kapstone paper and packaging corporation (ks)
Annual Report submitted under section 13or15 (d)
Under section 13,15, the Securities Trading Act for the fiscal year ended December 31, 2017 (d)
Securities Trading Act, 19-34, Commission Document No. : 001-
33494 kapok paper packaging company (
The exact name of the registrant specified in the articles of association)Delaware(
State or other jurisdiction of company or organization)20-2699372(I. R. S.
Employee Identification Number)
KapStone Paper & Packaging Company, skokey Avenue.
Suite300Northbrook, IL 60062 (
Main executive office address)(ZIP Code)
The registrant\'s telephone number, including the area code :(847)239-
8800 securities registered under section 12 (b)
Title of the act: name of each class of an exchange registered with common stock (Par Value $0. 0001)
New York Stock Exchange registered under section 12thg)
Key points of the act: if the registrant is healthy, a non-indicby check mark
Well-known experienced issuers, as defined in Rule 405 of the Securities Act.
If the registrant does not need to submit a report under Section 13 or Section 15, please indicate it by check mark (d)of theAct.
Indicate the registrant by check mark (1)
All reports requested in Section 13 or 15 have been submitted (d)
In Act 1934 of the stock exchange in the past 12 months (
Or a short period of time required for the registrant to submit such reports), and (2)
This filing requirement has been bound for the last 90 days.
Yesnoo indicates by check mark whether the registrant has been submitted electronically and posted on its company website (if any), each required to submit andT (§232.
This Chapter 405)
Within the first 12 months (
Or in a short period of time requiring therestrant to submit and publish such documents).
If the declaration of arrears is disclosed under section 405th of the regulations, please indicate by check mark-
K is not included in this article and will not be included, as the registrant is aware, in the final proxy or information statement referenced in the second part of this Form 10-
K or any amendments to this form 10K.
Indicate by check mark whether the registrant is a large accelerated file manager, a non-accelerated file manager
A smaller reporting company, or an emerging growth company.
See the definition of \"large accelerated reporting companies\", \"Small reporting companies\" and \"emerging growth companies\" in Rule12b
2 of the Trading Act.
Big acceleration filerio acceleration FileroNon-
Accelerated Ferro (
Do not check asmaller report Company)
Smaller reporting company o emerging growth company oifan emerging growth company, indicate by check mark whether the registrant chooses not to use the extended transition period to comply with any new ora)
The Trading Act.
Indicate whether the registrant is a shell company by check mark (
Defined in Rule 12b-
2 of the exchange).
The total market value of 86,198,428 ordinary shares of YesoNo shares is right and wrong
In June 30, 2017, the registrant\'s affiliates were $1,778,273,562.
This calculation is made at a common stock price of $20 per share. 63;
On June 30, 2017, the closing price of common stock on the New York Stock Exchange, the last day of the second fiscal quarter of 2017 recently completed by registrants.
For the purposes of this calculation alone, all shares held by the directors and executive officers of the registrant are excluded.
This exclusion should not be considered as a subsidiary to recognize these individuals as registrants.
In 2018, 97,380,941 ordinary shares were outstanding.
Documents incorporated in the references: final proxy statement of the registrant\'s 2018 annual shareholders meeting will be submitted to the Securities and Exchange Commission within 120 days of the end of the fiscal year covered in this form 10-
K according to general instructions (3)of the Form10-K.
The information in such a clear proxy statement will be incorporated into Part II by reference.
Table of contents. Business s3item1a.
16 items 1b of risk factors.
Unresolved staff comments
Information disclosure of Mine Safety 5.
The registrant\'s common stock, related shareholder matters and the market for the purchase of equity securities by the issuer.
29 Selected Financial Data 7.
Management Discussion and Analysis of financial status and results of operations
Quantitative and qualitative disclosure of market risks
47 financial statements and supplementary data 9.
Changes and differences with accountants in accounting and financial disclosure
Control and procedures.
Directors, executives and corporate governance
48 administrative compensation items 12.
Secured ownership of certain beneficial owners and management and related shareholders.
Certain relationships and related party transactions independent of directors 49 14.
Major accounting fees and services
Annex to financial statements and schedule of financial statements
Table 12 ContentsPART iitem 1.
In April 15, 2005, business skapstone HistoryKapStone paper packaging company was established in Delaware as an acquisition company for a special purpose, with the aim of conducting a merger, capital stock exchange, asset acquisition or other similar business portfolio with unknown business in paper, packaging, forest products and related industries.
References to \"KapStone\", \"company\", \"us\" and \"us\" refer to KapStone Paper packaging company and its subsidiaries unless otherwise required by the context.
On January 28, 2018, KapStone Paper Packaging Company of Delaware company WestRock reached a merger agreement (\"WestRock\")
, Whiskeyholco, Inc.
Delaware corporation and newly established wholly owned company
Cora Merger Subsidiary
Delaware corporation and newly established wholly owned company
Holding subsidiaries (
[Merger of companies]
Combined subsidiary with whiskey
Delaware corporation and newly established wholly owned company
Holding subsidiaries (
The merger agreement and plan were signed (
Under the merger agreement and subject to its terms and conditions, WestRock will acquire all outstanding shares of kapstone through the following transactions :(i)
WestRock will merge with the Holco merge Sub, and WestRock will survive the merge (
\"WestRock merge \")as a wholly-
A wholly owned subsidiary of the holding company and the holding company shall take effect upon the merger and merger of WestRock (
, Change its name to \"WestRock Company\" and (ii)
KapStone will be merged with the Company\'s consolidated subsidiary, which survived as a wholly owned subsidiary
Holding subsidiaries (the \"Merger\").
According to the terms and conditions set forth in the merger agreement, at the Effective Time :(i)
Common stock has a par value of $0 per share.
KapStone 0001 per share (
Common stock of kapok]
It was not completed immediately before the effective time (
Does not include any shares of KapStone common stock held (a)In the Ministry of Finance or (b)
AnyKapStone shareholders have the right to exercise and properly exercise the right to assess such shares of KapStone common stock)
Will be converted to the right of reception at the time of the shareholders\' election (
Proportional distribution as described below): (a)$35.
00 cash, no interest (
\"Cash Consideration \"), or (b)0.
4981 shares of common stock (
\"Holding Shares \"), par value $0.
01 per share, hodeko (
\"Stock consideration\" and \"combined consideration\" and cash consideration); and (ii)
Common Stock per share, worth $0.
The 01 shares per share of WestRock issued and unissued prior to the effective time will be converted to one of the hodeko common shares.
KapStonestockholders will be allowed to conduct the election by submitting an election form by 5: 00 pm for stock reviewm.
Working days prior to the adoption of the merger agreement at the upcoming KapStone shareholders\' meeting (
\"KapStone Shareholders\' Meeting \").
Any KapStone shareholder who has not chosen to accept a stock consideration will receive a cash consideration.
KapStone shareholder election stock consideration will follow the proportional distribution procedure set out in the shareholder agreement, which will limit the total amount of stock consideration to KapStone shareholders, in order to receive the stock consideration time of KapStone common stock outstanding shares no more than 25 immediately before the effective date.
3 The content table completed by the merger is subject to customary conditions, including but not limited to: KapStone shareholders pass the merger agreement at the KapStone shareholders\' meeting;
Expiry or termination of the applicable waiting period under Hart-Scott-
(B) The revised 1976 Rodino antitrust act;
Obtaining other necessary antitrust approvals such as Austria, Germany and Mexico;
Received certain tax comments;
Validity of the registration statement on the form
4 Related to the potential issuance of shaof Holding Co common stock in the merger.
The merger is expected to end in the quarter ending September 30, 2018.
Acquisition history in January 2, 2007, we acquired most of kraft paper\'s assets from International Paper Company and assumed some liabilities (\"KPB\")for $155.
8 million of the liquidity adjustment.
KPB assets include an unbleached kraft paper manufacturing plant in Roanoke Rapids, North Carolina, Ride Rite®Converting, a manufacturer of inflatable padded bags located in Fordes, Arkansas, trades accounts receivable and inventory.
We then paid $53.
7 million additional purchase price based on or with income-
Based on payment to achieve certain EBITDA goals.
Onjul1, 2008, we acquired most of the assets of the Charleston Kraft Division from MeadWestvaco Corporation and assumed certain liabilities (\"CKD\")for$485. 0million (
Net cash received was $10. 6million), less $8.
9 million of the liquidity adjustment.
An unbleached kraft paper mill in North Charleston, South Carolina (
Including cogeneration facilities)
Chip factory in Elgin, Hampton, Andrews and Kinnard, South Carolina, lumber factory in Summerville, South Carolina, Trade accounts receivable and inventory.
OnMarch31, 2009, we completed the sale of our inflatable padded bag business to Illinois Tools. for $36.
Million, $1 less.
1 million adjustment of working capital.
The company sees the sale as an opportunity to reduce debt and focus on the core paper and packaging business.
We bought OnOctober31, 2011 from the US. S.
Corrugated purchasing company(\"USC\")
According to the merger of $330.
Cash plus $1 million.
9 million of the adjustment of working capital.
At the time of the merger, the University of Southern California had a recycled cardboard paper mill in Cowen, South Carolina, and 14 corrugated packaging plants in the eastern and central parts of the United States.
OnJuly18, 2013, we acquired 100% of the capital stock of Longview Fiber Paper and Packaging Co. , Ltd. , (\"Longview\")for $1.
$25 billion plus $41
5 million of the liquidity adjustment.
Longview is a leading manufacturer of high quality cardboard, kraft paper and corrugated board products.
Longview\'s business includes a paper mill in Longview, Washington, equipped with five paper machines capable of producing about one.
Produce 3 million tons of cardboard and Kraft paper each year.
Longview also has seven conversion facilities in the northwest Pacific Ocean.
OnJune1, 2015, we got 100% partner equity in Victory PackagingP.
And its subsidiaries (\"Victory\")for $615.
0 million $2 in cashande.
The adjustment of working capital is 0 million.
Vicente, based in Houston, Texas, provides customers with comprehensive packaging solutions and services and is one of the largest distributors of packaging materials in North America.
Vicente\'s operations include approximately 60 distribution and fulfillment facilities in the United States, Mexico and Canada.
For more details, please see note 4, \"sayyacquition \".
OnApril8, 2016, the board of directors of the company approved plans to expand its geographic footprint to Southern California and built a new paper plant with an estimated total cost of about $14. 0million.
Meanwhile, the company signed a 10-
Annual lease agreement with a total commitment of about $9. 8million.
The new plate factory began manufacturing boxes in 4 catalogues, aiming to mainly serve the company\'s victory distribution business in Southern California as well as other KapStone customers.
For more details, see Note3 \"strategic investment \".
Onjul1, 2016, the Company acquired 100% of the common stock of Central Florida box (\"CFB\")
A corrugated product manufacturer near Orlando, Florida, for $15.
4 million net cash acquisition.
For more details, see Note3 \"strategic investment \".
The company made $2016.
6 million invested in a cardboard factory in Florida for a 49% stake.
In April, the company made $1 in 2016.
25 million invested in a cardboard factory in California and obtained a 20% stake.
These investments are expected to increase the company\'s vertical integration by more than 60,000 tons per year and will reach this level in 18 months.
For more details, see Note3 \"strategic investment \".
2017, the company acquired the assets of the relevant packaging company
And Fast Pak, LLC (\"API\" together \")
It operates at $33 in Greer, South Carolina. 5million.
API provides corrugated packaging and digital production needs for different customer groups, including emphasizing the implementation and matching of the automotive and consumer goods industries.
For more details, see Note3 \"strategic investment \".
We present our operational results in two reportable areas of paper, packaging and distribution.
Our paper and packaging department produces and sells a wide range of cardboard, corrugated products and special paper for the industrial and consumer markets.
Through the distribution department of Vicente, a North American packaging materials distributor, there are approximately 60 distribution centers in the United States, Mexico and Canada, providing packaging materials and related products to a wide range of customers.
For more information on our segment, see seente18 \"Segment Information \".
We produce cardboard, corrugated board and special paper.
At 2017, we produced 2.
8 million tons, of which nearly 86% are sold to third-party converters or to our corrugated products manufacturing plant in the United States, and 14% are sold to foreign customers.
In 2017, our corrugated products manufacturing plant sold about 912,000 tons or 14 tons.
4 billion square feet (\"BSF\")
Corrugated products in the United StatesS.
Our net sales of paper and packaging were $2 in 2017.
4 billion, consisting mainly of $1.
6 billion of cardboard and corrugated board, $0.
7 billion special paper.
Our distribution department operates under the trade name of victory, providing customers with comprehensive packaging solutions and services, distributing corrugated packaging materials and other professional packaging products, it includes stretch film, void filling, carton sealing tape and other special adhesive tape.
Net sales in our distribution division were $1 in 2017.
5% of them were sold to customers in Mexico and Canada.
The company\'s business is affected by cyclical industry conditions and general economic conditions in North America and the rest of the world, where we export cardboard and specialty paper and distribute packaging materials.
These conditions affect the price of our products and services.
Our foreign and export sales may also be affected by exchange rate fluctuations and trade policies and relationships.
5 catalogue Industry Overview Acid paper and packaging parts compete in the market for cardboard, corrugated products and specialty paper.
We believe that the special paper market includes cowhide, saturated cowhide and unbleached folding cartons.
Our distribution division competes in the distribution and fulfillment services market to serve customers from all walks of life.
These customers include government entities, as well as customers in the mobile and storage, automotive, retail and other industries.
Paper and Packaging section container cardboard consisting of cardboard and corrugated board is mainly used to manufacture corrugated boxes for packaging products. U. S.
Industrial production of processed foods, non-durable goods and certain durable goods often drives demand for corrugated cartons and cardboard.
Forest & Paper Association of America (\"AF&PA\")
Estimates of the size of the US economyS.
The container market is as follows :(In millions)
Total 201720162015 in the United StatesS. sales33. 5 tons32. 4 tons32. 2 tonsU. S. production37. 4 tons36. 3 tons35. 8 tonsImports1. 4 tons1. 2 tons1. 1 tonsExports5. 3 tons5. 1 tons4. 8 tonsU. S.
95% 94% the main market for our cardboard is our corrugated products manufacturing factory, Independent Corrugated and laminated products customers who focus on special packaging and victory.
According to the latest annual report of April 2017, the shipment volume of corrugated carton industry in 2016 was $30.
8 billion, an increase of $0. 3billion, or 1.
Compared with 2015, it was 0%. Theprimary end-
The market for the use of corrugated products is as follows (
As stated in the latest fiber box Association Annual Report of April 2017)
: General retail and wholesale trade of food, beverage and agricultural products 18% Petroleum, plastic, synthetic and rubber products 10% other manufactured 9% paper products 9% household appliances, vehicles and metal products
Shopce4 % 100% shopugatedproducts manufacturing plants tend to be close to customers to minimize shipping and shipping time.
According to the optical fiber box Association, the United StatesS.
The corrugated products industry consists of about 500 companies and more than 1,100 factories.
6 Content table special paper board paper we produce Kraft paper in three general categories: bags for the production of agricultural products, pet food, baked goods, cement and chemicals.
We are the only Americans. S.
Scalable manufacturer of high-performance multi-wall kraft paper.
We have fightshield®Tea.
Kraft®Our exceptional customer and technical services provide durability, cost savings, efficiency and support to the product range.
We also make durable flat multi-wall sack paper for various ends
Use the app.
Special products have a variety of uses in coating and laminating applications that require smooth surfaces.
Special Paper is also used for the production of wooden tile packaging, bottle caps, roll packs and padded bags.
Our specialty paper products are designed to meet the unique needs of a wide range of customers and end-use.
We have modified a range of special paper products for our special paper grade, such as size, smoothness, air hole rate, wet strength, pH and others.
Our special paper products are manufactured for a wide range of converters, including laminating machines, coating machines, insulation manufacturers, agricultural products processors and food packaging manufacturers.
Lightweight paper for a variety of flexible packaging applications with a recovery content ranging from 100% to fast
The service restaurant provides 100% of the original food for guests directly in contact with food packaging.
Our lightweight original furniture paper is produced by a specially mixed wood sheet recipe.
These wood chips and pulp formulations are specifically designed to develop paper properties that are important for a variety of special packaging end-use and coating paper applications.
Our recycled content lightweight paper is made with a basic weight and percentage of various recycled fiber content and is valued for its cleanliness, strength, sustainability and final quality
Possibility of use.
Recently developed product line Fiber Green®Is made of old corrugated cartons (\"OCC\")
Processing in our stateof-the-
Art OCC facility with extensive base weight.
Fiber Green®Satisfied the United StatesS.
Requirements of the Food and Drug Administration for direct access to food and certified by the Sustainable Forestry Initiative®.
TheAF & PA estimates of the size of the US economyS.
The market situation of kraft paper is as follows :(In millions)
Total 201720162015 in the United StatesS. sales1. 81 tons1. 80 tons1. 58 tonsU. S.
Operating rates 89% 93% 90% saturated kraft is used in a number of industries around the world, including construction, electronic manufacturing and furniture manufacturing. The major end-
Thin high pressure laminate is used (\"HPL\")
It is used to make decorative surfaces such as kitchen and bathroom countertops, home and office furniture, and floors.
In the HPL market, there is a growing and unique HPL segment that manufactures and sells a product with a greater thickness called a compact laminate for surface treatment products such as the outside
In Asia, saturated Kraft products have a great use in the manufacture of printed circuit boards and coated copper foil laminated products, and there are more and more uses for thin HPL decorative surfaces.
We do not know the size of any published data that reports the saturated Kraft market.
The entry threshold for producing high quality saturated Kraft is high because it is very difficult to produce paper products.
The unbleached folded carton board is a low density raw fiber board.
The application is widely distributed in the final use of the ordinary folding carton part of the cardboard packaging market.
This product can replace the use of more expensive coating recovery plates, coated natural Kraft plates and solid bleach sulfuric acid plates, which are repeated in the larger market.
No published data, we know the scale of the market for unbleached, uncoated folding cartons is reported.
The distribution segment, through the operation of Vicente, works with customers to improve and promote all aspects of packaging and distribution, including packaging design, creation, storage, delivery and management.
Headquartered in Houston, Texas, Vicente has about 60 warehouses and distribution facilities, most of which are located in the United States, 3 in Canada and 15 in Mexico.
Across the country, Vicente is one of the largest distributors dedicated to providing packaging solutions to customers across the country.
Victory also provides local packaging and distribution services to regional customers.
There are about 6 national networks in the distribution sector.
The warehouse area is 4 million square feet and about 230 vehicles are transported.
Swiydistributes sells corrugated and other special packaging products including stretch film, void filling, carton sealing tape and other special tape.
We operate four paper mills, three in the southeast of the United States and one in the northwest of the Pacific.
At 2017, we produce.
Our factory in North Charleston, South Carolina has 8 million tons of cardboard and special paper;
Roanoke Rapids, North Carolina;
Cowpen, South Carolina;
And Longview in Washington.
Our factory is usually open 24 hours a day, seven days a week.
The fibers used in the manufacture of cardboard and special paper are made of locally sourced round wood and wood chips.
After the wood is dumped and chopped, the pieces are loaded into a biogas digester for cooking.
Mix wood chips, chemicals and steam to produce cork pulp in biogas digesters.
Production of hardwood floors in the way of asimilar in North Charleston, mainly for the production of DuraSorb®Saturated Kraft and clafta Park®It is mainly used to produce corrugated media.
The pulp is screened and washed through a series of washers and then stored before the paper making process.
The OCC is used to manufacture recycled cardboard at our Cowpens factory and is an integral part of certain grades kraft paper and cardboard at our Longview factory.
The company uses 11 sheets of paper to machine pulp in our factory.
Managers monitor productivity in real time
Time base with on-
Line reporting tools that track production values and targets.
The overall efficiency of the equipment is also monitored daily through the production reporting system.
As of December 31, 2017, we have operated 23 corrugated products manufacturing plants, including 12 box factories, 9 cardboard factories and 2 cardboard factories.
The box factory is a joint operation for the production of corrugated board and finished corrugated board.
The paper feeder has a paper feeder that produces wave sheets that are transported to the paper feeder.
The paper board factory has a variety of machines to convert corrugated board purchased from our operations or third parties into finished corrugated board.
The total capacity of the plant with the grugatingmachine is about 19 BSF.
Our corrugated products manufacturing plants operate in 15 states in the United States. S.
There are no manufacturing facilities outside the US mainland. S.
In most cases, each plant provides an average amarket radius of 200 miles.
Our paper factory is usually close to our larger corrugated box factory, which enables us to provide additional services and conversion capabilities such as small size and quick turnover.
The content table produces a variety of products from basic corrugated containers to professional packaging.
We have more.
Color printing function to make high
Provide consumers with more attractive packaging products, such as consumer goods companies.
We carry out cardboard buying and selling arrangements with other cardboard manufacturers.
Supply chain cardboard and specialty paper produced by our paper mill is delivered to customers in the United States by rail or truckS.
It is then transported by truck at the port and then by ocean shipping to our export customers.
Domestic rail transport accounts for about 48% of the transport tons, while the remaining 52% are transported by truck.
Our corrugated products are delivered by truck due to our customer\'s request for timely service.
We use the third dedicated-
Our own truck and fleet.
The main product of victory in the United States. S.
Canada uses about 230 delivery vehicles to be delivered directly from a network of victorious distribution and fulfillment facilities.
In Mexico, delivery services are outsourced to third-party logistics companies.
Our distribution and fulfillment facilities offer a range of delivery options based on customer needs and preferences.
The strategic layout of the distribution and fulfillment facility also allows the delivery of special or \"urgent\" orders to many customers.
Our marketing strategy for cardboard and special paper is to sell our products to third parties
Square converters and manufacturers of industrial and consumer packaging products.
We seek to meet the quality and service needs of our corrugated business customers at the most effective cost, while balancing these needs with the needs of our cardboard customers.
We sell our products directly to end users and converters through a sales agent.
Our sales team is responsible for selling these products to third-party converters in the USS.
Sales in export markets are managed by personnel based in Europe and Asia.
Our corrugated and packaged products and services are sold through internal sales and marketing organizations.
We have sales representative and sales manager to serve local and regional clients.
We also have corporate account managers who serve large national accounts in multiple customer locations.
Our corrugated business focuses on providing high
High volume goods and professional packagingvalue graphics.
Our paper and packaging department has over $3,000 of customers and products. S. -
Our distribution department has about 200 active customers and over 6,300 export customers.
The container board is sold to domestic and foreign converters in the corrugated packaging industry, as well as other converters for various purposes, including laminated film and packaging materials.
Historically, our focus is on independent converters that don\'t have their own factory systems or converters that typically buy cardboard in the open market.
Shopugatedproduct is mainly sold to regional and local customers in different industries and geographical locations.
We have a selected number of national accounts or customers with national accounts.
Customers in these countries usually buy corrugated products from several of our carton factories throughout the United States.
9 catalogue dedicated paper is sold to domestic and export converters that produce multi-wall bags for food grade agricultural products, pet food, cement and chemicals, grocery bags and special conversion products such: wrapping paper products, padded bags, rolls, etc.
Saturated cowhide for sale in trade name Durasorb®The customer base is divided into three geographical regions: America; Europe; and Asia.
88% of our Durasorb®Sales are exports to customers in Europe, Latin America and Asia, where growth opportunities are favorable.
KapStone, or its predecessor, has been doing business with many of these customers for more than 40 years.
Some customers have merged to form a bigger presence in their enduse markets.
Customer consolidation is particularly evident in North America and is in its early stages in Europe.
There are many participants in Asia, a highly fragmented market that makes it difficult for some companies that are not well-known in the region to enter.
KapStone has gained leadership in our Durasorb®By understanding our market and understanding the technical requirements of our customers\' manufacturing process and the demanding requirements of their products.
Unbleached folding cartons for sale under Kraftpak®The trade name has a customer base that consists primarily of integrated and stand-alone converters in the folding carton industry.
Our unbleached folding carton Cardboard product is a unique low
Original optical fiber board with density.
KapStone believes that the best opportunity for growth for Kraftpak is in consumer brands that are changing their image to promote environmental friendliness and sustainability.
Kraftpak and similar products have replaced coating recovery plates, coated natural Kraft plates and solid bleached sulfuric acid plates currently used in larger markets.
Viceroy scustommer base includes local, regional and national accounts of a variety of industries and sizes and in a variety of ways
Annual supply agreement for transaction sales.
In addition to providing materials
Vicente also has a neutral design capability and a high level of distribution services dedicated to fulfillment, placement and contract packaging services.
There are many valuable, manyyear, long-
Enter into regular supply agreements with many of the largest customers, stipulating terms and conditions of sale, including pricing of products.
In general, under these agreements, customers do not need to purchase any minimum quantity of products and can place orders based on individual purchase orders.
Vicente, however, has reached negotiated supply agreements with certain customers, which include a commitment to inventory in its distribution facility.
The demand for operating capital for victory generally reflects the need to carry a large inventory in its distribution and fulfillment facilities to meet its distribution and fulfillment of customer delivery requirements, as well as a large balance of accounts receivable.
In this industry, customers of Vicente generally do not pay after payment is received, but provide terms based on the specific circumstances of the sale.
No customers accounted for more than 10% of consolidated net sales.
Our business is not dependent on a single customer or a small number of major customers.
Seasonal and reverse login to our paper and packaging department, the demand for our main product line is relatively stable throughout the year, and seasonal fluctuations in marketing, production, shipment and inventory are not significant.
Seasonal fluctuations are mainly driven by the agricultural market in the western United States.
Backlogs are a factor in the industry as they allow paper mills to operate more efficiently.
However, most orders are delivered within 30 days.
In our distribution division, the results of operations are affected by some seasonality that is not important to the results of the company\'s merger.
Historically, our highest shipments took place in the second and third quarters, while the lowest shipments took place in the first quarter.
In the 10 content distribution parts table, shipments in the first quarter are generally lower than shipments in the fourth quarter of the previous year.
Suppliers and main raw materials using fiber fibers are the biggest cost of making cardboard and special paper.
KapStone consumes both wood fiber and recycled fiber at its paper mill.
Our paper mill in North Charleston and Roanoke Rapids uses 100% of raw fiber.
Our Longview plant in Washington, D. C. , in 2017, the fiber demand was provided by about the original fiber.
The fibers used in the manufacture of cardboard and special paper are made of locally sourced round wood and wood chips.
We rely on supply agreements and openness.
Supply market purchase of round wood and wood chips to these factories.
Fiber resources are usually close to these factories, and we have not encountered any major difficulties in obtaining the fiber needs of the factory.
In 2017, the company began operating two timber crushing facilities managed by a third party for use at the North Charleston and ronock Rapids paper mills.
Recycled Fiber our fiber consumption at our factory in Cowen, South Carolina consists of 100% of recycled fiber or OCC.
Under certain supply agreements, we obtain the OCC from suppliers close to the Cowpen factory and purchase it in the open market.
There have been significant price fluctuations in the history of OCC.
The Cowen factory did not encounter any major difficulties in obtaining the OCC.
Our Longview WA millare recycled about 30% of the fiber demand.
Container cardboard our corrugated board manufacturing plant consumes the container cardboard produced by our factory or third party through the arrangement of buying and selling.
We also use the third one.
Party factory closer to our corrugated factory to achieve cost savings.
Cardboard is the main raw material for making corrugated board, including cardboard and corrugated raw paper.
Linerboard is used as the inner and outer surfaces or padding of corrugated products.
In the corrugated carton factory, the corrugated medium is recessed and laminated to the cardboard to produce the corrugated cardboard.
The paper is then printed, cut, folded and bonded to produce corrugated products.
Distribution products Vicente buys products from some suppliers, mainly in the United StatesS.
Vicente\'s suppliers include large paper and packaging companies, regional corrugated paper mills and non-
After being acquired by KapStone, Vicente increased its purchase from KapStone\'s corrugated products manufacturing plant.
The supplier is selected according to the customer\'s demand for the product and the overall service, cost and product quality of the supplier.
Product Sourcing is designed to ensure that Vicente is able to provide consistent but diverse product selection and competitive pricing across the enterprise while maintaining the ability to service localized market needs.
Our procurement plan also focuses on replenishment, including placement of purchase orders, and managing the total cost of inventory by increasing the number of days in stock, negotiating favorable payment conditions and maintaining suppliers
Owner and supplier-
The hosting program.
As a large purchaser of packaging materials, we can get quantitative subsidies with some suppliers and achieve a significant economies of scale.
In turn, we have entered into incentive agreements with some of our largest customers, which are often based on sales to these customers.
The ContentsEnergyEnergy table of the paper mill is obtained by purchasing electricity or various fuels which are converted into steam or electricitysite.
Fuel sources include coal, purchased biomass fuel, natural gas, oil, bark, sawdust and by-products
Products including liquor making and paper making process.
These fuels burn in the boiler to produce steam.
Steam turbine generators are used to generate electricity.
To reduce our plant energy costs, we have invested in processes and equipment to ensure a high degree of flexibility in the fuel purchased.
In recent history, fuel oil has shown higher unit thermal costs and greater price fluctuations than natural gas and coal.
KapStone uses falling coal prices plus extra bears
The long-term opportunity for gas prices to fall to balance the use of natural gas and coal with the use of other fuels at Charleston and Roanoke Rapids plants in 2017.
Most of the electricity demand at our Longview plant is met by relatively stable hydropower.
We bought coal under a contract.
Contracts for the purchase of natural gas at a fixed price are layered according to various terms and quantities, with the shortest period sent on 2019 and the longest period ending on 2022.
Kapstone\'s spliugated product manufacturing plant mainly uses boilers that produce steam used in the manufacturing process of the product.
While some boilers also have the ability to burn fuel, most of them burn natural gas.
The main energy source of the paper mill is electricity.
Volatile fuel prices have a direct impact on our distribution sector as it affects the price we pay for the product and the cost of delivering the product to our distribution and fulfillment customers.
Vicente purchases diesel under a contract relating to the price of the diesel market and does not participate in any substantial forward or hedge fuel contracts.
The competition in the market where we sell our products is fierce and consists of many participants.
We are faced with many competitors, including large vertically integrated companies and many small companies.
Our main competitors in the sales of cardboard and specialty paper are a number of large, diversified paper and packaging companies, including Georgia international paperPacific (
Owned by Koch Industrial)
WestRock and packaging companies in the United States, all of which have more financial resources than we do.
We also compete with other regional manufacturers of these products.
Our special paper products (
Except for our Durasorb. ®And Krista Park. ®Products)
Is everyone considered a commodity?
The types and competition of products that can be purchased from many suppliers are mainly based on price, product specifications, service and quality.
Mobilugatedproducts enterprises seek to be different through innovation, quality, service and product design.
We compete in local and national customer business and compete with producers of other types of packaging products.
At the national level, our main competitors include Georgia international paper. Pacific (
Owned by KochIndustries, Inc. )
Westlock Corporation and Packaging Corporation of the United States.
However, as our strategic focus is on local and regional customers, we also compete with smaller independent converters.
The packaging distribution industry is highly competitive, with a large number of regional and local competitors, and is a mature industry with slowing growth.
Vicente\'s main competitors include regional and local distributors, national and regional manufacturers, and independent brokers.
Most of these competitors, although the level of service is different, usually offer the same price as the price offered by victory.
At the national level, our main competitors include 12 tables from contentsinterpaper paper, Ga. Pacific (
Owned by Koch Industrial)
Westlock, Veritiv and packaging, USA.
However, as our strategic focus is on local and regional customers, we also compete with smaller independent distribution companies.
In addition, the new competition may come from
Traditional channels, group buying organizations, e-commerce
Integration between business, discount wholesalers or competitors.
We believe that Vicente provides the full range of services needed to compete effectively, but if new sources of competition emerge, it may lead to a decline in profit margins or it is more difficult to attract and retain customers.
The intellectual property company owns the patents, licenses, trademarks and trade names of the products.
However, we do not believe that our intellectual property rights are critical to our business and that the loss of any or our intellectual property rights will not have a significant adverse effect on our operations or financial position.
We have about 6,400 employees in December 31, 2017.
Among them, some 2,000 employees received wages and 4,400 employees received wages per hour.
About 2,400 of our hourly staff are represented by the Union.
Most of our Union\'s employees are represented by United Steel Workers or the Western Association of pulp and paper workers.
At present, before May 2024, the collective bargaining agreement of about 630 employees at Longwei paper mill came into effect, and as of June 2025, about 560 employees at the North Charleston paper mill, roanoke Rapids Paper mill employs about 310 people until August 2020.
Compliance with environmental requirements is an important factor in our business operations.
We put a lot of resources into maintaining environmental compliance and managing environmental risks.
We comply with and must comply with various foreign, federal, state and local environmental laws, in particular laws relating to air and water quality, waste disposal and contaminated soil cleaning, groundwater or rivers
The most important of theseS.
The laws that affect us are: 1.
Bill on resource conservation and recovery; 2. CleanWater Act; 3. CleanAir Act; 4.
Emergency plan and community rightsto-Know-Act; 5.
Administration of toxic substances; and6.
Safe Drinking Water Act.
We believe that we are currently materially in compliance with these and all applicable environmental rules and regulations.
Due to the continuous development of environmental regulations, we have and will continue to bear the costs of complying with these and other environmental laws and regulations.
We strive to anticipate and budget the impact of the application of environmental regulations, and it is currently expected that future environmental compliance obligations will not have a significant impact on our business or financial position.
We do not believe that any remedial items in progress are substantial.
13 content table Longview, a subsidiary of the company, is a potential liability party under the Comprehensive Environmental Response, Compensation and Liability Law (\"CERCLA\")
Super fund on waterways LowerDuwamish Washington state. (the \"Site\"). The U. S.
Environmental Protection Bureau (\"EPA\")
It is claimed that the site was contaminated by the discharge of various enterprises and government entities located downstream of the Duwamish Waterway, including the corrugated conversion plant owned and operated by Longview.
On November 2014, the EPA issued a record of the decision (\"ROD\")for the Site.
The rod includes remedial measures selected on site.
In ROD, EPA says the total estimated cost of net present value (2 fold. 3percent)
While there is still a lot of uncertainty that could lead to an increase in the cost of remediation, the number of remedies elected is $0. 342 billion.
This estimate does not include the actual costs incurred so far in remedial investigations and feasibility studies, nor does it include claims for potential natural resource damage from parties allegedly affected by site contamination.
The company has received a notice from the Elliott Bay board of trustees regarding the company\'s potential liability for damage to natural resources caused by the site.
Neither the company nor Longview received specific currency requirements regarding its potential liability for the site.
In addition, Longview is a participant in a non-
Judicial distribution procedures on site.
According to non
During the judicial allocation process, Longview and other participants will seek to allocate certain costs, including but not limited to the costs required to work under the bar. Thenon-
The judicial distribution process is not expected to be completed until 2020.
Based on the information currently available to the company, the company is unable to reasonably estimate its potential capabilities for this site, including any liability for the current or future third site --
Party claims related to the website.
As a result of a third party\'s claim for civil damages, we may also assume environmental liability, including liability for personal injury or property damage caused by the release of hazardous substances or pollution.
Apart from the above, we are not aware of any such significant claims that are currently being made against us.
While, from time to time, federal level has proposed legislation on regulation of greenhouse gas emissions over the past few years, there is no indication that any short-term action will be taken.
In the absence of extensive legislation, under the existing Clean Air Act program, EPA has advanced more and more regulations governing greenhouse gas emissions in certain industrial sectors.
The result of broader regulation of greenhouse gas emissions may be an increase in our future environmental compliance costs, or additional capital expenditures for facilities that may be important.
However, if we continue to encourage the use of renewable energy, climate change regulations, possible future legislation and the resulting future energy policies can also provide us with opportunities.
At the moment, we use bark, liquor and other biomass as fuel, generating a large portion of our plant\'s electricity demand from renewable resources.
Although we believe we are good
Positioning itself to take advantage of any renewable energy incentive, the final costs and opportunities for any climate change legislation or regulation and how our business and industry will be affected is uncertain.
The Environmental Protection Agency issued the Boiler MACT regulations in its fourth year, setting air emission standards and certain other requirements for industrial boilers.
These regulations are subject to a series of legal challenges and EPA has promulgated and/or revised several times since the initial rules were issued.
The final re-examination regulation was issued on January 2013, but legal challenges were raised.
In July 2016, the United StatesS.
The Court of Appeals of the Colombian Circuit ruled on a merger case challenging the Boiler MACT regulations.
The court set aside emission limits for certain classes of solid fuel boilers and sent other issues back to the EPA for further explanation.
On December 2016, at the request of the Environmental Protection Agency, the court changed the re-regulation of the vacated standard and sent it back to the Environmental Protection Agency. The U. S.
On June 2017, the Supreme Court refused to review the matter, but the legal process continued.
We are currently unable to predict exactly how the latest decisions will affect our existing Boiler MACT compliance, or whether our operating costs will increase in order to comply with any revised Boiler MACT regulations.
All of our plants subject to the Federal Boiler MACT regulations demonstrate compliance with current standards and requirements.
In addition to Boiler MACT and greenhouse gas standards, EPA recently finalized a number of other environmental rules that may affect the pulp and paper industry.
EPA is also revising existing environmental standards and developing several new rules that may apply to the industry in the future.
We are currently unable to identify changes in future environmental laws and regulations (
Or their explanation)
Will affect our business;
However, our compliance, capital expenditure requirements and operating costs can increase significantly.
InJanuary 2017, the company received a letter from the state Department of Ecology (\"WDOE\")
It is argued that the company, together with several other companies, is responsible for investigating and cleaning up sites allegedly contaminated, and that named companies, including Longview, can store or store petroleum products.
The letter concerns the potential release of petroleum products into the environment.
At 1998, langwei (
Before being acquired by the company)
And certain other companies that own or operate underground tanks and pipelines have entered into an agreement independent (
But consulted)the WDOE.
1998 groundwater monitoring will continue after the agreement expires.
On June 2017, theWDOE further informed the company that WDOE determined that Longview was a potential liability party in connection with on-site oil release or threat release.
The company has responded to these proposals and has discussions with WDOE and other potential responsible parties.
According to the information currently available to the company, the company cannot reasonably estimate its potential responsibility for the matter.
We provide free annual report on Form10-
Quarterly Report on Form10
Current Report of Q, form 8-
K and amendments to reports required to be submitted or provided in section 13 (a)or 15(d)
The revised Securities Trading Act of 1934, through our internet site (www. kapstonepaper. com)
After we submit these materials electronically to the Securities and Exchange Commission or to the Securities and Exchange Commission, as long as it is reasonably practicable.
The information contained in or contained in our internet site is not contained by reference.
Financial information on market segments and geographical areas we operate as two market segments with 86% of revenue sold in the US and 14% to foreign customers.
See Note 2 \"Segment Information\" for \"summary of major accounting policies\" and note 18 \"Segment Information\" contained in notes to consolidated financial statements \".
Table 1a of content website.
Risk factors some of the statements in this report, in particular the statements of the non-historical nature found in the Management\'s Discussion and Analysis of the financial situation and operational results, are forward-looking --
Statement in the sense of the Private Securities Litigation Reform Act of 1995. Forward-
The outlook statements include statements about our expectations for future operating and performance results, income, expenditure, and financial position and liquidity.
These statements are usually identified with \"will\", \"should\", \"expected\", \"believe\", \"expected\", \"intention\", \"estimate\", \"hope. Or a similar expression.
These statements reflect management\'s current views on future events and are affected by risks and uncertainties.
There are important factors that may lead to significant differences between actual results and forward results.
Many of them are beyond our control.
These factors, risks and uncertainties include but are not limited to the factors described below, as well as various factors related to the merger, including but not limited to: kapstone and WestRock\'s ability to obtain regulatory approval for the proposed exchange (
Such approval may result in the risk of imposing conditions that may adversely affect the expected benefits of the consolidated company or transaction)
, Obtain approval from KapStone shareholders and meet other conditions at the end of the transaction in a timely or fundamental manner;
The occurrence of events that may result in the right of one or both parties to terminate the merger agreement;
Announcement or completion of the transaction has a negative impact on the market price of WestRock or KapStone common stock and/or on their respective business and financial conditions, operating results and financial performance;
Risks associated with the value of common stock, significant transaction costs and/or unknown liabilities of the holding company that may be issued in the transaction;
The possibility that the expected benefit of the proposed transaction cannot be fully or fundamentally realized, or that the time for realization may be longer than expected;
Risks associated with third-party contracts containing consent and/or other terms that may be triggered by the proposed transaction;
Risks related to transactions
The possibility of costs or difficulties associated with KapStone\'s business with WestRock\'s business integration will be greater than expected;
Results required by law to be negotiated with employees, their work committee or other staff representative;
And the ability of KapStone and United to retain and hire key personnel.
There is no guarantee that the above proposed transaction or any other transaction will actually be completed in said or fundamental manner.
We are faced with additional risks and uncertainties that we do not know at the moment, or which we currently believe are irrelevant.
If any known or unknown risks and uncertainties develop into actual events, these developments may have a significant adverse effect on our business, results of operations, financial position or liquidity.
Our actual results, performance, financial position, liquidity, prospects and opportunities may differ materially from those forward performance or implied results
Therefore, we cannot guarantee any event expected by the striker --
Looking at the statements will happen or occur, or if any, what impact they will have on our business, results of operations, financial position or liquidity.
Given these uncertainties, investors should be careful not to rely too much on these forward-looking factors.
Look at the report.
We expressly deny any obligation to publicly amend any forward-looking statements made to reflect the occurrence of events after the date of this agreement, unless required by law or regulation.
Risks related to our business we rely on key managers and other key employees whose losses may adversely affect our business.
We rely on the expertise, experience and continuous service of the company, factory and distribution services management and other key employees.
Losing this kind of management, or being unable to attract 16 important people, can have a significant adverse impact on our business.
There is no guarantee that our compensation and incentive compensation plan will enable us to retain the services of such management and other key employees, or to hire new key employees.
We compete with other businesses in terms of management and other key employees and invest a lot of resources in training and motivating them.
We cannot guarantee to attract or retain highly qualified employees.
Failure to retain or hire qualified personnel at an economically reasonable salary level will compromise our ability to improve our business and lead to a decline in operating results and profitability.
In addition, as a result of the proposed merger with WestRock, our ability to retain all employees in order to continue the business in the normal process may be affected.
We may have business disruptions.
We take steps to reduce the risk of disruption of manufacturing and distribution facilities.
However, the occurrence of natural disasters such as hurricanes, tropical storms, earthquakes, tornadoes, floods, fires or other unexpected problems such as labor difficulties (
Including work stoppage or strike)
Equipment failure or irregular maintenance may result in operational disruption and may have a significant adverse effect on our business, revenue and cash flow.
Any loss as a result of these events may not be covered by our existing insurance policy or may be subject to certain deductibles.
Our huge debt can have a negative impact on our financial health.
We have about $1 as of December 31, 2017.
4 billion of outstanding debts.
Due to liabilities, our ability to obtain additional financing for working capital, capital expenditures, acquisitions or other general company purposes may be compromised in the future.
Debt may make us vulnerable to the recession and may hinder our ability to adapt to a rapidly changing market environment.
A large part of our business cash flow will need to pay the principal and interest on our debt.
The business may not be able to generate sufficient cash flow from operations to enable it to repay our debt and fund other liquidity needs, including capital expenditure requirements, or to pay for our common stock
The losses we have incurred under our senior credit facility (
\"Credit Loan \")
In accordance with our second revised and reiterated credit agreement (
The revised credit agreement)
So if interest rates go up, our debt service will go up.
In this case, we may need to refinance or restructure all or part of our debt.
We may not be able to refinance any of our debts, including credit financing, on commercially reasonable terms or at all.
If we cannot provide services or refinance our debt, we must take action such as suspending the payment of dividends, selling assets or reducing the amount of dividends, seeking additional equity or reducing or delaying capital expenditures, any of these may have a significant adverse effect on the price of our common stock, business and financial position.
Our credit mechanism contains restrictive covenants that limit our liquidity and corporate activities, including our ability to make additional acquisitions.
Operating and financial restrictions are not allowed in our credit facilities, limiting our ability to: generate additional debt;
Create additional liens on our assets;
Engaged in mergers and acquisitions; x95pay dividends;
Sell all or most of our assets.
In addition, our credit services impose other restrictions on us.
Therefore, in order to engage in certain corporate actions, we need to seek permission from the lender.
The lender\'s interests may be different from ours and there is no guarantee that we will be able to obtain the lender\'s permission when required.
This may prevent us from taking actions that we believe are best in the interests of the company and its shareholders.
Our credit mechanism requires us to maintain a certain financial ratio.
Failure to maintain a specified rate may result in a default event (
And ban us from borrowing with a revolver under our credit loan)
If there is no cure or give up.
In the event that our credit agreement defaults, the lender is generally able to declare that all outstanding debts and accrued interest are due and payable.
In addition, the loan under the credit loan is secured with a first priority lien on all of our assets (
Outside real estate)
And, once any breach of contract under that loan occurs and continues, the lender is usually entitled to seize collateral.
Default events under any debt instrument, unless corrected or waived, may adversely affect our business, liquidity and financial position.
We sell some of our products in the world, so, our business, operational results, cash flow and financial conditions may be adversely affected by the political and economic conditions of the countries in which we operate, exchange rate fluctuations and other factors related to our international operations.
Our revenue in 2017 was about 14%, and 2016 came from foreign and export sales.
Our international business and activities are at risk of selling products to foreign customers.
These factors include: changes in foreign exchange rates or controls that may adversely affect the selling price of our products, thus affecting our competitive position in a specific market.
Trade protection measures in favor of local producers of competitive products, including government subsidies, tax incentives, trade actions (suchas anti-
And other measures to give local producers a competitive advantage over us.
The political, regulatory, social or economic conditions of the countries in which we sell our products generally change. Astronger U. S.
The US dollar has a negative impact on our export prices, increasing foreign container imports at a relatively low price, affecting our USS.
Adversely affect our business and operational results.
These risks may affect the cost, pricing, sales and final financial performance of our products.
The possibility of such events and their potential impact on the company varies from country to country and is unpredictable.
If we fail to extend or renegotiate the collective bargaining agreements when they expire, or if our union employees participate in a strike or other stoppage, our business, the operating results and financial situation may be materially damaged.
Most of our hourly employees are represented by the Union.
Sometimes, we may be a party to the collective bargaining contract, which applies to about 900 employees in various corrugated manufacturing plants and 630 employees in langwei factory, 560 employees at the North Charleston plant and 310 employees at Roanoke Rapidsmill.
There is no guarantee that we will be able to successfully extend or renegotiate collective bargaining agreements as they expire from 18.