SAPPI LTD (SAP) 6-K

Pro forma notes
(1) Reflects the elimination of estimated historical depreciation charges associated with the decrease in property, plant and equipment in connection with
the purchase price allocation.
(2) The pro forma adjustment related to finance costs represents the incremental interest expense associated with the financing used to partially fund the
acquisition of the Acquired Business. The adjustment is calculated as follows:
EUR’m
US$’m
Vendor note loan 23 30
Less: historical interest on debt not acquired (4) (5)
Pro forma adjustment 19 25
The finance costs on the note payable of EUR212 million (US$335 million) has been determined based on fixed interest rates established in the vendor note
agreement and calculated at 9% for the first 6 months, 12% for the next 6 months, 14% for the next 6 months and 15% thereafter.
(3) Represents the tax effect of the pro forma adjustments described above at an estimated statutory tax rate for the combined group of 28.3%. We have
applied this rate to all periods presented as we believe it is a rate indicative of our future tax rate. We have assumed that tax benefits created will be
utilised to offset tax liabilities in these periods. However, our ability to utilise such assets is dependent on our taxable income and actual deferred tax
liabilities. Accordingly, our future effective tax rate may differ significantly from the rate presented in these unaudited pro forma condensed
combined financial statements.
(4) Headline Earnings Per Share
US$’m Sappi Group
Acquired
Business
Year ended
September 2007
Year ended
December 2007
(A) (B)
Pro forma
adjustments Notes
Pro
forma
Headline earnings per share (US cents) 82 51
Calculation of Headline earnings **
Profit for the year 202 296
Profit on disposal of property, plant and equipment (24) (24)
Asset impairments (reversals) 2 (152)
Tax effect of above items 6 32
Headline earnings 186 152
** Headline earnings disclosure is required by the JSE Limited.
The unaudited pro forma income statement of the Sappi Group as at June 2008 has been prepared on the assumption that the proposed transactions occurred
on 01 October 2007.
137