FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[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 333-51857
PLAINWELL INC.
(Exact name of registrant as specified in its charter)
Delaware 38-3391489
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 Allegan Street
Plainwell, Michigan 49080
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 616-685-2500
Not Applicable
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ].
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of March 31, 1999: 500 shares, $1 par value Common Stock
outstanding
<PAGE>
PLAINWELL INC.
FORM 10-Q
for the Quarterly Period ended March 31, 1999
INDEX
<TABLE>
<CAPTION>
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
Condensed Statements of Operations - Three Months ended March 31, 1999 and 1998 4
Condensed Balance Sheets at March 31, 1999 and December 31, 1998 5
Condensed Statements of Cash Flows - Three months ended March 31, 1999 and 1998 6
Notes to Condensed Financial Statements- March 31, 1999 7
Item 2. Management's Discussion and Analysis of Financial Position
and Results of Operations 12
Item 3. Quantitative and Qualitative Disclosures About Market Risk 16
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 17
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 6. Exhibits and Reports on Form 8-K 17
Signatures 17
Exhibit (27) Financial Data Schedule 18
</TABLE>
<PAGE>
PART I
PLAINWELL INC.
Condensed Statements of Operations
(Thousands of Dollars)
Three months ended
----------------------------
March March
31, 1999 31, 1998
----------- -----------
(Unaudited) (Unaudited)
Net sales $ 52,124 $ 30,170
Cost of sales 46,133 27,197
-------- --------
Gross profit 5,991 2,973
Selling, general and administrative
expenses 4,722 2,524
-------- --------
Operating income 1,269 449
Interest expense 4,000 1,548
-------- --------
Loss before taxes and extraordinary (2,731) (1,099)
item
Income tax benefit (741) (339)
-------- --------
Loss before extraordinary
Item (1,990) (760)
Extraordinary item, net of tax -- (597)
-------- --------
Net Loss $ (1,990) $ (1,357)
======== ========
See accompanying notes to condensed financial statements.
<PAGE>
PLAINWELL INC.
Condensed Balance Sheets
(Thousands of Dollars)
March 31, December 31,
1999 1999
--------- ------------
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 1,435 $ 1,846
Accounts receivable, net 22,118 19,387
Inventories 27,876 27,750
Other 6,172 5,599
--------- ---------
Total current assets 57,601 54,582
Net property, plant and equipment 135,668 137,410
Other assets 32,632 33,240
--------- ---------
Total assets $ 225,901 $ 225,232
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 17,343 $ 14,642
Accrued liabilities 12,594 18,093
Notes Payable -- 150
--------- ---------
Total current liabilities 29,937 32,885
--------- ---------
Long-term debt 162,427 152,915
Other long-term liabilities 16,046 15,951
--------- ---------
Total liabilities 208,410 201,751
--------- ---------
Commitments and Contingencies (Notes 4 and 5)
Stockholder's equity:
Common stock $1 par value, authorized 1,000 shares, 1 1
issued and outstanding 500 shares
Paid-in capital 28,319 28,319
Accumulated deficit (10,829) (4,839)
--------- ---------
Total stockholder's equity 17,491 23,481
--------- ---------
Total liabilities and stockholder's equity $ 225,901 $ 225,232
========= =========
See accompanying notes to condensed financial statements.
<PAGE>
PLAINWELL INC.
Condensed Statements of Cash Flows
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March March
31, 1999 31, 1998
--------- ---------
(Unaudited) (Unaudited)
<S> <C> <C>
Operating activities:
Net loss $ (1,990) $ (1,357)
Adjustments to reconcile net loss, to net cash used in
operating activities:
Depreciation and amortization 3,115 1,318
Amortization of deferred financing costs 289 96
Deferred income tax charges (741) (275)
Changes in operating assets and liabilities (5,223) (11,782)
--------- ---------
Net cash used in operating activities (4,550) (12,000)
--------- ---------
Investing activities:
Capital expenditures (1,373) (676)
Purchase of Consumer Products Division -- (122,317)
--------- ---------
Net cash used in investing activities (1,373) (122,993)
--------- ---------
Financing activities:
Net borrowings (payments) under revolving lines of credit 9,512 (1,354)
Repayment of term loan -- (13,500)
Issuance of long-term debt -- 130,000
Capital contribution -- 24,634
Dividends paid (4,000) (4,288)
--------- ---------
Net cash provided by financing activities 5,512 135,492
--------- ---------
Net (decrease) increase in cash and cash equivalents (411) 499
--------- ---------
Cash and cash equivalents at beginning of period $ 1,846 $ 772
--------- ---------
Cash and cash equivalents at end of period $ 1,435 $ 1,271
--------- ---------
</TABLE>
See accompanying notes to condensed financial statements.
<PAGE>
PLAINWELL INC.
Notes to Condensed Financial Statements (Unaudited)
March 31, 1999
Note 1. Basis of Presentation
PLAINWELL INC. (the Company) is a leading U.S. producer and marketer of value
added paper products for niche markets within the paper industry. The Company
conducts its business through two divisions: the Consumer Products Division,
which produces private label consumer tissue products such as bath tissue, paper
towels, napkins and facial tissue and the Specialty Paper Division, which
produces premium coated and uncoated printing papers and release and other
technical/specialty papers.
The Company is a wholly owned subsidiary of Plainwell Holding Company
(Holdings), which is a wholly owned subsidiary of Plainwell Shasta Holdings,
Inc. Effective March 6, 1998, Plainwell Paper Company merged with and into the
Company and its business operates as the Specialty Paper Division of the
Company. Also effective March 6, 1998, the Company purchased substantially all
of the assets, properties and rights and assumed certain related liabilities of
the tissue business of Pope & Talbot, Inc., which operates as the Consumer
Products Division of the Company (see Note 2).
The historic information of the Company for the three months ended March 31,
1998 include the results of the Consumer Products Division beginning with the
acquisition date (March 6, 1998).
The balance sheet at December 31, 1998 has been derived from the audited
financial statements at that date but do not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and the instructions to Form 10Q and Article 10 of Regulation S-X.
Accordingly, they do not include all the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting only of adjustments of a
normal and recurring nature) considered necessary for a fair presentation of the
financial position and results of operations have been included. Operating
results for the three months ended March 31, 1999 are not necessarily indicative
of the results that might be expected for the year ending December 31, 1999. For
further information, refer to the financial statements and footnotes for the
year ended December 31, 1998 included in the Company's Form 10-K dated March 31,
1999.
<PAGE>
PLAINWELL INC.
Notes to Condensed Financial Statements (Unaudited)
Note 2. Acquisitions
Effective March 6, 1998, the Company purchased substantially all of the assets,
properties and rights and assumed certain related liabilities of the tissue
business of Pope & Talbot, Inc. The total purchase price, including the costs of
the acquisition, was $122,317,000.
The following unaudited pro forma results of operations for the quarter ended
March 31, 1998 assumes the acquisition, merger and related transactions occurred
as of January 1, 1998 (in Thousands of Dollars):
Three Months Ended
March 31, 1998
------------------
Net sales $53,139
Loss before extraordinary item (1,885)
This pro forma information does not purport to be indicative of the results that
actually would have been obtained if the combined operations had been conducted
during the periods presented and is not intended to be a projection of future
results.
<PAGE>
PLAINWELL INC.
Notes to Condensed Financial Statements (Unaudited)
Note 3. Inventories
Inventories consist of the following (in thousands):
March 31, 1999 December 31, 1998
-------------- -----------------
Finished goods $18,411 $17,173
Work-in-process 3,343 4,444
Materials and supplies 6,122 6,133
------- -------
Total $27,876 $27,750
======= =======
Note 4. Commitments and Contingencies
The Company is involved in various legal proceedings in the ordinary course of
business. Although the final outcome of any legal proceeding or environmental
matter is subject to a great many variables and cannot be predicted with any
degree of certainty, the Company presently believes that the ultimate outcome
from these proceedings would not have a material adverse effect on the current
financial position or on the operations of the Company; however, in any given
future reporting period such proceedings or matters could have a material effect
on the results of operations.
In connection with the purchase of the Consumer Products Division, the Company
entered into an 18-month Transition Services Agreement through September 30,
1999, with the former owner under which the former owner provides certain
information systems support and development services
The Company leases certain facilities, vehicles and equipment over varying
periods. None of the agreements contain unusual renewal or bargain purchase
options.
Note 5. Environmental Remediation
The Company is committed to abiding by the Environmental, Health and Safety
Principles of the American Forest & Paper Association. Each capital project has
been planned to comply with applicable environmental regulations and to enhance
environmental protection at existing facilities. The Company faces increasing
capital expenditures and operating costs to comply with expanding and more
stringent environmental regulations, although compliance with existing
environmental regulations is not expected to have a materially adverse effect on
the Company's earnings, financial position, or competitive position.
The Comprehensive Environmental Response, Compensation and Liability Act
(CERCLA) and similar state "Superfund" laws impose liability, without regard to
fault or to the legality of the original action, on certain classes of persons
(referred to as potentially responsible parties or PRPs) associated with a
release or threat of a release of hazardous substances into the environment.
Financial responsibility for the cleanup or other remediation of contaminated
property or for natural resource damages can extend to previously owned or used
properties, waterways, and properties owned by third parties, as well as to
properties currently owned and used by a company even if contamination is
attributable entirely to prior owners.
The Company has been identified by certain governmental entities or other
parties as a potentially
<PAGE>
responsible party with respect to possible investigation and cleanup costs
associated with certain contaminated sites. The Company has recorded a liability
for the estimated work at the locations and a receivable for remediation costs
recoverable under related indemnification agreements.
In 1990, a predecessor company to the Company was named as one of several PRPs
at a Superfund site in Kalamazoo, Michigan, which has five distinct operable
units. PRPs may be held jointly and severally liable for cleanup plus related
costs. One operable unit of the Kalamazoo River Site is the 12th Street
Landfill, a property wholly owned by the Company. The Company expects to pay for
the entire cost of the investigation and remediation work at this location. The
Company has recorded a liability for the estimated cost to remediate this unit
as well as a receivable for remediation costs recoverable under an
indemnification agreement. Investigations at a second operable unit, which
includes a portion of the Kalamazoo River, continue. Environmental remediation
costs, if any, that may be incurred cannot presently be estimated. Based on
management's understanding of the contamination at the Kalamazoo River operable
unit, the involvement of other PPS and the indemnity rights the Company has
against the Predecessor Company, the Company does not expect this matter to have
a material adverse effect on operations, liquidity and financial condition.
The Company owns and operates a landfill in Washington Township, Wisconsin, for
disposal of its papermaking sludge. The Company has closed two of the three
sections of the landfill and is currently monitoring those sections in
accordance with requirements of state environmental laws. The Company expects to
begin closure of the third section by 2002. Estimated closure costs of $1.3
million are being accrued over the operating life of the landfill. Monitoring
costs estimated at $80,000 per year will be required for 40 years following the
closure of the landfill. The Company believes that, based on current information
and regulatory requirement, the estimates of the landfill closure costs are
adequate, although there can be no assurance that the cost will not eventually
exceed the amount presently estimated.
The Company is also considered a PRP with respect to the Blue Valley Landfill
Superfund Site in Eau Claire, Wisconsin. Based on the amount of material sent to
the Blue Valley Landfill and the Company's indemnification with a predecessor
company, the Company does not anticipate that its costs associated with the site
will have a material adverse effect on its operations, liquidity or financial
condition.
In 1998, the EPA published regulations establishing standards and limitations
for non-combustion sources under the Clean Air Act and revised regulations under
the Clean Water Act. The new rules require more stringent controls on air
emissions and wastewater discharges from the Company's paper and tissue mills.
These regulations are collectively referred to as the "cluster rules." The
Company estimates that future capital spending to comply with the cluster rules
could be up to $5 million.
Note 6. Paid-in Capital and Stockholder's Equity
In December 1998, Plainwell Shasta Holdings Inc. was created as the parent of
Plainwell Holdings, Inc. in a non-taxable transaction. In connection with this
restructuring, Plainwell Shasta Holdings Inc. created two affiliated entities to
the Company, Shasta Holdings, Inc. and Shasta Paper Company.
In January 1999, Shasta Paper Company acquired the pulp and paper operations of
Simpson Paper Company located in Anderson, California. The Company paid a
dividend of $4.0 million to finance the transaction. The Company has various
transactions with Shasta Paper Company, including intercompany sales, shared
sales and marketing costs, shared corporate administrative costs, and shared
information services costs.
<PAGE>
Note 7. Business Segment Information
Financial information by business segment follows:
<TABLE>
<CAPTION>
Consumer Specialty Paper
Products Division Corporate Total
Division
(in Thousands)
------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Three Months ended March 31, 1999:
Net Sales $32,965 $19,159 $ -- $52,124
Income (loss) before interest, income
taxes and extraordinary item 1,124 690 (545) 1,269
Interest expense 190 34 3,776 4,000
Depreciation and amortization 2,849 369 186 3,404
Capital expenditures 1,079 287 7 1,373
Total assets $55,238 $21,093 $149,570 $225,901
Three Months ended March 31, 1998:
Net Sales $10,135 $20,035 $-- $30,170
Income (loss) before interest, income
taxes 301 508 (360) 449
Interest expense 54 37 1,457 1,548
Depreciation and amortization 986 368 60 1,414
Capital expenditures 391 285 -- 676
Total assets $168,706 $51,036 $10,629 $230,371
</TABLE>
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
The Company acquired the Consumer Products Division on March 6, 1998. The
historical financial information of the Company for the three months ended March
31, 1998 includes the results of the Consumer Products Division since the date
of acquisition March 6, 1998.
Three months ended March 31, 1999 and March 31, 1998
Net Sales.
Net sales increased $22.0 million to $52.1 million for the three months ended
March 31, 1999 compared to $30.1 million for the three months ended March 31,
1998. The increase was attributable to the acquisition of the Consumer Product
Division which added $22.8 million in net sales. Sales for the Specialty Paper
Division decreased $0.8 million to $19.2 million for the three months ended
March 31, 1999 compared to $20.0 million for the three months ended March 31,
1998. The decrease in sales at the Specialty Paper Division was attributable to
a 2.1% decrease in volume of shipments and a 2.3% decrease in net selling price.
Cost of Sales and Gross Profit.
Cost of sales increased $18.9 million to $46.1 million for the three months
ended March 31, 1999 compared to $27.2 million for the three months ended March
31, 1998. The increase was attributable to the acquisition of the Consumer
Products Division which added $19.9 million in cost of sales. Cost of sales for
the Specialty Paper Division decreased approximately $1.0 million to $17.1
million, primarily due to reduced raw material and other material costs.
Selling, General and Administrative Expenses.
Selling, general and administrative expenses increased $2.2 million to $4.7
million for the three months ended March 31, 1999 compared to $2.5 million for
the quarter ended March 31, 1998. The increase was attributable to the
acquisition of the Consumer Products Division which added $2.1 million in
selling, general and administrative expenses. Selling, general and
administrative expenses for the Specialty Paper Division decreased approximately
$0.3 million to $1.3 million. Corporate general and administrative expenses for
the three months ended March 31, 1999 were $0.4 million.
Operating Income (Loss).
Operating income increased $0.9 million to $1.3 million for the three months
ended March 31, 1999 compared to $0.4 million for the quarter ended March 31,
1998. The acquisition of the Consumer Products Division added $0.8 million to
operating income. The Specialty Paper Division operating income increased $0.2
million, with the Corporate operating expenses of $0.1 decreasing operating
income for the first quarter of 1999 as compared to the first quarter of 1998.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, continued
Interest Expense.
Interest expense increased $2.5 million to $4.0 million for the three months
ended March 31, 1999 compared to $1.5 million for the quarter ended March 31,
1998, primarily related to acquisition related borrowings and interest expense
associated therewith.
Income Taxes.
The Company's effective income tax rate was 27.1% and 30.8%, in the first
quarter of 1999 and 1998, respectively. The difference between the Company's
effective income tax rate and the statutory federal income tax rate are
primarily due to state income taxes.
Liquidity and Capital Resources.
The Company's primary capital requirements are for working capital, capital
expenditures and possible acquisitions. Management believes that cash generated
from operations, together with borrowings under the New Credit Facility, will be
sufficient to meet the Company's capital needs in the foreseeable future.
Pursuant to the terms of the Amended and Restated Loan and Security Agreement
between our company and Fleet Business Credit Corporation (the "Loan
Agreement"), we are required to comply with various financial covenants,
including a covenant to maintain a fixed charge coverage ratio, as defined and
calculated in accordance with the Loan Agreement, of at least 1.00. Our fixed
charge coverage ratio at March 31, 1999 does not comply with such covenant. We
currently are seeking a waiver from Fleet Business Credit Corporation regarding
our non-compliance with this covenant for the period ended March 31, 1999 as
well as future periods.
Capital expenditures were $1.4 million for the three months ended March 31, 1999
compared to $0.7 million for the three months ended March 31, 1998.
For 1999, the Company anticipates remaining capital expenditures of
approximately $6.6 million primarily to support strategic initiatives. These
initiatives include new tissue converting equipment at the Eau Claire, Wisconsin
facility, structural improvements at several facilities and enhancements of the
Company's information systems. These projects are consistent with the Company's
strategy of expanding the specialty paper and tissue businesses, reducing costs,
and spending capital to generate a higher return on investment. Capital
expenditures and acquisitions for 1999 are expected to be financed with
internally generated cash or through available borrowings. The Company further
estimates that future capital spending to comply with the Cluster Rules and the
"GLI" could be up to $5.0 million. The Company cannot predict if or when such
rules will be promulgated in a form that will require the Company to make such
expenditures. In addition, the Company is indemnified under various agreements
with respect to certain contingent environmental liabilities.
EBITDA, a measure of internal cash flow combining earnings before interest and
income taxes plus non-cash charges for depreciation and amortization, was $4.7
million for the first quarter of 1999. This was $2.8 million higher than EBITDA
of $1.9 million for the first quarter of 1998. The increase was caused primarily
by the acquisition of the Consumer Products Division which generated $2.7
million of
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, continued
incremental EBITDA during the three months ended March 31, 1999 and which was
supplemented by the $0.1 million increase in EBITDA at the Specialty Paper
Division and Corporate Divisions as compared to the quarter ended March 31,
1998. Depreciation and amortization expense increased $2.0 million to $3.4
million for the three months ended March 31, 1999 compared to depreciation and
amortization expense of $1.4 million for the quarter ended March 31, 1998.
Net cash used in operating activities for the first quarter of 1999 was $4.6
million, up from $12.0 million of net cash used in operating activities for the
first quarter of 1998.
At the end of the first quarter of 1999 long-term debt totaled $162.4 million,
compared to $152.9 million at the end of the same period of 1998. The ratio of
long-term debt to total capital was 90.3% at the end of the first quarter of
1999, an increase of 3.6% from the end of the same period last year. The ratio
of long-term debt to shareholders' equity was 928.6% at the end of the first
quarter of 1999 compared to 651.2% at the end of the first quarter of 1998. Out
of a total of $35.0 million committed domestic credit lines available at the end
of the first quarter of 1999, $14.4 million were utilized.
Inflation.
The Company believes that inflation has not had a material impact on the results
of operations of either the Consumer Products Division or the Specialty Paper
Division.
Contingent Matters.
Refer to Notes 4 and 5 of the Notes to the Condensed Financial Statements for a
discussion of contingencies.
Year 2000 Issues.
The "Year 2000" refers generally to the problems that some software may have in
determining the correct century for the year. For example, software with
date-sensitive functions that is not Year 2000 compliant may not be able to
distinguish whether "00" means 1900 or 2000, which may result in failures or the
creation of erroneous results. Currently, many computer systems and software
products are coded to accept only two-digit entries to distinguish the 21st
century dates from 20th century dates. As a result, many companies' software and
computer systems may need to be upgraded or replaced in order to comply with
such "Year 2000" requirements. If we, or third parties with which we do
business, fail to comply with Year 2000 requirements, the integrity and
reliability of our information databases may also be adversely affected.
In connection with the 1997 acquisition of the Specialty Paper Division by our
sole stockholder, Plainwell Holding Company, a Transition Services Agreement
with Simpson Paper Company ("Simpson") the company from which we purchased such
division, pursuant to which Simpson agreed to provide certain services to us for
a period ending not later than the second anniversary of the acquisition. In
connection with the 1998 acquisition of the Consumer Products Division, we
entered into an 18-month Transition Services Agreement with Pope & Talbot, Inc.
for the purposes of supporting and enhancing the Consumer Products Division's
information systems and applications.
In addition, we engaged a consulting firm to assist in:
(1) inventorying the Consumer Products Division's existing information systems;
<PAGE>
(2) determining the ongoing use and value of each such system to the Consumer
Products Division;
(3) determining processing capabilities of the systems utilized by the
Specialty Paper Division, their fitness for purpose and certain other
tasks, including Year 2000 status; and
(4) certain other tasks.
We have made an initial assessment of its present Year 2000 status and have
developed an implementation plan. We have installed new order management
software and have tested the process control software at our Specialty Paper
Division. Replacement of the Specialty Paper Division's financial systems
software has begun and is scheduled for completion in September, 1999. We have
engaged third parties to enhance the functionality and value of existing order
management and warehouse management software and to concurrently upgrade the
related hardware at our Consumer Product Division. Replacement of Consumer
Products Division's financial systems software has begun and is scheduled for
completion in September, 1999. We expect that these enhancements will ensure
that we are Year 2000 compliant. Based on current estimates, we expect to incur
costs approximating $2.0 million to complete these tasks, the majority of which
are expected to be capital in nature.
We have queried those of our significant suppliers and subcontractors that do
not share information systems with us. To date, we are not aware of any such
third party with a Year 2000 issue that would materially impact our results of
operations, liquidity, or capital resources. However, we have no means of
ensuring that third parties with whom we do business will be Year 2000 ready.
The inability of third parties to complete their Year 2000 resolution process in
a timely fashion could materially impact us. The effect of non-compliance by
such third parties is presently not determinable.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, continued
Our management believes it has an effective program in place to resolve the Year
2000 issue in a timely manner. As noted above, we have not yet completed all
necessary phases of the Year 2000 program at this time. In the event that we do
not complete any remaining phases, we may be unable to take certain customer
orders, manufacture and ship products, invoice customers or collect payments. In
addition, disruptions in the economy generally resulting from the Year 2000
issues could also materially adversely affect us. We could be subject to
litigation for computer systems product failure, for example, equipment shutdown
or failure to properly date business records. The amount of potential liability
and lost revenue cannot be reasonably estimated at this time.
We have contingency plans for certain critical applications and is working on
such plans for others. These contingency plans involve, among other actions,
manual workarounds, increasing inventories and adjusting staffing strategies on
a short-term basis.
Forward-Looking Information
Certain statements in the Management's Discussion and Analysis of Financial
Condition and Results of Operation for the Quarter Ended March 31, 1999 compared
to the quarter ended March 31, 1998 may constitute forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
Because these forward-looking statements include risks and uncertainties, actual
future results may differ materially from those expressed in or implied by the
statements.
Factors that could cause actual results to differ include, among other things:
(1) Increased competition from either domestic or foreign paper producers,
including increases in more competitive capacity through construction
of new mills or conversion of older facilities to produce competitive
products;
(2) variations in demand for our products;
(3) changes in the cost or availability of the raw materials that we use,
particularly market pulp;
(4) costs of compliance with new environmental laws and regulations;
(5) any decisions by us to make a significant acquisition or a significant
increase in production capacity
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks, which include changes in U.S. interest
rates and commodity prices. The Company does not engage in financial
transactions for trading or speculative purposes.
<PAGE>
PART II
Item 1. Legal Proceedings
Reference is made to Note 7 of the Notes to Financial Statements included with
the Company's Form 10-K filed March 31, 1999.
Item 4. Submission of Matters to a Vote of Security Holders
(1) None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits on Form 8-K
None
(b) Reports on Form 8-K
None
The following Exhibit in included herein:
(27) Financial Data Schedule
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.
PLAINWELL INC.
(Registrant)
May 14, 1999 By: /s/ Jeffrey A. Arnesen
- ------------------------------ ------------------------------------------
Date Jeffrey A. Arnesen
Senior Vice President Finance
and Chief Accounting Officer
May 14, 1999 By: /s/ William L. New
- ------------------------------ ------------------------------------------
Date William L. New
Chairman and Chief Executive Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<CASH> 1,435,000
<SECURITIES> 0
<RECEIVABLES> 22,118,000
<ALLOWANCES> 0
<INVENTORY> 27,876,000
<CURRENT-ASSETS> 57,601,000
<PP&E> 135,668,000
<DEPRECIATION> 0
<TOTAL-ASSETS> 225,901,000
<CURRENT-LIABILITIES> 29,937,000
<BONDS> 152,300,000
1,000
0
<COMMON> 225,901,000
<OTHER-SE> 52,124,000
<TOTAL-LIABILITY-AND-EQUITY> 46,133,000
<SALES> 4,722,000
<TOTAL-REVENUES> 4,000,000
<CGS> (2,731,000)
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<INCOME-TAX> (741,000)
<INCOME-CONTINUING> 1,990,000
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<NET-INCOME> (1,990,000)
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</TABLE>
