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 FEBRUARY 29, 1996
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 charter)
WISCONSIN 39-0690900
(State of incorporation) (I.R.S. Employer
Identification Number)
ONE CLARK'S ISLAND
P.O. BOX 1408
WAUSAU, WISCONSIN 54402-1408
(Address of principal executive office)
Registrant's telephone number, including area code: 715-845-5266
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 report), and (2) has been subject to such
filing requirements for the past 90 days.
X
Yes ________ No ________
The number of common shares outstanding at March 31, 1996 was 36,831,579.
<PAGE>
WAUSAU PAPER MILLS COMPANY
AND SUBSIDIARIES
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of 1
Income Three and Six Months Ended
February 29, 1996 (unaudited) and
February 28, 1995 (unaudited)
Condensed Consolidated Balance 2
Sheets February 29, 1996 (unaudited)
and August 31, 1995 (derived from audited
financial statements)
Condensed Consolidated Statements 3
of Cash Flows Six Months
Ended February 29, 1996 (unaudited) and
February 28, 1995 (unaudited)
Notes to Condensed Consolidated 4 - 5
Financial Statements
Item 2. Management's Discussion and 6 - 9
Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders 10
Item 6. Exhibits and Reports on Form 8-K 10
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS:
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
Wausau Paper Mills Company and Subsidiaries
(Dollars in thousands, except For the Three Months For the Six Months
per share data - unaudited) Ended February 29, 1996 and February 28, 1995
<S> <C> <S> <C> C>
1996 1995 1996 1995
Net sales $128,590 $119,115 $270,494 $245,382
Cost of products sold 109,985 101,021 232,261 206,190
GROSS PROFIT 18,605 18,094 38,233 39,192
Selling, administrative
and research expenses 7,072 6,138 14,488 12,865
OPERATING PROFIT 11,533 11,956 23,745 26,327
Interest income 159 89 369 149
Interest expense (713) (389) (1,283) (825)
Other expense (62) (40) (109) (88)
EARNINGS BEFORE INCOME TAXES 10,917 11,616 22,722 25,563
Provision for income taxes 4,200 4,500 8,700 9,850
NET EARNINGS $ 6,717 $ 7,116 $ 14,022 $ 15,713
NET EARNINGS PER COMMON SHARE $ .18 $ .20 $ .38 $ .43
WEIGHTED AVERAGE NUMBER OF SHARES 36,832,000 36,842,000 36,831,000 36,834,000
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
Wausau Paper Mills Company and Subsidiaries
(Dollars in thousands) February 29 August 31
1996* 1995*
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents $ 1,418 $ 2,347
Accounts and notes receivable 42,019 42,429
Inventories 71,621 67,474
Other current assets 7,547 7,767
Total current assets 122,605 120,017
Property, plant and equipment 310,426 292,191
Other assets 16,792 22,478
TOTAL ASSETS $449,823 $434,686
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 6,362 $ 6,425
Accounts payable 22,517 24,426
Accrued and other liabilities 22,726 20,641
Accrued income taxes 1,652 1,259
Total current liabilities 53,257 52,751
LONG-TERM LIABILITIES
Long-term debt 69,698 68,623
Deferred income taxes 39,300 36,799
Other liabilities 40,871 39,824
Total long-term liabilities 149,869 145,246
Total shareholders' equity 246,697 236,689
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $449,823 $434,686
<FN>
* The consolidated balance sheet at February 29, 1996 is unaudited. The
August 31, 1995 consolidated balance sheet is derived from audited
financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Wausau Paper Mills Company and Subsidiaries
For the Six Months
(Dollars in thousands-unaudited) Ended Feb. 29, 1996 and Feb. 28, 1995
1996 1995
<S> <C> <C>
Operating Activities:
Net earnings $ 14,022 $ 15,713
Noncash items:
Provision for depreciation, depletion
and amortization 11,069 9,674
Deferred income taxes 2,501 2,174
Changes in operating assets and liabilities:
Receivables 410 (6,870)
Inventories (4,147) (7,288)
Other assets 256 (838)
Accounts payable and other liabilities 1,860 8,446
Accrued income taxes 393 (192)
NET CASH PROVIDED BY OPERATING ACTIVITIES 26,364 20,819
Investing Activities:
Capital expenditures (31,405) (21,591)
Proceeds from property, plant and
equipment disposals 60 247
Net cash distributed from funds
restricted for capital additions 5,650
NET CASH USED IN INVESTING ACTIVITIES (25,695) (21,344)
Financing Activities:
Net borrowings under
revolving credit facility 5,498 5,500
Repayments of long-term debt (3,245) (223)
Dividends paid (3,883) (3,473)
Proceeds from stock option exercises 32 2,036
Payments for purchase of treasury stock (5,222)
NET CASH USED IN FINANCING ACTIVITIES (1,598) (1,382)
Net decrease in cash and cash equivalents (929) (1,907)
Cash and cash equivalents at beginning of year 2,347 3,214
CASH AND CASH EQUIVALENTS AT END OF QUARTER $ 1,418 $ 1,307
Supplemental Information:
Interest paid (net of amount capitalized) $ 1,220 $ 833
Income taxes paid 5,840 7,845
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: The accompanying unaudited condensed financial statements include all
adjustments, which are all normal and recurring in nature and, in the
opinion of management, present fairly the results for the interim
periods presented. Refer to the Notes to Financial Statements which
appear in the 1995 Annual Report for the company's accounting policies
which are pertinent to these statements.
Note 2: Selling, administrative and research expenses include stock
appreciation rights (SARs) and stock option expense of $175,000 or
less than $.01 per share for the quarter ended February 29, 1996
and income of $76,000 or less than $.01 per share for the quarter
ended February 28, 1995. For the six months ended February 29, 1996,
SARs and stock option expense was $828,000 or $.01 per share compared
to income of $177,000 or less than $.01 per share for the six months
ended February 28, 1995.
Note 3: All shares and per share data have been restated to reflect the 5-for-
4 stock split in January 1996.
<TABLE>
Note 4: Accounts receivable consisted of the following:
<CAPTION>
FEBRUARY 29, 1996 AUGUST 31, 1995
<S> <C> <C>
Customer Accounts $45,590,000 $46,055,000
Misc. Notes and Accounts
Receivable 773,000 1,454,000
$46,363,000 $47,509,000
Less: Allowance for Discounts,
Doubtful Accounts and Pending
Credits 4,344,000 5,080,000
Net Receivables $42,019,000 $42,429,000
</TABLE>
<TABLE>
NOTE 5: THE VARIOUS COMPONENTS OF INVENTORIES WERE AS FOLLOWS:
<CAPTION>
FEBRUARY 29, 1996 AUGUST 31, 1995
<S> <C> <C>
Raw Materials and Supplies $38,604,000 $47,423,000
Work in Process
and Finished Goods 44,623,000 45,521,000
$83,227,000 $92,944,000
Less: LIFO Reserve 11,606,000 25,470,000
Net Inventories $71,621,000 $67,474,000
</TABLE>
<PAGE>
NOTE 6: THE ACCUMULATED DEPRECIATION ON FIXED ASSETS WAS $161,351,000 AS OF
FEBRUARY 29, 1996 AND $150,736,000 AS OF AUGUST 31, 1995.
<TABLE>
NOTE 7: A SUMMARY OF LONG-TERM DEBT IS AS FOLLOWS:
<CAPTION>
FEBRUARY 29, 1996 AUGUST 31, 1995
<S> <C> <C>
Bonds, Mortgages and
Similar Debt $69,380,000 $68,331,000
Capitalized Leases 318,000 292,000
Total Long Term Debt $69,698,000 $68,623,000
</TABLE>
<TABLE>
NOTE 8: DIVIDENDS PER SHARE WERE AS FOLLOWS:
<CAPTION>
THREE MONTHS ENDING SIX MONTHS ENDING
FEBRUARY 29, 1996 FEBRUARY 28, 1995 FEBRUARY 29, 1996 FEBRUARY 28, 1995
<C> <C> <C> <C>
$.110 $.100* $.110 $.100*
</TABLE>
The company's Board of Directors schedule resulted in the declaration
of cash dividends of $.110 and $.100 per share in the three months
ended February 29, 1996 and February 28, 1995, respectively.
* Per share dividends have been restated to reflect the 5-for-4 stock
split in January 1996.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations:
RESULTS OF OPERATIONS
Net Sales
Net sales for the quarter ended February 29, 1996 were a second quarter record
$128,590,000, up 8.0% from last year's second quarter sales of $119,115,000.
Shipments totalled 94,700 tons, down .4% from last year's record second
quarter shipment level. For the first six months of fiscal 1996, net sales
were a record $270,494,000, up 10.2% from the prior year while shipments of
198,600 tons were down .2% compared to the first half of fiscal 1995.
Paper market conditions slowed in the company's second quarter and continue to
remain soft, affecting many of the company's customers and, therefore, the
overall demand for its products. Throughout the paper industry there have
been many reports of production downtime due to low order levels. Despite the
market weakness, the company was able to operate at planned capacity in the
second quarter. Should the current weakness in the paper markets continue,
the company may need to schedule some production downtime before the end of
the fiscal year in order to maintain proper inventory levels.
Demand for the company's printing and writing grades was relatively strong for
most of its paper grades sold from stock inventory during the second quarter
of fiscal 1996. However, lower prices for manufacturing business commodity
cut-size and offset papers, due to weak demand, have made it difficult for the
company to obtain orders in this market segment. Although these grades
represent a small portion of the Printing and Writing Division's mix, they
contributed to a 2.2% decrease in the division's second quarter shipments
compared to a year ago. Order backlogs at the end of the second quarter were
down from last year due to weaker demand for certain grades of paper.
At the company's Rhinelander Division, second quarter shipments exceeded the
prior year's shipment level by 2.8%. Order backlogs at February 29, 1996 were
up slightly from a year ago due primarily to strong demand for packaging
grades.
Gross Profit
Gross profit for the three months ended February 29, 1996 was $18,605,000 or
14.5% of net sales. Gross profit in the second quarter of fiscal 1995 was
$18,094,000 or 15.2% of net sales.
Weak paper market conditions are also affecting demand for pulp, the company's
main raw material. Although pulp prices fell during the second quarter, pulp
costs, on average, were higher than a year ago. Despite higher selling prices
for its products, the company's gross profit margin in the second quarter was
lower than a year ago due to higher pulp prices and other manufacturing costs.
Management expects that the positive effect of continued lower prices for pulp
will result in improved gross profit margins in the quarters ahead.
Production at the Printing and Writing Division exceeded last year's second
quarter by .9%. Inventory levels rose during the quarter due to market
weakness. Second quarter production at Rhinelander was down 4.3% from the
prior year, due primarily to mix. Inventories at Rhinelander increased
slightly during the quarter.
<PAGE>
Selling, Administrative and Research Expenses
Selling, administrative and research expenses were $7,072,000 for the three
months ended February 29, 1996 compared to $6,138,000 in last year's second
quarter. Stock appreciation rights (SARs) and stock option expense of
$175,000 was recorded during the second quarter compared to income of $76,000
recorded in last year's second quarter. The increase in selling,
administrative and research spending compared to last year's second quarter is
primarily the result of higher advertising and incentive plan costs.
For the six months ended February 29, 1996, selling, administration and
research expenses totalled $14,488,000 compared to $12,865,000 for the first
half of fiscal 1995. SARs and stock option expense of $828,000 was incurred
in the first half of fiscal 1996 compared to income of $177,000 for the same
period a year ago. Higher advertising and incentive plan costs are the main
reason for the balance of the increase in spending compared to the previous
year.
Interest Income and Expense
Interest income of $159,000 was recorded in the second quarter of fiscal 1996
compared to $89,000 for the same period a year ago. Interest income totalled
$369,000 and $149,000 for the first six months of fiscal 1996 and fiscal 1995,
respectively. The increase in interest income in the second quarter and first
six months of fiscal 1996 compared to the prior year is due to interest income
on undistributed proceeds from a $19 million industrial development bond
issuance in August 1995.
For the three months ended February 29, 1996, interest expense was $713,000
compared to $389,000 in the second quarter of fiscal 1995. For the first six
months of fiscal 1996, interest expense was $1,283,000 compared to $825,000
for the same period a year ago. Higher interest expense in the second quarter
and first half of fiscal 1996 is due to higher debt levels compared to the
same periods a year ago. Capitalized interest recorded in the second quarter
of fiscal 1996 was $289,000 compared to $108,000 in last year's second
quarter. Capitalized interest was $672,000 and $163,000 for the first six
months of fiscal 1996 and fiscal 1995, respectively. Higher capitalized
interest in the fiscal 1996 periods is due to capital spending on major
projects under construction.
Income Taxes
The income tax provision in the second quarter of fiscal 1996 was $4,200,000
for an effective tax rate of 38.5%. The effective tax rate in last year's
second quarter was 38.7%. The income tax provision for the first six months
of fiscal 1996 was $8,700,000 for an effective tax rate of 38.3% compared to
an effective tax rate of 38.5% for the same fiscal 1995 period.
Net Earnings
Net earnings for the three months ended February 29, 1996 were $6,717,000 or
$.18 per share compared to net earnings of $7,116,000 or $.20 per share for
the three months ended February 28, 1995. Net earnings for the first half of
fiscal 1996 were $14,022,000 or $.38 per share compared to net earnings of
$15,713,000 or $.43 per share for the same period a year ago.
<PAGE>
CAPITAL RESOURCES AND LIQUIDITY
Cash Provided by Operations
Cash provided by operations in the second quarter of fiscal 1996 was
$7,894,000 compared to $664,000 for last year's second quarter. For the six
months ended February 29, 1996, cash provided by operations was $26,364,000
compared to $20,819,000 for the first half of fiscal 1995. Cash provided by
operations in the second quarter of fiscal 1996 was significantly higher than
last year's second quarter due to a substantial increase in inventories last
year which did not reoccur in the fiscal 1996 period. The improvement in cash
provided by operations in the first half of fiscal 1996 over the previous year
is due mainly to better collection of accounts receivables and a smaller
increase in inventories.
Capital Expenditures
Capital expenditures totalled $14,089,000 during the second quarter of fiscal
1996 compared to $12,965,000 for the same period last year. In the first half
of fiscal 1996, capital expenditures were $31,405,000 compared to $21,591,000
a year ago.
At Rhinelander, the second phase of its expansion project was completed in
March 1996 with the successful rebuild and startup of No. 7 paper machine.
The rebuild included a pre-metering size press and improved drying
capabilities to upgrade the papermaking process and increase capacity. At the
Brokaw mill, the $16.4 million fiber handling and processing project is
nearing completion as well which will allow the mill to use more recycled
post-consumer fiber.
Capital expenditures in fiscal 1996 are projected to be approximately $70
million.
Financing
Long-term debt increased $7,130,000 in the second quarter of fiscal 1996 to
$69,698,000 due to capital spending requirements. Long-term debt includes
$27.0 million in notes to Prudential Insurance Company of America and its
subsidiaries at a fixed rate of 6.03% and revolving credit agreement
borrowings of $11.5 million at effective interest rates ranging from 5.51% to
5.90% at February 29, 1996. The company also had $16,498,000 in commercial
paper outstanding at the end of the quarter with effective interest rates of
5.52% to 5.83%. In addition, the company had $19.0 million in variable rate
industrial development bonds with an interest rate of 3.45% at February 29,
1996. Undistributed proceeds from the industrial development bond issuance
totalled $9,081,000 at the end of the second quarter.
On March 29, 1996, the company amended its revolving credit facility. The
amended agreement increases the revolving credit line from $35 million to $65
million and extends through March 29, 2001, at which time, or earlier at the
company's option, the agreement converts to a one-year term loan. Terms and
conditions of the amended credit facility remained essentially unchanged.
Cash provided by operations, industrial development bond proceeds and the
revolving credit facility are expected to meet working capital needs and
dividend requirements, as well as fund the company's planned capital
expenditures. The company believes additional financing is readily available,
should it be needed, to fund a major expansion or acquisition.
<PAGE>
Common Stock Repurchase
On June 30, 1994, the Board of Directors authorized the repurchase of up to
1,856,250 shares (adjusted for the effect of the January 1996 stock split) of
the company's common stock from time to time in the open market or through
privately negotiated transactions at prevailing market prices. There have
been no repurchases of company stock during the first six months of fiscal
1996.
Dividends
On December 18, 1995, the Board of Directors declared a 5-for-4 stock split
and a 10% increase in the quarterly cash dividend, from $.05 to $.055 per
share on a new share basis. Both the cash dividend and the additional shares
from the stock split were paid on January 17, 1996 to shareholders of record
as of January 2, 1996. Any fractional shares resulting from the stock split
were paid in cash on January 17, 1996, based on the closing price of the
stock on the record date.
The Board of Directors, at the February 21, 1996 meeting, declared a quarterly
cash dividend of $.055 per share payable April 1, 1996 to shareholders of
record on March 11, 1996.
<PAGE>
PART II - OTHER INFORMATION
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
The annual meeting of shareholders of the company was held on December 18,
1995.
The matters voted upon, including the number of votes cast for, against or
withheld, as well as the number of abstentions and broker non-votes, as to
each such matter were as follows:
<TABLE>
<CAPTION>
MATTER SHARES
<S> <C> <C> <C> <C> <C>
Broker
1. Election of Class II Directors For Against Withheld Abstain Non-Vote
(a) Daniel D. King 26,071,960 N/A 141,783 N/A 0
(a) Harry R. Baker 26,066,006 N/A 147,737 N/A 0
Broker
2. Approval to increase the For Against Withheld Abstain Non-Vote
authorized common stock to
100,000,000 shares. 23,079,256 3,048,620 N/A 85,867 0
Broker
3. Approval of appointment of For Against Withheld Abstain Non-Vote
independent auditors for year
ending August 31, 1996 26,151,227 32,398 N/A 30,118 0
</TABLE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits required by Item 601 of Regulation S-K
(3) Restated articles of incorporation, as amended effective December 21,
1995
(27) Financial Data Schedule
(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
By: STEVEN A. SCHMIDT
Steven A. Schmidt
Vice President Finance, Secretary and Treasurer
(Principal Financial Officer)
Date: April 12, 1996
<PAGE>
EXHIBIT INDEX
PURSUANT TO SECTION 232.102(D), REGULATION S-T
1. Exhibit (3) Restated articles of incorporation as
amended effective December 21, 1995
2. Exhibit (27) Financial Data Schedule
EXHIBIT 3
12/18/91 COMPILATION
ARTICLES OF INCORPORATION
OF
WAUSAU PAPER MILLS COMPANY
ARTICLE 1.
The name of the corporation shall be WAUSAU PAPER MILLS COMPANY.
ARTICLE 2.
The period of its existence shall be perpetual.
ARTICLE 3.
The purpose shall be to engage in any lawful activity within the
purposes for which corporations may be organized under the Wisconsin
Business Corporation Law, Chapter 180 of the Wisconsin Statutes.
ARTICLE IV
The total number of shares of all classes of stock which the Company
shall have authority to issue is 100,500,000. Of these (1) 100,000,000
shares shall be common stock without par value (hereinafter sometimes
referred to as "Common Stock"); and (2) 500,000 shares shall be shares of
preferred stock without par value (hereinafter sometimes referred to as
"Preferred Stock").
The Board of Directors is expressly authorized to adopt, from time to
time, a resolution or resolutions providing for the establishment and
issuance of Preferred Stock without par value in one or more series; to
fix the number of shares in each such series and to fix the designations
and all the powers, preferences and relative, participating, optional or
other special rights, and the qualifications, limitations or restrictions
of each such series; and to determine that shares of each such series
shall have more than one vote, or one vote, or less than one vote, or
shall have no voting rights.
The holder of each outstanding share of Common Stock shall have one
vote per share with respect to all matters submitted to a vote of
shareholders.
ARTICLE 5.
No holder of shares of this corporation shall be entitled to
preemptive rights or to any right to subscribe for, purchase or receive
any part of any new or additional issue of stock of any class, whether now
or hereafter authorized, or of any bonds, debentures, or other securities
convertible into stock of any class, and all such additional shares of
stock, bonds, debentures or other securities convertible into stock may be
issued and disposed of by the Board of Directors to such person or persons
and on such terms and for such consideration (so far as may be permitted
by law) as the Board of Directors, in their absolute discretion, may deem
advisable.
<PAGE>
ARTICLE 6.
The Board of Directors of this Corporation shall consist of such
number of members as the By-laws may provide, but not less than three (3)
members nor more than nine (9) members. Members of the Board of Directors
shall have such qualifications as may from time to time be provided by the
By-laws of this Corporation. Directors shall be divided into three (3)
classes to be as nearly equal as possible. The term of office of
Directors of the first class shall expire at the first annual meeting of
shareholders after their election, the second class shall expire at the
second annual meeting after their election, and the third class shall
expire at the third annual meeting after their election. At each annual
meeting after such classification, the number of Directors equal to the
number of the class whose term expires at the time of such meeting shall
be elected to hold office until the third succeeding annual meeting. Each
Director shall hold office for the term for which he is elected and until
his successor shall have been elected and qualified. No change in the
number of Directors will affect the term of office of a Director. The
affirmative vote for four-fifths of the outstanding shares entitled to
vote for the election of a Director shall be required to remove such
Director from office. Amendment of this Article of Incorporation (Article
6) shall require the affirmative vote of four-fifths of all classes of
stock of the Company entitled to vote thereon.
ARTICLE VII
The address of the registered office is One Clark's Island, P.O. Box
1408, Wausau, Marathon County, Wisconsin 54401, and the name of the
registered agent at such address is Daniel R. Olvey.
ARTICLE 8.
PART I
These Articles of Incorporation may be amended in the manner
authorized by the Wisconsin Business Corporation Law at the time of
amendment unless a specific article of incorporation (including this
article) requires a different proportion of the shares of stock of all
classes of stock of the Company.
PART II
(a) Except as set forth in clause (d) of this Part II, the
affirmative vote or consent of the holders of four-fifths of all classes
of stock of this Corporation entitled to vote in elec- tions of directors,
considered for the purposes of this Part II as one class, shall be
required (i) for the adoption of any agreement for the merger or
consolidation of this Corporation with or into any other corporation, or
(ii) to authorize any sale, lease, exchange, mortgage, pledge or other
disposition of all or any substantial part of the assets of this
Corporation to, or any sale, lease, exchange, mortgage, pledge or other
disposi- tion to this Corporation or any subsidiary thereof in exchange
for securities of this Corporation of any assets of, any other
corporation, person or other entity, if, in either case, as of the record
date for the determination of shareholders entitled to notice thereof and
to vote thereon or consent thereto such other corporation, person or
entity is the beneficial owner, directly or indirectly, of more than ten
per cent of the outstanding shares of stock of this Corporation entitled
to vote in elections of directors considered for the purposes of this Part
<PAGE>
II as one class. Such affirmative vote or consent shall be in addition to
the vote or consent of the holders of the stock of this Corpora- tion
otherwise required by law, these Articles of Incorporation or any
agreement between this Corporation and any national securities exchange.
(b) For the purposes of this Part II, (i) any corporation, person or
other entity shall be deemed to be the beneficial owner of any shares of
stock of this Corporation (A) which it has the right to acquire pursuant
to any agreement, or upon exercise of conversion rights, warrants or
options, or otherwise or (B) which are beneficially owned, directly or
indirectly (including shares deemed owned through application of subclause
(A), above), by any other corporation, person or entity with which it or
its "affiliate" or "associate" (as defined below) has any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting
or disposing of stock of this Corporation, or which is its "affiliate" or
"associate" as those terms are defined in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934 as in effect on
January 1, 1969, and (iii) the outstanding shares of any class of stock of
this Corporation shall include shares deemed owned through application of
subclauses (A) and (B) above but shall not include any other shares which
may be issuable pursuant to any agreement, or upon exercise of conversion
rights, warrants or options, or otherwise.
(c) The Board of Directors shall have the power and duty to determine
for the purposes of this Part II on the basis of infor- mation known to
such Board, whether (i) such other corporation, person or other entity
beneficially owns more than ten per cent of the outstanding shares of
stock of this Corporation entitled to vote in elections of directors, (ii)
a corporation, person or entity is an "affiliate" or "associate" (as
defined above) of another, and (iii) the memorandum of understanding
referred to below is substantially consistent with the transaction covered
thereby. Any such determination shall be conclusive and binding for all
purposes of this Part II.
(d) The provisions of this Part II shall not be applicable to (i) any
merger or consolidation of this Corporation, with or into any other
corporation, or any sale, lease, exchange, mortgage, pledge or other
disposition of all or any substantial part of the assets of this
Corporation to, or any sale, lease, mortgage, pledge or other disposition
of this Corporation or any subsidiary thereof in exchange for securities
of this Corporation of any assets of, any other corporation, person or
other entity, if such transaction is approved by resolution of the Board
of Directors of the Corporation, provided that a majority of the members
of the Board of Directors voting for the approval of such transaction were
duly elected and acting members of the Board of Directors prior to the
time any such other corporation, person or other entity shall have become
a beneficial owner of more than ten per cent (10%) of the shares of stock
of this corporation entitled to vote in an election of directors; or (ii)
any merger or consolidation of this Corporation with, or any sale, lease,
exchange, mortgage, pledge or other disposition to this Corpora- tion or
any subsidiary thereof of any assets of any corporation of which a
majority of the outstanding shares of all classes of stock entitled to
vote in elections of directors is owned of record or beneficially by this
Corporation and its subsidiaries.
(e) No amendment to these Articles of Incorporation shall amend,
alter, change or repeal any of the provisions of this Part II, unless the
amendment effecting such amendment, alteration, change or repeal shall
<PAGE>
receive the affirmative vote or consent of the holders of four-fifths of
all classes of stock of this corporation entitled to vote in elections of
directors, considered for the purposes of this Part II as one class.
ARTICLE IX
PART I
(a) Except as otherwise expressly provided in Part II of this Article
IX and in addition to any other provision of law and as may otherwise be
set forth in these Articles, the consummation of any Business Combination
shall require that all of the following conditions shall have been met:
(i) The aggregate amount of the cash and the Fair Market Value
as of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of
Common Stock in such Business Combination shall be at least equal to the
highest of the following:
(A) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the Interested Shareholder for any shares of Common Stock acquired
by it (1) within the two-year period immediately prior to the first public
announcement of the proposal of the Business Combination (the
"Announcement Date") or (2) in the transaction in which it became an
Interested Shareholder, whichever is higher;
(B) the Fair Market Value per share of Common Stock on the
Announcement Date or on the date on which the Interested Shareholder
became an Interested Shareholder (such latter date is referred to in this
Article IX as the "Determination Date"), whichever is higher; and
(C) (if applicable) the price per share equal to the Fair
Market Value per share of Common Stock determined pursuant to paragraph
(a)(i)(B) above, multiplied by the ratio of (1) the highest per share
price (including any brokerage commissions, transfer taxes and soliciting
dealers' fees) paid by the Interested Shareholder for any shares of Common
Stock acquired by it within the two-year period immediately prior to the
Announcement Date to (2) the Fair Market Value per share of Common Stock
on the first day in such two-year period upon which the Interested
Shareholder acquired any shares of Common Stock.
(ii) The aggregate amount of the cash and the Fair Market Value
as of the date of the consummation of the Business Combination of
consideration other than cash to be received per share by holders of
shares of any class of outstanding Voting Stock other than Common Stock
(and other than Institutional Voting Stock), shall be at least equal to
the highest of the following (it being intended that the requirements of
this paragraph (a)(ii) shall be required to be met with respect to every
class of outstanding Voting Stock [other than Institutional Voting Stock],
whether or not the Interested Shareholder has previously acquired any
shares of a particular class of Voting Stock):
(A) (if applicable) the highest per share price (including
any brokerage commissions, transfer taxes and soliciting dealers' fees)
paid by the Interested Shareholder for any shares of such class of Voting
Stock acquired by it (1) within the two-year period immediately prior to
the Announcement Date or (2) in the transaction in which it became an
Interested Shareholder, whichever is higher;
<PAGE>
(B) (if applicable) the highest preferential amount per
share to which the holders of shares of such class of Voting Stock are
entitled in the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation;
(C) the Fair Market Value per share of such class of Voting
Stock on the Announcement Date or on the Determination Date, whichever is
higher; and
(D) (if applicable) the price per share equal to the Fair
Market Value per share of such class of Voting Stock determined pursuant
to paragraph (a)(ii)(C) above, multiplied by the ratio of (1) the highest
per share price (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested Shareholder for any
shares of such class of Voting Stock acquired by it within the two-year
period immediately prior to the Announcement Date to (2) the Fair Market
Value per share of such class of Voting Stock on the first day in such
two-year period upon which the Interested Shareholder acquired any shares
of such class of Voting Stock.
(iii) The consideration to be received by holders of a
particular class of outstanding Voting Stock (including Common Stock)
shall be in cash or in the same form as the Interested Shareholder has
previously paid for shares of such class of Voting Stock. If the
Interested Shareholder has paid for shares of any class of Voting Stock
with varying forms of consideration, the form of consideration for such
class of Voting Stock shall be either cash or the form used to acquire the
largest number of shares of such class of Voting Stock previously acquired
by it.
(iv) After such Interested Shareholder has become an Interested
Shareholder and prior to the consummation of such Business Combination:
(A) except as approved by a majority of the Continuing Directors, there
shall have been no failure to declare and pay at the regular date therefor
any full quarterly dividends (whether or not cumulative) on the
outstanding Preferred Stock; (B) there shall have been (1) no reduction in
the annual rate of dividends paid on the Common Stock (except as necessary
to reflect any subdivision of the Common Stock), except as approved by a
majority of the Continuing Directors, and (2) an increase in such annual
rate of dividends as necessary to reflect any reclassifica- tion
(including any reverse stock split), recapitalization, reorganization or
any similar transaction which has the effect of reducing the number of
outstanding shares of the Common Stock, unless the failure so to increase
such annual rate is approved by a majority of the Continuing Directors;
and (C) such Interested Shareholder shall have not become the beneficial
owner of any additional shares of Voting Stock except as part of the
transaction which results in such Interested Shareholder becoming an
Interested Share holder.
(v) After such Interested Shareholder has become an Interested
Shareholder, such Interested Shareholder shall not have received the
benefit, directly or indirectly (except proportionately as a shareholder),
of any loans, advances, guarantees, pledges or other financial assistance
or any tax credits or other tax advantages provided by the Corporation,
whether in anticipation of or in connection with such Business Combination
or otherwise.
(vi) A proxy or information statement describing the proposed
Business Combination and containing the information specified for proxy or
<PAGE>
information statements under the Securities Exchange Act of 1934 and the
rules and regulations thereunder (or any subsequent provisions replacing
such Act, rules or regulations) shall be mailed by or on behalf of and at
the expense of the Interested Shareholder seeking to effect such Business
Combination, to Shareholders of the Corporation at least 30 days prior to
the consummation of such Business Combination (whether or not such proxy
or information statement is required to be mailed pursuant to such Act or
subsequent provisions).
(b) The term "Business Combination", as used in this Article IX,
shall mean:
(i) any merger or consolidation of the Corporation or any
Subsidiary with (A) any Interested Shareholder or (B) any other
corporation (whether or not itself an Interested Shareholder) which is, or
after such merger or consolidation would be, an Affiliate of an Interested
Shareholder; and
(ii) any sale, lease, exchange, mortgage, pledge, transfer or
other disposition (in one transaction or a series of transactions) to or
with any Interested Shareholder or any Affiliate of any Interested
Shareholder of any assets of the Corporation or any Subsidiary having an
aggregate Fair Market Value of $1,000,000 or more; and
(iii) the issuance or transfer by the Corporation or any
Subsidiary (in one transaction or a series of transactions) of any
securities of the Corporation or any Subsidiary to any Interested
Shareholder or any Affiliate of any Interested Shareholder in exchange for
cash, securities or other property (or a combination thereof) having an
aggregate Fair Market Value of $1,000,000 or more; and
(iv) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an Interested
Shareholder or any Affiliate of any Interested Shareholder; and
(v) any reclassification of securities (including any reverse
stock split), or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries or any other
transaction (whether or not with or into or otherwise involving an
Interested Shareholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class
of equity or convertible securities of the Corporation or any Subsidiary
which is directly or indirectly owned by any Interested Shareholder or any
Affiliate of any Interested Shareholder.
Part II
The provisions of Part I of this Article IX shall be applicable to
each particular Business Combination unless (a) such Business Combination
shall have been approved by the affirmative vote of at least two-thirds of
the voting power of all shares of Voting Stock (considered for purposes of
this Article IX as one class, it being understood that for purposes of
this Article IX, each share of Voting Stock shall have the number of votes
granted to it pursuant to Article IV of these Articles of Incorporation)
which are then held by Independent Shareholders or (b) a majority of the
Continuing Directors shall by resolution have approved a memorandum of
understanding with such Interested Shareholder with respect to and
substantially consistent with such Business Combination.
<PAGE>
Part III
For the purposes of this Article IX, the following terms shall have
the meaning hereinafter set forth:
(a) "Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on November 19,
1984.
(b) A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or Associates (as
herein defined) beneficially owns, directly or indirectly; or
(ii) which such person or any of its Affiliates or Associates
has (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (B) the right to
vote pursuant to any agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or indirectly, by
any other person with which such person or any of its Affiliates or
Associates has any agreement, arrangement or understanding for the purpose
of acquiring, holding, voting or disposing of any shares of Voting Stock.
(c) "Continuing Director" shall mean any member of the Board of
Directors of the Corporation (the "Board") who is unaffiliated with the
Interested Shareholder referred to in the definition of "Business
Combination" in (b) of Part I of this Article IX and was a member of the
Board prior to the time that the Interested Shareholder became an
Interested Shareholder and any successor of a Continuing Director who is
unaffiliated with the Interested Shareholder and is recommended to succeed
a Continuing Director by a majority of Continuing Directors then on the
Board.
(d) "Fair Market Value" means: (i) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date
in question of a share of such stock on the Composite Tape for the New
York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the
Composite Tape for the New York Stock Exchange, or, if such stock is not
listed on such Exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934 on which
such stock is listed, or, if such stock is not listed on any such
Exchange, the highest closing bid quotation with respect to a share of
such stock during the 30-day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated Quotations
System ("NASDAQ") or, if NASDAQ is not then in use, any other system then
in use, or, if no such quotations are available, the Fair Market Value on
the date in question of a share of such stock as determined by the Board
in good faith; and (ii) in the case of property other than cash or stock,
the Fair Market Value of such property on the date in question as
determined by the Board in good faith.
(e) "Independent Shareholder" shall mean any person who or which:
(i) is the beneficial owner, directly or indirectly, of one or
more shares of Voting Stock, and
<PAGE>
(ii) is not the Interested Shareholder, an Affiliate or an
Associate of the Interested Shareholder or a party to or subject to any
agreement or understanding with the Interested Shareholder or any
Affiliate of an Associate thereof for the purpose of acquiring, holding,
voting or disposing of any shares of Voting Stock; which Interested
Shareholder or Affiliate or Associate of the Interested Shareholder is
referred to in the definition of "Business Combination" in (b) of Part I
of this Article IX.
(f) "Institutional Voting Stock" shall mean any class of Voting Stock
which was issued to and continues to be held solely by one or more
insurance companies, pension funds, commercial banks, savings banks and/or
similar financial institutions or institutional investors.
(g) "Interested Shareholder" shall mean any person (other than the
Corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or indirectly, of more
than 10% of the voting power of the outstanding Voting Stock; or
(ii) is an Affiliate of the Corporation and at any time within
the two-year period immediately prior to the date in question, became the
beneficial owner, directly or indirectly, of 10% or more of the voting
power of the then outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any shares
of Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by any
Interested Shareholder, if such assignment or succession shall have
occurred in the course of a transaction or series of transactions not
involving a public offering within the meaning of the Securities Act of
1933.
For the purposes of determining whether a person is an Interested
Shareholder pursuant to this paragraph (g), the number of shares of Voting
Stock deemed to be outstanding shall include shares deemed owned through
application of paragraph (b) of this Part III but shall not include any
other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion
rights, warrants or options, or otherwise.
(h) In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as
used in paragraphs (a)(i) and (ii) of Part I of this Article IX shall
include the shares of Common Stock and/or the shares of any other class of
outstanding Voting Stock retained by the holders of such shares.
(i) A "person" shall mean any individual, firm, corporation or other
entity.
(j) "Subsidiary" means any corporation of which a majority of any
class of equity security is owned, directly or indirectly, by the
Corporation; provided, however, that for the purposes of the definition of
Interested Shareholder set forth in paragraph (g) of this Part III, the
term "Subsidiary" shall mean only a corporation of which a majority of
each class of equity security is owned, directly or indirectly, by the
Corporation.
(k) "Voting Stock" shall mean each share of stock of the Corporation
generally entitled to vote in elections of Directors.
<PAGE>
The directors of the Corporation shall have the power and duty to
determine, for the purposes of this Article IX, on the basis of
information known to them after reasonable inquiry, (a) whether a person
is an Interested Shareholder, (b) whether a person is an Independent
Shareholder, (c) the number of shares of Voting Stock beneficially owned
by any person, (d) whether a person is an Affiliate or Associate of
another, (e) whether a class of Voting Stock in Institutional Voting Stock
and (f) whether the assets which are the subject of any Business
Combination have, or the consideration to be received for the issuance or
transfer of securities by the Corporation or any Subsidiary in any
Business Combination has, an aggregate Fair Market Value of $1,000,000 or
more. Any such determination made in good faith shall be binding and
conclusive on all parties.
Part IV
Nothing contained in this Article IX shall be construed to relieve any
Interested Shareholder from any fiduciary obligation imposed by law.
Part V
Notwithstanding any other provisions of these Articles of
Incorporation or the Bylaws of the Corporation (and notwithstanding the
fact that a lesser percentage may be specified by law, these Articles of
Incorporation or the Bylaws of the Corporation), the affirmative vote of
the holders of four-fifths of all classes of stock of this Corporation
entitled to vote in elections of directors, considered for the purposes of
this Part V as one class, shall be required to amend or repeal, or adopt
any provisions inconsistent with, this Article IX of these Articles of
Incorporation.
ARTICLE X
Part I
Subject to the provisions of Part II hereof, the act of the majority
of the directors present at a meeting at which a quorum is present shall
be the act of the Board of Directors, unless the act of a greater number
is required by law.
Part II
Any vacancy occurring in the Board of Directors, including a vacancy
created by an increase in the number of directors, shall be filled only by
the affirmative vote of a majority of the directors then in office, though
less than a quorum of the Board of Directors. A director elected to fill
a vacancy, other than a vacancy created by an increase in the number of
directors, shall be elected for the unexpired term of his predecessor. A
director elected to fill a vacancy created by an increase in the number of
directors shall be elected for a term of office continuing only until the
next succeeding annual election of directors of any class.
Part III
Despite any other provisions of these Articles of Incorpora- tion or
the Bylaws of the Corporation (and despite the fact that a lesser
<PAGE>
percentage may be specified by law, these Articles of Incorporation or the
Bylaws of the Corporation), the affirmative vote of the holders of
four-fifths of all classes of stock of this Corporation entitled to vote
in elections of directors, considered for the purpose of this Part III as
one class, shall be required to amend or repeal, or adopt any provisions
inconsistent with, this Article X of these Articles of Incorporation.
ARTICLE XI
These articles shall supersede and take the place of the heretofore
existing Articles of Incorporation and all amendments thereto.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS
ENDED FEBRUARY 29, 1996 OF WAUSAU PAPER MILLS COMPANY AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-END> FEB-29-1996
<CASH> 1,418
<SECURITIES> 0
<RECEIVABLES> 46,363
<ALLOWANCES> 4,344
<INVENTORY> 71,621
<CURRENT-ASSETS> 122,605
<PP&E> 471,777
<DEPRECIATION> 161,351
<TOTAL-ASSETS> 449,823
<CURRENT-LIABILITIES> 53,257
<BONDS> 69,698
<COMMON> 138,824
0
0
<OTHER-SE> 107,873
<TOTAL-LIABILITY-AND-EQUITY> 449,823
<SALES> 270,494
<TOTAL-REVENUES> 270,494
<CGS> 232,261
<TOTAL-COSTS> 232,261
<OTHER-EXPENSES> (260)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,283
<INCOME-PRETAX> 22,722
<INCOME-TAX> 8,700
<INCOME-CONTINUING> 14,022
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,022
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</TABLE>
