FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended September 30, 1994
Commission file number 0-1051
CONSOLIDATED PAPERS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin
(State or other jurisdiction of incorporation or organization)
39-0223100
(I.R.S. Employer Identification No.)
Wisconsin Rapids, Wisconsin 54495
(Address of principal executive offices)
(Zip Code)
715 422-3111
(Registrant's telephone number, including area code)
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 the latest practicable date.
Common stock par value $1.00 outstanding October 21, 1994 44,179,109 shares
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<CAPTION>
As Of
September 30 September 30
1994 1993 December 31
(Unaudited) (Unaudited) 1993
ASSETS
<S> <C> <C> <C>
Current Assets
Cash & cash equivalents $ 3,142 $ 1,784 $ 2,123
Receivables (net of reserves of
$3,912 as of September 30, 1994,
$3,636 as of September 30, 1993
and $3,558 as of December 31,
1993) 101,238 70,594 61,321
Inventories
Finished stock 26,933 31,522 39,549
Unfinished stock 3,630 6,765 4,932
Raw materials and supplies 65,533 58,078 55,806
Total inventories 96,096 96,365 100,287
Prepaid expenses 15,895 13,832 17,859
Total current assets 216,371 182,575 181,590
Investments and other assets 61,606 67,862 62,222
Buildings, machinery and equipment 1,877,823 1,829,356 1,833,919
Less: Accumulated depreciation 736,814 660,135 680,767
1,141,009 1,169,221 1,153,152
Land and timberlands 28,839 27,941 28,315
Capital additions in process 59,744 30,003 41,788
Total plant and equipment 1,229,592 1,227,165 1,223,255
$ 1,507,569 $ 1,477,602 $ 1,467,067
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
<S> <C> <C> <C>
Current maturities of long-term debt $ 50,000 $ 75,000 $ 50,000
Accounts payable 45,609 33,886 33,352
Other 77,062 65,355 62,333
Total current liabilities 172,671 174,241 145,685
Long-term debt 89,000 108,000 121,000
Deferred income taxes 175,666 149,520 158,448
Postretirement benefits 104,979 104,198 98,776
Other non-current liabilities 5,153 4,210 4,110
Shareholders' Investment
Preferred stock, authorized and
unissued 15,000,000 shares - - -
Common stock, shares issued
44,174,477 as of September 30, 1994,
43,991,987 as of September 30, 1993
and 44,014,385 as of December 31,
1993 44,174 43,992 44,014
Capital in excess of par value 54,713 47,243 48,770
Cumulative translation adjustment (2,061) (2,057) (2,047)
ESOP loan guarantee - ( 250) -
Unrealized net loss on investment
securities ( 791) - -
Reinvested earnings 864,065 848,505 848,311
Total shareholders' investment 960,100 937,433 939,048
$ 1,507,569 $ 1,477,602 $ 1,467,067
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA - UNAUDITED)
Three Months Ended Nine Months Ended
September 30 June 30 September 30
1994 1993 1994 1994 1993
<S> <C> <C> <C> <C> <C>
Net sales $ 272,903 $ 228,776 $ 233,855 $ 738,949 $ 730,674
Cost of goods sold 226,098 194,448 184,483 602,091 594,442
Gross profit 46,805 34,328 49,372 136,858 136,232
Selling, general and
administrative expenses 15,518 15,636 15,743 46,923 45,881
Income from operations 31,287 18,692 33,629 89,935 90,351
Interest expense ( 1,451) ( 2,014) ( 1,291) ( 3,862) ( 6,393)
Interest income 30 443 52 87 446
Miscellaneous, net 2,049 1,050 5,891 9,101 2,980
Total other income
(expense), net 628 ( 521) 4,652 5,326 ( 2,967)
Income before provision for
income taxes 31,915 18,171 38,281 95,261 87,384
Provision for income taxes 12,451 10,888 14,970 37,196 37,074
Net income $ 19,464 $ 7,283 $ 23,311 $ 58,065 $ 50,310
Net income per share $ .44 $ .17 $ .53 $ 1.32 $ 1.15
Average number of
common shares outstanding 44,129,287 43,976,520 44,070,572 44,079,647 43,896,909
CONSOLIDATED STATEMENTS OF REINVESTED EARNINGS
(DOLLARS IN THOUSANDS - UNAUDITED)
Three Months Ended Nine Months Ended
September 30 June 30 September 30
1994 1993 1994 1994 1993
<S> <C> <C> <C> <C> <C>
Balance beginning of period $ 858,721 $ 855,294 $ 849,509 $ 848,311 $ 840,332
Add: Net income 19,464 7,283 23,311 58,065 50,310
Deduct: Cash dividends (14,120) (14,072) (14,099) (42,311) (42,137)
Balance end of period $ 864,065 $ 848,505 $ 858,721 $ 864,065 $ 848,505
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS - UNAUDITED)
Nine Months Ended
September 30
1994 1993
<S> <C> <C>
Cash Flows From Operating Activities:
Cash Flows From Operating Activities:
Net Income $ 58,065 $ 50,310
Depreciation and depletion 63,955 77,595
Deferred income taxes 17,218 16,122
Earnings of affiliates ( 2,010) ( 2,447)
(Increase) decrease in current assets,
other than cash and cash equivalents (33,762) 1,820
Increase (decrease) in current
liabilities other than current
maturities of long-term debt 26,986 ( 8,692)
Increase (decrease) in postretirement
benefits 6,203 4,623
Increase (decrease) in other noncurrent
liabilities 1,043 1,502
Net cash provided by operating activities 137,698 140,833
Cash Flows From Investing Activities:
Capital expenditures (70,292) (61,271)
(Increase) decrease in investments and
other assets 1,821 ( 6,566)
Net cash used in investing activities (68,471) (67,837)
Cash Flows From Financing Activities:
Cash dividends (42,311) (42,137)
Increase (decrease) in long-term debt (32,000) (38,000)
Other 6,103 6,960
Net cash used in financing activities (68,208) (73,177)
Net increase (decrease) in cash and cash
equivalents 1,019 ( 181)
Cash and Cash equivalents -
beginning of period 2,123 1,965
Cash and cash equivalents - end of period $ 3,142 1,784
Cash paid during the year for:
Interest $ 4,538 $ 6,912
Income Taxes 15,328 30,005
<FN>
Notes to Financial Statements:
1. Reference is made to the Notes to Financial Statements which appear in the 1993
Annual Report on Form 10-K. The basic principles of those notes are pertinent to
these statements.
2. Results for 1994 include the lengthening of estimated useful lives of machinery and
equipment used in the pulp and papermaking process to a 20-year period versus the
company's former 16-year period. The effect of the change increased after-tax
income by $3.5 million, or 8 cents per share for the third quarter and $10.5
million, or 24 cents per share on a year-to-date basis.
3. Results for the second quarter 1994 reflect an increase in other income of $5.5
million, $3.3 million after-tax, or 8 cents per share, for a nonrecurring patent
infringement settlement.
4. Results for 1993 include adjustments to deferred income tax balances to reflect the
increase in the federal income tax rate from 34 percent to 35 percent. The
cumulative effect of the change in the tax rate was recorded during the third
quarter and totaled $3.6 million, or 8 cents per share, for deferred tax
liabilities at January 1, 1993.
* * * * *
The financial information furnished is unaudited. It reflects all adjustments
which are, in the opinion of management, necessary to a fair statement of the
results.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
LIQUIDITY AND CAPITAL RESOURCES
On September 30, 1994 the ratio of current assets to current liabilities was
1.3 compared with 1.0 at September 30, 1993. During the third quarter,
working capital decreased by $2.8 million with cash and cash equivalents
decreasing by $.5 million. Accounts receivable increased by $15.1 million due
to a higher volume of shipments in September, 1994, because of generally
improved product markets. Inventories were reduced $10.4 million during the
quarter for the same reason. Accounts payable and other current liabilities
increased by $5.5 million due primarily to full capacity operations during
September, which increased purchases.
Capital expenditures during the quarter totaled $27.8 million compared with
$18.7 million in the third quarter of 1993. The 1994 capital spending program
is now projected to total $90.0 million. Major capital spending for the third
quarter 1994 included $5.5 million expended on a $30 million grinder room
replacement project at the Wisconsin River Division and $2.0 million expended
on a $9 million supercalender addition at the Stevens Point Division. Funded
debt was reduced by $13.0 million during the quarter. A combination of
internally-generated funds and external financing assures adequate capital to
fund existing and projected projects.
At its October 1994 meeting, the board of directors approved a $116 million
1995 capital approval budget. The 1995 capital approval budget includes $67
million for necessary replacement and quality projects, $14 million for high-
return projects, and $35 million for environmental control projects.
OPERATING RESULTS
THIRD QUARTER AND FIRST NINE MONTHS, 1994-1993 COMPARISONS
Net sales for the third quarter were a record $272.9 million, an increase of
19.3%, and net sales for the first three quarters were also a record for the
period with increases of 1.1%. A strengthened market for lightweight coated
printing paper sold to magazine publishers and heavier weight free-sheet
papers was the main reason for the increase in sales during the third quarter.
Current demand allowed the company to increase prices 3% to 5% late in the
third quarter for free-sheet papers and about 7% on October 1, 1994 for
lightweight coated papers. Another price increase of approximately 11% for
web free-sheet grades sold to merchants is announced for December 1.
Net income for the third quarter, which included the favorable after-tax
effect of $3.5 million for the change in the depreciation of machinery and
equipment, increased by 12.2% when compared with the similar period in 1993,
which included a retroactive tax increase resulting in a charge of $3.6
million. The primary reasons for the after-tax earnings increase were:
higher volume - $12.3 million; change in depreciable lives of pulp and
papermaking equipment - $3.5 million; and better operations - $1.8 million;
partially offset by reduced selling prices and mix - $5.2 million; and higher
material costs, mostly pulp - $2.9 million. Net income, after accounting
adjustments, increased by 15.4% for the nine-month period in 1994 compared to
1993.
The lightweight groundwood mills, Biron and Wisconsin River divisions
combined, operated at 99.7% and 91.7% of capacity for the third quarter and
first three quarters 1994, respectively, compared with 78.2% and 92.6% for
similar periods in 1993. The groundwood-free mill, Wisconsin Rapids Division,
operated at 95.1% and 87.4% of active capacity for the third quarter and first
three quarters 1994 compared with 85.2% and 87.4% for the comparable periods
in 1993. In spite of the flat year-to-year capacity utilization, shipments of
groundwood-free grades increased 28.0% for the first nine months of 1994
compared with the same period in 1993 due to increased plant productivity and
efficiencies. The Converting Division, which converts heavier-weight
groundwood-free rolls into sheets, increased shipments by 25.5% and operated
at 97.7% of capacity during the third quarter of 1994 compared with 80.7% in
the same period in 1993. Better productivity and mix at the coated specialty
mill increased shipments by 7.1% and 9.0% for the third quarter and
year-to-date 1994, respectively, compared with the same periods in 1993. This
mill operated at 100.0% of capacity in both the third quarter and first three
quarters of 1994 compared with 100.0% and 98.9% in comparable periods of 1993.
Paperboard products shipments declined while corrugated product shipments
increased slightly during the third quarter, 1994 compared with the same
period in 1993. Both operations continued their emphasis on producing higher
value-added products.
Gross margins as a percent of net sales increased to 17.2% for the third
quarter 1994 compared with 15.0% for the third quarter in 1993, and held
steady for the first nine months of 1994 at 18.5% compared with 18.6% in 1993.
Increased volume and changes in depreciation lives more than overcame
reductions in product prices and accounted for the majority of the increase in
gross profit margins in the third quarter.
Selling, general and administrative expenses as a percent of net sales
decreased in the third quarter to 5.7% compared with 6.8% for the third
quarter 1993 and held steady at 6.3% for the nine month period in both 1994
and 1993.
Other income (expense) net increased by $1.0 million in the third quarter 1994
compared with same period in 1993 primarily due to lower interest expense.
The year-to-date result improved in 1994 by $8.3 million when compared to 1993
due to a $5.5 million favorable settlement of a patent infringement suit,
reduced debt, and a lower interest rate on the debt.
The effective tax rate was 39.0% for both periods in 1994 compared with 59.9%
in the third quarter and 42.4% for the first nine months in 1993. The higher
1993 tax rates resulted from the August, 1993 increase in the federal tax rate
retroactively implemented in the third quarter 1993.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Furnish the exhibits required by Item 601 of Regulation S-K.
(27) Financial Data Schedule.
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K during the quarter ended
September 30, 1994.
Items 1, 2, 3, 4, and 5 are not applicable and have been omitted.
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.
CONSOLIDATED PAPERS,INC.
Date November 10, 1994 By /s/ Richard J. Kenney
Richard J. Kenney, Vice President, Finance
Principal Financial Officer
Date November 10, 1994 By /s/ Carl R. Lemke
Carl R. Lemke, Assistant Secretary
[TYPE] EX-27
[DESCRIPTION] ART. 5 FDS FOR 3RD QUARTER 10-Q
[TEXT]
This schedule contains summary financial information extracted from the
September 30,1994 consolidated balance sheet and the consolidated statements
of income, reinvested earnings and cash flows for the nine-month period ended
9/30/94 and is qualified in its entirety by reference to such financial
statements.
[ARTICLE] 5
[MULTIPLIER] 1,000
</TABLE>
<TABLE>
<S> <C>
[PERIOD-TYPE] 9-MOS
[FISCAL-YEAR-END] DEC-31-1994
[PERIOD-END] SEP-30-1994
[CASH] 3,142
[SECURITIES] 0
[RECEIVABLES] 105,150
[ALLOWANCES] 3,912
[INVENTORY] 96,096
[CURRENT-ASSETS] 216,371
[PP&E] 1,966,406
[DEPRECIATION] 736,814
[TOTAL-ASSETS] 1,507,569
[CURRENT-LIABILITIES] 172,671
[BONDS] 89,000
[COMMON] 0
[PREFERRED-MANDATORY] 0
[PREFERRED] 44,174
[OTHER-SE] 915,926
[TOTAL-LIABILITY-AND-EQUITY] 1,507,569
[SALES] 738,949
[TOTAL-REVENUES] 738,949
[CGS] 602,091
[TOTAL-COSTS] 602,091
[OTHER-EXPENSES] 0
[LOSS-PROVISION] 0
[INTEREST-EXPENSE] 3,862
[INCOME-PRETAX] 95,261
[INCOME-TAX] 37,196
[INCOME-CONTINUING] 58,065
[DISCONTINUED] 0
[EXTRAORDINARY] 0
[CHANGES] 0
[NET-INCOME] 58,065
[EPS-PRIMARY] 1.32
[EPS-DILUTED] 1.32
</TABLE>
