1325281--3/31/2009--KAPSTONE_PAPER_&_PACKAGING

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{stock, price, share}

{cost, regulation, environmental}

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{control, financial, internal}

{stock, price, operating}

{condition, economic, financial}

{personnel, key, retain}

{operation, international, foreign}

{acquisition, growth, future}

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Risks associated with our business Recent changes in U.S. and global economic conditions could have a continuing adverse effect on the profitability of some or all of our businesses. Conditions in the global capital and credit markets and the economy generally may materially adversely affect our business, results of operations and financial position and we do not expect these conditions to improve in the near future. We rely on key customers. We are dependent upon key management executives whose loss may adversely impact our business. KapStone's substantial indebtedness may adversely affect its financial health. If we fail to extend or renegotiate the collective bargaining agreements with the United Steelworkers Union as they expire from time to time, or if our unionized employees were to engage in a strike or other work stoppage, our business and operating results could be materially harmed. As a result of the CKD acquisition, our operations have become increasingly global in nature. Our business, financial condition and results of operations could be adversely affected by the political and economic conditions of the countries in which we conduct business, by fluctuations in exchange rates and other factors related to our international operations. If we fail to maintain effective systems for disclosure controls and internal control over financial reporting, we may be unable to comply with the requirements of Section 404 of the Sarbanes Oxley Act of 2002 in a timely manner. The Company may be required to record a charge to our earnings if our goodwill becomes impaired. Our business depends on effective information management systems. Risks Associated with KapStone's Common Stock and Warrants The market price for our common stock may be highly volatile. Shares available for future issuance, conversion and exercise could have an adverse effect on the earnings per share and the market price of our common stock. We may choose to redeem our outstanding warrants at a time that is disadvantageous to our warrant holders. Although we currently have an effective registration statement covering the issuance of the shares underlying the warrants issued in our initial public offering at the time that the warrant holders exercise their warrants, we cannot guarantee that a registration statement will continue to be effective, in which case the warrant holders may not be able to exercise their warrants. Our executive officers and directors control a substantial percentage of our common stock and warrants and thus may influence certain actions requiring a stockholder vote. Some of our executive officers and directors may in the future become affiliated with entities engaged in business activities similar to those intended to be conducted by us and, accordingly, may have conflicts of interest in determining to which entity a particular business opportunity should be presented. Risks associated with the paper, packaging, forest products and related industries. The paper, packaging, forest products and related industries are highly cyclical. Fluctuations in the prices of and the demand for products could result in smaller profit margins and lower sales volumes. Difficulty obtaining wood fiber at favorable prices, or at all, may negatively impact companies in the packaging industry. An increase in the cost of purchased energy and raw materials would lead to higher manufacturing costs, thereby reducing margins. Paper, packaging and forest products companies face strong competition. Certain paper and wood products are vulnerable to long-term declines in demand due to competing technologies or materials. Packaging companies are subject to significant environmental regulation and environmental compliance expenditures, as well as other potential environmental liabilities. Future acquisitions of businesses by us would subject us to additional business, operating and industry risks, the impact of which cannot presently be evaluated, and could adversely impact our capital structure. If the benefits of our KPB and CKD acquisitions do not meet the expectations of the marketplace, or financial or industry analysts, the market price of our common stock may decline. Our operations are dependent upon certain operating agreements with IP and MWV. Although IP has agreed to indemnify us with respect to environmental liabilities that were assumed, we may incur significant remediation and other costs if such losses exceed the cap on indemnification or occur after the expiration of the indemnification period. Although MWV has agreed to indemnify us with respect to environmental liabilities pertaining to the North Charleston facility, we may incur significant remediation and other costs if such losses are below the basket or exceed the cap on indemnification or occur after the expiration of the indemnification period. The anticipated benefits of the CKD acquisition may not be realized. We may fail to realize the anticipated synergies and cost savings expected from the CKD acquisition. We may have difficulty integrating our business with the CKD business and may incur substantial costs in connection with the integration. We may have difficulty integrating our system of internal control over financial reporting with that of CKD.

Full 10-K form ▸

1325281--3/31/2009--KAPSTONE_PAPER_&_PACKAGING_CORP