FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from____________ to _________________
Commission file number: 0-7574
WAUSAU-MOSINEE PAPER CORPORATION
(Exact name of registrant as specified in charter)
WISCONSIN 39-0690900
(State of incorporation) (I.R.S Employer Identification
Number)
1244 KRONENWETTER DRIVE
MOSINEE, WISCONSIN 54455-9099
(Address of principal executive office)
Registrant's telephone number, including area code: 715-693-4470
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such report), and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
The number of common shares outstanding at April 30, 1999 was 52,339,013.
<PAGE>
WAUSAU-MOSINEE PAPER CORPORATION
AND SUBSIDIARIES
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of
Income, Three Months Ended
March 31, 1999 (unaudited) and
March 31, 1998 (unaudited) 1
Condensed Consolidated Balance
Sheets, March 31, 1999 (unaudited)
and December 31, 1998 (derived from
audited financial statements) 2
Condensed Consolidated Statements
of Cash Flows, Three Months
Ended March 31, 1999 (unaudited)
and March 31, 1998 (unaudited) 3
Notes to Condensed Consolidated
Financial Statements 3-5
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 6-11
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 12-15
-i-
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
Wausau-Mosinee Paper Corporation and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended
March 31,
($ thousands, except per share data - unaudited) 1999 1998
<S> <C> <C>
NET SALES $ 226,441 $ 237,660
Cost of products sold 187,778 191,351
GROSS PROFIT 38,663 46,309
Selling and administrative expenses 13,532 19,987
Restructuring expense 0 37,700
OPERATING PROFIT (LOSS) 25,131 (11,378)
Interest expense (2,518) (2,046)
Other (9) 136
EARNINGS(LOSS) BEFORE INCOME TAXES 22,604 (13,288)
Provision (credit) for income taxes 8,500 (5,050)
NET EARNINGS (LOSS) $ 14,104 $ (8,238)
NET EARNINGS (LOSS) PER SHARE BASIC $ 0.27 $ (0.14)
NET EARNINGS (LOSS) PER SHARE DILUTED $ 0.26 $ (0.14)
Weighted average shares outstanding-basic 53,188,197 57,804,542
Weighted average shares outstanding-diluted 53,325,864 58,159,616
</TABLE>
-1-
<PAGE>
<TABLE>
WAUSAU-MOSINEE PAPER CORPORATION
CONSOLIDATED BALANCE SHEETS
<CAPTION>
($ thousands*) MARCH 31, December 31,
1999 1998
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,787 $ 2,495
Receivables, net 81,110 66,956
Refundable income taxes 3,282
Inventories 148,920 150,217
Deferred income taxes 17,619 18,344
Other current assets 1,946 832
Total current assets 253,382 242,126
Property, plant and equipment, net 629,116 625,065
Other assets 34,194 32,958
TOTAL ASSETS $ 916,692 $ 900,149
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 74,294 $ 45,466
Current maturities of long-term debt 6,178 6,051
Accounts payable 51,692 58,419
Accrued and other liabilities 47,426 50,784
Total current liabilities 179,590 160,720
Long-term debt 127,432 127,000
Deferred income taxes 94,897 94,911
Postretirement benefits 62,562 60,558
Pension 39,431 39,235
Other liabilities 21,137 21,139
Total liabilities 525,049 503,563
Stockholders' equity 391,643 396,586
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 916,692 $ 900,149
<FN>
*The consolidated balance sheet at March 31, 1999 is unaudited. The
December 31, 1998 consolidated balance sheet is derived from audited
financial statements.
</TABLE>
-2-
<PAGE>
<TABLE>
WAUSAU-MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Three Months Ended
March 31,
($ thousands - unaudited) 1999 1998
<S> <C> <C>
Net cash provided by operating activities $ 11,011 $ 31,379
Capital expenditures (16,382) (17,608)
Borrowings (payments) under credit agreements 28,955 (7,424)
Dividends paid (3,753) (3,625)
Purchase of Company stock (19,047) 0
Proceeds on sale of property, plant and equipment 76 108
Other investing and financing activities 432 166
Net increase in cash $ 1,292 $ 2,996
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The accompanying condensed financial statements, in the opinion
of management, reflect all adjustments which are normal and
recurring in nature and which are necessary for a fair statement
of the results for the periods presented. Some adjustments
involve estimates which may require revision in subsequent
interim periods or at year-end. In all regards, the financial
statements have been presented in accordance with generally
accepted accounting principles. Refer to notes to the financial
statements which appear in the Annual Report on Form 10-K for
the year ended December 31, 1998, for the Company's accounting
policies which are pertinent to these statements.
Note 2. In connection with the merger of Wausau Paper Mills Company
(Wausau) and Mosinee Paper Corporation (Mosinee), the Company
implemented a plan to reduce its workforce by over 8%. An
after-tax expense of $23.4 million ($37.7 million pretax) or
$0.40 per share was recorded in the three month period ended
March 31, 1998 to cover the cost of this workforce reduction
initiative as well as smaller amounts for other merger related
costs.
Note 3. Net income includes expenses, or credits, for stock-based
incentive plans calculated by using the average price of the
Company's stock at the close of the reporting period as if all
plans had been exercised on that day. For the three months
ended March 31, 1999, these plans resulted in after-tax income
of $1,438,000 or $0.03 per share, compared to an after-tax
expense of $2,144,000 or $0.04 per share for the same period
last year.
-3-
<PAGE>
<TABLE>
Note 4. Accounts receivable consisted of the following:
<CAPTION>
($ thousands) March 31, December 31,
1999 1998
<S> <C> <C>
Customer Accounts $ 86,928 $ 73,950
Misc. Notes and Accounts Receivable 3,071 3,068
89,999 77,018
Less: Allowances for Discounts,
Doubtful Accounts and Pending Credits (8,889) (10,062)
Receivables, Net $ 81,110 $ 66,956
</TABLE>
<TABLE>
Note 5. The various components of inventories were as follows:
<CAPTION>
($ thousands) March 31, December 31,
1999 1998
<S> <C> <C>
Raw Materials and Supplies $ 79,801 $ 86,994
Finished Goods and Work in Process 81,263 75,906
Subtotal 161,064 162,900
Less: LIFO Reserve ( 12,144) ( 12,683)
Net inventories $ 148,920 $ 150,217
</TABLE>
Note 6. The accumulated depreciation on fixed assets was $439,748,000 as
of March 31, 1999 and $427,954,000 as of December 31, 1998. The
provision for depreciation, amortization and depletion for the
three months ended March 31, 1999 and March 31, 1998 was
$12,698,000 and $12,167,000, respectively.
Note 7. Certain legal proceedings are described under Part II, Item 1 of
this report.
Note 8. Interim Segment Information.
FACTORS USED TO IDENTIFY REPORTABLE SEGMENTS
The Company's operations are classified into three principal
reportable segments, the Specialty Paper Group, the Printing &
Writing Group and the Towel & Tissue Group, each providing
different products. Separate management of each segment is
required because each business unit is subject to different
marketing, production and technology strategies.
<PAGE>
-4-
PRODUCTS FROM WHICH REVENUE IS DERIVED
The Specialty Paper Group produces specialty papers at its
manufacturing facilities in Rhinelander, Wisconsin; Mosinee,
Wisconsin; Jay, Maine; and Middletown, Ohio. The Printing &
Writing Group produces a broad line of premium printing and
writing grades at manufacturing facilities in Brokaw, Wisconsin
and Groveton, New Hampshire. The Printing & Writing Group also
includes two converting facilities which produce wax-laminated
roll wrap and related specialty finishing and packaging products
and a converting facility which produces school papers. The
Towel & Tissue Group markets a complete line of towel, tissue,
soap and dispensing systems for the "away-from-home" market. The
Towel & Tissue Group operates a paper mill in Middletown, Ohio and
a converting facility in Harrodsburg, Kentucky.
<PAGE>
<TABLE>
RECONCILIATIONS
The following are reconciliations to corresponding totals in the
accompanying consolidated
financial statements:
<CAPTION>
Three Months
Ended March 31,
($ in thousands-unaudited) 1999 1998
<S> <C> <C>
Net sales external customers
Specialty Paper $100,242 $112,950
Printing & Writing 91,236 92,723
Towel & Tissue 34,963 31,987
$226,441 $237,660
Net sales intersegment
Specialty Paper $ 3,314 $ 3,738
Printing & Writing 310 398
Towel & Tissue 15 44
$ 3,639 $ 4,180
Operating profit
Specialty Paper $ 8,626 $ 13,796
Printing & Writing 10,960 13,246
Towel & Tissue 5,433 6,522
Total reportable segment
Operating profit 25,019 33,564
Corporate & eliminations 112 (7,242)
Restructuring charge 0 (37,700)
Interest expense (2,518) (2,046)
Other income/expense (9) 136
Earnings before income taxes $ 22,604 ($ 13,288)
</TABLE>
<TABLE>
<CAPTION>
($ in thousands-unaudited) March 31, December 31,
1999 1998
<S> <C> <C>
Segment Assets
Specialty Paper $376,585 $ 371,986
Printing & Writing 307,376 293,509
Towel & Tissue 178,296 176,303
Corporate & Unallocated* 54,435 58,351
$916,692 $ 900,149
<FN>
* Industry segment assets do not include intersegment accounts
receivable, cash, deferred tax assets and certain other assets which
are not identifiable with industry segments.
</TABLE>
-5-
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
NET SALES
For the three months ended March 31, 1999, net sales for the Company
were $226.4 million, a decrease of 5% over last year's first quarter net
sales of $237.7 million. Despite volume gains of 17% in the Towel &
<PAGE>
Tissue Group over the first quarter of 1998 and relatively constant
volume in the Specialty Paper and Printing & Writing Groups, first
quarter sales declined from a year ago due to continued competitive
selling price pressure in all operating groups.
The Specialty Paper Group's net sales decreased 11% in the first quarter
of 1999 compared to the first quarter of 1998. The decline was
primarily due to lower average selling prices, especially in the
pressure sensitive market, in the first quarter of 1999, compared to a
year ago. Tonnage was impacted by product mix differences and the
decision to build inventories at the Otis mill in preparation for
scheduled down time in April 1999. The order backlog for the Specialty
Paper Group at March 31, 1999 was higher than a year ago; however, order
volumes may fluctuate, especially in the competitive pressure sensitive
market. First quarter net sales in the Company's Printing & Writing
Group declined 2% from the comparable quarter in 1998. Shipments were a
first quarter record and were 2% ahead of last year's shipment level;
however, the decline in selling prices compared to the prior year offset
the volume gain. Order backlog at March 31, 1999 was comparable to
levels at the same time last year.
Net sales for the first quarter of 1999 increased 9% over the first
quarter of 1998 for the Towel & Tissue Group. Shipments at the Towel
&Tissue Group were a first quarter record with a 17% increase in 1999
compared to the same 1998 period. However, selling prices, on average,
were approximately 6% lower than a year ago due to competitive market
conditions. Backlogs at March 31, 1999 were lower than a year ago,
principally due to a decline in the buy-in of distributor incentive
programs. Order volume continues strong in the second quarter of 1999.
GROSS PROFIT
Gross profit for the three months ended March 31, 1999 was $38.7 million
or 17.1% of net sales, compared to last year's first quarter gross
profit of $46.3 million or 19.5% of net sales. The decline in gross
profit margin compared to the first quarter of 1998 is the result of
continued selling price pressure in all operating groups. As a whole,
raw material costs have declined compared to the first quarter of 1998;
however, the decrease in raw material cost has not offset decreased
selling prices. Pulp prices are expected to increase in the second
quarter which may result in a negative impact on the Company's
gross profit if the increased costs are not recovered through higher
selling prices.
The Specialty Paper Group's gross profit margin decreased from 16.3% of
net sales in the first quarter of 1998 to 13.4% this year. The Group
operated without any down time in the first quarter of 1999. However,
due to product mix, total paper mill production was
-6-
6% lower than last year's first quarter. Paper mill paper inventories
at March 31, 1999 were 3% higher than a year ago due primarily to the
Otis facility building inventory in preparation for scheduled capital
maintenance on a paper machine in April 1999.
<PAGE>
The Printing & Writing Group's gross profit for the first quarter of
1999 was 17.8% of net sales compared to 19.2% in the same period last
year. The Group experienced a decrease in paper and pulp mill
production, while the converting facilities reported overall increases
in production. Capital modification performance issues at the Brokaw
pulp mill facility negatively impacted gross profit during the first
quarter of 1999. These performance issues are being closely monitored
with improvement expected in the second quarter of 1999. Inventory
levels at all facilities have increased over the same period of 1998 due
to the start-up of a west coast warehouse in the fourth quarter of 1998
and the building of inventory to meet seasonal customer demand at the
Specialty Products converting facility.
The gross profit for the Towel & Tissue Group was 24.7% for the three
months ended March 31, 1999 compared to 29.0% last year. The Group,
while experiencing an increase in shipments of approximately 17% over
the first quarter of 1998, was negatively impacted by a 6% decline in
selling prices from the same period last year as a result of competitive
pricing pressures in the towel and tissue market. Wastepaper prices are
down minimally from the first quarter of 1998 and there are no
significant changes in the price of raw materials for the Group expected
to occur in the second quarter of 1999. Production costs were impacted
negatively in the first quarter of 1999 as a result of performance
issues surrounding a toweling machine rebuild. These issues have been
addressed with improvement expected in the second quarter of 1999.
Inventory levels have remained relatively comparable to the prior year.
SELLING AND ADMINISTRATIVE EXPENSES
Selling and administrative expenses, excluding the first quarter 1998
restructuring charge discussed below, were $13.5 million in the first
quarter of 1999, compared to $20.0 million last year. Income for
incentive compensation programs based on the market price of the
Company's stock was $2.3 million in 1999, compared to expense of $3.5
million for the same period a year ago and accounts for $5.8 million of
the change in expenses year over year.
RESTRUCTURING CHARGE
In March 1998, the Company announced and began implementation of a
workforce reduction program, which is expected to reduce Company-wide
employment by over 8%. Upon completion of the program, and several
capital projects, the Company expects to realize $24 million annually
in labor cost savings. As a result, the Company recorded a one-time
pre-tax restructuring charge of $37.7 million ($23.4 million after-tax)
in the first quarter of 1998 to cover the cost of the workforce
reduction program as well as other costs related to the merger. As of
the first quarter of 1999, annualized savings of $18 million dollars
through position reductions have been implemented. The balance of the
annual savings is anticipated to be implemented by the end of 1999.
Merger related cost reduction activities are proceeding on track.
Company-wide cost savings from the workforce reduction program and other
merger related cost reduction activities are now projected to reach $35
million
-7-
<PAGE>
annually, significantly greater than the $19 million in savings
originally estimated.
CAPITAL RESOURCES AND LIQUIDITY
CASH PROVIDED BY OPERATIONS
For the three months ended March 31, 1999, cash provided by operations
was $11.0 million, compared to $31.4 million for the first quarter of
1998. The decrease in cash provided by operations is primarily the
result of an increase in accounts receivable and significant decreases
in accounts payable and other liabilities, compared to a year ago.
CAPITAL EXPENDITURES
Capital expenditures totaled $16.4 million for the first quarter ended
March 31, 1999, compared to $17.6 million for the same period last year.
During the first three months of 1999, the Sorg mill completed the #1
paper machine capacity increase rebuild and began installing a color
monitoring system on the same machine. Capital spending on these two
projects amounted to $2.3 million for the quarter. The Otis mill spent
$4.4 million on a $25 million capital improvement project during the
quarter. This project, which is expected to be completed during the
second quarter 1999, will expand the production capacity of both Otis's
paper machines, add new manufacturing capabilities and improve the sales
mix.
At the April 1999 meeting, the Board of Directors approved $45 million
in capital improvements at the Specialty Paper Group's Rhinelander mill
to upgrade the production process for pressure sensitive papers to
surpass customers' technical requirements and improve their operating
efficiencies, while at the same time improving the Company's product
mix. These capital improvements are expected to be fully implemented by
the third quarter of the year 2000.
FINANCING
Total current and long-term debt increased for the three months ended
March 31, 1999 to $207.9 million. The increase in total debt from
December 1998 is due to the authorized repurchase of the Company's stock
during the first quarter of 1999 and the payment of the accounts payable
from year end.
Interest expense was $2.5 million in the first quarter of 1999 compared
to $2.0 million in the same period of 1998. The increase in interest
expense is the result of higher funded debt levels in 1999 compared to
1998. The increase as a result of higher debt levels has been partially
offset by decreased borrowing rates.
Cash provided by operations and the borrowing capacity are expected to
meet capital needs and dividends. The Company plans to refinance the
outstanding debt obligations in 1999 to secure longer term financing.
-8-
<PAGE>
COMMON STOCK REPURCHASE
In August, 1998 the Board of Directors authorized the Company to
repurchase up to 5,650,000 shares of common stock, subject to adjustment
for future stock splits or dividends. This repurchase authorization
represents approximately ten percent of the shares then outstanding.
Under this authorization, the Company repurchased an aggregate of
1,335,326 shares during the three-month period ended March 31, 1999.
This brings the total to 4,499,926 shares purchased under this
authorization.
DIVIDENDS
A dividend declared in December, 1998, of $.07 per share was paid
February 15, 1999 to shareholders of record as of February 1, 1999. At
the April 22, 1999 meeting, the Board of Directors approved a 14%
increase in the cash dividend. The quarterly cash dividend of $.08 per
share is payable May 17, 1999 to stockholders of record as of May 3,
1999.
YEAR 2000
Year 2000 issues apply to the Company's computerized manufacturing
process controllers, environmental systems, order processing, inventory
management, the shipment of finished goods, and internal financial and
other information systems. Year 2000 issues also apply to the Company's
suppliers and customers. For purposes of this discussion, the terms
"Year 2000 issues" or "Year 2000 problems", or terms of similar import,
refer to the potential failure of computer applications as a result of
the failure of a program or hardware to properly recognize the year 2000
and to properly handle dates beyond the year 1999. The term "Year 2000
readiness", or terms of similar import, mean that the particular
equipment or processes referred to have been modified or replaced and
the Company believes that such modified or replaced equipment or
processes will operate as designed after 1999 without Year 2000 problems.
READINESS
The Company has developed a Year 2000 Plan intended to (1) upgrade its
information technology hardware and software and all software and
embedded technology applications in its equipment and facilities to be
Year 2000 ready, (2) assess the Year 2000 readiness of suppliers and
customers, and (3) develop contingency plans, if practical, for critical
systems and processes.
The Company has completed an inventory of mission critical information
systems, process equipment, and manufacturing facilities. The Company
continues to evaluate and test equipment, environmental controls, and
other core functions. Assessment is expected to be completed by the end
of the second quarter with testing to be completed by the end of the
third quarter of 1999. The Company believes that the most critical
information systems, primarily the sales order processing, inventory,
and shipping systems, are already Year 2000 ready or, if not, that such
systems have been given first priority to be made Year 2000 ready and
will be ready by September, 1999. The Company's enterprise resource
planning system ("ERP") is intended to bring the remainder of the
Company's information systems to Year 2000 readiness by September, 1999.
<PAGE>
The broader, non-Year 2000 aspects of the ERP system will be fully
implemented in 2001.
-9-
COSTS
The costs of achieving Year 2000 readiness have not been material to
date and are not expected to be material. The cost of remediation for
key papermaking process controls and equipment is expected to be less
than $2 million. Internal costs for Year 2000 readiness are not being
tracked, but principally relate to payroll costs of Company personnel.
The implementation of the Company-wide ERP system is expected to require
a capital investment of approximately $5.5 million. Although the ERP
implementation timetable was not accelerated to address Year 2000
issues, those issues were considered in determining the overall
timetable for its implementation.
RISKS
The Company expects no material adverse effect on its consolidated
financial condition, liquidity or results of operations (collectively,
its "business") as a result of problems encountered in its own business
as a result of Year 2000 issues or as a result of the impact of Year
2000 problems on its customers or vendors. However, the risks to the
Company associated with Year 2000 issues are many.
The Company's assessment of possible Year 2000 related problems depends,
to some extent, on the assurances and guidance provided it by the
suppliers of the technology as to its Year 2000 readiness. In addition,
the Company has limited ability to independently verify the possible
effect of Year 2000 problems on its customers and vendors. Therefore,
the Company's assumptions concerning the effect of Year 2000 issues
relies, in part, on its ability to analyze the business and operations
of each of its critical vendors or customers. This process is, by the
nature of the problem, limited to such persons' public statements, their
responses to the Company's inquiries, and the information available to
the Company from third parties concerning the industries or particular
vendors or customers involved.
The Company expects that Year 2000 problems which cause customers to be
unable to place orders would have a material adverse impact on its
business only if the problem was widespread and long-lived. The Company
has a broad customer base, which would likely alleviate the adverse
effects of isolated customer Year 2000 problems.
Some risk also exists that, despite the Company's best efforts, critical
manufacturing systems may malfunction due to Year 2000 problems and
curtail the manufacturing process. The Company does not anticipate such
interruptions and it is unlikely any such curtailment would be lengthy.
With eleven manufacturing facilities, a temporary interruption at one
facility is unlikely to have a material adverse impact on the Company's
business.
Interruption of raw material supply due to supplier problems caused by
Year 2000 issues are not expected to be material as the Company stocks
raw materials to protect against supply problems and alternative sources
of supply exist to meet the Company's raw material needs. Similarly,
although the Company faces potential disruptions in its operations from
<PAGE>
Year 2000 problems as a result of the failure of the power grid,
telecommunications, or other abilities, it is not aware that any
material disruption in these infrastructures is reasonably likely to
occur and the number and widespread location of its facilities is likely
to minimize the impact of any disruption.
-10-
CONTINGENCY PLAN
The Company has evaluated various contingencies that may arise as a
result of Year 2000 issues. The Company anticipates that disruptions in
production, sales, the supply of raw materials, loss of customer orders,
and other foreseeable effects of the Year 2000 issues can be addressed
following normal business alternatives. The Company will continue to
analyze and develop contingency plans where possible and not cost
prohibitive.
INFORMATION CONCERNING FORWARD LOOKING STATEMENTS
This report contains certain of management's expectations and other
forward-looking information regarding the Company pursuant to the safe-
harbor provisions of the Private Securities Litigation reform Act of
1995. While the Company believes that these forward-looking statements
are based on reasonable assumptions, such statements are not guarantees
of future performance and all such statements involve risk and
uncertainties that could cause actual results to differ materially from
those contemplated in this report. The assumptions, risks and
uncertainties relating to the forward-looking statements in this report
include general economic and business conditions, changes in the prices
of raw materials, competitive pricing in the markets served by the
Company as a result of economic conditions or overcapacity in the
industry, and possible adverse effects on the Company or the economy
from Year 2000 problems. These and other assumptions, risks and
uncertainties are described under the caption "Cautionary Statement
Regarding Forward-Looking Information" in Item 1 of the Company's
Annual Report on Form 10-K for the year ended December 31, 1998, and,
from time to time, in the Company's other filings with the Securities
and Exchange Commission.
-11-
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In 1997, the Attorney General of the State of Florida filed a civil
complaint in the United States District Court for the Northern District
of Florida against ten manufacturers of commercial sanitary paper
products, including the Company's wholly owned subsidiary, Bay West
Paper Corporation. The lawsuit alleges a conspiracy to fix prices of
commercial sanitary paper products starting at least as early as 1993.
Since the filing of this lawsuit, numerous class action suits have been
filed by private direct purchasers of commercial sanitary paper products
in various federal district courts throughout the country and additional
federal lawsuits have been filed by the Attorneys General of the States
<PAGE>
of Kansas, Maryland, New York, and West Virginia. All of these federal
cases have been certified as class actions and consolidated in a
multi-district litigation proceeding in the United States District Court
for the Northern District of Florida in Gainesville. Certain indirect
purchasers of sanitary commercial paper products have also filed class
action lawsuits in various state courts alleging a conspiracy to fix
prices under state antitrust laws. No class has been certified in the
state actions. All of these actions are in early stages. In the opinion
of management, the Company has not violated any antitrust laws. The
Company is vigorously defending these claims.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 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
NUMBER DESCRIPTION
3.1 Restated Articles of Incorporation, as amended October 21, 1998
(incorporated by reference to Exhibit 3.1 to the Company's
Current Report on Form 8-K dated October 21, 1998)
3.2 Restated Bylaws, as amended December 17, 1997 (incorporated by
reference to Exhibit 4.2 to the Company's Registration
Statement on Form S-8 dated December 17, 1997)
4.1 Rights Agreement, dated as of October 21, 1998, between the
Company and Harris Trust and Savings Bank, including the Form
of Restated Articles of Incorporation as Exhibit A and the Form
of Rights Certificate as Exhibit B (incorporated by reference
to Exhibit 4.1 to the Company's Current Report on Form 8-K
dated October 21, 1998)
4.2 Summary of Rights to Purchase Preferred Shares, Exhibit C to
Rights Agreement filed as Exhibit 4.1 hereto (incorporated by
reference to Exhibit 4.2 to the Company's Registration
Statement on Form 8-A, filed on October 29, 1998)
-12-
10.1 Supplemental Retirement Plan, as last amended March 4, 1999
(incorporated by reference to Exhibit 10.1 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1998)*
10.2 Incentive Compensation Plans (Printing & Writing Division and
Technical Specialty Division), as amended September 17, 1997
(incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
November 30, 1997)*
10.3 Corporate Management Incentive Plan, as amended September 18,
1996 (incorporated by reference to Exhibit 10(c) to the
<PAGE>
Company's Annual Report on Form 10-K for the fiscal year ended
August 31, 1996)*
10.4 1988 Stock Appreciation Rights Plan, as last amended March 4,
1999 (incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998)*
10.5 1988 Management Incentive Plan, as last amended March 4, 1999
(incorporated by reference to Exhibit 10.5 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1998)*
10.6 1990 Stock Appreciation Rights Plan, as last amended March 4,
1999 (incorporated by reference to Exhibit 10.6 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998)*
10.7 Deferred Compensation Agreement dated July 1, 1994, as last
amended March 4, 1999 (incorporated by reference to Exhibit
10.7 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998)*
10.8 1991 Employee Stock Option Plan, as last amended March 4, 1999
(incorporated by reference to Exhibit 10.8 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1998)*
10.9 1991 Dividend Equivalent Plan, as last amended March 4, 1999
(incorporated by reference to Exhibit 10.9 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1998)*
10.10 Supplemental Retirement Benefit Plan dated January 16, 1992,
as last amended March 4, 1999 (incorporated by reference to
Exhibit 10.10 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998)*
-13-
10.11 Directors' Deferred Compensation Plan, as last amended March
4, 1999 (incorporated by reference to Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998)*
10.12 Directors Retirement Benefit Policy, as amended April 16, 1998
(incorporated by reference to Exhibit 10.12 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1998)*
10.13 Transition Benefit Agreement with former President and CEO
(incorporated by reference to Exhibit 10.13 to the Company's
Annual Report on Form 10-K for the fiscal year ended August 31,
1997)*
<PAGE>
10.14 Mosinee Paper Corporation 1985 Executive Stock Option Plan, as
last amended March 4, 1999 (incorporated by reference to
Exhibit 10.14 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998)*
10.15 Mosinee Paper Corporation 1988 Stock Appreciation Rights Plan,
as last amended March 4, 1999 (incorporated by reference to
Exhibit 10.15 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998)*
10.16 Mosinee Paper Corporation 1996 and 1997 Incentive Compensation
Plans for Corporate Executive Officers (incorporated by
reference to Exhibit 10.16 to the Company's Transition Report
on Form 10-Q for the transition period ended December 31,
1997)*
10.18 Mosinee Paper Corporation Supplemental Retirement Benefit
Agreement dated November 15, 1991, as last amended March 4,
1999 (incorporated by reference to Exhibit 10.18 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998)*
10.19 Mosinee Paper Corporation 1994 Executive Stock Option Plan, as
last amended March 4, 1999 (incorporated by reference to
Exhibit 10.19 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998)*
10.20 Incentive Compensation Plan for Executive Officers (1998)
(incorporated by reference to Exhibit 10.20 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1998)*
10.21 1999 Incentive Compensation Plan for Executive Officers
(incorporated by reference to Exhibit 10.21 to the Company's
Annual Report on Form 10-K for the fiscal year ended December
31, 1998)*
21.1 Subsidiaries as of December 31, 1998 (incorporated by reference
to Exhibit 21.1 to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1998)*
-14-
23.1 Consent of Wipfli Ullrich Bertelson LLP (incorporated by
reference to Exhibit 23.1 to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1998)*
27.1 Financial Data Schedule (filed electronically only)
*Executive compensation plans or arrangements. All plans are
sponsored or maintained by the Company unless otherwise noted.
(b) Reports on Form 8-K:
None.
-15-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WAUSAU-MOSINEE PAPER
CORPORATION
May 12, 1999 GARY P. PETERSON
Gary P. Peterson
Senior Vice President-Finance,
Secretary and Treasurer
(On behalf of the Registrant and as
Principal Financial Officer)
-16-
EXHIBIT INDEX
TO
FORM 10-Q
OF
WAUSAU-MOSINEE PAPER CORPORATION
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1998
Pursuant to Section 102(d) of Regulation S-T
(17 C.F.R. <section>232.102(d))
EXHIBIT 27.1 FINANCIAL DATA SCHEDULE
-17-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31,
1999 OF WAUSAU-MOSINEE PAPER CORPORATION AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 3,787
<SECURITIES> 0
<RECEIVABLES> 89,999
<ALLOWANCES> 8,889
<INVENTORY> 148,920
<CURRENT-ASSETS> 253,382
<PP&E> 1,068,864
<DEPRECIATION> 439,748
<TOTAL-ASSETS> 916,692
<CURRENT-LIABILITIES> 179,590
<BONDS> 127,432
<COMMON> 170,686
0
0
<OTHER-SE> 220,957
<TOTAL-LIABILITY-AND-EQUITY> 916,692
<SALES> 226,441
<TOTAL-REVENUES> 226,441
<CGS> 187,778
<TOTAL-COSTS> 201,310
<OTHER-EXPENSES> 9
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,518
<INCOME-PRETAX> 22,604
<INCOME-TAX> 8,500
<INCOME-CONTINUING> 14,104
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,104
<EPS-PRIMARY> 0.27
<EPS-DILUTED> 0.26
</TABLE>
