SPP » Topics » PRO FORMA FINANCIAL STATEMENTS

This excerpt taken from the SPP 6-K filed Jul 23, 2009.
PRO FORMA FINANCIAL STATEMENTS

 

The following unaudited pro forma condensed financial information gives effect to the Acquisition and the Refinancing. The unaudited pro forma condensed income statements combine the results of continuing operations of the Sappi Group for the year ended September 2008 and the six month period ended March 2009, and of those of the Acquired Business for the year ended December 2008, and the three month period ended December 2008, and give effect to the Acquisition and the Refinancing as if they had occurred on 1 October 2007. The Acquisition was effected on 31 December 2008 and the financial results of the Acquired Business are included within Sappi’s results of operations from 1 January 2009.

 

The Refinancing is comprised of the following transactions:

 

                 We will issue, dollar notes and euro notes (together, the “notes”), for a total amount of  US$500 million aggregate principal amount of notes pursuant to this offering and use these proceeds to pay transaction costs estimated at US$77 million and part of our existing revolving credit facility of US$277 million. We have yet to decide which indebtedness to repay with the remaining uncommitted Note proceeds of US$146 million. These pro forma condensed income statements do not take into consideration any additional interest savings that may result from the use of these funds to repay other indebtedness.

 

                 We are entering into a new Revolving Credit Facility in an assumed amount of €250 million (US$333 million) (which may be increased up to €400 million) which will replace our existing € 600 million revolving credit facility of which US$543 million was drawn down at March 29, 2009, which was scheduled to terminate in May 2010. We will not draw down any funds, as part this Refinancing, under the new Revolving Credit Facility;

 

                 We are entering into a new OeKB Term Loan Facility in an amount of €400 million (US$532 million), the proceeds of which will be used to repay and discharge our existing €400 million term loan with the OeKB, which matures on December 31, 2010.

 

                 We will use US$266 million of our cash and cash equivalents to repay part of our existing revolving credit facility.

 

The financial statements of the Acquired Business have been prepared in accordance with IFRS on a “carve-out” basis from the consolidated financial statements of M-real, using the historical results of operations, assets and liabilities attributable to the Acquired Business, and include allocations of assets and expenses from M-real, and are presented in euros.

 

The unaudited pro forma condensed income statements have been derived from, and should be read in conjunction with:

 

                 for the year ended September 2008, Sappi’s audited historical group income statement for the year ended September 2008, and the audited condensed combined income statement of the Acquired Business for the year ended December 2008 prepared in accordance with IFRS. The financial information for the Acquired Business has been converted from euros into US dollars using the average exchange rate for the year ended December 2008 of EUR1 : US$1.4738;

 

                 for the six months ended March 2009, Sappi’s unaudited condensed interim group income statement for the six months ended March 2009 and the reviewed interim condensed combined income statement of the Acquired Business for the three months ended December 2008 prepared in accordance with IFRS. Financial information for the Acquired Business for the three months ended December 2008 has been converted from euros into US dollars using the average exchange rate for the three months ended December 2008 of EUR1 : US$1.3471.

 

As noted above, the pro forma adjustments reflect the Acquisition and the Refinancing. The allocation of the purchase price reflected in Sappi’s reviewed condensed financial information for the six months ended March 2009 is preliminary. It is based on estimated fair values and an estimated purchase price and eventually will be adjusted based on a complete assessment of the fair value of the net assets acquired and the final purchase price. The final purchase price allocation

 

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is dependent on, among other things, the finalization of asset and liability valuations. As at the date hereof, we have not completed the valuation studies necessary to finalize the fair values of the assets acquired and liabilities assumed and the related allocation of the purchase price. We have allocated the total estimated purchase price to the assets acquired and liabilities assumed based on preliminary estimates of their fair values. A final determination of these fair values will reflect, among other things, our consideration of a final valuation based on the actual net tangible and intangible assets that existed as at the closing of the acquisition.

 

The unaudited pro forma adjustments give effect to events that are directly attributable to the Acquisition and the Refinancing, and are factually supportable. The unaudited pro forma condensed financial statements are presented for information purposes only, and do not purport to represent what our actual results of operations or financial condition would have been had the acquisition and financing occurred on the dates indicated, nor are they necessarily indicative of future results of operations or financial condition. In addition to the matters noted above, the unaudited pro forma condensed financial statements do not reflect the effect of anticipated synergies and efficiencies associated with combining the companies due to the adoption of best practices and movements in the US Dollar/Euro exchange rate.

 

The directors of Sappi are responsible for the preparation of the unaudited pro forma income statements. The unaudited pro forma condensed financial statements have been prepared in accordance with IFRS as issued by the IASB.

 

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