 4,724.5 $ (233.7) $ 49.5 $ 4,540.3
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LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities
Current installments of long-term debt $ 20.0 $ - $ - $ 20.0
Short-term bank debt 70.5 - (70.5) (2) -
Accounts payable and accrued liabilities 321.3 (41.2) 28.0 (3) 308.1
Income taxes payable 57.2 - (50.8) (4) 6.4
Dividends payable 10.9 - - 10.9
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Total current liabilities 479.9 (41.2) (93.3) 345.4
Long-term debt, net of current installments 1,463.5 - - 1,463.5
Other long-term liabilities 340.2 (122.7) 65.0 (3) 282.5
Deferred income taxes 454.1 - 34.1 (4) 488.2
Minority interests in subsidiaries 128.6 - - 128.6
Commitments and contingencies
Shareholders' Equity
Common stock 59.6 - - 59.6
Exchangeable shares 151.2 - - 151.2
Additional paid-in capital 1,260.4 (78.3) 78.3 1,260.4
Retained earnings 746.7 - (34.6) (5) 712.1
Accumulated other comprehensive income/(loss) (26.2) 8.5 - (17.7)
Loan to ESOT (1.7) - - (1.7)
Treasury stock (331.8) - - (331.8)
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Total shareholders' equity 1,858.2 (69.8) 43.7 1,832.1
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Total liabilities and shareholders' equity $ 4,724.5 $ (233.7) $ 49.5 $ 4,540.3
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See accompanying notes to Pro Forma Condensed Financial Statements.
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BOWATER INCORPORATED
PRO FORMA CONDENSED INCOME STATEMENT - UNAUDITED
FOR THE YEAR ENDED DECEMBER 31, 1998
($ in millions, except per share amounts)
(1)
GNP and
Bowater Pro Forma
As Reported Adjustments Pro Forma
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Net Sales $ 1,995.0 $ (425.0) $ 1,570.0
Cost of Sales 1,422.2 (351.7) 1,070.5
Depreciation, amortization and cost
of timber harvested 229.6 (29.4) 200.2
Impairment of assets 119.6 (119.6) -
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Gross profit 223.6 75.7 299.3
Selling and administrative expense 81.4 - 81.4
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Operating income 142.2 75.7 217.9
Other expense (income):
Interest income (17.5) (0.7) (2) (18.2)
Interest expense, net of capitalized interest 98.4 (4.2) (2) 94.2
Gain on sale of timberlands (21.1) 1.1 (20.0)
Other, net 65.6 0.1 65.7
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Income before income taxes and
minority interest 16.8 79.4 96.2
Income tax expense (benefit) 27.1 36.0 63.1
Minority interests in net income of subsidiaries 8.2 - 8.2
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Net income (loss) $ (18.5) $ 43.4 $ 24.9
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Per Share amounts:
Basic average common shares outstanding 47.6 - 47.6
Basic earnings (loss) per share $ (0.44) $ 0.92 $ 0.48
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Diluted average common and common
equivalent shares outstanding 47.6 1.9 49.5 (6)
Diluted earnings (loss) per share $ (0.44) $ 0.92 $ 0.48 (6)
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See accompanying notes to Pro Forma Condensed Financial Statements.
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BOWATER INCORPORATED
PRO FORMA CONDENSED INCOME STATEMENT - UNAUDITED
FOR THE SIX MONTHS ENDED JUNE 30, 1999
($ in millions, except per share amounts)
(1)
GNP and
Bowater Pro Forma
As Reported Adjustments Pro Forma
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Net Sales $ 1,098.7 $ (159.4) $ 939.3
Cost of Sales 840.8 (148.5) 692.3
Depreciation, amortization and cost
of timber harvested 151.8 (13.9) 137.9
Impairment of assets 92.0 (92.0) -
------------------------------------------------
Gross profit 14.1 95.0 109.1
Selling and administrative expense 42.6 - 42.6
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Operating income (28.5) 95.0 66.5
Other expense (income):
Interest income (1.8) (0.4) (2) (2.2)
Interest expense, net of capitalized interest 63.0 (2.1) (2) 60.9
Gain on sale of timberlands (253.7) 253.7 -
Other, net (28.2) - (28.2)
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Income (loss) before income taxes and
minority interest 192.2 (156.2) 36.0
Income tax expense 77.5 (60.0) 17.5
Minority interests in net income of subsidiaries 3.0 - 3.0
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Net income (loss) $ 111.7 $ (96.2) $ 15.5
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Per Share amounts:
Basic average common shares outstanding 54.4 - 54.4
Basic earnings (loss) per share $ 2.03 $ (1.77) $ 0.26
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Diluted average common and common
equivalent shares outstanding 55.3 - 55.3 (7)
Diluted earnings (loss) per share $ 2.00 $ (1.74) $ 0.26 (7)
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See accompanying notes to Pro Forma Condensed Financial Statements.
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BOWATER INCORPORATED
NOTES TO PRO FORMA CONDENSED FINANCIAL STATEMENTS
($ IN MILLIONS UNLESS OTHERWISE NOTED)
1. These unaudited proforma condensed financial statements present results of
operations as if the sale of Great Northern Paper ("GNP") occurred as of
January 1, 1998 and present financial position as if the sale occurred on
June 30, 1999. Proceeds from the sale include cash of $110.0 million, a note
receivable for $10.0 million, and the assumption of certain liabilities of
$130.0 million.
2. Debt Repayment and Interest Costs
The proforma condensed financial statements reflect, for the periods
presented, the interest savings resulting from the repayment of debt, and
interest income on the $10.0 million note receivable from the buyer. Interest
expense decreased $4.2 million for 1998 and $2.1 million for the first six
months of 1999 assuming debt totaling $70.5 million was repaid with an
interest cost of 6%. Interest income from the note receivable amounted to
$0.7 million for 1998 and $0.4 million for the first six months of 1999. The
tax effect of the reduction in net interest cost was additional tax expense
of $1.9 million for 1998 and $1.0 million for the six months ended June 30,
1999.
3. Liabilities
In connection with the sale, Bowater retained certain employee related
liabilities and accrued transaction costs, working capital and other
adjustments totalling $93.0 million.
4. Income Taxes
Deferred tax adjustments associated with additional accrued liabilities noted
above and the loss on sale net to $34.1 million. The current income tax
adjustment totaled $50.8 million.
5. Loss on Sale
The proforma condensed balance sheet reflects a charge to retained earnings
of $34.6 million representing the net loss on the sale of GNP.
6. Earnings per share for the year ended December 31, 1998
The diluted earnings per share calculation includes the following
adjustments: (i) weighted shares outstanding include the dilutive effect of
an additional 1.9 million common stock equivalents; (ii) net income is
increased by adding back $1.0 million of interest expense on convertible
debentures that are assumed to be converted to common stock; and (iii) net
income is reduced by $2.2 million of preferred stock dividends.
7. Earnings per Share for the six months ended June 30, 1999
The diluted earnings per share calculation includes a reduction to net income
of $1.1 million for preferred stock dividends.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: September 1, 1999
BOWATER INCORPORATED
(Registrant)
By: /s/ Michael F. Nocito
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Name: Michael F. Nocito
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Title: Vice President and Controller
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EXHIBIT INDEX
The following exhibits are filed herewith:
Exhibit No. Description
- ----------- -----------
2.1 Stock Purchase Agreement dated as of May 18, 1999, by and between
Inexcon Maine, Inc. and the Company. Schedules and other attachments
have been omitted but will be furnished supplementally to the
Commission upon request.
2.1.1 Amendment No. 1 dated August 17, 1999, to Stock Purchase Agreement
dated May 18, 1999, between Inexcon Maine, Inc. and the Company.
Attachments have been omitted but will be furnished supplementally to
the Commission upon request.
99.1 Press release dated August 17, 1999.