FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 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 July 29, 1994 44,114,337 shares
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<CAPTION>
As Of
June 30 June 30
1994 1993 December 31
(Unaudited) (Unaudited) 1993
ASSETS
<S> <C> <C> <C>
Current Assets
Cash & cash equivalents $ 3,592 $ 3,381 $ 2,123
Receivables (net of reserves of
$3,799 as of June 30, 1994,
$3,514 as of June 30, 1993
and $3,558 as of December 31,
1993) 86,090 85,051 61,321
Inventories
Finished stock 40,561 39,030 39,549
Unfinished stock 4,158 4,765 4,932
Raw materials and supplies 61,811 60,226 55,806
Total inventories 106,530 104,021 100,287
Prepaid expenses 17,475 12,705 17,859
Total current assets 213,687 205,158 181,590
Investments and other assets 61,267 60,375 62,222
Buildings, machinery and equipment 1,853,346 1,777,380 1,833,919
Less: Accumulated depreciation 718,433 635,048 680,767
1,134,913 1,142,332 1,153,152
Land and timberlands 28,525 27,699 28,315
Capital additions in process 59,853 64,251 41,788
Total plant and equipment 1,223,291 1,234,282 1,223,255
$ 1,498,245 $ 1,499,815 $ 1,467,067
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<S> <C> <C> <C>
Current maturities of long-term debt $ 50,000 $ 86,000 $ 50,000
Accounts payable 42,643 39,267 33,352
Other 74,577 69,146 62,333
Total current liabilities 167,220 194,413 145,685
Long-term debt 102,000 115,000 121,000
Deferred income taxes 169,878 141,831 158,448
Postretirement benefits 102,943 102,812 98,776
Other noncurrent liabilities 4,783 3,917 4,110
Shareholders' Investment
Preferred stock, authorized and
unissued 15,000,000 shares - - -
Common stock: shares issued,
44,085,816 as of June 30, 1994,
43,951,462 as of June 30, 1993
and 44,014,385 as of December 31,
1993 44,086 43,951 44,014
Capital in excess of par value 51,452 45,112 48,770
Cumulative translation adjustment (2,095) (2,015) (2,047)
ESOP loan guarantee - ( 500) -
Unrealized net loss on investment
securities ( 743) - -
Reinvested earnings 858,721 855,294 848,311
Total shareholders' investment 951,421 941,842 939,048
$ 1,498,245 $ 1,499,815 $ 1,467,067
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA - UNAUDITED)
Three Months Ended Six Months Ended
June 30 March 31 June 30
1994 1993 1994 1994 1993
<S> <C> <C> <C> <C> <C>
Net sales $ 233,855 $ 260,302 $ 232,191 $ 466,046 $ 501,898
Cost of goods sold 184,483 202,778 191,510 375,993 399,994
Gross profit 49,372 57,524 40,681 90,053 101,904
Selling, general
and administrative expenses 15,743 14,811 15,662 31,405 30,245
Income from operations 33,629 42,713 25,019 58,648 71,659
Interest expense ( 1,291) ( 2,113) ( 1,120) ( 2,411) ( 4,379)
Interest income 52 1 5 57 3
Miscellaneous, net 5,891 525 1,161 7,052 1,930
Total other income
(expense), net 4,652 ( 1,587) 46 4,698 ( 2,446)
Income before provision for
income taxes 38,281 41,126 25,065 63,346 69,213
Provision for income taxes 14,970 15,572 9,775 24,745 26,186
Net Income $ 23,311 $ 25,554 $ 15,290 $ 38,601 $ 43,027
Net Income Per Share $ 0.53 $ 0.58 $ 0.35 $ 0.88 $ 0.98
Average number of
common shares outstanding 44,070,572 43,889,443 44,038,078 44,054,415 43,856,444
CONSOLIDATED STATEMENTS OF REINVESTED EARNINGS
(DOLLARS IN THOUSANDS - UNAUDITED)
Three Months Ended Six Months Ended
June 30 March 31 June 30
1994 1993 1994 1994 1993
<S> <C> <C> <C> <C> <C>
Balance beginning of period $ 849,509 $ 843,782 $ 848,311 $ 848,311 $ 840,332
Add: Net income 23,311 25,554 15,290 38,601 43,027
Deduct: Cash dividends (14,099) (14,042) (14,092) (28,191) (28,065)
Balance end of period $ 858,721 $ 855,294 $ 849,509 $ 858,721 $ 855,294
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS - UNAUDITED)
Six Months Ended
June 30
1994 1993
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 38,601 $ 43,027
Depreciation and depletion 42,501 51,738
Deferred income taxes 11,430 8,433
Earnings of affiliates ( 1,157) ( 1,589)
(Increase) decrease in current assets,
other than cash and cash equivalents (30,628) (19,166)
Increase (decrease) in current
liabilities other than current
maturities of long-term debt 21,535 480
Increase (decrease) in postretirement
benefits 4,167 3,237
Increase (decrease) in other noncurrent
liabilities 673 959
Net cash provided by operating activities 87,122 87,119
Cash Flows from Investing Activities:
Capital expenditures (42,537) (42,531)
(Increase) decrease in investments and
other assets 1,321 105
Net cash used in investing activities (41,216) (42,426)
Cash Flows from Financing Activities:
Cash dividends (28,191) (28,065)
Increase (decrease) in long-term debt (19,000) (20,000)
Other 2,754 4,788
Net cash used in financing activities (44,437) (43,277)
Net increase (decrease) in cash and cash
equivalents 1,469 1,416
Cash and cash equivalents -
beginning of period 2,123 1,965
Cash and cash equivalents - end of period $ 3,592 $ 3,381
Cash paid during the year for:
Interest $ 2,815 $ 4,780
Income taxes 10,573 22,678
<FN>
Notes to Financial Statements:
Notes to Financial Statements:
1. Reference is made to the Notes to Financial Statements that 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 second quarter
and $7 million, or 16 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 non-recurring patent
infringement settlement.
* * * * *
The financial information furnished is unaudited. It reflects all adjustments that
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
During the second quarter, working capital increased by $16 million with cash and
cash equivalents increasing by $2 million. Receivables increased by $11 million
primarily due to a $7 million addition resulting from the favorable settlement of a
patent infringement suit. Finished stock increased by $7 million as a result of
temporary increases to cover four days of contractual machine downtime over the July
4 holiday. Raw material inventory increased by $3 million. The $24 million
increase in current assets was partially offset by an accounts payable increase of
$5 million and other liabilities increase of $3 million that are considered to be
due to timing. The ratio of current assets to current liabilities was 1.3:1 at June
30, 1994 compared to 1.2:1 at March 31, 1994.
Capital expenditures in the second quarter of 1994 totaled $22 million compared with
$23 million in the second quarter of 1993. Major capital spending for the second
quarter 1993 included $6.7 million expended on a $30 million grinder room
replacement project at the Wisconsin River Division and $1.2 million expended on a
$9 million supercalender addition at the Stevens Point Division.
The 1994 capital spending program is currently projected to be $100 million. A
combination of internally generated funds and external financing is expected to
provide adequate capital to fund the projects. Funded debt decreased by $5 million
in the second quarter, and depending on business conditions and future capital
spending plans, it is expected that current debt will be repaid by the end of 1997.
OPERATING RESULTS
SECOND QUARTER AND FIRST SIX MONTHS, 1994-1993 COMPARISONS
Net sales and earnings decreased for the second quarter and the first two quarters
1994 compared with similar periods in 1993. Second quarter's net sales decreased
$26 million or 10.2%. Severe discounting from published prices continues in the
lightweight coated paper segment. Compared with the second quarter of 1993, second
quarter 1994 after tax earnings decreased by $2 million due to lower volume - $5.6
million and reduced selling prices and product mix - $5.4 million, partially offset
by better operations - $3.8 million, change in depreciable lives of pulp and
papermaking equipment - $3.5 million and a patent infringement suit settlement -
$3.3 million.
The lightweight groundwood mills, Biron and Wisconsin River divisions combined,
operated at 86.7% and 87.8% of capacity for the second quarter and first two
quarters 1994, respectively, compared with 100.0% and 99.7% for similar periods in
1993. The groundwood-free coated mill, Wisconsin Rapids Division, operated at 84.9%
and 83.3% of active capacity for the second quarter and year-to-date 1994 compared
with 91.3% and 88.5% for the comparable periods in 1993. In spite of the 5.2%
decrease in year-to-year capacity utilization, shipments of groundwood-free grades
increased 5.4% for the first half of 1994 compared with the same period in 1993 due
to increased plant efficiencies. During the first two quarters, the groundwood-free
machines (Nos. 12, 14, 15, and 16) were taken out of service various times due to
lack of orders. The Converting Division, which converts heavier-weight groundwood-
free rolls into sheets, increased shipments by 8% and operated at 84.6% of capacity
during the second quarter of l994 compared with 86.8% in the same period in 1993.
Coated specialty shipments increased 5.1% and 10.0% for the second 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 second quarter and first two quarters of
1994 compared with 100.0% and 98.3% in comparable periods of 1993. Paperboard and
corrugated products shipments declined slightly during the second quarter, l994
compared with the same period in l993. Both operations continued their emphasis on
producing higher value-added products.
Gross margins as a percent of net sales decreased slightly to 21.1% and 19.3% for
the second quarter and first six months of l994 compared with 22.1% and 20.3% for
similar periods in l993. Reduced volume, greater selling-price concessions and
unfavorable sales mix, only partially offset by changes in depreciation lives,
accounted for the decrease in gross profit margins.
Selling, general and administrative expenses as a percent of net sales increased
slightly for the quarter and first half of 1994 compared with 1993.
Other income (expense) net increased by $6 million due to settlement of a patent
infringement suit and reduced debt coupled with lower interest rates on the debt.
The effective tax rate was 39.1% for both periods in 1994 compared with 37.8% in
1993. The higher 1994 tax rate results from the increase in the federal tax rate
retroactively implemented in the third quarter 1993, when legislation was enacted.
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.
None.
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K during the quarter ended June 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 August 10, 1994
/s/ Richard J. Kenney
By: Richard J. Kenney, Vice President, Finance
Principal Financial Officer
Date August 10, 1994
/s/ Carl R. Lemke
By: Carl R. Lemke
Assistant Secretary
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