FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended NOVEMBER 30, 1993
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to ___________
Commission file number 0-7574
WAUSAU PAPER MILLS COMPANY
(Exact name of registrant as specified in its charter)
ONE CLARK'S ISLAND WISCONSIN
P.O. BOX 1408 (State of incorporation)
WAUSAU, WISCONSIN 54402-1408 39-0690900
(Address of principal executive office) (I.R.S. Employer
Identification Number)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 715-845-5266
Not Applicable
(Former name, former address and former fiscal year, if changed
since last report.)
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 X NO
The registrant had 20,227,594 (A) shares of no par value
common stock outstanding at DECEMBER 31, 1993.
THIS DOCUMENT HAS 13 PAGES
The Exhibit Index is located on Page 12
(A) Shares prior to four-for-three split to shareholders of record
December 27, 1993. On a post-split basis, shares outstanding
are 26,969,456 as of January 7, 1994.
<PAGE>
WAUSAU PAPER MILLS COMPANY
AND SUBSIDIARIES
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of 3
Income Three Months Ended
November 30, 1993 (unaudited) and
November 30, 1992 (unaudited)
Condensed Consolidated Balance 4
Sheets November 30, 1993
(unaudited) and August 31, 1993 (derived
from audited financial statements).
Condensed Consolidated Statements 5
of Cash Flows Three Months
Ended November 30, 1993 (unaudited) and
November 30, 1992 (unaudited)
Notes to Condensed Consolidated 6 - 7
Financial Statements
Item 2. Management's Discussion and 8 - 11
Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
<PAGE>
<TABLE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS:
CONSOLIDATED STATEMENTS OF INCOME
Wausau Paper Mills Company and Subsidiaries
<CAPTION>
(Dollars in thousands, except per share data - unaudited) For the Three Months
Ended November 30
1993 1992
---------------------------------
<S> <C> <C>
NET SALES $108,731 $94,794
Cost of products sold 82,840 75,808
---------------------------------
GROSS PROFIT 25,891 18,986
Selling, administrative and research expenses 7,426 6,531
---------------------------------
OPERATING PROFIT 18,465 12,455
Interest income 8 9
Interest expense (553) (188)
Other income 41 18
---------------------------------
EARNINGS BEFORE INCOME TAXES 17,961 12,294
Provision for income taxes 6,900 4,487
---------------------------------
NET EARNINGS BEFORE CUMULATIVE EFFECT OF
ACCOUNTING CHANGES 11,061 7,807
Cumulative Effect of Accounting Changes:
Postretirement benefits (net of income taxes) (15,750)
Income taxes 1,000
---------------------------------
NET EARNINGS (LOSS) $ 12,061 $ (7,943)
=================================
NET EARNINGS PER COMMON SHARE BEFORE
CUMULATIVE EFFECT OF ACCOUNTING CHANGES $ .55 $ .39
Cumulative effect of account changes .05 (.78)
---------------------------------
NET EARNINGS (LOSS) PER COMMON SHARE $ .60 $ (.39)
=================================
WEIGHTED AVERAGE NUMBER OF SHARES 20,219,490 20,206,201
=================================
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
Wausau Paper Mills Company and Subsidiaries
<CAPTION>
(Dollars in thousands) November 30 August 31
1993* 1993*
-----------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 1,620 $ 2,624
Accounts and notes receivable 31,284 30,937
Inventories 58,343 59,659
Other current assets 5,466 5,701
---------------------------
Total current assets 96,713 98,921
---------------------------
Property, plant and equipment 227,505 221,839
Other assets 8,958 8,823
---------------------------
TOTAL ASSETS $ 333,176 $ 329,583
===========================
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of long-term debt $ 504 $ 504
Accounts payable 16,754 18,833
Accrued and other liabilities 20,044 20,543
Accrued income taxes 5,633 2,034
---------------------------
Total current liabilities 42,935 41,914
---------------------------
LONG-TERM LIABILITIES
Long-term debt 32,086 42,712
Deferred income taxes 28,629 28,220
Other liabilities 34,182 33,598
---------------------------
Total long-term liabilities 94,897 104,530
---------------------------
Total shareholders' equity 195,344 183,139
---------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 333,176 $ 329,583
===========================
<FN>
*The consolidated balance sheet at November 30, 1993 is unaudited. The August 31, 1993
consolidated balance sheet is derived from audited financial statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Wausau Paper Mills Company and Subsidiaries
<CAPTION>
For the Three Months
(Dollars in thousands - unaudited) Ended November 30
1993 1992
--------------------------
<S> <C> <C>
Increase (Decrease) in Cash and Cash Equivalents:
Cash Flows From Operating Activities:
Net earnings (loss) $ 12,061 $ (7,943)
--------------------------
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Provision for depreciation, depletion
and amortization 4,553 3,623
Provision for postretirement benefits other
than pensions 487 25,365
Deferred income taxes 312 (8,513)
Changes in operating assets and liabilities:
Receivables (347) 691
Inventories 1,316 1,284
Other assets 302 133
Accounts payable and other liabilities (738) (2,892)
Accrued income taxes 3,599 1,602
--------------------------
Total adjustments 9,484 21,293
--------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 21,545 13,350
--------------------------
Cash Flows From Investing Activities:
Capital expenditures (10,535) (8,256)
Proceeds from property, plant and
equipment disposals 28 32
--------------------------
NET CASH USED IN INVESTING ACTIVITIES (10,507) (8,224)
--------------------------
Cash Flows From Financing Activities:
Repayments under revolving credit facility (10,500) (3,500)
Repayment of long-term debt (126) (74)
Dividends paid (1,416) (1,288)
Proceeds from sale of treasury stock 22
--------------------------
NET CASH USED IN FINANCING ACTIVITIES (12,042) (4,840)
--------------------------
Net increase (decrease) in cash and cash equivalents (1,004) 286
Cash and cash equivalents at beginning of year 2,624 1,984
--------------------------
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 1,620 $ 2,270
==========================
Supplemental Information:
Interest paid (net of amount capitalized) $ (526) $ (196)
Income taxes paid (1,986) (2,147)
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: The accompanying unaudited financial statements include all
adjustments, which are all normal and recurring in nature
except as referenced in Note 2, and, in the opinion of
management, present fairly the condensed results for the
interim periods presented. Refer to the Notes to Financial
Statements which appear in the 1993 Annual Report for the
Company's accounting policies which are pertinent to these
statements.
Note 2: The Company adopted Statement of Financial Accounting
Standard (SFAS) 109, "Accounting for Income Taxes" in the
quarter ended November 30, 1993. Results for the quarter
ended November 30, 1992 reflect the retroactive adoption of
SFAS 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions".
Note 3: Selling, administrative and research expenses include stock
appreciation rights and stock option expenses of $267,000
or $.01 per share for the quarter ended November 30, 1993
and $1,873,000 or $.06 per share for the quarter ended
November 30, 1992.
Note 4: All shares and per share data have been restated to reflect
the four-for-three stock split to shareholders of record as
of December 30, 1992.
<TABLE>
Note 5: Accounts receivable consisted of the following:
<CAPTION>
NOVEMBER 30, 1993 AUGUST 31, 1993
----------------- ---------------
<S> <C> <C>
Customer Accounts $33,721,000 $32,528,000
Misc. Notes and Accounts Receivable 1,659,000 2,075,000
--------- ---------
$35,380,000 $34,603,000
Less: Allowance for
Discounts, Doubtful
Accounts and Pending Credits 4,096,000 3,666,000
--------- ---------
Net Receivables $31,284,000 $30,937,000
----------- -----------
</TABLE>
<PAGE>
<TABLE>
Note 6: The various components of inventories were as follows:
<CAPTION>
NOVEMBER 30, 1993 AUGUST 31, 1993
----------------- ---------------
<S> <C> <C>
Raw Materials and Supplies $33,408,000 $31,690,000
Work in Process
and Finished Goods 31,899,000 34,933,000
---------- ----------
$65,307,000 $66,623,000
Less: LIFO Reserve 6,964,000 6,964,000
--------- ---------
Net Inventories $58,343,000 $59,659,000
----------- -----------
</TABLE>
Note 7: The accumulated depreciation on fixed assets was
$121,386,000 as of November 30, 1993 and $117,308,000 as of
August 31, 1993.
<TABLE>
Note 8: A summary of Long Term Debt is as follows:
<CAPTION>
NOVEMBER 30, 1993 AUGUST 31, 1993
----------------- ---------------
<S> <C> <C>
Bonds, Mortgages and Similar $31,500,000 $42,000,000
Debt
Capitalized Leases 586,000 712,000
------- -------
Total Long Term Debt $32,086,000 $42,712,000
----------- -----------
</TABLE>
<TABLE>
Note 9: Dividends per share were as follows:
<CAPTION>
THREE MONTHS ENDING
NOVEMBER 30, 1993 NOVEMBER 30, 1992
----------------- -----------------
<S> <C>
$.00* $.00*
<FN>
* The company's Board of Directors meeting schedule did not result
in the declaration of a cash dividend in the three months ended
November 30, 1993 or 1992.
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONs
RESULTS OF OPERATIONS
Net Sales
Record net sales and shipments were recorded for the three months
ended November 30, 1993. For the quarter, net sales were
$108,731,000 up 14.7% from net sales of $94,794,000 reported for the
first quarter of fiscal 1993. Shipments of 90,600 tons exceeded
last year's first quarter by 20.0%.
Shipments of the company's printing and writing grades, manufactured
at the Printing and Writing Division, were ahead of the first
quarter of fiscal 1993 by 30%. Demand for printing and writing
products remained strong, allowing full production on one of the two
paper machines at the Groveton mill and full operation at the Brokaw
mill. Order backlogs for the Printing and Writing Division's
products are up slightly for the quarter and are higher than the
backlogs from last year's first quarter due primarily to the added
capacity of the Groveton mill which was purchased on April 1, 1993.
In the first quarter of fiscal 1994, shipments of specialty
technical grades produced at the Rhinelander Division improved by
1.7%. Some downtime was taken during the quarter on Rhinelander's
two smaller paper machines due to isolated weakness in certain
product segments. Order backlog decreased slightly during the
quarter, but is at normal levels for the end of the first quarter.
Total shipments at Rhinelander increased 6.7% in the three months
ended November 30, 1993 compared to the same period a year ago.
Gross Profit
Gross profit was $25,891,000 for the first quarter of fiscal 1994,
or 23.8% of net sales. For the first quarter of fiscal 1993, gross
profit was $18,986,000 or 20.0% of net sales. Slightly lower
selling prices due to mix changes and price reductions for certain
product segments were more than offset by lower raw material costs
and increased production levels.
Production of printing and writing products from the Brokaw and
Groveton mills for the quarter exceeded the first quarter of fiscal
1993 by 28.9%. Last year's first quarter did not include production
from the Groveton mill which was purchased on April 1, 1993.
Finished goods inventory at the Printing and Writing Division
declined during the quarter as a result of strong shipments. The
inventory decline was greater than was experienced in the first
quarter of fiscal 1993 due to higher shipments.
Despite some downtime taken on the smaller machines to keep
inventory at appropriate levels, paper production increased 0.5% at
Rhinelander during the first quarter of fiscal 1994 compared to the
same period a year ago. There was little change in Rhinelander's
finished goods inventory during the quarter compared to an inventory
increase which occurred during the first quarter of fiscal 1993.
<PAGE>
Selling, Administrative and Research Expenses
Selling, administrative and research expenses were $7,426,000 for
the quarter ended November 30, 1993 compared to $6,531,000 for the
comparable quarter a year ago. Expense of $267,000 from stock
appreciation rights and stock option adjustments was recorded in the
first quarter of fiscal 1994 compared to expenses of $1,873,000
recorded in last year's first quarter. Higher marketing and
administrative costs in the first quarter of fiscal 1994 are
attributable primarily to the addition of administrative functions
at the Groveton mill which was acquired on April 1, 1993. In
addition, increased advertising and staffing costs to promote new
product offerings and market the increased capacity in the Printing
and Writing Division also contributed to the increase as well as
higher professional fees and incentive plan expenses.
Interest Income and Expense
Interest income of $8,000 and interest expense of $553,000 were
recorded for the three months ended November 30, 1993. This
compares to interest income of $9,000 and interest expense of
$188,000 for the same period last year. Higher interest expense in
the first quarter of fiscal 1994 is the result of the purchase of
manufacturing facilities in Groveton, New Hampshire, which was
financed through additional debt.
Income Taxes
In the first quarter of fiscal 1994, the income tax provision before
the cumulative effect of an accounting change was $6,900,000, for an
effective tax rate of 38.4%. The effective tax rate for the first
quarter last year was 36.5%. The higher tax rate is the result of
a 1% increase in corporate federal tax rates enacted in August,
1993. Last year's first quarter rate was favorably impacted by state
tax credit carryforwards.
The company adopted Statement of Financial Accounting Standard
(SFAS) 109, "Accounting for Income Taxes" in the quarter ended
November 30, 1993. This resulted in a one-time $1,000,000
cumulative reduction in the net deferred tax liability.
Net Earnings
Net earnings for the three months ended November 30, 1993 were
$11,061,000 or $.55 per share before the cumulative effect of the
SFAS 109 accounting change. Net earnings for the first quarter of
fiscal 1993 were $7,807,000 or $.39 per share before the cumulative
effect of the retroactive adoption of SFAS 106 "Employers'
Accounting for Postretirment Benefits Other Than Pensions". After
including the impact of these accounting changes, net earnings for
the first quarter of fiscal 1994 were $12,061,000 or $.60 per share,
compared to a loss of $7,943,000 or $.39 per share in the prior
year's first quarter.
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
Cash Provided by Operations
Cash provided by operations was $21,545,000 for the first quarter of
fiscal 1994 compared to $13,350,000 during the first quarter of
fiscal 1993. The improvement in operating cash flow is primarily
the result of higher sales and reduced unit costs. Working capital
decreased slightly in the first quarter of fiscal 1994 and 1993,
reflecting reduced inventories.
Capital Expenditures
Capital expenditures were $10,535,000 during the first three months
of fiscal 1994 compared to $8,256,000 for the same period a year
ago. At Brokaw, construction is continuing on the new power boiler
and feedwater system, with completion planned for late calendar
1994. At Groveton, a color measurement system is being installed,
which will reduce grade change time and enhance color control
capabilities needed to manufacture deeply colored sheets. At
Rhinelander, work is underway on drying and other improvements for
No. 9 paper machine to increase capacity and improve quality.
Capital investments totalling nearly $7.5 million were approved by
the Board of Directors during the first quarter of fiscal 1994. Most
of the funds will be used to increase capacity, improve quality and
reduce costs at the Brokaw and Groveton mills. A dye storage system
and delivery system was approved for Groveton, which will give the
mill color production capability equal to the Brokaw mill. A new
machine chest for No. 6 paper machine was also approved for
Groveton. At Brokaw, several projects were approved, including a
new water marking system for No. 4 paper machine to improve quality
and increase production, and a new sizing system which will reduce
operating costs.
On December 13, 1993, the Board of Directors approved over $16
million in capital projects for the Rhinelander mill. Most of the
funds will be for a new silicone coater capable of processing 15,000
tons of Rhinelander's annual production into coated "release" papers
for the pressure sensitive label industry. Also included in these
funds are more than $1 million of improvements to Rhinelander's
No. 6 paper machine, which produces mostly packaging grades.
Planned capital expenditures on existing facilities total over
$50 million for fiscal 1994.
Financing
Long-term debt decreased $10.6 million in the first quarter to
$32,086,000 at November 30, 1993. The remaining debt was primarily
notes to Prudential Insurance Company of America and its
subsidiaries, which were issued in June, 1993.
<PAGE>
On November 30, 1993, the company also had $1,500,000 outstanding in
commercial paper at an effective rate of 3.38%.
In November, 1993, the company decreased its revolving credit
facility from $65,000,000 to $35,000,000. The amendment to the
revolving credit agreement with the company's two banks contains
substantially the same terms as previously were in effect. There
were no borrowings under the $35,000,000 revolving credit agreement
at November 30, 1993.
Cash provided by operations, the private placement notes with
Prudential, commercial paper and the revolving credit agreement are
expected to fund the company's planned fiscal 1994 capital
expenditure requirements. The company believes that sufficient
amounts of capital resources are available to achieve both
short-term and long-term goals.
Dividends
On December 13, 1993, the Board of Directors declared a
four-for-three stock split and a 14.3% increase in the quarterly
cash dividend, from $.0525 to $.06 per share on a new share basis.
Both the dividend increase and stock split are payable January 7,
1994 to shareholders of record as of December 27, 1993. Any
fractional shares resulting from the stock split will be paid in
cash, based on the closing price of the stock on the record date.
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) None
(b) Reports on form 8-K: None
<PAGE>
S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
WAUSAU PAPER MILLS COMPANY
Registrant
Date: January 7, 1994 By: Steven A. Schmidt
Steven A. Schmidt
Vice President Finance, Secretary and
Treasurer
(Principal Financial Officer)
