KapStone Paper and Packaging Corporation Prepays Earn-Out Obligation

NORTHBROOK, Ill., Jan. 4, 2011 /PRNewswire/ -- KapStone Paper and Packaging Corporation (NYSE: KS) ("KapStone" or "the Company"), a leading North American producer of unbleached kraft paper products and linerboard, today reported that the Company prepaid the balance of earn-outs due to International Paper Company ("IP"). The earn-out obligations arose from the June 23, 2006 agreement for the Company's purchase from IP of the kraft paper business assets, including a paper mill located in Roanoke Rapids, NC, and a dunnage bag manufacturing facility located in Fordyce, AR. A portion of the earn-out obligations was paid to IP upon the sale of the dunnage bag business in March of 2009, leaving a potential $55.0 million payment in April of 2012.

KapStone could not foresee any realistic scenario that would result in a reduction of the $55.0 million obligation.  However, the early payment allowed KapStone to take advantage of an 8 percent 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 Chief Executive Officer.

About the Company

Headquartered in Northbrook, IL, KapStone Paper and Packaging Corporation is a leading North American producer of unbleached kraft paper products and linerboard.   The Company is the parent company of KapStone Kraft Paper Corporation which includes paper mills in Roanoke Rapids, NC and North Charleston, SC, a lumber mill in Summerville, SC, and five chipping mills in South Carolina.  The business employs approximately 1,600 people.

SOURCE KapStone Paper and Packaging Corporation

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