Smurfit Kappa Group 2006 Second Quarter Results.DUBLIN Dublin, city, Republic of Ireland Dublin, Irish Baile Átha Cliath, county borough (1991 pop. 915,516), Leinster, capital of the Republic of Ireland, on Dublin Bay at the mouth of the Liffey River. , Ireland Ireland, Irish Eire (âr`ə) [to it are related the poetic Erin and perhaps the Latin Hibernia], island, 32,598 sq mi (84,429 sq km), second largest of the British Isles. -- Smurfit Kappa Funding plc (formerly JSG JSG Joint Study Group (India and Pakistan) JSG Jain Social Group Funding plc), incorporating Kappa Packaging ('SKG' or 'the Group'), today announced results for the 3 months and 6 months ending June June: see month. 30, 2006. Overview Smurfit Kappa Group The Smurfit Kappa Group is Europe's leading corrugated packaging company, following the merger of Jefferson Smurfit Group and Kappa Packaging. This merger was finalized by the end of 2005. was formed on December December: see month. 1, 2005 through the merger of the operations of Jefferson Jefferson, uninc. city (1990 pop. 25,782), Fairfax co., N Va. It is a residential suburb of Washington, D.C. Smurfit Group ('JSG') and Kappa Packaging ('Kappa'). The combination of JSG and Kappa creates a strong, focused player in paper-based packaging, with compelling strategic, operational and geographic geographic /geo·graph·ic/ (je?o-graf´ik) in pathology, of or referring to a pattern that is well demarcated, resembling outlines on a map. geographic pertaining to geography. fit. SKG SKG Stichting Kwaliteit Gevelbouw (Dutch) SKG Spielberg, Katzenberg,and Geffen (DreamWorks Studios) SKG Thessaloniki, Greece - Thessaloniki (Airport Code) SKG Smith and Kraus Global is now a world leader in corrugated cor·ru·gate v. cor·ru·gat·ed, cor·ru·gat·ing, cor·ru·gates v.tr. To shape into folds or parallel and alternating ridges and grooves. v.intr. , a clear European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. leader in containerboard con·tain·er·board n. A corrugated or solid cardboard used to make containers. and has market leading positions, in both containerboard and corrugated, in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. . As the merger of JSG and Kappa was completed on December 1, 2005, the reported financial performance of SKG, for the second quarter and first half of 2005, does not include the results of Kappa Packaging. Therefore, for the purposes of comparison year-on-year, results of the combined group for the second quarter and first half of 2005 are included in the table below.
Combined Combined
2Q '06 2Q '05 Change H1 '06 H1 '05 Change
EUR M EUR M % EUR M EUR M %
----------------------------------------------------------------------
Net Sales 1,772 1,808 (2%) 3,520 3,508 -
EBITDA * 210 227 (7%) 382 422 (9%)
EBITDA Margin * 11.9% 12.6% (6%) 10.9% 12.0% (9%)
* Pre-exceptional EBITDA of subsidiaries only.
2006 Second Quarter Performance Review and Outlook Gary Gary, city (1990 pop. 116,646), Lake co., NW Ind., a port of entry on Lake Michigan; inc. 1909. Gary was founded by the U.S. Steel Corporation, which purchased the land in 1905 and landscaped it for a city. McGann McGann is a surname, and may refer to
This page or section lists people with the surname , Chief Executive Officer, commented "SKG's second quarter results were up 22% on those of the first quarter. This was underpinned by improving European industry conditions, which have led to increased pricing momentum. Year on year, however, SKG's financial performance does not yet show a corresponding improvement, as increasing variable costs dampen the impact of rising prices. Our Latin Lat·in n. 1. a. The Indo-European language of the ancient Latins and Romans and the most important cultural language of western Europe until the end of the 17th century. b. American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of operations again reported broad-based broad-based Of or relating to an index or average that provides a good representation of the overall market. The S&P 500 and NYSE Composite are generally regarded as broad-based stock indexes, while the popular Dow Jones Industrial Average is biased growth for the second quarter. Our mill system, in this region, is now operating at or close to capacity and projects are in progress to address this. Better than expected corrugated demand growth and increasingly broad-based capacity rationalisation Noun 1. rationalisation - (psychiatry) a defense mechanism by which your true motivation is concealed by explaining your actions and feelings in a way that is not threatening rationalization are the factors which are delivering and should sustain improving industry conditions. SKG will continue to assess its own capacity requirements and the cost profile of its existing mill system but it is now increasingly apparent that the European market is progressively coming into balance. The steps we have taken and will continue to take, in terms of capacity rationalisation decisions, reflect our commitment to focus on value creation and to provide industry leadership within our chosen grades. We are pleased to report that nine months into the life of the Smurfit Kappa Group both management teams and operations of the former companies are combining well. SKG's scale, structure, focus and asset quality is significantly better than it was for either entity on a stand alone basis. We believe that the benefits of affirmative AFFIRMATIVE. Averring a fact to be true; that which is opposed to negative. (q.v.) 2. It is a general rule of evidence that the affirmative of the issue must be proved. Bull. N. P. 298 ; Peake, Ev. 2. 3. industry action will become increasingly apparent towards the latter half of 2006 and beyond. We believe SKG now has world class manufacturing capabilities and an increasingly competitive cost base. We are excited by the opportunities that this combination presents. With market leading positions across Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and Latin America, SKG is uniquely positioned to
capitalise Verb 1. capitalise - supply with capital, as of a business by using a combination of capital used by investors and debt capital provided by lenderscapitalize upon the benefits of a balanced market in developed economies and the sustainable growth opportunities in Latin America and Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. ." 2006 Second Quarter Review The reported financial performance of SKG, which does not include the results of Kappa Packaging for the second quarter or first half of 2005, are set out below.
2Q '062Q '05Change2Q '061Q '06Change1H '061H '05Change
EUR EUR EUR EUR EUR EUR
M M % M M % M M %
----------------------------------------------------------------------
Net Sales 1,772 1,097 62%1,772 1,748 1%3,520 2,148 64%
EBITDA * 210 129 63% 210 172 22% 382 238 61%
.
EBITDA Margin * 11.9% 11.8% 1% 11.9% 9.8% 21% 10.9% 11.1% (2%)
* Pre-exceptional EBITDA of
subsidiaries only.
----------------------------------------------------------------------
Free cash flow (43) 13 - (43) (90) (52%) (133) (20) -
Net debt at
period end
(including
capital leases)4,667 2,499 87%4,667 4,644 - 4,667 2,499 87%
The European market environment continued to show improvement during the second quarter of 2006. Product price increases, for both kraftliner and recycled containerboard, were implemented towards the end of both the first and second quarters. Further price increases have been announced for September September: see month. , 2006. The positive impact of these price increases has been significantly eroded e·rode v. e·rod·ed, e·rod·ing, e·rodes v.tr. 1. To wear (something) away by or as if by abrasion: Waves eroded the shore. 2. To eat into; corrode. by rising input costs. However, paper price increases are now contributing to rising margins in our mill system. SKG, as an integrated producer, continues to experience margin pressure in corrugated as a consequence of rising paper and other input prices. However, those increases are slowly but progressively being recovered in corrugated prices. In Latin America, SKG's operations continued to report broad-based growth in the second quarter. In particular, Mexico Mexico, city, Mexico Mexico or Mexico City, Span. Ciudad de México (Méjico), city (1990 pop. 8,236,960; 1991 met. area est. 20,899,000), central Mexico, capital and largest city of Mexico. continued to report good growth while political stability and a recent weakening weak·en tr. & intr.v. weak·ened, weak·en·ing, weak·ens To make or become weak or weaker. weak  en·er n. of the currency contributed to
continued growth in Colombia Colombia (kəlŭm`bēə, Span. kōlōm`byä), officially Republic of Colombia, republic (2005 est. pop. 42,954,000), 439,735 sq mi (1,138,914 sq km), NW South America. Bogotá is the capital and largest city. . It is not expected that political
uncertainty in Mexico will materially affect business conditions in
2006. Venezuela Venezuela (vĕnəzwā`lə, Span. vānāswā`lä), officially the Bolivarian Republic of Venezuela, republic (2005 est. pop. 25,375,000), 352,143 sq mi (912,050 sq km), N South America. also continues to report good growth while Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. was
modestly weaker year-on-year.Second Quarter, 2006: Year on year financial performance Including financial information for Kappa Packaging for the second quarter of 2005, net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of EUR EUR In currencies, this is the abbreviation for the Euro. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 1,772 million in the second quarter of 2006, represent a 2% decrease on combined net sales of EUR 1,808 million in the second quarter of 2005. EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become , before exceptional items, of EUR 210 million decreased 7% compared to combined EBITDA of EUR 227 million in the second quarter of 2005. This represents a margin of net sales of 11.9% and 12.6% respectively. Second Quarter, 2006: Quarter-on-quarter financial performance Net sales of EUR 1,772 million in the second quarter of 2006, represent a 1% increase on net sales of EUR 1,748 million in the first quarter of 2006. EBITDA, before exceptional items, of EUR 210 million increased 22% compared to EBITDA of EUR 172 million in the first quarter of 2006. This represents a margin of net sales of 11.9% and 9.8% respectively. First Half, 2006: Year-on-year financial performance Including financial information for Kappa Packaging for the first half of 2005, net sales of EUR 3,520 million in the first half of 2006, represent a modest increase on combined net sales of EUR 3,508 million in the first half of 2005. EBITDA, before exceptional items, of EUR 382 million decreased 9% compared to combined EBITDA of EUR 422 million in the first half of 2005. This represents a margin of net sales of 10.9% and 12.0% respectively. Change in Accounting Policy: Stock compensation expense The Group has adopted FRS FRS abbr. Fellow of the Royal Society FRS, n “flexed rotated side-bent,” an osteopathic abbreviation used to describe vertebral position in cases of spinal dysfunction. 20, ''Share-based Payment'' from January January: see month. 1, 2006. FRS 20 requires that all share-based payments are recognized in the financial statements based on their fair values. The transitional provisions require restatement Restatement A revision in a company's earlier financial statements. Notes: The need for restating financial figures can result from fraud, misrepresentation, or a simple clerical error. of comparative information, adjusting the opening balance of retained earnings Retained Earnings The percentage of net earnings not paid out in dividends, but retained by the company to be reinvested in its core business or to pay debt. It is recorded under shareholders equity on the balance sheet. for the earliest period presented. The estimated stock compensation expense for the second quarter and first six months of 2006 amounted to EUR 465,000 and EUR 845,000 respectively. The second quarter and first six months of 2005 have been restated by EUR 569,000 and EUR 1,035,000 respectively, to reflect the estimated stock compensation expense on the adoption of FRS 20. The full year effect on 2005 results was EUR 2,172,000. Adoption of FRS 20 does not result in a change in total shareholders funds in any period as the expense is offset by a credit to other reserves. We are currently reviewing the appropriateness of the model used to calculate the stock compensation expense. Product Market Overview Europe SKG's second quarter results in Europe again reflect high input costs and margin pressure resulting from the slow but progressive implementation of paper price increases through the corrugated system. The demand environment in Europe continues to show improvement. Substantial inefficient, higher cost containerboard capacity has been closed by SKG and other European paper-based packaging producers. In addition to SKG's announcements to close further higher cost capacity, other European producers also continue to announce the closure of uneconomic high cost mills. These factors have contributed to a better supply/demand environment in the European market and positive momentum on pricing. Improving market conditions have not yet translated into improved financial performance as a consequence of rising input costs, primarily energy and transport and the slow but progressive increase in corrugated prices. SKG's energy costs increased by EUR 37 million in Europe in the first half of 2006 (EUR 23 million in the first quarter and EUR 14 million in the second quarter) compared to the combined cost for JSG and Kappa in the comparable period in 2005. A EUR 50 per tonne tonne measure of weight or mass; 1 tonne=1000 kg. See also ton. increase was announced for both kraftliner and recycled containerboard in the first quarter to recover rising input costs. A further price increase, of EUR 40 per tonne on kraftliner and EUR 30 per tonne on recycled containerboard, was announced in June. These increases follow another cost driven price increase in both grades during the fourth quarter of 2005. The combination of these three price increases resulted in a total increase of approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. EUR 75 per tonne for both kraftliner and recycled containerboard over the past 8 months. A further paper price increase, of EUR 30 per tonne, has been announced for both grades for September, 2006. As an integrated producer, the implementation of paper price increases has resulted in margin pressure while price increases are being implemented through the end product, corrugated. SKG announced corrugated price increases throughout Europe in the first quarter. By the end of the second quarter, a run rate increase of 4% was realised across SKG's European corrugated system compared to prices at the end of 2005. These increases will continue, reflecting the fact that many corrugated prices are fixed to published paper price indices with a time lag. Index linked corrugated price increases are currently being implemented. This will have the effect of raising the European corrugated price increase to a run rate of over 6% in the second half. SKG's total combined European kraftliner and recycled containerboard volumes were unchanged in the second quarter on the comparable (combined) period in 2005 reflecting the impact of SKG's capacity closures in 2006. SKG's European kraftliner and recycled containerboard volumes increased 1% and 2% in the first half on the comparable (combined) period in 2005. SKG's European corrugated volumes decreased 2% in the second quarter but increased 1% in the first half when compared to the same (combined) periods in 2005. Volume growth of 1% in SKG's corrugated system, in the first half, is lower than broader market growth of over 3% in the same period and reflects the impact of converting plant closures and product price initiatives. SKG's other European paper-based packaging businesses, Solid Board, Graphic Board, Sacks and Bag-in-Box For the BIB bibliography database format, see . In packaging, a Bag-In-Box or BIB is a type of container invented by William R. Scholle in 1955 for the storage and transportation of liquids. It consists of a strong plastic bag seated inside a corrugated fiberboard box. , were impacted by a similar high input cost environment during the quarter. The combination of increased input costs, a competitive market environment and a lag in passing through primary product cost increases to end product pricing contributed to a difficult quarter to varying degrees in each of these businesses. A price increase of EUR 30 per tonne on Solid and Graphic Board grades has been announced for September 1. A price increase of EUR 50 per tonne has been announced for September in our sack kraft businesses. Efficient Capacity Management During the second quarter of 2006, SKG completed the closure of the five European recycled containerboard mills, announced during the first quarter, with a combined capacity of 270,000 tonnes. These closures are contributing to a better supply and demand balance within the Group while improving the overall cost profile and competitiveness of SKG's existing mill system. SKG has also recently announced the closure of a further 70,000 tonnes of recycled containerboard at Lagamill in southern Sweden Sweden, Swed. Sverige, officially Kingdom of Sweden, constitutional monarchy (2005 est. pop. 9,002,000), 173,648 sq mi (449,750 sq km), N Europe, occupying the eastern part of the Scandinavian peninsula. (which will also reduce the Group's folding boxboard box·board n. A firm cardboard used for making boxes. capacity by 20,000 tonnes). SKG has continued to rationalise Verb 1. rationalise - structure and run according to rational or scientific principles in order to achieve desired results; "We rationalized the factory's production and raised profits" rationalize its recycled containerboard capacity through permanent grade switches at the Nettingsdorfer and Sturovo mills from recycled containerboard to kraftliner. SKG has also permanently closed its PM2 machine in Mengibar in Spain Spain, Span. España (āspä`nyä), officially Kingdom of Spain, constitutional monarchy (2005 est. pop. 40,341,000), 194,884 sq mi (504,750 sq km), including the Balearic and Canary islands, SW Europe. . The impact on recycled grades, from these initiatives, is a reduction of 150,000 tonnes year on year. In addition, SKG has also closed its 60,000 tonne PM1 coated paper Coated paper is paper which has been coated by an inorganic compound to impart certain qualities to the paper, including weight and surface gloss, smoothness or ink absorbency. Kaolinite is the compound most often used for coating papers used in commercial printing. machine at Townsend Hook In programming, instructions that provide breakpoints for future expansion. Hooks may be changed to call some outside routine or function or may be places where additional processing is added. See also switch hook. 1. HOOK - ? Object Oriented Kernel. Delphia. in the UK. The total impact of these closures, on SKG's mill system, is 220,000 tonnes of recycled containerboard, 20,000 tonnes of folding boxboard and approximately 60,000 tonnes of coated paper. SKG continues to review its production capacity and the cost profile of its mill base against the background of a competitive environment and the introduction of increasingly efficient recycled containerboard capacity into the European market. SKG is considering a further reduction in its recycled containerboard capacity within its overall mill system through a possible further closure later in 2006. As an integrated producer, however, SKG needs to manage the impact of any capacity re-alignments with its own internal paper requirements and the availability, price and quality of recycled containerboard in the open market. European Disposals SKG is at an advanced stage in the process of disposing of eight facilities as part of European Union European Union (EU), name given since the ratification (Nov., 1993) of the Treaty of European Union, or Maastricht Treaty, to the European Community (EU) approval of the merger of the operations of JSG and Kappa. SKG has received an extension to the deadline for disposal from the EU and expects to complete this process in the near future. Synergies Following the merger of the operations of JSG and Kappa, one of the Group's key priorities is the delivery of sustainable synergy The enhanced result of two or more people, groups or organizations working together. In other words, one and one equals three! It comes from the Greek "synergia," which means joint work and cooperative action. benefits of EUR 160 million at the end of three years. Target synergy areas include paper mill rationalization rationalization, in psychology: see defense mechanism. , paper logistics logistics In military science, all the activities of armed-force units in support of combat units, including transport, supply, communications, and medical aid. The term, first used by Henri Jomini, Alfred Thayer Mahan, and others, was adopted by the U.S. and integration, optimization optimization Field of applied mathematics whose principles and methods are used to solve quantitative problems in disciplines including physics, biology, engineering, and economics. of the SKG corrugated system, purchasing savings and central and administrative overhead savings. SKG's synergy programme is on schedule with a target of delivering over EUR 60 million of synergies in 2006. While the benefits of the programme started to flow through at the end of the second quarter, a significant impact of the programme will be reflected in SKG's results for the second half of 2006. SKG's target is for a synergy run rate of approximately EUR 95 million per annum Per annum Yearly. by the end of the 2006 calendar year. Latin America SKG's Latin American operations reported another strong performance in the second quarter of 2006. SKG's containerboard volumes, in the second quarter, declined 6% year-on-year, however, this primarily reflects maintenance downtime The time during which a computer is not functioning due to hardware, operating system or application program failure. at the San Felipe San Felipe (săn fəlē`pā), pueblo (1990 pop. 1,557), Sandoval co., N central N.Mex., on the Rio Grande; founded early 18th cent. The inhabitants are Pueblo of the Keresan linguistic family. Ceremonial dances are held there in spring and winter. mill in Venezuela. Flat volumes in containerboard, year-on-year, reflects the San Felipe maintenance shut and the fact that SKG is currently operating at close to full capacity in the Colombian and Venezuelan markets and is a net purchaser in Mexico. SKG's corrugated volumes increased 4% and 6% in the second quarter and first half of 2006 on the comparable periods in 2005 respectively. The Mexican Mexican named after or originating in Mexico. Mexican axolotl see ambystomamexicanum. Mexican beaded lizard (Heloderma horridum economy continued to show robust growth in the second quarter reflecting continued strong export growth. SKG's reported performance, during the second quarter, also reflects the positive impact of product price increases during the first quarter of 2006. Containerboard and corrugated volumes increased 4% and 12% in the first half respectively compared to the same period in 2005. The Colombian economy continued to grow in the second quarter reflecting relative political stability, a recent weakening of the currency, low inflation and strong GDP GDP (guanosine diphosphate): see guanine. growth. Volume growth, during the quarter, reflects both domestic demand and export growth. Containerboard volumes increased 1% while corrugated volumes increased modestly during the first half compared to the same period in 2005. The Venezuelan economy also remains strong. SKG's performance, during the second quarter, was impacted by maintenance downtime at our San Felipe mill for the installation of a new press section, adding 30,000 tonnes capacity. The installation is complete and the mill is now operating at full capacity. Containerboard volumes declined 13% during the first half, reflecting the impact of the San Felipe downtime. Venezuelan corrugated volumes increased 8% in the first half compared to the same period in 2005. In Argentina, economic growth is slowing somewhat although export markets are robust. Slowing domestic growth reflects Government measures to control inflation. In addition, the paper-based packaging market is becoming increasingly competitive with a number of competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. having re-started paper machines. Paper pricing, however, remains the single biggest competitive issue in Argentina where competitive pressure is holding down paper pricing (and consequently corrugated pricing) despite upward cost pressure. SKG's containerboard volumes increased 1% year-on-year while corrugated volumes decreased 6% in the first half compared to the same period in 2005. Second Quarter, 2006: Cash Flows & Capital Structure 2006 second quarter cash flow combines the full three month cash flows for JSG and Kappa. As the merger was completed on December 1, 2005, the 2005 second quarter comparative cash flow relates only to JSG. Free cash flow, for the second quarter was a net outflow of EUR 43 million compared to a net inflow in·flow n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. of EUR 13 million in the same period in 2005. The pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta loss in 2006 was strongly driven by exceptional costs primarily related to our synergy rationalization program, the major part of which were either non-cash or unpaid at the end of the quarter, plus higher charges for depreciation and amortization reflecting the enlarged scale of the Group. The reduction in free cash flow in 2006 versus 2005 reflects mainly higher outflows for capital expenditure, taxation and working capital. Capital expenditure at EUR 63 million in the second quarter of 2006 represented 69% of depreciation. At EUR 45 million, expenditure in the second quarter of 2005 represented 81% of depreciation. Working capital increased by EUR 63 million in the second quarter with higher debtors and, to a lesser extent, stocks offset by higher creditors. As a percentage of annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. net sales, working capital of EUR 639 million at June 2006, represented 9.0%, compared to 8.5% at March 2006. Cash flows from financing and investment activity were modest in the second quarter of 2006 and amounted to a net outflow of EUR 2 million. This, together with the free cash outflow of EUR 43 million resulted in a total net cash outflow of EUR 45 million in the quarter. In the second quarter of 2005, the net inflow from financing and investment activity was EUR 48 million and arose primarily from the sale of businesses and investments. The total of EUR 48 million from the sale of businesses and investments comprised EUR 25 million and EUR 23 million in relation to the tissue business and The K Club respectively. Together, the free cash flow for the second quarter of 2005 and the financing and investment surplus resulted in a net cash inflow of EUR 61 million. A positive currency adjustment on net debt of EUR 21 million arose in the second quarter of 2006 primarily because of a relative strengthening of the euro against the U.S. dollar. In total, net borrowing in SK Funding increased by approximately EUR 24 million to EUR 4,646 million (EUR 4,667 million including capital leases of EUR 21 million) at June 2006 compared to EUR 4,622 million (EUR 4,644 million including capital leases of EUR 22 million) at March 2006. If the PIK PIK See: Payment-in-kind bond PIK See payment-in-kind security (PIK). notes in Smurfit Kappa Holdings plc are included together with net cash in the companies above Smurfit Kappa Funding plc and the subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. promissory note promissory note, unconditional written promise to pay a certain sum of money at a definite time to bearer or to a specified person on his order. Promissory notes are generally used as evidence of debt. of EUR 94 million payable to Kappa shareholders, the total net borrowing at the level of Smurfit Kappa Group Limited is EUR 5,141 million at June 2006. Summary cash flows for the 3 month and 6 month periods to June 30, 2006 and 2005 are set out in the following table:
Smurfit Kappa Funding plc
Restated(1) Restated(1)
3 months 6 months
to 3 months to to 6 months to
June 30 June 30 June 30 June 30
2006 2005 2006 2005
EUR EUR EUR EUR
Million Million Million Million
------------------------------------ ----------- -------- -----------
(Loss)/income before tax -
subsidiaries (52) 10 (115) (58)
Exceptional items 52 (8) 77 (41)
Depreciation and depletion 91 55 185 110
Amortization of intangible
assets 16 8 34 18
Non cash interest expense 2 8 5 40
Refinancing costs - - - 53
Stock compensation expense 1 1 1 1
Working capital change (63) (19) (138) (32)
Capital expenditure (63) (45) (140) (83)
Change in capital creditors (5) 4 (9) (10)
Sale of fixed assets - 9 9 10
Tax paid (11) (6) (22) (20)
Dividends from associates 3 3 3 3
Other (14) (7) (23) (11)
------------------------------------ ----------- -------- -----------
Free cash flow (43) 13 (133) (20)
Investments - (1) (34) (2)
Sale of businesses and
investments 3 48 4 324
Dividends paid to
minorities (3) (4) (6) (5)
Debt issue costs - - - (8)
Acquisition costs and fees (2) - (3) -
Transfer of cash from
affiliates - 5 1 5
Refinancing costs - - - (53)
------------------------------------ ----------- -------- -----------
Net cash (outflow)/inflow (45) 61 (171) 241
Net cash disposed - 1 - (4)
Munksjo inter-company debt
repaid - - - 157
K Club inter-company debt
repaid - 92 - 92
Non-cash interest accrued - (1) - (12)
Currency translation
adjustments 21 (32) 32 (62)
------------------------------------ ----------- -------- -----------
(Increase)/decrease in net
borrowing (excluding EUR EUR
leases) (24) EUR 121 (139) EUR 412
------------------------------------ ----------- -------- -----------
(1) The financial statements have been restated to reflect the estimated impact of implementation of FRS 20 'Share-based Payment'. Website access to reports The Registrant's annual report on Form 20-F, current reports on Form 6-K and all amendments to those reports are made available free of charge through the Registrant's website (www.smurfitkappa.com) as soon as practicable practicable adj. when something can be done or performed. after such material is electronically filed with or furnished fur·nish tr.v. fur·nished, fur·nish·ing, fur·nish·es 1. To equip with what is needed, especially to provide furniture for. 2. to the Securities and Exchange Commission.
Smurfit Kappa Funding plc
Consolidated Statements of Operations
Restated(1) Restated(1)
3 months 3 months to 6 months 6 months to
to June June 30, to June June 30,
30, 2006 2005 EUR 2006 EUR 2005 EUR
EUR 000 000 000 000
----------------------------------------------------------------------
Net sales
Continuing
operations 1,771,413 1,085,124 3,519,849 2,123,075
Discontinued
operations - 11,514 - 25,205
----------------------------------------------------------------------
1,771,413 1,096,638 3,519,849 2,148,280
Cost of sales 1,278,375 793,103 2,549,100 1,556,325
----------------------------------------------------------------------
Gross profit 493,038 303,535 970,749 591,955
Net operating expenses 388,556 235,492 803,309 476,772
Reorganization and
restructuring costs 70,689 2,186 111,957 11,792
----------------------------------------------------------------------
Operating income
subsidiaries
Continuing
operations 33,793 65,702 55,483 105,147
Discontinued
operations - 155 - (1,756)
----------------------------------------------------------------------
33,793 65,857 55,483 103,391
Share of associates'
operating income 3,966 2,445 6,104 3,498
----------------------------------------------------------------------
Total operating income 37,759 68,302 61,587 106,889
(Loss) / income on sale
of assets and
businesses (379) 8,362 1,978 45,324
Interest income 6,011 3,148 7,777 6,762
Interest expense (89,039) (59,843) (175,293) (126,230)
Loss from early
extinguishment of debt - (4,018) - (80,434)
Other financial expense (2,392) (3,213) (5,348) (6,531)
Share of associates' net
interest (674) (347) (1,172) (579)
----------------------------------------------------------------------
(Loss) / income before
taxes and equity
minority interests (48,714) 12,391 (110,471) (54,799)
Taxes on income 19,614 10,630 37,595 19,556
----------------------------------------------------------------------
(Loss) / income before
equity minority
interests (68,328) 1,761 (148,066) (74,355)
Equity minority
interests 1,162 3,660 3,783 5,321
----------------------------------------------------------------------
Net loss for the period EUR EUR EUR EUR
(69,490) (1,899) (151,849) (79,676)
----------------------------------------------------------------------
(1) The financial statements have been restated to reflect the estimated impact of implementation of FRS 20 'Share-based Payment'. Companies (Amendment) Act, 1986 The financial statements included in this report do not comprise To embrace, cover, or include; to confine within; to consist of. In the law governing patents—grants of an exclusive right or privilege to make, use, or sell an invention or product for a term of years—the term comprise 'full group accounts' within the meaning of Regulation 40(1) of the European Communities European Community: see European Union. European Community (EC) Organization formed in 1967 with the merger of the European Economic Community, European Coal and Steel Community, and European Atomic Energy Community. (Companies: Group Accounts) Regulations, 1992 of Ireland insofar in·so·far adv. To such an extent. Adv. 1. insofar - to the degree or extent that; "insofar as it can be ascertained, the horse lung is comparable to that of man"; "so far as it is reasonably practical he should practice as such group accounts would have to comply with the disclosure and other requirements of those Regulations. Full group accounts for the year ended December 31, 2005 have received an unqualified audit report and will be filed with the Irish Registrar of Companies The introduction to this article provides insufficient context for those unfamiliar with the subject matter. Please help [ improve the introduction] to meet Wikipedia's layout standards. You can discuss the issue on the talk page. in due course.
Smurfit Kappa Funding plc
Segmental Analyses
Sales - third party
(external net sales)
Restated(1) Restated(1)
3 months 3 months to 6 months 6 months to
to June 30, to June 30,
June 30, 2005 EUR June 30, 2005 EUR
200 EUR 000 2006 EUR 000
000 000
----------------------------------------------------------------------
Packaging 1,303,418 771,240 2,601,170 1,515,687
Specialties 252,995 129,903 485,393 256,037
----------------------------------------------------------------------
Europe 1,556,413 901,143 3,086,563 1,771,724
Latin America 215,000 195,495 433,286 376,556
----------------------------------------------------------------------
EUR EUR EUR EUR
1,771,413 1,096,638 3,519,849 2,148,280
----------------------------------------------------------------------
(Loss) / income before
taxes and equity minority
interests
Restated(1) 6 months Restated(1)
3 months to 3 months to to 3 months to
June 30, June 30, June 30, June 30,
2006 2005 EUR 2006 EUR 2005 EUR
EUR 000 000 000 000
Packaging 75,917 40,541 123,045 70,145
Specialties 16,094 9,700 26,383 14,656
Associates 3,564 1,784 5,563 2,815
----------------------------------------------------------------------
Europe 95,575 52,025 154,991 87,616
----------------------------------------------------------------------
Packaging 30,308 29,705 58,153 55,802
Associates 402 661 541 683
----------------------------------------------------------------------
Latin America 30,710 30,366 58,694 56,485
----------------------------------------------------------------------
Unallocated centre costs (4,192) (6,787) (11,865) (13,902)
----------------------------------------------------------------------
Income before intangible
assets amortization,
interest and exceptional
items 122,093 75,604 201,820 130,199
Amortization of intangible
assets (16,037) (8,329) (33,624) (18,049)
Group net interest (83,028) (56,695) (167,516) (119,468)
Loss from early
extinguishment of debt - (4,018) - (80,434)
Share of associates' net
interest (674) (347) (1,172) (579)
----------------------------------------------------------------------
Income / (loss) before
exceptional items 22,354 6,215 (492) (88,331)
Reorganization and
restructuring costs (70,689) (2,186) (111,957) (11,792)
(Loss) / income on the
sale of assets and
businesses (379) 8,362 1,978 45,324
----------------------------------------------------------------------
(Loss) / income before EUR EUR EUR
taxes and equity minority (48,714) EUR 12,391 (110,471) (54,799)
interests
----------------------------------------------------------------------
(1) The financial statements have been restated to reflect the estimated impact of implementation of FRS 20 'Share-based Payment'.
Smurfit Kappa Funding plc
Consolidated Balance Sheets
June 30, Restated(1)
2006 June 30,
EUR 000 2005
EUR 000
Assets
Current assets
Cash 165,282 131,114
Accounts receivable and prepayments 1,440,166 931,573
Amounts due by affiliates 107 408
Amounts due by affiliates after more than one
year 262,974 268,289
Inventories 681,865 402,619
----------------------------------------------------------------------
Total current assets 2,550,394 1,734,003
----------------------------------------------------------------------
Fixed assets
Investments 86,640 83,154
Property, plant and equipment 3,413,143 1,975,289
Intangible assets 2,495,531 1,305,717
----------------------------------------------------------------------
Total fixed assets 5,995,314 3,364,160
----------------------------------------------------------------------
EUR EUR
Total assets 8,545,708 5,098,163
----------------------------------------------------------------------
Liabilities, minority interests and
shareholders' equity
Current liabilities
Bank loans, overdrafts and other borrowing 146,864 108,829
Accounts payable and accrued liabilities 1,519,166 1,033,596
----------------------------------------------------------------------
Total current liabilities 1,666,030 1,142,425
Non current liabilities
Long term debt and other long term liabilities 4,559,088 2,442,753
Amounts due to affiliates 11,725 10,116
Provisions for liabilities and charges 270,596 185,368
Pension liabilities 650,094 373,777
Capital grants deferred 13,751 13,407
Minority interests (equity interests) 124,276 128,215
----------------------------------------------------------------------
Total liabilities and minority interests 7,295,560 4,296,061
----------------------------------------------------------------------
Shareholders equity
Share capital 40 40
Other reserves 1,701,247 937,405
Retained deficit (451,139) (135,343)
----------------------------------------------------------------------
Shareholders' equity 1,250,148 802,102
----------------------------------------------------------------------
Total liabilities, minority interests and EUR EUR
shareholders' equity 8,545,708 5,098,163
----------------------------------------------------------------------
(1) The financial statements have been restated to reflect the estimated impact of implementation of FRS 20 'Share-based Payment'.
Smurfit Kappa Funding plc
Statement of Total Recognized Gains and Losses
6 months Restated(1)
to 6 months to
June 30, June 30,
2006 2005
EUR 000 EUR 000
(Loss) / income for the period
- Group (151,507) (80,143)
- Associates (342) 467
----------------------------------------------------------------------
(151,849) (79,676)
----------------------------------------------------------------------
Translation adjustments on foreign currency net
investments
- Group 5,912 (8,597)
----------------------------------------------------------------------
Actuarial (loss) / gain recognized in retirement
benefit schemes (23,622) 20,239
----------------------------------------------------------------------
Total recognized gains and losses relating to
the period
- Group (169,217) (68,501)
- Associates (342) 467
----------------------------------------------------------------------
EUR EUR
(169,559) (68,034)
----------------------------------------------------------------------
Reconciliation of Movements in Shareholders'
Funds
6 Months Restated(1)
to 6 Months to
June 30, June 30,
2006 2005
EUR 000 EUR 000
At beginning of year 1,418,862 869,101
(Loss) for the period (151,849) (79,676)
Actuarial (loss) / gain recognized in retirement
benefit schemes (23,622) 20,239
Stock compensation 845 1,035
Translation adjustments on foreign currency net
investments 5,912 (8,597)
----------------------------------------------------------------------
At end of period EUR EUR
1,250,148 802,102
----------------------------------------------------------------------
(1) The financial statements have been restated to reflect the estimated impact of implementation of FRS 20 'Share-based Payment'.
Smurfit Kappa Funding plc
Reconciliation of net income to EBITDA, before
exceptional items
Restated
(1)
3 months 3 months 6 months Restated(1)
to to to 6 months to
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
EUR 000 EUR 000 EUR 000 EUR 000
Net losses (69,490) (1,899) (151,849) (79,676)
Equity minority interests 1,162 3,660 3,783 5,321
Taxation 19,614 10,630 37,595 19,556
Share of associates' operating
income (3,966) (2,445) (6,104) (3,498)
Loss / (income) on sale of
assets and operations -
subsidiaries 379 (8,362) (1,978) (45,324)
Reorganization and
restructuring costs 70,689 2,186 111,957 11,792
Total net interest 83,702 61,060 168,688 200,481
Stock compensation expense 465 569 845 1,035
Depreciation, depletion and
amortization 107,444 63,945 219,192 128,249
----------------------------------------------------------------------
EBITDA before exceptional items EUR EUR EUR EUR
209,999 129,344 382,129 237,936
----------------------------------------------------------------------
(1) The financial statements have been restated to reflect the estimated impact of implementation of FRS 20 'Share-based Payment'.
Smurfit Kappa Group Limited
Analysis of Net Debt
June 30, June 30,
2006 2005
EUR '000 EUR '000
----------------------------------------------------------------------
Senior credit facility:
Revolving credit facility (1) - interest at
relevant interbank rate + 2.25% 7,634 2,011
Restructuring facility (2) - interest at
relevant interbank rate + 2.25% until
conversion to Term Loan 15,438 -
Tranche A Term loan (3a) - interest at
relevant interbank rate + 2.25% 485,361 1,739
Tranche B Term loan (3b) - interest at
relevant interbank rate + 2.50% euro & 2.375%
US$ 1,188,558 241,061
Tranche C Term loan (3c) - interest at
relevant interbank rate + 3.00% euro & 2.875%
US$ 1,188,558 255,878
Yankee bonds (including accrued interest) (4) 252,490 413,572
Bank loans and overdrafts / (cash) (65,828) (36,835)
2011 Receivables securitization floating rate
notes (including accrued interest) (5) 210,215 210,212
----------------------------------------------------------------------
Total subsidiary debt 3,282,426 1,087,638
2012 Bonds (including accrued interest) (6) 986,416 1,017,846
2015 Cash pay subordinated notes (including
accrued interest) (7) 377,375 377,687
----------------------------------------------------------------------
Net debt 4,646,217 2,483,171
Capitalized leases 20,673 15,630
----------------------------------------------------------------------
Net debt including leases - Smurfit Kappa Funding
plc 4,666,890 2,498,801
2015 Senior PIK Notes - Smurfit Kappa Holdings plc
(including accrued interest) (8) 381,184 340,858
Smurfit Finance Luxembourg Sarl PIK (9) 93,581 -
Newcos, Smurfit Kappa Corporation Ltd, Smurfit
Kappa Holdings plc &
Smurfit Finance Luxembourg cash (455) (317)
----------------------------------------------------------------------
Net Debt including Leases - Smurfit Kappa Group EUR EUR
Ltd 5,141,200 2,839,342
----------------------------------------------------------------------
Revolving credit facility of EUR 600 million (available under the
(1) senior credit facility) to be repaid in full in 2012.
(Revolver Loans - EUR 0m, Drawn under
Ancillary facilities and letters of credit -
EUR 7.6m).
Restructuring credit facility of EUR 275 million
(2) (available under the senior credit facility).
Term loan A due to be repaid in certain
(3a) installments up to 2012.
(3b)Term loan B due to be repaid in full in 2013.
(3c)Term loan C due to be repaid in full in 2014.
7.50% senior debentures due 2025 of $292.3
(4) million.
Receivables securitization floating rate notes
(5) maturing September 2011.
10.125% senior notes due 2012 of EUR 350 million and 9.625%
(6) senior notes due 2012 of $750 million.
EUR 217.5 million 7.75% senior subordinated notes due 2015 and
(7) US$200.0 million of 7.75% senior subordinated notes due 2015.
EUR 325 million 11.5% Senior PIK Notes due
(8) 2015.
(9) 9% Shareholder PIK maturing December 31, 2016.
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