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KapStone Paper and Packaging Corporation Prepays Earn-Out Obligation to International Paper

Northbrook, Illinois, USA, 04 January 2011 -- /PRNewswire/ -- KapStone Paper and Packaging Corporation (NYSE: KS), a leading North American producer of unbleached kraft paper products and linerboard, today reported that the company prepaid the balance of earn-outs due to International Paper Company (IP).

The earn-out obligations arose from the 23 June 2006 agreement for the company's purchase from IP of the kraft paper business assets, including a paper mill in Roanoke Rapids, North Carolina, and a dunnage bag manufacturing facility in Fordyce, Arkansas. A portion of the earn-out obligations was paid to IP upon the sale of the dunnage bag business in March of 2009, leaving a potential USD 55.0 million payment in April of 2012.

KapStone could not foresee any realistic scenario that would result in a reduction of the USD 55.0 million obligation. However, the early payment allowed KapStone to take advantage of an 8% annualized discount reducing the obligation from USD 55.0 million to USD 49.7 million, a savings of USD 5.3 million. The earn-out payment will be accounted for as goodwill.

"We have been very pleased with the outstanding performance of the Roanoke Rapids operation, and we look forward to continued excellent results," said Roger W. Stone, chairman and chief executive officer. "Quite frankly, I would have been very disappointed if this payment had not been earned."

Headquartered in Northbrook, Illinois, KapStone Paper and Packaging Corporation is a leading North American producer of unbleached kraft paper products and linerboard. The company is the parent company of KapStone Kraft Paper Corporation which includes paper mills in Roanoke Rapids, North Carolina, and North Charleston, South Carolina, a lumber mill in Summerville, South Carolina, and five chipping mills in South Carolina. The business employs approximately 1600 people.

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