UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2013



o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 333-136559

EXOPACK HOLDING CORP.

(Exact name of registrant as specified in its charter)



Delaware		76-0678893
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

3070 Southport Rd., Spartanburg, SC		29302
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: (864) 596-7140

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨ No ý*

* The registrant is a voluntary filer of reports required to be filed by certain companies under Sections 13 or 15(d) of the Securities Exchange Act of 1934 and has filed all reports that would have been required to be filed by the registrant during the preceding 12 months had it been subject to such filing requirements.

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ý No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):



Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x (Do not check if a smaller reporting company)	Smaller reporting company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No ý

The registrant is a privately held corporation and has no voting or non-voting common equity held by non-affiliates. As of August 8, 2013, one share of the registrant’s common stock was outstanding.

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EXOPACK HOLDING CORP.

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FORM 10-Q



		Page
	PART I
	FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)	1
	Condensed Consolidated Balance Sheets as of June 30, 2013 and December 31, 2012	1
	Condensed Consolidated Statements of Operations and Condensed Consolidated Statements of Comprehensive Income (Loss) for the three and six months ended June 30, 2013 and 2012	2
	Condensed Consolidated Statement of Stockholder’s Equity (Deficit) for the six months ended June 30, 2013	3
	Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2013 and 2012	4
	Notes to Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	36
Item 4.	Controls and Procedures	37

	PART II
	OTHER INFORMATION
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	38
Item 6.	Exhibits	38

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PART I

FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

EXOPACK HOLDING CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands of dollars, except for share and per share data)



	June 30, 2013			December 31, 2012
Assets
Current assets
Cash	$	4,418		$	3,150
Trade accounts receivable (net of allowance for uncollectible accounts of $1,707 and $2,060 as of June 30, 2013 and December 31, 2012, respectively)	83,920			88,186
Other receivables	5,273			4,259
Inventories	100,706			90,103
Deferred income taxes	3,219			3,139
Prepaid expenses and other current assets	4,152			4,559
Total current assets	201,688			193,396
Property, plant, and equipment, net	226,891			223,298
Deferred financing costs, net	14,716			14,164
Intangible assets, net	86,794			85,413
Goodwill	69,630			69,673
Other assets	8,179			8,226
Total assets	$	607,898		$	594,170
Liabilities and Stockholder’s Equity (Deficit)
Current liabilities
Revolving credit facility and current portion of long-term debt and capital leases	$	35,336		$	23,557
Accounts payable	72,873			62,432
Accrued liabilities	34,112			34,414
Income taxes payable	1,448			1,532
Total current liabilities	143,769			121,935
Long-term liabilities
Long-term debt, less current portion	574,500			576,250
Capital lease obligations, less current portion	11,659			13,163
Deferred income taxes	23,226			22,810
Other liabilities	30,417			28,723
Total long-term liabilities	639,802			640,946
Commitments and contingencies (Note 8)
Stockholder’s equity (deficit)
Preferred stock, par value, $0.001 per share - 100,000 shares authorized, no shares issued and outstanding as of June 30, 2013 and December 31, 2012	—			—
Common stock, par value, $0.001 per share - 2,900,000 shares authorized, 1 share issued and outstanding as of June 30, 2013 and December 31, 2012	—			—
(Distributions in excess of) Paid-in capital	(75,381		)	(75,582		)
Accumulated other comprehensive income (loss), net	(24,283		)	(22,951		)
Retained earnings (accumulated deficit)	(76,009		)	(70,178		)
Total stockholder’s equity (deficit)	(175,673		)	(168,711		)
Total liabilities and stockholder’s equity (deficit)	$	607,898		$	594,170

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

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EXOPACK HOLDING CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands of dollars)



	Three Months Ended						Six Months Ended
	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Net sales	$	202,889		$	212,868		$	409,963		$	430,932
Cost of sales	176,655			184,791			355,535			374,863
Gross margin	26,234			28,077			54,428			56,069
Selling, general and administrative expenses	17,182			20,891			34,454			39,075
Operating income	9,052			7,186			19,974			16,994
Other expenses
Interest expense	12,183			13,102			25,111			26,130
Other expense (income), net	(430		)	(104		)	(1,159		)	(235		)
Net other expenses	11,753			12,998			23,952			25,895
Loss before income taxes	(2,701		)	(5,812		)	(3,978		)	(8,901		)
Provision (benefit) for income taxes	1,096			456			1,853			1,051
Net loss	$	(3,797	)	$	(6,268	)	$	(5,831	)	$	(9,952	)

EXOPACK HOLDING CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

(in thousands of dollars)



	Three Months Ended						Six Months Ended
	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Net loss	$	(3,797	)	$	(6,268	)	$	(5,831	)	$	(9,952	)
Other comprehensive income (loss):
Foreign currency translation adjustment	(860		)	(1,553		)	(2,347		)	(989		)
Change in pension liability, net of income taxes	507			523			1,015			1,046
Other comprehensive income (loss)	(353		)	(1,030		)	(1,332		)	57

Comprehensive loss	$	(4,150	)	$	(7,298	)	(7,163		)	(9,895		)

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

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EXOPACK HOLDING CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDER’S EQUITY (DEFICIT) (unaudited)

(in thousands of dollars, except share data)



	Common Stock			(Distributions in excess of) Paid-in capital			Accumulated other comprehensive income (loss), net			Retained earnings (accumulated deficit)			Total
	Shares	Amount		(Distributions in excess of) Paid-in capital			Accumulated other comprehensive income (loss), net			Retained earnings (accumulated deficit)			Total
Balance as of December 31, 2012	1	$	—	$	(75,582	)	$	(22,951	)	$	(70,178	)	$	(168,711	)
Stock compensation expense	—	—		201			—			—			201
Net loss	—	—		—			—			(5,831		)	(5,831		)
Foreign currency translation adjustment	—	—		—			(2,347		)	—			(2,347		)
Change in pension liability, net of income taxes of $0	—	—		—			1,015			—			1,015
Balance as of June 30, 2013	1	$	—	$	(75,381	)	$	(24,283	)	$	(76,009	)	$	(175,673	)

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

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EXOPACK HOLDING CORP. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands of dollars)



	Six Months Ended
	June 30, 2013			June 30, 2012
Cash flows from operating activities:
Net loss	$	(5,831	)	$	(9,952	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization	21,440			20,599
Deferred income tax provision (benefit)	390			(90		)
Stock compensation expense	201			285
Loss (gain) on sale and disposition of property, plant and equipment	(129		)	(1		)
Changes in operating assets and liabilities:
Receivables	3,429			(6,193		)
Inventories	(11,248		)	9,931
Prepaid expenses and other assets	(4,411		)	874
Accounts payable and accrued and other liabilities	13,749			(10,367		)
Income tax receivable/payable	(8		)	204
Net cash provided by (used in) operating activities	17,582			5,290
Cash flows from investing activities:
Repayments from (Investment in) joint venture	(369		)	62
Purchases of property, plant and equipment, including capitalized software	(22,149		)	(11,709		)
Proceeds from sales of property, plant and equipment	174			1
Net cash provided by (used in) investing activities	(22,344		)	(11,646		)
Cash flows from financing activities:
Repayments of term loan	(1,750		)	(1,750		)
Repayment of capital lease obligations	(1,393		)	(1,223		)
Deferred loan costs paid	(2,177		)	(96		)
Borrowings under revolving credit facility	385,926			345,973
Repayments of revolving credit facility	(374,258		)	(335,445		)
Net cash provided by (used in) financing activities	6,348			7,459
Effect of exchange rate changes on cash	(318		)	(8		)
Increase (decrease) in cash	1,268			1,095
Cash
Beginning of period	3,150			2,317
End of period	$	4,418		$	3,412

The accompanying notes are an integral part of these condensed consolidated financial statements (unaudited).

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Exopack Holding Corp. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

(unaudited)

1.Organization and Basis of Presentation

Exopack Holding Corp. and subsidiaries (the “Company”) was formed in October of 2005 through the acquisition and consolidation of three flexible packaging businesses, including Exopack Holding Corporation (“Exopack”), Cello-Foil Products, Inc. (“Cello-Foil”), and The Packaging Group (“TPG”). As a result of this acquisition and consolidation, the Company is wholly-owned by Exopack Key Holdings, LLC, which is a wholly-owned subsidiary of CPG Finance, Inc. (“CPG”), an affiliate of Sun Capital Partners, Inc. (“Sun Capital”).

The Company operates 18 manufacturing facilities located throughout the United States, United Kingdom, Canada and China. The Company operates seven manufacturing facilities in the food packaging segment, of which the Company leases two, including one in Concord, Canada, and owns the remaining five facilities. The Company operates eight manufacturing facilities in the non-food packaging segment, of which the Company leases two and owns the remaining six facilities. The Company operates three manufacturing facilities in the coated products segment, all of which the Company leases, including one manufacturing facility in North Wales, United Kingdom and one manufacturing facility in Guangzhou, China. During the year ended December 31, 2012, the Company closed its manufacturing facility in Seymour, Indiana. The Company has consolidated the Seymour, Indiana consumer multiwall packaging operations into other facilities located in Spartanburg, South Carolina, Tifton, Georgia and Sibley, Iowa.

On May 31, 2013, Sun Capital and its affiliates completed a consolidation (the “Consolidation”) of five of their flexible and rigid packaging portfolio businesses in North America and Europe, including the Company, Kobusch, Britton Group, Paragon Print & Packaging and Paccor (collectively, the “Consolidated Businesses”) under Exopack Holdings Sarl, a new Luxembourg company. The Consolidation created a global packaging company with operations in over 70 countries that focuses on rigid and flexible plastic packaging. Although the Consolidation has taken place, the Company has not implemented any purchase accounting changes or consolidated the other four businesses for reporting purposes. As of the filing date of this report, there have been no additional guarantees issued among the Consolidated Businesses and the Company's Senior Notes, therefore no event has occurred to trigger a business combination or consolidation for reporting purposes.

The accompanying unaudited condensed consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles in the United States of America ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X under the Securities Exchange Act of 1934, as amended. The condensed balance sheet as of December 31, 2012 was derived from audited financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted from this report. It is management’s opinion, however, that all material adjustments (consisting only of normal recurring adjustments, unless otherwise noted) have been made which are necessary for a fair statement of the Company’s financial position, results of operations, comprehensive (loss) income, stockholder's deficit and cash flows. The results for the interim periods are not necessarily indicative of the results to be expected for any other interim period, for the fiscal year or for any future period.

For further information, refer to the Company's condensed consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012.

2.Recent Accounting Pronouncements

In July 2012, the FASB issued Accounting Standards Update ("ASU") No. 2012-02, Testing Indefinite-Lived Intangible Assets for Impairment. The objective of this update is to simplify how entities test indefinite-lived intangible assets other than goodwill. This amendment allows companies to first assess qualitative factors of impairment of all indefinite-lived intangible assets, similar to the provisions in ASU No. 2011-08. The Company adopted this ASU as of January 1, 2013. This ASU did not have a material impact on the condensed consolidated financial statements.

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In February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The objective of this update is to improve the reporting of reclassifications out of accumulated other comprehensive income (loss). The amendments in this update seek to attain that objective by requiring an entity to report the effect of significant reclassifications out of accumulated other comprehensive income on the respective line items in net income if the amount being reclassified is required under U.S. GAAP to be reclassified in its entirety to net income. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income in the same reporting period, an entity is required to cross-reference other disclosures required under U.S. GAAP that provide additional detail about those amounts. The Company adopted this ASU as of January 1, 2013. This ASU did not have a material impact on the condensed consolidated financial statements. See Note 9 for new disclosures resulting from this ASU.

The condensed consolidated statement of comprehensive income (loss) for the three and six months ended June 30, 2012 have been revised to correct other comprehensive income (loss) as it omitted the changes in the pension and postretirement plan liability component of accumulated other comprehensive income (loss) pertaining to the amortization of net actuarial loss during the period. This revision increased other comprehensive income and reduced other liabilities by $523,000 and $1.0 million for the three and six months ended June 30, 2012, respectively. This revision will increase other comprehensive income and reduce other liabilities by $650,000 and $1.7 million for the three and nine months ended September 30, 2012, respectively. The Company has determined that these revisions were immaterial to the Company's current and previously issued condensed consolidated financial statements.

3.Inventories

The components of the Company's inventory are summarized as follows:



(in thousands of dollars)	June 30, 2013		December 31, 2012
Inventories
Raw materials and supplies	$	36,602	$	32,387
Work in progress	12,305		14,558
Finished goods	51,799		43,158
Total inventories	$	100,706	$	90,103

4.Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill attributable to each reportable segment are as follows:



(in thousands of dollars)	Food Packaging Segment		Non-Food Packaging Segment		Coated Products Segment			Total
Goodwill at December 31, 2012	$	19,219	$	47,780	$	2,674		$	69,673
Foreign currency translation	—		—		(43		)	(43		)
Goodwill at June 30, 2013	$	19,219	$	47,780	$	2,631		$	69,630

Effective January 1, 2013, Management made a decision to move two of its operating segments from one reportable segment to a different reportable segment to more effectively assess the performance of the business and allocate resources amongst its various operating segments. One of the operating segments was moved from the food packaging segment to the non-food packaging segment, and another operating segment was moved from the non-food packaging segment to the food packaging segment. This change had no impact on the Company's goodwill reporting units. The goodwill balances by reportable segment as of December 31, 2012 have been recast to reflect this change in the Company's reportable segments.

The Company’s other intangible assets are summarized as follows:

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(in thousands of dollars)	June 30, 2013			December 31, 2012
Intangible assets
Definite-lived intangible assets:
Customer lists	$	46,756		$	43,300
Patents	6,663			6,663
Trademarks and trade names	2,614			2,629
Gross definite-lived intangible assets	56,033			52,592
Accumulated amortization	(20,239		)	(18,179		)
Net definite-lived intangible assets	35,794			34,413
Indefinite-lived intangible assets - trademarks and trade names	51,000			51,000
Net intangible assets	$	86,794		$	85,413

Amortization expense for definite-lived intangible assets for the three months ended June 30, 2013 and 2012 was $1.0 million and $947,000, respectively, and for the six months ended June 30, 2013 and 2012 was $2.1 million and $1.9 million, respectively. Estimated future amortization expense is as follows:



(in thousands of dollars)
Year Ending December 31,
2013 remainder	$	2,073
2014	4,154
2015	3,865
2016	2,901
2017	2,807
2018 and thereafter	19,994
Total	$	35,794

5.Financing Arrangements

The balances due under long-term debt agreements at June 30, 2013 and December 31, 2012 were as follows:



(in thousands of dollars)	June 30, 2013		December 31, 2012
Senior Notes	$	235,000	$	235,000
Term Loan Facility	343,000		344,750
Senior Credit Facility	28,789		17,121
Capital Leases	14,706		16,099
Total Debt	621,495		612,970
Less: Current Portion	35,336		23,557
Total Long-Term Debt	$	586,159	$	589,413

Senior Notes

On May 31, 2011, the Company issued $235.0 million aggregate principal amount senior notes (the "Senior Notes") maturing on June 1, 2018. Interest on the Senior Notes accrues at the rate of 10.0% per annum and is payable on a semi-annual basis on each June 1 and December 1, commencing December 1, 2011.

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Before June 1, 2014, the Company may redeem the Senior Notes, in whole or in part, at a price equal to 100% of the principal amount thereof plus a make-whole premium and accrued and unpaid interest, if any, to the date of redemption. In addition, at any time before June 1, 2014, the Company may redeem up to 35.0% of the aggregate principal amount of the Senior Notes with the net proceeds of certain equity offerings at a price equal to 110.0% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of redemption, provided at least 65.0% of the aggregate principal amount of the Senior Notes remains outstanding immediately after such redemption. The Company may also redeem the Senior Notes at any time, in part or in whole, on or after June 1, 2014 at the redemption prices set forth in the indenture governing the Senior Notes plus accrued and unpaid interest, if any, to the date of redemption.

The Company and all of its domestic restricted subsidiaries have guaranteed the Senior Notes. See Note 12 for supplemental guarantor financial information required by Rule 3-10 of Regulation S-X. The Senior Notes place certain restrictions on the Company including, but not limited to, the Company’s ability to incur additional indebtedness, issue preferred stock, pay dividends, make other distributions, repurchase or redeem the Company’s stock or subordinated indebtedness, make investments, sell assets, issue capital stock of restricted subsidiaries, incur liens, enter into agreements restricting the ability of the Company’s subsidiaries to pay dividends, enter into transactions with affiliates, and consolidate, merge or sell all or substantially all of the Company’s assets. As of June 30, 2013, the Company was in compliance with all of these restrictions.

The Company incurred $6.9 million in deferred financing costs related to the Senior Notes, which are being amortized over the term of the Senior Notes.

The carrying values and estimated fair values of the Senior Notes as of June 30, 2013 and December 31, 2012, respectively, were as follows:



(in thousands of dollars)	June 30, 2013		December 31, 2012
Carrying Value	$	235,000	$	235,000
Fair Value (Level 2)	$	236,000	$	219,000

The fair value measurements of the Company’s Senior Notes are primarily determined using input prices that are directly observable for the asset or liability or indirectly observable through corroboration with observable market data.

Term Loan Facility

On May 31, 2011, the Company, its parent company and certain of the Company’s subsidiaries entered into a new $350.0 million senior secured term loan B facility (the “Term Loan Facility”). In addition to providing for term loans of up to $350.0 million, the Term Loan Facility also provides for an uncommitted incremental term loan facility of up to $75.0 million that will be available subject to certain conditions. In general, in the absence of an event of default, the Term Loan Facility matures on May 31, 2017.

On May 15, 2013, the Company amended the Term Loan Facility to make certain technical changes to permit the Consolidation and enable the Company to participate in certain supplier financing arrangements at investment grade borrowing rates. Borrowings under the Term Loan Facility accrue interest at (i) for base rate loans, an annual rate equal to the highest of three rate options: (a) the federal funds rate in effect on such date plus 0.5% per annum, (b) the variable annual rate of interest then announced by Bank of America as its “prime rate,” or (c) the Eurodollar Rate (as defined in the Term Loan Facility) plus 1.0%, plus, in each case, an applicable margin. The Amendment to the Term Loan Facility changed the applicable margins payable on the term loan from the previous rates of 4.0% for Base Rate Loans (as defined in the Term Loan Facility) and 5.0% for Eurodollar Rate Loans (as defined in the Term Loan Facility) with a LIBOR floor of 1.5%. The new applicable margins are 2.75% for Base Rate Loans and 3.75% for Eurodollar Rate Loans with a LIBOR floor of 1.25%. The interest rate applicable to outstanding borrowings under the Term Loan Facility was 5.0% as of June 30, 2013.

The Company makes quarterly principal payments on the Term Loan Facility of $875,000. Any remaining outstanding amounts as of May 31, 2017 will become due on the maturity date.

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The Term Loan Facility is collateralized by (i) a first priority lien on substantially all of the Company’s assets, other than the first priority lien collateral securing indebtedness under the Senior Credit Facility described below and assets of the Company’s foreign subsidiaries, and (ii) a second priority lien on the first priority lien collateral securing indebtedness under the Senior Credit Facility. In addition, obligations under the Term Loan Facility are secured by a first priority lien on the Company’s equity interests in its domestic subsidiaries and a portion of the Company’s equity interests in its foreign subsidiaries. All obligations under the Term Loan Facility are fully and unconditionally guaranteed by, subject to certain exceptions, each of the Company’s existing and future domestic subsidiaries.

The Term Loan Facility contains customary events of default, including, but not limited to, failure to make payments under the Term Loan Facility, materially incorrect representations, breaches of covenants (subject to a thirty-day grace period after notice in the case of certain covenants), cross-default to other material indebtedness, material unstayed judgments, certain ERISA, bankruptcy and insolvency events, failure of guarantees or security to remain in full force and effect, and changes of control. The Term Loan Facility places certain restrictions on the Company that are similar to the restrictions related to the Senior Notes. In addition, capital expenditures are limited to $45.0 million each fiscal year with carryover of any unused amounts to the next fiscal year. As of June 30, 2013, the Company was in compliance with all of these restrictions.

In connection with entering into the Term Loan Facility and the subsequent Amendment on May 15, 2013, the Company has incurred various deferred financing costs. In association with the Amendment to the Term Loan Facility, the Company incurred an additional $2.2 million of deferred financing costs. Total gross deferred financing costs associated with the Term Loan Facility are now $12.4 million, which are amortized over the remaining term of the Term Loan Facility.

Senior Credit Facility

The Company maintains a revolving $75.0 million senior credit facility (the "Senior Credit Facility"), which includes a $15.0 million Canadian dollar sub-facility. The Senior Credit Facility also provides the Company’s domestic and Canadian subsidiaries with letter of credit sub-facilities. Availability under the Senior Credit Facility is subject to borrowing base limitations for both the U.S. and the Canadian subsidiaries, as defined in the loan agreement. In general, in the absence of an event of default, the Senior Credit Facility matures on May 31, 2016. Under the terms of the Company’s lock box arrangement, remittances automatically reduce the revolving debt outstanding on a daily basis and therefore the Senior Credit Facility is classified as a current liability on the accompanying condensed consolidated balance sheets as of June 30, 2013 and December 31, 2012. As of June 30, 2013, $28.8 million was outstanding and $42.1 million was available for additional borrowings under the Senior Credit Facility.

The Company may also borrow up to an additional $25.0 million under the Senior Credit Facility subject to certain conditions. As of June 30, 2013, there were outstanding letters of credit of $4.1 million under the Senior Credit Facility.

On May 15, 2013, the Company amended the Senior Credit Facility to enable it participate in certain supplier financing arrangements at investment grade borrowing rates and permit the Consolidation.

Under the Senior Credit Facility, in general, interest accrues on amounts outstanding under the U.S facility at a variable annual rate equal to the U.S. Index Rate (as defined therein) plus 1.25% to 2.0%, depending on the Company’s utilization of the Senior Credit Facility, or at the Company’s election, at an annual rate equal to the LIBOR Rate (as defined therein) plus 2.25% to 3.0%, depending upon utilization. In general, interest accrues on amounts outstanding under the Canadian sub-facility at a variable rate equal to the Canadian Index Rate (as defined therein) plus 1.25% to 2.0%, depending upon utilization, or at the Company’s election, at an annual rate equal to the BA Rate (as defined therein) plus 2.25% to 3.0%, depending upon utilization. The Senior Credit Facility also includes unused facility and letter-of-credit fees which are reflected in interest expense in the accompanying condensed consolidated statements of operations. The weighted-average interest rate on borrowings outstanding under the Senior Credit Facility as of June 30, 2013 was 2.9%.

The Senior Credit Facility is collateralized by substantially all of the Company’s tangible and intangible property (other than real property and equipment). In addition, all of the Company’s equity interests in its domestic subsidiaries and a portion of the equity interests in its foreign subsidiaries are pledged to collateralize the Senior Credit Facility.

The Senior Credit Facility contains certain customary affirmative and negative covenants that restrict the Company’s and its subsidiaries’ ability to, among other things, incur additional indebtedness, grant liens, engage in mergers, acquisitions and asset sales, declare dividends and distributions, redeem or repurchase equity interests, incur contingent obligations, prepay certain subordinated indebtedness, make loans, certain payments and investments and enter into transactions with affiliates. As of June 30, 2013, the Company was in compliance with all of these covenants.

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In connection with the Senior Credit Facility, the Company has incurred $2.2 million in deferred financing costs that are being amortized over the term of the Senior Credit Facility.

Lease Transactions

On July 12, 2010, the Company completed an equipment sale/leaseback transaction with a third party that resulted in net proceeds of $4.9 million, after fees and deposits. These funds were subsequently used to reduce amounts outstanding under the Senior Credit Facility. The Company determined that this lease qualified as a capital lease ("Sale/Leaseback Lease") and, accordingly, recorded a capital lease obligation equal to the present value of the minimum lease payments of $5.2 million. The lease term is five years with a lease expiration date of July 2015. In connection with the sale/leaseback transaction, the Company paid $1.7 million in security deposits, which are refundable at lease expiration and are included in other assets in the accompanying condensed consolidated balance sheets.

In July 2010, the Company completed an acquisition of certain assets and liabilities of a packaging business, previously operated by Bemis Company, Inc. The acquired business is referred to in this quarterly report as Exopack Meat, Cheese and Specialty or EMCS. In conjunction with the EMCS acquisition, the Company assumed one capital lease related to real estate ("EMCS Real Estate Lease") and three leases related to extrusion equipment that the Company determined qualified as capital leases. The Company recorded a total capital lease obligation equal to the present value of the minimum lease payments, or $9.2 million. The leases were scheduled to expire over various periods with the EMCS Real Estate Lease expiring in May 2019 and the three equipment leases expiring in May 2014, September 2014 and December 2017. Subsequent to the EMCS acquisition, the Company re-negotiated two of the equipment leases into one consolidated lease ("EMCS Equipment Lease"). The remaining equipment lease was canceled and the equipment was purchased by the Company for $1.5 million. The EMCS Equipment Lease expires in September 2014. In connection with the EMCS Equipment Lease, the Company paid $1.4 million in security deposits, which are refundable at lease expiration and are included in other assets in the accompanying condensed consolidated balance sheets.

On September 1, 2011, the Company entered into a lease agreement with a third party related to real estate for the facility located in Thomasville, North Carolina. The Company has determined this lease qualifies as a capital lease ("Thomasville Real Estate Lease") and, accordingly, has recorded a capital lease obligation equal to the present value of the minimum lease payments of $2.3 million. The lease term is ten years and four months with a lease expiration date of December 31, 2021.

On March 29, 2012, the Company entered into a modification of a lease agreement with a third party related to equipment for the facility located in Tifton, Georgia. The Company has determined that, due to the modification, this lease now qualifies as a capital lease ("Tifton Equipment Lease") and, accordingly, has recorded a capital lease obligation equal to the present value of the minimum lease payments of $5.9 million. The new lease term is seven years with a lease expiration date of March 1, 2019. In connection with the modification of the lease agreement, the Company expensed $132,000 in prepaid lease costs.

The components of the Company's capital leases as of June 30, 2013 were as follows:



Original Lease Name	Lease Term	Plant Property & Equipment		Accumulated Depreciation			Net Book Value		Capital Lease Obligation
									Short-Term			Long-Term			Total
(in thousands of dollars)
Sale/Leaseback Lease	5 years	$	5,154	$	(3,093	)	$	2,061	$	(1,030	)	$	(1,176	)	$	(2,206	)

EMCS Real Estate Lease	9 years	4,270		(427		)	3,843		(96		)	(4,106		)	(4,202		)

EMCS Equipment Lease	4 years	3,807		(2,855		)	952		(982		)	(259		)	(1,241		)

Thomasville Real Estate Lease	10.3 years	2,307		(409		)	1,898		(158		)	(1,891		)	(2,049		)

Tifton Equipment Lease	7 years	5,936		(1,060		)	4,876		(781		)	(4,227		)	(5,008		)

Total		$	21,474	$	(7,844	)	$	13,630	$	(3,047	)	$	(11,659	)	$	(14,706	)

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6.Employee Benefit Plans and Other Programs

Defined Benefit Plans

The pension assets and obligations of the Retirement Plan of Exopack, LLC (the “Retirement Plan”) and the pension obligations of the Exopack, LLC Pension Restoration Plan for Salaried Employees (the “Restoration Plan”) (collectively, the “Pension Plans”) were transferred to and assumed by the Company in connection with the acquisition of Exopack in 2005. Substantially all full-time employees of Exopack, LLC hired prior to June 30, 2003 were eligible to participate in the Retirement Plan. The Pension Plans were frozen prior to the acquisition of Exopack in 2005. Accordingly, the employees’ final benefit calculation under the Pension Plans was the benefit they had earned under the Pension Plans as of the date the Pension Plans were frozen. This benefit will not be diminished, subject to the terms and conditions of the Pension Plans, which remain in effect. The Company also sponsors a postretirement benefit plan covering, on a restricted basis, certain Exopack employees pursuant to a collective bargaining agreement.

In conjunction with the EMCS acquisition, the Company assumed a defined benefit pension plan for certain employees at the Menasha, Wisconsin facility. Employees hired prior to March 1, 2010 were eligible to participate in the plan upon completion of 1,000 service hours. This plan was subsequently incorporated into the Retirement Plan of Exopack, LLC.

The components of the net periodic benefit cost for the Pension Plans and the postretirement benefit plan are as follows for the three and six months ended June 30, 2013 and 2012:



Pension plans	Three Months Ended						Six Months Ended
(in thousands of dollars)	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Service cost	$	60		$	119		$	120		$	238
Interest cost	837			846			1,674			1,692
Expected return on plan assets	(967		)	(806		)	(1,934		)	(1,612		)
Amortization of net actuarial losses¹	509			527			1,018			1,054
Net periodic benefit cost	$	439		$	686		$	878		$	1,372

(1) Amounts reclassified from accumulated other comprehensive income (loss)



Postretirement benefit plan	Three Months Ended						Six Months Ended
(in thousands of dollars)	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Service cost	$	6		$	6		$	12		$	12
Interest cost	5			7			10			14
Amortization of net actuarial gains	(4		)	(4		)	(8		)	(8		)
Net periodic benefit cost	$	7		$	9		$	14		$	18

The Company contributed $509,000 and $882,000 to the Retirement Plan during the three months ended June 30, 2013 and 2012, respectively, and $979,000 and $1.4 million during the six months ended June 30, 2013 and 2012, respectively. Contributions of $1.3 million are expected to be made to the Retirement Plan during the remainder of 2013. As of June 30, 2013, the fair value of the assets of the Pension Plans was estimated at $57.8 million, up from $55.3 million as of December 31, 2012.

Exopack, LLC Savings Plan

The Company has a 401(k) plan, which is a defined contribution plan that covers all full-time employees in the United States. Employee contributions to the plan are partially matched by the Company. Company matching contributions vest immediately. Expense totaled $539,000 and $509,000 during the three months ended June 30, 2013 and 2012, respectively and $1.0 million and $978,000 during the six months ended June 30, 2013 and 2012, respectively.

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Management Incentive Compensation Plan

The Company maintains a management incentive compensation plan for eligible management personnel based on both Company and individual performance against pre-defined goals. The plan provides for quarterly cash payments of 66.7% of the quarterly amount earned and 33.3% is accrued and held back for payment once the annual audit is finalized. The Company recognized expense of $654,000 and $555,000 during the three months ended June 30, 2013 and 2012, respectively, and $1.5 million and $941,000 during the six months ended June 30, 2013 and 2012, respectively, for the benefits under the management incentive compensation plan.

Option Holder Bonus Agreements

During June 2011, CPG entered into bonus agreements (the “Bonus Agreements”) with the employees of the Company who hold options to purchase shares of CPG’s common stock. The Bonus Agreements provided for payment to each employee holding options an amount equal to the dividend amount per share minus the exercise price per share. Following entry into the Bonus Agreements, CPG made cash payments to employees holding vested in-the-money options. Additional payments will be made as the options vest, expire, and upon certain events of termination of the applicable employee’s employment or the occurrence of certain change of control events. The Company recognized expense related to these bonus agreements of $126,000 and $84,000 during the three months ended June 30, 2013 and 2012, respectively, and $220,000 and $365,000 during the six months ended June 30, 2013 and 2012 respectively.

7.Severance Expenses

During the three and six months ended June 30, 2013, the Company terminated the employment of certain employees and eliminated some of their positions. In connection with these terminations, the Company recorded employee termination costs of $51,000 and $2.2 million for the three months ended June 30, 2013 and 2012, respectively. During the six months ended June 30, 2013, the Company reduced the accrual for employee termination costs by $112,000 and recorded employee termination costs of $2.2 million for six months ended June 30, 2012. These amounts are included in "selling, general and administrative expenses" in the condensed consolidated statements of operations. Of these amounts, the Company paid $903,000 through June 30, 2013, and $116,000 remains accrued for employee termination benefits as of June 30, 2013. The Company expects that the remaining balance will be paid in 2013.

8.Contingencies

From time to time, the Company becomes party to legal proceedings and administrative actions, which are of an ordinary or routine nature, incidental to the operations of the Company. Although it is difficult to predict the outcome of any legal proceeding, in the opinion of the Company’s management, such proceedings and actions should not, individually or in the aggregate, have a material adverse effect on the Company’s condensed consolidated financial statements.

9.Accumulated Other Comprehensive Income (Loss)

The following table summarizes the components and changes to the components of accumulated other comprehensive income (loss) for the six months ended June 30, 2013:



(in thousands of dollars)	Foreign Currency Translation Adjustments			Pension and Postretirement Plans Liability⁽¹⁾			Cumulative Tax Effect on Liability		Accumulated Other Comprehensive Income (Loss)
Balance as of December 31, 2012	$	41		$	(26,768	)	$	3,776	$	(22,951	)
Foreign currency translation	(2,347		)				—		(2,347		)
Amounts reclassified from accumulated other comprehensive income (loss)²	—			1,015			—		1,015
Balance as of June 30, 2013	$	(2,306	)	$	(25,753	)	$	3,776	$	(24,283	)

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(1)	The accrued benefit obligation is actuarially determined on an annual basis as of December 31.

(2)

Amounts reclassified from accumulated other comprehensive income (loss) represent amortization of net actuarial loss related to the Company's Pension Plans and Postretirement Benefit Plan to selling, general and administrative expense in the condensed consolidated statement of income. See Note 6 for breakout of amounts reclassified from accumulated other comprehensive income (loss) by quarter. The Company recorded a deferred tax liability of $384,000 related to the pension and postretirement plan liabilities. This deferred tax liability was fully offset by a reduction to the valuation allowance against the Company's cumulative deferred tax asset pertaining to the Company's pension and postretirement plan liabilities. This accumulated other comprehensive income component is included in the computation of net periodic pension cost (see Note 6 for additional details).

10.Related Party Transactions

Fees Related to Management and Consulting Services

On May 31, 2011, the Company entered into a management services agreement (the "consulting agreement") with Sun Capital Partners Management IV, LLC, an affiliate of Sun Capital ("Sun Capital Management"), which will terminate on May 31, 2021. Pursuant to the terms of the consulting agreement, Sun Capital Management has provided and will provide the Company with certain financial and management consulting services, subject to the supervision of the Company’s Board of Directors. In exchange for these services, the Company pays Sun Capital Management an annual consulting fee equal to the greater of $3.0 million or 6.0% of EBITDA (as defined in the consulting agreement), not to exceed $6.0 million annually.

The Company incurred management and consultant fees and other related expenses under the consulting agreement of $1.5 million and $1.5 million during the three months ended June 30, 2013 and 2012, respectively, and $3.1 million and $3.0 million during the six months ended June 30, 2013 and 2012, respectively. Such fees are reflected in “Selling, general and administrative expenses” in the accompanying condensed consolidated statements of operations.

The Company incurred no expense for certain additional consulting fees from Sun Capital Management during the three and six months ended June 30, 2013. The Company incurred $11,500 and $28,000 in consulting fees for certain additional consulting services provided by Sun Capital Management during the three and six months ended June 30, 2012, respectively.

Fees Related to Transactions

In addition to the above fees, in connection with any consulting services provided to the Company, its subsidiaries, or its stockholders with respect to certain corporate events, including, without limitation, refinancing, restructurings, equity or debt offerings, acquisitions, mergers, consolidations, business combinations, sales and divestitures, Sun Capital Management is entitled to 1.0% of the aggregate consideration paid (including liabilities assumed) in connection with the applicable corporate event as well as any customary and reasonable fees. The Company will also reimburse Sun Capital Management for all out-of-pocket expenses incurred in the performance of the services under the consulting agreement. There were no fees paid to Sun Capital Management in connection with any such consulting services for such events during the three and six months ended June 30, 2013 and 2012.

During the six months ended June 30, 2013, the Company purchased some manufacturing equipment and a customer list from PaperWorks Industries Inc., which is also owned by Sun Capital, for total consideration of $4.4 million.

Related Party Transactions

Throughout the quarter, the Company has incurred various expenses on behalf of the Combined Businesses in association with the May 31, 2013 Consolidation. The Company has invoiced Kobusch, Britton Group, Paccor and Paragon $1.5 million during the quarter and six months ended June 30, 2013 for these expenses and management services. Amounts invoiced amongst the Combined Businesses by the Company are included as reductions to selling, general and administrative expense on the condensed consolidated statements of operations.

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11.Segments and Significant Customers

Segments

Effective July 1, 2012 the Company determined that reorganization was appropriate to clarify and highlight detailed aspects of sales growth and operational excellence for management, thus providing a more effective basis for management decisions. As a result of the reorganization, the Company's operations consist of three reportable segments 1) food packaging; 2) non-food packaging; and 3) coated products (commonly referred to as EAC). Previously, the Company reported external segment information under four operating segments, including 1) pet food and specialty packaging; 2) consumer food and packaging specialty; 3) performance packaging; and 4) coated products. Segment operating results for the three and six months ended June 30, 2012 have been recast to conform to the reorganization below.

Effective January 1, 2013, Management made a decision to move two of its operating segments from one reportable segment to a different reportable segment to more effectively assess the performance of the business and allocate resources amongst its various operating segments. One of the operating segments was moved from the food packaging segment to the non-food packaging segment, and another operating segment was moved from the non-food packaging segment to the food packaging segment. Identifiable assets by segment as of December 31, 2012 have been recast to reflect this change below.

The Company identifies its reportable segments in accordance with FASB guidance for disclosures about segments of an enterprise and related information. In accordance with FASB guidance, the Company reviewed certain qualitative factors in identifying and determining reporting segments. These factors include: 1) the nature of the products; 2) the nature of the production processes and major raw material inputs; 3) the class of consumer for each product; and 4) the methods used to distribute each product. While all of these factors were reviewed, the most relevant factors were determined to be the nature of the products and the type of customers served. The types of products sold from each segment are similar in nature and have a similar customer base.

The Company evaluates segment performance based on operating income or loss.

While sales and transfers between segments are recorded at cost plus a reasonable profit, the effects of intersegment sales are excluded from the computations of segment operating income. Intercompany profit is eliminated in consolidation and is not significant for the periods presented.

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The table below presents information about the Company’s reportable segments for the three and six months ended June 30, 2013 and 2012:



	Three Months Ended						Six Months Ended
(in thousands of dollars)	June 30, 2013			June 30, 2012			June 30, 2013			June 30, 2012
Net sales to external customers:
Food packaging	$	92,133		$	99,953		$	186,711		$	200,832
Non-Food packaging	87,547			90,436			178,797			185,897
Coated products	23,209			22,479			44,455			44,203
Total	$	202,889		$	212,868		$	409,963		$	430,932
Intersegment net sales:
Food packaging	$	4,159		$	6,231		$	9,394		$	11,879
Non-Food packaging	345			979			458			1,771
Coated products	—			—			—			—
Total	$	4,504		$	7,210		$	9,852		$	13,650
Operating income:
Food packaging	$	8,639		$	11,285		$	18,930		$	19,669
Non-Food packaging	4,475			4,045			8,912			11,009
Coated products	3,781			4,108			7,577			7,739
Corporate	(7,843		)	(12,252		)	(15,445		)	(21,423		)
Total	9,052			7,186			19,974			16,994
Interest expense - Corporate	12,183			13,102			25,111			26,130
Other income, net	(430		)	(104		)	(1,159		)	(235		)
Loss before income taxes	$	(2,701	)	$	(5,812	)	$	(3,978	)	$	(8,901	)

Identifiable assets:							June 30, 2013			December 31, 2012
Food packaging							239,596			228,765
Non-Food packaging							240,187			231,497
Coated products							57,085			54,156
Corporate							71,030			79,752
Total							$	607,898		$	594,170

Significant Customers

One customer, primarily in the food packaging segment, accounted for 10.4% of the Company's net sales during the six months ended June 30, 2013. No customer accounted for more than 10.0% of the Company’s net sales during the six months ended June 30, 2012.

12.Supplemental Guarantor Financial Information

The Senior Notes are jointly, severally, fully and unconditionally guaranteed by the Company’s domestic restricted subsidiaries. Each guarantor subsidiary is 100% owned, directly or indirectly, by the Company within the meaning of Rule 3-10(h) of Regulation S-X. The Senior Notes include a provision which allows for a guarantor subsidiary to be released of any obligation under the subsidiary guarantee under certain conditions. These conditions include the sale or other disposition of all or substantially all of the guarantor subsidiary's assets, the sale or other disposition of all the capital stock of the guarantor subsidiary, change in the designation of any restricted subsidiary as an unrestricted subsidiary by the Company, or upon legal defeasance or satisfaction and discharge of the Senior Notes. Following are consolidating financial statements of the Company, including the guarantors, provided pursuant to Rule 3-10 of Regulation S-X in lieu of separate financial statements of each subsidiary guaranteeing the Senior Notes.

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The following condensed consolidating financial statements present the balance sheets as of June 30, 2013 and December 31, 2012, the statements of comprehensive (loss) income for the three and six months ended June 30, 2013 and 2012, and the statements of cash flows for the six months ended June 30, 2013 and 2012, of (i) Exopack Holding Corp. (the “Parent”), (ii) the domestic subsidiaries of Exopack Holding Corp. (the “Guarantor Subsidiaries”), (iii) the foreign subsidiaries of Exopack Holding Corp. (the “Nonguarantor Subsidiaries”), and (iv) the eliminations necessary to arrive at the information for the Company on a consolidated basis. The Parent and the Guarantor Subsidiaries have each reflected investments in their respective subsidiaries under the equity method of accounting. There are no restrictions limiting transfers of cash from Guarantor Subsidiaries and Nonguarantor Subsidiaries to the Parent. The condensed consolidating financial statements should be read in conjunction with the accompanying condensed consolidated financial statements of the Company.

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CONDENSED CONSOLIDATING BALANCE SHEET AS OF JUNE 30, 2013



(in thousands of dollars)	Parent			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Assets
Current assets
Cash	$	—		$	1,417		$	3,001		$	—		$	4,418
Trade accounts receivable (net of allowance for uncollectible accounts of $1,707)	—			66,521			17,399			—			83,920
Other receivables	—			4,447			826			—			5,273
Income taxes receivable	—			13			—			(13		)	—
Inventories	—			87,489			13,217			—			100,706
Deferred income taxes	—			2,963			256			—			3,219
Prepaid expenses and other current assets	—			2,971			1,181			—			4,152
Total current assets	—			165,821			35,880			(13		)	201,688
Property, plant, and equipment, net	—			202,880			24,011			—			226,891
Deferred financing costs, net	4,886			9,830			—			—			14,716
Intangible assets, net	—			83,029			3,765			—			86,794
Goodwill	—			68,943			687			—			69,630
Investment in subsidiaries	—			18,208			—			(18,208		)	—
Intercompany receivables	35,638			26,806			63			(62,507		)	—
Deferred income taxes	73,739			—			—			(73,739		)	—
Other assets	—			8,167			165			(153		)	8,179
Total assets	$	114,263		$	583,684		$	64,571		$	(154,620	)	$	607,898
Liabilities and Stockholder’s Equity (Deficit)
Current liabilities
Revolving credit facility and current portion of long-term debt and capital leases	$	—		$	35,489		$	—		$	(153	)	$	35,336
Accounts payable	—			61,671			11,202			—			72,873
Accrued liabilities	1,958			29,218			2,936			—			34,112
Income taxes payable	—			—			1,461			(13		)	1,448
Total current liabilities	1,958			126,378			15,599			(166		)	143,769
Long-term liabilities
Long-term debt, less current portion	235,000			339,500			—			—			574,500
Capital lease obligations, less current portion	—			11,659			—			—			11,659
Deferred income taxes	—			95,900			1,065			(73,739		)	23,226
Intercompany payables	23,430			12,347			26,730			(62,507		)	—
Deficiency in excess of investment in subsidiaries	29,548			—			—			(29,548		)	—
Other liabilities	—			27,448			2,969			—			30,417
Total long-term liabilities	287,978			486,854			30,764			(165,794		)	639,802
Commitments and contingencies
Stockholder’s equity (deficit)
Preferred stock, par value, $0.001 per share - 100,000 shares authorized, no shares issued and outstanding	—			—			—			—			—
Common stock, par value, $0.001 per share - 2,900,000 shares authorized, 1 share issued and outstanding	—			—			—			—			—
(Distributions in excess of) Paid-in capital	(75,381		)	(75,381		)	30,981			44,400			(75,381		)
Accumulated other comprehensive income (loss), net	(24,283		)	(24,283		)	(2,195		)	26,478			(24,283		)
Retained earnings (accumulated deficit)	(76,009		)	70,116			(10,578		)	(59,538		)	(76,009		)
Total stockholder’s equity (deficit)	(175,673		)	(29,548		)	18,208			11,340			(175,673		)
Total liabilities and stockholder’s equity (deficit)	$	114,263		$	583,684		$	64,571		$	(154,620	)	$	607,898

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CONDENSED CONSOLIDATING BALANCE SHEET AS OF DECEMBER 31, 2012



				Guarantor			Nonguarantor
(in thousands of dollars)	Parent			Subsidiaries			Subsidiaries			Eliminations			Consolidated
Assets
Current assets
Cash	$	—		$	14		$	3,136		$	—		$	3,150
Trade accounts receivable (net of allowance for uncollectible accounts of $2,060)	—			74,111			14,075			—			88,186
Other receivables	—			3,573			686			—			4,259
Inventories	—			76,400			13,703			—			90,103
Deferred income taxes	—			2,868			271			—			3,139
Prepaid expenses and other current assets	—			3,644			915			—			4,559
Total current assets	—			160,610			32,786			—			193,396
Property, plant, and equipment, net	—			199,177			24,121			—			223,298
Deferred financing costs, net	5,380			8,784			—			—			14,164
Intangible assets, net	—			84,897			516			—			85,413
Goodwill	—			68,943			730			—			69,673
Investment in subsidiaries	—			14,951			—			(14,951		)	—
Intercompany receivables	35,637			28,542			—			(64,179		)	—
Deferred income taxes	73,740			—			—			(73,740		)	—
Other assets	—			8,223			3			—			8,226
Total assets	$	114,757		$	574,127		$	58,156		$	(152,870	)	$	594,170
Liabilities and Stockholder’s Equity (Deficit)
Current liabilities
Revolving credit facility and current portion of long-term debt	$	—		$	23,557		$	—		$	—		$	23,557
Accounts payable	—			53,195			9,237			—			62,432
Accrued liabilities	1,958			29,895			2,561			—			34,414
Income taxes payable	—			85			1,447			—			1,532
Total current liabilities	1,958			106,732			13,245			—			121,935
Long-term liabilities
Long-term debt, less current portion	235,000			341,250			—			—			576,250
Capital lease obligations, less current portion	—			13,163			—			—			13,163
Deferred income taxes	—			95,400			1,150			(73,740		)	22,810
Intercompany payables	12,777			22,998			28,404			(64,179		)	—
Deficiency in excess of investment in subsidiaries	33,733			—			—			(33,733		)	—
Other liabilities	—			28,317			406			—			28,723
Total long-term liabilities	281,510			501,128			29,960			(171,652		)	640,946
Commitments and contingencies
Stockholder’s (deficit) equity
Preferred stock, par value, $0.001 per share - 100,000 shares authorized, no shares issued and outstanding	—			—			—			—			—
Common stock, par value, $0.001 per share - 2,900,000 shares authorized, 1 share issued and outstanding	—			—			—			—			—
(Distributions in excess of) Paid-in capital	(75,582		)	(75,582		)	30,981			44,601			(75,582		)
Accumulated other comprehensive income (loss), net	(22,951		)	(22,951		)	(1,333		)	24,284			(22,951		)
Retained earnings (accumulated deficit)	(70,178		)	64,800			(14,697		)	(50,103		)	(70,178		)
Total stockholder’s equity (deficit)	(168,711		)	(33,733		)	14,951			18,782			(168,711		)
Total liabilities and stockholder’s equity (deficit)	$	114,757		$	574,127		$	58,156		$	(152,870	)	$	594,170

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CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME FOR THE THREE MONTHS ENDED JUNE 30, 2013



(in thousands of dollars)	Parent			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	178,239		$	31,778		$	(7,128	)	$	202,889
Cost of sales	—			157,661			26,122			(7,128		)	176,655
Gross margin	—			20,578			5,656			—			26,234
Selling, general and administrative expenses	58			15,509			1,615			—			17,182
Operating (loss) income	(58		)	5,069			4,041			—			9,052
Other expenses (income)
Interest expense	5,473			6,333			377			—			12,183
Other (income) expense, net	—			(1,432		)	(8		)	1,010			(430		)
Net other expense	5,473			4,901			369			1,010			11,753
(Loss) income before income taxes	(5,531		)	168			3,672			(1,010		)	(2,701		)
(Benefit from) provision for income taxes	—			351			745			—			1,096
Net (loss) income before equity in earnings of affiliates	(5,531		)	(183		)	2,927			(1,010		)	(3,797		)
Equity in earnings (loss) of affiliates	1,734			1,917			—			(3,651		)	—
Net (loss) income	$	(3,797	)	$	1,734		$	2,927		$	(4,661	)	$	(3,797	)
Comprehensive (loss) income	$	4,150		$	1,734		$	2,574		$	(4,308	)	$	4,150

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME FOR THE THREE MONTHS ENDED JUNE 30, 2012



(in thousands of dollars)	Parent			Guarantor Subsidiaries			Nonguarantor Subsidiaries		Eliminations			Consolidated
Net sales	$	—		$	184,307		$	30,806	$	(2,245	)	$	212,868
Cost of sales	—			161,060			25,976		(2,245		)	184,791
Gross margin	—			23,247			4,830		—			28,077
Selling, general and administrative expenses	122			18,289			2,480		—			20,891
Operating (loss) income	(122		)	4,958			2,350		—			7,186
Other expenses (income)
Interest expense	5,473			7,163			466		—			13,102
Other (income) expense, net	—			(1,755		)	237		1,414			(104		)
Net other expense	5,473			5,408			703		1,414			12,998
(Loss) income before income taxes	(5,595		)	(450		)	1,647		(1,414		)	(5,812		)
(Benefit from) provision for income taxes	—			(154		)	610		—			456
Net (loss) income before equity in earnings of affiliates	(5,595		)	(296		)	1,037		(1,414		)	(6,268		)
Equity in earnings (loss) of affiliates	(673		)	(377		)	—		1,050			—
Net (loss) income	$	(6,268	)	$	(673	)	$	1,037	$	(364	)	$	(6,268	)
Comprehensive (loss) income	$	(7,298	)	$	(673	)	$	7	$	666		$	(7,298	)

Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS COMPREHENSIVE (LOSS) INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2013



(in thousands of dollars)	Parent			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Net sales	$	—		$	361,566		$	63,173		$	(14,776	)	$	409,963
Cost of sales	—			318,079			52,232			(14,776		)	355,535
Gross margin	—			43,487			10,941			—			54,428
Selling, general and administrative expenses	200			31,355			2,899			—			34,454
Operating (loss) income	(200		)	12,132			8,042			—			19,974
Other expenses (income)
Interest expense	10,947			13,409			755			—			25,111
Other (income) expense, net	—			(2,925		)	(744		)	2,510			(1,159		)
Net other expense	10,947			10,484			11			2,510			23,952
(Loss) income before income taxes	(11,147		)	1,648			8,031			(2,510		)	(3,978		)
(Benefit from) provision for income taxes	—			451			1,402			—			1,853
Net (loss) income before equity in earnings of affiliates	(11,147		)	1,197			6,629			(2,510		)	(5,831		)
Equity in earnings (loss) of affiliates	5,316			4,119			—			(9,435		)	—
Net (loss) income	$	(5,831	)	$	5,316		$	6,629		$	(11,945	)	$	(5,831	)
Comprehensive (loss) income	$	(7,163	)	$	5,316		$	5,297		$	(10,613	)	$	(7,163	)

CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS COMPREHENSIVE (LOSS) INCOME FOR THE SIX MONTHS ENDED JUNE 30, 2012



(in thousands of dollars)	Parent			Guarantor Subsidiaries			Nonguarantor Subsidiaries		Eliminations			Consolidated
Net sales	$	—		$	377,933		$	64,672	$	(11,673	)	$	430,932
Cost of sales	—			329,709			56,827		(11,673		)	374,863
Gross margin	—			48,224			7,845		—			56,069
Selling, general and administrative expenses	285			35,050			3,740		—			39,075
Operating (loss) income	(285		)	13,174			4,105		—			16,994
Other expenses (income)
Interest expense	10,955			14,201			974		—			26,130
Other (income) expense, net	—			(2,812		)	363		2,214			(235		)
Net other expense	10,955			11,389			1,337		2,214			25,895
(Loss) income before income taxes	(11,240		)	1,785			2,768		(2,214		)	(8,901		)
(Benefit from) provision for income taxes	—			(47		)	1,098		—			1,051
Net (loss) income before equity in earnings of affiliates	(11,240		)	1,832			1,670		(2,214		)	(9,952		)
Equity in earnings (loss) of affiliates	1,288			(544		)	—		(744		)	—
Net (loss) income	$	(9,952	)	$	1,288		$	1,670	$	(2,958	)	$	(9,952	)
Comprehensive (loss) income	$	9,895		$	1,288		$	1,727	$	(3,015	)	$	9,895

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CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2013



(in thousands of dollars)	Parent			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities
Net (loss) income	$	(5,831	)	$	5,316		$	6,629		$	(11,945	)	$	(5,831	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization	497			18,950			1,993			—			21,440
Equity in (earnings) loss of affiliates	(5,316		)	(6,629		)	—			11,945			—
Dividends received	—			2,510			—			(2,510		)	—
Deferred income tax provision (benefit)	(1		)	405			(14		)	—			390
Stock compensation expense	201			201			—			(201		)	201
(Gain) loss on sale and disposition of property, plant and equipment	—			(159		)	30			—			(129		)
Changes in operating assets and liabilities:
Receivables	—			7,590			(4,161		)	—			3,429
Inventories	—			(11,089		)	(159		)	—			(11,248		)
Prepaid expenses and other assets	—			(407		)	(4,004		)	—			(4,411		)
Accounts payable and accrued and other liabilities	—			7,988			5,761			—			13,749
Income tax receivable/payable	—			(98		)	90			—			(8		)
Net cash (used in) provided by operating activities	(10,450		)	24,578			6,165			(2,711		)	17,582
Cash flows from investing activities
Repayments from joint venture	—			(369		)	—			—			(369		)
Purchases of property, plant and equipment, including capitalized software	—			(19,083		)	(3,066		)	—			(22,149		)
Proceeds from sales of property, plant and equipment	—			174			—			—			174
Investments in subsidiaries	(201		)	—			—			201			—
Net cash (used in) provided by investing activities	(201		)	(19,278		)	(3,066		)	201			(22,344		)
Cash flows from financing activities
Repayments of term loan	—			(1,750		)	—			—			(1,750		)
Repayment of capital lease obligations	—			(1,393		)	—			—			(1,393		)
Deferred loan costs paid	(3		)	(2,174		)	—			—			(2,177		)
Dividends paid	—			—			(2,510		)	2,510			—
Borrowings under revolving credit facility	—			382,862			3,064			—			385,926
Repayments of revolving credit facility	—			(371,041		)	(3,217		)	—			(374,258		)
Intercompany (repayments) borrowings	10,654			(8,916		)	(1,738		)	—			—
Net cash (used in) provided by financing activities	10,651			(2,412		)	(4,401		)	2,510			6,348
Effect of exchange rate changes on cash	—			(1,485		)	1,167			—			(318		)
Increase in cash	—			1,403			(135		)	—			1,268
Cash
Beginning of period	—			14			3,136			—			3,150
End of period	$	—		$	1,417		$	3,001		$	—		$	4,418

Table of Contents

CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 2012



(in thousands of dollars)	Parent			Guarantor Subsidiaries			Nonguarantor Subsidiaries			Eliminations			Consolidated
Cash flows from operating activities
Net (loss) income	$	(9,952	)	$	1,288		$	1,670		$	(2,958	)	$	(9,952	)
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
Depreciation and amortization	507			18,203			1,889			—			20,599
Equity in (earnings) loss of affiliates	(1,288		)	(1,670		)	—			2,958			—
Dividends received	—			2,214			—			(2,214		)	—
Deferred income tax provision (benefit)	—			(71		)	(19		)	—			(90		)
Stock compensation expense	285			285			—			(285		)	285
(Gain) loss on sale and disposition of property, plant and equipment	—			(1		)	—			—			(1		)
Changes in operating assets and liabilities:
Receivables	—			(1,771		)	(4,422		)	—			(6,193		)
Inventories	—			7,310			2,621			—			9,931
Prepaid expenses and other assets	—			938			(64		)	—			874
Accounts payable and accrued and other liabilities	(1		)	(10,283		)	(83		)	—			(10,367		)
Income tax receivable/payable	—			(158		)	362			—			204
Net cash (used in) provided by operating activities	(10,449		)	16,284			1,954			(2,499		)	5,290
Cash flows from investing activities
Repayments from joint venture	—			62			—			—			62
Purchases of property, plant and equipment, including capitalized software	—			(10,818		)	(891		)	—			(11,709		)
Proceeds from sales of property, plant and equipment	—			1			—			—			1
Investments in subsidiaries	(285		)	—			—			285			—
Net cash (used in) provided by investing activities	(285		)	(10,755		)	(891		)	285			(11,646		)
Cash flows from financing activities
Repayments of term loan	—			(1,750		)	—			—			(1,750		)
Repayment of capital lease obligations	—			(1,223		)	—			—			(1,223		)
Deferred loan costs paid	(96		)	—			—			—			(96		)
Dividends paid	—			—			(2,214		)	2,214			—
Borrowings under revolving credit facility	—			310,977			34,996			—			345,973
Repayments of revolving credit facility	—			(300,588		)	(34,857		)	—			(335,445		)
Intercompany (repayments) borrowings	10,830			(11,564		)	734			—			—
Capital contribution from guarantors	—			(800		)	800

EXOPACK HOLDING CORP 10-Q