FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended August 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission File Number 0-7475
WAUSAU PAPER MILLS COMPANY
(Exact name of registrant as specified in charter)
One Clark's Island WISCONSIN
P.O. Box 1408 (State of incorporation)
Wausau, Wisconsin 54402-1408 39-0690900
(Address of principal (I.R.S. Employer
executive office) Identification Number)
Registrant's telephone number, including area code: 715-845-5266
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, No Par Value
(Title of each class)
Indicate by check 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.
Yes X No ______
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. _____
As of November 1, 1996, the aggregate market value of the common stock shares
held by non-affiliates was approximately $481,326,000.
The number of common shares outstanding at November 1, 1996 was 36,512,528.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy Statement dated November 8, 1996; Pages 2 to 9 and 11*(Part III)
* to the extent noted herein
<PAGE>
TABLE OF CONTENTS
PAGE
PART I
Item 1. Business ........................................... 1
Item 2. Properties ......................................... 7
Item 3. Legal Proceedings .................................. 7
Item 4. Submission of Matters to a Vote of Security
Holders ............................................ 7
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters ........................ 7
Item 6. Selected Financial Data ............................ 8
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations ................ 9
Item 8. Financial Statements and Supplementary Data ........ 16
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures ............... 36
PART III
Item 10. Directors and Executive Officers of the
Registrant ........................................ 36
Item 11. Executive Compensation ............................ 36
Item 12. Security Ownership of Certain Beneficial
Owners and Management ............................. 36
Item 13. Certain Relationships and Related Transactions .... 36
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K ............................... 37
Schedule II - Valuation and Qualifying Accounts ...... 38
<PAGE>
PART I
ITEM 1. BUSINESS.
NATURE OF THE BUSINESS
The company, incorporated under the laws of the State of Wisconsin in 1899,
manufactures and sells paper. The company is organized into a small corporate
staff consisting of principal executive officers and two operating divisions:
the Printing and Writing Division, consisting of a paper and pulp mill in
Brokaw, Wisconsin and Wausau Papers of New Hampshire, Inc., a wholly-owned
subsidiary which operates a paper mill in Groveton, New Hampshire; and the
Rhinelander Division, which consists of Rhinelander Paper Company, Inc., a
wholly-owned subsidiary operating a paper mill in Rhinelander, Wisconsin. The
company's executive offices are located in Wausau, Wisconsin.
The company's export sales are administered through Wausau Papers
International, Inc., a wholly-owned subsidiary which acts as a foreign sales
corporation (FSC).
Unless stated otherwise, the terms "company" and "Wausau Papers" mean the
company and its subsidiaries.
SEGMENT INFORMATION
Paper manufacturing is the company's only line of business.
PRINTING AND WRITING DIVISION
The Printing and Writing Division manufactures fine printing, writing and
specialty papers at the Brokaw, Wisconsin and Groveton, New Hampshire mills.
The division's product lines include recycled products made with 20% of the
total fiber content from post-consumer waste. The printing and writing papers
are sold to paper distributors and converters throughout the United States,
Canada and Mexico. Typical end uses for these fine papers include printed
advertising, corporate external reports, office papers and converted products
such as announcements and greeting card envelopes.
The Printing and Writing Division was formed in 1993 by combining the
operations of the company's Brokaw Division and the manufacturing facilities
at Groveton, New Hampshire. The Groveton facilities were purchased in
April 1993, by the company's wholly-owned subsidiary Wausau Papers of New
Hampshire, Inc.
RHINELANDER DIVISION
The Rhinelander Division, located in Rhinelander, Wisconsin, manufactures
lightweight, dense, technical specialty papers which are sold directly to
converters and end users throughout the United States. International markets
for Rhinelander's products include Canada, the Pacific Rim, Europe, Mexico and
Central and South America. Typical end uses for these papers are pressure
sensitive products, silicone coated products, medical packaging, food
packaging and multiple laminated products. Small volumes of yeast and
lignosulfonates are also manufactured. These products are sold for use as
food additives, pet food ingredients and for other end uses.
<PAGE>
EXPORT SALES
Wausau Papers International, Inc. has been the commissioned sales agent for
the export sales of the company since September 1, 1992. Wausau Papers
International, Inc. has elected to be treated as a FSC for federal income tax
purposes.
RAW MATERIALS
Pulp is the basic raw material for paper production. Approximately 60% of the
pulp consumed by the Brokaw mill is manufactured internally from aspen, which
is in abundant supply. The remaining 40% of required pulp at Brokaw and all
of the required pulp at the Rhinelander and Groveton mills is purchased from
pulp mills throughout the United States and Canada. Market pulp is in
adequate supply and readily obtained from both domestic and foreign sources.
Recycled, de-inked fiber with a high content of post-consumer waste is
purchased from domestic suppliers as part of the fiber requirements for the
Printing and Writing Division's recycled products. Recycled fiber is also in
adequate supply and readily obtained.
Various chemicals are used in the pulping and papermaking processes. These
industrial chemicals are all available from a number of suppliers and are
purchased at current market prices.
ENERGY
The company's paper mills require large amounts of electrical and steam energy
which are adequately supplied by public utilities or generated at company
operated facilities. The Brokaw mill operates a power plant which provides
all of its steam requirements. The power plant is fueled by natural gas,
which is in adequate supply, with fuel oil as an alternate energy source. The
Brokaw mill purchases 100% of its electrical requirements from a public
utility company. The Groveton mill operates a power plant which provides 100%
of the mill's steam requirements and a portion of its electrical needs. The
primary fuels burned at Groveton are wood chips and fuel oil. The Rhinelander
Division maintains a power plant, fueled by coal and natural gas, capable of
generating the mill's steam needs and nearly half of its electrical needs.
The Groveton and Rhinelander mills purchase approximately 73% and 61% of their
electrical needs, respectively, from public utility companies. The fuels used
at each mill are all available on a contract basis at prevailing market
prices.
In July 1996, the company signed a natural gas transportation agreement with
the Portland Natural Gas Transmission System (PNGTS). Under the terms of the
agreement, PNGTS will construct necessary gas supply and delivery equipment to
the company's Groveton, New Hampshire mill thereby assuring natural gas
delivery at competitive rates under a long-term contract. Capital
improvements to the Groveton mill's power plant will be required to take
advantage of this agreement. A reduction in the mill's energy costs is
expected from the use of natural gas as an energy source instead of wood chips
and fuel oil. Transportation of natural gas to the Groveton mill is scheduled
to begin in fiscal 1999.
PATENTS AND TRADEMARKS
The company develops and files trademarks and patents, as appropriate. The
company does not own or hold material licenses, franchises or concessions.
<PAGE>
SEASONAL NATURE OF BUSINESS
The markets for some of the grades of paper produced by the company tend to be
somewhat seasonal. However, the marketing seasons for these grades are not
necessarily the same. Overall, the company generally experiences lower sales
in the second fiscal quarter, in comparison to the rest of the year, primarily
due to downtime typically taken by its converting customers during the holiday
season and a general slowing of business activity that time of year.
WORKING CAPITAL
As is customary in the paper industry, the company carries adequate amounts of
raw materials and finished goods inventory to facilitate the manufacture and
rapid delivery of paper products to its customers.
MAJOR CUSTOMERS
Avery Dennison Corporation and ResourceNet International, a division of
International Paper Company, accounted for 12.7% and 11.5% of consolidated net
sales, respectively, in fiscal 1996. The loss of either customer would have
an initial material adverse effect; however, the company believes that, in the
long-term, satisfactory alternative marketing arrangements could be made.
BACKLOG
The company's order backlog at August 31, 1996 amounted to $26,749,000, or
just over 2 weeks of operation. This is 20% higher on a tonnage basis than
the backlog of orders of $24,981,000 or about 2 weeks of operation at
August 31, 1995. The backlog increase is due to increased demand for the
company's printing and writing and technical specialty grades.
Backlog totals are not a true indicator of the strength of the company's
business activity. A significant and growing volume of orders are shipped out
of inventory promptly upon order receipt. This portion of the business is not
reflected in the company's backlog totals. The entire backlog at August 31,
1996 is expected to be shipped during fiscal 1997.
COMPETITIVE CONDITIONS
The company competes in different markets within the paper industry. Each of
its two divisions serves distinct market niches. The Printing and Writing
Division produces fine printing and writing papers, of which over 60% are
colored papers. Fine printing and writing sales are estimated to be less than
3% of the total market. The division's competitors range from small to large
paper manufacturers and represent many different product lines. The division
distributes its products primarily through paper wholesalers. The Rhinelander
Division produces technical specialty papers and is a leader in its markets.
Rhinelander's market position varies by product segment and, thus, competition
also includes small to large paper manufacturers. Rhinelander sells its
products directly to converters and end users. The various markets for the
products of the company are highly competitive, with competition based on
service, quality and price.
RESEARCH AND DEVELOPMENT
Expenditures for product development were approximately $1,381,000 in 1996,
$1,219,000 in 1995, and $1,158,000 in 1994.
<PAGE>
ENVIRONMENT
Wausau Papers has a strong commitment to protecting the environment. Like its
competitors in the paper industry, the company faces increasing capital
investments and operating costs to comply with expanding and more stringent
environmental regulations. The $14 million rebuild and expansion of the
wastewater treatment plant at the Brokaw mill is nearing completion. In
addition, in the past year the company invested $1.6 million in modifications
to the wastewater treatment plant at the Rhinelander mill. The company
estimates that its capital expenditures for environmental purposes will be
less than $5 million in fiscal 1997.
The company has not been identified as a potentially responsible party at any
site designated for remedial action under the federal Superfund law. The
company is required to monitor conditions relative to its past waste disposal
activities and may be required to take remedial action if conditions are
discovered which warrant such action.
The United States Environmental Protection Agency (EPA) has published draft
rules under the Clean Water Act and the Clean Air Act which would impose new
air and water quality standards for pulp and paper mills (the "Cluster
Rules"). The definitive Cluster Rules, when finally promulgated, are expected
to require compliance within three years after the date of adoption. Final
promulgation of the rules for "paper grade sulfite" mills (which would include
the Brokaw mill) is currently projected for late 1996 or early 1997. One
major aspect of the proposed new regulations may require the company to adopt
Total Chlorine Free (TCF) technology for the pulp bleaching operations at the
Brokaw mill. In 1988, the company installed an oxygen delignification system
which eliminated the use of elemental chlorine; however, chlorine compounds
are used in other stages of the bleaching process at the Brokaw mill. Based
on the company's preliminary estimates, if the Cluster Rules were adopted in
substantially their present form, compliance with a TCF requirement for the
Brokaw mill would require a capital expenditure of $3 to $5 million. The
company believes that the costs for compliance with the proposed Cluster Rules
and other environmental regulations will not have a material adverse effect on
its financial position or results of operations.
EMPLOYEES
The company had 1,771 employees at August 31, 1996. The company has
collective bargaining contracts with the United Paperworkers International
Union covering approximately 1,382 employees. These contracts expire in March
1997, December 2000 and May 2001 at the Groveton, Rhinelander and Brokaw
mills, respectively. The company considers its relationship with its
employees to be excellent. Eligible employees participate in retirement plans
and group life, disability and medical insurance programs.
EXECUTIVE OFFICERS
The executive officers of the company as of October 1, 1996, their ages, their
positions and offices with the company and their principal occupations during
the past five years are as follows:
SAN W. ORR, JR., 55
Chairman of the Board of Directors since December 1989 and, Chief Executive
Officer from July 1994 to December 1995, and Director since April 1970;
also, Attorney, Estates of A.P. Woodson and Family; also, a director of
Mosinee Paper Corporation, MDU Resources Group, Inc and Marshall & Ilsley
Corporation.
<PAGE>
DANIEL D. KING, 49
Director, President and Chief Executive Officer since December 1995;
Director, President and Chief Operating Officer July 1994 to December 1995;
Senior Vice President, Printing and Writing Division, December 1993 to July
1994; Vice President and General Manager, Brokaw Division, September 1990 to
December 1993.
LARRY A. BAKER, 57
Senior Vice President, Administration since December 1990; prior thereto,
Vice President, Administration.
STEVEN A. SCHMIDT, 42
Vice President, Finance, Secretary and Treasurer since June 1993; Corporate
Controller, August 1992 to June 1993; prior thereto, Plant Controller,
Georgia Pacific Corporation, formerly Nekoosa Papers, Inc., March 1989 to
August 1992.
D. MICHAEL WILSON, 34
Vice President and General Manager, Rhinelander Division since April 1996;
prior thereto, Vice President of Marketing and Sales, Rexam Release, August
1993 to April 1996; General Manager, Laminex, Inc., April 1991 to August
1993.
THOMAS J. HOWATT, 47
Vice President and General Manager, Printing and Writing Division since
December 1994; Vice President and General Manager, Groveton, April 1993 to
December 1994; Vice President Operations, Brokaw Division, September 1990 to
April 1993; prior thereto, Vice President, Administration, Brokaw Division.
All executive officers of the company are elected annually by the Board of
Directors.
CAUTIONARY STATEMENT
This Form 10-K, each of the company's annual reports to shareholders, Forms
10-K, 8-K and 10-Q, proxy statements, prospectuses and any other written or
oral statement made by or on behalf of the company subsequent to the filing of
this Form 10-K may include one or more "forward-looking statements" within the
meaning of Sections 27A of the Securities Act of 1933 and 21E of the
Securities Exchange Act of 1934 as enacted in the Private Securities
Litigation Reform Act of 1995 (the "Reform Act"). In making forward-looking
statements within the meaning of the Reform Act, the company undertakes no
obligation to publicly update or revise any such statement.
Forward-looking statements of the company are based on information available
to the company as of the date of such statements and reflect the company's
expectations as of such date, but are subject to risks and uncertainties that
may cause actual results to vary materially. In addition to specific factors
which may be described in connection with any of the company's forward-looking
statements, factors which could cause actual results to differ materially
include, but are not limited to the following:
<PAGE>
<bullet> Increased competition from either domestic or foreign paper producers
or providers of alternatives to the company's products, including increases
in competitive production capacity, resulting in sales declines from reduced
shipment volume and/or lower net selling prices in order to maintain shipment
volume.
<bullet> Changes in demand for the company's products due to overall economic
activity affecting the rate of consumption of the company's paper products,
growth rates of the end markets for the company's products, technological or
consumer preference changes or acceptance of the products by the markets
served by the company.
<bullet> Changes in the price of pulp, the company's main raw material. Over
75% of the company's pulp needs are purchased on the open market and price
changes for pulp have a significant impact on the company's costs. Pulp
price changes can occur due to worldwide consumption levels of pulp, pulp
capacity additions, expansions or curtailments affecting the supply of pulp,
inventory building or depletion at pulp consumer levels which affect short-
term demand, and pulp producer cost changes related to wood availability,
environmental issues, or other variables.
<bullet> Unforeseen operational problems at any of the company's facilities
causing significant lost production and/or cost issues.
<bullet> Significant changes to the company's strategic plans such as a major
acquisition or expansion, or failure to successfully execute major capital
projects or other strategic plans.
<bullet> Changes in laws or regulations which affect the company.
ITEM 2. PROPERTIES.
The company's executive offices are located in Wausau, Wisconsin on property
leased to the company under a lease which expires on December 31, 2005. There
are renewal options for another 25 years.
The company's Brokaw, Wisconsin mill operated at capacity during fiscal 1996,
producing approximately 460 tons of finished paper per day. The mill facility
provides approximately 60% of its pulp requirements from its own hardwood
sulphite pulp mill. Brokaw mill facilities are situated on approximately 270
acres of land, all owned by the company.
The Groveton, New Hampshire mill operated at capacity in fiscal 1996,
producing approximately 290 tons of finished paper per day. The company's
facilities occupy 124 acres of land all owned by the company's wholly-owned
subsidiary, Wausau Papers of New Hampshire, Inc.
The company's mill in Rhinelander, Wisconsin operated at 98% of capacity in
fiscal 1996 due to capital improvement related downtime for the rebuild of No.
7 paper machine and limited downtime taken on one paper machine in the first
quarter due to market weakness. The Rhinelander mill produced approximately
390 tons of finished paper per day. Its facilities, which include a yeast and
lignosulfonate processing plant capable of producing 21,000 pounds of torula
yeast per day, occupy 72 acres of land, all owned by Rhinelander Paper
Company, Inc.
The company owns approximately 43,500 acres of timberland in Wisconsin. The
company believes the market value of these lands exceeds the August 31, 1996
book value of $1,430,000.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
Legal proceedings are discussed in Note 11 to the Consolidated Financial
Statements on page 34 of this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of shareholders during the fourth quarter
of fiscal 1996.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
The company's common stock trades on The Nasdaq Stock Market under the symbol
WSAU. The number of shareholders of record as of October 1, 1996 was 2,043.
The company believes that there are approximately 6,957 additional beneficial
owners whose shares are held in street name accounts or in other fiduciary
capacities. The total estimated number of shareholders as of October 1, 1996,
is 9,000. Information related to high and low closing prices and dividends is
explained in detail in Item 8, Financial Statements and Supplementary Data,
and appears on page 35 of this report. Dividend restrictions under certain
loan covenants are explained in Note 4 to the Consolidated Financial
Statements which is found on page 25 of this report.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
<CAPTION>
(all dollar amounts in thousands,
except per share data) For the years ended August 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
FINANCIAL RESULTS
Net sales $542,669 $515,743 $426,504 $381,816 $370,935
Depreciation, depletion &
amortization 23,140 19,940 17,635 15,445 13,760
Operating profit 69,523 52,754 69,990 62,910 62,414
Interest expense 2,786 1,688 1,958 1,272 1,126
Earnings before provision for
income taxes 66,829 50,851 68,052 61,771 61,309
Earnings before cumulative
effect of accounting change 41,229 31,251 42,052 38,371 40,009
Net earnings 41,229 31,251 43,052 22,621 40,009
Average number of shares
outstanding 36,821,000 36,829,000 37,026,000 37,052,000 37,029,000
Cash dividends declared 8,104 7,385 6,487 5,686 5,152
Cash dividends paid 7,938 7,156 6,291 5,559 5,000
Capital expenditures 63,174 66,104 43,800 51,297 31,777
Tons of paper shipped 409,700 399,300 355,100 310,600 296,600
FINANCIAL CONDITION
Working capital $ 60,187 $ 67,266 $ 59,878 $ 57,007 $ 34,338
Long-term debt 53,119 68,623 30,270 42,712 22,695
Shareholders' equity 264,711 236,689 214,818 183,139 165,989
Total assets 467,028 434,686 361,389 329,583 266,592
PER SHARE
Earnings before cumulative
effect of accounting change $ 1.12 $ .85 $ 1.14 $ 1.04 $ 1.08
Net earnings 1.12 .85 1.16 .61 1.08
Cash dividends declared .220 .200 .174 .153 .139
Shareholders' equity 7.19 6.43 5.80 4.94 4.48
Price range
(low and high closing) 16.25-24.13 16.20-20.00 16.18-24.73 12.99-21.55 12.28-23.42
RATIOS/RETURNS
Return on sales before
cumulative effect of
accounting change 7.6% 6.1% 9.9% 10.0% 10.8%
Net return on sales 7.6% 6.1% 10.1% 5.9% 10.8%
Return on average
shareholders' equity
before cumulative effect
of accounting change 16.4% 13.8% 21.2% 21.0% 27.0%
Net return on average share-
holders' equity 16.4% 13.8% 21.6% 13.0% 27.0%
Current assets to current
liabilities 2.0 to 1 2.3 to 1 2.3 to 1 2.4 to 1 1.9 to 1
% of long-term debt to total
capital 13.0% 18.0% 9.6% 14.8% 9.9%
Tons of paper shipped per
employee 233 231 210 206 225
EMPLOYMENT
Average number of employees 1,756 1,727 1,692 1,510 1,319
<FN>
All shares and per share data have been restated to reflect the five-for-
four stock split in 1996, the 10% stock dividend in 1995, the four-for-
three stock splits in 1994 and 1993, and the two-for-one stock split in
1992. This summary should be read in conjunction with the consolidated
financial statements which follow.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
OVERVIEW
In fiscal 1996, the company achieved record sales and shipments, while net
earnings represent the second best performance ever. Net sales were $542.7
million in fiscal 1996, up 5.2% from 1995 results. Shipments of 409,700 tons
were 2.6% ahead of last year's shipment level. Net earnings increased 31.9%
in fiscal 1996 to $41.2 million, compared to fiscal 1995 net earnings.
Fiscal 1996 was a year of extremes for Wausau Papers. During the first part
of the year, pulp prices continued their upward trend, which began in January
1994. Market pressures prevented the company from recovering much of the
increased pulp costs through higher paper prices, which negatively impacted
first and second quarter earnings results. While demand for the company's
printing and writing grades remained strong, market weakness in the technical
specialty grades continued from fiscal 1995 into early fiscal 1996. As a
result, some limited downtime was taken at the Rhinelander mill in the first
quarter of fiscal 1996. Worldwide demand in the pulp and paper markets
softened in mid-fiscal 1996, which resulted in a series of rapid pulp price
declines in the second and third quarters of the fiscal year. This, coupled
with improved demand for Rhinelander's technical specialty grades, continued
strong business conditions at the company's Printing and Writing Division and
less volatility in the company's paper prices, compared to pulp prices,
resulted in record second half earnings in fiscal 1996.
Worldwide pulp market conditions have shown signs of stabilizing toward the
latter part of fiscal 1996 and into 1997. Pulp price increases were
implemented near the end of the fiscal year and another pulp price increase
had been announced for October 1996, though current market conditions did not
support this latest increase and it was delayed. Should the October pulp
price increase eventually take effect, pulp prices, on average, will still be
well below the average pulp prices experienced during fiscal 1996 and 1995.
<PAGE>
NET SALES
Net sales for fiscal 1996 were a record $542.7 million, an increase of 5.2%
over fiscal 1995 net sales of $515.7 million. Fiscal 1994 net sales were
$426.5 million. Shipments were a record 409,700 tons in fiscal 1996, up 2.6%
compared to the 399,300 tons shipped in 1995. Shipments were 355,100 tons in
fiscal 1994.
Strong customer demand led to full operations at the Printing and Writing
Division throughout fiscal 1996. Printing and Writing Division shipments
increased 2.0% in fiscal 1996 over the previous year. Mix enhancement efforts
resulted in a solid increase in premium paper sales while reducing the
division's participation in commodity grades. The company expects to continue
to grow its printing and writing products in fiscal 1997.
Demand for the company's technical specialty products showed improvement
during the second half of fiscal 1996, compared to the first half of the year.
Limited downtime was taken on one paper machine at Rhinelander during the
first quarter of the year as a result of market weakness. Shipments of
Rhinelander's products improved 3.7% in fiscal 1996, compared to the prior
year, while shipments of pressure sensitive products, its largest product
segment, increased 5.8% over 1995 results. The slow rate of growth in the
pressure sensitive industry during late fiscal 1995 and fiscal 1996, compared
to historical averages, has limited the company's ability to significantly
increase its pressure sensitive volume since the rebuild of the No. 7 paper
machine at Rhinelander, although recent order activity for pressure sensitive
products has been much improved. Continued mix improvement toward more
pressure sensitive grades is expected in fiscal 1997.
The order backlog at August 31, 1996 was $26.7 million, compared to order
backlogs of $25.0 million and $25.7 million at August 31, 1995 and 1994,
respectively. On a tonnage basis, order backlog at the end of fiscal 1996 was
20% higher than at the end of 1995 and 1% better than the order backlog at the
end of 1994. The improved backlog at August 31, 1996, compared to a year ago,
is due to increased demand for the company's products. Backlog totals do not
accurately indicate the full business strength of the company, however, as a
significant and growing volume of orders are shipped out of inventory promptly
upon order receipt.
GROSS PROFIT
Gross profit margin increased to 18.3% of net sales for fiscal 1996, compared
to 15.7% for the previous year. The gross profit margin was 22.8% in fiscal
1994. The improvement in gross profit margin in fiscal 1996, compared to the
prior year, is due primarily to mix improvement, higher average selling prices
for the company's products and lower pulp costs, on average.
During the first half of fiscal 1996, market prices for pulp, the company's
main raw material in manufacturing paper, continued their upward climb which
began in January 1994. However, pulp prices started to decline in the second
quarter of the fiscal year as worldwide pulp and paper markets weakened. In
fiscal 1996, the average list price of northern bleached softwood kraft, a
commonly used benchmark pulp grade, decreased 8%, compared to a 55% increase
in fiscal 1995 and a 4% decline in 1994.
More recent declines in worldwide pulp producer inventories have led to pulp
price increases on most species of pulp toward the end of fiscal 1996.
Additional pulp price increases were announced for October 1996, however,
sufficient weakness still exists in the pulp market and pulp producers were
<PAGE>
not successful implementing the October increase. Even if the October pulp
price increases are eventually fully implemented, the then current market pulp
prices will be significantly lower, on average, than those in effect in fiscal
1996 and fiscal 1995.
Production of the company's printing and writing grades increased 3.4% in
fiscal 1996 over the previous year as a result of productivity gains from
capital improvements and operating both the Brokaw and Groveton mills at
capacity, compared to operating them at 98% and 96% of capacity, respectively,
in fiscal 1995. Production at the Printing and Writing Division in fiscal
1995 was 22.5% higher than in 1994 when only one of two paper machines was in
operation at the Groveton mill.
The Rhinelander mill operated at 98% of capacity in fiscal 1996 due to capital
improvement related downtime for the rebuild of No. 7 paper machine and
limited downtime taken on one paper machine in the first quarter due to market
weakness. Production increased 1.6% in fiscal 1996 over the previous year
when the mill operated at 95% of capacity. Production at Rhinelander in
fiscal 1995 was comparable to 1994 as productivity gains were offset by
extended paper machine downtime taken in the second half of fiscal 1995.
Maintenance and repair costs increased $1.4 million to $31.6 million in fiscal
1996 from $30.2 million in 1995. The increase is primarily attributable to
the full operation of the second paper machine at the Groveton mill throughout
fiscal 1996 and the addition of a new silicone coater at Rhinelander.
Maintenance and repair costs were $29.6 million in fiscal 1994.
LABOR
In fiscal 1996, the company successfully negotiated new five-year labor
agreements with the United Paperworkers International Union at the Rhinelander
Division and at the Brokaw mill. At Rhinelander, the new labor agreement
became effective January 1, 1996 and includes a general wage increase of 3.0%
in 1996, 3.5% in both 1997 and 1998 and 3.0% in both 1999 and 2000. On June
1, 1996 the new labor agreement at the Brokaw mill took effect which includes
a general wage increase of 3.0% in each of the five years covered by the
agreement. Both agreements include changes in work rules to provide greater
operating efficiencies and increases in employee benefits. The company is
currently in the final year of a four-year labor agreement with the United
Paperworkers International Union at the Groveton mill.
The company considers its relationship with its employees to be excellent and
is of the opinion that it will be able to successfully negotiate a new labor
agreement at the Groveton mill in fiscal 1997.
SELLING, ADMINISTRATIVE AND RESEARCH EXPENSES
Selling, administrative and research expenses were $29.8 million in fiscal
1996, compared to $28.0 million and $27.3 million in 1995 and 1994,
respectively. Higher marketing, promotion and incentive plan expenses and
increases in labor costs were the primary reasons for the growth in fiscal
1996 expenses over the previous year. Stock appreciation rights, dividend
equivalents and stock option discount expense was $.1 million in fiscal 1996,
compared to expense of $.1 million in 1995 and income of $.3 million in 1994.
<PAGE>
INTEREST INCOME, INTEREST EXPENSE AND OTHER INCOME
Fiscal 1996 interest income was $.6 million, compared to $.2 million in 1995
and $.1 million in 1994. The increase in interest income in fiscal 1996 over
the previous year is due to interest income from undisbursed proceeds on a $19
million industrial development bond issue which occurred in August 1995.
Interest expense totalled $2.8 million in fiscal 1996, compared to $1.7
million in 1995 and $2.0 million in 1994. Interest expense increased in
fiscal 1996 as a result of higher debt levels, on average, compared to the
previous year primarily due to capital spending requirements. Capitalized
interest was $.9 million in fiscal 1996, $.7 million in 1995 and $.2 million
in 1994. The increase in capitalized interest in fiscal years 1996 and 1995
is due to several major capital projects under construction, including a
capacity expansion project at the Rhinelander mill, installation of a fiber
handling and processing system at the Brokaw mill and upgrades to the
wastewater treatment plant at both Wisconsin mills.
Other income and expense was $.5 million expense in 1996, compared to $.5
million expense in 1995 and $.1 million expense in 1994. Capital asset
disposal losses are the primary reasons for the increase in other expense
since fiscal 1994.
INCOME TAXES
The income tax provision in fiscal 1996 was $25.6 million, for an effective
tax rate of 38.3%. The effective tax rates for fiscal years 1995 and 1994
were 38.5% and 38.2%, respectively.
In fiscal 1994, the company adopted Statement of Financial Accounting Standard
(SFAS) No. 109 "Accounting for Income Taxes." The adoption was reflected as a
one-time cumulative reduction in the net deferred tax liability resulting in a
$1.0 million increase in fiscal 1994 net earnings.
NET EARNINGS
Fiscal 1996 net earnings were $41.2 million, an increase of 31.9% compared to
1995 earnings of $31.3 million. Fiscal 1994 earnings were $42.1 million
before the cumulative effect of an accounting change from adopting SFAS No.
109. This change in accounting resulted in a one-time cumulative benefit of
$1.0 million.
CAPITAL RESOURCES AND LIQUIDITY
LONG-TERM DEBT
Long-term debt decreased by $15.5 million in fiscal 1996 to $53.1 million at
August 31, 1996. Long-term debt was $68.6 million and $30.3 million at August
31, 1995 and 1994, respectively. Long-term debt decreased in fiscal 1996 as a
result of improved cash flow from operations. The increase in long-term debt
in fiscal 1995 over the previous year was primarily due to reduced cash flow
from operations and increased capital spending. Long-term debt as a percent
of capital was 13.0% in 1996 as compared to 18.0% in 1995 and 9.6% in 1994.
At August 31, 1996, long-term debt consisted primarily of $24.0 million in
senior promissory notes (including the current portion) to Prudential
Insurance Company of America and its subsidiaries, $19.0 million in industrial
<PAGE>
development bonds and $13.5 million outstanding under the company's revolving
credit facility. Long-term debt at the end of fiscal 1995 was comprised
mainly of $30.0 million in senior promissory notes (including the current
portion), $19.0 million in industrial development bonds, $14.2 million
outstanding under the revolving credit facility and $8.3 million in commercial
paper.
CASH PROVIDED BY OPERATIONS
Fiscal 1996 cash provided by operations was $80.0 million, 68% above fiscal
1995 results of $47.5 million. Cash provided by operations in fiscal 1994 was
$64.7 million. The improvement in fiscal 1996 was primarily a result of
higher selling prices, a reduction in accounts receivable and smaller
increases in inventories compared to the previous year. The reduced operating
cash flow in fiscal 1995, compared to 1994, was due to higher unit production
costs and increased working capital needs.
CAPITAL EXPENDITURES
Capital expenditures totalled $63.2 million in fiscal 1996, compared to $66.1
million in 1995 and $43.8 million in 1994.
In fiscal 1996, a $42 million expansion project was completed at the
Rhinelander mill to increase its pressure sensitive papermaking capacity. As
part of this project, a new state-of-the-art supercalender was installed in
November 1995 and a major rebuild of No. 7 paper machine was completed in
March 1996. The project also included over $3 million for a new gas-fired
boiler. This project increased annual pressure sensitive backing paper
capacity nearly 40,000 tons while improving quality. In connection with mix
changes, the mill's total annual capacity is expected to increase by over
26,000 tons. Other capital improvements at the Rhinelander mill in fiscal
1996 include a new roll wrapping system to enable the mill to handle, wrap and
ship larger diameter rolls and an upgrade to the mill's wastewater treatment
plant.
At the Brokaw mill, a $16 million fiber handling and processing project was
completed in April 1996. This project included a building expansion,
additional pulping capacity and a new fiber handling system to process more
recycled post-consumer pulp. A major upgrade to the mill's wastewater
treatment plant is nearing completion as well and is expected be finished in
early fiscal 1997.
A new shrink wrap packaging line at the Groveton mill was completed in March
1996 to reduce converting operating costs on the company's retail product
offerings. A centralized starch kitchen was also installed in fiscal 1996,
allowing the mill to utilize lower cost raw materials.
At the end of fiscal 1996, the company was committed to spend approximately
$22 million to complete capital projects currently under construction.
Capital commitments were $62 million and $30 million at the end of 1995 and
1994, respectively. Major capital projects currently in process include a $6
million wood processing facility modernization at the Brokaw mill to improve
wood yield, increase process efficiencies, reduce operating costs and improve
working conditions. At the Groveton mill, a new saveall and broke metering
system is underway to improve fiber yield and reduce operating costs and a
turbine upgrade is also in process to reduce the mill's electrical costs.
The company expects capital expenditures to be approximately $150 million over
the next three years, including approximately $40 million in fiscal 1997.
<PAGE>
FINANCING
The company maintains a revolving credit facility agreement with four banks to
provide loans up to $40 million. This credit facility was reduced, at the
company's request, from $65 million to $40 million in September 1996. The
credit facility will permit the company to borrow $40 million through March
29, 2001, at which time, or earlier at the company's option, the agreement
converts to a one-year term loan. Interest rates on these borrowings are based
on domestic rate loans, eurodollar loans, adjusted CD rate loans, offered
loans or treasury rate loans. The company also maintains a commercial paper
placement agreement, with one of its four major banks, which provides for the
issuance of up to $40 million of unsecured debt obligations. The commercial
paper placement agreement requires unused credit availability under the
company's revolving credit agreement equal to the amount of outstanding
commercial paper. The company had no commercial paper outstanding at the end
of fiscal 1996. On August 31, 1996, a combined total of $26.5 million was
available (based on the $40 million credit facility in effect after August
1996) for borrowing under the company's credit and commercial paper placement
agreements. In a separate agreement, one of the four banks participating in
the revolving credit facility has provided a $10 million uncommitted line of
credit to the company. In addition, the company also has a $2 million short-
term line of credit available. There was no borrowing against these lines at
August 31, 1996.
In June 1993, the company borrowed $30 million through the issuance of notes
to Prudential Insurance Company of America and its subsidiaries. The loan was
in the form of senior unsecured term notes bearing a fixed interest rate of
6.03%. Principal is payable in equal semi-annual installments, with the final
payment due June 16, 2000. Proceeds from the notes were used to reduce
borrowings from the revolving credit facility.
In August 1995, the company obtained $19 million in industrial development
bond financing to fund the upgrade of the Brokaw mill wastewater treatment
plant, the construction of a new landfill and several other projects which
qualify for this type of financing. The bonds, which were issued by a local
governmental unit, mature on July 1, 2023 and have a floating interest rate
commensurate with short-term municipal bond rates on similar issues. The
interest rate can be converted to a fixed rate at the option of the company.
Principal is due upon maturity or earlier at the company's option. Proceeds
from the bond issue are held in a trust fund until they are drawn upon by the
company as spending occurs on these projects. As of August 31, 1996, the
company had utilized $15.7 million from the bond issue.
Cash provided by operations, industrial development bond proceeds and the
revolving credit facility are expected to meet current and anticipated working
capital needs and dividend requirements, as well as fund the company's planned
capital expenditure requirements. The company believes additional financing
is readily available, should it be needed, to fund a major expansion or
acquisition.
COMMON STOCK REPURCHASES
On June 30, 1994, the Board of Directors authorized the repurchase of up to
1,856,250 shares of the company's common stock, from time-to-time in the open
market or through privately negotiated transactions at prevailing market
prices. In fiscal 1996, the company repurchased 369,500 shares at market
prices ranging from $16.750 per share to $18.125 per share. In fiscal 1995,
the company repurchased 308,938 shares at market prices ranging from $16.550
<PAGE>
per share to $17.091 per share. The company repurchased 123,750 shares at
market prices ranging from $17.364 per share to $17.909 per share in fiscal
1994. Shares and per share data have been restated to reflect the five-for-
four stock split and the 10% stock dividend which occurred in January 1996 and
January 1995, respectively.
DIVIDENDS
The company's Board of Directors declared cash dividends of $.22 per share in
fiscal 1996, a 10% increase over the $.20 per share cash dividend declared in
fiscal 1995.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
WIPFLI ULLRICH BERTELSON
Certified Public Accountants
To the Shareholders and Board of Directors
Wausau Paper Mills Company
Wausau, Wisconsin
We have audited the accompanying consolidated balance sheets of Wausau Paper
Mills Company and Subsidiaries as of August 31, 1996 and 1995, and the related
consolidated statements of income, cash flows and shareholders' equity for
each of the years in the three-year period ended August 31, 1996 and the
supporting schedule listed in the accompanying index to financial statements.
These financial statements and supporting schedule are the responsibility of
the company's management. Our responsibility is to express an opinion on
these financial statements and supporting schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
supporting schedule are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements and supporting schedule. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Wausau
Paper Mills Company and Subsidiaries at August 31, 1996 and 1995, and the
results of their operations and cash flows for each of the years in the three-
year period ended August 31, 1996, and the supporting schedule presents fairly
the information required to be set forth therein, all in conformity with
generally accepted accounting principles.
As discussed in Note 8 of the Notes to Consolidated Financial Statements, the
company changed its method of accounting for income taxes in 1994.
We hereby consent to the incorporation by reference of this report in the
Registration Statements on Form S-8 and amendments thereto filed with the
Securities and Exchange Commission by Wausau Paper Mills Company on April 26,
1996, March 18, 1996, August 25, 1995, January 3, 1992 and January 27, 1988.
WIPFLI ULLRICH BERTELSON
WIPFLI ULLRICH BERTELSON
September 18, 1996
Wausau, Wisconsin
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Wausau Paper Mills Company is responsible for the integrity
and objectivity of the financial data contained in the financial statements
and supporting schedule. The financial statements and supporting schedule
have been prepared in conformity with generally accepted accounting principles
appropriate under the circumstances and, where necessary, reflect informed
judgments and estimates of the effects of certain events and transactions
based on currently available information at the date the financial statements
were prepared.
The company's management depends on the company's system of internal
accounting controls to assure itself of the reliability of the financial
statements. The internal control system is designed to provide reasonable
assurance, at appropriate cost, that assets are safeguarded and transactions
are executed in accordance with management's authorizations and recorded
properly to permit the preparation of financial statements in accordance with
generally accepted accounting principles. Periodic reviews are made of
internal controls by management and corrective action is taken if needed.
The Board of Directors reviews and monitors financial statements through its
audit committee. The audit committee meets with the independent public
accountants and management to review internal accounting controls, auditing
and financial reporting matters.
The independent public accountants are engaged to provide an objective and
independent review of the company's financial statements in accordance with
generally accepted auditing standards and to express an opinion thereon. The
report of the company's independent public accountants is included in this
annual report.
DANIEL D. KING STEVEN A. SCHMIDT
DANIEL D. KING STEVEN A. SCHMIDT
President and Chief Executive Vice President Finance,
Officer Secretary and Treasurer
<PAGE>
INDEX TO FINANCIAL STATEMENTS COVERED BY REPORT OF INDEPENDENT PUBLIC
ACCOUNTANTS
Consolidated Statements of Income for the years ended
August 31, 1996, 1995 and 1994 ................................19
Consolidated Balance Sheets as of August 31, 1996
and 1995 .......................................................20
Consolidated Statements of Shareholders' Equity for
the years ended August 31, 1996, 1995 and 1994 .................22
Consolidated Statements of Cash Flows for the years
ended August 31, 1996, 1995 and 1994 ...........................23
Notes to Consolidated Financial Statements .........................24
Schedule for the years ended August 31, 1996, 1995 and 1994
Schedule II - Valuation and Qualifying Accounts ................38
All other schedules called for under Regulation S-X are not submitted because
they are not applicable or not required, or because the required information
is included in the Consolidated Financial Statements and Notes thereto.
<PAGE>
<TABLE>
WAUSAU PAPER MILLS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
(all dollar amounts in thousands, For the years ended August 31,
except per share data) 1996 1995 1994
<S> <C> <C> <C>
Net Sales $542,669 $515,743 $426,504
Cost of products sold 443,383 434,995 329,191
Gross Profit 99,286 80,748 97,313
Selling, administrative and research
expenses 29,763 27,994 27,323
Operating Profit 69,523 52,754 69,990
Interest expense ( 2,786) ( 1,688) ( 1,958)
Interest income 562 239 111
Other income and expense - net ( 470) ( 454) ( 91)
Earnings Before Income Taxes and
Cumulative Effect of a Change in
Accounting Principle 66,829 50,851 68,052
Provision for income taxes 25,600 19,600 26,000
Earnings Before Cumulative Effect of a
Change in Accounting Principle 41,229 31,251 42,052
Cumulative effect of a change in
accounting principle 1,000
Net Earnings $ 41,229 $ 31,251 $ 43,052
Earnings Per Share Before Cumulative
Effect of a Change in Accounting
Principle $ 1.12 $ 0.85 $ 1.14
Cumulative effect of a change in
accounting principle 0.02
Net Earnings Per Common Share $ 1.12 $ 0.85 $ 1.16
<FN>
See accompanying notes to consolidated financial statements.
All per share data has been restated to reflect a five-for-four stock split
occurring in 1996, a 10% stock dividend occurring in 1995 and a four-for-three
stock split occurring in 1994.
</TABLE>
<PAGE>
<TABLE>
WAUSAU PAPER MILLS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
(all dollar amounts in thousands) As of August 31,
1996 1995
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 2,372 $ 2,347
Accounts and notes receivable:
Customers, less allowances of $6,004 in 1996 and
$5,080 in 1995 36,814 40,975
Other 1,403 1,454
Inventories 70,443 67,474
Deferred income taxes 7,688 7,204
Other current assets 520 563
Total current assets 119,240 120,017
Property, Plant and Equipment
Buildings 56,461 46,009
Machinery and equipment 420,958 359,930
477,419 405,939
Less: Accumulated depreciation ( 164,983) ( 150,736)
312,436 255,203
Land 1,982 1,657
Timberlands, net of depletion of
$745 in 1996 and $672 in 1995 1,430 1,494
Capital additions in process 14,688 33,837
Total property, plant and equipment 330,536 292,191
Other Assets
Cash restricted for capital additions 3,844 14,732
Deferred charges and other assets 13,408 7,746
Total other assets 17,252 22,478
Total Assets $467,028 $434,686
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
(all dollar amounts in thousands) As of August 31,
1996 1995
<S> <C> <C>
Liabilities
Current Liabilities
Current maturities of long-term debt $ 6,340 $ 6,425
Accounts payable 26,307 24,426
Accrued salaries and wages 9,197 7,480
Accrued and other liabilities 14,299 13,161
Accrued income taxes 2,910 1,259
Total current liabilities 59,053 52,751
Long-Term Liabilities
Long-term debt 53,119 68,623
Deferred income taxes 43,469 36,799
Postretirement benefits 31,849 30,433
Pension 10,194 5,184
Other liabilities 4,633 4,207
Total long-term liabilities 143,264 145,246
Commitments and contingencies
Shareholders' Equity
Preferred stock: (500,000 shares authorized)
no par value
No shares issued
Common stock: (100,000,000 shares authorized)
no par value
38,840,403 shares issued - 1996
31,072,323 shares issued - 1995 139,155 138,784
Retained earnings 143,470 110,345
282,625 249,129
Less: Treasury stock at cost
(2,327,875 shares in 1996 and
1,608,436 shares in 1995) ( 17,721) ( 11,652)
Net loss not recognized as pension expense
(net of deferred taxes) ( 193) ( 788)
Total shareholders' equity 264,711 236,689
Total Liabilities and Shareholders' Equity $467,028 $434,686
</TABLE>
<PAGE>
<TABLE>
WAUSAU PAPER MILLS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Total
(all dollar amounts COMMON STOCK TREASURY STOCK Net Common Share-
in thousands) Retained Pension Stock-Shares holders'
SHARES ISSUED AMOUNT EARNINGS SHARES AMOUNT ADJUSTMENT OUTSTANDING EQUITY
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance August 31, 1993 21,186,683 $ 79,437 $106,859 ( 967,193) ($ 3,087) ($ 70) 20,219,490 $183,139
Net earnings, 1994 43,052 43,052
Cash dividends declared ( 6,487) ( 6,487)
Four-for-three stock split 7,061,557 ( 319,695) 6,741,862
Purchases of treasury shares ( 190,000) ( 4,959) ( 190,000) ( 4,959)
Stock options exercised 608 86,678 442 86,678 1,050
Tax benefit related to stock
options 335 335
Change in unrecognized
pension expense (net of
deferred taxes) ( 1,312) ( 1,312)
Balance August 31, 1994 28,248,240 $ 80,380 $143,424 (1,390,210) ($ 7,604) ($ 1,382) 26,858,030 $214,818
Net earnings, 1995 31,251 31,251
Cash dividends declared ( 7,385) ( 7,385)
10% stock dividend 2,824,083 56,945 ( 56,945) ( 144,856) 2,679,227
Purchases of treasury shares ( 226,500) ( 5,222) ( 226,500) ( 5,222)
Stock options exercised 872 153,130 1,174 153,130 2,046
Tax benefit related to
stock options 587 587
Change in unrecognized
pension expense (net of
deferred taxes) 594 594
Balance August 31, 1995 31,072,323 $138,784 $110,345 (1,608,436) ($ 11,652) ($ 788) 29,463,887 $236,689
Net earnings, 1996 41,229 41,229
Cash dividends declared ( 8,104) ( 8,104)
Five-for-four stock split 7,768,080 ( 402,343) 7,365,737
Purchases of treasury shares ( 369,500) ( 6,376) ( 369,500) ( 6,376)
Stock options exercised ( 10) 52,404 307 52,404 297
Tax benefit related to stock
options 351 351
Stock option discount
(net of deferred taxes) 30 30
Change in unrecognized
pension expense (net of
deferred taxes) 595 595
Balance August 31, 1996 38,840,403 $139,155 $143,470 (2,327,875) ($ 17,721) ($ 193) 36,512,528 $264,711
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
WAUSAU PAPER MILLS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
(all dollar amounts in thousands) For the Years Ended August 31,
1996 1995 1994
<S> <C> <C> <C>
Operating Activities:
Net earnings $41,229 $31,251 $43,052
Cumulative effect of accounting changes ( 1,000)
Noncash items:
Provision for depreciation, depletion and
amortization 23,140 19,940 17,635
Loss on property, plant and equipment disposals 1,259 585 231
Deferred income taxes 6,186 4,581 3,033
Changes in operating assets and liabilities:
Receivables 4,212 ( 7,320) ( 4,172)
Inventories ( 2,969) ( 7,252) ( 563)
Other assets ( 5,643) 521 423
Accounts payable and other liabilities 10,893 4,139 7,942
Accrued income taxes 1,651 1,067 ( 1,842)
Net Cash Provided by Operating Activities 79,958 47,512 64,739
Investing Activities:
Capital expenditures ( 61,389) ( 64,479) ( 42,056)
Proceeds from property, plant and equipment
disposals 85 115 615
Net cash used from (invested in) funds restricted
for capital additions 10,888 ( 14,732)
Net Cash Used in Investing Activities ( 50,416) ( 79,096) ( 41,441)
Financing Activities:
Net borrowings (repayments) under revolving
credit facility ( 700) 14,200 ( 12,000)
Net borrowings (repayments) of commercial paper ( 8,300) 8,300
Repayment of long-term debt ( 500) ( 451) ( 508)
Repayment of long-term notes ( 6,000)
Proceeds from issuance of long-term bonds 19,000
Dividends paid ( 7,938) ( 7,156) ( 6,291)
Proceeds from stock option exercises 297 2,046 1,050
Payments for purchases of treasury stock ( 6,376) ( 5,222) ( 4,959)
Net Cash Provided by (Used in) Financing
Activities ( 29,517) 30,717 ( 22,708)
Net increase (decrease) in cash and cash
equivalents 25 ( 867) 590
Cash and cash equivalents at beginning of year 2,347 3,214 2,624
Cash and Cash Equivalents at End of Year $ 2,372 $ 2,347 $ 3,214
Supplemental Cash Flow Information:
Interest paid (net of amount capitalized) $ 2,793 $ 1,554 $ 1,903
Income taxes paid 17,830 13,762 23,598
<FN>
Noncash investing and financing activities: Capital lease obligations of
$498, $497 and $24 in 1996, 1995 and 1994, respectively, were incurred when
the company entered into leases for new equipment.
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
WAUSAU PAPER MILLS COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION - The consolidated financial statements include the accounts of
the company and its subsidiaries. All significant intercompany transactions,
balances and profits have been eliminated in consolidation.
REVENUE RECOGNITION - Revenue is recognized upon shipment of goods and
transfer of title to the customer. The company grants credit to customers in
the ordinary course of business. A substantial portion of the company's
accounts receivable is with customers in various paper converting industries
or the paper merchant business. Concentrations of credit risk with respect to
trade receivables are limited due to the large number of customers and their
geographic dispersion.
USE OF ESTIMATES IN PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS - The
preparation of the accompanying consolidated financial statements in
conformity with generally accepted accounting principles requires the use of
certain estimates and assumptions that directly affect the results of reported
assets, liabilities, revenue and expenses. Actual results may differ from
these estimates.
CASH EQUIVALENTS - The company defines cash equivalents as highly liquid,
short-term investments with an original maturity of three months or less.
INVENTORIES - Pulpwood, finished paper products and the majority of raw
materials are valued at the lower of cost, determined on the last-in, first-
out (LIFO) method, or market. All other inventories are valued at the lower
of average cost or market.
PROPERTY, PLANT AND EQUIPMENT - Plant and equipment are stated at cost and are
depreciated over the estimated useful lives of the assets using the straight-
line method for financial statement purposes. The cost and related
accumulated depreciation of all plant and equipment retired or otherwise
disposed of are removed from the accounts and any resulting gains or losses
are included in the consolidated statements of income.
Buildings are depreciated over a 25- to 45-year period; machinery and
equipment over a 4- to 20-year period. Maintenance and repair costs are
charged to expense as incurred. Renewals and improvements which extend the
useful lives of the assets are added to the plant and equipment accounts.
Equipment financed by long-term leases, which in effect are installment
purchases, have been recorded as assets and the related obligations as debt.
Land is stated at cost. Timberlands are at cost less the pro rata cost of
timber harvested since acquisition. Depletion expense is calculated using the
block method.
INCOME TAXES - Deferred income taxes have been provided under the liability
method. Deferred tax assets and liabilities are determined based upon the
estimated future tax effects of differences between the financial statement
and tax bases of assets and liabilities, as measured by the current enacted
tax rates. Deferred tax expense is the result of changes in the deferred tax
asset and liability. See Note 8 for change in accounting principle in 1994.
<PAGE>
EARNINGS PER SHARE - Earnings per common share are based on the weighted
average number of common shares outstanding. Dilution of earnings per common
share due to common stock equivalents (stock options) is negligible and,
accordingly, no dilution has been reported.
<TABLE>
NOTE 2. INVENTORIES
<CAPTION>
(all dollar amounts in thousands) 1996 1995
<S> <C> <C>
Raw materials $ 24,273 $ 30,925
Supplies 16,549 16,498
Work in process and finished goods 41,630 45,521
Inventories at cost 82,452 92,944
LIFO reserve ( 12,009) ( 25,470)
Net inventories $ 70,443 $ 67,474
</TABLE>
Because various components of the inventories are valued by use of the last-
in, first-out (LIFO) method, it is impracticable to segregate the LIFO reserve
between raw materials and work in process and finished goods.
<TABLE>
NOTE 3. ACCRUED AND OTHER LIABILITIES
<CAPTION>
(all dollar amounts in thousands) 1996 1995
<S> <C> <C>
Employee retirement plans $ 2,142 $ 1,583
Taxes other than income 1,633 1,348
Interest 483 523
Stock appreciation rights 2,408 2,720
Other 7,633 6,987
Totals $ 14,299 $ 13,161
</TABLE>
<TABLE>
NOTE 4. DEBT
The company's long-term debt, excluding current maturities as of August 31, is
outlined below:
<CAPTION>
(all dollar amounts in thousands) 1996 1995
<S> <C> <C>
6.03% Senior promissory notes $ 18,000 $ 24,000
Industrial development bonds 19,000 19,000
Revolving credit facility agreement 13,500 14,200
Commercial paper 8,300
Fixed asset payables to be financed
with revolving credit agreement 2,244 2,831
Capitalized leases 375 292
Totals $ 53,119 $ 68,623
</TABLE>
The company has outstanding $24 million in unsecured senior promissory notes.
Interest is payable quarterly on the outstanding balance at a rate of 6.03%
per annum. Principal is payable in equal semi-annual installments, with the
final payment due June 16, 2000.
During 1995, the company borrowed $19 million related to industrial
development bonds issued by a local governmental unit. The variable rate
bonds require quarterly interest payments and had an interest rate of 3.70% at
<PAGE>
August 31, 1996. The company also pays fees for a bank letter of credit and
remarketing services related to the bonds which it includes in net interest
expense. The interest rate can be converted to a fixed rate, at the company's
option, after which semi-annual interest payments will be required. The bonds
mature on July 1, 2023. At August 31, 1996, bond proceeds of $3,844,000 were
not disbursed and are reflected as an asset on the balance sheet.
The company maintains an unsecured revolving credit facility of $40 million
with four banks which continues through March 29, 2001 at which time, or
earlier at the company's option, the revolving credit converts to a term loan
facility, and the loans then outstanding are payable in four equal quarterly
installments. The company may elect the base for interest from either
domestic rate loans, eurodollar loans, adjusted CD rate loans, offered loans
or treasury rate loans. The weighted average interest rate on borrowings
under the revolving credit facility was 5.62% and 6.21% at August 31, 1996 and
1995, respectively. The credit agreement provides for commitment fees during
the revolving loan period. Fees are based on quarterly funded debt to equity
levels. Based on debt and equity levels at August 31, 1996, the fees are .1%
per annum.
Consistent with the classification of the revolving credit agreement, fixed
asset payables that will be financed through the agreement are classified as
long-term debt.
The senior promissory notes and the revolving credit facility agreement
require the company to comply with certain covenants, one of which requires
the company maintain minimum net worth. At August 31, 1996, $77,357,000 of
retained earnings was available for payment of cash dividends without
violation of the minimum net worth covenant related to the senior promissory
notes.
The company maintains a commercial paper placement agreement with a bank to
issue up to $40 million of unsecured debt obligations which requires unused
credit availability under its revolving credit agreement equal to the amount
of outstanding commercial paper. There were no amounts outstanding at August
31, 1996. The weighted average interest rate on outstanding commercial paper
was 6.20% at August 31, 1995.
The difference between the book and the fair market value of the long-term
debt is not material.
<TABLE>
<CAPTION>
The aggregate annual maturities of long-term debt for the next five years are:
<S> <C> <C> <C> <C> <C> <C>
(all dollar amounts There-
in thousands) 1997 1998 1999 2000 2001 AFTER
$ 6,340 $ 6,290 $ 6,085 $ 6,000 $ 3,936 $ 30,808
</TABLE>
Annual maturities will be affected by future borrowings.
A bank participating in the revolving credit agreement has provided a separate
uncommitted revolving line of credit to the company in the amount of up to $10
million. The specific terms of any revolving loans borrowed pursuant to this
line of credit will be negotiated at the time of the borrowing and any
revolving loans so borrowed will be payable on demand. In addition, the
company has a $2 million line of credit with interest payable at the prime
rate. The line does not require a compensating balance or a commitment fee.
There was no borrowing against these lines at August 31, 1996.
<PAGE>
<TABLE>
NOTE 5. LEASE COMMITMENTS
The company has various leases for real estate, mobile equipment and machinery
which generally provide for renewal privileges or for purchase at option
prices established in the lease agreements. Property, plant and equipment
includes the following amounts for capitalized leases:
<CAPTION>
(all dollar amounts in thousands) 1996 1995
<S> <C> <C>
Machinery and equipment $ 1,416 $ 1,728
Allowance for amortization ( 354) ( 744)
Net value $ 1,062 $ 984
</TABLE>
Lease amortization is included in depreciation expense.
<TABLE>
Future minimum payments, by year and in the aggregate, under capitalized
leases and noncancelable operating leases with initial or remaining terms of
one year or more consisted of the following at August 31, 1996:
<CAPTION>
(all dollar amounts in thousands) Capital Operating
LEASES LEASES
<S> <C> <C>
1997 $ 366 $ 186
1998 301 145
1999 86 77
2000 33
2001 33
Thereafter 110
Total minimum payments 753 584
Amounts representing interest ( 38)
Present value of net minimum lease
payments $ 715 $ 584
</TABLE>
The future minimum payments for capitalized leases are reflected in the
aggregate annual maturities of long-term debt disclosure in Note 4.
<TABLE>
Rental expense for all operating leases consists of:
<CAPTION>
(all dollar amounts in thousands) 1996 1995 1994
<S> <C> <C> <C>
Minimum rentals $ 1,323 $ 1,347 $ 1,334
Contingent rentals 288 267 213
Totals $ 1,611 $ 1,614 $ 1,547
</TABLE>
Contingent rentals are based upon usage.
<TABLE>
NOTE 6. INTEREST EXPENSE AND CAPITALIZED INTEREST
<CAPTION>
Total Net
Interest Capitalized Interest
(all dollar amounts in thousands) EXPENSE INTEREST EXPENSE
<S> <C> <C> <C>
1996 $ 3,698 $ 912 $ 2,786
1995 2,423 735 1,688
1994 2,185 227 1,958
</TABLE>
<PAGE>
NOTE 7. RETIREMENT PLAN
Substantially all employees are covered under retirement plans. The defined
benefit plans covering salaried employees provide benefits based on final
average pay formulas; the plans covering hourly employees provide benefits
based on years of service and fixed benefit amounts for each year of service.
The plans are funded in accordance with federal laws and regulations.
The company selected measurement dates of plan assets of May 31, 1996 and
1995.
<TABLE>
The components of net periodic pension cost follow:
<CAPTION>
(all dollar amounts in thousands) 1996 1995 1994
<S> <C> <C> <C>
Service cost $ 2,345 $ 2,199 $ 2,020
Interest cost 4,266 3,920 3,791
Actual return on assets ( 11,019) ( 4,365) ( 1,066)
Net amortization and deferral 7,625 1,201 ( 1,843)
Net pension cost $ 3,217 $ 2,955 $ 2,902
</TABLE>
<PAGE>
<TABLE>
The following table sets forth the benefit obligations and funded status of
the plans at August 31:
<CAPTION>
1996 1995
PLANS WITH PLANS WITH PLANS WITH PLANS WITH
ASSETS ASSETS ASSETS ASSETS
EXCEEDING LESS THAN EXCEEDING LESS THAN
ACCUMULATED ACCUMULATED ACCUMULATE ACCUMULATED
(ALL DOLLAR AMOUNTS IN BENEFIT BENEFIT BENEFIT BENEFIT
THOUSANDS) OBLIGATION OBLIGATION OBLIGATION OBLIGATION
<S> <C> <C> <C> <C>
Actuarial present value of
benefit obligations:
Vested benefits ($29,548) ($25,550) ($ 27,027) ($ 17,370)
Nonvested benefits ( 5,402) ( 3,867) ( 5,086) ( 3,293)
Accumulated benefit obligations ( 34,950) ( 29,417) ( 32,113) ( 20,663)
Additional amounts related to
projected salary increases ( 4,379) ( 421) ( 3,658) ( 528)
Projected benefit obligation ( 39,329) ( 29,838) ( 35,771) ( 21,191)
Plan assets at market value at
May 31 41,214 18,007 34,785 14,719
Plan assets in excess of
(less than) projected
benefit obligation 1,885 ( 11,831) ( 986) ( 6,472)
Unrecognized net loss (gain) ( 4,831) 732 1,368 1,709
Unrecognized prior service
costs 5,235 8,524 2,898 2,575
Unrecognized initial net
obligation (asset) ( 1,339) 500 ( 1,511) 573
Cash contributions to plans
subsequent to May 31 109 16
Adjustment to recognize
minimum liability ( 9,335) ( 4,450)
Net pension asset (liability)
recognized in the
consolidated balance sheets $ 1,059 ($11,410) $ 1,769 ($ 6,049)
</TABLE>
Projected benefit obligations were determined using an assumed discount rate
of 7.5% and an assumed rate of increases in future compensation levels of
5.0%. The assumed long-term rate of return on plan assets was 8.0%. Plan
assets consist principally of publicly traded stocks and fixed income
securities and include Wausau Paper Mills Company common stock with a market
value of $1,632,000 in 1996 and $1,377,000 in 1995.
The company also sponsors defined contribution pension plans, several of which
provide for company contributions based on a percentage of employee
contributions. The cost of such plans totaled $314,000 in 1996, $232,000 in
1995 and $445,000 in 1994.
The company has deferred compensation or supplemental retirement agreements
with certain present and past key officers and employees. The principal cost
of such plans is being or has been accrued over the period of active
employment to the full eligibility date. The annual cost of the deferred
compensation and supplemental retirement agreements does not represent a
material amount.
<PAGE>
The company sponsors unfunded defined benefit postretirement health and life
insurance plans that cover substantially all employees reaching normal
retirement age while working for the company. Benefits and eligibility for
various employee groups vary by location and union agreements. Generally,
employees are eligible after reaching age 55 or 62 and meeting minimum service
requirements. At age 65, the benefits become coordinated with Medicare. The
company funds the benefit costs on a current basis.
<TABLE>
Postretirement benefit cost includes the following components:
<CAPTION>
(all dollar amounts in thousands) 1996 1995 1994
<S> <C> <C> <C>
Service cost $ 911 $ 933 $ 994
Interest cost 2,033 1,984 2,085
Net periodic postretirement benefit cost $ 2,944 $ 2,917 $ 3,079
</TABLE>
<TABLE>
The plans' status at August 31, were as follows:
<CAPTION>
(all dollar amounts in thousands) 1996 1995
<S> <C> <C>
Actuarial present value of benefit obligation:
Retirees $ 10,188 $ 8,934
Fully eligible active participants 8,236 8,952
Other active participants 10,982 10,971
Accumulated postretirement benefit obligation 29,406 28,857
Unrecognized net gain 2,443 1,576
Accrued postretirement benefit liability $ 31,849 $ 30,433
</TABLE>
For 1996 and 1995, the assumed health care cost trend rate used in measuring
the accumulated postretirement benefit obligation was 11% declining by 1%
annually for six years to an ultimate rate of 5%. The weighted average
discount rate was 7.5%.
A one-percentage-point increase in the assumed health care cost trend rates
would increase the accumulated postretirement benefit obligation as of
August 31 by approximately $3,801,000 or 12.9% in 1996 and $3,779,000 or 13.1%
in 1995. The effect of this change on the aggregate of the service and
interest cost would be an increase of $441,000 or 16.6% in 1996 and $416,000
or 14.3% in 1995.
NOTE 8. INCOME TAXES
Effective September 1, 1993, the company adopted the liability method of
accounting for income taxes prescribed by Statement of Financial Accounting
Standard (SFAS) No. 109. Deferred tax assets and liabilities are determined
based on the estimated future tax effects of temporary differences between the
financial statement and tax bases of assets and liabilities, as measured by
the current enacted tax rates. Deferred tax expense is the result of changes
in the deferred tax asset and liability. Previously, the company used the
deferral method which provided for deferred income taxes on the basis of
income and expense items reported for financial accounting and tax purposes in
different periods.
<PAGE>
The company recognized the cumulative effect of the change as of September 1,
1993. The adoption was reflected as a one-time cumulative reduction in the
net deferred tax liability resulting in a $1,000,000 increase in fiscal 1994
net earnings. The effect of the change in method did not have a material
effect in 1994.
<TABLE>
The provision for income taxes is comprised of the following:
<CAPTION>
(all dollar amounts in thousands) 1996 1995 1994
<S> <C> <C> <C>
Currently payable
Federal $ 17,776 $ 13,487 $ 20,245
State 1,638 1,532 2,722
19,414 15,019 22,967
Deferred
Federal 5,668 4,197 2,688
State 518 384 345
6,186 4,581 3,033
Totals $ 25,600 $ 19,600 $ 26,000
</TABLE>
<TABLE>
A reconciliation between taxes computed at the federal statutory rate and the
consolidated effective tax rate follows:
<CAPTION>
(all dollar amounts in thousands) 1996 1995 1994
<S> <C> <C> <C>
Federal statutory tax rate $ 23,390 35% $ 17,798 35% $ 23,818 35%
State taxes net of federal
tax benefits 1,472 2 1,324 3 1,994 3
Other 738 1 478 1 188
Consolidated effective tax $ 25,600 38% $ 19,600 39% $ 26,000 38%
</TABLE>
<TABLE>
The major temporary differences that give rise to the deferred tax assets and
liabilities at August 31, 1996 and 1995 are as follows:
<CAPTION>
(all dollar amounts in thousands) 1996 1995
<S> <C> <C>
Deferred tax asset:
Allowances on accounts receivable $ 865 $ 977
Accrued compensated absences 1,772 1,666
Stock appreciation rights plans 982 1,101
Inventories 2,105 1,387
Postretirement benefits 12,627 12,086
Other 1,963 1,880
Gross deferred tax asset 20,314 19,097
Deferred tax liability:
Property, plant and equipment ( 54,823) ( 47,666)
Other ( 1,272) ( 1,026)
Gross deferred tax liability ( 56,095) ( 48,692)
Net deferred tax liability ($ 35,781) ($ 29,595)
</TABLE>
<PAGE>
<TABLE>
The total deferred tax liabilities (assets) as presented in the accompanying
consolidated balance sheets are as follows:
<CAPTION>
(all dollar amounts in thousands) 1996 1995
<S> <C> <C>
Net long-term deferred tax liabilities $ 43,469 $ 36,799
Net current deferred tax assets ( 7,688) ( 7,204)
Net deferred tax liability $ 35,781 $ 29,595
</TABLE>
NOTE 9. STOCK OPTIONS AND APPRECIATION RIGHTS
The company maintains the 1991 Employee Stock Option Plan. The plan specifies
purchase price, time and method of exercise. Payment of the option price may
be made in cash or by tendering an amount of common stock having a fair market
value equal to the option price.
Options are granted for terms up to 20 years, the option price being equal to
the fair market value of the company's common stock at the date of grant for
incentive options. The option price for non-qualified options may not be less
than 50% of the fair market value of the company's common stock at the date of
grant.
During 1996, 64,375 options were granted under the plan to be earned in the
current year based upon the satisfaction of operating goals set forth in the
agreement. A total of 46,062 options granted in 1995 terminated when
operating goals were not met.
During 1992, options were granted under the plan. The options were to be
earned over a three-year period based upon the satisfaction of operating goals
set forth in the agreement. A total of 122,229 options terminated in 1994
when operating goals were not met.
<TABLE>
The following table summarizes the activity relating to the company's stock
option plans:
<CAPTION>
STOCK OPTIONS: 1996 1995 1994
<S> <C> <C> <C>
Options outstanding at beginning
of year (number of shares) 308,792 439,426 674,773
Granted 143,125 132,687 9,779
Terminated ( 53,390) ( 122,229)
Exercised ( 52,887) ( 209,931) ( 122,897)
Options outstanding at end of year
(number of shares) 399,030 308,792 439,426
Options exercisable at end of year
(number of shares) 384,905 280,832 408,260
Price range of options exercised $ 3.35-16.41 $1.50-10.00 $1.50-10.00
Price range of outstanding options $12.68-24.00 $3.35-24.00 $1.50-18.14
<FN>
All shares and option prices have been restated to reflect the five-for-four
stock split occurring in 1996, the 10% stock dividend occurring in 1995 and
the four-for-three stock split occurring in 1994.
</TABLE>
Future Accounting Change: Statement of Financial Accounting Standard (SFAS)
No. 123, "Accounting for Stock-Based Compensation," is effective September 1,
1996, for the company. The new standard establishes a fair value based method
<PAGE>
of accounting for stock-based employee compensation plans or allows companies
to continue to account for those plans using the intrinsic value based method
prescribed by APB Opinion No. 25, "Accounting for Stock Issued to Employees."
In accordance with SFAS No. 123, the company will adopt the requirements of
the standard by making pro forma disclosures of net income and net earnings
per share as if the fair value based method had been applied.
The 1988 Management Incentive Plan entitles certain management employees the
right to receive cash equal to the sum of the appreciation in value of the
stock and the hypothetical value of cash dividends which would have been paid
on the stock covered by the grant assuming reinvestment in company stock. The
stock appreciation rights granted may be exercised in whole or in such
installments and at such times as specified in the grant. In all instances,
the rights lapse if not exercised within 20 years of the grant date.
Compensation expense is recorded with respect to the rights based upon the
quoted market value of the shares and the exercise provisions.
<TABLE>
The following table summarizes the activity relating to the company's stock
appreciation rights plans:
<CAPTION>
STOCK APPRECIATION RIGHTS:
1996 1995 1994
<S> <C> <C> <C>
Rights outstanding at beginning of
year (number of shares) 179,555 184,555 198,305
Exercised ( 15,827) ( 5,000) ( 13,750)
Rights outstanding at end of year
(number of shares) 163,728 179,555 184,555
Rights exercisable at end of year
(number of shares) 163,728 179,555 184,555
Price range of stock appreciation
rights exercised $ 4.46 $ 5.88 $ 4.46
Price range of outstanding
stock appreciation rights $4.46-6.26 $4.46-6.26 $4.46-6.26
<FN>
All shares and price ranges have been restated to reflect the five-for-four
stock split occurring in 1996, the 10% stock dividend occurring in 1995 and
the four-for-three stock split occurring in 1994.
</TABLE>
The company maintains the 1991 Dividend Equivalent Plan. Participants are
entitled to receive cash based on the hypothetical value of cash dividends
which would have been paid on the stock covered by the grant assuming
reinvestment in company stock. During 1996, 64,375 dividend equivalents were
granted under the plan to be earned in the current year based upon the
satisfaction of operating goals set forth in the agreement. All dividend
equivalents granted in 1995 terminated when operating goals were not met.
During 1992, 245,668 dividend equivalents were granted under the plan and were
to be earned over a three-year period based upon the satisfaction of operating
goals set forth in the agreement. A total of 112,445 dividend equivalents
terminated in 1994 when operating goals were not met.
<PAGE>
<TABLE>
<CAPTION>
DIVIDEND EQUIVALENTS: 1996 1995 1994
<S> <C> <C> <C>
Equivalents outstanding at beginning of year
(number of shares) 142,999 142,999 560,999
Granted 143,125 46,063
Exercised ( 9,777) ( 305,555)
Terminated ( 46,063) ( 112,445)
Equivalents outstanding at end of year
(number of shares) 276,347 142,999 142,999
Equivalents exercisable at end of year
(number of shares) 276,347 142,999 142,999
<FN>
All shares have been restated to reflect the five-for-four stock split
occurring in 1996, the 10% stock dividend occurring in 1995 and the four-for-
three stock split occurring in 1994.
</TABLE>
The pre-tax impact on earnings of all stock option discounts, dividend
equivalents and stock appreciation rights for the years ended August 31, 1996,
1995 and 1994 was expense of $78,000, expense of $79,000 and income of
$283,000, respectively.
NOTE 10. RESEARCH EXPENSES
Research expenses charged to operations were $1,381,000 in 1996, $1,219,000 in
1995 and $1,158,000 in 1994.
NOTE 11. COMMITMENTS, CONTINGENCIES AND RELATED PARTY TRANSACTIONS
The company is involved in various legal proceedings in the normal course of
business. It is the opinion of management that any judgment or settlement
resulting from pending or threatened litigation would not have a material
adverse effect on the financial position or on the operations of the company.
As of August 31, 1996, the company was committed to spend approximately $22
million to complete capital projects which were in various stages of
completion.
In July 1996, the company signed a natural gas transportation agreement with
the Portland Natural Gas Transmission System (PNGTS). Under the terms of the
agreement, PNGTS will construct necessary gas supply and delivery equipment to
the company's Groveton, New Hampshire mill. The company is committed to the
transportation of a fixed volume of natural gas over the 20-year agreement.
Capital improvements to the Groveton mill's power plant will be required to
take advantage of this agreement. Transportation of natural gas to the
Groveton mill is scheduled to begin in fiscal 1999.
During fiscal 1994, the company purchased 100,000 shares of the company's no
par value common stock from a director in a private transaction at $27.625 per
share, the average market price on the day of the transaction.
NOTE 12. MAJOR CUSTOMERS
One customer accounted for 12.7% of net sales aggregating $68,797,000, 12.0%
of net sales aggregating $61,732,000 and 12.3% of net sales aggregating
$52,313,000 in 1996, 1995 and 1994, respectively. Another customer accounted
for 11.5% of net sales aggregating $62,563,000 in 1996.
<PAGE>
<TABLE>
<CAPTION>
QUARTERLY DATA (UNAUDITED)
(all dollar amounts 1996 1995
in thousands, except
per share data) FOURTH THIRD SECOND FIRST FOURTH THIRD SECOND FIRST
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $132,729 $139,446 $128,590 $141,904 $134,801 $135,560 $119,115 $126,267
Gross profit 30,005 31,048 18,605 19,628 19,969 21,587 18,094 21,098
Operating profit 21,997 23,781 11,533 12,212 11,740 14,687 11,956 14,371
Net earnings 13,113 14,094 6,717 7,305 6,793 8,745 7,116 8,597
Per share $0.36 $0.38 $0.18 $0.20 $0.19 $0.23 $0.20 $0.23
Per share basis:
Cash dividends* $0.055 $0.055 $0.11 $0.05 $0.05 $0.10
Common stock price
(closing)**
High $22.75 $24.13 $23.50 $22.70 $19.00 $19.00 $19.60 $20.00
Low $16.25 $20.50 $20.00 $18.60 $16.80 $16.80 $16.20 $16.54
<FN>
*Dividends reported as of declaration date. During each year presented, two
quarterly dividends were declared in the second quarter.
**Such prices reflect the high and low "closing" price quotation on The Nasdaq
Stock Market and do not reflect markups, markdowns or commissions and may not
necessarily reflect actual transactions.
</TABLE>
The estimated effective tax rate utilized for the first three quarters of each
fiscal year was different than the final annual effective rate and the
adjustment of income taxes was all reflected in the quarter ended August 31 of
each fiscal year.
All per share data has been restated to reflect the five-for-four stock split
occurring in 1996, the 10% stock dividend occurring in 1995 and the four-for-
three stock split occurring in 1994.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information relating to directors of the company is incorporated into this
Form 10-K by this reference to the material set forth in the table under the
caption "Election of Directors" on page 3 of the company's proxy statement
dated November 8, 1996 ("1996 Proxy Statement"). Information relating to the
identification of executive officers of the company is found in Part I of this
Form 10-K, page 5. Information relating to compliance with Section 16(a) of
the Securities Exchange Act of 1934 is incorporated by this reference to the
material set forth under the caption "Section 16(a) Beneficial Ownership
Reporting Compliance", page 3 of the 1996 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION.
Information relating to director compensation is incorporated into this Form
10-K by this reference to the material set forth in the 1996 Proxy Statement
under the subcaption "Director Compensation", page 5. Information relating to
the compensation of executive officers is incorporated into this Form 10-K by
this reference to (1) the material set forth under the caption "Compensation
of Executive Officers" and ending with the material set forth under the
subcaption "Supplemental Plans", pages 5 through 9, and (2) the material set
forth under the subcaption "Committee Interlocks and Insider Participation",
page 11, in the 1996 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information relating to security ownership of certain beneficial owners and
management is incorporated into this Form 10-K by this reference to the
material set forth in the 1996 Proxy Statement under the caption "Beneficial
Ownership of Shares", pages 2 and 3.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Financial statements and financial statement schedules, filed as part of
this report and required by Item 14(d), are set forth on page 15 herein.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the company during the fourth quarter
of fiscal 1996.
(c) Exhibits required by Item 601 of Regulation S-K.
The following exhibits are filed with the Securities and Exchange Commission
as part of this report.
Exhibit 3 - Articles of Incorporation and Bylaws
(a) Articles of Incorporation, as amended December 21, 1995 ......15-24(1)
(b) Bylaws, as restated July 17, 1992 ............................46-81(2)
Exhibit 4 - Instruments Defining the Rights of Security Holders
(a) Articles and Bylaws (see Exhibit 3)
Exhibit 10 - Material Contracts*
(a) Executive Officers' Deferred Compensation Retirement Plan,
as amended 09/18/96
(b) Incentive Compensation Plans, as amended 09/18/96
(Printing and Writing Division and Rhinelander Paper
Company, Inc.)
(c) Corporate Management Incentive Plan, as amended 09/18/96
(d) 1988 Stock Appreciation Rights Plan, as amended 04/17/91
(e) 1988 Management Incentive Plan, as amended 04/17/91
(f) 1990 Stock Appreciation Rights Plan, as amended 04/17/91
(g) Deferred Compensation Agreement dated 03/02/90, as
amended 07/01/94 ............................................51-56(3)
(h) 1991 Employee Stock Option Plan ............................133-146(4)
(i) 1991 Dividend Equivalent Plan ..............................147-155(4)
(j) Supplemental Retirement Benefit Plan dated 01/16/92,
as amended 11/13/95..........................................13-17(5)
(k) Directors' Deferred Compensation Plan .......................71-86(6)
(l) Director Retirement Benefit Policy ..........................87-88(6)
*All exhibits represent executive compensation plans and arrangements.
Exhibit 21 - Subsidiaries ..........................................89(6)
Exhibit 27 - Financial Data Schedule
<PAGE>
Page numbers set forth herein correspond to the page numbers using the
sequential numbering system for documents filed in paper or the page numbers
as filed via EDGAR in electronic format where such exhibit can be found in the
following reports of the company (Commission File No. 0-7574) filed with the
Securities and Exchange Commission:
(1) Registrant's quarterly report on Form 10-Q for the quarterly period
ended February 29, 1996.
(2) Registrant's annual report on Form 10-K for the fiscal year ended
August 31, 1992.
(3) Registrant's annual report on Form 10-K for the fiscal year ended
August 31, 1994.
(4) Registrant's annual report on Form 10-K for the fiscal year ended
August 31, 1991.
(5) Registrant's quarterly report on Form 10-Q for the quarterly period
ended November 30, 1996.
(6) Registrant's annual report on Form 10-K for the fiscal year ended
August 31, 1993.
<PAGE>
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
Allowance Allowance
for Allowance for
(all dollar amounts in Doubtful for Pending
thousands) TOTAL ACCOUNTS DISCOUNTS CREDITS
<S> <C> <C> <C> <C>
Balance August 31, 1993 $ 3,666 $ 1,200 $ 433 $ 2,033
Charges to costs and expenses 15,644 18 6,189 9,437
(Deductions) recoveries ( 14,666) 117 ( 6,105) ( 8,678)
Balance August 31, 1994 $ 4,644 $ 1,335 $ 517 $ 2,792
Charges to costs and expenses 17,099 141 7,781 9,177
Deductions ( 16,663) ( 3) ( 7,658) ( 9,002)
Balance August 31, 1995 $ 5,080 $ 1,473 $ 640 $ 2,967
Charges to costs and expenses 17,599 48 8,003 9,548
Deductions ( 16,675) ( 100) ( 8,042) ( 8,533)
Balance August 31, 1996 $ 6,004 $ 1,421 $ 601 $ 3,982
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant had duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
WAUSAU PAPER MILLS COMPANY
/S/ STEVEN A. SCHMIDT
Steven A. Schmidt
Vice President Finance,
Secretary and Treasurer
(Principal Accounting and
Financial Officer)
Date: October 28, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/S/ SAN W. ORR, JR. /S/ DAVID B. SMITH, JR.
San W. Orr, Jr. David B. Smith, Jr.
October 28, 1996 October 28, 1996
Chairman of the Board Director
/S/ DANIEL D. KING /S/ STANLEY F. STAPLES, JR.
Daniel D. King Stanley F. Staples, Jr.
October 28, 1996 October 28, 1996
President and Chief Executive Officer Director
(Principal Executive Officer)
Director
/S/ HARRY R. BAKER
Harry R. Baker
October 28, 1996
Director
<PAGE>
EXHIBIT INDEX<dagger>
TO
FORM 10-K
OF
WAUSAU PAPER MILLS COMPANY
FOR THE PERIOD ENDED DECEMBER 31, 1996
Pursuant to Section 102(d) of Regulation S-T
(17 C.F.R. <section>232.102(d))
EXHIBIT 10 - MATERIAL CONTRACTS*
(a) Executive Officers' Deferred Compensation Retirement
Plan, as amended September 18, 1996
(b) Incentive Compensation Plans, as amended
September 18, 1996 (Printing and Writing Division
and Rhinelander Paper Company, Inc.)
(c) Corporate Management Incentive Plan, as amended
September 18, 1996
(d) 1988 Stock Appreciation Rights Plan, as amended
April 17, 1991
(e) 1988 Management Incentive Plan, as amended
April 17, 1991
(f) 1990 Stock Appreciation Rights Plan, as amended
April 17, 1991
*All exhibits represent executive compensation plans and
arrangements.
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
<dagger> Exhibits required by Item 601 of Regulation S-K which have been
previously filed and are incorporated by reference are set forth in Part
IV, Item 14(c) of the Form 10-K to which this Exhibit Index relates
EXHIBIT 10(a)
WAUSAU PAPER MILLS COMPANY
EXECUTIVE OFFICERS' DEFERRED COMPENSATION RETIREMENT PLAN
Wausau Paper Mills Company, a Wisconsin corporation, on behalf of its
eligible employees hereby restates the Wausau Paper Mills Company
Executive Officers' Deferred Compensation Retirement Plan in accordance
with the terms and conditions herein contained.
ARTICLE I
PURPOSE AND ADMINISTRATION OF THE PLAN
Section 1.1 PURPOSE. The Company has established the Plan for the
purpose of providing deferred compensation (within the meaning of Section
3(2)(B) of the Employee Retirement Income Security Act of 1974) for key
executives of the Company who, by reason of their position, expertise and
years of service, contribute to the growth and stability of the Company.
Section 1.2 ADMINISTRATION. The Plan shall be administered by the
Company.
Section 1.3 EFFECTIVE DATE. The effective date of the Plan shall be
December 15, 1980.
ARTICLE II
DEFINITIONS
Section 2.1 DEFINITIONS. The following terms shall have the meanings
set forth below:
(a) "Executive Officer" shall mean any person employed by the
Company as its President or a Vice President but shall not include any
officer of any division or subsidiary of the Company.
(b) "Participant" shall mean an Executive Officer of the Company
who has qualified to be a participant in the Plan in accordance with
Section 3.1.
(c) "Plan" shall mean the Wausau Paper Mills Company Executive
Officers' Deferred Compensation Retirement Plan as herein set forth.
(d) "Retirement Plan" shall mean the Wausau Paper Retirement
Plan as now in effect or hereafter amended.
Section 2.2 DEFINITIONS INCORPORATED BY REFERENCE. The following
terms shall have the meanings set forth in the Retirement Plan and the
definition of such terms by the Retirement Plan is hereby incorporated by
reference:
(a) "Company"
(b) "Beneficiary"
(c) "Benefit Service"
<PAGE>
(d) "Vesting Service"
(e) "Annual Earnings"
(f) "Retirement Benefit"
(g) "Actuarial Equivalent"
ARTICLE III
PARTICIPATION
Section 3.1 PARTICIPATION. Each Executive Officer shall become a
Participant as of the first day of his employment by the Company in the
capacity of an Executive Officer.
Section 3.2 SERVICE IN A CAPACITY OTHER THAN AS AN EXECUTIVE OFFICER.
Service by an individual for the Company in any capacity other than as an
Executive Officer shall not be recognized for any purpose under the terms
and conditions of the Plan; provided, however, that service by any
Executive Officer prior to the effective date of the Plan in the capacity
of Vice President-Industrial Relations or Vice President-Finance, shall be
deemed to be service in the capacity of an Executive Officer.
Section 3.3 TERMINATION OF PARTICIPATION AND REEMPLOYMENT. A
Participant shall cease participation in the Plan on the later of (1) the
earlier of (a) the date his termination of employment with the Company
occurs or (b) the date he is no longer employed as an Executive Officer of
the Company, or (2) the date the final benefit payment to which the
Participant may be entitled pursuant to Section 4.1 is made. In the event
a Participant or former Participant is reemployed by the Company as an
Executive Officer, all periods of service with the Company as an Executive
Officer shall be aggregated for purposes of this Plan.
ARTICLE IV
BENEFITS
Section 4.1 BENEFIT. Subject to the limitations elsewhere contained
in this Plan, the benefit provided by this Plan shall be as follows:
(a) Each Participant (or, if applicable, his Beneficiary) shall
be entitled to receive a monthly single life annuity benefit in an
amount equal to the excess of:
(1) the Retirement Benefit, payable in single life annuity
form, which the Participant would have accrued under the
Retirement Plan as of the date of such Participant's termination
of employment with the Company if such benefit was determined in
accordance with the terms of the Retirement Plan, but (A) without
regard to the limitations on the maximum annual benefit, maximum
compensation, or any other limitation imposed under Section 415
or any other section of the Internal Revenue Code of 1986, as now
or hereafter in effect and set forth in, or otherwise
incorporated into, the terms of the Retirement Plan, (B) as if
"Annual Earnings" were computed by including 100% of bonuses,
which would be payable to the Participant (or, if applicable, his
Beneficiary) as of the first date payments are made to or for the
benefit of the Participant under the payment option actually
elected under the Retirement Plan or which, in the absence of an
effective election, is provided for under the provisions of the
<PAGE>
Retirement Plan and (C), regardless of the number of months of
Benefit Service actually accrued by the Participant, as if the
Participant then had accrued three hundred sixty months of
Benefit Service, over
(2) the Participant's actual Retirement Benefit, payable in
single life annuity form, under the Retirement Plan.
(b) The Participant may elect, subject to the approval of the
Board of Directors, (1) to receive the Actuarial Equivalent of the
benefit accrued by a Participant pursuant to paragraph (a) in any form
of annuity payment option then available under the Retirement Plan or
(2) to receive the value of the benefit accrued by a Participant
pursuant to paragraph (a) in the form of a lump sum distribution. In
the event a Participant elects, with the approval of the Board of
Directors, to receive a lump sum distribution of the value of the
benefit otherwise provided for in paragraph (a), the value of the lump
sum distribution under this Plan shall be determined in accordance
with the provisions for determining the value of a lump sum
distribution of the Participant's Retirement Benefit under the terms
of the Retirement Plan. Despite any other provision of this Plan, a
Participant who receives a benefit in the form of a lump sum
distribution shall not be entitled to any monthly benefit otherwise
described in paragraph (a).
(c) Monthly benefit payments to the Participant (and, if
applicable, his Beneficiary) under this Section 4.1 shall continue for
such period as payments would be made to such Participant (and, if
applicable, in his Beneficiary) if such benefit was being paid
pursuant to the Retirement Plan.
Section 4.2 REQUIRED AGE AND SERVICE. Despite the provisions of
Section 4.1, no Participant shall be eligible for a benefit under the
terms of the Plan if (1) on the date of his termination of employment with
the Company, he had accrued fewer than one hundred twenty months of
Vesting Service in the capacity of an Executive Officer or (2) if, on the
date of his termination of employment with the Company for a reason other
than disability, determined within the meaning of Section 3.03 of the
Retirement Plan, the Participant has not yet attained age fifty-five;
provided, however, that for purposes of this clause (2), in the event a
Participant's death occurred on or after a date which is not more than
four months prior to his fifty-fifth birthday and he was employed as an
Executive Officer of the Company on the date of his death, he shall be
deemed to have attained age fifty-five on the date of his termination of
employment. Despite any other provision of this Plan, the Executive Vice
President and General Manager, Rhinelander Division as of November 17,
1995, shall be deemed to have attained age sixty-two and completed one
hundred twenty months of Vesting Service as an Executive Officer as of the
date of his termination of employment for purposes of computing the
benefit provided for in Section 4.1(a)(1).
Section 4.3 COMMENCEMENT OF BENEFITS. Benefits which become payable
under the provisions of Section 4.1 shall be made by the Company as of the
first day of the first month in which the first Retirement Plan payment is
made to the Participant or his Beneficiary.
Section 4.4 FORFEITURE OF BENEFITS. Despite any other provision of
this Plan, a Participant's eligibility for benefit payments described in
Section 4.1, above, is expressly subject to the following terms and
conditions:
<PAGE>
(a) The Company is and shall be entitled to the sole benefit and
exclusive ownership of any inventions or improvements in plant,
machinery and processes, and all patents for the same, and all
customer or price lists, trade secrets and other things of similar
type or nature used in the business of the Company that may be made or
discovered by a Participant while he is employed by the Company, or,
after the termination of his employment period if arising out of his
activities, knowledge or experience gained while in the employment of
the Company. In the event that a Participant, during or after the
termination of his employment, discloses all or any portion of the
list of the Company's customers or the Company's pricing structure or
all or any portion of the Company's manufacturing process or any other
trade secrets or confidential information to any person, firm,
corporation, associations or other entity for any reason or purpose
whatsoever, no payment of any benefit otherwise due the Participant or
his Beneficiary pursuant to Section 4.1 shall be made by the Company.
(b) In the event a Participant, without the prior written
consent of the Company and within a period of two years beginning on
the first day following the Participant's termination of employment
with the Company, directly or indirectly owns, manages, operates,
joins, controls, is employed by or participants in the ownership,
management, operation or control of, or is connected in any manner
with, any business of a type and character which, in the opinion of
the Company, results in the Participant then being engaged in the
field of activities in which he was engaged by the Company at the time
of termination (and within one year prior to said termination) and
such business is, in the opinion of the Company, in direct or indirect
competition in any market area served by the Company with any business
then conducted by the Company in such market area, no payment of any
benefit otherwise due the Participant or his Beneficiary pursuant to
Section 4.1 shall be made by the Company if the Participant fails to
cease such activity within fifteen days of the mailing to him by the
Company of the Company's opinion that he is in violation of the
restrictions contained in this Section 4.4(b).
(c) The Company shall have sole discretion to stop payment of
any benefit or refuse to make payments otherwise due the Participant
or his Beneficiary pursuant to Section 4.1 if the Participant's
termination of employment with the Company or his appointment to a
position with the Company as other than an Executive Officer was by
reason of the Participant's fraud, embezzlement, misappropriation or
similar offense against the Company or any other state or federal
felony offense.
(d) Subject to the provisions of Section 6.2, no benefit shall
be payable under this Plan to any Participant or Beneficiary who, for
any reason, is not eligible for and does not receive a benefit under
the provisions of this Retirement Plan.
Section 4.5 INALIENABILITY OF BENEFITS. A Participant's right to a
benefit under the Plan shall not be subject to voluntary or involuntary
sale, pledge, hypothecation, transfer or assignment by the Participant or
by his personal representatives or heirs, or any other person or persons
or organization or organizations succeeding to any of the Participant's
rights and benefits hereunder.
Section 4.6 FACILITY OF PAYMENTS. Any benefit payable hereunder to
any person who is legally incapacitated may be paid to a court appointed
legal representative of such person.
<PAGE>
Section 4.7 CLAIMS PROCEDURE. Each Participant or Beneficiary whose
claim for benefits is denied, in whole or in part, shall be provided with
a notice, written in a manner calculated to be understood by the
Participant, setting forth the specific reasons for such denial and
outlining the review procedure of the Company. Each such Participant or
Beneficiary shall be given a reasonable opportunity for a full and fair
review by the Company of the decision by which the claim was denied.
Section 4.8 CHANGE IN CONTROL. Despite any other provision of this
Article IV, in the event a Change of Control of the Company occurs, the
Company shall pay to each Participant whose termination of employment
occurs coincident with or subsequent to the Change of Control of the
Company and who has not then satisfied the age and service requirements of
Section 4.2, a lump sum amount equal to the present value, as determined
hereunder, of such Participant's accrued benefit as of the date of such
termination of employment and (ii) the Company shall pay to each
Beneficiary a lump sum amount equal to the present value, as determined
hereunder, of such Beneficiary's accrued, but unpaid, benefit as of the
first day of the first month following such Change of Control of the
Company, whether or not such Change of Control of the Company occurred
prior to, concurrent with or subsequent to the date on which the first
payment of such benefit had occurred or would occur in accordance with the
terms of this Plan. The payment provided for hereunder shall be made by
the Company within ten days of the date on which the payment obligation
arises under the terms of this Section 4.8. Upon payment of the lump sum
amount provided for in this paragraph (a), the Company shall have no
further obligation to pay any benefits under this Plan.
(a) For purposes of this plan, a "Change of Control of the
Company" shall be deemed to have occurred when any one of the
following events occurs:
(1) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), other than (A) the Company or
any of its subsidiaries, (B) a trustee or other fiduciary
holding securities under an employee benefit plan of the
Company or any of its subsidiaries, (C) an underwriter
temporarily holding securities pursuant to an offering of
such securities, or (D) a corporation or other legal entity
owned, directly or indirectly, by the shareholders of the
Company in substantially the same proportions as their
ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the
Company (not including in the securities beneficially owned
by such persons any securities acquired directly from the
Company or its affiliates) representing more than 50% of the
combined voting power of the Company's then outstanding
securities; provided, however, that for the purpose of
determining whether any shareholder of the Company on the
date hereof becomes the beneficial owner of securities of
the Company representing more than 50% of the combined
voting power of the Company's then outstanding securities,
the securities of the Company held by such shareholder on
the date hereof shall not be taken into account;
<PAGE>
(2) the shareholders of the Company approve a merger
or consolidation of the Company or a share exchange with any
other company, other than a merger or consolidation or share
exchange which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) in
combination with the ownership of any trustee or other
fiduciary holding securities under an employee benefit plan
of the Company, at least 50% of the combined voting power of
the voting securities of the Company or such surviving
entity outstanding immediately after such merger or
consolidation or share exchange, or a merger or
consolidation or share exchange effected to implement a
recapitalization of the Company (or similar transaction) in
which no person acquires more than 50% of the combined
voting power of the Company's then outstanding securities;
or
(3) the shareholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially
all of the Company's assets.
(b) For purposes of this Plan, the present value of a
Participant's or Beneficiary's benefit shall be determined in
accordance with the provisions for determining the value of a lump sum
distribution of the Participant's or Beneficiary's Retirement Benefit
under the terms of the Retirement Plan as in effect as of the date
immediately prior to the Change of Control of the Company.
(c) Despite any other provision of this Plan, this Section 4.8
may not be amended on or after the date on which a Change of Control
of the Company has occurred.
ARTICLE V
PROVISION FOR BENEFITS
Section 5.1 ASSETS OF THE COMPANY. Benefits which become payable
under the provisions of the Plan shall be paid directly by the Company out
of its assets. No assets of the Company shall be set aside or segregated
for the provision of such benefit payments. Neither the Participant nor
his Beneficiary, nor any other potential or actual recipient of benefits
under the provisions of Section 4.1 shall acquire any right, title or
interest in the assets of the Company by reason of the Plan and, to the
extent that the Participant, Beneficiary or such other recipient shall
acquire a right to receive payments from the Company pursuant to the Plan,
such right shall be no greater than the right of any unsecured general
creditor of the Company.
ARTICLE VI
AMENDMENT AND TERMINATION OF THE PLAN
Section 6.1 AMENDMENT. The Company reserves the right to amend the
Plan at any time, and from time to time, effective as of any specified
current, prior or future date; provided, however, that no such amendment
shall modify or reduce a Participant's accrued benefit as of the date such
amendment is adopted.
<PAGE>
Section 6.2 TERMINATION. The Company reserves the right to terminate
the Plan; provided, however, that upon termination each Participant's
accrued benefit shall be fully vested subject only to the provisions of
Section 4.4. A Participant's "accrued benefit" shall mean the benefit
which would be paid or payable pursuant to Section 4.1 following the
Participant's termination of employment, determined without regard to
Section 4.2, if the Retirement Plan had terminated as of the same date on
which the termination of the Plan occurs (and provided for payment of
accrued Retirement Plan benefits upon the Participant's termination of
Employment) multiplied by a fraction, the numerator of which is a
Participant's years of Vesting Service recognized under Section 3.2 and
the denominator of which is ten.
ARTICLE VII
MISCELLANEOUS
Section 7.1 NONGUARANTEE OF EMPLOYMENT. Nothing contained in this
Plan shall be construed as a contract of employment between the Company
and any employee, as a right of any employee to be continued in the
employment of the Company in any capacity, or as a limitation of the right
of the Company to discharge any of its employees, with or without cause.
Section 7.2 ACTION BY THE COMPANY. Any action by the Company under
this Plan may be by resolution of its Board of Directors, or by any
officer or officers duly authorized by resolution of said Board to take
such action.
Section 7.3 AGREEMENT BINDING ON SUCCESSORS. This agreement shall be
binding upon all persons entitled to benefits hereunder, and upon their
respective heirs and legal representatives and upon the Company, its
successors and assigns.
Section 7.4 CONSTRUCTION. Except when otherwise indicated by the
context, any masculine terminology herein shall also include feminine, and
the definition of any term herein in singular shall also include the
plural.
Section 7.5 TITLES. Article and Section titles are included for
reference purposes only and in the event of a conflict between a title and
its respective text the text shall control.
Section 7.6 GOVERNING LAW. This Plan shall, to the extent not
superseded by the Employee Retirement Income Security Act of 1974, be
governed by the laws of the State of Wisconsin.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Plan document to be
compiled to reflect all amendments adopted through September 18, 1996, to
be executed on its behalf on this 18th day of September, 1996.
WAUSAU PAPER MILLS COMPANY
By: DANIEL D. KING
Daniel D. King
President and Chief Executive
Officer
ATTEST:
LARRY A. BAKER
Larry A. Baker
Senior Vice President - Administration
EXHIBIT 10(b)
WAUSAU PAPER MILLS COMPANY
PRINTING AND WRITING DIVISION
INCENTIVE COMPENSATION PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE OF THE PLAN
1.1 AMENDMENT OF THE PLAN. Wausau Paper Mills Company hereby amends,
restates and renames the Printing and Writing Paper Division Incentive
Compensation Plan effective for Fiscal Years beginning on and after
September 1, 1995.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to reward
participating employees for efforts to increase the financial performance
of the Printing and Writing Division.
SECTION 2. DEFINITIONS
2.1 DEFINITIONS. Whenever used in the Plan, the following terms
shall have the respective meanings set forth below, unless otherwise
expressly provided herein, and when the defined meaning is intended, the
term is capitalized:
(a) "ACHIEVED PERFORMANCE LEVEL" for a Fiscal Year shall mean
that percentage (rounded to the nearest .01%) obtained by dividing
actual ROA for the Fiscal Year by the Target Performance Level for the
year.
(b) "ADJUSTED OPERATING INCOME" means, with respect to each
Fiscal Year, the Printing and Writing Division's income before
adjustment for (1) income tax, (2) accrued or paid bonuses, (3)
interest income or expense, (4) commissions paid to a domestic
international sales corporation or foreign sales corporation which is
a subsidiary of the Company or any other subsidiary of the Company,
(5) gains and losses on the sale of operating assets, common stock or
other securities, (6) income realized from LIFO decrements and (7) any
other material, nonrecurring events of an unusual nature. "Adjusted
Operating Income" shall be determined in accordance with generally
accepted accounting principles.
(c) "ATTACHMENT A" means the schedule appended hereto and
designated "Attachment A" or any amended schedule designated by the
Executive Committee as "Attachment A" for the Plan for any Fiscal
Year; provided however, that any such designation for a Fiscal Year
shall occur on or before the date on which the Executive Committee
sets the Target Performance Level for such Fiscal Year. Once amended,
any schedule designated as "Attachment A" shall remain in effect until
further amended by specific resolution of the Executive Committee.
(d) "AVERAGE CONTROLLABLE OPERATING ASSETS" means, with respect
to each Fiscal Year, the average of the amounts of Total Controllable
Operating Assets as of the last day of each calendar month of such
Fiscal Year.
(e) "COMPANY" shall mean Wausau Paper Mills Company.
<PAGE>
(f) "FISCAL YEAR" means the twelve-month period beginning
September 1 and ending August 31 or such other period as may be
designated by the Company as its fiscal year reporting period.
(g) "PARTICIPANT" means each person who is eligible to
participate in the Plan and to receive an award of incentive
compensation as a result of being a Participant during a portion of a
Fiscal Year as determined in accordance with section 3.
(h) "PLAN" means the Wausau Paper Mills Company Printing and
Writing Division Incentive Compensation Plan as set forth herein.
(i) "PRESIDENT" means the President of the Company.
(j) "PRINTING AND WRITING DIVISION" means the Printing and
Writing Division of the Company which consists of the Company's Brokaw
Division and its wholly owned subsidiary, Wausau Papers of New
Hampshire, Inc., a Delaware corporation.
(k) "ROA" means, with respect to each Fiscal Year of the
Company, the Company's return on Average Controllable Operating Assets
expressed as the percentage determined by dividing Adjusted Operating
Income by Average Controllable Operating Assets.
(l) "SALARY" means, with respect to each Participant, his annual
rate of basic compensation as of the last day of the Fiscal Year
immediately preceding the Fiscal Year for which a determination
pursuant to section 5.2 is made; provided, however; that in the event
a Participant had no annual rate of basic compensation as of the last
day of such preceding Fiscal Year, "Salary" shall mean the annual rate
of the Participant's basic compensation as of the last day of the
Fiscal Year for which a determination is being made pursuant to
section 5.2. For purposes of this section 2.1(l), "basic
compensation" shall exclude (1) bonuses, (2) overtime pay, (3)
payments under any deferred compensation or other plan and (4) all
other forms of non-cash compensation, including, but not limited to
income imputed with respect to group life insurance, use of Company-
owned automobiles and all other forms of imputed income.
(m) "TARGET PERFORMANCE LEVEL" means, for each Fiscal Year, the
ROA for the year which is established by the Executive Committee as
the base ROA target against which ROA performance is to be compared
(and by which the Achieved Performance Level shall be computed) in
order to determine the existence or amount of incentive awards to be
paid to Participants.
(n) "THRESHOLD PERFORMANCE LEVEL" means such percentage of ROA
as may, from time to time and at any time, be established by the
Executive Committee pursuant to section 4.
(o) "TOTAL CONTROLLABLE OPERATING ASSETS" means the amount of
total assets of the Printing and Writing Division exclusive of the sum
of (1) cash and cash equivalents and other assets held for investment,
including common stock or other investment securities, (2)
construction in progress, (3) loans to Rhinelander Paper Company, Inc.
or any other subsidiary of the Company, and (4) deferred tax assets.
The amount of total assets of the Printing and Writing Division shall
be determined in accordance with generally accepted accounting
principles.
<PAGE>
SECTION 3. PARTICIPATION
3.1 ELIGIBILITY.
(a) Each Fiscal Year the President of the Company shall
designate (1) by name, those employees at the Printing and Writing
Division who shall be eligible to participate in the Plan for such
Fiscal Year, (2) by position, those positions at the Printing and
Writing Division which shall entitle the holders thereof to be
eligible to participate in the Plan for such Fiscal Year and (3) by
name or position, those other employees of the Company who shall be
eligible to receive an individual Presidential Pool Incentive
Compensation Award pursuant to section 5.3 and who shall be
"Participants" only with respect to such Presidential Pool
participation. Such designations may be made by position or by
individual name as the President deems appropriate and, in the case of
employees described in clauses (1) and (2) of the preceding sentence,
shall specify whether the Participant is eligible to receive an
incentive award pursuant to section 5.2 or section 5.3 or both of such
sections. Participation shall begin as of the date specified by the
President and may be for less than a full Fiscal Year.
(b) Each employee or position designated by the President as
being eligible to receive an incentive award pursuant to section 5.2
shall also be assigned to a Group Participation Level by the President
from among the following groups:
Group ROA
Participation Incentive Award
LEVEL (% OF SALARY)
A 15.00%
B 33.33%
C 66.67%
D 100.00%
If a Participant is assigned to a different Group Participation Level
during a Fiscal Year, the Participant's incentive award under section
5.2 shall be determined by proration of the Participant's Group
Participation Levels for the Fiscal Year.
3.2 DURATION OF PARTICIPATION.
(a) Selection by the President to participate in the Plan for a
Fiscal Year shall not give any individual or position designated the
right to continue as a Participant in any subsequent Fiscal Year. The
President has complete discretion to and shall each Fiscal Year
designate, by individuals or positions, such persons as in his
discretion shall be appropriate to further the interests of the
Company and serve the purposes for which this Plan has been
established.
(b) Participation with respect to a Fiscal Year shall terminate
upon the first to occur of the Participant's (1) termination of
employment or (2) transfer to a position not then eligible to
participate in the Plan, but the former Participant will be entitled
to receive a prorated incentive award if the provisions of section
5.2(d) are satisfied.
<PAGE>
SECTION 4. DETERMINATION OF INCENTIVE COMPENSATION
4.1 DETERMINATION OF TARGET PERFORMANCE LEVEL. On or before October
1st of each Fiscal Year, the Executive Committee shall establish the
Target Performance Level for such Fiscal Year.
4.2 DETERMINATION OF THRESHOLD PERFORMANCE LEVEL. On or before
October 1st of each Fiscal Year, the Executive Committee shall establish
the Threshold Performance Level for such Fiscal Year.
SECTION 5. INCENTIVE AWARDS
5.1 FISCAL YEAR PERFORMANCE. Each Fiscal Year, as soon as reasonably
possible following the availability to the Executive Committee of the
Company's audited financial statements for the Fiscal Year, the Executive
Committee shall determine the ROA and the Achieved Performance Level for
the Fiscal Year.
5.2 DETERMINATION OF ROE INCENTIVE AWARD. Each Participant shall be
entitled to receive a ROA Incentive Award in an amount equal to the
product of (a) the Participant's Salary, as determined prior to any award
under this Plan, multiplied by (b) the percentage in Column (4) of
Attachment A which is set forth opposite the percentage in Column (2) of
Attachment A which corresponds to the Achieved Performance Level for such
Fiscal Year, multiplied by (c) the percentage specified in section 3.1(b)
for the Group Participation Level to which the Participant has been
assigned; provided, however, that:
(a) No ROA Incentive Award shall be payable in any Fiscal Year in
which ROA does not equal or exceed the Threshold Performance
Level.
(b) If the Achieved Performance Level for the Fiscal Year is not
expressed as a whole integer (and therefore not specifically set
forth in Column (2) of Attachment A), the applicable percentage
of base salary used to determine a Participant's ROA Incentive
Award shall be determined by interpolation (rounded up to the
next highest .01%), based on the percentages set forth in Column
(4) of Attachment A, of the percentage which would correspond to
the Achieved Performance Level set forth in Column (2) if Column
(4) specified Achieved Performance Levels at each .01% between
80% and 120%.
(c) A Participant who (1) was a Participant on the last day of Fiscal
Year, but was not eligible to participate for the entire Fiscal
Year or (2) transfers to a position in the Company or any
subsidiary thereof and is thereafter not eligible to participate
in the Plan or (3) incurs a termination of employment on or
before the last day of the Fiscal Year because of (A) normal,
early or late retirement (or prior to becoming eligible for a
disability retirement benefit) under the terms of any pension
plan maintained by the Company or any subsidiary thereof as part
of a trust qualified under section 401(a) of the Internal Revenue
Code of 1986, as amended, or (B) death shall be entitled to
receive a prorated ROA Incentive Award for such Fiscal Year based
on the number of complete calendar months in the Fiscal Year in
which such Participant or former Participant participated in the
Plan during such Fiscal Year.
<PAGE>
5.3 DISCRETIONARY INDIVIDUAL PARTICIPANT INCENTIVE COMPENSATION
AWARDS - "PRESIDENTIAL POOL". Each Fiscal Year, an amount which is not in
excess of 5% of the aggregate amount of individual ROA Incentive Awards
for the Fiscal Year awarded pursuant to section 5.2 (the "Presidential
Pool") may be awarded to one or more Participants who are selected in the
sole discretion of the President to receive an incentive award pursuant to
this section 5.3. The Participants who shall be entitled to receive such
awards, if any, and the basis upon which such awards shall be determined
shall be the sole and exclusive province of the President. If less than
the amount provided for as the Presidential Pool in this section 5.3 is
awarded with respect to a Fiscal Year, any amount not awarded to
Participants shall lapse and shall not be paid under any other provision
of this Plan.
5.4 PAYMENT OF AWARDS. Payment of incentive awards shall be made by
the Company to the Participant as soon as administratively feasible
following the determination of the amount of such awards. Any payment due
a participant at or after the time of his death shall be made by the
Company to the personal representative of the Participant's estate.
SECTION 6. ADMINISTRATION
6.1 PLAN ADMINISTRATOR. The President shall act as the plan
administrator of the Plan and shall have sole and complete authority to
interpret and implement the provisions of the Plan, including, but not
limited to, the sole and final discretion as to matters of eligibility to
participate, matters relating to the eligibility to receive any incentive
awards, the determination of Achieved Performance Level, Adjusted
Operating Income, Average Controllable Operating Assets, ROA, Salary,
Target Performance Level, Total Controllable Operating Assets and the
determination of the Presidential Pool. The President may designate one
or more employees or other agents to assist him in administering the Plan.
SECTION 7. AMENDMENTS AND TERMINATION
7.1 AMENDMENTS AND TERMINATION. The Executive Committee or the Board
of Directors of the Company may, from time to time and at any time, amend
or terminate the Plan; provided, however, that such amendment or
termination may not result in the forfeiture of any incentive award earned
with respect to any Fiscal Year preceding the Fiscal Year in which such
amendment or termination is adopted. Any amendment or termination may be
made effective with respect to any Fiscal Year in which such action is
adopted.
SECTION 8. EMPLOYMENT RIGHTS
8.1 EMPLOYMENT RIGHTS. Nothing contained in the Plan shall be
construed as conferring a right upon any employee to be continued in the
employment of the Company or to remain as a Participant in the Plan after
amendment or termination of the Plan.
SECTION 9. APPLICABLE LAW
9.1 APPLICABLE LAW. The Plan shall be construed, administered and
governed in all respects under and by the laws of the State of Wisconsin.
<PAGE>
IN WITNESS WHEREOF, this Plan, as amended effective as of September
18, 1996, has been executed by and for the Company by its duly authorized
officer.
WAUSAU PAPER MILLS COMPANY
By: DANIEL D. KING
Daniel D. King
President and Chief Executive
Officer
<PAGE>
ATTACHMENT A
<TABLE>
PRINTING & WRITING DIVISION
INCENTIVE COMPENSATION PLANS
OCTOBER 18, 1995
<CAPTION>
(2) (4)
(1) ACHIEVED ROA INCENTIVE
PERCENT PERFORMANCE (3) AWARD AS PERCENTAGE
OF PLAN LEVEL R.O.A. OF SALARY
<S> <C> <C> <C>
70.21% 80.00% 11.50% 15.00%
71.06% 81.00% 11.64% 16.75%
71.92% 82.00% 11.78% 18.50%
72.83% 83.00% 11.93% 20.25%
73.69% 84.00% 12.07% 22.00%
74.54% 85.00% 12.21% 23.75%
75.46% 86.00% 12.36% 25.50%
76.31% 87.00% 12.50% 27.25%
77.23% 88.00% 12.65% 29.00%
78.08% 89.00% 12.79% 30.75%
78.94% 90.00% 12.93% 32.50%
79.85% 91.00% 13.08% 34.25%
80.71% 92.00% 13.22% 36.00%
81.56% 93.00% 13.36% 37.75%
82.48% 94.00% 13.51% 39.50%
83.33% 95.00% 13.65% 41.25%
84.25% 96.00% 13.80% 43.00%
85.10% 97.00% 13.94% 44.75%
85.96% 98.00% 14.08% 46.50%
86.87% 99.00% 14.23% 48.25%
87.73% 100.00% 14.37% 50.00%
88.58% 101.00% 14.51% 52.50%
89.50% 102.00% 14.66% 55.00%
90.35% 103.00% 14.80% 57.50%
91.21% 104.00% 14.94% 60.00%
92.12% 105.00% 15.09% 62.50%
92.98% 106.00% 15.23% 65.00%
93.89% 107.00% 15.38% 67.50%
94.75% 108.00% 15.52% 70.00%
95.60% 109.00% 15.66% 72.50%
96.52% 110.00% 15.81% 75.00%
97.37% 111.00% 15.95% 77.50%
98.23% 112.00% 16.09% 80.00%
99.15% 113.00% 16.24% 82.50%
100.00% 114.00% 16.38% 85.00%
100.92% 115.00% 16.53% 87.50%
101.77% 116.00% 16.67% 90.00%
102.63% 117.00% 16.81% 92.50%
103.54% 118.00% 16.96% 95.00%
104.40% 119.00% 17.10% 97.50%
105.25% 120.00% 17.24% 100.00%
</TABLE>
<PAGE>
RHINELANDER PAPER COMPANY, INC.
INCENTIVE COMPENSATION PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE OF THE PLAN
1.1 AMENDMENT OF THE PLAN. Rhinelander Paper Company, Inc. hereby
amends and restates the Rhinelander Paper Company, Inc. Incentive
Compensation Plan effective for Fiscal Years beginning on and after
September 1, 1995.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to reward
participating employees for efforts to increase the financial performance of
the Company.
SECTION 2. DEFINITIONS
2.1 DEFINITIONS. Whenever used in the Plan, the following terms shall
have the respective meanings set forth below, unless otherwise expressly
provided herein, and when the defined meaning is intended, the term is
capitalized:
(a) "ACHIEVED PERFORMANCE LEVEL" for a Fiscal Year shall mean that
percentage (rounded to the nearest .01%) obtained by dividing actual ROA
for the Fiscal Year by the Target Performance Level for the year.
(b) "ADJUSTED OPERATING INCOME" means, with respect to each Fiscal
Year, the Company's income before adjustment for (1) income tax, (2)
accrued or paid bonuses, (3) interest income or expense, (4) commissions
paid to a domestic international sales corporation or foreign sales
corporation which is a subsidiary of the Company or any other subsidiary
of the Company, (5) gains and losses on the sale of operating assets,
common stock or other securities, (6) income realized from LIFO
decrements and (7) any other material, nonrecurring events of an unusual
nature, but excluding income (as determined before the adjustments
described in clauses (1) through (7) of this paragraph) which is
attributable to the Company's Lake States Division. "Adjusted Operating
Income" shall be determined in accordance with generally accepted
accounting principles.
(c) "ATTACHMENT A" means the schedule appended hereto and
designated "Attachment A" or any amended schedule designated by the
Board of Directors as "Attachment A" for the Plan for any Fiscal Year;
provided however, that any such designation for a Fiscal Year shall
occur on or before the date on which the Board of Directors sets the
Target Performance Level for such Fiscal Year. Once amended, any
schedule designated as "Attachment A" shall remain in effect until
further amended by specific resolution of the Board of Directors.
(d) "AVERAGE CONTROLLABLE OPERATING ASSETS" means, with respect to
each Fiscal Year, the average of the amounts of Total Controllable
Operating Assets as of the last day of each calendar month of such
Fiscal Year.
(e) "COMPANY" shall mean Rhinelander Paper Company, Inc.
<PAGE>
(f) "FISCAL YEAR" means the twelve-month period beginning
September 1 and ending August 31 or such other period as may be
designated by the Company as its fiscal year reporting period.
(g) "PARTICIPANT" means each person who is eligible to participate
in the Plan and to receive an award of incentive compensation as a
result of being a Participant during a portion of a Fiscal Year as
determined in accordance with section 3.
(h) "PLAN" means the Rhinelander Paper Company, Inc. Incentive
Compensation Plan as set forth herein.
(i) "PRESIDENT" means the President of the Company.
(j) "ROA" means, with respect to each Fiscal Year of the Company,
the Company's return on Average Controllable Operating Assets expressed
as the percentage determined by dividing Adjusted Operating Income by
Average Controllable Operating Assets.
(k) "SALARY" means, with respect to each Participant, his annual
rate of basic compensation as of the last day of the Fiscal Year
immediately preceding the Fiscal Year for which a determination pursuant
to section 5.2 is made; provided, however; that in the event a
Participant had no annual rate of basic compensation as of the last day
of such preceding Fiscal Year, "Salary" shall mean the annual rate of
the Participant's basic compensation as of the last day of the Fiscal
Year for which a determination is being made pursuant to section 5.2.
For purposes of this section 2.1(k), "basic compensation" shall exclude
(1) bonuses, (2) overtime pay, (3) payments under any deferred
compensation or other plan and (4) all other forms of non-cash
compensation, including, but not limited to income imputed with respect
to group life insurance, use of Company-owned automobiles and all other
forms of imputed income.
(l) "TARGET PERFORMANCE LEVEL" means, for each Fiscal Year, the
ROA for the year which is established by the Board of Directors as the
base ROA target against which ROA performance is to be compared (and by
which the Achieved Performance Level shall be computed) in order to
determine the existence or amount of incentive awards to be paid to
Participants.
(m) "THRESHOLD PERFORMANCE LEVEL" means such percentage of ROA as
may, from time to time and at any time, be established by the Board of
Directors pursuant to section 4.
(n) "TOTAL CONTROLLABLE OPERATING ASSETS" means the amount of
total assets of the Company exclusive of the sum of (1) cash and cash
equivalents and other assets held for investment, including common stock
or other investment securities, (2) construction in progress, (3) loans
to Wausau Paper Mills Company, (4) deferred tax assets and (5), to the
extent not already excluded by clauses (1) through (4) of this
paragraph, any other assets employed by the Company's Lake States
Division. The amount of total assets of the Company shall be determined
in accordance with generally accepted accounting principles.
<PAGE>
SECTION 3. PARTICIPATION
3.1 ELIGIBILITY.
(a) Each Fiscal Year the President shall designate (1) by name,
those employees at the Company who shall be eligible to participate in
the Plan for such Fiscal Year, (2) by position, those positions at the
Company which shall entitle the holders thereof to be eligible to
participate in the Plan for such Fiscal Year and (3) by name or
position, those other employees of the Wausau Paper Mills Company or the
Company who shall be eligible to receive an individual Presidential Pool
Incentive Compensation Award pursuant to section 5.3 and who shall be
"Participants" only with respect to such Presidential Pool
participation. Such designations may be made by position or by
individual name as the President deems appropriate and, in the case of
employees described in clauses (1) and (2) of the preceding sentence,
shall specify whether the Participant is eligible to receive an
incentive award pursuant to section 5.2 or section 5.3 or both of such
sections. Participation shall begin as of the date specified by the
President and may be for less than a full Fiscal Year.
(b) Each employee or position designated by the President as being
eligible to receive an incentive award pursuant to section 5.2 shall
also be assigned to a Group Participation Level by the President from
among the following groups:
Group Maximum
Participation Incentive Award
LEVEL (% OF SALARY)
A 33.33%
B 66.67%
C 100.00%
provided, however, that in the event the President designates a new
Group Participation Level of a Participant during a Fiscal Year, the
Participant's incentive award under section 5.2 shall be determined by
proration of the Participant's Group Participation Levels for the Fiscal
Year.
3.2 DURATION OF PARTICIPATION.
(a) Selection by the President to participate in the Plan for a
Fiscal Year shall not give any individual or position designated the
right to continue as a Participant in any subsequent Fiscal Year. The
President has complete discretion to and shall each Fiscal Year
designate, by individuals or positions, such persons as in his
discretion shall be appropriate to further the interests of the Company
and serve the purposes for which this Plan has been established.
(b) Participation with respect to a Fiscal Year shall terminate
upon the first to occur of the Participant's (1) termination of
employment or (2) transfer to a position not then eligible to
participate in the Plan, but the former Participant will be entitled to
receive a prorated incentive award if the provisions of section 5.2(d)
are satisfied.
<PAGE>
SECTION 4. DETERMINATION OF INCENTIVE COMPENSATION
4.1 DETERMINATION OF TARGET PERFORMANCE LEVEL. On or before October
1st of each Fiscal Year, the Board of Directors shall establish the Target
Performance Level for such Fiscal Year.
4.2 DETERMINATION OF THRESHOLD PERFORMANCE LEVEL. On or before October
1st of each Fiscal Year, the Board of Directors shall establish the
Threshold Performance Level for such Fiscal Year.
SECTION 5. INCENTIVE AWARDS
5.1 FISCAL YEAR PERFORMANCE. Each Fiscal Year, as soon as reasonably
possible following the availability to the Board of Directors of the
Company's audited financial statements for the Fiscal Year, the Board of
Directors shall determine the ROA and the Achieved Performance Level for the
Fiscal Year.
5.2 DETERMINATION OF ROE INCENTIVE AWARD. Each Participant shall be
entitled to receive a ROA Incentive Award in an amount equal to the product
of (a) the Participant's Salary, as determined prior to any award under this
Plan, multiplied by (b) the percentage in Column (2) of Attachment A which
is set forth opposite the percentage in Column (1) of Attachment A which
corresponds to the Achieved Performance Level for such Fiscal Year,
multiplied by (c) the percentage specified in section 3.1(b) for the Group
Participation Level to which the Participant has been assigned; provided,
however, that:
(a) No ROA Incentive Award shall be payable in any Fiscal Year in which
ROA does not equal or exceed the Threshold Performance Level.
(b) If the Achieved Performance Level for the Fiscal Year is not
expressed as a whole integer (and therefore not specifically set
forth in Column (1) of Attachment A), the applicable percentage of
base salary used to determine a Participant's ROA Incentive Award
shall be determined by interpolation (rounded up to the next
highest .01%), based on the percentages set forth in Column (2) of
Attachment A, of the percentage which would correspond to the
Achieved Performance Level set forth in Column (1) if Column (2)
specified Achieved Performance Levels at each .01% between 80% and
120%.
(c) A Participant who (1) was a Participant on the last day of Fiscal
Year, but was not eligible to participate for the entire Fiscal
Year or (2) transfers to a position in the Company or any
subsidiary thereof and is thereafter not eligible to participate in
the Plan or (3) incurs a termination of employment on or before the
last day of the Fiscal Year because of (A) normal, early or late
retirement (or prior to becoming eligible for a disability
retirement benefit) under the terms of any pension plan maintained
by the Company or any subsidiary thereof as part of a trust
qualified under section 401(a) of the Internal Revenue Code of
1986, as amended, or (B) death shall be entitled to receive a
prorated ROA Incentive Award for such Fiscal Year based on the
number of complete calendar months in the Fiscal Year in which such
Participant or former Participant participated in the Plan during
such Fiscal Year.
<PAGE>
5.3 DISCRETIONARY INDIVIDUAL PARTICIPANT INCENTIVE COMPENSATION AWARDS
- "PRESIDENTIAL POOL". Each Fiscal Year, an amount which is not in excess
of 5% of the aggregate amount of individual ROA Incentive Awards for the
Fiscal Year awarded pursuant to section 5.2 (the "Presidential Pool") may be
awarded to one or more Participants who are selected in the sole discretion
of the President to receive an incentive award pursuant to this section 5.3.
The Participants who shall be entitled to receive such awards, if any, and
the basis upon which such awards shall be determined shall be the sole and
exclusive province of the President. If less than the amount provided for
as the Presidential Pool in this section 5.3 is awarded with respect to a
Fiscal Year, any amount not awarded to Participants shall lapse and shall
not be paid under any other provision of this Plan.
5.4 PAYMENT OF AWARDS. Payment of incentive awards shall be made by
the Company to the Participant as soon as administratively feasible
following the determination of the amount of such awards. Any payment due a
participant at or after the time of his death shall be made by the Company
to the personal representative of the Participant's estate.
SECTION 6. ADMINISTRATION
6.1 PLAN ADMINISTRATOR. The President shall act as the plan
administrator of the Plan and shall have sole and complete authority to
interpret and implement the provisions of the Plan, including, but not
limited to, the sole and final discretion as to matters of eligibility to
participate, matters relating to the eligibility to receive any incentive
awards, the determination of Achieved Performance Level, Adjusted Operating
Income, Average Controllable Operating Assets, ROA, Salary, Target
Performance Level, Total Controllable Operating Assets and the determination
of the Presidential Pool. The President may designate one or more employees
or other agents to assist him in administering the Plan.
SECTION 7. AMENDMENTS AND TERMINATION
7.1 AMENDMENTS AND TERMINATION. The Executive Committee of the Board
of Directors, if one has been appointed, or the Board of Directors of the
Company may, from time to time and at any time, amend or terminate the Plan;
provided, however, that such amendment or termination may not result in the
forfeiture of any incentive award earned with respect to any Fiscal Year
preceding the Fiscal Year in which such amendment or termination is adopted.
Any amendment or termination may be made effective with respect to any
Fiscal Year in which such action is adopted.
SECTION 8. EMPLOYMENT RIGHTS
8.1 EMPLOYMENT RIGHTS. Nothing contained in the Plan shall be
construed as conferring a right upon any employee to be continued in the
employment of the Company or to remain as a Participant in the Plan after
amendment or termination of the Plan.
SECTION 9. APPLICABLE LAW
9.1 APPLICABLE LAW. The Plan shall be construed, administered and
governed in all respects under and by the laws of the State of Wisconsin.
<PAGE>
IN WITNESS WHEREOF, this Plan, as amended to incorporate all amendments
effective through September 18, 1996, has been executed as of the 18th day
of September, 1996, by and for the Company by its duly authorized officer.
RHINELANDER PAPER COMPANY, INC.
By: DANIEL D. KING
Daniel D. King
President
<PAGE>
ATTACHMENT A
<TABLE>
RHINELANDER PAPER COMPANY, INC.
INCENTIVE COMPENSATION PLAN
<CAPTION>
(1) (2)
ACHIEVED ROA INCENTIVE
PERFORMANCE AWARD AS PERCENTAGE
LEVEL OF SALARY
<S> <C>
88.00% 15.00%
89.00% 17.90%
90.00% 20.80%
91.00% 23.70%
92.00% 26.60%
93.00% 29.50%
94.00% 32.40%
95.00% 35.30%
96.00% 38.20%
97.00% 41.10%
98.00% 44.00%
99.00% 46.90%
100.00% 50.00%
101.00% 52.50%
102.00% 55.00%
103.00% 57.50%
104.00% 60.00%
105.00% 62.50%
106.00% 65.00%
107.00% 67.50%
108.00% 70.00%
109.00% 72.50%
110.00% 75.00%
111.00% 77.50%
112.00% 80.00%
113.00% 82.50%
114.00% 85.00%
115.00% 87.50%
116.00% 90.00%
117.00% 92.50%
118.00% 95.00%
119.00% 97.50%
120.00% 100.00%
</TABLE>
EXHIBIT 10(c)
WAUSAU PAPER MILLS COMPANY
CORPORATE MANAGEMENT INCENTIVE PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE OF THE PLAN
1.1 ESTABLISHMENT OF THE PLAN. Wausau Paper Mills Company hereby
establishes the Corporate Management Incentive Plan effective for the fiscal
year beginning September 1, 1986 and ending August 31, 1987 and for each
fiscal year thereafter until the Plan is terminated.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to reward
participating employees for efforts to increase the Company's return on
equity and for attaining management objectives established for each
Participant in accordance with the terms of the Plan.
SECTION 2. DEFINITIONS
2.1 DEFINITIONS. Whenever used in the Plan, the following terms shall
have the respective meanings set forth below, unless otherwise expressly
provided herein, and when the defined meaning is intended, the term is
capitalized:
(a) The term "ACHIEVED PERFORMANCE LEVEL" for a fiscal year shall mean
that percentage (rounded to the nearest .1%) obtained by dividing
actual ROE for the fiscal year by the Target Performance Level for
the year.
(b) The term "CEO" shall mean the Chief Executive Officer of the
Company.
(c) The term "COMPANY" shall mean Wausau Paper Mills Company and its
subsidiaries.
(d) The term "EXECUTIVE COMMITTEE" shall mean the Executive Committee
of the Board of Directors of the Company, as from time to time
constituted.
(e) The term "INDIVIDUAL PERFORMANCE OBJECTIVE" shall mean, with
respect to each Participant who is an executive officer of the
Company, each management objective established for such Participant
by the CEO pursuant to Section 5.
(f) The term "PARTICIPANT" shall mean each employee of the Company who
has been selected by the Executive Committee to participate in the
Plan.
(g) The term "PLAN" shall mean the Wausau Paper Mills Company Corporate
Management Incentive Plan as set forth herein.
(h) The term "ROE" shall mean, with respect to each fiscal year of the
Company, the Company's return on equity capital expressed as the
percentage determined by dividing the Company's consolidated net
earnings by the Company's average total shareholders' equity for
the fiscal year. Consolidated net earnings shall be defined as the
<PAGE>
consolidated net earnings as reported in the Company's Form 10-K
Annual Report, but before the after-tax effect of all bonus
accruals, profits from LIFO decrements, and the gain and loss on
fixed assets. Average total shareholders' equity shall be computed
by taking the simple average of beginning and ending shareholders'
equity for the fiscal year. The calculation of consolidated net
earnings and average equity for bonus purposes may be adjusted for
unusual or non-recurring items at the sole discretion of the
Executive Committee. All such numbers shall be computed in
accordance with generally accepted accounting principles in a
manner consistent with the Company's audited financial statements.
(i) The term "TARGET PERFORMANCE LEVEL" shall mean, for each fiscal
year, the ROE for the year which is established by the Executive
Committee as the base ROE target against which ROE performance is
to be compared (and by which the Achieved Performance Level shall
be computed) in order to determine the existence or amount of
incentive awards to be paid to Participants.
(j) The term "THRESHOLD PERFORMANCE LEVEL" shall mean such percentage
of ROE as may, from time to time and at any time, be established by
the Executive Committee pursuant to Section 4.
SECTION 3. DETERMINATION OF TARGET PERFORMANCE LEVEL
3.1 DETERMINATION OF TARGET PERFORMANCE LEVEL. On or before October
1st of each fiscal year, the Executive Committee shall establish and
communicate to Participants the Target Performance Level for such year.
3.2 TARGET PERFORMANCE LEVEL FACTORS. In establishing the Target
Performance Level for any fiscal year the Executive Committee shall
consider, among other factors, the following:
(a) The ROE at budgeted future consolidated net earning levels;
(b) Changes from prior years in the size and the composition of the
Company's capital structure;
(c) The historical ROE for the Company;
(d) The historical ROE for companies of like size and operating
characteristics of the Company, as determined by the Executive
Committee; and
(e) The Company's cost of equity capital, as from time to time and at
any time determined by the Executive Committee, and the Executive
Committee's determination of appropriate returns in excess of the
Company's costs of equity capital.
The importance of any one or more of the factors described herein shall be
determined in the sole discretion of the Executive Committee which may
choose to emphasize or de-emphasize the importance of any one or more of
such factors or to consider additional factors if the Executive Committee
deems it appropriate and in the best interests of the Company and to carry
out the purposes of the Plan.
<PAGE>
SECTION 4. THRESHOLD PERFORMANCE LEVEL
4.1 ADJUSTMENTS. From time to time and at any time, the Executive
Committee may evaluate and adjust the minimum ROE which constitutes the
Threshold Performance Level. In making such evaluations and adjustments,
the Executive Committee shall consider such factors as it deems appropriate,
including, but not limited to the following:
(a) The Company's cost of equity capital, as from time to time and at
any time determined by the Executive Committee; and
(b) the historical and expected future ROE of the Company.
SECTION 5. INDIVIDUAL PERFORMANCE OBJECTIVES
5.1 ESTABLISHMENT OF OBJECTIVES. Prior to October 1st of each fiscal
year, the CEO shall establish not less than three, nor more than five,
Individual Performance Objectives for each Participant who is an executive
officer, considering the Participant's job responsibilities and the manner
in which the Participant can and is expected to most directly and
significantly affect the Company's overall performance and ROE.
5.2 DOLLAR VALUE OF INDIVIDUAL PERFORMANCE OBJECTIVES. At the same
time as the CEO establishes an Individual Performance Objective, the CEO
shall determine the dollar amount which, if the Participant fully attains
such Individual Performance Objective, shall be paid as incentive
compensation to the Participant pursuant to Section 6; provided, however,
that the total amount attributable to full attainment of all Individual
Performance Objectives for any one Participant shall not exceed $15,000.
SECTION 6. INCENTIVE AWARDS
6.1 FISCAL YEAR PERFORMANCE. Each fiscal year, as soon as reasonably
possible following the availability to the Executive Committee of the
Company's audited financial statements for the fiscal year, the Executive
Committee shall determine:
(a) ROE for the fiscal year; and
(b) The Achieved Performance Level for the fiscal year.
6.2 DETERMINATION OF ROE INCENTIVE AWARD. Each Participant shall be
entitled to receive an ROE Incentive Award in an amount equal to (1) the
Participant's base salary for the period he was a Participant, as determined
prior to any award under this Plan, multiplied by (2) the percentage in
Column (2) of Attachment A which is set forth opposite the percentage in
Column (1) of Attachment A which corresponds to the Achieved Performance
Level for such fiscal year; provided, however, that:
(a) No ROE Incentive Award shall be payable in any fiscal year in which
ROE does not equal or exceed the Threshold Performance Level.
(b) If the Achieved Performance Level for the fiscal year is not
expressed as a whole integer (and therefore not specifically set
forth in Column (1) of Attachment A), the applicable percentage of
base salary used to determine a Participant's ROE Incentive Award
<PAGE>
shall be determined by interpolation, based on the percentages set
forth in Column (2), of the percentage which would correspond to
the Achieved Performance Level set forth in Column (1) if Column
(1) specified Achieved Performance Levels at each .1% between 80%
and 120%.
(c) In the case of Participants other than executive officers of the
Company, the amount of ROE Incentive Award otherwise determined
above shall be multiplied by 15% or such other percentage, not
above 100%, as may be determined prior to the beginning of any
fiscal year by the President of the Company in order to determine
the amount of such Participants' ROE Incentive Award for such
fiscal year.
6.3 INDIVIDUAL PERFORMANCE INCENTIVE AWARDS. As soon as reasonably
possible following the determination of ROE Incentive Awards for the fiscal
year, the CEO will evaluate and determine the percentage attainment of each
Participant's Individual Performance Objectives. The Participant shall
receive, with respect to each Individual Performance Objective, an
Individual Performance Incentive Award in an amount equal to the aggregate
of (1) the dollar value payable for full attainment of the Individual
Performance Objective multiplied by (2) the percentage attainment of such
Individual Performance Objective as determined by the CEO.
6.4 PAYMENT OF AWARDS. Payment of ROE Incentive Awards and Individual
Performance Incentive Awards shall be made by the Company to the Participant
or his beneficiary (as provided for in Section 7) as soon as
administratively feasible following the determination of the amount of such
awards.
6.5 PARTICIPATION FOR LESS THAN ENTIRE FISCAL YEAR. A Participant who
(1) is a Participant on the last day of a fiscal year, but was not eligible
to participate in the Plan for the entire year, (2) transfers to a position
in the Company or any subsidiary thereof and is thereafter not eligible to
participate in the Plan or (3) incurs a termination of employment on or
before the last day of the fiscal year because of (A) normal, early or late
retirement (or prior to becoming eligible for a disability retirement
benefit) under the terms of any pension plan maintained by the Company or
any subsidiary thereof as part of a trust qualified under section 401(a) of
the Internal Revenue Code of 1986, as amended, or (B) death shall be
entitled to receive a prorated ROE Incentive Award for such fiscal year
based on the number of days in the fiscal year in which such Participant
participated in the Plan during such fiscal year. No Individual Performance
Incentive Award shall be payable to a Participant under the Plan for any
fiscal year in which such Participant was not eligible to receive an ROE
Incentive Award.
SECTION 7. BENEFICIARY DESIGNATION
7.1 BENEFICIARY DESIGNATION.
(a) Each Participant may from time to time and at any time designate,
upon such forms as may be provided or approved for that purpose by
the Executive Committee, a beneficiary or beneficiaries who are to
receive any incentive award which has been earned, but not paid to
such Participant at the time of his death, but the designation of a
beneficiary or beneficiaries shall not be effective for any purpose
unless and until it has been filed by the Participant with the
Company.
<PAGE>
(b) In the event that a Participant shall not designate a beneficiary
or beneficiaries in accordance with the terms of the Plan, or if
for any reason the most recent such designation shall be legally
ineffective, or if such beneficiary or beneficiaries predecease the
Participant, then for all purposes of the Plan, any payment due a
Participant at the time of his death shall be made by the Company
to the personal representative of the Participant's estate.
SECTION 8. ADMINISTRATION
8.1 PLAN ADMINISTRATOR. The Executive Committee shall act as the plan
administrator of the Plan and shall have sole and complete authority to
interpret and implement the provisions of the Plan, including the sole
discretion as to matters of eligibility to participate and to matters
relating to the eligibility to receive any incentive awards, the
determination of Target Performance Levels and the determination of
Threshold Performance Levels.
SECTION 9. AMENDMENTS AND TERMINATION
9.1 AMENDMENTS AND TERMINATION. The Executive Committee or the Board
of Directors of the Company may, from time to time and at any time, amend or
terminate the Plan; provided, however, that such amendment or termination
may not result in the forfeiture of any incentive award earned with respect
to any fiscal year preceding the fiscal year in which such amendment or
termination is adopted. Any amendment or termination may be made effective
with respect to any fiscal year in which such action is adopted.
SECTION 10. EMPLOYMENT RIGHTS
10.1 EMPLOYMENT RIGHTS. Nothing contained in the Plan shall be
construed as conferring a right upon any employee to be continued in the
employment of the Company or to remain as a Participant in the Plan after
amendment or termination of the Plan.
SECTION 11. APPLICABLE LAW
11.1 APPLICABLE LAW. The Plan shall be construed, administered and
governed in all respects under and by the laws of the State of Wisconsin.
IN WITNESS WHEREOF, this Plan, as amended to incorporate all amendments
effective through September 18, 1996, has been executed as of the 18th day
of September, 1996, by and for the Company by its duly authorized officer.
WAUSAU PAPER MILLS COMPANY
By: DANIEL D. KING
Daniel D. King
President and Chief Executive
Officer
<PAGE>
<TABLE>
WAUSAU PAPER MILLS COMPANY
CORPORATE MANAGEMENT INCENTIVE PLAN
ATTACHMENT A
<CAPTION>
(1) (2)
ACHIEVED ROA INCENTIVE
PERFORMANCE AWARD AS PERCENTAGE
LEVEL OF SALARY
<S> <C>
80.00% 15.00%
81.00% 16.75%
82.00% 18.50%
83.00% 20.25%
84.00% 22.00%
85.00% 23.75%
86.00% 25.50%
87.00% 27.25%
88.00% 29.00%
89.00% 30.75%
90.00% 32.50%
91.00% 34.25%
92.00% 36.00%
93.00% 37.75%
94.00% 39.50%
95.00% 41.25%
96.00% 43.00%
97.00% 44.75%
98.00% 46.50%
99.00% 48.25%
Target Target
100.00% 50.00%
101.00% 52.50%
102.00% 55.00%
103.00% 57.50%
104.00% 60.00%
105.00% 62.50%
106.00% 65.00%
107.00% 67.50%
108.00% 70.00%
109.00% 72.50%
110.00% 75.00%
111.00% 77.50%
112.00% 80.00%
113.00% 82.50%
114.00% 85.00%
115.00% 87.50%
116.00% 90.00%
117.00% 92.50%
118.00% 95.00%
119.00% 97.50%
120.00% 100.00%
</TABLE>
EXHIBIT 10(d)
WAUSAU PAPER MILLS COMPANY
1988 STOCK APPRECIATION RIGHTS PLAN
1. PURPOSE.
The purpose of the Wausau Paper Mills Company 1988 Stock Appreciation
Rights Plan (the "Plan") is to attract and retain outstanding individuals as
officers and key employees of Wausau Paper Mills Company (the "Corporation")
and its subsidiaries, and to furnish incentives to such individuals through
rewards based upon the performance of the common stock of the Corporation.
To this end, the Committee hereinafter designated may grant stock
appreciation rights to officers and other key employees of the Corporation
and its subsidiaries, on the terms and subject to the conditions set forth
in this Plan.
2. PARTICIPANTS.
Participants in the Plan shall consist of such officers and other key
employees of the Corporation and its subsidiaries as the Committee in its
sole discretion may select from time to time to receive stock appreciation
rights.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a Committee (the "Committee") of at
least three members appointed by the Board of Directors of the Corporation
from among its members. No person shall be appointed a member of the
Committee if, during the one year prior to the date on which such person's
service as a member of the Committee is to commence, such person was granted
or awarded equity securities of the Corporation (within the meaning of
Securities and Exchange Commission Rule 16a-1(d)) under the Plan or any
other plan of the Corporation or any subsidiary of the Corporation. Subject
to the provisions of the Plan, the Committee shall have authority (i) to
determine which employees of the Corporation and its subsidiaries shall be
eligible for participation in the Plan; (ii) to select employees to receive
grants under the plan; (iii) to determine the number of stock appreciation
rights subject to the grant, the time and conditions of exercise or vesting,
the fair market value of the common stock of the Corporation for purposes of
the Plan, and all other terms and conditions of any grant; and (iv) to
prescribe the form of agreement, certificate or other instrument evidencing
the grant. the Committee shall also have authority to interpret the Plan
and to establish, amend and rescind rules and regulations for the
administration of the Plan, and all such interpretations, rules and
regulations shall be conclusive and binding on all persons, provided,
however, that the Committee shall not exercise such authority in a manner
adversely and significantly affecting rights previously granted unless the
action taken is required to comply with any applicable law or regulation.
4. EFFECTIVE DATE AND TERM OF PLAN.
The Plan shall become effective on July 20, 1988, the date of its
approval by the Board of Directors of the Corporation. The Plan shall
terminate ten years after it becomes effective, unless terminated sooner by
action of the Board of Directors. No further grants may be made under the
Plan after its termination, but the termination of the Plan shall not affect
the rights of any participant under, or the authority of the Committee with
respect to, any grants made prior to termination.
<PAGE>
5. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in paragraph 7 hereof, the aggregate
number of shares of common stock of the Corporation with respect to which
stock appreciation rights may be granted under the Plan shall not exceed
25,000. Whenever a stock appreciation right granted under the Plan can no
longer under any circumstances be exercised, the shares, if any, then
remaining subject to such stock appreciation right shall thereupon be
released from such stock appreciation right and shall thereafter be
available for additional grants of stock appreciation rights under the Plan.
6. STOCK APPRECIATION RIGHTS.
(a) Grants. Stock appreciation rights entitling the grantee to receive
cash equal to the sum of (i) the appreciation in value of and (ii) the value
of the reinvested cash dividends which would have been paid with respect to
a stated number of shares of common stock of the Corporation between the
date of grant and the date of exercise (the "hypothetical reinvested cash
dividends") may be granted from time to time to such officers and other key
employees of the Corporation and its subsidiaries as may be selected by the
Committee.
(b) Terms of Grant. Stock appreciation rights shall be exercisable in
whole or in such installments and at such times as may be determined by the
Committee, provided that no stock appreciation right shall be exercisable
more than twenty years after the date of grant. the Committee may at the
time of grant or at any time thereafter impose such additional terms and
conditions on the exercise of stock appreciation rights as it deems
necessary or desirable for compliance with Section 16(a) or 16(b) of the
Securities Exchange Act of 1934 and the rules and regulations thereunder.
(c) Termination of Employment or Death. If a grantee ceases to be
employed by the Corporation and any of its subsidiaries for any reason other
than death, any stock appreciation right held by such grantee may be
exercised for a period ending on the earlier of the 90th day following the
date of such cessation of employment or the date of expiration of such stock
appreciation right, but only with respect to that number of shares of common
stock for which such right was exercisable immediately prior to the date of
cessation of employment.
If a grantee ceases to be employed by the Corporation or any of its
subsidiaries by reason of death, or dies within 90 days after termination of
his employment by the Corporation or any of its subsidiaries, any stock
appreciation right held by such grantee may be exercised, with respect to
all or any part of the common stock of the Corporation with respect to which
such stock appreciation right was exercisable by the grantee immediately
prior to his death, for a period ending on the earlier of the first
anniversary of the date of such grantee's death or the date of expiration of
such stock appreciation right.
(d) Payment on Exercise. Upon exercise of a stock appreciation right
the grantee shall be paid within five business days an amount in cash equal
to the sum of (i) the amount by which the fair market value of one share of
the Corporation's common stock on the date of exercise exceeds the date of
grant value thereof multiplied by the number of shares in respect of which
the stock appreciation right is being exercised and (ii) the value of the
hypothetical reinvested cash dividends associated therewith. The value of
the hypothetical reinvested cash dividends associated with a share in
respect of which the stock appreciation right is being exercised (the
<PAGE>
"exercised share") shall be equal to the fair market value on the date of
exercise of the number of additional shares (or fraction thereof) of the
Company's common stock the grantee would have owned if it is assumed (1)
that cash dividends which would have been paid with respect to the exercised
share if the exercised share had been outstanding from the time of grant had
been paid in cash to the grantee and then immediately reinvested by the
grantee in the Company's common stock at the fair market value thereof on
the applicable dividend payment date, and (2) that, once assumed issued,
hypothetical shares resulting from assumed dividend reinvestment themselves
paid cash dividends (at the same time and in the same amount as shares of
the Corporation's outstanding common stock) which were reinvested in a
similar manner.
For purposes of this paragraph, the fair market value of a share of
common stock of the Corporation means:
(A) The mean between the high and the low prices at which the
common stock of the Corporation was traded if the common stock of
the Corporation was then listed for trading on a national or
regional securities exchange; or
(B) The mean between the published bid and asked prices of
the common stock of the Corporation if the common stock of the
Corporation was then traded on a bona fide over-the-counter market;
or
(C) If the common stock of the Corporation was not traded on
an exchange or on a bona fide over-the-counter market, a value
determined by an appraiser selected by the Committee.
In the event that the date of the exercise of a stock appreciation right is
a date on which there is no trading of the common stock of the Corporation
on a national or regional securities exchange or is a date for which there
is no published bid and asked prices if the stock is traded on the over-the-
counter market, such fair market value shall be determined by referring to
the next preceding business day on which trading occurs or on which
published prices are available.
(e) Additional Terms and Conditions. The agreement or instrument
evidencing the grant of stock appreciation rights may contain such other
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Committee in its sole discretion.
7. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION, ETC.
Stock appreciation rights shall be subject to adjustment by the
Committee in its sole discretion as to the number, kind and date of grant
value of shares or other consideration subject to such grants in the event
of changes in the outstanding common stock by reason of stock dividends,
stock splits, recapitalizations, reorganizations, mergers, consolidations,
combinations, exchanges or other relevant changes in corporate structure or
capitalization occurring after the date of the grant of any stock
appreciation right, provided that if the Corporation shall change its common
stock into a greater or lesser number of shares through a stock dividend,
stock split-up, or combination of shares, outstanding rights shall be
adjusted proportionately, consistent with existing law and regulation, to
prevent inequitable results.
<PAGE>
8. EFFECT OF LIQUIDATION, MERGER, CONSOLIDATION OR OTHER EVENTS.
Nothing contained in the Plan of in any stock appreciation right granted
under the Plan shall in any way prohibit the Corporation from merging with
or consolidating into another corporation, or from selling or transferring
all or substantially all of its assets, or from distributing all or
substantially all of its assets to its stockholders in liquidation, or from
dissolving and terminating its corporate existence; and in any such event,
all outstanding stock appreciation rights granted under the Plan shall be
deemed to have been exercised at the time of any such merger, consolidation,
sale or transfer of assets, liquidation, or dissolution, except to the
extent that any agreement or undertaking of any party to such merger,
consolidation, or sale or transfer of assets, or any plan pursuant to which
such liquidation or dissolution is effected, shall make specific provision
to continue such stock appreciation rights and the rights of such person or
persons entitled to exercise such stock appreciation rights.
9. AMENDMENT AND TERMINATION OF PLAN.
The Plan may be amended or terminated by the Board of Directors of the
Corporation in any respect, provided, however, that the Board shall not
exercise such authority in a manner adversely and significantly affecting
rights previously granted unless the action taken is required to comply with
any applicable law or regulation.
10. MISCELLANEOUS.
(a) No Right to a Grant. Neither the adoption of the Plan nor any
action of the Board of Directors or of the Committee shall be deemed to give
any employee any right to be selected as a participant or to be granted a
stock appreciation right.
(b) Rights as Stockholder. No person shall have any rights as a
stockholder of the Corporation with respect to any shares covered by a stock
appreciation right.
(c) Employment. Nothing contained in this Plan shall be deemed to
confer upon any employee any right of continued employment with the
Corporation or any of its subsidiaries or to limit or diminish in any way
the right of the Corporation or any such subsidiary to terminate his or her
employment at any time with or without cause.
(d) Taxes. the Corporation shall be entitled to deduct from any
payment under the Plan the amount of any tax required by law to be withheld
with respect to such payment or may require any participant to pay such
amount to the Corporation prior to and as a condition of making such
payment.
(e) Nontransferability. No stock appreciation right shall be
transferable except by will or the laws of descent and distribution. During
the holder's lifetime, stock appreciation rights shall be exercisable only
by such holder.
EXHIBIT 10(e)
WAUSAU PAPER MILLS COMPANY
1988 MANAGEMENT INCENTIVE PLAN
1. PURPOSE.
The purpose of the Wausau Paper Mills Company 1988 Management Incentive
Plan (the "Plan") is to attract and retain outstanding individuals as
management employees of Wausau Paper Mills Company (the "Corporation") and
its subsidiaries, and to furnish incentives to such individuals through
rewards based upon the performance of the common stock of the Corporation.
To this end, the Committee hereinafter designated may grant stock
appreciation rights to management employees of the Corporation and its
subsidiaries, on the terms and subject to the conditions set forth in this
Plan.
2. PARTICIPANTS.
Participants in the Plan shall consist of such management employees of
the Corporation and its subsidiaries as the Committee in its sole discretion
may select from time to time to receive stock appreciation rights.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a Committee (the "Committee") of at
least three members appointed by the Board of Directors of the Corporation
from among its members. No person shall be appointed a member of the
Committee if, during the one year prior to the date on which such person's
service as a member of the Committee is to commence, such person was granted
or awarded equity securities of the Corporation (within the meaning of
Securities and Exchange Commission Rule 16a-1(d)) under the Plan or any
other plan of the Corporation or any subsidiary of the Corporation. Subject
to the provisions of the Plan, the Committee shall have authority (i) to
determine which employees of the Corporation and its subsidiaries shall be
eligible for participation in the plan; (ii) to select employees to receive
grants under the Plan; (iii) to determine the number of stock appreciation
rights subject to the grant, the time and conditions of exercise or vesting,
the fair market value of the common stock of the Corporation for purposes of
the Plan, and all other terms and conditions of any grant; and (iv) to
prescribe the form of agreement, certificate or other instrument evidencing
the grant. The Committee shall also have authority to interpret the Plan
and to establish, amend and rescind rules and regulations for the
administration of the Plan, and all such interpretations, rules and
regulations shall be conclusive and binding on all persons, provided,
however, that the Committee shall not exercise such authority in a manner
adversely and significantly affecting rights previously granted unless the
action taken is required to comply with any applicable law or regulation.
4. EFFECTIVE DATE AND TERM OF PLAN.
The Plan shall become effective on August 15, 1988, the date of its
approval by the Board of Directors of the Corporation. The Plan shall
terminate ten years after it becomes effective, unless terminated sooner by
action of the Board of Directors. No further grants may be made under the
Plan after its termination, but the termination of the Plan shall not affect
the rights of any participant under, or the authority of the Committee with
respect to, any grants made prior to termination.
<PAGE>
5. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in paragraph 7 hereof, the aggregate
number of shares of common stock of the Corporation with respect to which
stock appreciation rights may be granted under the Plan shall not exceed
75,000. Whenever a stock appreciation right granted under the Plan can no
longer under any circumstances be exercised, the shares, if any, then
remaining subject to such stock appreciation right shall thereupon be
released from such stock appreciation right and shall thereafter be
available for additional grants of stock appreciation rights under the Plan.
6. STOCK APPRECIATION RIGHTS.
(a) Grants. Stock appreciation rights entitling the grantee to receive
cash equal to the sum of (i) the appreciation in value of and (ii) the value
of the reinvested cash dividends which would have been paid with respect to
a stated number of shares of common stock of the Corporation between the
date of grant and the date of exercise (the "hypothetical reinvested cash
dividends") may be granted from time to time to such officers and other key
employees of the Corporation and its subsidiaries as may be selected by the
Committee.
(b) Terms of Grant. Stock appreciation rights shall be exercisable in
whole or in such installments and at such times and subject to the
attainment of such performance goals as may be determined by the Committee,
provided that no stock appreciation right shall be exercisable more than
twenty years after the date of grant. The Committee may at the time of
grant or at any time thereafter impose such additional terms and conditions
on the exercise of stock appreciation rights as it deems necessary or
desirable for compliance with Section 16(a) or 16(b) of the Securities
Exchange Act of 1934 and the rules and regulations thereunder.
(c) Termination of Employment of Death. If a grantee ceases to be
employed by the Corporation and any of its subsidiaries for any reason other
than death, any stock appreciation right held by such grantee may be
exercised for a period ending on the earlier of the 90th day following the
date of such cessation of employment or the date of expiration of such stock
appreciation right, but only with respect to that number of shares of common
stock for which such right was exercisable immediately prior to the date of
cessation of employment.
If a grantee ceases to be employed by the Corporation or any of its
subsidiaries by reason of death, or dies within 90 days after termination of
his employment by the Corporation or any of its subsidiaries, any stock
appreciation right held by such grantee may be exercised, with respect to
all or any part of the common stock of the Corporation with respect to which
such stock appreciation right was exercisable by the grantee immediately
prior to his death, for a period ending on the earlier of the first
anniversary of the date of such grantee's death or the date of expiration of
such stock appreciation right.
(d) Payment on Exercise. Upon exercise of a stock appreciation right
the grantee shall be paid within five business days an amount in cash equal
to the sum of (i) the amount by which the fair market value of one share of
the Corporation's common stock on the date of exercise exceeds the date of
grant value thereof multiplied by the number of shares in respect of which
the stock appreciation right is being exercised and (ii) the value of the
hypothetical reinvested cash dividends associated therewith. The value of
the hypothetical reinvested cash dividends associated with a share in
<PAGE>
respect of which the stock appreciation right is being exercised (the
"exercised share") shall be equal to the fair market value on the date of
exercise of the number of additional shares (or fraction thereof) of the
Company's common stock the grantee would have owned if it is assumed (1)
that cash dividends which would have been paid with respect to the exercised
share if the exercised share had been outstanding from the time of grant had
been paid in cash to the grantee and then immediately reinvested by the
grantee in the Company's common stock at the fair market value thereof on
the applicable dividend payment date, and (2) that, once assumed issued,
hypothetical shares resulting from assumed dividend reinvestment themselves
paid cash dividends (at the same time and in the same amount as shares of
the Corporation's outstanding common stock) which were reinvested in a
similar manner.
For purposes of this paragraph, the fair market value of a share of
common stock of the Corporation means:
(A) The mean between the high and the low prices at which the
common stock of the Corporation was traded if the common stock of the
Corporation was then listed for trading on a national or regional
securities exchange; or
(B) The mean between the published bid and asked prices of the
common stock of the Corporation if the common stock of the Corporation
was then traded on a bona fide over-the-counter market; or
(C) If the common stock of the Corporation was not traded on an
exchange or on a bona fide over-the-counter market, a value determined
by an appraiser selected by the Committee.
In the event that the date of the exercise of a stock appreciation right is
a date on which there is no trading of the common stock of the Corporation
on a national or regional securities exchange or is a date for which there
is no published bid and asked prices if the stock is traded on the over-the-
counter market, such fair market value shall be determined by referring to
the next preceding business day on which trading occurs or on which
published prices are available.
(e) Additional Terms and Conditions. The agreement or instrument
evidencing the grant of stock appreciation rights may contain such other
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Committee in its sole discretion.
7. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION, ETC.
Stock appreciation rights shall be subject to adjustment by the
Committee in its sole discretion as to the number, kind and date of grant
value of shares or other consideration subject to such grants in the event
of changes in the outstanding common stock by reason of stock dividends,
stock splits, recapitalizations, reorganizations, mergers, consolidations,
combinations, exchanges or other relevant changes in corporate structure or
capitalization occurring after the date of the grant of any stock
appreciation right, provided that if the Corporation shall change its common
stock into a greater or lesser number of shares through a stock dividend,
stock split-up, or combination of shares, outstanding rights shall be
adjusted proportionately, consistent with existing law and regulation, to
prevent inequitable results.
<PAGE>
8. EFFECT OF LIQUIDATION, MERGER, CONSOLIDATION OR OTHER EVENTS.
Nothing contained in the Plan or in any stock appreciation right granted
under the Plan shall in any way prohibit the Corporation from merging with
or consolidating into another corporation, or from selling or transferring
all or substantially all of its assets, or from distributing all or
substantially all of its assets to its stockholders in liquidation, or from
dissolving and terminating its corporate existence; and in any such event,
all outstanding stock appreciation rights granted under the Plan shall be
deemed to have been exercised, to the extent then exercisable by the
grantee, at the time of any such merger, consolidation, sale or transfer of
assets, liquidation, or dissolution, except to the extent that any agreement
or undertaking of any party to such merger, consolidation, or sale or
transfer of assets, or any plan pursuant to which such liquidation or
dissolution is effected, shall make specific provision to continue such
stock appreciation rights and the rights of such person or persons entitled
to exercise such stock appreciation rights.
9. AMENDMENT AND TERMINATION OF PLAN.
The Plan may be amended or terminated by the Board of Directors of the
Corporation in any respect, provided, however, that the Board shall not
exercise such authority in a manner adversely and significantly affecting
rights previously granted unless the action taken is required to comply with
any applicable law or regulation.
10. MISCELLANEOUS.
(a) No Right to a Grant. Neither the adoption of the Plan nor any
action of the Board of Directors or of the Committee shall be deemed to give
any employee any right to be selected as a participant or to be granted a
stock appreciation right.
(b) Rights as Stockholder. No person shall have any rights as a
stockholder of the Corporation with respect to any shares covered by a stock
appreciation right.
(c) Employment. Nothing contained in this Plan shall be deemed to
confer upon any employee any right of continued employment with the
Corporation or any of its subsidiaries or to limit or diminish in any way
the right of the Corporation or any such subsidiary to terminate his or her
employment at any time with or without cause.
(d) Taxes. The Corporation shall be entitled to deduct from any
payment under the Plan the amount of any tax required by law to be withheld
with respect to such payment or may require any participant to pay such
amount to the Corporation prior to and as a condition of making such
payment.
(e) Nontransferability. No stock appreciation right shall be
transferable except by will or the laws of descent and distribution. During
the holder's lifetime, stock appreciation rights shall be exercisable only
by such holder.
EXHIBIT 10(f)
WAUSAU PAPER MILLS COMPANY
1990 STOCK APPRECIATION RIGHTS PLAN
1. PURPOSE.
The purpose of the Wausau Paper Mills Company 1990 Stock Appreciation
Rights Plan (the "Plan") is to attract and retain outstanding individuals as
officers and key employees of Wausau Paper Mills Company (the "Corporation")
and its subsidiaries, and to furnish incentives to such individuals through
rewards based upon the performance of the common stock of the Corporation.
To this end, the Committee hereinafter designated may grant stock
appreciation rights to officers and other key employees of the Corporation
and its subsidiaries, on the terms and subject to the conditions set forth
in this Plan.
2. PARTICIPANTS.
Participants in the Plan shall consist of such officers and other key
employees of the Corporation and its subsidiaries as the Committee in its
sole discretion may select from time to time to receive stock appreciation
rights.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a Committee (the "Committee") of at
least three members appointed by the Board of Directors of the Corporation
from among its members. No person shall be appointed a member of the
Committee if, during the one year prior to the date on which such person's
service as a member of the Committee is to commence, such person was granted
or awarded equity securities of the Corporation (within the meaning of
Securities and Exchange Commission Rule 16a-1(d)) under the Plan or any
other plan of the Corporation or any subsidiary of the Corporation. Subject
to the provisions of the Plan, the Committee shall have authority (i) to
determine which employees of the Corporation and its subsidiaries shall be
eligible for participation in the Plan; (ii) to select employees to receive
grants under the Plan; (iii) to determine the number of stock appreciation
rights subject to the grant, the time and conditions of exercise or vesting,
the fair market value of the common stock of the Corporation for purposes of
the Plan, and all other terms and conditions of any grant; and (iv) to
prescribe the form of agreement, certificate or other instrument evidencing
the grant. The Committee shall also have authority to interpret the Plan
and to establish, amend and rescind rules and regulations for the
administration of the Plan, and all such interpretations, rules and
regulations shall be conclusive and binding on all persons, provided,
however, that the Committee shall not exercise such authority in a manner
adversely and significantly affecting rights previously granted unless the
action taken is required to comply with any applicable law or regulation.
4. EFFECTIVE DATE AND TERM OF PLAN.
The Plan shall become effective on July 24, 1990, the date of its
approval by the Board of Directors of the Corporation. The Plan shall
terminate ten years after it becomes effective, unless terminated sooner by
action of the Board of Directors. No further grants may be made under the
Plan after its termination, but the termination of the Plan shall not affect
the rights of any participant under, or the authority of the Committee with
respect to, any grants made prior to termination.
<PAGE>
5. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in paragraph 7 hereof, the aggregate
number of shares of common stock of the Corporation with respect to which
stock appreciation rights may be granted under the Plan shall not exceed
250,000. Whenever a stock appreciation right granted under the Plan can no
longer under any circumstances be exercised, the shares, if any, then
remaining subject to such stock appreciation right shall thereupon be
released from such stock appreciation right and shall thereafter be
available for additional grants of stock appreciation rights under the Plan.
6. STOCK APPRECIATION RIGHTS.
(a) Grants. Stock appreciation rights entitling the grantee to receive
cash equal to the sum of (i) the appreciation in value of and (ii) the value
of the reinvested cash dividends which would have been paid with respect to
a stated number of shares of common stock of the Corporation between the
date of grant and the date of exercise (the "hypothetical reinvested cash
dividends") may be granted from time to time to such officers and other key
employees of the Corporation and its subsidiaries as may be selected by the
Committee.
(b) Terms of Grant. Stock appreciation rights shall be exercisable in
whole or in such installments and at such times as may be determined by the
Committee, provided that no stock appreciation right shall be exercisable
more than twenty years after the date of grant. The Committee may at the
time of grant or at any time thereafter impose such additional terms and
conditions on the exercise of stock appreciation rights as it deems
necessary or desirable for compliance with Section 16(a) or 16(b) of the
Securities Exchange Act of 1934 and the rules and regulations thereunder.
(c) Termination of Employment or Death. If a grantee ceases to be
employed by the Corporation and any of its subsidiaries for any reason other
than death, any stock appreciation right held by such grantee may be
exercised for a period ending on the earlier of the 90th day following the
date of such cessation of employment or the date of expiration of such stock
appreciation right, but only with respect to that number of shares of common
stock for which such right was exercisable immediately prior to the date of
cessation of employment.
If a grantee ceases to be employed by the Corporation or any of its
subsidiaries by reason of death, or dies within 90 days after termination of
his employment by the Corporation or any of its subsidiaries, any stock
appreciation right held by such grantee may be exercised, with respect to
all or any part of the common stock of the Corporation with respect to which
such stock appreciation right was exercisable by the grantee immediately
prior to his death, for a period ending on the earlier of the first
anniversary of the date of such grantee's death or the date of expiration of
such stock appreciation right.
(d) Payment on Exercise. Upon exercise of a stock appreciation right
the grantee shall be paid within five business days an amount in cash equal
to the sum of (i) the amount by which the fair market value of one share of
the Corporation's common stock on the date of exercise exceeds the date of
grant value thereof multiplied by the number of shares in respect of which
the stock appreciation right is being exercised and (ii) the value of the
hypothetical reinvested cash dividends associated therewith. The value of
the hypothetical reinvested cash dividends associated with a share in
respect of which the stock appreciation right is being exercised (the
<PAGE>
"exercised share") shall be equal to the fair market value on the date of
exercise of the number of additional shares (or fraction thereof) of the
Company's common stock the grantee would have owned if it is assumed (1)
that cash dividends which would have been paid with respect to the exercised
share if the exercised share had been outstanding from the time of grant had
been paid in cash to the grantee and then immediately reinvested by the
grantee in the Company's common stock at the fair market value thereof on
the applicable dividend payment date, and (2) that, once assumed issued,
hypothetical shares resulting from assumed dividend reinvestment themselves
paid cash dividends (at the same time and in the same amount as shares of
the Corporation's outstanding common stock) which were reinvested in a
similar manner.
For purposes of this paragraph, the fair market value of a share of
common stock of the Corporation means:
(A) The mean between the high and the low prices at which the
common stock of the Corporation was traded if the common stock of the
Corporation was then listed for trading on a national or regional
securities exchange; or
(B) The mean between the published bid and asked prices of the
common stock, of the Corporation if the common stock of the Corporation
was then traded on a bona fide over-the-counter market; or
(C) If the common stock of the Corporation was not traded on an
exchange or on a bona fide over-the-counter market, a value determined
by an appraiser selected by the Committee.
In the event that the date of the exercise of a stock appreciation right is
a date on which there is no trading of the common stock of the Corporation
on a national or regional securities exchange or is a date for which there
is no published bid and asked prices if the stock is traded on the over-the-
counter market, such fair market value shall be determined by referring to
the next preceding business day on which trading occurs or on which
published prices are available.
(e) Additional Terms and Conditions. The agreement or instrument
evidencing the grant of stock appreciation rights may contain such other
terms, provisions and conditions not inconsistent with the Plan as may be
determined by the Committee in its sole discretion.
7. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION, ETC.
Stock appreciation rights shall be subject to adjustment by the
Committee in its sole discretion as to the number, kind and date of grant
value of shares or other consideration subject to such grants in the event
of changes in the outstanding common stock by reason of stock dividends,
stock splits, recapitalizations, reorganizations, mergers, consolidations,
combinations, exchanges or other relevant changes in corporate structure or
capitalization occurring after the date of the grant of any stock
appreciation right, provided that if the Corporation shall change its common
stock into a greater or lesser number of shares through a stock dividend,
stock split-up, or combination of shares, outstanding rights shall be
adjusted proportionately, consistent with existing law and regulation, to
prevent inequitable results.
<PAGE>
8. EFFECT OF LIQUIDATION, MERGER, CONSOLIDATION OR OTHER EVENTS.
Nothing contained in the Plan or in any stock appreciation right granted
under the Plan shall in any way prohibit the Corporation from merging with
or consolidating into another corporation, or from selling or transferring
all or substantially all of its assets, or from distributing all or
substantially all of its assets to its stockholders in liquidation, or from
dissolving and terminating its corporate existence; and in any such event,
all outstanding stock appreciation rights granted under the Plan shall be
deemed to have been exercised at the time of any such merger, consolidation,
sale or transfer of assets, liquidation, or dissolution, except to the
extent that any agreement or undertaking of any party to such merger,
consolidation, or sale or transfer of assets, or any plan pursuant to which
such liquidation or dissolution is effected, shall make specific provision
to continue such stock appreciation rights and the rights of such person or
persons entitled to exercise such stock appreciation rights.
9. AMENDMENT AND TERMINATION OF PLAN.
The Plan may be amended or terminated by the Board of Directors of the
Corporation in any respect, provided, however, that the Board shall not
exercise such authority in a manner adversely and significantly affecting
rights previously granted unless the action taken is required to comply with
any applicable law or regulation.
10. MISCELLANEOUS.
(a) No Right to a Grant. Neither the adoption of the Plan nor any
action of the Board of Directors or of the Committee shall be deemed to give
any employee any right to be selected as a participant or to be granted a
stock appreciation right.
(b) Rights as Stockholder. No person shall have any rights as a
stockholder of the Corporation with respect to any shares covered by a stock
appreciation right.
(c) Employment. Nothing contained in this Plan shall be deemed to
confer upon any employee any right of continued employment with the
Corporation or any of its subsidiaries or to limit or diminish in any way
the right of the Corporation or any such subsidiary to terminate his or her
employment at any time with or without cause.
(d) Taxes. the Corporation shall be entitled to deduct from any
payment under the Plan the amount of any tax required by law to be withheld
with respect to such payment or may require any participant to pay such
amount to the Corporation prior to and as a condition of making such
payment.
(e) Nontransferability. No stock appreciation right shall be
transferable except by will or the laws of descent and distribution. During
the holder's lifetime, stock appreciation rights shall be exercisable only
by such holder.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR
ENDED AUGUST 31, 1996 OF WAUSAU PAPER MILLS AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1996
<PERIOD-END> AUG-31-1996
<CASH> 2,372
<SECURITIES> 0
<RECEIVABLES> 42,818
<ALLOWANCES> 6,004
<INVENTORY> 70,443
<CURRENT-ASSETS> 119,240
<PP&E> 495,519
<DEPRECIATION> 164,983
<TOTAL-ASSETS> 467,028
<CURRENT-LIABILITIES> 59,053
<BONDS> 53,119
<COMMON> 139,155
0
0
<OTHER-SE> 125,556
<TOTAL-LIABILITY-AND-EQUITY> 467,028
<SALES> 542,669
<TOTAL-REVENUES> 542,669
<CGS> 443,383
<TOTAL-COSTS> 443,383
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,786
<INCOME-PRETAX> 66,829
<INCOME-TAX> 25,600
<INCOME-CONTINUING> 41,229
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 41,229
<EPS-PRIMARY> 1.12
<EPS-DILUTED> 1.12
</TABLE>
