================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000 Commission file number
0-20231
FIBERMARK, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 82-0429330
(State of incorporation) (IRS Employer Identification No.)
161 WELLINGTON ROAD
P.O. BOX 498
BRATTLEBORO, VERMONT 05302
(802) 257-0365
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, $.001 PAR VALUE
Registrant (1) has filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the Registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.
Yes X No
---- ----
Disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained to be the best of Registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
Yes No X
---- ----
The approximate aggregate market value of the Common Stock held by
non-affiliates of the Registrant, based upon the last sale price of the Common
Stock reported on the New York Stock Exchange was $59,803,972 as of February 2,
2001. Excluded from this computation were shares held by directors and executive
officers of the Company and their associates as a group. Such exclusion does not
signify that members of this group are "affiliates" of or controlled by the
Company.
The number of shares of Common Stock outstanding was 6,834,183 as of
February 2, 2001.
DOCUMENTS INCORPORATED BY REFERENCE
REGISTRANT'S DEFINITIVE PROXY STATEMENT THAT WILL BE FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION IN CONNECTION WITH REGISTRANT'S 2000 ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON MAY 15, 2001 IS INCORPORATED BY REFERENCE
INTO PART III OF THIS REPORT.
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PART I
ITEM 1. BUSINESS
FiberMark is a leading producer of specialty fiber-based materials meeting
industrial and consumer needs worldwide, with facilities in the United States
and Europe. Formed as an independent company in 1989, we subsequently went
public in 1993. Through strong technical capabilities, innovation and a service
orientation, FiberMark holds leadership positions in its primary markets. Our
versatile manufacturing capabilities - comprising papermaking,
synthetic/nonwoven web technology, saturating, coating and other finishing
processes - generate products such as:
o filter media for transportation, vacuum bag and fast food filtration
o base materials for specialty tapes, labels, photographic and graphic
arts applications, printed circuit boards, wallcovering, flooring
materials and sandpaper
o cover materials for office and school supplies.
Using a wide range of fibers and raw materials, including wood pulp and
recovered paper, cotton denim, glass, rayon and other synthetic fibers, our
engineered materials are typically sold in roll or sheet form. Through our
internal sales force, we sell most of our business directly to customers. These
customers, often called converters, manufacture components or finished products
such as automotive oil filters, industrial fuel cells, specialized masking tapes
and pressboard ring binders. In some markets, our materials are sold through
distributors or paper merchants.
OVERVIEW
As a specialty fiber-based materials producer, we serve a broad range of markets
that stem from four broad product families: filter media, durable specialties
(tape and label base materials), technical specialties (base materials for a
multitude of markets) and cover materials for office, home and school supplies.
Our three operating segments are: German Operations and Filter Media North
America, Durable Specialties, and Technical & Office Products. The relationship
of our operating segments to our product families is described in footnote 20 to
the consolidated financial statements included in this offering memorandum,
entitled "Segment Information".
2
The following chart outlines our broad product families and their corresponding
products and markets:
---------------------------------- ----------------------------------
FILTER MEDIA DURABLE SPECIALTIES
---------------------------------- ----------------------------------
TRANSPORTATION FILTRATION TAPE SUBSTRATES
Liquid: Fuel/ (MASKING/PRESSURE SENSITIVE TAPES)
Hydraulic/Lubrication Medical/Surgical
Engine Air Automotive: Painting
Passenger Cabin Air Construction/Renovation:
HOME FILTRATION Painting
Vacuum Bag Filters Electronics
Water Photographic
INDUSTRIAL FILTRATION BINDING TAPES
Industrial Fuels Edge Binding and Reinforcing
Beverage Processing Home and Office
Hot Oil Processing: Fast Food DURABLE BASE MATERIALS
Pharmaceutical Processing Labels - imitation leather and
synthetic
Protective Coverings
----------------------------------- ----------------------------------
TECHNICAL SPECIALTIES OFFICE PRODUCTS
----------------------------------- ----------------------------------
ELECTRICAL/ELECTRONICS HEAVYWEIGHT COVER MATERIALS
Insulating Base for Binding
Transformers Filing
Printed Circuit Board Base LIGHTER-WEIGHT COVER
Fuel Cell Composite MATERIALS
Assembly Cushioning Materials Filing
COMMUNICATIONS/GRAPHIC ARTS Presentation
Archival Materials
Security Paper
Specialty Cover Materials
Label Base
INDUSTRIAL HIGH PERFORMANCE
Fire Retardant Material:
Automotive/Industrial Filter
Wet Strength: Industrial
Process
Friction Materials: Automotive
Absorbent Materials: Medical
Photographic Packaging
HOME/COMMERCIAL
Abrasive Base: Sandpaper
Wallcovering, Flooring,
Tablecloths
Disposable Wetlaid Nonwovens
Wallboard Joining
3
BUSINESS STRATEGY
We seek to maximize returns to our stockholders by pursuing a strategy that has
the following elements:
o Gain market leadership by excelling at serving existing and new markets
with high value-added opportunities
o Pursue strategic, accretive acquisitions that build on our core
competencies in existing and new markets
o Forge global, mutually beneficial partnerships with our suppliers
and customers, providing catalysts for innovation and increasing our
knowledge of marketplace needs
o Strengthen product and business development to accelerate our
internal growth rates
o Optimize operations to gain an unparalleled competitive advantage in the
markets we serve
o Enhance our technical, manufacturing, and service capabilities,
aligning them with the product and service needs of our markets
o Add value to customers through continuous improvement of
productivity, including consolidation of operations that will
generate improvements in quality, service or cost
o Broaden our raw materials base
o Enhance responsiveness to customer requirements
o Create new market opportunities
o Reduce costs
o Reduce exposure to supply/demand volatility
4
OVERVIEW OF MAJOR MARKETS AND FIBERMARK PRODUCT FAMILIES
FILTER MEDIA
Filter media remains tied as our largest product family, due to the January 1998
acquisition of Steinbeis Gessner GmbH. FiberMark Gessner's filter business,
together with our North American Filter Media business, accounted for 29% of
2000 sales. The following chart summarizes the filter materials that we produce,
the markets they serve, and representative customers.
--------------------------------------------------------------------------------
MATERIALS/PRODUCTS END PRODUCTS/MARKETS REPRESENTATIVE CUSTOMERS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRANSPORTATION FILTRATION (CAR, TRUCK, HEAVY-DUTY EQUIPMENT, TRAIN, JET, ETC.)
--------------------------------------------------------------------------------
o Saturated and o Liquid filters: Delphi Automotive
unsaturated paper that fuel, lube, hydraulic Systems Corp.,
may be reinforced with oil Eurofilters N.V.,
glass, cotton or o Air filters: Filterwerke Mann+Hummel
synthetic fibers engine and vehicle GmbH, Fleetguard Inc.,
o Synthetic: passenger cabin Division of Cummings
non-woven meltblown Engine Co., Mahle
o Composite materials Filterwerke GmbH,
Purolator Products
--------------------------------------------------------------------------------
HOME FILTRATION
--------------------------------------------------------------------------------
o Paper and o Vacuum cleaner bags Branofilter GmbH,
synthetic: Electrolux Filter AB, The
non-woven meltblown Eureka Co., Home Care
Industries, Inc.
o Carbon-activated o Residential water Met-Pro (Keystone Filter
paper for removal of filters: drinking Division), Omni Filter &
taste and odor water, swimming pools Manufacturing
o Pleated/saturated and spas
paper for particulate
removal
--------------------------------------------------------------------------------
INDUSTRIAL FILTRATION
--------------------------------------------------------------------------------
o Hot-oil filter bags o Hot-oil filtration Food service distributors
and sheets in fast food
restaurants
o Specialized filter o Processing Industrial distributors
media filtration:
industrial fuels,
beverages,
pharmaceuticals
--------------------------------------------------------------------------------
COMPETITORS
The largest single competitor in the filter business is Ahlstrom Corp. Other
competitors include Hollingsworth and Vose Co. and Binzer GmbH & Co KG. In
the vacuum filter media market, Monadnock Paper Mills, Inc., is a U.S.
competitor and Neukaliss Spezialpapier GmbH and MB Papeless Especiales S.A.
are European competitors.
MANUFACTURING
We produce filter media at our Feldkirchen/Westerham facility in Germany, and
our Richmond, Virginia, and Rochester, Michigan, facilities. We manufacture base
materials, including paper, often with combinations of non-wood pulp sources
such as natural and synthetic fibers, synthetic fiber-based materials, and
composite paper and non-woven materials. In addition to manufacturing these base
materials, we have saturating, creping, laminating and other finishing
capabilities. During the year, we sold
5
a portion of our filter business to Ahlstrom Corp., and announced plans to close
our leased Richmond, Virginia, facility. We expect to close this facility by
April 30, 2001.
TECHNICAL SPECIALTIES
Technical Specialties represent the most diverse product families and markets
within the company. Its materials are used in communications, including base or
cover materials for electrical/electronics and graphic arts, as well as other
technical specialties such as abrasive backing materials. As a group, these
products and markets represent 29% of FiberMark's 2000 sales revenue.
---------------------------------------------------------------------------------------
MATERIALS/PRODUCTS END PRODUCTS/MARKETS REPRESENTATIVE CUSTOMERS
---------------------------------------------------------------------------------------
ELECTRICAL/ELECTRONICS
-------------------------------------------------------------
o Insulating base o Electrical transformers
o Printed circuit board o PC's, remote control
base devices
o Fuel cell composite o Industrial fuel cells o 3M
------------------------------------------------------------- o Automotive
COMMUNICATIONS/GRAPHIC ARTS Composites Co.
-------------------------------------------------------------
o Archival quality, o Matboard for picture
acid free paper and mounting/framing
boards; cover materials o Archival filing and o Bedford
for storing, presenting storage products Materials Co., Inc.
information or materials
o Specialty cover o Publishing:
materials for presenting, hard- and soft-cover o Eastman Kodak
storing, and preserving diaries, planners, Corp.
information or materials reference books
o Graphic arts/printing
trade:
menus, promotional o Crescent
literature, maps, durable Cardboard, Co.
documents, labels, flock
o Label base o Laser printed labels -
indoor or outdoor o Laminating
Company of America
o Security paper o Identity cards such as
Social Security, ticket
stock, stock certificates,
drivers' licenses and car o Nielson and
registrations Bainbridge
-------------------------------------------------------------
HOME/COMMERCIAL
------------------------------------------------------------- o C. Klingspor GmbH
o Base materials: o Wallcovering, flooring
paper and nonwovens o Disposable tablecloth
and medical drapes and o Isola Laminate
garments Systems
o Abrasive backing o Sandpaper for hand and o Permafiber, Corp.
material: machine sanding
wet and dry applications o Saint-Gobain
------------------------------------------------------------- Group (Saint-Gobain
INDUSTRIAL
------------------------------------------------------------- o Starcke GmbH & Co.
o Fire retardant o Automotive/industrial
material filter
o Wet strength o Industrial Process o Virginia
o Friction materials o Automotive Abrasives Corp.
o Absorbent materials o Medical
-------------------------------------------------------------
6
COMPETITORS
Our competitors in this market group include a mix of large integrated
manufacturers and smaller independent companies, such as Arjo Wiggins Appleton
PLC, International Paper Co., Brownville Specialty Paper Products Inc., Crocker
Technical Papers, Inc, Fiber Composites (a division of Ahlstrom Paper Group),
Kimberly Clark Corp., Knowlton Specialties, Munxjo, Schoeffer & Hoesch and Mead
Corp. In some of our niche markets, we compete with various small competitors,
typically none of which has a dominant market position. In many of these product
lines, manufacturers of alternate materials such as polyethylene or vinyl must
also be considered competitors.
MANUFACTURING
The base materials for this group of markets are typically manufactured in the
four mills in the Technical & Office Products Division: Fitchburg,
Massachusetts; Warren Glen and Hughesville, New Jersey; and Brattleboro,
Vermont. Additionally, the Bruckmuhl, Germany, facility also manufactures
technical specialties in the abrasive category. All of FiberMark Lahnstein's
product lines are counted among technical specialties. Other FiberMark
facilities may, at times, manufacture materials for this market.
DURABLE SPECIALTIES
Our durable specialties product lines are produced and marketed by our U.S.
Durable Specialties Division and the durable specialties business from FiberMark
Gessner, accounting for 28% of our 2000 business. Tape substrates represent the
company's primary product family within durable specialties. We are one of the
leading producers of specialty tape substrates and a broad range of saturated,
coated non-woven and paper materials. The following chart summarizes the key
product lines, their corresponding finished products and markets, and
representative customers within this market:
---------------------------------------------------------------------------------------
MATERIALS/PRODUCTS END PRODUCTS/MARKETS REPRESENTATIVE CUSTOMERS
---------------------------------------------------------------------------------------
TAPE SUBSTRATES
-------------------------------------------------------------
o Tape substrates: o Masking /pressure
base for masking tape sensitive tape for:
and other pressure o Automotive
sensitive tapes painting: OEM and
o Raw and saturated repair o 3M
o Building
construction/ o Alpha Beta
renovation: painting Enterprise Co.,
aid Ltd.
o Carrier and
bandoliering materials o Avery Dennison
used for electronics Corp.
components
manufacturing o Beiersdorf AG
o Medical/surgical (Tesa)
tapes and bandages
o Esselte Corp.
o Intertape Polymer
Group
-------------------------------------------------------------
BINDING TAPES o Lantzis S.A.
------------------------------------------------------------- Adhesives
o Binding tapes: o Filing products, o Nitto Denko Corp.
edge binding and checkbooks, memo pads
reinforcing o Sicad S.p.A.
o Coated synthetic
non-woven materials o Smead
------------------------------------------------------------- Manufacturing Co.
DURABLE BASE MATERIALS
-------------------------------------------------------------
o Durable base o Labels for seat
materials belts, infant car seats
o Label base: and jeans
synthetic and o Protective covers
imitation leather for air bags
o Synthetic materials
-------------------------------------------------------------
7
COMPETITORS
Our competitors include a mix of large integrated manufacturers and smaller
independent companies, such as Kimberly Clark Corp., Northeast Paper Converting
Company and Ahlstrom Corp. In some of our niche markets, we compete with various
small competitors, none of which has a dominant market position. Manufacturers
of alternate materials must also be considered competitors.
MANUFACTURING
The base materials for this market are either manufactured in FiberMark
facilities including Bruckmuhl, Germany, and Hughesville, New Jersey, or are
purchased from outside suppliers. Our Quakertown facility is a converting
facility, relying on supply sources from within and outside of FiberMark. For
example, a substantial portion of the substrate used in making the company's
edge binding and reinforcing tapes is Tyvek(R), purchased from DuPont and
marketed under the FiberMark trade name SUPER ARCOFLEX(R). Base materials are
typically saturated, coated and embossed within FiberMark facilities, and in
some cases, by our customers.
OFFICE PRODUCTS
Office products cover materials are used in communications applications,
primarily for supplies used in the office, home or school. Marketed by our
Technical & Office Products Division, office products materials comprise 14% of
the company's 2000 revenue. The major components of this product family/market,
the end products/markets and representative customers are noted below:
-----------------------------------------------------------------------------------
MATERIALS/PRODUCTS END PRODUCTS/MARKETS REPRESENTATIVE CUSTOMERS
-----------------------------------------------------------------------------------
o Specialty cover o Binding: o ACCO World Corp
materials (heavyweight data and ring binders, o Esselte Corp.
and lighter-weight) for notebooks o Smead Manufacturing
products that present, o Filing/active use: Co.
bind, store or preserve file folders,
information pressboard folders and
other filing products,
diaries and planners
o Presentation:
document / report
covers, folders
-----------------------------------------------------------------------------------
COMPETITORS
Our competitors in this market group include a mix of large integrated
manufacturers and smaller independent companies, such as: International Paper
Co., Brownville Specialty Paper Products Inc., Crocker Technical Papers, Inc.
and Merrimac Paper Co., Inc. In many of these product lines, manufacturers
of alternate materials such as polyethylene or vinyl are also competitors.
MANUFACTURING
The base materials for this group of markets are largely manufactured in
Brattleboro, Vermont, but are also manufactured or processed further by other
facilities within the Technical & Office Products Division, notably Warren Glen
and Hughesville, New Jersey.
8
INTERNATIONAL SALES
With the combination of the German business acquisitions and pre-existing
international sales, the company now sells or manufactures 39.0% of its business
outside North America. The majority of these sales are in Europe. A detailed
breakdown of sales revenue and property, plant and equipment by geographic
region is found in the final tables of footnote 20 to the consolidated financial
statements, entitled Segment Information.
EMPLOYEES
As of December 31, 2000, the company employed a total of 1,609 employees, of
whom 527 were salaried and 1,084 were hourly.
In the U.S., all of our hourly employees are members of either the Paper,
Allied-Industrial, Chemical and Energy Workers International Union, known as
PACE, formerly the United Paper Workers International Union, known as UPIU, or
the International Brotherhood of Electrical Workers, except that the hourly
employees at the Quakertown, Pennsylvania, facility, are non-union. In Germany,
employees are represented by the Mining, Chemicals and Energy Trade Union,
INDUSTRIEGEWERKSCHAFT BERGBAU, CHEMIE AND ENERGIE (IG BCE). Approximately 70% of
salaried employees and all of the hourly employees are union eligible, but are
not necessarily members, as membership is voluntary and not disclosed. Employees
are represented by a local works council.
Our labor contracts expire as follows:
FACILITY EXPIRATION DATE
-----------------------------------------------------------------
Warren Glen, N.J. (a) ............................ May 23, 2004
May 25, 2004
Hughesville, N.J. (a) ............................ May 23, 2004
May 25, 2004
Rochester, Mich. ................................. June 26, 2004
Fitchburg, Mass. ................................. April 30, 2003
Brattleboro, Vt. ................................. August 31, 2002
Bruckmuhl and Feldkirchen/Westerham, Bavaria,
Germany (b)..................................... February 28, 2002
Lahnstein, Germany (b)............................ February 28, 2002
Richmond, Va. .................................... April 28, 2005
(a) Workers at Warren Glen, N.J. and Hughesville, N.J. are subject to
two separate collective bargaining agreements.
(b) Expiration dates relate to the main labor agreement. Portions within
these contracts have different expiration dates. German contracts
are negotiated with industry representatives and the union, not by
the company.
In general, we believe that we have good relations with our employees and their
unions.
RAW MATERIALS
We use a wide array of raw materials to formulate our products, including virgin
hardwood and softwood pulp, secondary wood fiber from pre-and post-consumer
waste, secondary cotton fiber from the apparel industry, synthetic fibers (such
as nylon, polyester and fiberglass), synthetic latex, chemicals, pigments and
dyes. These materials are purchased from numerous suppliers worldwide. We do not
produce pulp. Pulp and secondary fiber prices are subject to substantial
cyclical price fluctuations. We experienced a
9
significant increase in raw material costs during 2000, not only in pulp, but in
oil-based resins and latexes. We have been able to recover a significant portion
of these cost increases through selling price increases. We will attempt to
continue to increase our prices to our customers, but no assurances can be made
that we will continue to be successful in recovering a significant portion of
these increases. Approximately 14% of our revenues are based on contractual
pricing that is indexed to commodity pulp. These contracts provide us with some
insulation from raw material cost variability.
We have a long-standing relationship with DuPont as an approved converter of
Tyvek(R) and Dacron(R) and have never experienced a disruption in supply.
Although we believe that we have a good relationship with DuPont, there can be
no assurance that we will be able to continually purchase adequate supplies of
Tyvek(R). Any material interruption in our supply of Tyvek(R) could have a
material adverse effect on the results of operations and financial condition.
ENVIRONMENTAL REGULATION AND COMPLIANCE
We and our predecessors have made substantial investments in pollution control
facilities to comply with existing environmental laws and regulations. We made
expenditures for environmental purposes of $7.0 million in 2000, $5.3 million in
1999, and $3.3 million in 1998. While we believe that we have made sufficient
capital expenditures to maintain compliance with existing environmental laws,
any failure to comply with present and future environmental laws could subject
us to future liability or require the suspension of operations. In addition,
such environmental laws could restrict our ability to expand our facilities or
could require the company to acquire costly equipment or incur significant
expenses to comply with environmental regulations.
The previous owners of CPG Investors, Inc., which we acquired in 1996, have been
named as potentially responsible parties by the United States Environmental
Protection Agency, or EPA, for costs incurred and to be incurred in responding
to the investigation and clean-up of various third-party sites. We do not
currently expect the EPA or any other agency to implicate FiberMark. We believe
we have no incurred liability in connection with the clean-up of these sites.
However, we cannot assure you that our predecessors will satisfy their
responsibilities in connection with such sites and, if they do not, we may incur
liabilities in connection with such sites. Nor can we assure you that we will
not be named as a potentially responsible party in connection with these or
other sites in the future. These investigations of the activities of previous
owners relate to the Comprehensive Environmental Response, Compensation, and
Liability Act of 1980, known as CERCLA, and similar state laws, which provide
for responses to, and liability for, releases of certain hazardous substances
from a facility into the environment. These obligations are imposed on the
current owner or operator of a facility from which there has been a release, the
owner or operator of a facility at the time of the disposal of hazardous
substances at the facility, any person who arranged for the treatment or
disposal of hazardous substances at the facility, and any person who accepted
hazardous substances for transport to a facility selected by such person.
Liability under CERCLA can be strict, and a defendant can be held liable for
damages caused by other defendants.
Under New Jersey law, the state of New Jersey required extensive environmental
investigation of two sites acquired in 1996. These investigations relate to the
release of hazardous substances, materials and/or wastes, as well as any
necessary remediation, and are the responsibility of the previous owners of the
sites. In connection with the acquisition of CPG, the former owners of CPG
agreed to indemnify us, with some limitations, for various kinds of identified
and potential environmental liabilities arising from the historical use of the
property acquired in the acquisition of CPG or from CPG's conduct prior to the
acquisition of CPG. We believe that the amount of the money held in escrow as a
source of payment for these and other indemnity obligations of the former CPG
owners will be sufficient to cover potential environmental liabilities incurred
as a result of our acquisition of CPG. However, we cannot assure you that the
limited
10
indemnity provided by the former owners of CPG will be sufficient to cover all
material environmental liabilities associated with our acquisition of CPG.
Based upon our experience to date, we believe that the future cost of compliance
with existing environmental laws, and liability for known environmental claims
pursuant to such laws, will not have a material adverse effect on our financial
condition and results of operation. However, future events, such as new
information, changes in existing environmental laws or their interpretation, and
more vigorous enforcement policies of regulatory authorities, may give rise to
additional expenditures or liabilities that could be material to our financial
condition and results of operations.
ITEM 2. PROPERTIES
The following table depicts all of the company's properties as of December 31,
2000.
FACILITIES OWNED/ SQ. LAND
---------- ------ --- ----
LEASE FEET ACRES
----- ---- -----
Brattleboro, Vt. .............................. Owned 200,000 39
Brattleboro, Vt. .............................. Leased 75,000 -
Fitchburg, Mass. .............................. Owned 255,000 161
Warren Glen, N.J. ............................. Owned 299,000 162
Hughesville, N.J............................... Owned 88,000 166
Beaver Falls, N.Y. (closed on January 29, 1999) Owned 100,000 167
Owensboro, Ky. (closed on January 14, 1998) ... Owned 47,000 15
Rochester, Mich. .............................. Owned 96,000 17
Richmond, Va. ................................. Leased 112,000 -
Quakertown, Pa. ............................... Owned 165,000 7
Bruckmuhl, Germany ............................ Owned 275,698 39
Feldkirchen/Westerham, Germany ................ Owned 223,396 27
Lahnstein, Germany ............................ Owned 188,585 12
Our corporate headquarters is located at the Brattleboro, Vermont, site. We
began leasing 75,000 square feet of warehouse space in Brattleboro in January
2001. We own a production facility in Lowville, New York, that is leased to
a customer. Most facilities offer web production capabilities, largely
paper, but often with the inclusion of synthetic or specialty fibers
producing composite materials. Most of our facilities also combine with some
level of finishing or converting capabilities such as laminating, coating,
saturating, embossing. Our facility in Quakertown, Pennsylvania, however, is
strictly a converting facility, coating and saturating base material
purchased from other FiberMark facilities and outside sources. Additionally,
Feldkirchen/Westerham contains a meltblown unit for producing synthetic
non-woven materials. We maintain international sales offices in Kowloon, Hong
Kong, and Annecy, France, as well as at corporate headquarters and all three
German facilities.
ITEM 3. LEGAL PROCEEDINGS
We are involved in legal proceedings arising in the ordinary course of business.
We do not believe that the outcome of any of these proceedings will have a
material adverse effect on our operations or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter ended December 2000.
11
EXECUTIVE OFFICERS
The company's executive officers are:
NAME AGE POSITION
---- --- --------
Alex Kwader............................... 58 President and
Chief Executive Officer
Bruce Moore............................... 53 Vice President and
Chief Financial Officer
David R. Kruft............................ 60 Vice President and General Manager,
Durable Specialties
David E. Rousse........................... 48 Vice President and General Manager,
Technical & Office Products
Dr. Walter M. Haegler..................... 53 Vice President and General Manager,
FiberMark Gessner and Filter Media
ALEX KWADER has been our President and Chief Executive Officer since August 1991
and a director since November 1991. He is a member of the Executive Committee of
the Board. Since 1970, Mr. Kwader has been employed by us and our predecessor, a
division of Boise Cascade, a diversified paper products company. He served as
Senior Vice President from March 1990 to August 1991 and as Vice President from
our inception as a separate company in June 1989 until March 1990. From 1970
until June 1989, Mr. Kwader was employed by Boise Cascade, in various managerial
positions. Mr. Kwader was General Manager of the Pressboard Products Division
from 1986 until June 1989. From 1980 to 1985, he served as General Manager of
the Latex Fiber Products Division of Boise Cascade. Mr. Kwader holds a B.S. in
Mechanical Engineering from the University of Massachusetts and a M.S. from
Carnegie Mellon University and attended the Harvard Business School Executive
Program.
BRUCE MOORE has served as a Vice President since our inception as a separate
company in June 1989 and as Chief Financial Officer since December 1990. From
1980 to 1989, Mr. Moore was employed by Boise Cascade in various management
positions, including Controller and General Manager of the Latex Fiber Products
Division. Mr. Moore holds a B.A. in Business Administration from Siena College
and attended the Stanford University Executive Program.
DAVID R. KRUFT has served as Vice President and General Manager, Durable
Specialties Division, since joining us in 1996 at the time of our acquisition
of Arcon Holdings, Inc. He had held the position of President of Arcon since
1993, after having joined Arcon in 1990. Mr. Kruft received his B.S. in
Mechanical Engineering from Hofstra University.
DAVID E. ROUSSE has served as Vice President and General Manager, Technical &
Office Products Division, since April 1999. Mr. Rousse served in the same
capacity for Office Products since January 1997, and joined us in 1996 in the
role of Vice President, Marketing and Business Development. He was
previously employed by International Paper in a number of marketing and
general management positions, primarily in their Strathmore Papers fine
printing papers unit, with other assignments in office papers and envelope
products. Mr. Rousse received his B.S. in Engineering from Dartmouth College
and an M.B.A. from the Amos Tuck School of Business at Dartmouth.
DR. WALTER M. HAEGLER has served as Vice President and General Manager,
FiberMark Gessner GmbH, since the January 1998 acquisition of Steinbeis Gessner
GmbH. Since May 1999, he also assumed responsibility for Filter Media worldwide,
and in September 1999, for FiberMark Lahnstein GmbH. With Gessner since 1987, he
served as Managing Director of Steinbeis Gessner from 1990 until 1997, and as
plant manager of the Feldkirchen site from 1987 until 1990. Dr. Haegler received
a Ph.D. and Masters Degree from the University of Erlangen in inorganic and
analytical chemistry.
12
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS
The company's Common Stock was first traded on March 11, 1993, on the NASDAQ
National Market System ("Nasdaq") under the symbol SPBI. As of the close of
business on April 8, 1997, the Common Stock ceased trading on Nasdaq and on
April 9, 1997, was listed on the New York Stock Exchange ("NYSE") under the
symbol "FMK". The following table shows the high and low sale prices per share
of the Common Stock as reported on the NYSE Composite Transactions Tape.
Year Ended December 31, 1999 High Low
------------------------------------------------------- -------- --------
First Quarter.......................................... $13.50 $ 9.69
Second Quarter......................................... $15.00 $11.50
Third Quarter.......................................... $13.94 $12.56
Fourth Quarter......................................... $13.50 $10.94
Year Ended December 31, 2000 High Low
------------------------------------------------------- -------- --------
First Quarter.......................................... $13.31 $10.38
Second Quarter......................................... $13.81 $10.38
Third Quarter.......................................... $13.81 $10.19
Fourth Quarter......................................... $10.31 $ 7.38
The company had approximately 1,105 stockholders of record of its Common Stock
as of February 2, 2001. The company's transfer agent and registrar have
indicated that the company had approximately 2,025 beneficial owners of its
Common Stock as of February 2, 2001. The company has never paid any cash
dividends on its Common Stock and does not anticipate paying cash dividends in
the foreseeable future.
ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA
The data set forth below should be read in conjunction with the financial
statements and notes included elsewhere in this Annual Report on Form 10-K.
13
FIBERMARK, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
Year Ended December 31,
2000 1999 1998 1997 1996
------------------------------------------------------------
CONSOLIDATED INCOME STATEMENT DATA:
Net sales(1) $ 355,453 $ 325,308 $ 307,092 $ 235,358 $ 124,771
Cost of sales 294,237 263,385 249,337 189,294 101,981
------------------------------------------------------------
Gross profit 61,216 61,923 57,755 46,064 22,790
General and administrative expenses 25,132 24,088 22,684 16,331 9,908
Facility closure expense(2) 7,972 9,818 7,274 10,000 --
Sale of technology(2) (8,422) -- -- -- --
------------------------------------------------------------
Income from operations 36,534 28,017 27,797 19,733 12,882
Cogeneration income(3) -- -- (1,451) (215) --
Other expenses (income), net(4) 1,579 469 152 600 (1,127)
Interest expense (net of interest income) 13,467 11,079 10,495 9,187 1,798
------------------------------------------------------------
Income before income taxes and
extraordinary items 21,488 16,469 18,601 10,161 12,211
Income tax expense 8,629 7,486 7,092 3,992 4,697
------------------------------------------------------------
Income before extraordinary items 12,859 8,983 11,509 6,169 7,514
Extraordinary items(5) -- -- -- -- (297)
------------------------------------------------------------
Net income $ 12,859 $ 8,983 $ 11,509 $ 6,169 $ 7,217
------------------------------------------------------------
Weighted average shares outstanding 6,830 7,659 7,751 6,141 6,054
Basic earnings per share $ 1.88 $ 1.17 $ 1.48 $ 1.01 $ 1.19
Diluted earnings per share 1.84 1.15 1.43 0.95 1.14
OTHER CONSOLIDATION OPERATING DATA:
Depreciation and amortization $ 11,444 $ 9,290 $ 8,953 $ 7,393 $ 3,651
Capital expenditures 42,598 15,736 13,943 13,528 8,457
December 31,
2000 1999 1998 1997 1996
------------------------------------------------------------
CONSOLIDATED BALANCE SHEET DATA:
Working capital $ 76,397 $ 69,085 $ 80,591 $ 61,983 $ 29,151
Total assets 386,213 346,946 311,231 248,001 212,008
Long-term debt (net of current maturities) 182,294 168,974 133,583 100,000 100,000
Stockholders' equity 102,948 91,777 97,563 82,771 48,093
---------------------------------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA.
14
NOTES TO SELECTED CONSOLIDATED FINANCIAL DATA
(1) The increase in net sales for the year ended December 31, 1997, reflects
the impact of the acquisition of Custom Papers Group and Arcon Coating
Mills on October 31, 1996. Net sales related to these acquisitions were
$127.9 million in 1997 as compared to $20.2 million in 1996. The increase
in net sales for the year ended December 31, 1998 reflects the acquisition
of Steinbeis Gessner GmbH in January 1998. Net sales related to this
acquisition were $81.2 million in 1998. The increase in net sales for the
year ended December 31, 1999 reflects the acquisition of Papierfabrik
Lahnstein on August 1, 1999. Net sales related to this acquisition were
$15.9 million in 1999, and $39.7 million in 2000.
(2) On November 19, 1997, the company announced that it planned to close
operations at its Owensboro, Kentucky, mill and consolidate its production
demands with several of its other mills. Operations continued until a
sufficient level of transition inventory was established to ensure
continued service to customers during the production transfer period. The
Kentucky mill was closed on January 14, 1998. The company booked a $10.0
million charge related to this mill closure in the fourth quarter of 1997.
On November 4, 1998, the company announced that it planned to cease
operations at its Beaver Falls, New York, facility and consolidate its
production demands with several of its other facilities. Operations
continued until a sufficient level of transition inventory was established
to ensure continued service to customers during the transition period. The
New York facility was closed on January 29, 1999. The company booked a
$7.8 million pre-tax charge related to the closure of this facility in the
fourth quarter of 1998. We also reduced Owensboro closure expenses by $0.5
million in 1998.
On August 31, 1999, the company initiated a project to install a new paper
machine at its Warren Glen, New Jersey, facility and to consolidate
operations from the neighboring Hughesville, New Jersey, mill. The company
plans to cease operations at Hughesville by March 31, 2001, and the book
value of the mill has been written down by $7.2 million accordingly.
Additionally, the company increased closure expenses for its previously
closed Beaver Falls and Owensboro facilities by $.1 million and $2.5
million, respectively. In 2000, the company added approximately $45,000 of
expenses related to Beaver Falls, and adjusted Hughesville closure
expenses by a reduction of $232,000.
On September 1, 2000, the company agreed to sell a portion of the filter
media volume manufactured at its leased Richmond, Virginia, facility to
Ahlstrom Paper Group. The company plans to transfer the remaining volume
to other FiberMark facilities and to close the Richmond facility by April
30, 2001. As of December 31, 2000, related facility closure charges of
$8.2 million were recorded. Proceeds from the sale of technology net of
legal expenses were $8.4 million.
(3) In 1993 the company entered into an agreement with Kamine, pursuant to
which the company was the host for a cogeneration facility developed by
Kamine at the company's Beaver Falls mill. In December 1998, Kamine sold
the cogeneration plant and assigned the ground lease contract to the new
owner. The company received a $1.5 million payment from the new owner
relative to the transaction. There are no further payments due under the
ground lease contract.
(4) Other expenses (income) for the 1999, 1998, 1997 and 1996 periods include
$1,289,000, $1,719,000, $1,718,000 and $1,719,000, respectively, of
amortized income related to a deferred gain on a sale-leaseback
transaction. On April 29, 1994, the company sold and leased back certain
operating assets at the Brattleboro, Vermont, mill. The sale of these
assets resulted in a book gain of $17,187,000. This gain was amortized
over the ten-year life of the lease. The assets relative to this lease
were repurchased on September 30, 1999. There was no related amortized
income for the year 2000.
(5) Extraordinary items for 1996 include a $495,000 loss related to the early
extinguishment of debt, net of an income tax benefit of $198,000.
15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
During our history as an independent company, we have undertaken a series of
acquisitions and consolidations designed to broaden and deepen our product
and market capabilities, lower our manufacturing costs and our dependence on
certain raw materials and improve our operational flexibility. We have
successfully acquired and integrated five major businesses into FiberMark
operations since 1994 and grown our revenues from $80.0 million in 1993 to
$355.5 million in 2000. The following acquisitions and consolidations reflect
our objectives.
On November 19, 1997, we announced that we planned to cease operations at our
Owensboro, Kentucky, mill and consolidate its production with several of our
other mills. Operations continued until we established a sufficient level of
transition inventory to ensure continued service to customers during the
production transfer period. The Kentucky mill was closed on January 14, 1998. We
took a $10.0 million pre-tax charge related to the closure of this facility in
the fourth quarter of 1997.
Effective January 1, 1998, we acquired Steinbeis Gessner GmbH, referred to as
Gessner, for a purchase price of $43.0 million. Gessner, headquartered near
Munich, Germany, is a leading producer of specialty fiber-based materials
sold into the filtration, technical specialties and durable specialties
markets. Sales for 1998 were $81.2 million. To finance this acquisition, we
sold 1,500,000 shares of common stock on December 15, 1997 and 135,000 shares
on January 15, 1998 for gross proceeds of $33.5 million and net proceeds to
us of approximately $31.0 million. To complete the financing of the Gessner
acquisition, we also borrowed $29.6 million from Bayerische Vereinsbank in
Munich, Germany on January 12, 1998. This term loan amortizes over seven
years with interest rates ranging from 5.8% to 7.0%.
On November 4, 1998, we announced that we planned to cease operations at our
Beaver Falls, New York facility and consolidate our production demands with
several of our other facilities. Operations continued until we established a
sufficient level of transition inventory to ensure continued service to
customers during the transition period. The New York facility was closed on
January 29, 1999. We booked a $7.8 million pre-tax charge related to the closure
of this facility in the fourth quarter of 1998. We also reduced Owensboro
closure expenses by $0.5 million in 1998.
Effective August 1, 1999, we acquired Papierfabrik Lahnstein GmbH, a leading
European manufacturer of specialty papers and nonwoven materials used for
wallcoverings, security papers, self-adhesive labels and flooring overlay.
Lahnstein's annual sales at that time were approximately $36.0 million. The
purchase price for the acquisition was approximately $22 million and was
financed with $7.0 million of cash reserves and $15.0 million in German bank
debt. This debt amortizes over six years and carries an interest rate ranging
from 5.4% to 7.1%.
On August 31, 1999, we initiated a project to install a new paper machine at our
Warren Glen, New Jersey, facility and to consolidate operations from another
facility. In connection with this project, net asset value has been written down
by $7.2 million. In 1999 we also increased closure expenses for our previously
closed facilities by $2.6 million. In 2000 facility closure expenses were
decreased by $0.2 million.
On September 30, 1999, we terminated our sale/leaseback facility with The CIT
Group, and repurchased the assets at our Brattleboro mill. Concurrently, we
expanded our revolving credit facility with CIT from $20.0 million to $50.0
million. On an annualized basis, this transaction reduced lease expense by $4.5
million and increased depreciation expense by $1.2 million. Due to this cost
structure reduction, inventory valuation was reduced by $0.8 million. We also
incurred refinancing fees of $0.3 million, which are being amortized over the
life of the agreement.
16
On September 1, 2000, we entered into an agreement with Ahlstrom Paper Group to
sell certain filter media production technology and equipment and a portion of
the filter media volume manufactured at the Richmond, Virginia, facility. We
plan to transfer the remaining Richmond volume to other FiberMark facilities and
to close the Richmond facility by April 30, 2001. As of December 31, 2000, we
booked $8.2 million in closure charges and $8.4 million revenue from the sale of
technology.
Excluding the impact of facility write downs and the sale of technology, our
income from operations increased from $29.7 million in 1997 (12.6% of sales) to
$36.1 million in 2000 (10.2% of sales). This increase was attributable to the
added sales volume that resulted from the 1998 and 1999 acquisitions.
The following table sets forth certain operating data as a percentage of net
sales.
--------------------------------------------------------------------------------
2000 1999 1998
--------------------------------------------------------------------------------
Net sales............................................ 100.0% 100.0% 100.0%
Cost of sales........................................ 82.8 81.0 81.2
Gross profit......................................... 17.2 19.0 18.8
General and administrative expenses.................. 7.1 7.4 7.4
Facility closure..................................... 2.2 3.0 2.3
Sale of technology................................... (2.4) -- --
Income from operations............................... 10.3 8.6 9.1
Other (income) expense, net.......................... .5 .1 (.4)
Interest expense, net of interest income............. 3.8 3.4 3.4
---- ---- ----
Income before income taxes........................... 6.0 5.1 6.1
Net effect of income taxes........................... 2.4 2.3 2.3
Net income........................................... 3.6% 2.8% 3.8%
--------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31, 2000 COMPARED WITH YEAR ENDED DECEMBER 31, 1999
Net sales increased 9.3% to $355.5 million in 2000 from $325.3 million in 1999.
Sales in our German operations and filter media operating segment increased
21.9% to $173.7 million compared with $142.5 million in 1999. This growth was
due to the August 1, 1999, acquisition of Papierfabrik Lahnstein GmbH, now
referred to as FiberMark Lahnstein, which contributed $39.7 million in the year
2000, and stronger business conditions in the European automotive and vacuum bag
filter markets. Technical and office products operating segment sales declined
5.9% to $110.5 million from $117.4 million in 1999. This decline was due to
general softening of the U.S. economy and continued consolidation within the
office products industry. Sales in the durable specialties operating segment
increased 9.0% to $71.3 million compared with $65.4 million in 1999. This
increase reflected stronger demand worldwide for masking tape, which was driven
by increased construction and renovation activity and new business from key
customers.
Gross margin decreased to 17.2% in 2000 from 19.0% in 1999. This decrease in
gross margin was attributable to significant increases in raw material and
energy costs that were not fully recovered through selling price increases.
General and administrative expenses increased 4.1% to $25.1 million from $24.1
million in 1999 due to the Lahnstein acquisition.
Income from operations increased 30.4% to $36.5 million (10.3% sales) from $28.0
million (8.6% sales) in 1999 due to lower facility closure expenses and the sale
of technology.
17
Other expenses increased to $1.6 million in 2000 from $.5 million in 1999. This
increase was primarily due to the termination of the sale/leaseback credit
facility on September 30, 1999, which eliminated the deferred gain in the year
2000 compared to $1.3 million in 1999.
Net interest expense increased 21.6% to $13.5 million from $11.1 million in
1999. This increase was due to higher levels of debt as a result of the
Lahnstein acquisition, a repurchase of sale/leaseback assets and funds used for
last year's stock repurchase program.
Income taxes were $8.6 million or 40.2% of taxable income in 2000 compared with
$7.5 million or 45.5% of taxable income in 1999. The lower tax rate was due to a
reduction of five percentage points in the German corporate tax rates in October
2000. This rate reduction applies to current taxes going forward, as well as
deferred tax liabilities accrued in earlier periods. The cumulative effect of
this tax rate change was a $1.1 million reduction in tax expense in 2000 of
which $.6 million relates to prior periods.
Net income for 2000 was $12.9 million, or $1.84 per share, compared with $9.0
million, or $1.15 per share, in 1999. Excluding the tax-adjusted impact of
facility closure expenses that were recorded in both years and the prior period
impact of the German tax rate change in 2000, net income for 2000 would have
been $12.0 million, or $1.72 per share, compared with $16.1 million, or $2.05
per share, in 1999. Per share earnings are stated on a fully diluted basis.
YEAR ENDED DECEMBER 31, 1999 COMPARED WITH YEAR ENDED DECEMBER 31, 1998
Net sales increased 5.9% to $325.3 million in 1999 from $307.1 million in 1998.
Within our operating segments, sales in the German operations and filter media
segment increased 16.7% to $142.5 million from $122.1 million in 1998. This
growth was due to the August 1, 1999, acquisition of FiberMark Lahnstein that
contributed $15.9 million to 1999 revenues and to stronger business conditions
in the European filter and tape markets. Softness in the U.S. filter market
partially offset these gains. Sales in the technical and office products segment
declined 9.2% to $117.4 million from $129.3 million in 1998. This decline was
due to market softness and the loss of some business when a book cover customer
established in-house production capabilities that replaced some of our sales.
Sales in the durable specialties segment increased 17.4% to $65.4 million from
$55.7 million in 1998. This increase reflected successful business development
efforts, strong business conditions in the United States and a resurgence of
demand from the Far East.
Gross margin increased to 19.0% in 1999 from 18.8% in 1998. This increase was
primarily due to fixed cost savings related to the January 1999 closure of the
Beaver Falls, New York, facility.
General and administrative expenses increased by 6.2% to $24.1 million , or 7.4%
of sales, from $22.7 million , or 7.4% sales, in 1998, primarily due to the
Lahnstein acquisition.
Income from operations increased .7% to $28.0 million, or 8.6% of sales, from
$27.8 million, or 9.1% of sales, in 1998. This increase was due to the higher
sales volume and higher gross margin, offset in part by a $2.5 million increase
in facility closure expenses.
Other expenses increased to $0.5 million in 1999 from $0.2 million in 1998. This
increase was primarily due to the termination of the sale-leaseback credit
facility on September 30, 1999, which reduced the amortization of a deferred
gain from $1.7 million in 1998 to $1.3 million in 1999.
18
Net interest expense increased 5.7% to $11.1 million from $10.5 million in 1998
due to the Lahnstein acquisition, the September 30, 1999 repurchase of
sale-leaseback assets and funds used for our share repurchase program.
Income taxes were $7.5 million or 45.5% of taxable income in 1999 compared with
$7.1 million or 38.1% of taxable income in 1998. This increased tax rate was
primarily due to a higher mix of income from German operations that are subject
to higher tax rates than U.S. operations.
Net income for 1999 was $9.0 million, or $1.15 per share, compared with $11.5
million, or $1.43 per share, in 1998. Excluding the tax-adjusted impact of
facility closure expenses, which took place in both years, and the non-recurring
cogeneration income in 1998, net income for 1999 would have been $16.1 million,
or $2.05 per share, compared with $15.4 million or $1.91 per share in 1998. Per
share earnings are stated on a fully diluted basis.
LIQUIDITY AND CAPITAL RESOURCES
We have funded our operations and acquisitions through cash flow from operations
and a number of different types of debt financing.
Cash flows from operating activities were $24.9 million in 2000, $18.5 million
in 1999 and $18.6 million in 1998. Net cash used in investing activities was
$44.0 million in 2000, compared with $39.7 million in 1999 and $52.6 million in
1998. The increase was primarily attributable to acquisitions and capital
expenditures related to the installation of a new paper machine at the Warren
Glen, New Jersey, facility, which we believe will provide quality improvements,
cost reductions, product performance enhancements and the ability to produce a
broader range of products. Net cash provided by financing activities was
$19.0 million in 2000 compared with $1.9 million in 1999 and $32.1 million in
1998. The increase was primarily attributable to borrowing under the credit
facility with Jules & Associates to partially fund the Warren Glen paper
machine.
As of December 31, 2000, we had outstanding $100.0 million of senior notes. The
notes have a ten-year term beginning October 16, 1996, are non-amortizing and
carry a fixed interest rate of 9.375%. Additionally, we have available to us a
$50.0 million revolving credit facility. As of December 31, 2000, $39.0 million
was outstanding under this credit facility. A portion of the outstanding balance
was at an interest rate of LIBOR plus 2% and the remainder was at an interest
rate of prime plus .5%. Effective January 1, 1998 we acquired Steinbeis Gessner
GmbH. A portion of the purchase price was funded through term loans. As of
December 31, 2000, Gessner had a secured term loan of $22.2 million with
Bayerische Bank. The balance of this loan amortizes over five years with
interest rates ranging from 5.8% to 7.0%. As of this same date, Gessner had an
unsecured term loan of $1.9 million with the previous owner. The balance of this
loan amortizes through March 2001 at a fixed interest rate of 5%. As of December
31, 2000, Gessner also has a $5.8 million capital spending loan with Bayerische
Vereinsbank. The interest rate on this loan balance is LIBOR plus 1.75% and the
balance amortizes over five years. On December 31, 2000, Gessner also had a $7.2
million line of credit. At that date, no advances were outstanding under this
facility. Effective August 1, 1999, we acquired Papierfabrik Lahnstein GmbH. A
portion of the purchase price was funded through a term loan. At December 31,
2000, Lahnstein had a $10.8 million secured term loan with Bayerische Bank. This
loan amortizes over five years with interest rates ranging from 5.4% to 7.1% .
At December 31, 2000, $9.3 million was outstanding on a term loan with Jules and
Associates secured by the paper machine at the Warren Glen, New Jersey,
facility. The interest rate on this loan is 8.47% with the balance amortizing
over seven years. As of the same date, $2.9 million was outstanding on a term
loan with CIT secured by machinery at the Quakertown, Pennsylvania, facility.
The interest rate on this loan is LIBOR + 2% with the balance amortizing through
November 2007.
19
We believe that cash reserves on hand, cash flow from operations, plus amounts
available under credit facilities, will be sufficient to fund our capital
requirements, debt service and working capital requirements for the foreseeable
future.
NEW ACCOUNTING PRONOUNCEMENTS
Not applicable.
FORWARD-LOOKING STATEMENTS
Statements in this report that are not historical are forward-looking statements
subject to risk and uncertainties that could cause actual results to differ
materially. Such risk and uncertainties include fluctuations in economies
worldwide, fluctuations in our customers' demand and inventory levels (including
the loss of certain major customers or the possibility that customers could
choose to bring previously outsourced business in house); the price and
availability of raw materials and of competitive materials, which may preclude
passing increases on or maintaining prices with customers; changes in
environmental and other governmental regulations; changes in terms from lenders;
ability to retain key management and to reach agreement on labor issues; or the
failure to identify or carry out suitable strategic acquisitions.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We believe we have minimal exposure to financial market risks. The majority of
our debt is at a fixed rate. Most of the our sales transactions have been
conducted in the currency where the shipment originated, limiting our exposure
to changes in currency exchange rates. We do not use derivative financial
instruments.
INFLATION
We attempt to minimize the effect of inflation on earnings by controlling
operating expenses. During the past several years, the rate of general inflation
has been relatively low and has not had a significant impact on our results of
operations. We purchase raw materials that are subject to cyclical changes in
costs that may not reflect the rate of general inflation.
SEASONALITY
Our business is mildly seasonal, with the second half of each year typically
having a lower level of net sales and operating income. This seasonality is the
result of summer manufacturing shutdowns and the impact of year-end holidays.
ITEM 8. FINANCIAL STATEMENTS
The financial statements and supplementary data filed as part of this report
begin on page 23, as outlined in Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
20
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
See the section entitled "Executive Officers" in Part I, Item 1 hereof for
information regarding the company's executive officers.
The information required by this item with respect to the company's directors is
presented under the caption entitled "Election of Directors" of the company's
Definitive Proxy Statement, which will be filed with the Securities and Exchange
Commission in connection with the solicitation of proxies for the company's
Annual Meeting of Shareholders to be held on May 15, 2001 (the "Proxy
Statement"), and is incorporated herein by reference.
The information required by this item concerning compliance with Section 16(a)
of the Exchange Act is presented under the caption entitled "Compliance with
Section 16(a) of the Securities Exchange Act of 1934" of the Proxy Statement,
and is incorporated herein by this reference.
ITEM 11. EXECUTIVE COMPENSATION AND OTHER INFORMATION
The information required by this item is incorporated herein by reference to the
information presented under the caption entitled "Executive Compensation and
Other Information" of the Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item is incorporated herein by reference to the
information presented under the caption entitled "Security Ownership of Certain
Beneficial Owners and Management" of the Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None existed.
21
PART IV
ITEM 14. EXHIBITS, CONSOLIDATED FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
(a)(1) Index to Consolidated Financial Statements
The consolidated financial statements required by this term are submitted
beginning on page 24 of this Form 10-K.
PAGE
----
Independent Auditors' Report .............................23
Consolidated Statements of Income for the years ended
December 31, 2000, 1999, and 1998......................24
Consolidated Balance Sheets of December 31, 2000 and 1999.25
Consolidated Statements of Cash Flows for the years ended
December 31, 2000, 1999, and 1998......................26
Consolidated Statements of Stockholders' Equity
and Comprehensive Income for the years ended
December 31, 2000, 1999, and 1998......................27
Notes to Consolidated Financial Statements ...............28
(a)(2) Financial Statement Schedule:
Schedule II--Valuation and Qualifying Accounts Reserves...62
Independent Auditors' Report..............................63
(a)(3) Index to Exhibits, beginning on ..........................64
(b) Reports on Form 8-K
There were no reports on Form 8-K filed by the
Registrant during the fourth quarter of the fiscal
year ended December 31, 2000.
(c) Exhibits
The exhibits required by this item are listed under
Item 14(a)(3) .........................................67
22
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
FiberMark, Inc.:
We have audited the accompanying consolidated balance sheets of FiberMark, Inc.
as of December 31, 2000 and 1999, and the related consolidated statements of
income, stockholders' equity and comprehensive income, and cash flows for each
of the years in the three-year period ended December 31, 2000. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of FiberMark, Inc. as
of December 31, 2000 and 1999, and the results of their operations and their
cash flows for each of the years in the three-year period then ended December
31, 2000, in conformity with accounting principles generally accepted in the
United States of America.
/s/ KPMG LLP
Burlington, Vermont
February 2, 2001
Vt. Reg. No. 92-0000241
23
FIBERMARK, INC
Consolidated Statements of Income
Years Ended December 31, 2000, 1999 and 1998
(In thousands, except per share amounts)
2000 1999 1998
--------- --------- ---------
Net sales $ 355,453 $ 325,308 $ 307,092
Cost of sales 294,237 263,385 249,337
--------- --------- ---------
Gross profit 61,216 61,923 57,755
Selling, general and administrative expenses 25,132 24,088 22,684
Facility closure expense (note 12) 7,972 9,818 7,274
Sale of technology (note 2) (8,422) -- --
--------- --------- ---------
Income from operations 36,534 28,017 27,797
--------- --------- ---------
Other expense, net 1,579 469 152
Cogeneration income (note 3) -- -- (1,451)
Interest expense 15,236 11,938 11,675
Interest income (1,769) (859) (1,180)
--------- --------- ---------
Income before income taxes 21,488 16,469 18,601
Income tax expense (note 9) 8,629 7,486 7,092
--------- --------- ---------
Net income $ 12,859 $ 8,983 $ 11,509
========= ========= =========
Basic earnings per share: $ 1.88 $ 1.17 $ 1.48
========= ========= =========
Diluted earnings per share $ 1.84 $ 1.15 $ 1.43
========= ========= =========
Average Basic Shares Outstanding 6,830 7,659 7,751
Average Diluted Shares Outstanding 6,970 7,843 8,070
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
24
FIBERMARK, INC.
Consolidated Balance Sheets
December 31, 2000 and 1999
(In thousands)
ASSETS 2000 1999
---- ----
Current assets:
Cash $ 11,133 $ 12,466
Accounts receivable, net of allowances of $1,220 in 2000, $1,023 in 1999 44,902 41,880
Inventories (note 4) 72,360 57,928
Other 776 717
Deferred income taxes (note 9) 4,950 3,982
--------- ---------
Total current assets 134,121 116,973
Property, plant and equipment, net (notes 5 and 6) 194,505 171,423
Goodwill, net 44,948 47,038
Other intangible assets, net 6,778 6,268
Other long-term assets 1,843 1,602
Other pension assets (note 13) 4,018 3,642
--------- ---------
Total assets $ 386,213 $ 346,946
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion long-term debt (note 6) 9,675 7,221
Accounts payable 29,786 17,954
Accrued liabilities (note 15) 15,243 19,898
Accrued income taxes payable 3,020 2,815
--------- ---------
Total current liabilities 57,724 47,888
--------- ---------
Long-term liabilities:
Revolving credit line (note 6) 39,027 27,968
Long-term debt, less current portion (note 6) 143,267 141,006
Deferred income taxes (note 9) 21,439 16,087
Other long-term liabilities (note 13) 21,808 22,220
--------- ---------
Total long-term liabilities 225,541 207,281
--------- ---------
Total liabilities 283,265 255,169
Commitments and contingencies (note 7)
Stockholders' equity (notes 8 and 18):
Preferred stock, par value $.001 per share;
2,000,000 shares authorized, and none issued -- --
Common stock, par value $.001 per share;
20,000,000 shares authorized
6,830,483 and 6,826,683 shares issued and outstanding in 2000 and
7,830,483 and 6,830,483 shares issued and outstanding in 1999 7 8
Additional paid-in capital 64,399 77,052
Retained earnings 42,876 30,017
Accumulated other comprehensive loss (4,299) (2,646)
Less treasury stock, 3,800 shares at cost in 2000 and
1,000,000 shares at cost in 1999 (35) (12,654)
--------- ---------
Total stockholders' equity 102,948 91,777
--------- ---------
Total liabilities and stockholders' equity $ 386,213 $ 346,946
========= =========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
25
FIBERMARK, INC.
Consolidated Statements of Cash Flows
Years Ended December 31, 2000, 1999, and 1998
(In thousands)
2000 1999 1998
-------- -------- --------
Cash flows from operating activities:
Net income $ 12,859 $ 8,983 $ 11,509
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 11,444 9,290 8,953
Amortization of deferred gain -- (1,289) (1,719)
Loss on closure of facility 7,972 9,818 7,274
Loss (gain) on sale of property, plant and equipment 7 (2) 125
Deferred taxes 4,727 4,643 3,717
Changes in operating assets and liabilities:
Accounts receivable (4,117) (8,967) 1,555
Inventories (15,475) (6,596) (2,132)
Other (72) 736 (279)
Accounts payable 12,207 1,197 (7,542)
Accrued pension and other liabilities (5,256) (1,820) (765)
Prepaid expense -- (204) (307)
Other long-term liabilities 223 297 164
Accrued income taxes payable 335 2,369 (1,983)
-------- -------- --------
Net cash provided by operating activities 24,854 18,455 18,570
-------- -------- --------
Cash flows used for investing activities:
Purchase of life insurance (275) (806) (1,207)
Additions to property, plant and equipment (42,598) (15,736) (13,943)
Net proceeds from sale of property, plant and equipment 2 38 22
Payments for businesses acquired -- (22,935) (37,337)
Increase in other intangible assets (1,114) (254) (145)
-------- -------- --------
Net cash used in investing activities (43,985) (39,693) (52,610)
-------- -------- --------
Cash flows from financing activities:
CIT Sale/Leaseback Buyout -- (30,651) --
Proceeds from issuance of bank debt 15,337 20,957 29,552
Proceeds from issuance of common stock -- -- 2,628
Cost of stock offering -- -- (511)
Net proceeds from exercise of stock options -- 498 466
Stock repurchase (35) (12,654) --
Net borrowings under revolving credit line 11,059 27,968 --
Repayment of debt (7,348) (3,810) --
Debt issuance costs -- (366) --
-------- -------- --------
Net cash provided by financing activities 19,013 1,942 32,135
-------- -------- --------
Effect of exchange rate changes on cash (1,215) (2,042) (1,566)
Net decrease in cash (1,333) (21,338) (3,471)
Cash at beginning of year 12,466 33,804 37,275
-------- -------- --------
Cash at end of year $ 11,133 $ 12,466 $ 33,804
======== ======== ========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
26
FIBERMARK, INC.
Consolidated Statements of Stockholders' Equity and Comprehensive Income
Years Ended December 31, 2000, 1999 and 1998
(In thousands, except share amounts)
Accumulated
Additional Other
Common Stock Paid-In Accumulated Comprehensive
Shares Amount Capital Earnings Income (Loss)
------ ------ ------- -------- -------------
Balance at December 31, 1997 7,581,531 $ 8 $ 73,709 $ 9,525 $ (471)
Issuance of common stock 135,000 -- 2,117 -- --
Issuance of common stock 6 -- -- -- --
Exercise of stock options 61,285 -- 466 -- --
Tax benefit of option exercise -- -- 262 -- --
Comprehensive income:
Net income -- -- -- 11,509 --
Minimum pension liability adjustment, net of
tax benefit of $876 -- -- -- -- (1,128)
Currency translation adjustment -- -- -- -- 1,566
--------- ----------- ----------- ----------- -----------
Total comprehensive income
Balance at December 31, 1998 7,777,822 8 76,554 21,034 (33)
Exercise of stock options 52,661 -- 403 -- --
Tax benefit of option exercise -- -- 95 -- --
Purchase of Treasury Stock (1,000,000) -- -- -- --
Comprehensive income:
Net income -- -- -- 8,983 --
Minimum pension liability adjustment, net of
tax provision of $577 -- -- -- -- 843
Currency translation adjustment -- -- -- -- (3,456)
--------- ----------- ----------- ----------- -----------
Total comprehensive income
Balance at December 31, 1999 6,830,483 8 77,052 30,017 (2,646)
Purchase of Treasury Stock (3,800) -- -- -- --
Retirement of Treasury Stock -- (1) (12,653) -- --
Comprehensive income: -- -- -- -- --
Net income -- -- -- 12,859 --
Minimum pension liability adjustment, net of
tax provision of $594 -- -- -- -- 756
Currency translation adjustment -- -- -- -- (2,409)
--------- ----------- ----------- ----------- -----------
Total comprehensive income
Balance at December 31, 2000 6,826,683 $ 7 $ 64,399 $ 42,876 $ (4,299)
========= =========== =========== =========== ===========
Total
Stockholders'
Treasury Equity
Stock (Deficit)
----- ---------
Balance at December 31, 1997 $ -- $ 82,771
Issuance of common stock -- 2,117
Issuance of common stock -- --
Exercise of stock options -- 466
Tax benefit of option exercise -- 262
Comprehensive income:
Net income -- 11,509
Minimum pension liability adjustment, net of
tax benefit of $876 -- (1,128)
Currency translation adjustment -- 1,566
--------- -----------
Total comprehensive income 11,947
Balance at December 31, 1998 -- 97,563
Exercise of stock options -- 403
Tax benefit of option exercise -- 95
Purchase of Treasury Stock (12,654) (12,654)
Comprehensive income:
Net income -- 8,983
Minimum pension liability adjustment, net of
tax provision of $577 -- 843
Currency translation adjustment -- (3,456)
----------- -----------
Total comprehensive income 6,370
Balance at December 31, 1999 (12,654) 91,777
Purchase of Treasury Stock (35) (35)
Retirement of Treasury Stock 12,654 --
Comprehensive income: -- --
Net income -- 12,859
Minimum pension liability adjustment, net of
tax provision of $594 -- 756
Currency translation adjustment -- (2,409)
----------- -----------
Total comprehensive income 11,206
Balance at December 31, 2000 $ (35) $ 102,948
=========== ===========
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
27
FIBERMARK, INC.
Notes to Consolidated Financial Statements
December 31, 2000, 1999 and 1998
(1) DESCRIPTION OF BUSINESS
FiberMark produces specialty fiber-based materials in three operating
segments: German operations and filter media, technical and office products,
and durable specialties. FiberMark is headquartered in Brattleboro, Vermont,
and operates seven facilities located in the eastern and midwestern regions
of the United States and three facilities in Germany.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include FiberMark, Inc. and its wholly
owned subsidiaries. All significant intercompany transactions and accounts
have been eliminated in consolidation.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
these estimates.
CASH EQUIVALENTS
For purposes of the statement of cash flows, the company considers all
highly liquid investments with original maturities of three months or less
to be cash equivalents.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined
using the moving weighted average cost method for raw materials and the
first-in, first-out (FIFO) method for work in process and finished goods.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Depreciation for financial
reporting purposes is provided using the straight-line method based upon the
useful lives of the assets. Buildings and improvements and machinery and
equipment are depreciated over periods not exceeding forty (40) and twenty
(20) years, respectively. When assets are sold or retired, the cost and
accumulated depreciation are removed from the accounts and any gain or loss
is included in operating income. Improvements are capitalized and included
in property, plant and equipment while expenditures for maintenance and
repairs are charged to expense. Leasehold improvements are amortized over
the shorter of the life of the improvement or the lease term.
28
OTHER INTANGIBLE ASSETS AND GOODWILL
Other intangible assets and goodwill are summarized as follows at December
31, 2000 and 1999 (in thousands):
2000 1999
---- ----
Goodwill, net of accumulated amortization of
$7,051 in 2000 and $5,338 in 1999 $ 44,948 $ 47,038
======== ========
Debt issue costs, net of accumulated amortization of
$2,296 in 2000 and $1,619 in 1999 3,553 4,268
Intangible pension assets (see note 13) 1,270 768
Other, net of accumulated amortization of
$98 in 2000 and $133 in 1999 1,955 1,232
-------- --------
Other intangible assets, net $ 6,778 $ 6,268
======== ========
Goodwill represents the cost in excess of the fair value of the net assets
of acquired companies and is amortized on a straight-line basis over thirty
years. The company periodically evaluates the recoverability of goodwill
triggered by such factors as business trends and prospects and market and
economic conditions. The company measures the amount of impairment, if any,
by using the discounted cash flow method. The significant aspects considered
in the assessment, such as interest charges and the discount rate, would be
selected based on current market conditions.
Debt issue costs related to the Series B Senior Notes are amortized using
the interest method over the life of those notes. Other debt issue costs are
amortized on a straight-line basis over the life of the related debt.
Other intangible assets are stated at cost and amortized on a straight-line
basis over the estimated useful lives of the assets.
Amortization expense for other intangibles and goodwill was $2,514,000,
$2,454,000 and $2,567,000 in 2000, 1999 and 1998, respectively.
DEFERRED GAIN
The deferred gain incurred in connection with the sale-leaseback transaction
was amortized on a straight-line basis over the life of the lease until
termination (see note 7).
RESEARCH AND DEVELOPMENT
Research and development costs are expensed as incurred and are reflected in
cost of sales. The costs amounted to $2.2 million, $2.4 million, and $2.4
million for the years ended December 31, 2000, 1999, and 1998, respectively.
FOREIGN CURRENCY TRANSLATION
The functional currency of all operations outside the U.S. is the respective
local currency. The assets and liabilities of these operations are
translated at the exchange rates in effect at the balance sheet date and
income and expense accounts at average exchange rates during the year.
Resulting translation adjustments are recorded directly to a separate
component of accumulated other comprehensive income (loss).
29
INCOME TAXES
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized
in income in the period that includes the enactment date.
STOCK-BASED COMPENSATION
Statement of Financial Accounting Standards No. 123, ACCOUNTING FOR
STOCK-BASED COMPENSATION, encourages, but does not require companies to
record compensation cost for stock-based employee compensation plans at fair
value. The company has chosen to continue to account for stock-based
compensation using the intrinsic value method prescribed in Accounting
Principles Board Opinion No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES,
and related interpretations. Accordingly, compensation cost for stock
options is measured as the excess, if any, of the quoted market price of the
company's stock at the date of the grant over the amount an employee must
pay to acquire the stock.
EARNINGS PER SHARE
Basic earnings per share excludes any dilutive effects of options, warrants
and convertible securities. The following table sets forth the computation
of basic and diluted earnings per share:
2000 1999 1998
---- ---- ----
Numerator:
Income available to common shareholders
used in basic and diluted earnings per share $ 12,859 $ 8,983 $ 11,509
========== ========== ==========
Denominator:
Denominator for basic earnings per share:
Weighted average shares 6,829,691 7,659,420 7,751,399
Effect of dilutive securities:
Fixed stock options 140,546 183,233 318,987
---------- ---------- ----------
Denominator for diluted earnings per share:
Adjusted weighted average shares 6,970,237 7,842,653 8,070,386
========== ========== ==========
Basic earnings per share $ 1.88 $ 1.17 $ 1.48
Diluted earnings per share $ 1.84 $ 1.15 $ 1.43
Stock options that could potentially dilute earnings per share in the future
of 724,454, 693,681 and 303,130 in 2000, 1999 and 1998, respectively, were
not included in the computation of diluted earnings per share because to do
so would have been anti-dilutive for the periods presented.
30
IMPAIRMENT OF LONG-LIVED ASSETS AND LONG-LIVED ASSETS TO BE DISPOSED OF
The company follows the provisions of SFAS No. 121, ACCOUNTING FOR THE
IMPAIRMENT OF LONG-LIVED ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF,
which requires that long-lived assets and certain identifiable intangibles
be reviewed for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of
the carrying amount of an asset to future net cash flows expected to be
generated by the asset. If such assets are considered to be impaired, the
impairment to be recognized is measured by the amount by which the carrying
amount of the assets exceed the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair value
less costs to sell. In the third quarter of 2000, the company decided to
close its Richmond, Virginia, facility. During the third quarter of 1999,
the company decided to discontinue manufacturing at its Hughesville, New
Jersey, facility. During the fourth quarter of 1998, the company also
decided to close their Beaver Falls, New York, facility. The costs of
closing these facilities, including the costs associated with disposing of
the assets, are reflected as a component of income from operations (see note
12).
COMPREHENSIVE INCOME
Comprehensive income consists of net income, minimum pension liability
adjustments, and foreign currency translation adjustments and is presented
in the Consolidated Statement of Stockholders' Equity. The adoption of SFAS
130 had no impact on total shareholders' equity.
COMMITMENTS AND CONTINGENCIES
Liabilities for loss contingencies, including environmental remediation
costs, arising from claims, assessments, litigation, fines and penalties,
and other sources are recorded when it is probable that a liability has been
incurred and the amount of the assessment and/or remediation can be
reasonably estimated. Recoveries from third parties that are probable of
realization are separately recorded, and are not offset against the related
environmental liability, in accordance with Financial Accounting Standards
Board Interpretation No. 39, OFFSETTING OF AMOUNTS RELATED TO CERTAIN
CONTRACTS.
ENVIRONMENTAL MATTERS
Pursuant to environmental laws and regulations, there are currently pending
investigations at certain of the company's plants relating to the release of
hazardous substances, materials and/or wastes. In addition, various
predecessors of the company have been named as potentially responsible
parties ("PRPs") by the United States Environmental Protection Agency
("EPA") for costs incurred and to be incurred in responding to the
investigation and clean-up of various third-party sites. The company has not
received any notification or inquiry from EPA or any other agency concerning
these sites. Management believes that the company will have no material
liability in connection with the clean-up of these sites. However, no
assurance can be given that such predecessors will perform their
responsibilities in connection with such sites and, in the event of such
nonperformance, the company may incur material liabilities in connection
with such sites, and no assurance can be given that the company will not
receive PRP notices in connection with these or other sites in the future.
OTHER MATTERS
The company is involved in various legal proceedings in the ordinary course
of business. Management believes that the outcome of these proceedings will
not have a material adverse effect on the company's financial condition,
results of operations or cash flows.
31
REVENUE RECOGNITION
NET SALES
The company recognizes revenue from product sales upon shipment to
customers. When pervasive evidence of a sales arrangement exists, the price
to the buyer is fixed and determinable, and the collectability of the sales
price is reasonably assured.
SALE OF TECHNOLOGY
On September 1, 2000, the company agreed to sell the technology for a
portion of the filter media volume manufactured at the leased Richmond,
Virginia facility, together with some production equipment to Ahlstrom Paper
Group. The technology and legal title was transferred to Ahlstrom on the
date of the agreement and the company recognized the revenue from the sale
of technology of $8,866,000, net of legal costs of $444,000. The revenue
from the sale of the equipment will be recognized when the equipment has
been delivered.
CONCENTRATION RISK
The company's hourly employees and 70% of the company's German salaried
employees are union eligible under various collective bargaining agreements
expiring through 2005. As union membership is voluntary and membership does
not need to be disclosed per German law, the percentage of employees covered
by the agreement that expires on February 28, 2002 at the three German
facilities cannot be determined. There are no US agreements that will expire
in the year 2001.
(3) COGENERATION PROJECT
In 1993, the company entered into agreements with Kamine/Besicorp Beaver
Falls L.P. ("Kamine") pursuant to which the company's Latex Fiber Products
Division would host a gas-fired, 79-megawatt combined-cycle cogeneration
facility developed by Kamine in Beaver Falls, New York. The company received
$4.4 million in cash in 1993. The company had a firm contract with Kamine to
receive a series of cash payments totaling $7.0 million between May 1995 and
May 1997. The present value of these cash payments, in the amount of $6.5
million, was recorded as income in the first quarter of 1995. Cash payments
of $2 million each were received in May 1997 and 1996 and $3 million was
received in 1995. In December 1998, the owner of the cogeneration facility
sold the business and related equipment to another party and the company
received a one-time payment of approximately $1.5 million as consideration
for its consent to the assignment of the related ground lease to the new
owner.
32
(4) INVENTORIES
Inventories consist of the following at December 31, 2000 and 1999 (in
thousands):
2000 1999
---- ----
Raw materials $ 20,377 $ 21,232
Work in process 19,413 14,774
Finished goods 21,914 12,872
Finished goods on consignment 5,437 4,689
Stores inventory 2,750 2,386
Operating supplies 2,469 1,975
--------- --------
Total inventories $ 72,360 $ 57,928
========= ========
(5) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following at December 31, 2000
and 1999 (in thousands):
2000 1999
---- ----
Land $ 14,630 $ 14,332
Buildings and improvements 36,021 36,950
Machinery and equipment 139,070 133,000
Construction in progress 31,020 6,626
--------- ---------
220,741 190,908
Less accumulated depreciation and amortization (26,236) (19,485)
--------- ---------
Net property, plant and equipment $ 194,505 $171,423
========= =========
Depreciation expense was $8,930,000, $6,836,000 and $6,386,000 for the years
ended December 31, 2000, 1999, and 1998, respectively.
(6) DEBT
The company's long-term debt is summarized as follows at December 31, 2000
and 1999 (in thousands):
2000 1999
---- ----
Series B senior notes - interest at 9.375%,
interest payable semi-annually
in arrears on April 15 and
October 15, unsecured, due October 15, 2006 $100,000 $100,000
Bank term loan - interest rates ranging from 5.765% to
7.015% payable semi-annually in arrears on
January 12 and July 12, secured by the stock of the
Gessner subsidiary, annual principal payments
commencing January 12, 1999 through the
year 2005 22,160 25,790
Term loan - interest at 5%, unsecured, interest and
principal payable annually in three installments
commencing March 31, 1999 1,927 3,095
Bank term loan - interest rates ranging from 5.40% to
7.10%, payable
semi-annually in arrears on March 17 and
September 17, secured by the
stock of the Lahnstein subsidiary, annual
principal payments commencing
September 17, 2000 through the year 2005 10,839 14,700
33
Bank term loan - interest rate at LIBOR + 1.75%,
payable semi-annually in arrears on June 30 and
December 30, Gessner capital spending loan secured
by the stock of the Gessner subsidiary, annual
principal payments commencing December 31, 1999
through the year 2005 5,781 4,642
Term loan - interest rate at 8.47%, secured by
machinery at Warren Glen, NJ facility, interest
and principal payable in monthly installments
commencing July 27, 2000 through the year 2007 9,306 --
Term loan - interest rate at LIBOR + 2%, secured by
machinery at Quakertown, PA facility, interest and
principal payable in monthly installments
commencing November 13, 2000 through the year 2007 2,929 --
--------- ---------
Total Debt 152,942 148,227
Less Current Portion (9,675) (7,221)
--------- ---------
Long-term Portion $ 143,267 $ 141,006
========= =========
The Series B senior notes are redeemable at the company's option in whole or in
part, on or after October 15, 2001 at redemption prices ranging from 100% to
104.688% of face value.
Approximately, $15,196,000, $11,650,000, and $10,474,000 of interest was paid
during the years ended December 31, 2000, 1999, and 1998, respectively.
The aggregate maturities of long-term debt for each of the five years subsequent
to December 31, 2000 and thereafter are as follows (in thousands):
2001.......................................... $ 9,675
2002.......................................... 10,167
2003.......................................... 10,277
2004.......................................... 9,914
2005.......................................... 9,563
Thereafter.................................... 103,346
The company maintains a $50.0 million revolving credit facility with CIT,
secured by a lien on substantially all of our accounts receivable and inventory
and on the equipment and real estate located at our Brattleboro, Vermont,
facility. The interest rate on the line as of December 31, 2000 is prime plus
.5% or LIBOR plus 2%. The revolving credit line is subject to a commitment fee
payable at the rate of 3/8 of 1% per annum on the daily average unused portion
of this line. This fee is payable on a quarterly basis. In addition, the company
is required to pay an annual Collateral Management Fee of $35,000 in connection
with periodic examination, analysis and evaluation of the collateral. As of
December 31, 2000, $39.0 million was outstanding under such credit facility.
There are no balances due under this facility until its final maturity on
September 30, 2002.
Gessner has $7,226,000 in available funds through a line of credit with
Bayerische Vereinsbank AG at December 31, 2000. The interest rate on the line is
LIBOR + 1.75%. The credit line is subject to a commitment fee payable
semi-annually at the rate of 1/4 of 1% per annum on the disbursed amount. As of
December 31, 2000, no advances were outstanding under this facility.
The foreign subsidiaries do not guarantee any of the domestic debt or revolving
credit line. See note 21 for Consolidating Financial Statements.
34
(7) LEASES
DEFERRED GAIN AND SALE-LEASEBACK
In April 1994, FiberMark entered into a sale-leaseback agreement with The
CIT Group, Inc. ("CIT"). FiberMark sold CIT $7,813,000 in fixed assets for a
purchase price of $25,000,000. As a result FiberMark recorded a deferred
gain of $17,187,000 which is amortized on a straight-line basis over the
life of the ten year lease. In 1999 and 1998 the company amortized
$1,289,000 and $1,719,000, respectively, of the deferred gain into income.
In connection with the sale-leaseback transaction, CIT leased back the fixed
assets to FiberMark utilizing a ten-year operating lease. The lease requires
quarterly payments of $843,000 for the first five years and quarterly
payments of $690,000 for the remaining five years of the lease.
In December 1995 FiberMark amended the sale-leaseback agreement whereby
FiberMark sold a newly constructed wet end machine ("Kobayashi") for $10
million. No gain or loss was recorded on the transaction. FiberMark received
$5.0 million of the purchase price from CIT in December 1995, the remaining
$5.0 million was placed in escrow and paid during 1996 when all
specifications were met. CIT leased back the Kobayashi machine to FiberMark
using the remaining 8.5 years of the operating lease discussed above. The
amended lease required additional payments including a first quarter payment
of $113,000 and quarterly payments of $339,901 for the next 33 quarters.
Rental expense associated with these leases is recognized on a straight-line
basis and amounted to $3,320,000 and $4,426,000 for the years ending
December 31, 1999 and 1998, respectively. Accumulated deferred rent expense
included in prepaid expense amounted to $1,380,000 as of December 31, 1998.
On September 30, 1999, the company terminated the sale/leaseback facility
with The CIT Group, and repurchased the assets at its Brattleboro mill. The
remaining unamortized balance of the deferred gain, net of the accumulated
deferred rent expense ($7,158,000) was offset against the asset purchase
price.
OTHER LEASES
The company assumed obligations under operating leases for certain
machinery, equipment and facilities with the acquisitions of Steinbeis
Gessner GmbH in January 1998 and Papierfabrik Lahnstein GmbH in August 1999,
and with facilities purchased from CPG in October 1996.
Rental expense was $1,261,000, $1,287,000, and $869,000 for the years ended
December 31, 2000, 1999, and 1998, respectively.
35
As of December 31, 2000, obligations to make future minimum lease payments
under these leases were as follows (in thousands):
PAYMENTS TO BE MADE IN THE YEARS ENDING DECEMBER 31:
2001 $ 1,050
2002 916
2003 805
2004 422
2005 34
Thereafter --
---------
$ 3,227
=========
(8) PREFERRED STOCK
At December 31, 2000 and 1999, the company has 2,000,000 shares of preferred
stock authorized with none issued. The company, without stockholder
approval, can issue preferred stock with voting, conversion, and other
rights.
(9) INCOME TAXES
Income before provision for income taxes, classified by source of income was
as follows (in thousands):
2000 1999 1998
---- ---- ----
U.S. $ 5,152 $ 4,134 $10,013
Foreign 16,336 12,335 8,588
------- ------- -------
Income before provision for income taxes $21,488 $16,469 $18,601
======= ======= =======
The components of the provision for income taxes for the years ended
December 31, 2000, 1999 and 1998 are as follows (in thousands):
2000 1999 1998
---- ---- ----
Current
Federal $ 811 $ 1,449 $ 2,201
State 202 406 558
Foreign 3,431 1,796 616
--------- --------- ---------
4,444 3,651 3,375
Deferred
Federal and State 925 (222) 296
Foreign 3,260 4,057 3,421
--------- ---------- ---------
4,185 3,835 3,717
Income tax expense $ 8,629 $ 7,486 $ 7,092
========= ========= =========
36
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at December 31, 2000 and
1999 are presented below (in thousands):
DECEMBER 31, 2000
--------------------------
Deferred Tax Deferred Tax
Assets Liabilities
------------ ------------
Accounts receivable $ 754 $ --
Inventory 912 --
Property, plant and equipment -- 23,544
Payroll related accruals 4,322 --
Intangible assets -- 180
Miscellaneous reserves 587 --
Facility closure 660 --
------- -------
$ 7,235 $23,724
======= =======
DECEMBER 31, 1999
--------------------------
Deferred Tax Deferred Tax
Assets Liabilities
------ -----------
Accounts receivable $ 1,062 $ --
Inventory 1,075 --
Property, plant and equipment -- 20,068
Payroll related accruals 5,218 --
Intangible assets -- 252
Miscellaneous reserves 600 --
Facility closure 260
------- -------
$ 8,215 $20,320
======= =======
SFAS No. 109 requires a valuation allowance against deferred tax assets if,
based on the weight of available evidence, it is more likely than not that
some or all of the deferred tax assets will not be realized. Although
realization is not assured, management believes it is more likely than not
that the deferred tax assets will be realized through future taxable
earnings.
37
A reconciliation of income taxes from continuing operations at the United
States statutory rate to the effective rate for the years ended December 31,
2000, 1999 and 1998 are as follows:
2000 1999 1998
---- ---- ----
U.S. federal rate 35.0% 35.0% 35.0%
State taxes net of federal benefit 1.2% 1.9% 2.4%
Foreign rate difference 9.6% 9.3% 5.5%
Effect of German tax reform (5.1%) -- --
Other (.5%) (.7%) (4.8%)
---- ---- ----
Effective tax rate 40.2% 45.5% 38.1%
==== ==== ====
Income taxes paid during 2000, 1999 and 1998 were $5,007,000, $2,831,000,
and $5,399,000 respectively.
German tax reform was enacted in October 2000 which reduces the corporate
tax rate from 40% in the case of retained profits and 30% in the case of
distributed profits to 25% uniformly from January 1, 2001 forward. The
effect of this change in tax law is required to be reported in the fourth
quarter of 2000, even though the change is not effective until January 1,
2001. Deferred tax assets and liabilities at December 31, 2000 have been
calculated based upon these future lower tax rates, resulting in a
$1,106,000 benefit.
(10) FAIR VALUE OF FINANCIAL INSTRUMENTS
Statement of Financial Accounting Standards No. 107, DISCLOSURES ABOUT THE
FAIR VALUE OF FINANCIAL INSTRUMENTS, requires disclosure of information
about the fair value of certain financial instruments for which it is
practicable to estimate that value. For purposes of the following disclosure
the fair value of a financial instrument is the amount at which the
instrument could be exchanged in a current transaction between willing
parties other than in a forced sale or liquidation. The fair value of
long-term debt is based upon the quoted market price and amounts to
$185,469,000 (carrying value of $191,969,000) at December 31, 2000, and
$175,695,000 (carrying value $176,195,000) at December 31, 1999. Management
has determined that the carrying values of its other financial assets and
liabilities approximated fair value at December 31, 2000 and 1999.
(11) ACQUISITIONS
1999 ACQUISITION
Effective August 1, 1999, the company acquired Papierfabrik Lahnstein GmbH
for a purchase price of $22.1 million. FiberMark Lahnstein manufactures
specialty papers and nonwoven materials. The operation's coating substrates
are used for wallcoverings, security papers, self-adhesive labels and
flooring overlay; printing substrates for graphic arts applications,
specialty tags and labels; and disposable nonwovens for medical products and
tablecloths. This acquisition was financed with $6.9 million of cash
reserves along with borrowings under a DM 28.5 ($15.2) million bank facility
with Bayerische Vereinsbank. The acquisition was accounted for using the
purchase method. Accordingly, the full purchase price was allocated to the
assets acquired and liabilities assumed based upon their respective fair
values. The 1999 consolidated results include Lahnstein's results of
operations for five months.
38
The following summarized unaudited pro forma results of operations for the
years ended December 31, 1999 and 1998, assumes the Lahnstein acquisition
occurred as of the beginning of the periods presented (dollars in thousands,
except per share amounts):
UNAUDITED UNAUDITED
--------- ---------
1999 1998
---- ----
Net sales $ 348,384 $ 340,723
Net income 9,875 12,277
Basic earnings per share 1.29 1.58
The unaudited pro forma results are not necessarily indicative of actual
results of operations that would have occurred had the acquisitions been
consummated as of the above dates, nor are they necessarily indicative of
future operating results.
1998 ACQUISITION
Effective January 1, 1998, the company purchased all of the outstanding
shares of Steinbeis Gessner GmbH (Gessner) for $40.0 million and DM 8.08
($4.4) million in cash. Gessner manufactures crepe masking and specialty
tape materials, wet and dry abrasives papers, filter media for automotive
air, oil and fuel and filter media for automotive cabins and vacuum cleaner
bags. The acquisition was financed with a portion of the proceeds of the
sale of 1,500,000 shares of the company's common stock for $28.7 million
along with borrowings under a DM 54.0 ($29.6) million bank facility provided
by Bayerische Vereinsbank AG and an unsecured note issued by Gessner and
guaranteed by the company to the seller in the amount of DM 8.0 ($4.4)
million. The acquisition was accounted for using the purchase method.
Accordingly, the purchase price was allocated to the assets acquired and
liabilities assumed based upon their respective fair values. This resulted
in approximately $6.4 million of cost in excess of net assets acquired, or
goodwill which is being amortized on a straight line basis over thirty
years. The 1998 consolidated results include Gessner's results of operation
for the entire year.
(12) FACILITY CLOSURE
On January 14, 1998, the company closed the Owensboro, Kentucky, facility.
Production at this facility was moved into certain of the company's other
operations.
In 1998 the company adjusted its closure accrual by $520,000 related to its
Owensboro, Kentucky, mill to facility closure expense. The company also
adjusted $2,468,000 to previously accrued facility closure expenses in 1999
for its Owensboro, Kentucky, mill to reflect a full write off of property,
plant and equipment value for that facility.
The company ceased operations at its Beaver Falls, New York, facility on
January 29, 1999. Part of the historical demand from this facility has been
taken in-house by an integrated customer. The balance of the production
demand was absorbed by other mills within the company. As of December 31,
1998, the company recorded a facility closure charge of $7,794,000 to
recognize severance and benefits for the employees to be terminated
($1,427,000) to reflect contract cancellation costs ($250,000) and to
reflect the write off of property, plant and equipment ($6,117,000). The
company terminated 87 administrative and plant employees. Actual termination
benefits paid were $1,654,715. Results of operations of the facility
amounted to a $.1 million income for the year ended December 31, 1998. In
2000 and 1999 the company added approximately $45,000 and $120,000,
respectively, to
39
previously accrued facility closure expenses for its Beaver Falls, New
York, mill to reflect additional severance and benefits for terminated
employees.
On August 31, 1999, the company initiated a project to install a new paper
machine at its Warren Glen, New Jersey, facility and to consolidate
operations from the neighboring Hughesville, New Jersey, mill. The company
plans to cease operations at Hughesville as of March 31, 2001. As of
December 31, 1999, the company recorded a facility closure charge of
$7,230,000 to recognize severance and benefits for employees to be
terminated ($523,000), and to reflect the write off of property, plant and
equipment ($6,707,000). The company expects to terminate 33 administrative
and plant employees. Results of operations of the facility amounted to a
$135,000 loss for the year ended December 31, 1999. In addition, facility
closure charges were decreased by $232,000 for the year ended December 31,
2000.
On September 1, 2000, the company decided to consolidate production at its
Richmond, Virginia, facility into certain of the company's other operations
and to close the Richmond facility by April 30, 2001. As of December 31,
2000, the company recorded facility closure charges of $8,159,000 to
recognize severance and benefits for employees to be terminated
($1,250,000), to reflect the write off of property, plant and equipment
($6,659,000) and to write off deferred charges ($250,000). The company
expects to terminate 96 salary and hourly employees. Results of operations
of the facility amounted to income of $907,000 for the year ended December
31, 2000.
(13) RETIREMENT AND DEFERRED COMPENSATION PLANS
QUALIFIED PLANS
The company has a defined contribution plan (salaried and hourly) and a
defined benefit (hourly) retirement plan for FiberMark.
DEFINED CONTRIBUTION PLAN
The defined contribution plan is a 401(k) ERISA and IRS-qualified plan
covering substantially all employees that permits employee salary deferrals
up to 16% of salary with the company matching 50% of the first 6%. Defined
contribution expense for the company was $832,000, $1,022,000 and $1,017,000
for the years ended December 31, 2000, 1999 and 1998, respectively.
DEFINED BENEFIT PLAN FOR HOURLY EMPLOYEES
The defined benefit plan is an ERISA and IRS-qualified plan. Plan assets are
invested principally in equity securities, government and corporate debt
securities and other fixed income obligations. The company annually
contributes at least the minimum amount as required by ERISA.
40
The following table sets forth the accumulated pension benefit obligation
(APBO) (in thousands):
2000 1999
---- ----
APBO at January 1 $ 31,026 $ 25,831
Increase due to Lahnstein acquisition -- 6,634
Service cost 701 743
Interest cost 1,960 1,702
Actuarial gain (1,263) (1,337)
Benefits paid (1,333) (1,319)
Plan amendments 890 435
Foreign currency impact (1,126) (1,663)
-------- --------
APBO at December 31 $ 30,855 $ 31,026
======== ========
The funded status at December 31 is (in thousands):
2000 1999
---- ----
Projected benefit obligation $(30,855) $(31,026)
Fair value of plan assets 15,025 13,631
-------- --------
Funded status (15,830) (17,395)
Unrecognized net transition obligation 10 13
Unrecognized prior service cost 1,327 539
Unrecognized net loss 336 1,417
-------- --------
Accrued pension cost before
adjustment for minimum liability (14,157) (15,426)
Adjustment to recognize minimum liability -- (1,010)
-------- --------
Accrued pension cost included in other
long-term liabilities $(14,157) $(16,436)
======== ========
Net periodic pension expense included the following components (in
thousands):
2000 1999 1998
---- ---- ----
Service cost $ 698 $ 753 $ 691
Interest cost 1,951 1,744 1,405
Return on assets (996) (1,417) (2,055)
Net amortization and deferral:
Unrecognized net transition obligation 3 3 3
Unrecognized prior service cost 102 46 12
Unrecognized loss -- 81 83
Net asset gain (loss) deferred (248) 382 1,320
Recognized net loss -- 101 --
-------- -------- --------
Net periodic pension expense $ 1,510 $ 1,693 $ 1,459
======== ======== ========
41
The following table reconciles plan assets (in thousands):
2000 1999
---- ----
Fair value of plan assets at beginning of year $ 13,631 $ 11,062
Return on plan assets 996 1,417
Employer contributions 1,731 2,471
Benefits paid (1,333) (1,319)
--------- ---------
Fair value of plan assets at end of year $ 15,025 $ 13,631
========= =========
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation at December 31, 2000 and 1999 was
7.75% and 7.25%, respectively. The expected long-term rate of return on plan
assets was 9% in 2000 and 1999.
As is required by SFAS No. 87, EMPLOYERS' ACCOUNTING FOR PENSIONS, for plans
where the accumulated pension benefit obligation exceeds the fair value of
plan assets, the company has recognized in the accompanying consolidated
balance sheets the minimum liability of the unfunded accumulated pension
benefit obligation as a long-term liability with an offsetting intangible
asset ($552,000 at December 31, 1999 included in other intangible assets,
net) and equity adjustment, net of tax impact.
NON-QUALIFIED PLANS
In addition to the benefits provided under the qualified pension plans,
retirement and deferred compensation benefits associated with wages in
excess of the IRS allowable wages are provided to certain employees under
non-qualified plans.
During 1997 the company established a trust pursuant to two executive
deferral plans for the benefit of a select group of management, highly
compensated employees and/or directors who contribute materially to the
continued growth, development and business success of the company. The plans
established under the trust agreement are set forth as follows:
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN (SERP)
The plan is a defined benefit plan and shall be unfunded for tax purposes
and for purposes of Title I of ERISA. Pension benefits are based upon final
average compensation and years of service. Benefits earned are subject to
cliff vesting after fifteen (15) years or more of service.
The following table sets forth the accumulated pension benefit obligation
(APBO) (in thousands):
2000 1999
---- ----
APBO at January 1 $ 3,425 $ 3,604
Service cost 143 136
Interest cost 257 230
Actuarial loss (gain) 409 (481)
Plan Amendments -- (64)
Benefits paid (25) --
--------- -------
APBO at December 31 $ 4,209 $ 3,425
========= =======
42
The funded status at December 31 is (in thousands):
2000 1999
---- ----
Projected benefit obligation $(4,209) $(3,425)
Fair value of plan assets 1,583 1,895
------- -------
Funded Status (2,626) (1,530)
Unrecognized prior service cost 2,019 2,269
Unrecognized net (gain) or loss 450 (1,078)
------- -------
Accrued pension cost before
adjustment for minimum liability (157) (339)
Adjustment to recognize minimum liability (2,019) (939)
------- -------
Accrued pension cost included in other long-term
liabilities $(2,176) $(1,278)
======= =======
Net periodic pension expense included the following components (in
thousands):
2000 1999 1998
---- ---- ----
Service cost $ 143 $ 136 $ 182
Interest cost 258 230 251
Return on assets 912 (735) 34
Net amortization and deferral:
Unrecognized prior service cost 250 250 256
Unrecognized gain (54) -- --
Net asset gain (loss) deferred (1,066) 668 (58)
------- ------- -------
Net periodic pension expense $ 443 $ 549 $ 665
======= ======= =======
The following table reconciles plan assets (in thousands):
2000 1999
---- ----
Fair value of plan assets at beginning of year $ 1,895 $ 566
Return on plan assets (912) 735
Employer contributions 625 594
Benefits paid (25) --
------- -------
Fair value of plan assets at end of year $ 1,583 $ 1,895
======= =======
The weighted average discount rate used in determining the actuarial present
value of the projected benefit obligation at December 31, 2000 and 1999 was
7.75% and 7.25%, respectively. The expected long-term rate of return on plan
assets was 7% in 2000 and 1999.
As required by SFAS No. 87, EMPLOYERS' ACCOUNTING FOR PENSIONS, for plans
where the accumulated pension benefit obligation exceeds the fair value of
plan assets, the company has recognized in the accompanying consolidated
balance sheets the minimum liability of the unfunded accumulated pension
benefit obligation as a long-term liability with an offsetting intangible
asset of $216,000 at December 31, 1999 included in other intangible assets,
net.
43
DEFERRED COMPENSATION PLAN
The company has a deferred compensation plan that permits eligible
participants to defer a specified portion of their compensation. The
deferred compensation, together with certain company contributions, earns a
guaranteed rate of return. As of December 31, 2000 and 1999, the company has
accrued $4,018,000 and $3,642,000, respectively, for its obligation under
the plan included in other long-term liabilities. The company's expense,
which includes company contributions and interest expense, amounted to
$33,000, $28,000, and $17,000 for the years ended December 31, 2000, 1999,
and 1998, respectively.
To assist in the funding of the plan, the company purchased corporate-owned
life insurance contracts. Proceeds from the insurance policies are payable
to the company upon the death of the participant. The cash surrender value
of the policies, included in other long-term assets, was $4,018,000 and
$3,642,000 as of December 31, 2000 and 1999, respectively.
(14) POST-RETIREMENT BENEFITS OTHER THAN PENSIONS
The company provides certain health care and life insurance benefits to
specific groups of former CPG employees when they retire. The salaried group
of employees generally become eligible for retiree medical benefits after
reaching age 62 and with 15 years of service or after reaching age 65. The
medical plan for salaried employees provides for an allowance, which must be
used towards the purchase of a Medicare supplemental insurance policy, based
on a retiree's length of service. The allowance may be adjusted to reflect
annual changes in the Consumer Price Index ("CPI"); however, once the
initial allowance has doubled, there will be no further increases. Salaried
employees hired after January 1, 1993 are not eligible to participate in
this retiree medical plan. Upon satisfying certain eligibility requirements,
approximately 45% of the hourly employees are eligible upon retirement to
receive a medical benefit, which is an allowance to be used toward the
purchase of a Medicare supplemental insurance policy and cannot exceed a
specified annual amount. The post-retirement benefit obligations related to
employees who retired prior to the acquisition were not assumed by the
company and remain the responsibility of prior owners.
The following table sets forth the accumulated pension benefit obligation
(APBO) (in thousands):
2000 1999
---- ----
APBO at January 1 $ 1,441 $ 1,641
Service cost 35 30
Interest cost 106 93
Actuarial gain (42) (257)
Benefits paid (109) (66)
--------- ---------
APBO at December 31 $ 1,431 $ 1,441
========= =========
The funded status at December 31 is (in thousands):
2000 1999
---- ----
Funded status at December 31 $ (1,431) $ (1,441)
Unamortized prior cost 20 23
Unrecognized net actuarial gain (240) (205)
---------- ----------
Accrued post-retirement benefit cost included in
accrued liabilities $ (1,651) $ (1,623)
========== ==========
44
Net periodic post-retirement benefits cost included the following components
(in thousands):
2000 1999 1998
---- ---- ----
Service cost $ 35 $ 30 $ 35
Interest cost on APBO 106 93 101
Prior service cost 3 3 --
Actuarial gain (6) (7) --
-------- -------- -------
$ 138 $ 119 $ 136
======== ======== =======
The assumed health care cost trend rate used in measuring future benefit
costs was 7.5%, gradually declining to 6% by 2001 and remaining at that
level thereafter. A 1% increase in this annual trend rate would result in an
accumulated post-retirement benefit obligation of $1,402,000 and the
aggregate of service and interest cost components of net periodic
post-retirement benefit expense for the year ended December 31, 2000 of
$146,000. Conversely, a 1% decrease in the annual trend rate would result in
an accumulated post-retirement benefit obligation of $1,178,000 and the
aggregate of service and interest cost components of net periodic
post-retirement benefit expense of $117,000 for the year ended December 31,
2000. The assumed discount rate used in determining the accumulated
post-retirement benefit obligation was 7.75% and 7.25% as of December 31,
2000 and 1999, respectively.
(15) ACCRUED LIABILITIES CONSIST OF (IN THOUSANDS): 2000 1999
---- ----
Salaries and related benefits $ 8,107 $ 9,858
Interest 2,029 2,003
Facility closure costs 1,674 684
Post-retirement benefits 1,651 1,623
Other 1,782 5,730
--------- ---------
$ 15,243 $ 19,898
========= =========
(16) SUPPLEMENTAL CASH FLOW INFORMATION
Non-cash disclosures related to the acquisitions:
1999 1998
---- ----
Assets acquired $ 36,046 $ 54,656
Liabilities assumed (12,977) (16,270)
--------- ---------
Cash paid 23,069 38,386
Less cash acquired (134) (1,049)
--------- ---------
$ 22,935 $ 37,337
========= =========
Non-cash investing and financing activities:
During 2000 the company reduced its intangible asset related to the hourly
defined benefit pension plan in the amount of $552,000 and the related
long-term liability of $1,010,000. The offset resulted in the elimination of
the minimum pension liability adjustment of $284,000, net of tax benefit.
45
During 2000 the company increased its intangible asset related to the SERP
in the amount of $1,055,000 and increased the related long-term liability
for the same amount.
During 1999 the company recorded an intangible asset related to the hourly
defined benefit pension plan of $386,000 and a long-term liability of
$1,806,000. The offset resulted in a minimum pension liability adjustment of
$843,000, net of tax provision.
During 1999 the company reduced its intangible asset related to the SERP in
the amount of $2,406,000 and reduced the related long-term liability for the
same amount.
During 1998 the company recorded an intangible asset related to the hourly
defined benefit pension plan amounting to $166,000 and a long-term liability
of $2,170,000. The offset resulted in a minimum pension liability adjustment
of $1,128,000, net of tax benefit.
During 1998 the company increased its intangible asset related to the SERP
in the amount of $135,000 and a related long-term liability for the same
amount.
(17) SIGNIFICANT BUSINESS CONCENTRATIONS
2000 1999 1998
---- ---- ----
CUSTOMER CONCENTRATION
Total % sales from top 5 customers 23% 24% 24%
Foreign sales as % of total sales(a) 39% 34% 29%
Europe 33% 27% 23%
Far East 4% 4% 3%
Other (including Latin America) 2% 3% 3%
(a)Excluding Canada
(18) STOCK OPTION AND BONUS PLANS
The company has several stock option plans that provide for grants of
non-qualified or incentive stock options. The 1992 Amended and Restated
Stock Option Plan ("1992 Plan") is fully granted at 301,425 shares of common
stock to management of the company. Options granted under the 1992 Plan
typically vest at a rate of 20% per year and are exercisable for a period of
ten years from the grant date.
The 1994 Stock Option Plan ("1994 Plan") is fully granted at 300,000 shares
of common stock to selected officers and employees of the company. Options
granted under the Plan vest at a rate of 20% per year commencing on the one
year anniversary of the grant date and 1.66% at the end of each month
thereafter. The options are exercisable for a period of ten years from the
grant date.
The 1994 Director Stock Option Plan ("Directors' Plan") authorizes the grant
of up to 225,000 shares of common stock to directors who are not otherwise
full-time employees of the company. The Plan was amended in 1996 to increase
the authorized shares from 75,000 to 225,000 shares and to allow for an
accelerated vesting schedule not to exceed five years. Options will vest and
become exercisable based upon target levels set for the fair market value of
the common stock or in the event of a merger or asset sale. The options are
exercisable for a period of eight years from the date of grant.
46
During 1997 the company authorized the grant of up to 600,000 incentive
stock options under a new plan, the 1997 Stock Option Plan ("1997 Plan") to
selected officers and employees of the company. Options granted under the
1997 Plan vest at a rate of 20% per year and are exercisable for a period of
ten years from the grant date.
During 1998 the company authorized the grant of up to 200,000 stock options
under a new plan, the 1998 Stock Option Plan ("1998 Plan") to non-employee
Directors. The 1998 Plan contains two types of option grants: (1) a base
grant of an option for 7,500 shares which vests at a rate of 20% for each
year of board service and (2) a performance grant of an option for 15,000
shares which has accelerated vesting if the stock of the company reaches
certain price levels for 20 consecutive trading days and ultimately vests
after eight years of service on the Board of Directors.
The following table sets forth the stock option transactions for the three
years ended December 31, 2000:
Weighted
Number Average
of Exercise
Shares Price
------ -----
Outstanding, December 31, 1997 904,384 $10.70
1998: Granted 335,000 20.88
Exercised (61,285) 7.60
Forfeited (26,715) 13.02
--------
Outstanding, December 31, 1998 1,151,384 13.77
1999: Granted 196,500 13.75
Exercised (52,661) 7.67
Forfeited (126,828) 14.83
---------
Outstanding, December 31, 1999 1,168,395 13.93
2000: Granted 12,000 10.88
Forfeited (25,100) 16.83
---------
Outstanding, December 31, 2000 1,155,295 $12.60
========
47
The following table summarizes information about stock options outstanding at
December 31, 2000:
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------- ------------------------
Weighted
Number Average Weighted Number Weighted
Range of Outstanding Remaining Average Exercisable Average
Exercise at Contractual Exercise at Exercise
Prices 12/31/00 Life Price 12/31/00 Price
-------------------------------------------------------------------------------
$ 3.33 207,380 1.6 $ 3.33 207,380 $ 3.33
6.00 to 7.83 93,100 4.1 7.00 93,100 7.00
9.00 to 10.88 147,263 5.9 9.34 125,857 9.22
13.38 to 13.75 404,052 7.7 13.58 166,322 13.52
19.44 to 25.63 303,500 7.1 20.92 120,000 22.05
--------- -------
1,155,295 712,659
========= =======
The company has adopted the disclosure-only provisions of Statement of
Financial Standards No. 123, ACCOUNTING FOR STOCK-BASED COMPENSATION.
Accordingly, no compensation cost has been recognized for stock options
granted under the plans during 2000, 1999 and 1998 as the options were all
granted at exercise prices that equaled the market value at the date of the
grant. Had compensation cost for the company's stock option plans been
determined based on the fair value at the grant date for awards during 2000,
1999 and 1998 consistent with the provisions of SFAS No. 123, the company's
net income would have been reduced to the pro forma amounts indicated below:
2000 1999 1998
---- ---- ----
Net income, as reported $ 12,859 $ 8,983 $ 11,509
Net income, pro forma 10,963 7,265 9,919
Basic earnings per share, as reported $ 1.88 $ 1.17 $ 1.48
Basic earnings per share, pro forma 1.61 .95 1.28
Diluted earnings per share, as reported $ 1.84 $ 1.15 $ 1.43
Diluted earnings per share, pro forma 1.57 .93 1.23
Pro forma net income reflects only options granted after 1994. Therefore,
the full impact of calculating compensation cost for stock options under
SFAS No. 123 is not reflected in the pro forma net income amounts presented
above because compensation cost is reflected over the options' vesting
periods and compensation cost for options granted prior to January 1, 1995
is not considered.
The fair value of each option grant is estimated on the date of the grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions used for grants in 2000, 1999 and 1998,
respectively: risk-free interest rate of 6%; dividend yield of $0; expected
volatility of 39%, 33% and 51%; and expected lives per the plan agreement.
48
Effective January 1, 1994, the Compensation Committee adopted the Executive
Bonus Plan, which provides for bonus payments of a percentage of base salary
based upon achievement by the company of certain levels of earnings per
share. The Executive Bonus Plan utilizes a sliding scale so that the
percentage of base salary paid as bonus compensation increases as the
earnings per share of the company increase. The Executive Bonus Plan is
designed to directly align the interests of the executive officers and the
stockholders. The Executive Bonus Plan is subject to annual review by the
Committee. Expense recorded under the plan amounted to $1,240,000,
$1,723,000 and $1,621,000 in 2000, 1999 and 1998, respectively.
(19) UNAUDITED QUARTERLY SUMMARY INFORMATION
The following is a summary of unaudited quarterly summary information for
the years ended December 31, 2000, 1999 and 1998 (in thousands, except per
share data).
2000 MARCH 31 JUNE 30 SEPT 30 DEC 31
---- -------- ------- ------- ------
Net sales $ 95,088 $ 91,388 $ 84,458 $ 84,519
Gross profit 18,098 17,452 13,790 11,876
Net income 4,048 3,846 2,561 2,404
Basic earnings per share 0.59 0.56 0.37 0.35
Diluted earnings per share 0.58 0.55 0.37 0.35
1999(a) MARCH 31 JUNE 30 SEPT 30(1) DEC 31
------- -------- ------- ---------- ------
Net sales $ 75,906 $ 75,982 $ 81,866 $ 91,554
Gross profit 15,276 15,599 13,831 17,217
Net income (loss) 4,054 4,210 (1,533) 2,252
Basic earnings per share 0.52 0.54 (0.20) 0.30
Diluted earnings per share 0.51 0.53 (0.20) 0.30
1998(a) MARCH 31 JUNE 30 SEPT 30 DEC 31(2)
------- -------- ------- ------- ---------
Net sales $ 79,951 $ 78,591 $ 73,150 $ 75,400
Gross profit 15,676 14,767 13,383 13,929
Net income 4,351 3,751 3,318 89
Basic earnings per share 0.56 0.48 0.43 0.01
Diluted earnings per share 0.54 0.46 0.41 0.01
(a) Effective August 1, 1999, the company acquired Lahnstein Papierfabrik GmbH
at a purchase price of approximately $22 million. Effective January 1,
1998, the company acquired Steinbeis Gessner GmbH for a purchase price of
approximately $43 million.
(1) On August 31, 1999, the company initiated a project to install a new paper
machine at its Warren Glen, New Jersey, facility and to consolidate
operations from the neighboring Hughesville, New Jersey, mill. The company
plans to cease manufacturing operations at Hughesville by March 31, 2001,
and the book value of the mill has been written down by $7.2 million
accordingly. Additionally, the company incurred closure expenses for its
previously closed Beaver Falls and Owensboro facilities of $.1 million and
$2.5 million respectively.
49
(2) In the fourth quarter of 1998, the company announced its decision to close
the facility located in Beaver Falls, New York. Income from operations
reflects a $7,794,000 charge as a result of this event.
Note: Equivalent shares of common stock have not been included in the
1999 third quarter as their effect would be anti-dilutive.
(20) SEGMENT INFORMATION
On December 31, 1998, the company adopted Statement of Financial Accounting
Standards No. 131, DISCLOSURES ABOUT SEGMENTS OF AN ENTERPRISE AND RELATED
INFORMATION (SFAS 131). SFAS 131 established standards for reporting
information about operating segments in annual financial statements and
requires selected information about operating segments in interim financial
reports issued to stockholders. It also established standards for related
disclosures about products and services and geographic areas.
The company's reportable operating segments include: technical and office
products, durable specialties and German operations and filter media. Each
operating segment consists of facilities with common management, with
significant marketing and manufacturing overlap.
German operations and filter media manufactures filter media used in
automotive, vacuum, water and industrial filtration, including paper,
synthetic non-woven materials and composite materials. FiberMark Gessner
also manufactures technical specialties (abrasives) and durable specialties
(tape backing materials). This segment encompasses FiberMark Gessner GmbH,
Filter Media North America, and FiberMark Lahnstein (technical specialties).
The technical and office products segment manufactures a wide range of
specialty fiber-based materials used in communications, including base or
cover materials for electrical/electronics applications, graphic arts and
home and office products markets, as well as other technical specialties.
This represents our Technical & Office Products Division.
The durable specialties segment produces specialty tape substrates, using a
broad range of saturated, coated paper and non-woven materials. This
represents our U.S. Durable Specialties Division.
The following table details sales and selected financial data by operating
segment (in thousands). Inter-segment sales are accounted for as if the
sales were to third parties.
50
20. SEGMENT INFORMATION, (CONTINUED)
The following table categorizes net sales in each market segment into the
appropriate operating segment:
(In Thousands)
Operating Segment
------------------------------------------------------------
German Operations Technical
12 months ended December 31, 2000 and & Office Durable
Net sales Filter Media Products Specialties Other Total
------------ -------- ----------- ----- -----
MARKET SEGMENT
--------------
Filter Media $ 98,390 $ 5,325 $ -- $-- $103,715
Technical Specialties 46,980 54,836 -- -- 101,816
Durable Specialties 28,291 -- 71,259 -- 99,550
Office Products -- 50,372 -- -- 50,372
-------- -------- -------- --- --------
Total $173,661 $110,533 $ 71,259 $-- $355,453
======== ======== ======== === ========
12 months ended December 31, 1999
Net sales
MARKET SEGMENT
--------------
Filter Media $ 95,231 $ 5,237 $ -- $-- $100,468
Technical Specialties 22,448 58,019 -- -- 80,467
Durable Specialties 24,846 -- 65,382 -- 90,228
Office Products -- 54,145 -- -- 54,145
-------- -------- -------- --- --------
Total $142,525 $117,401 $ 65,382 $-- $325,308
======== ======== ======== === ========
12 months ended December 31, 1998
Net sales
MARKET SEGMENT
--------------
Filter Media $ 94,692 $ 4,065 $ -- $-- $ 98,757
Technical Specialties 7,181 72,717 -- -- 79,898
Durable Specialties 20,216 -- 55,688 -- 75,904
Office Products -- 52,533 -- -- 52,533
-------- -------- -------- --- --------
Total $122,089 $129,315 $ 55,688 $-- $307,092
======== ======== ======== === ========
51
(20) SEGMENT INFORMATION, (CONTINUED)
--------------------------------
(In thousands)
Operating Segment
------------------------------------------------------------------------------------------------
German Operations
and Technical and Durable
Filter Media Office Products Specialties Other Total
------------ --------------- ----------- ----- -----
12 months ended December 31, 2000
Net sales $173,661 $110,533 $ 71,259 $ -- $ 355,453
Inter-segment net sales 238 4,556 -- (4,794) --
-------- -------- -------- ------------ ---------
Total net sales $173,899 $115,089 $ 71,259 $ (4,794) $ 355,453
======== ======== ======== ============ =========
EBIT $ 19,984 $ 3,428 $ 11,093 $ 450 (1) $ 34,955
======== ======== ======== ============ =========
Depreciation & Amortization $ 3,914 $ 5,122 $ 2,408 $ -- $ 11,444
Total Assets $149,582 $147,394 $ 32,738 $ 56,499 (4) $ 386,213
12 months ended December 31, 1999
Net sales $142,525 $117,401 $ 65,382 $ -- $ 325,308
Inter-segment net sales 320 3,566 120 (4,006) --
-------- -------- -------- ------------ ---------
Total net sales $142,845 $120,967 $ 65,502 $ (4,006) $ 325,308
======== ======== ======== ============ =========
EBIT $ 17,030 $ 11,876 $ 9,477 $ (10,835)(2) $ 27,548
======== ======== ======== ============ =========
Depreciation & Amortization $ 2,979 $ 3,921 $ 2,390 $ -- $ 9,290
Total Assets $144,107 $121,587 $ 31,175 $ 50,077 (4) $ 346,946
12 months ended December 31, 1998
Net sales $122,089 $129,315 $ 55,688 $ -- $ 307,092
Inter-segment net sales 333 918 296 (1,547) --
-------- -------- -------- ------------ ---------
Total net sales $122,422 $130,233 $ 55,984 $ (1,547) $ 307,092
======== ======== ======== ============ =========
EBIT $ 14,623 $ 12,729 $ 7,567 $ (5,823)(3) $ 29,096
======== ======== ======== ============ =========
Depreciation & Amortization $ 2,649 $ 3,814 $ 2,490 $ -- $ 8,953
Total assets $112,917 $102,333 $ 57,011 $ 38,970 (4) $ 311,231
(1) 2000 Other Includes Facility Closure (Filter Media and Technical & Office Products Segment) $ (7,972)
Sale of technology (Filter Media Segment) 8,422
---------
$ 450
(2) 1999 Other Includes Sale/Leaseback Buyout (Technical & Office Products Segment) $ (1,017)
Facility Closure (Technical & Office Products Segment) $ ( 9,818)
---------
$ (10,835)
(3) 1998 Other Includes Facility Closure (Technical & Office Products Segment) $ (7,274)
Cogeneration Income 1,451
---------
$ (5,823)
(4) Corporate assets not allocated to operating segments.
52
(20) SEGMENT INFORMATION, (CONTINUED)
--------------------------------
Information concerning principal geographic areas is as follows (in thousands):
2000 1999 1998
----- ---- ----
NET SALES(a)
North America $216,826 $214,703 $217,664
Europe 117,299 87,833 69,202
Far East 14,218 13,013 9,426
Other 7,110 9,759 10,800
-------- -------- --------
Total $355,453 $325,308 $307,092
(a) Revenues are attributed to countries based on
product shipment destination.
2000 1999
---- ----
PROPERTY, PLANT AND EQUIPMENT, NET
North America $129,177 $108,112
Europe 65,328 63,311
-------- --------
Total $194,505 $171,423
2000 1999
---- ----
NET ASSETS
North America $ 64,536 $ 62,168
Europe 38,412 29,609
------- --------
Total $102,948 $ 91,777
53
(21) CONSOLIDATING FINANCIAL STATEMENTS
Below are consolidating balance sheets, statements of income and statements of
cash flows for FiberMark, Inc. as of December 31, 2000 and 1999 and for the
three years ended December 31, 2000 (in thousands).
CONSOLIDATING BALANCE SHEETS December 31, 2000
-----------------------------------------------------------
Domestic Foreign Consolidated
ASSETS Guarantor Non-Guarantor Eliminations FiberMark, Inc.
-----------------------------------------------------------
Current assets:
Cash $ -- $ 11,133 $ -- $ 11,133
Accounts receivable, net 28,541 16,718 (357) 44,902
Inventories 50,459 21,901 -- 72,360
Other 598 178 -- 776
Deferred income taxes 5,042 (92) -- 4,950
-----------------------------------------------------
Total current assets 84,640 49,838 (357) 134,121
Property, plant and equipment, net 129,177 65,328 -- 194,505
Goodwill, net 40,175 4,773 -- 44,948
Intercompany note receivable 18,140 -- (18,140) --
Investment in foreign subsidiaries 19,915 -- (19,915) --
Other intangible assets, net 5,586 1,192 -- 6,778
Other long-term assets 670 1,173 -- 1,843
Other pension assets 4,018 -- -- 4,018
-----------------------------------------------------
Total assets $ 302,321 $ 122,304 $ (38,412) $ 386,213
=====================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion long-term debt 1,485 8,190 -- 9,675
Accounts payable 19,058 10,836 (108) 29,786
Accrued liabilities 10,797 4,446 -- 15,243
Accrued income taxes payable 379 2,641 -- 3,020
-----------------------------------------------------
Total current liabilities 31,719 26,113 (108) 57,724
-----------------------------------------------------
Long-term liabilities:
Revolving credit line 39,027 -- -- 39,027
Long-term debt, less current portion 110,749 32,518 -- 143,267
Intercompany notes payable -- 15,999 (15,999) --
Deferred income taxes 11,874 9,565 -- 21,439
Other long-term liabilities 6,004 15,804 -- 21,808
-----------------------------------------------------
Total long-term liabilities 167,654 73,886 (15,999) 225,541
-----------------------------------------------------
Total liabilities 199,373 99,999 (16,107) 283,265
Commitments and contingencies
Stockholders' equity:
Preferred stock -- -- -- --
Common stock 7 55 (55) 7
Additional paid-in capital 64,399 3,383 (3,383) 64,399
Retained earnings 42,876 20,678 (20,678) 42,876
Accumulated other comprehensive loss (4,299) (1,811) 1,811 (4,299)
Less treasury stock (35) -- -- (35)
-----------------------------------------------------
Total stockholders' equity 102,948 22,305 (22,305) 102,948
-----------------------------------------------------
Total liabilities and stockholders' equity $ 302,321 $ 122,304 $ (38,412) $ 386,213
=====================================================
54
CONSOLIDATING STATEMENTS OF INCOME Year ended December 31, 2000
------------------------------------------------------------------
Domestic Foreign Consolidated
Guarantor Non-Guarantor Eliminations FiberMark, Inc.
------------------------------------------------------------------
Net sales $ 220,785 $ 134,668 $ -- $ 355,453
Cost of sales 187,689 106,548 -- 294,237
---------------------------------------------------------------
Gross profit 33,096 28,120 -- 61,216
Selling, general and administrative expenses 16,612 8,520 -- 25,132
Facility closure expense 7,972 -- -- 7,972
Sale of technology (8,422) -- -- (8,422)
---------------------------------------------------------------
Income from operations 16,934 19,600 -- 36,534
Other expense (income), net 1,759 (180) -- 1,579
Equity in subsidiary income (9,645) -- 9,645 --
Interest expense 12,655 3,813 (1,232) 15,236
Interest income (2,632) (369) 1,232 (1,769)
---------------------------------------------------------------
Income before income taxes 14,797 16,336 (9,645) 21,488
Income tax expense 1,938 6,691 -- 8,629
---------------------------------------------------------------
Net income $ 12,859 $ 9,645 $ (9,645) $ 12,859
===============================================================
55
CONSOLIDATING STATEMENTS OF CASH FLOWS Year ended December 31, 2000
---------------------------------------------------------
Domestic Foreign Consolidated
Guarantor Non-Guarantor Eliminations FiberMark, Inc.
---------------------------------------------------------
Cash flows from operating activities:
Net income $ 12,859 $ 9,645 $ (9,645) $ 12,859
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 8,800 2,644 -- 11,444
Equity in subsidiary income (9,645) -- 9,645 --
Loss on closure of facility 7,972 -- -- 7,972
Loss on sale of property, plant and equipment 7 -- -- 7
Deferred taxes 1,099 3,628 -- 4,727
Changes in operating assets and liabilities:
Accounts receivable (3,179) (938) -- (4,117)
Inventories (10,087) (5,388) -- (15,475)
Other (80) 8 -- (72)
Accounts payable 8,240 3,967 -- 12,207
Accrued pension and other liabilities (2,237) (3,019) -- (5,256)
Intercompany accounts, net (1,095) 12 1,083 --
Other long-term liabilities 533 (310) -- 223
Accrued income taxes payable (271) 606 -- 335
--------------------------------------------------
Net cash provided by operating activities 12,916 10,855 1,083 24,854
Cash flows from investing activities:
Purchase of life insurance (275) -- -- (275)
Additions to property, plant and equipment (34,239) (8,359) -- (42,598)
Investment in subsidiary -- (10) 10 --
Net proceeds from sale of property, plant and equipment 2 -- -- 2
Increase in other intangible assets (834) (280) -- (1,114)
--------------------------------------------------
Net cash used in investing activities (35,346) (8,649) 10 (43,985)
Cash flows from financing activities:
Proceeds from issuance of bank debt 12,979 2,358 -- 15,337
Stock repurchase (35) -- -- (35)
Net borrowings under revolving credit line 11,059 -- -- 11,059
Repayment of debt (745) (6,603) -- (7,348)
Net borrowings under intercompany notes -- 927 (927) --
Capital reserve -- (49) 49 --
--------------------------------------------------
Net cash provided by (used in) financing activities 23,258 (3,367) (878) 19,013
Effect of exchange rate changes on cash -- (1,000) (215) (1,215)
Net increase (decrease) in cash 828 (2,161) -- (1,333)
Cash at beginning of year (828) 13,294 -- 12,466
--------------------------------------------------
Cash at end of year $ -- $ 11,133 $ -- $ 11,133
==================================================
56
CONSOLIDATING BALANCE SHEETS December 31, 1999
--------------------------------------------------------
Domestic Foreign Consolidated
ASSETS Guarantor Non-Guarantor Eliminations FiberMark, Inc.
--------------------------------------------------------
Current assets:
Cash $ (828) $ 13,294 $ -- $ 12,466
Accounts receivable, net 25,362 16,875 (357) 41,880
Inventories 40,372 17,556 -- 57,928
Other 518 199 -- 717
Deferred income taxes 4,375 (393) -- 3,982
-----------------------------------------------------
Total current assets 69,799 47,531 (357) 116,973
Property, plant and equipment, net 108,112 63,311 -- 171,423
Goodwill, net 41,732 5,306 -- 47,038
Intercompany note receivable 17,045 -- (17,045) --
Investment in foreign subsidiaries 12,207 -- (12,207) --
Other intangible assets, net 5,103 1,165 -- 6,268
Other long-term assets 357 1,245 -- 1,602
Other pension assets 3,642 -- -- 3,642
-----------------------------------------------------
Total assets $ 257,997 $ 118,558 $ (29,609) $ 346,946
=====================================================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion long-term debt 7,221 -- -- 7,221
Accounts payable 10,818 7,252 (116) 17,954
Accrued liabilities 11,837 8,061 -- 19,898
Accrued income taxes payable 650 2,165 -- 2,815
-----------------------------------------------------
Total current liabilities 30,526 17,478 (116) 47,888
-----------------------------------------------------
Long-term liabilities:
Revolving credit line 27,968 -- -- 27,968
Long-term debt, less current portion 92,779 48,227 -- 141,006
Intercompany notes payable -- 16,115 (16,115) --
Deferred income taxes 10,108 5,979 -- 16,087
Other long-term liabilities 4,839 17,381 -- 22,220
-----------------------------------------------------
Total long-term liabilities 135,694 87,702 (16,115) 207,281
-----------------------------------------------------
Total liabilities 166,220 105,180 (16,231) 255,169
Commitments and contingencies
Stockholders' equity:
Preferred stock -- -- -- --
Common stock 8 55 (55) 8
Additional paid-in capital 77,052 3,429 (3,429) 77,052
Retained earnings 30,017 11,033 (11,033) 30,017
Accumulated other comprehensive loss (2,646) (1,139) 1,139 (2,646)
Less treasury stock (12,654) -- -- (12,654)
-----------------------------------------------------
Total stockholders' equity 91,777 13,378 (13,378) 91,777
-----------------------------------------------------
Total liabilities and stockholders' equity $ 257,997 $ 118,558 $ (29,609) $ 346,946
=====================================================
57
CONSOLIDATING STATEMENTS OF INCOME Year ended December 31, 1999
-----------------------------------------------------------
Domestic Foreign Consolidated
Guarantor Non-Guarantor Eliminations FiberMark, Inc.
-----------------------------------------------------------
Net sales $ 220,276 $ 105,032 $ -- $ 325,308
Cost of sales 181,149 82,236 -- 263,385
-------------------------------------------------------
Gross profit 39,127 22,796 -- 61,923
Selling, general and administrative expenses 16,768 7,320 -- 24,088
Facility closure expense 9,818 -- -- 9,818
-------------------------------------------------------
Income from operations 12,541 15,476 -- 28,017
Other expense (income), net 543 (74) -- 469
Equity in subsidiary income (6,482) -- 6,482 --
Interest expense 9,528 3,380 (970) 11,938
Interest income (1,664) (165) 970 (859)
-------------------------------------------------------
Income before income taxes 10,616 12,335 (6,482) 16,469
Income tax expense 1,633 5,853 -- 7,486
-------------------------------------------------------
Net income $ 8,983 $ 6,482 $ (6,482) $ 8,983
=======================================================
58
CONSOLIDATING STATEMENTS OF CASH FLOWS Year ended December 31, 1999
-----------------------------------------------------------
Domestic Foreign Consolidated
Guarantor Non-Guarantor Eliminations FiberMark, Inc.
-----------------------------------------------------------
Cash flows from operating activities:
Net income $ 8,983 $ 6,482 $ (6,482) $ 8,983
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 7,464 1,826 -- 9,290
Amortization of deferred gain (1,289) -- -- (1,289)
Equity in subsidiary income (6,482) -- 6,482 --
Loss on closure of facility 9,818 -- -- 9,818
Loss on sale of property, plant and equipment -- (2) -- (2)
Deferred taxes 164 4,479 -- 4,643
Changes in operating assets and liabilities:
Accounts receivable (3,688) (5,279) -- (8,967)
Inventories (2,412) (4,184) -- (6,596)
Other 102 634 -- 736
Accounts payable 408 789 -- 1,197
Accrued pension and other liabilities (4,769) 2,949 -- (1,820)
Prepaid expense (204) -- -- (204)
Intercompany accounts, net (121) (229) 350 --
Other long-term liabilities 115 182 -- 297
Accrued income taxes payable 650 1,719 -- 2,369
--------------------------------------------------------
Net cash provided by operating activities 8,739 9,366 350 18,455
Cash flows from investing activities:
Purchase of life insurance (806) -- -- (806)
Additions to property, plant and equipment (11,177) (4,559) -- (15,736)
Investment in subsidiary -- (13) 13 --
Net proceeds from sale of property, plant and equipment -- 38 -- 38
Payments for business acquired -- (22,935) -- (22,935)
Increase in other intangible assets (76) (178) -- (254)
--------------------------------------------------------
Net cash used in investing activities (12,059) (27,647) 13 (39,693)
Cash flows from financing activities:
CIT sale/leaseback buyout (30,651) -- -- (30,651)
Proceeds from issuance of bank debt -- 20,957 -- 20,957
Net proceeds from exercise of stock options 498 -- -- 498
Stock repurchase (12,654) -- -- (12,654)
Net borrowings under revolving credit line 27,968 -- -- 27,968
Repayment of debt -- (3,810) -- (3,810)
Net borrowings under intercompany notes (6,083) 6,169 (86) --
Debt issuance costs (211) (155) -- (366)
Capital reserve -- (57) 57 --
--------------------------------------------------------
Net cash provided by (used in) financing activities (21,133) 23,104 (29) 1,942
Effect of exchange rate changes on cash -- (1,708) (334) (2,042)
Net increase (decrease) in cash (24,453) 3,115 -- (21,338)
Cash at beginning of year 23,625 10,179 -- 33,804
--------------------------------------------------------
Cash at end of year $ (828) $ 13,294 $ -- $ 12,466
========================================================
59
CONSOLIDATING STATEMENTS OF INCOME Year ended December 31, 1998
-------------------------------------------------------------
Domestic Foreign Consolidated
Guarantor Non-Guarantor Eliminations FiberMark, Inc.
-------------------------------------------------------------
Net sales $ 225,881 $ 81,211 $ -- $ 307,092
Cost of sales 185,806 63,531 -- 249,337
-------------------------------------------------------
Gross profit 40,075 17,680 -- 57,755
Selling, general and administrative expenses 16,244 6,440 -- 22,684
Facility closure expense 7,274 -- -- 7,274
-------------------------------------------------------
Income from operations 16,557 11,240 -- 27,797
Other expense, net 152 -- -- 152
Cogeneration income (1,451) -- -- (1,451)
Equity in subsidiary income (4,551) -- 4,551 --
Interest expense 9,686 2,751 (762) 11,675
Interest income (1,843) (99) 762 (1,180)
-------------------------------------------------------
Income before income taxes 14,564 8,588 (4,551) 18,601
Income tax expense 3,055 4,037 -- 7,092
-------------------------------------------------------
Net income $ 11,509 $ 4,551 $ (4,551) $ 11,509
=======================================================
60
CONSOLIDATING STATEMENTS OF CASH FLOWS Year ended December 31, 1998
-------------------------------------------------------
Domestic Foreign Consolidated
Guarantor Non-Guarantor Eliminations FiberMark, Inc.
-------------------------------------------------------
Cash flows from operating activities:
Net income $ 11,509 $ 4,551 $ (4,551) $ 11,509
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 7,339 1,614 -- 8,953
Amortization of deferred gain (1,719) -- -- (1,719)
Equity in subsidiary income (4,551) -- 4,551 --
Loss on closure of facility 7,274 -- -- 7,274
Loss on sale of property, plant and equipment 125 -- -- 125
Deferred taxes 30 3,687 -- 3,717
Changes in operating assets and liabilities:
Accounts receivable 1,725 (170) -- 1,555
Inventories (935) (1,197) -- (2,132)
Other (282) 3 -- (279)
Accounts payable (8,412) 870 -- (7,542)
Accrued pension and other liabilities (1,923) 1,158 -- (765)
Prepaid expense (307) -- -- (307)
Intercompany accounts, net -- 418 (418) --
Other long-term liabilities 361 (197) -- 164
Accrued income taxes payable (2,560) 577 -- (1,983)
---------------------------------------------------
Net cash provided by operating activities 7,674 11,314 (418) 18,570
Cash flows from investing activities:
Purchase of life insurance (1,207) -- -- (1,207)
Additions to property, plant and equipment (8,450) (5,493) -- (13,943)
Investment in subsidiary (3,537) (37) 3,574 --
Net proceeds from sale of property, plant and equipment 22 -- -- 22
Payments for business acquired -- (37,337) -- (37,337)
Decrease (increase) in other intangible assets 227 (372) -- (145)
---------------------------------------------------
Net cash used in investing activities (12,945) (43,239) 3,574 (52,610)
Cash flows from financing activities:
Proceeds from issuance of bank debt -- 29,552 -- 29,552
Proceeds from issuance of common stock 2,628 -- -- 2,628
Cost of stock offering (511) -- -- (511)
Net proceeds from exercise of stock options 466 -- -- 466
Net borrowings under intercompany notes (10,962) 10,897 65 --
Debt issuance costs -- -- -- --
Capital reserve -- 3,511 (3,511) --
---------------------------------------------------
Net cash provided by (used in) financing activities (8,379) 43,960 (3,446) 32,135
Effect of exchange rate changes on cash -- (1,856) 290 (1,566)
Net increase (decrease) in cash (13,650) 10,179 -- (3,471)
Cash at beginning of year 37,275 -- -- 37,275
---------------------------------------------------
Cash at end of year $ 23,625 $ 10,179 $ -- $ 33,804
===================================================
61
FIBERMARK, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(In Thousands)
Balance at Charged to Balance
Beginning Costs and at End
DESCRIPTION of Period Expenses Deductions of Period
----------- --------- -------- ---------- ---------
Year Ended December 31, 2000 Allowances for possible
losses on accounts receivable ...................... $1,023 $ 594 $ 397 $1,220
Year Ended December 31, 1999 Allowances for possible
losses on accounts receivable ...................... $ 626 $ 694 $ 297 $1,023
Year Ended December 31, 1998 Allowances for possible
losses on accounts receivable ...................... $ 203 $ 586 $ 163 $ 626
62
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
FiberMark, Inc.:
Under date of February 2, 2001, we reported on the consolidated balance sheets
of FiberMark, Inc. and subsidiaries as of December 31, 2000 and 1999, and the
related consolidated statements of income, stockholders' equity and
comprehensive income, and cash flows for each of the years in the three-year
period ended December 31, 2000, as contained in the annual report on Form 10-K
for the year 2000. In connection with our audits of the aforementioned
consolidated financial statements, we also audited the related consolidated
financial statement schedule as listed in the accompanying index. This financial
statement schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement schedule
based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, present fairly,
in all material respects, the information set forth therein.
/s/ KPMG LLP
Burlington, Vermont
February 2, 2001
63
ITEM 14 (A) (3) EXHIBITS
NUMBER DESCRIPTION
------ -----------
2.1(10) Share Purchase Agreement dated as of November 26, 1997, among
Steinbeis Holding GmbH ("Steinbeis"), Zetaphoenicis
Beteiligungs GmbH and Thetaphoenicis Beteiligungs GmbH
2.2(10) Acquisition Agreement dated September 15, 1999 by and
between SIHL Beteiligungsgesellschaft GmbH and FiberMark
GmbH and FiberMark Beteiligungs GmbH
3.1(1) Restated Certificate of Incorporation of the Company as
amended through March 25, 1997
3.2(10) Certificate of Ownership and Merger of FiberMark, Inc.
with and into Specialty Paperboard, Inc. filed with the
Secretary of State of Delaware on March 26, 1997
3.3(1) Restated By-laws
4.1(1) Reference is made to Exhibits 3.1, 3.2 and 3.3
4.2(1) Specimen stock certificate
4.3(9) Indenture dated as of October 15, 1996 (the "Indenture")
among the Company, CPG Co., Specialty Paperboard/Endura,
Inc. ("Endura") and the Wilmington Trust Company
("Wilmington")
4.4(9) Specimen Certificate of 9 3/8% Series B Senior Note due
2006 (included in Exhibit 4.3 hereof)
4.5(9) Form of Guarantee of Senior Notes issued pursuant to the
Indenture (included in Exhibit 4.3 hereof)
10.1(5) Lease Agreement dated April 29, 1994, between CIT
Group/Equipment Financing Inc. ("CIT/Financing") and the
Company
10.2(5) Grant of Security Interest in Patents, Trademarks and
Leases dated April 29, 1994, between the Company and
CIT/Financing
10.3(5) Bill of Sale dated April 29, 1994, to CIT/Financing
10.4(1)(3) Form of Indemnity Agreement entered into between the
Company and its directors and executive officers
10.5(1)(3) The Company's 1992 Amended and Restated Stock Option Plan
and related form of Option Agreement
10.6(1) Paper Procurement Agreement, between the Company and
Acco-U.S.A
10.7(1) Energy Service Agreement (Latex mill), dated as of
November 19, 1992, between Kamine and the Company
10.8(2) Amendment No. 1 to the Energy Service Agreement (Latex
mill), dated as of May 7, 1993, between Kamine and the
Company
10.9(1) Energy Service Agreement (Lewis mill), dated as of
November 19, 1992, between Kamine and the Company
10.10(2) Amendment No. 1 to the Energy Service Agreement (Lewis
mill), dated as of May 7, 1993, between Kamine and the
Company
10.11(1) Restated Ground Lease, dated as of November 19, 1992,
between Kamine and the Company
10.12(1) Beaver Falls Cogeneration Buyout Agreement, dated as of
November 20, 1992, between Kamine, Kamine Beaver Falls
Cogen. Co., Inc. and the Company
10.13(2) Consent and Agreement (Energy Services Agreement), dated
as of May 7, 1993, by the Company
10.14(2) First Amendment of Restated Ground Lease, dated as of
May 7, 1993, between Kamine and the Company
64
10.15(2) Memorandum of Lease, dated as of May 7, 1993, between
Kamine and the Company
10.16(7)(3) The Company's 1994 Stock Option Plan and related forms of
Option Agreements
10.17(7)(3) The Company's 1994 Directors Stock Option Plan and
related form of Option Agreement
10.18(9)(3) Amendment to the Company's 1994 Directors Stock Option
Plan
10.19(4)(3) The Company's Executive Bonus Plan
10.20(9) Deed of Lease between James River Paper Company, Inc. and
CPG-Virginia Inc. dated as of October 31, 1993
10.21(9) Amended and Restated Agreement of Lease, between Arnold
Barsky doing business as A&C Realty and Arcon Mills Inc.,
dated June 1, 1988
10.22(9) Lease Agreement dated November 15, 1995, between IFA
Incorporated and Custom Papers Group Inc. ("Custom Papers
Group")
10.23(9) Master Lease Agreement dated January 1, 1994, between
Meridian Leasing Corp. and Custom Papers Group
10.24(9) Master Equipment Lease Agreement dated February 3, 1995,
between Siemens Credit Corp. and CPG Holdings Inc.
10.25 (6) Endura Sale Agreement, by and among W.R. Grace & Co.
Conn., W.R. Grace (Hong Kong) Limited, Grace Japan
Kabushiki Kaisha (collectively, the "Sellers"), the
Company, Specialty Paperboard (Hong Kong Limited) and
Specialty Paperboard Japan Kabushiki Kaisha (collectively
the "Buyers"), dated May 10, 1994
10.26 (11) Loan Agreement dated as of November 24, 1997, between
Steinbeis and Gessner
10.27 (11) Expansion Land Option and Preemption Right Agreement
dated as of November 13, 1997, between Steinbeis and
Gessner
10.28 (12) Third Amended and Restated Financing Agreement & Guaranty
10.29 (12) Second Amended and Restated Security Agreement dated
December 31, 1997, between FiberMark Office Products, LLC and
CIT Group/Equipment Financing, Inc.
10.30 (12) Second Amended and Restated Security Agreement dated
December 31, 1997, between FiberMark, Inc. FiberMark
Durable Specialties, Inc., and FiberMark Filter and
Technical Products
10.31 (12) Loan Agreement dated as of January 7, 1988, between
Zetaphoenicis Beteiligungs GmbH and Bayerische
Vereinsbank AG ("Bayerische")
10.32 (12) Working Credit Facility dated as of January 13, 1998
between Gessner and Bayerische
10.33 (12) Capex Loan Agreement dated as of January 13, 1998,
between Gessner and Bayerische
10.34 (13) 1998 Amended and Restated Non-Employee Directors Stock
Option Plan
10.35 (13) Loan Agreement dated September 15, 1999 between FiberMark
GmbH (the "Borrower") and Bayerische Hypo- und
Vereinsbank Aktiengesellschaft (Lender)
10.36 (13) Loan Amendment Agreement dated September 15, 1999 between
FiberMark GmbH (the "Borrower") and Bayerische Hypo- und
Vereinsbank Aktiengesellschaft (Lender)
10.37 (13) Share Pledge Agreement dated September 15, 1999 between
FiberMark Beteiligungs GmbH and FiberMark GmbH (the
"Pledgors") and Bayerische Hypo- und Vereinsbank AG (the
"Pledgee")
65
10.38 (13) Pledge Amendment Agreement dated September 15, 1999
between FiberMark Beteiligungs GmbH and FiberMark GmbH
(the "Pledgors") and Bayerische Hypo- und Vereinsbank AG
(the "Pledgee")
10.39 (13) Third Amended and Restated Financing Agreement
and Guaranty dated September 30, 1999 among
FiberMark, Inc.; FiberMark Durable Specialties,
Inc.; FiberMark Filter and Technical Products,
Inc. and FiberMark Office Products, LLC (as
"Borrowers and Guarantors") and The CIT
Group/Business Credit, Inc., The CIT
Group/Equipment Financing, Inc. (as "Lenders")
10.40 (13) Termination and Release Agreement among FiberMark Office
Products, LLC; FiberMark, Inc.; FiberMark Durable
Specialties, Inc.; FiberMark Filter and Technical
Products, Inc., and The CIT Group/Equipment Financing,
Inc.
10.41 Asset Purchase Agreement dated August 18, 2000, between
Ahlstrom Engine Filtration, LLC (the "Purchaser"), and
FiberMark, Inc. (the "Seller")
21 List of FiberMark subsidiaries
23.1 Consent of KPMG LLP
66
NOTES TO EXHIBITS
(1) Incorporated by reference to exhibits filed with the company's
Registration Statement on Form S-1 (No. 33-47954), as amended, which
became effective March 10, 1993.
(2) Incorporated by reference to exhibits filed with the company's report on
Form 10-Q for the quarter ended June 30, 1993, filed August 13, 1993.
(3) Indicates management contracts or compensatory arrangements filed pursuant
to Item 601(b)(10) of Regulation S-K.
(4) Incorporated by reference to exhibits filed with the company's report
on Form 10-K for the year ended December 31, 1993 (No. 0-20231).
(5) Incorporated by reference to exhibits filed with the company's report on
Form 10-Q for the quarter ended March 31, 1994, filed May 14, 1994.
(6) Incorporated by reference to exhibits filed with the company's report on
Form 8-K, filed July 14, 1994.
(7) Incorporated by reference to exhibits filed with the company's
Registration Statement on Form S-8 filed, July 18, 1994.
(8) Incorporated by reference to exhibits filed with the company's report
on Form 10-K for the year ended December 31, 1994 (No. 0-20231).
(9) Incorporated by reference to exhibits filed with the company's report on
Form 10-K for the year ended December 31, 1996, filed April 1, 1997.
(10) Previously filed.
(11) Incorporated by reference to exhibits filed with the company's
Registration Statement on Form S-3, filed December 15, 1997.
(12) Incorporated by reference to exhibits filed with the company's report on
Form 10-K for the year ended December 31, 1997, filed March 31, 1998.
(13) Incorporated by reference to exhibits filed with the company's report on
Form 10-K for the year ended December 31, 1999, filed March 31, 2000.
67
FIBERMARK, INC.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized, in the City of Brattleboro,
County of Windham, State of Vermont, on the 8th day of February, 2001.
FiberMark, Inc.
By /s/ ALEX KWADER
---------------------------
Alex Kwader
President and
Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints Alex Kwader and Bruce Moore, or any of them, his or her
attorney-in-fact, each with the power of substitution, for him or her in any and
all capacities, to sign any amendments to this Report, and to file the same,
with exhibits thereto and other documents in connections therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
each of said attorneys-in-fact, or his or her substitute or substitutes, may do
or cause to be done by virtue hereof. This Form 10-K may be executed in multiple
counterparts, each of which shall be an original, but which shall together
constitute but one agreement.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/S/ ALEX KWADER President and February 8, 2001
------------------------ Chief Executive Officer
Alex Kwader
/S/ K. PETER NORRIE Chairman of the Board February 8, 2001
------------------------
K. Peter Norrie
/S/ BRIAN C. KERESTER Director February 8, 2001
------------------------
Brian C. Kerester
/S/ MARION A. KEYES, IV Director February 8, 2001
------------------------
Marion A. Keyes, IV
/S/ GLENN S. MCKENZIE Director February 8, 2001
------------------------
Glenn S. McKenzie
/S/ JON H. MILLER Director February 8, 2001
------------------------
Jon H. Miller
/S/ ELMAR B. SCHULTE Director February 8, 2001
-------------------------
Elmar B. Schulte
/S/ EDWARD P. SWAIN, JR. Director February 8, 2001
-------------------------
Edward P. Swain, Jr.
/S/ BRUCE MOORE Vice President February 8, 2001
-------------------------
Bruce Moore Chief Financial Officer
68