KapStone Prepays IP Kraft Paper Earn-Out Obligation

KapStone Paper and Packaging Corp., Northbrook, Ill., USA, a producer of unbleached kraft paper products and linerboard, today reported that it has prepaid the balance of earn-outs due to International Paper Co., Memphis, Tenn., USA. The earn-out obligations arose from the June 23, 2006, agreement for the company's purchase of IP's kraft paper business assets, including a paper mill located in Roanoke Rapids, N.C., and a dunnage bag manufacturing facility in Fordyce, Ark. A portion of the earn-out obligations was paid to IP upon the sale of the dunnage bag business in March 2009, leaving a potential $55.0 million payment in April of 2012.

KapStone said that it could not foresee any realistic scenario that would result in a reduction of the $55.0 million obligation. However, the early payment allowed it to take advantage of an 8% annualized discount, reducing the obligation from $55.0 million to $49.7 million, a savings of $5.3 million. The earn-out payment will be accounted for as goodwill.

"We have been very pleased with the outstanding performance of the Roanoke Rapids operation, and we look forward to continued excellent results. Quite frankly, I would have been very disappointed if this payment had not been earned," said Roger W. Stone, chairman and CEO.

KapStone Paper and Packaging Corp. is the parent company of KapStone Kraft Paper Corp. that includes mills in Roanoke Rapids and North Charleston, S.C., a lumber mill in Summerville, S.C., and five chipping mills in South Carolina. The business employs approximately 1,600 people.

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