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 March 31,1995
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, WI 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 April 28, 1995 44,310,021 shares
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<CAPTION>
As Of
March 31 March 31
1995 1994 December 31
(Unaudited) (Unaudited) 1994
ASSETS
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 3,244 $ 1,990 $ 8,155
Receivables (net of reserves of
$4,230 as of March 31, 1995,
$3,673 as of March 31, 1994,
and $4,066 as of December 31,
1994) 96,737 75,321 88,462
Inventories
Finished stock 28,584 33,295 24,356
Unfinished stock 4,955 4,078 4,722
Raw materials and supplies 63,461 59,068 58,935
Total inventories 97,000 96,441 88,013
Prepaid expenses 16,851 15,783 14,698
Total current assets 213,832 189,535 199,328
Investments and other assets 60,144 62,262 60,209
Plant and Equipment
Buildings, machinery and equipment 1,914,227 1,843,425 1,907,952
Less: Accumulated depreciation 772,782 701,000 753,263
1,141,445 1,142,425 1,154,689
Land and timberlands 29,505 28,398 29,384
Capital additions in process 74,190 51,930 55,901
Total plant and equipment 1,245,140 1,222,753 1,239,974
$ 1,519,116 $ 1,474,550 $ 1,499,511
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Current maturities of
long-term debt $ 50,000 $ 50,000 $ 50,000
Accounts payable 51,966 37,623 47,436
Other 77,241 71,327 59,514
Total current liabilities 179,207 158,950 156,950
Long-term debt 23,000 107,000 68,000
Deferred income taxes 192,687 161,548 181,778
Postretirement benefits 110,406 101,120 109,558
Other noncurrent liabilities 7,691 4,466 7,338
Shareholders' Investment
Preferred stock, authorized and
unissued 15,000,000 shares - - -
Common stock: shares issued,
44,290,350 as of March 31, 1995,
44,056,842 as of March 31, 1994
and 44,199,736 as of December 31,
1994 44,290 44,057 44,200
Capital in excess of par value 59,661 50,414 56,082
Cumulative translation adjustment (2,108) (2,095) (2,113)
Unrealized net loss on investment
securities ( 764) ( 419) ( 879)
Reinvested earnings 905,046 849,509 878,597
Total shareholders' investment 1,006,125 941,466 975,887
$ 1,519,116 $ 1,474,550 $ 1,499,511
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA - UNAUDITED)
Three Months Ended
March 31 December 31
1995 1994 1994
<S> <C> <C> <C>
Net sales $ 308,904 $ 232,191 $ 288,602
Cost of goods sold 227,433 191,510 225,357
Gross profit 81,471 40,681 63,245
Selling, general
and administrative expenses 16,003 15,662 16,556
Income from operations 65,468 25,019 46,689
Interest expense ( 1,459) ( 1,120) ( 1,382)
Interest income 348 5 55
Miscellaneous, net 2,383 1,161 1,982
Total other income
(expense), net 1,272 46 655
Income before provision for
income taxes 66,740 25,065 47,344
Provision for income taxes 26,135 9,775 18,675
Net Income $ 40,605 $ 15,290 $ 28,669
Net income per share $ 0.92 $ 0.35 $ 0.65
Average number of
common shares outstanding 44,231,398 44,038,078 44,187,983
CONSOLIDATED STATEMENTS OF REINVESTED EARNINGS
(DOLLARS IN THOUSANDS - UNAUDITED)
Three Months Ended
March 31 December 31
1995 1994 1994
<S> <C> <C> <C>
Balance beginning of period $ 878,597 $ 848,311 $ 864,065
Add: Net income 40,605 15,290 28,669
Deduct: Cash dividends (14,156) (14,092) (14,137)
Balance end of period $ 905,046 $ 849,509 $ 878,597
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS - UNAUDITED)
Three Months Ended
March 31
1995 1994
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 40,605 $ 15,290
Depreciation and depletion 22,775 21,226
Deferred income taxes 10,909 3,100
Earnings of affiliates ( 1,081) ( 853)
(Increase) decrease in current assets,
other than cash and cash equivalents (19,415) ( 8,078)
Increase (decrease) in current
liabilities other than current
maturities of long-term debt 22,257 13,265
Increase (decrease) in postretirement
benefits 848 2,344
Increase (decrease) in other noncurrent
liabilities 353 356
Net cash provided by operating activities 77,251 46,650
Cash Flows from Investing Activities:
Capital expenditures (27,941) (20,724)
(Increase) decrease in investments
and other assets 1,266 346
Net cash used in investing activities (26,675) (20,378)
Cash Flows From Financing Activities:
Cash dividends (14,156) (14,092)
Increase (decrease) in long-term debt (45,000) (14,000)
Other 3,669 1,687
Net cash (used in) financing activities (55,487) (26,405)
Net increase (decrease) in cash and cash
equivalents ( 4,911) ( 133)
Cash and cash equivalents-beginning of period 8,155 2,123
Cash and cash equivalents-end of period $ 3,244 $ 1,990
Cash paid during the year for:
Interest $ 1,398 $ 1,371
Income taxes 3,755 101
Notes to Financial Statements:
Reference is made to the Notes to Financial Statements which appear in the 1994 Annual
Report on Form 10-K. The basic principles of those notes are pertinent to these
statements.
* * * * *
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 March 31, 1995, the ratio of current assets to current liabilities was
1.2:1 compared with 1.3:1 at December 31, 1994. During the first quarter,
working capital decreased by $8 million with cash and cash equivalents
decreasing by $5 million. Accounts receivable increased by $8 million due to
higher March sales and inventories increased by $9 million following a
decrease of $10 million during the fourth quarter 1994. Accounts payable and
other current liabilities increased by $22 million due primarily to a $23
million increase in income and payroll taxes payable at March 31, 1995
compared with December 31, 1994.
Capital expenditures totaled $28 million compared with $21 million during the
same period in 1994. The major first quarter 1994 expenditures included $3
million of a $30 million grinder room replacement at Wisconsin River Division,
$4 million of a $33 million chlorine reduction project at Kraft Division, and
$3 million for a paper machine rebuild at Biron Division.
In February, the board of directors approved a $166 million paper machine
project for the Stevens Point Division. The 1995 capital approval budget now
totals $282 million, with 1995 projected spending to be $174 million. The
expected 1995 spending includes $69 million for the new No. 35 paper machine
project. Funded debt was reduced by $45 million in the first quarter. A
combination of internally generated funds and external financing assures
adequate capital to fund existing and projected projects.
OPERATING RESULTS
FIRST QUARTER, 1995-1994 COMPARISON
Net sales for the first quarter were a record $308.9 million, an increase of
33% compared with the first quarter 1994. A strengthened market for heavier
weight free-sheet papers and lightweight coated printing paper sold to
magazine publishers was the main reason for the increase in first-quarter
sales. Current demand allowed the Company to increase prices during the
quarter 5% to 6% for free-sheet papers, 7% to 8% for lightweight coated
papers, and specialty papers 4% to 5%. Another price increase of
approximately 8% for lightweight coated papers and 5% for specialty papers was
announced for April 1, 1995 and April 17, 1995, respectively.
Net income for the first quarter increased 166% compared with the same period
in 1994. The primary reasons for the after-tax increase were: higher selling
prices and mix, $49.1 million; higher volume, $4.8 million; and better
operations, $5.2 million; partially offset by higher material costs, mostly
pulp, $18.8 million.
During the first quarter 1995, the Company's three coated paper mills,
excluding No. 11 paper machine, operated at 100% of capacity compared to 86%
for the same period in 1994. The two lightweight coated groundwood mills
(Biron and Wisconsin River) operated at 100% compared to 89% during the first
quarter of 1994. In 1994, one lightweight coated paper machine was off line
37 days for a quality rebuild and speed up. Had this machine been available
to produce during the quarter, capacity utilization during the first quarter
of 1994 would have been 81%. The Wisconsin Rapids groundwood free mill,
excluding No. 11 paper machine (which was put on standby status in 1991 with
the start up of the Company's No. 16 paper machine) operated at 100% of
available capacity during the first quarter, compared with 82% for the same
period last year. No. 11 paper machine resumed operation in mid March and is
not in this quarter's calculation of available capacity. The Company's coated
specialty paper division (Stevens Point) operated at 100% of available
capacity in the first quarter of 1995 and 1994. Shipments of paperboard
products increased 7% and corrugated containers increased 14% for the first
quarter 1995 compared to the same period in 1994.
Gross profit margins as a percent of net sales increased to 26.3% from 17.5%
in the first quarter 1995 compared to 1994. Increased volume and higher
selling prices partially offset by higher pulp prices accounted for the
increase in gross profit margin.
Selling, general, and administrative expenses held steady when compared with
last year's first quarter.
Other income (expense) held steady during the quarter as compared with first
quarter 1994.
The effective tax rate was 39.2% in 1995 compared with 39.0% for the first
quarter 1994.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Shareholders was held on April 24, 1995. At the
meeting, the shareholders elected eleven directors to hold office until the
next annual meeting of shareholders. Total shares represented in person or by
proxy were 38,794,004, which was 87.65 percent of the 44,259,833 shares
outstanding. The shares represented at the meeting were voted as follows:
Election of directors.
Shares Voted
For
R.B. Barker 38,461,466
J.R. Bostic 38,448,473
P.F. Brennan 38,468,327
W.N. Caldwell 38,469,522
S.M. Hands 38,461,129
B.S. Kubale 38,471,331
D.R. Mead, Jr. 38,464,793
G.W. Mead 38,471,687
G.D. Mead 38,472,357
L.R. Nash 38,467,797
G.N. Rupp 38,432,260
Withheld authority
for all directors 321,647
Withheld authority
on some directors 40,097
Item 5. Other Information.
On May 8, 1995, the Company entered into agreements with Pentair, Inc. and
Minnesota Power & Light Company whereby the Company will acquire Niagara of
Wisconsin Paper Corporation, Lake Superior Paper Industries and Superior
Recycled Fiber Industries for a total of approximately $215 million in cash,
plus assumption of related obligations of the acquired entities, including the
release of an approximately $42 million guarantee of a related entity. The
transactions are subject to further due diligence and regulatory clearances.
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.
(99) Additional Exhibits.
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K during the quarter ended
March 31, 1995.
Items 1, 2, and 3 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 May 10, 1995
/s/ Richard J. Kenney
By: Richard J. Kenney, Vice President, Finance
Principal Financial Officer
Date May 10, 1995
/s/ Carl R. Lemke
By: Carl R. Lemke
Assistant Secretary
Exhibit (99) To Form 10-Q For
Consolidated Papers, Inc. For
The Quarter Ended March 31, 1995
News Release of Registrant dated May 8, 1995
CONSOLIDATED PAPERS, INC. TO PURCHASE NIAGARA OF WISCONSIN PAPER CORPORATION,
LAKE SUPERIOR PAPER INDUSTRIES AND SUPERIOR RECYCLED FIBER INDUSTRIES
WISCONSIN RAPIDS, Wis. - Patrick F. Brennan, president and chief executive
officer of Consolidated Papers, Inc. (NYSE: CDP) today announced that the
company has agreed with Pentair, Inc. to purchase its Niagara of Wisconsin
Paper Corporation and Pentair's joint-venture share of Lake Superior Paper
Industries and Superior Recycled Fiber Industries. Minnesota Power of Duluth,
Minnesota, Pentair's joint-venture partner for Lake Superior Paper Industries
and Superior Recycled Fiber Industries, is also selling its share of those
businesses to Consolidated Papers.
The transaction will result in Consolidated's full ownership of Niagara of
Wisconsin Paper Corporation, Lake Superior Paper Industries and Superior
Recycled Fiber Industries. Consolidated Papers will pay a total of
approximately $215 million for the companies and assume related obligations
and debt of the acquired companies.
Although the transaction has been approved by the relevant boards of
directors, it is subject to further due diligence by Consolidated Papers and
satisfactory discussions with other affected parties. The sale is expected to
close in late June 1995.
The friendly acquisition of these companies represents strategic and
meaningful growth for Consolidated Papers, Brennan said. "Niagara of
Wisconsin is a respected and successful maker of coated groundwood papers, a
business we have been in for more than 60 years. Superior Recycled Fiber
Industries has been supplying high-quality recycled fiber made from post-
consumer wastepaper to Consolidated, a partnering customer, since its start-up
in 1993. We are very familiar with Superior Recycled Fiber Industries and its
product.
"Since Consolidated is a full-spectrum supplier of coated printing papers,
adding Lake Superior Paper Industries allows us to broaden our product grade
line to include supercalendered papers, which are used by many of the same
customers who purchase No. 5 lightweight coated groundwood publication
papers," he added. "Acquisition of these companies represents timely,
strategic growth for Consolidated and is consistent with our history of
deliberate expansion to meet the needs of our customers and the markets they
serve."
Niagara of Wisconsin Paper Corporation, Niagara, Wisconsin, is a manufacturer
of coated groundwood publication papers. The mill has three fourdrinier paper
machines, which combine to total 240,000 tons of annual papermaking capacity.
Pentair acquired Niagara of Wisconsin Paper Corporation in 1972. The company
employs about 600 people and has sales offices in Illinois and Connecticut.
Lake Superior Paper Industries, Duluth, Minnesota, manufactures
supercalendered paper on a fourdrinier machine equipped with a top-wire
former. The machine's annual capacity is 240,000 tons. The company employs
330 people and has a sales office in Illinois. Company operations began in
late 1987.
Lake Superior Papers Industries also operates Superior Recycled Fiber
Industries, which is adjacent to the Lake Superior Paper Industries mill in
Duluth. Superior Recycled Fiber Industries produces more than 90,000 tons a
year of high-quality pulp from post-consumer wastepaper. The company began
operations in 1993 and employs about 35 people.
Combined sales of Niagara of Wisconsin, Lake Superior Paper Industries and
Superior Recycled Fiber Industries were in excess of $360 million in 1994.
Pentair, Inc., St. Paul, Minnesota, is a diversified manufacturer with 1994
sales of $1.6 billion. Products made by Pentair's 10 domestic and
international businesses include: electrical and electronics enclosures,
woodworking equipment, power tools, sporting ammunition, automotive service
equipment, industrial lubrication systems and material-dispensing equipment,
pumps, and publication papers.
Minnesota Power is a diversified utility company headquartered in Duluth,
Minnesota. The company provides electric service to customers in northern
Minnesota and northwestern Wisconsin. Minnesota Power also has water utility
operations and other investments and corporate services.
Consolidated Papers, Inc., based in central Wisconsin, manufactures and
markets a complete line of enamel papers, also known as coated papers. These
papers are used in many prominent magazines and in an assortment of printed
materials, including distinguished books, brochures, advertising
communications and corporate annual reports.
Consolidated Papers is also the nation's largest manufacturer of lightweight
coated specialty papers, which are used in food and consumer product packaging
and labeling. Other products manufactured by Consolidated include paperboard
products and custom-designed corrugated displays and containers. The company
reported 1994 sales of $1.028 billion. Consolidated has been in the
papermaking business more than 91 years and has specialized in the manufacture
of coated papers for the past 60 years.
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted
from the March 31, 1995 consolidated balance sheet and the
consolidated statements of income, reinvested earnings and cash
flows for the three-month period ended 03/31/95 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 03-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 3,244
<SECURITIES> 0
<RECEIVABLES> 100,967
<ALLOWANCES> 4,230
<INVENTORY> 97,000
<CURRENT-ASSETS> 213,832
<PP&E> 2,017,922
<DEPRECIATION> 772,782
<TOTAL-ASSETS> 1,519,116
<CURRENT-LIABILITIES> 179,207
<BONDS> 23,000
<COMMON> 44,290
0
0
<OTHER-SE> 1,006,125
<TOTAL-LIABILITY-AND-EQUITY> 1,519,116
<SALES> 308,904
<TOTAL-REVENUES> 308,904
<CGS> 227,433
<TOTAL-COSTS> 227,433
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 164
<INTEREST-EXPENSE> 1,459
<INCOME-PRETAX> 66,740
<INCOME-TAX> 26,135
<INCOME-CONTINUING> 40,605
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 40,605
<EPS-PRIMARY> 0.92
<EPS-DILUTED> 0.92
</TABLE>
