SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------------------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): June 30, 1995
CONSOLIDATED PAPERS, INC.
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(Exact name of registrant as specified in its charter)
Wisconsin 0-1051 39-0223100
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State or other jurisdiction (Commission(I.R.S. Employer
of incorporation) File Number Identification No.)
231 First Avenue North, Wisconsin Rapids, WI 54495-8050
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (715) 422-3111
The Form 8-K Current Report filed by the registrant on July 14, 1995 is hereby
amended as follows:
ITEM 7.
FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
The text of this item as previously filed is hereby restated to read in
its entirety as follows:
(a) Financial statements of business acquired.
Financial Statements and Other Financial Information of Lake
Superior Paper Industries for the six-month period ended June 30,
1995 and for the years ended December 31, 1994 and 1993 with Reports
of Independent Auditors.
Financial Statements and Other Financial Information of Superior
Recycled Fiber Industries for the six-month period ended June 30,
1995 and for the nineteen-month period ended December 31, 1994 with
Reports of Independent Auditors.
Financial Statements and Other Financial Information of Niagara of
Wisconsin Paper Corporation for the years ended December 31, 1994
and 1993 with Reports of Independent Auditors.
Unaudited Financial Statements of Niagara of Wisconsin Paper
Corporation for the six-month period ended June 30, 1995.
(b) Pro Forma financial information.
Unaudited Combined Pro Forma Consolidated Financial Statements of
Consolidated Papers, Inc. and the acquired businesses: Lake
Superior Paper Industries, Niagara of Wisconsin Paper Corporation,
Superior Recycled Fiber Industries, and other smaller subsidiaries
acquired.
(c) See Exhibit Index.
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 hereunto duly authorized.
CONSOLIDATED PAPERS, INC.
---------------------------------------------
Date September 13, 1995 By /s/ Richard J. Kenney
-------------------- ----------------------------------------
Richard J. Kenney, Vice President, Finance
EXHIBIT INDEX
The text of this Exhibit Index as previously filed is hereby restated to read in
its entirety as follows:
(2) Plan of acquisition, reorganization, arrangement, liquidation or
succession
(a) Agreement for Sale and Purchase of Stock of Niagara of Wisconsin
Paper Corporation dated May 8, 1995 among the Registrant and
Pentair, Inc. (together with a list briefly identifying the contents
of all omitted schedules thereto). The Registrant agrees to provide
copies of such schedules to the Commission upon request.
(b) Agreement for Sale and Purchase of Stock of Pentair Duluth Corp. and
Minnesota Paper Incorporated dated May 8, 1995 among the Registrant,
Pentair, Inc. and Minnesota Power & Light Company as amended on
June 30, 1995 (together with a list briefly identifying the contents
of all omitted schedules thereto). The Registrant agrees to provide
copies of such schedules to the Commission upon request.
(c) Agreement for Sale and Purchase of Assets of LSPI Fiber Co. and
Stock of Superior Recycled Fiber Corporation dated May 8, 1955 among
the Registrant, Pentair, Inc., Minnesota Power & Light Company,
Synertec, Inc. and LSPI Fiber Co. (together with a list briefly
identifying the contents of all omitted schedules thereto). The
Registrant agrees to provide copies of such schedules to the
Commission upon request.
(4) Instruments defining the rights of security holders, including indentures
(a) $130,000,000 Credit Agreement dated June 27, 1995 among the
Registrant and Wachovia Bank of Georgia, N.A. (together with a list
briefly identifying the contents of all omitted exhibits and
schedules thereto). The Registrant agrees to provide copies of such
exhibits and schedules to the Commission upon request.
(b) $120,000,000 Credit Agreement dated June 27, 1995 among the
Registrant and Wachovia Bank of Georgia, N.A. (together with a list
briefly identifying the contents of all omitted exhibits and
schedules thereto). The Registrant agrees to provide copies of such
exhibits and schedules to the Commission upon request.
The Registrant has additional long-term debt that does not exceed 10
percent of its total assets. The Registrant agrees to provide
copies of agreements covering such indebtedness to the Commission
upon request.
(23) *(a) Consent of Arthur Andersen LLP
*(b) Consent of KPMG Peat Marwick LLP
*(c) Consent of KPMG Peat Marwick LLP
(99) Additional Exhibits
(a) Forms of documents covered by an indemnification agreement as set
forth in Exhibit 2(b): Financing Agreement and related transaction
documents, including Keepwell Agreement and Lease, all dated
December 31, 1987.
(b) Press Release dated June 30, 1995 covering the transactions
described in this Form 8K.
*(c) Financial Statements and Other Financial Information of Lake
Superior Paper Industries for the six-month period ended June 30,
1995 and for the years ended December 31, 1994 and 1993 with Reports
of Independent Auditors.
*(d) Financial Statements and Other Financial Information of Superior
Recycled Fiber Industries for the six-month period ended June 30,
1995 and for the nineteen-month period ended December 31, 1994 with
Reports of Independent Auditors.
*(e) Financial Statements and Other Financial Information of Niagara of
Wisconsin Paper Corporation for the years ended December 31, 1994
and 1993 with Report of Independent Auditors.
*(f) Unaudited Financial Statements of Niagara of Wisconsin Paper
Corporation for the six-month period ended June 30, 1995.
*(g) Unaudited Combined Pro Forma Consolidated Financial Statements of
Consolidated Papers, Inc. and the acquired businesses: Lake
Superior Paper Industries, Superior Recycled Fiber Corporation, and
Niagara of Wisconsin Paper Corporation.
______________________________
* Filed herewith<PAGE>
EXHIBIT 23.a
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated August 24, 1995 relating to the balance sheets of Niagara of
Wisconsin Paper Corporation as of December 31, 1994 and 1993 and the related
statements of operations, shareholder's equity, and cash flows for the years
then ended included in this Form 8-K/A, into Consolidated Papers, Inc.'s
previously filed Registration Statement File Nos. 2-87423, 33-28786 and 33-
376838.
/s/ Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
September 12, 1995<PAGE>
EXHIBIT 23.b
The Venture Council
Lake Superior Paper Industries
We consent to the inclusion of our report dated August 4, 1995, with respect to
the balance sheets of Lake Superior Paper Industries as of June 30, 1995, and
December 31, 1994 and 1993, and the related statements of operations, joint
venture earnings and cash flows for the six-month period ended June 30, 1995 and
for each of the years in the two-year period ended December 31, 1994, which
report appears in the Form 8-K/A of Consolidated Papers, Inc. dated September
13, 1995.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 13, 1995<PAGE>
EXHIBIT 23.c
The Joint Venture Board
Superior Recycled Fiber Industries
We consent to the inclusion of our report dated August 4, 1995, with respect to
the balance sheets of Superior Recycled Fiber Industries as of June 30, 1995 and
December 31, 1994, and the related statements of operations and joint ventures'
loss, joint venture capital, and cash flows for the six-month period ended June
30, 1995 and the period from inception (May 28, 1993) through December 31, 1994,
which report appears in the Form 8-K/A of Consolidated Papers, Inc. dated
September 13, 1995.
/s/ KPMG Peat Marwick LLP
KPMG Peat Marwick LLP
Minneapolis, Minnesota
September 13, 1995<PAGE>
EXHIBIT 99.c
LAKE SUPERIOR PAPER INDUSTRIES
Financial Statements
June 30, 1995 and
December 31, 1994 and 1993
INDEPENDENT AUDITORS' REPORT
The Venture Council
Lake Superior Paper Industries:
We have audited the accompanying balance sheets of Lake Superior Paper
Industries (the Joint Venture) as of June 30, 1995 immediately prior to closing
the agreement for sale and purchase of stock with Consolidated Papers, Inc., and
December 31, 1994 and 1993, and the related statements of operations, joint
venture earnings, and cash flows for the six-month period ended June 30, 1995
and for each of the years in the two-year period ended December 31, 1994. These
financial statements are the responsibility of the Joint Venture's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
<PAGE>
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Lake Superior Paper Industries
as of June 30, 1995 immediately prior to closing the agreement for sale and
purchase of stock with Consolidated Papers, Inc. and December 31, 1994 and 1993,
and the results of its operations and its cash flows for the six-month period
ended June 30, 1995 and for each of the years in the two-year period ended
December 31, 1994 in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
July 28, 1995
LAKE SUPERIOR PAPER INDUSTRIES
Balance Sheets
June 30, 1995 and December 31, 1994 and 1993
<TABLE>
<CAPTION>
June 30, December 31,
Assets 1995 1994 1993
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents $ 0 4,673,000 1,000
Accounts receivable - trade,
net 23,381,000 13,475,000 15,786,000
Inventories 11,599,000 7,723,000 6,328,000
Prepaid rent - current 16,681,000 21,865,000 20,975,000
Other current assets 1,822,000 1,299,000 1,280,000
Receivables from related
parties 0 1,391,000 8,863,000
Total current assets 53,483,000 50,426,000 53,233,000
Property, plant and equipment,
net 80,638,000 81,393,000 81,855,000
Prepaid rent - long-term 65,603,000 65,603,000 55,266,000
Other amortizable costs, net 7,811,000 7,497,000 6,966,000
$ 207,535,000 204,919,000 197,320,000
Liabilities and Joint Venturers' Capital
Current liabilities:
Subordinated debt due to Joint
Venturer 64,000,000 69,237,000 61,000,000
Accounts payable 13,749,000 10,056,000 11,893,000
Accrued liabilities 7,068,000 7,917,000 5,664,000
Payables to related parties 59,000 0 0
Notes payable to bank 10,000,000 15,000,000 0
Total current liabilities 94,876,000 102,210,000 78,557,000
Note payable to banks 0 0 17,400,000
Deferred gain, net 29,921,000 30,776,000 32,486,000
Total liabilities 124,797,000 132,986,000 128,443,000
<PAGE>
Joint Venturers' capital:
Joint Venturers' contributions 29,000,000 29,000,000 29,000,000
Accumulated earnings 53,738,000 42,933,000 39,877,000
Total Joint Venturers' capital 82,738,000 71,933,000 68,877,000
Commitments and contingencies (notes 8, 9 and 13)
$207,535,000 204,919,000 197,320,000
See accompanying notes to financial statements.
</TABLE>
LAKES SUPERIOR PAPER INDUSTRIES
Statements of Operations and Joint Venture Earnings
Six-month period ended June 30, 1995 and
years ended December 31, 1994 and 1993
<TABLE>
<CAPTION>
Sixth-month
period ended
June 30, Year ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Net sales $ 92,447,000 152,227,000 143,041,000
Cost of sales 73,833,000 136,857,000 137,525,000
Gross profit 18,614,000 15,370,000 5,516,000
Operating expenses:
Selling and marketing 467,000 1,524,000 1,459,000
General and administrative 4,517,000 7,064,000 5,012,000
Operating income (loss) 13,630,000 6,782,000 (955,000)
Other income (expense):
Interest expense (3,243,000) (4,577,000) (3,284,000)
Interest income 144,000 166,000 335,000
Other, net 274,000 685,000 254,000
Joint Venture earnings (loss) 10,805,000 3,056,000 (3,650,000)
Accumulated earnings:
Beginning of period 42,933,000 39,877,000 43,527,000
End of period $ 53,738,000 42,933,000 39,877,000
See accompanying notes to financial statements.
</TABLE>
LAKE SUPERIOR PAPER INDUSTRIES
Statements of Cash Flows
Six month period ended June 30, 1995 and
years ended December 31, 1994 and 1993
<PAGE>
<TABLE>
<CAPTION>
Six-month
period ended
June 30, Year ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating
activities:
Joint Venture earnings (loss) $ 10,805,000 3,056,000 (3,650,000)
Adjustments to reconcile Joint
Venture earnings (loss) to
net cash provided by (used
in) operating activities:
Prepaid rent - long-term 0 (10,337,000) (10,336,000)
Depreciation and amortization 2,807,000 4,962,000 5,210,000
Amortization of deferred gain (855,000) (1,710,000) (1,709,000)
Changes in current assets and
liabilities:
Accounts receivable -
trade, net (9,906,000) 2,311,000 (1,229,000)
Receivables from related
parties 1,391,000 7,472,000 (3,031,000)
Inventories (3,876,000) (1,395,000) (788,000)
Prepaid rent - current 5,184,000 (890,000 (641,000)
Other current assets (523,000) (19,000) 218,000
Accounts payable 3,693,000 (1,837,000) 1,157,000
Accrued liabilities (849,000) 2,253,000 502,000
Payables to related parties 59,000 0 0
Net cash provide by (used in)
operating activities 7,930,000 3,866,000 (14,297,000)
Cash flows from investing activities:
Additions to property, plant and
equipment (1,907,000) (4,220,000) (3,266,000)
Additions to other amortizable
costs (459,000) (811,000) (1,127,000)
Net cash used in investing
activities (2,366,000) (5,031,000) (4,393,000)
Cash flows from financing activities:
Note payable to banks, net (5,000,000) (2,400,000) 2,400,000
Joint Venturers' subordinated
debt, net (5,237,000) 8,237,000 17,000,000
Repayment of long-term debt 0 0 (828,000)
Net cash provided by (used in)
financing activities (10,237,000) 5,837,000 18,572,000
Net increase (decrease) in cash
and cash equivalents (4,673,000) 4,672,000 (118,000)
Cash and cash equivalents,
beginning of period 4,673,000 1,000 119,000
Cash and cash equivalents,
end of period $ 0 4,673,000 1,000
Supplemental disclosures of cash
flow information:
Interest paid $ 4,003,000 4,227,000 2,791,000
See accompanying notes to financials statements.
</TABLE>
LAKE SUPERIOR PAPER INDUSTRIES
<PAGE>
Notes to Financial Statements
June 30, 1995, and December 31, 1994 and 1993
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF BUSINESS
ORGANIZATION AND NATURE OF BUSINESS
Lake Superior Paper Industries (the Joint Venture) was formed in 1985 by
Minnesota Paper, Incorporated, and Pentair Duluth Corp. (the Joint
Venturers), wholly owned subsidiaries of Minnesota Power and Pentair, Inc.,
respectively, for the purpose of manufacturing and selling, on an unsecured
basis, supercalendered paper for sale and distribution to publishers and
printers of magazines, direct mail catalogs and advertising inserts,
primarily in North America.
BASIS OF PRESENTATION
The Joint Venture's financial position and results of operations for the
six month period ended June 30, 1995 are stated immediately prior to the
closing of the agreement for sale and purchase of stock with Consolidated
Papers, Inc. on June 30, 1995 (see notes 5 and 15). As a result, even
though Consolidated Papers, Inc. paid-off $10,000,000 of notes payable to
bank after the closing on June 30, 1995, such amount is reflected as owed
to bank in these financial statements.
CASH EQUIVALENTS
For purposes of the statements of cash flows the Joint Venture considers
all highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
ACCOUNTS RECEIVABLE - TRADE
Accounts receivable - trade is stated net of allowances for uncollectible
accounts of $563,000 at June 30, 1995, $638,000 in 1994 and $600,000 in
1993.
INVENTORIES
Inventories are stated at the lower of cost (first in, first out method) or
market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and depreciated using the
straight-line method over their estimated useful lives of 30 years for
buildings and land improvements and 3 to 16 years for equipment.
STEAM PLANT
Payments by the Joint Venture relating to the steam plant's capital
expenditures are recorded as other assets and amortized over the lesser of
their estimated useful lives or the term of the steam plant agreement using
the straight-line method. Payments by the Joint Venture relating to the
steam plant's debt service are expensed on a level annual basis over the
term of the agreement.
LAKE SUPERIOR PAPER INDUSTRIES
SELF INSURANCE
The Company self insures $250,000 of workers' compensation expense per
<PAGE>
employee per year and has a $750,000 per year aggregate "stop loss"
agreement with an insurance company for aggregate claims expense.
The Company self insures $50,000 of medical benefits per employee per year,
and has insurance agreements for amounts in excess thereof, the cost of
which is shared with the employees.
The Company provides an accrual for its estimated expense for the self
insured portion of workers' compensation and medical claims.
POSTRETIREMENT BENEFITS
The Company sponsors a health care plan for substantially all employees.
The Company accounts for postretirement benefits under Statement of
Financial Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other than Pensions (SFAS No. 106). Effectively
January 1, 1995, the Company adopted SFAS No. 106 and has elected to
amortize this change over the next 22 years.
PRODUCTION EQUIPMENT LEASES
Annual rent payments for production equipment under operating leases vary
over the terms of the leases. Annual rent expense is calculated on a level
basis. Related deferred gains on sale and leaseback are amortized on a
straight-line basis (see notes 7 and 8).
REVENUE RECOGNITION
Revenue from sales is recognized at the time paper is shipped.
INCOME TAXES
The Joint Venture pays no income taxes. All taxable income or loss, tax
credits and other tax attributes are passed through directly to the Joint
Venturers.
(2) INVENTORIES
Inventories consist of:
June 30, December 31,
1995 1994 1993
Finished paper $ 784,000 1,116,000 739,000
Raw Materials 7,535,000 3,519,000 2,439,000
Other supplies and materials 915,000 844,000 961,000
Storeroom supplies 2,365,000 2,244,000 2,189,000
$ 11,599,000 7,723,000 6,328,000
LAKE SUPERIOR PAPER INDUSTRIES
(3) PROPERTY, PLANT AND EQUIPMENT, NET
Property, plant and equipment, net owned by the Joint Venture consist of
the following:
June 30, December 31,
1995 1994 1993
Land $ 8,784,000 8,784,000 8,779,000
Land improvements 6,581,000 6,581,000 6,493,000
Buildings 57,036,000 57,036,000 57,036,000
Equipment 30,899,000 31,045,000 27,898,000
<PAGE>
Construction in progress 4,055,000 2,110,000 1,130,000
107,355,000 105,556,000 101,336,000
Less accumulated depreciation 26,717,000 24,163,000 19,481,000
$ 80,638,000 81,393,000 81,855,000
In addition, substantial additional production equipment is leased under
operating lease arrangements (see note 8).
(4) OTHER AMORTIZABLE COSTS, NET
Other amortizable costs, net consist of:
June 30, December 31,
1995 1994 1993
Steam plant $ 8,915,000 8,456,000 7,645,000
Development costs 0 0 2,640,000
8,915,000 8,456,000 10,285,000
Less accumulated amortization 1,104,000 959,000 3,319,000
$ 7,811,000 7,497,000 6,966,000
(5) NOTE PAYABLE TO BANKS
A credit agreement with three banks allows for borrowings of up to the
lesser of $22,500,000 or the "borrowing base," as defined in the agreement.
Amounts outstanding under this agreement bear interest at a spread over a
base rate of "CD's," Eurodollar, or a reference rate. These rates, which
fluctuate, were 6%, 6% and 5% at June 30, 1995, December 31, 1994 and 1993,
respectively. The loans are secured by accounts receivable and
inventories, and any amounts outstanding are due on April 19, 1996.
On June 30, 1995, immediately after completion of the sale of the Joint
Venture (note 15), the purchaser, Consolidated Papers, Inc., paid off the
outstanding balance of $10,000,000. (See "Basis of Accounting" in note 1.)
LAKE SUPERIOR PAPER INDUSTRIES
(6) SUBORDINATED DEBT DUE TO JOINT VENTURERS
Amounts due to the Joint Venturers consist of prime rate operating loans
with no specified maturity and are considered subordinated debt under terms
of the sale and leaseback "Financing Agreement." The prime rate was 9%,
8.5% and 6% at June 30, 1995 and December 31, 1994 and 1993, respectively.
(7) DEFERRED GAIN
Substantially all production equipment at December 31, 1987 was sold to
third party investors and leased back by the Joint Venture. A total gain
of $42,826,000 was deferred and is being amortized over the 25-year term of
the leases.
(8) LEASES
The Joint Venture leases substantially all its production equipment under
25-year operating leases expiring in 2012, and require total annual rental
payments in amounts varying from $15,771,000 to $43,930,000. Annual rent
expense, computed on a level basis, is approximately $33,400,000
($16,700,000 for six months). Prepaid rent - long-term represents the
excess of scheduled rents paid to date over annual rent expense.
<PAGE>
The Leases also require the Joint Venture to pay customary operating and
repair expenses, to observe certain operating restrictions and covenants,
and provide a renewal option at fair market value upon lease termination
and purchase options at amounts approximating fair market value in 1997 and
at lease termination.
The Joint Venture has agreed to indemnify the lessors against future
possible loss of income tax attributes and credits related to the leases.
The increase in maximum, federal income tax rates included in the provision
of the "1993 Tax Act" resulted in $283,000, $565,000 and $565,000 of
additional lease expense for the six months ended June 30, 1995, and twelve
month periods ended December 31, 1994 and 1993, respectively, based on a
single payment to lessors in 2005. Taxing authority challenges to the
lessors' characterization of certain items relating to the leased assets
could result in the Joint Venture incurring additional prepaid lease costs,
which would be charged to lease expense over the remaining term of the
lease.
LAKE SUPERIOR PAPER INDUSTRIES
Minimum future cash rental payments under all noncancelable operating
leases, including certain vehicle and office equipment leases, having
remaining terms in excess of one year as of June 30, 1995, are as follows:
Year ending
1996 $ 36,000,000
1997 45,000,000
1998 42,000,000
1999 33,000,000
2000 37,000,000
Thereafter 285,000,000
$ 478,000,000
Total operating lease expenses were $17,387,000 for the six month period
ended June 30, 1995, $34,532,000 in 1994 and $34,306,000 in 1993.
(9) JOINT VENTURERS COMMITMENTS AND CONTRIBUTIONS
In connection with the sale and leaseback of production equipment, the
Joint Venturers agreed to guarantee certain rent payments under the leases
up to a total of $89,635,000, $89,635,000 and $95,000,000 each (severally
and not jointly) as of June 30, 1995, December 31, 1994 and 1993,
respectively.
(10) EMPLOYEE BENEFIT PLANS
The Joint Venture sponsors a money purchase pension plan and a retirement
savings plan which covers substantially all employees. The Joint Venture
has committed to match contributions in varying percentages, 25% to 75%,
applied against the first 6% of employee contributions, based upon the
achievement of certain profit objectives. Costs applicable to a money
purchase pension plan and a retirement and savings plan covering all
employees were $1,015,000 for the six months ended June 30, 1995,
$1,360,000 in 1994 and $1,160,000 in 1993.
The Joint Venture sponsored a long-term equity incentive plan pursuant to
which certain key employees were awarded, on a discretionary basis,
restricted stock of the Joint Venturers and cash, the amounts of which were
dependent on the achievement of agreed upon performance levels. Expense
incurred under this plan was $(161,000), $204,000 and $202,000 for the six
months ended June 30, 1995 and for the years ended December 31, 1994 and
1993, respectively.
The Joint Venture adopted a business improvement incentive plan in 1994
<PAGE>
pursuant to which employees are paid annual cash incentives, determined by
category of employee and level of compensation, for contributing to the
achievement of specified goals. Expense incurred under this plan was
$1,447,000 for the six months ended June 30, 1995, $1,812,000 for 1994, and
none in 1993.
LAKE SUPERIOR PAPER INDUSTRIES
(11) POSTRETIREMENT BENEFITS
The Company sponsors, on an unfunded basis, a health care plan which
provides postretirement medical benefits to full time employees. The plan
is contributory, with employee contributions adjusted annually. The
Company adopted SFAS No. 106 as of January 1, 1995. The cumulative effect
of this change in accounting was determined as of January 1, 1995 and will
be amortized over the next 22 years.
The following table presents the amounts recognized in the Company's
balance sheets as of June 30, 1995:
Accumulated postretirement benefit obligation $ 939,000
Unrecognized net loss (58,000)
Unrecognized transition obligation (764,000)
Accumulated postretirement benefit liability $ 117,000
Net periodic postretirement benefit cost for the six months ended June 30,
1995, which is reflected as an expense in Statement of Operations and Joint
Venture Earnings, includes the following components:
Service cost $ 66,000
Interest 33,000
Transition obligation amortization 18,000
Net periodic postretirement benefit cost $117,000
For measurement purposes, a 13% annual rate of increase in the per capita
cost of uncovered benefits (i.e., health care cost trend rate) was assumed
for 1995, the rate was assumed to decrease gradually to 5.5% by the year
2004 and remain at that level thereafter. The health care cost trend rate
assumption has a significant effect on the amounts reported. For example,
increasing the assumed health care cost trend rates by one percentage point
would increase the accumulated postretirement benefit obligation as of June
30, 1995 by $232,000, and the aggregate of the service and interest cost
components of net periodic postretirement benefit cost for the six months
ended June 30, 1995 by $28,000.
The weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8% at June 30, 1995.
(12) RELATED PARTY TRANSACTIONS
DE-INK RECYCLED PULP MILL
During 1993, the Joint Venture's 24% interest in Superior Recycled
Fiber Industries, Inc. (SRFI), an entity formed to construct and operate a
de-ink recycled pulp mill (pulp mill), was purchased by LSPI Fiber Co.
(LSPI Fiber), an entity owned by subsidiaries of Minnesota Power and
Pentair, Inc.
LAKE SUPERIOR PAPER INDUSTRIES
SRFI completed the construction phase of the pulp mill during 1993
and operations began on November 1, 1993. At June 30, 1995, December 31,
<PAGE>
1994 and 1993 the Joint Venture has receivables due from (payables due to)
SRFI and LSPI Fiber as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994 1993
<S> <C> <C> <C>
Costs incurred by the Joint Venture
on SRFI's behalf during the
construction phase of the pulp
mill $ 0 0 4,395,000
Costs incurred by the Joint Venture
on SRFI's behalf during operation (59,000) 1,391,000 3,475,000
Interest receivable due from SRFI 0 0 383,000
Legal expenses incurred by the Joint
Venture related to the formation of
the pulp mill 0 0 610,000
$(59,000) 1,391,000 8,863,000
</TABLE>
The Joint Venture purchased recycled pulp from LSPI Fiber in the amount of
$354,000 for the six months ended June 30, 1995 and $1,415,000 during 1994.
Joint Venture accounts payables include $750,000 due to LSPI Fiber and
$156,000 to SRFI for purchases of recycled pulp as of December 31,1993, and
$99,000 due to SRFI for construction costs incurred by SRFI on the Joint
Venture's behalf as of December 31, 1993.
The Joint Venture recorded interest income of $284,000 in 1993 related to
the interest bearing advances made to SRFI. In addition, other income
includes $87,000 for the six months ended June 30, 1995 and $183,000 and
$254,000 in 1994 and 1993, respectively, for services provided to SRFI.
LAKE SUPERIOR PAPER INDUSTRIES
In connection with the construction and operations of the pulp mill, the
Joint Venture entered into the following contractual agreements:
SRFI OPERATING AND MAINTENANCE AGREEMENT
Under this agreement the Joint Venture agrees to perform certain functions
as operating agent for SRFI, including engineering, contract preparation
and enforcement, repair, accounting, purchasing, supervision, training, and
all other required business services, for which it charges SRFI for the
direct labor, actual benefits, materials and services incurred, plus a five
percent charge on labor and benefits to cover certain management and
overhead expenses. In addition, the Joint Venture agrees to maintain
nominal inventories of equipment and tools to perform operating services
and is required to carry customary general insurance on the pulp mill
properties in specified amounts. Total amounts billed to SRFI under this
agreement were $7,092,000 for the six months ended June 30, 1995, and
$11,411,000 and $3,475,000 during 1994 and 1993, respectively.
LSPI FIBER PULP PURCHASE CONTRACT
Under this agreement the Joint Venture agrees to purchase LSPI Fiber's
recycled pulp purchased from SRFI in slurry form for a period of 96 months
at a price of the cost of the pulp plus $100 per bone dry short ton to a
maximum of partnering customers' price, plus ten percent, escalating five
<PAGE>
percent per year for each year the contract remains in force.
OTHER
The Joint Venture purchased electrical power from the parent company of one
of the Joint Venturers in the amount of $6,719,000 for the six month period
ended June 30, 1995, and $13,488,000 and $14,719,000 during 1994 and 1993,
respectively.
(13) COMMITMENTS
Under an agreement dated May 8, 1987, the Joint Venture has agreed to
purchase paper mill process steam from the City of Duluth Steam District
No. 2 Cooperative Association at a unit cost to be determined based upon
operating, maintenance and capital cost of the steam plant. In addition,
the Joint Venture pays an amount equal to the principal and interest
requirements on $12,839,000 of outstanding Steam Utility Revenue Bonds
which mature at various times through April 1, 2002 and certain other
costs, principally capital expenditures. The Joint Venture paid
$1,389,000, $2,778,000 and $2,778,000 for the six month period ended June
30, 1995, and the years ended December 31, 1994, and 1993, respectively, on
the bonds. Annual payments for the principal and interest portion of this
agreement are expected to be $2,778,000 in 1996 through 1999, with
aggregate payments of $6,251,000 for the years thereafter.
LAKE SUPERIOR PAPER INDUSTRIES
The Joint Venture agreed to special sewer assessments needed to fund the
annual debt service amount due on $3,150,000 of outstanding general
obligation bonds of Western Lake Superior Sanitary District (the District),
to the extent such amounts are not funded through other treatment charges
received by the District. During the six months ended June 30, 1995,
fiscal 1994 and fiscal 1993, the total debt service requirements were
$516,000, $516,000 and $509,000, respectively, on the bonds, of which the
Joint Venture paid $13,000 for the six months ended June 30, 1995 relating
to a 1994 shortfall, and $84,000 and $86,000 for 1994 and 1993,
respectively, in the form of special sewer assessments. The special
assessment payments are included as an expense on the Joint Venture's
financial statements.
The Joint Venture has outstanding letters of credit aggregating
approximately $700,000.
(14) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practical to
estimate that value:
CASH AND CASH EQUIVALENTS
The carrying amounts approximate fair value because of the short maturity
of those instruments.
ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
The carrying amounts approximate fair value because of the short maturity
of those instruments.
NOTES PAYABLE TO BANK AND SUBORDINATED DEBT DUE TO JOINT VENTURERS
The carrying amounts of the notes payable to banks and subordinated debt
due to Joint Venturers approximate fair value based on recent borrowings.
<PAGE>
(15) SUBSEQUENT SALE
On May 8, 1995, the parents of the Joint Venturers entered into agreements
for the sale and purchase of stock and assets with Consolidated Papers,
Inc., pursuant to which the Joint Venturers and related entities including
Superior Recycled Fiber Industries, Superior Recycled Fiber Corporation,
and the assets of LSPI Fiber Company were sold to Consolidated Papers, Inc.
on June 30, 1995 (see "Basis of Accounting" in note 1).
<PAGE>
EXHIBIT 99.d
SUPERIOR RECYCLED FIBER INDUSTRIES
Financial Statements
June 30, 1995 and December 31, 1994
INDEPENDENT AUDITORS' REPORT
The Joint Venture Board
Superior Recycled Fiber Industries:
We have audited the accompanying balance sheets of Superior Recycled Fiber
Industries (the Joint Venture) as of June 30, 1995 immediately prior to closing
the agreement for sale and purchase of stock with Consolidated Papers, Inc., and
December 31, 1994, and the related statements of operations and joint venture
loss, joint venturers' capital, and cash flows for the six-month period ended
June 30, 1995 immediately prior to closing the agreement for sale and purchase
of stock, and the period from inception (May 28, 1993) through December 31,
1994. These financial statements are the responsibility of the Joint Venture's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Superior Recycled Fiber
Industries as of June 30, 1995 immediately prior to closing the agreement for
sale and purchase of stock with Consolidated Papers, Inc., and December 31,
1994, and the results of its operations and its cash flows for the six-month
period ended June 30, 1995 immediately prior to closing the agreement for sale
and purchase of stock, and the period from inception (May 28, 1993) through
December 31, 1994 in conformity with generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Minneapolis, Minnesota
July 28, 1995
SUPERIOR RECYCLED FIBER INDUSTRIES
Balance Sheets
June 30, 1995 and December 31, 1994
<TABLE>
<CAPTION>
June 30, December 31,
Assets 1995 1994
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 5,803,000 $ 5,971,000
Restricted cash 2,327,000 2,256,000
Receivables from related parties 410,000 955,000
Other receivables 39,000 12,000
Inventories 5,855,000 3,738,000
Total current assets 14,434,000 12,932,000
Property, plant, and equipment, net 69,872,000 71,217,000
Deferred costs 69,000 0
Intangible assets, net 2,355,000 2,587,000
$86,730,000 86,736,000
Liabilities and Joint Venturers' Capital
Current liabilities:
Accounts payable 7,095,000 4,656,000
Payables to related parties 0 1,391,000
Accrued expenses 251,000 329,000
Total current liabilities 7,346,000 6,376,000
Joint Venturers' capital:
Joint Venturers' contributions 86,810,000 85,540,000
Accumulated loss (7,426,000) (5,180,000)
Total Joint Venturers' capital 79,384,000 80,360,000
Commitments (note 5)
$86,730,000 $86,736,000
See accompanying notes to financial statements.
/TABLE
<PAGE>
SUPERIOR RECYCLED FIBER INDUSTRIES
Statements of Operations and Joint Venture Loss
Six-month period ended June 30, 1995 and the
period from inception (May 28, 1993) through December 31, 1994
<TABLE>
<CAPTION>
Six-month Inception
Period (May 28, 1993)
ended through
June 30, December 31,
1995 1994
<S> <C> <C>
Costs of operations:
Variable costs $ 32,100,000 40,814,000
Fixed costs, excluding depreciation
and amortization 4,856,000 9,218,000
Depreciation and amortization 2,246,000 5,180,000
Interest income (205,000) (266,000)
Total costs of operations 38,977,000 54,946,000
Less costs of operations allocated to
Joint Venturers 36,751,000 49,766,000
Joint Venture loss (2,246,000) (5,180,000)
Accumulated loss:
Beginning of period (5,180,000) 0
End of period $ (7,426,000) (5,180,000)
See accompanying notes to financial statements.
</TABLE>
SUPERIOR RECYCLED FIBER INDUSTRIES
Statements of Joint Venturers' Capital
Six-month period ended June 30, 1995 and the
period from inception (May 28, 1993) through December 31, 1994
<TABLE>
<CAPTION>
Superior Total
Recycled Joint
Fiber LSPI Venturers'
Corporation Fiber Co. Capital
<S> <C> <C> <C>
Balance at May 28, 1993 $ 0 0 0
Contributions 66,025,000 19,515,000 85,540,000
Joint Venture loss (3,998,000) (1,182,000) (5,180,000)
Balance at December 31, 1994 62,027,000 18,333,000 80,360,000
Contributions 965,000 305,000 1,270,000
Joint Venture loss (1,738,000) (508,000) (2,246,000)
Balance at June 30, 1995 $ 61,254,000 18,130,000 79,384,000
See accompanying notes to financial statements.
</TABLE>
SUPERIOR RECYCLED FIBER INDUSTRIES
Statements of Cash Flows
Six-month period ended June 30, 1995 and the
period from inception (May 28, 1993) through December 31, 1994
<TABLE>
<CAPTION>
Inception
Six-month (May 28, 1993)
period ended through
June 30, December 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Joint Venture loss $ (2,246,000) (5,180,000)
Adjustments to reconcile Joint Venture
loss to net cash provided by (used by)
operating activities:
Depreciation and amortization 2,246,000 5,180,000
Changes in current assets and liabilities:
Receivables from related parties 545,000 (955,000)
Other receivables (27,000) (12,000)
Inventories (2,117,000) (3,738,000)
Accounts payable 2,439,000 4,656,000
Payables to related parties (1,391,000) 1,391,000
Accrued expenses (78,000) 329,000
Net cash provided by (used by)
operating activities (629,000) 1,671,000
Cash flows from investing activities:
Additions to property, plant, and
equipment (669,000) (75,898,000)
Payment of deferred costs (69,000) 0
Net cash used by investing activities (738,000) (75,898,000)
Cash flows from financing activities:
Contributions from Joint Venturers 1,270,000 85,540,000
Payment of organization costs 0 (1,041,000)
Payment of financing costs 0 (2,045,000)
Net cash provided by financing
activities 1,270,000 82,454,000
Net increase (decrease) in cash and cash
equivalents and restricted cash (97,000) 8,227,000
Cash and cash equivalents and restricted cash,
beginning of period 8,227,000 0
Cash and cash equivalents and restricted cash,
end of period $8,130,000 8,227,000<PAGE>
See accompanying notes to financial statements.
</TABLE>
SUPERIOR RECYCLED FIBER INDUSTRIES
Notes to Financial Statements
June 30, 1995 and December 31, 1994
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF BUSINESS
ORGANIZATION AND NATURE OF BUSINESS
Superior Recycled Fiber Industries (the Joint Venture) was formed on May 28,
1993 by Superior Recycled Fiber Corporation (SRFC), a subsidiary of a
corporation owned by Minnesota Power, and LSPI Fiber Co. (LSPI Fiber), a
joint venture owned 50% each by subsidiaries of Minnesota Power and Pentair,
Inc. (the Joint Venturers). The Joint Venture was formed to complete the
construction of, and to operate, a de-ink recycled pulp mill (pulp mill)
designed to manufacture and sell recycled fiber pulp to the joint venturers
at an agreed upon price essentially equal to allocated cost, pursuant to a
Recycled Pulp Manufacture and Sale Agreement. SRFC is obligated to take 76%
and LSPI Fiber is obligated to take 24% of pulp mill production.
SRFC sells its purchased production to partnering and preferred customers
pursuant to long-term sales contracts and to the spot market. LSPI Fiber
sells its purchased production to an affiliated company, Lake Superior Paper
Industries (LSPI) and to other mills owned by Pentair, Inc. Any unsold
production up to 24% is sold by SRFC on behalf of LSPI Fiber to preferred
customers pursuant to long-term sales contracts and to the spot market.
SRFC receives a commission of 3% from LSPI Fiber on these brokered sales.
LSPI is owned by affiliates of the same companies which own LSPI Fiber, and
has a contract to operate and maintain the pulp mill pursuant to an
Operating and Maintenance Agreement.
The Joint Venture completed the construction phase of the pulp mill during
1993 and operations began on November 1, 1993.
BASIS OF PRESENTATION
The Joint Venture's financial position and results of operations for the six
month period ended June 30, 1995 are stated immediately prior to closing the
agreement for sale and purchase of stock and assets with Consolidated
Papers, Inc. which took place on June 30, 1995 (see note 7). As a result,
the intangible asset reflected on the financial statements for deferred
financing costs relating to certain debt obligations of a related company
(note 5) continue to be carried as an asset even though the buyer,
Consolidated Papers, Inc., paid off the debt subsequent to the closing on
June 30, 1995.
CASH EQUIVALENTS AND RESTRICTED CASH
For purposes of the statements of cash flows the Joint Venture considers
all highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents.
Restricted cash serves as collateral on the working capital portion of the
Senior Secured Guaranteed Notes issued by SRFC as discussed in note 5.
SUPERIOR RECYCLED FIBER INDUSTRIES
INVENTORIES<PAGE>
Inventories are stated at the lower of cost (first in,
first out method) or market.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and depreciated using the
straight-line method over estimated useful lives of 30 years for buildings
and land improvements and 3 to 16 years for equipment.
DEFERRED COSTS
The Company defers certain consulting costs incurred during the research
related to new expansion projects phase and amortizes the costs over the
life of the new project when completed.
INTANGIBLES
Intangible assets consist of organization costs and costs associated with
the financing obtained by SRFC (note 5). The costs of these intangible
assets are being amortized using the straight-line method and are as
follows:
June 30, December 31, Period Of
1995 1994 Amortization
Organization costs $ 1,041,000 1,041,000 5 years
Financing costs
("Basis of Presentation) 2,045,000 2,045,000 8 years
Less accumulated amortization (731,000) (499,000)
$ 2,355,000 2,587,000
INCOME TAXES
The Joint Venture pays no income taxes. All taxable income or loss, tax
credits, and other tax attributes are passed through directly to the Joint
Venturers for inclusion in their respective income tax returns.
RECLASSIFICATIONS
Certain reclassifications have been made to the 1994 financial statements
to conform to the 1995 presentation.
SUPERIOR RECYCLED FIBER INDUSTRIES
(2) INVENTORIES
Inventories consist of:
June 30, December 31,
1995 1994
Finished goods $ 128,000 444,000
Raw materials 5,296,000 2,911,000
Supplies and other materials 431,000 383,000
$ 5,855,000 3,738,000
(3) PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consist of the following:
June 30, December 31,
1995 1994
Land $ 4,352,000 4,352,000
Land improvements 2,473,000 2,473,000
Buildings 14,893,000 14,893,000
Equipment 54,850,000 54,180,000
76,568,000 75,898,000
Less accumulated depreciation (6,696,000) (4,681,000)
$ 69,872,000 71,217,000
(4) RELATED PARTY TRANSACTIONS
In connection with the construction and operation of the pulp mill, the
Joint Venture entered into the following contractual agreements:
RECYCLED PULP MANUFACTURE AND SALE AGREEMENT
Under this agreement SRFC agrees to purchase 76% of the pulp mill's output
each year and LSPI Fiber agrees to purchase the remaining 24%. The costs
of operations to manufacture the recycled pulp are allocated to the Joint
Venturers, for the tons of production shipped to each, in an amount equal
to the allocation of the respective fixed and variable costs as defined in
the agreement. Fixed costs of the pulp mill are allocated based on the
respective joint venturer's ownership interest in the pulp mill, while
variable costs are allocated based on respective actual tonnage of each
grade of recycled pulp taken from the pulp mill. As a result, all pulp
mill expenses are recovered from the Joint Venturers through the sale of
its recycled pulp, except for depreciation and amortization charges.
SUPERIOR RECYCLED FIBER INDUSTRIES
OPERATING AND MAINTENANCE AGREEMENT
Under this agreement, LSPI agrees to perform certain functions as operating
agent for the Joint Venture, including engineering, contract preparation
and enforcement, repair, accounting, purchasing, supervision, and training.
Charges for these services are billed to the Joint Venture based on the
amount of direct labor, actual benefits, materials and services incurred by
LSPI, plus a five percent charge to cover certain management and overhead
expenses. In addition, LSPI agrees to maintain adequate inventories of
equipment and tools to perform operating services and is required to carry
customary general insurance on the pulp mill in specified amounts. Total
expenses under this agreement for the six month period ending June 30, 1995
and for the period from inception (May 28, 1993) to December 31, 1994 were
$7,092,000 and $14,886,000, respectively.
At June 30, 1995 and December 31, 1994, the Joint Venture has amounts due
to and due from related parties as follows:
June 30, December 31,
1995 1994
Costs of operations allocated to Joint
Venturers for production shipped
through June 30, 1995 and December 31, 1994 $ 285,000 719,000
Costs reimbursed to LSPI in excess of costs
incurred by LSPI during operations in
June 1995, on the Joint Venture's behalf 59,000 0
Freight receivable from SRFC 66,000 236,000
Receivables from related parties $ 410,000 955,000<PAGE>
Costs incurred by LSPI during operations in
December 1994, on the Joint Venture's behalf $ 0 1,391,000
Payable to related parties $ 0 1,391,000
The Joint Venture purchased electrical power from the parent company of one
of the Joint Venturers in the amount of $1,302,000 and $2,642,000 for the
six month period ended June 30, 1995, and the period from inception
(May 28, 1993) to December 31, 1994, respectively.
SUPERIOR RECYCLED FIBER INDUSTRIES
(5) COMMITMENTS
On December 30, 1993, one of the joint venturers, SRFC, issued its 7.65%
Senior Secured Guaranteed Notes (the Notes), due on December 31, 2003 in an
aggregate principal amount of $45,000,000 to refinance debt incurred by
SRFC in connection with the construction of the pulp mill and to establish
a working capital reserve for the Joint Venture. Payment of the principal
and interest on the notes is unconditionally guaranteed by the Joint
Venture. Under this agreement, the Joint Venture is responsible for
various nonfinancial covenants and is required to carry specified levels of
customary general insurance on the pulp mill properties and employees.
Immediately after closing of the sale of the Joint Venture (note 7), the
purchaser, Consolidated Papers, Inc., paid off the remaining balance of the
notes on June 30, 1995.
(6) DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practical to
estimate the fair value:
CASH AND CASH EQUIVALENTS AND RESTRICTED CASH
The carrying amounts approximate fair value because of the short maturity
of those instruments.
ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
The carrying amounts approximate fair value because of the short maturity
of those instruments.
(7) SUBSEQUENT SALE
On May 8, 1995, the parents of the Joint Venturers entered into agreements
for sale and purchase of stock and assets with Consolidated Papers, Inc.
pursuant to which, SRFI, SRFC, and the assets of LSPI Fiber were sold to
Consolidated Papers, Inc. on June 30, 1995.<PAGE>
EXHIBIT 99.e
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors
of Niagara of Wisconsin Paper Corporation:
We have audited the accompanying balance sheets of Niagara of Wisconsin Paper
Corporation (a Wisconsin corporation and a subsidiary of Pentair, Inc.) as of
December 31, 1994 and 1993, and the related statements of operations,
shareholder's equity, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Niagara of Wisconsin Paper
Corporation as of December 31, 1994 and 1993, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
August 24, 1995
NIAGARA OF WISCONSIN PAPER CORPORATION
BALANCE SHEETS
DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
ASSETS 1994 1993
S> <C> <C
<PAGE>
Current assets:
Cash $ 144,752 $ 176,002
Accounts receivable, less allowance for
doubtful accounts of $305,796 and $463,817
in 1994 and 1993, respectively 12,199,889 10,005,188
Inventories (Note 2) -
Raw materials 6,615,381 3,208,671
Work in process 167,271 124,623
Finished goods 594,617 1,066,694
Total inventories 7,377,269 4,399,988
Prepaid expenses 304,829 708,115
Other supplies 930,878 1,170,772
Total current assets 20,957,617 16,460,065
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 2,878,146 2,098,850
Buildings 15,076,988 10,962,475
Machinery and equipment 145,398,629 119,526,936
Construction in progress 1,429,982 12,954,467
164,783,745 145,542,728
Less Accumulated depreciation 92,578,387 83,217,635
Net property, plant and equipment 72,205,358 62,325,093
OTHER ASSETS (Note 3) 3,489,204 4,313,269
DEFERRED INCOME TAXES 4,833,000 5,060,000
Total assets $101,485,179 $ 88,158,427
LIABILITIES AND SHAREHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,238,126 $ 9,321,638
Lease payable 3,688,963 -
Payroll and employee benefits 3,528,321 3,750,327
Current maturities of long-term debt 2,200,000 -
Accrued liabilities 8,559,926 6,665,122
Total current liabilities 27,215,336 19,737,087
NONCURRENT LIABILITIES:
Long-term debt - 2,200,000
Lease payable 1,228,198 -
Environmental accrual 8,000,000 8,000,000
Pension benefits 5,327,840 8,432,816
Postretirement benefits 12,505,167 11,953,487
Due Pentair, Inc. 51,357,680 52,256,808
Total noncurrent liabilities 78,418,885 82,843,111
SHAREHOLDER'S EQUITY:
Common stock $1.00 par value, 50,000
shares authorized in 1994 and 1993,
respectively, 500 issued and outstanding 500 500
Pension adjustment (1,528,660) (2,930,796)
Retained earnings (deficit) (2,620,882) (11,491,475)
Total shareholder's equity (4,149,042) (14,421,771)
Total liabilities and shareholder's equity $101,485,179 $88,158,427
</TABLE>
The accompanying notes to financial statements are an integral part of these
balance sheets.
NIAGARA OF WISCONSIN PAPER CORPORATION<PAGE>
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
NET SALES $151,211,116 $148,179,793
COSTS OF GOODS SOLD 146,034,526 138,255,301
Gross profit 5,176,590 9,924,492
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 9,291,407 17,146,942
Loss from operations (4,114,817) (7,222,450)
OTHER INCOME (EXPENSE):
Interest expense (2,444,113) (1,982,973)
Interest income 30,086 130,503
Total other income (expense) (2,414,027) (1,852,470)
Loss before benefit for income taxes (6,528,844) (9,074,920)
BENEFIT FOR INCOME TAXES (2,300,000) (3,500,000)
Net loss $ (4,228,844) $ (5,574,920)
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
NIAGARA OF WISCONSIN PAPER CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (4,228,844) $ (5,574,920)
Adjustments to reconcile net loss
to net cash provided by operating
activities-
Depreciation 9,431,181 8,702,240
Loss on sale of fixed assets 56,600 16,123
Provision (benefit) for deferred
income taxes 227,000 (4,461,000)
Changes in assets and liabilities -
(Increase) decrease in receivables 146,058 (602,535)
(Increase) decrease in inventories (2,977,281) 115,814
(Increase) decrease in prepaid expenses 403,286 (292,609)
(Increase) decrease in other supplies 239,894 (31,095)
(Increase) decrease in other assets (10,088) (11,440)<PAGE>
(Increase) decrease in accounts payable (83,512) (327,114)
Increase (decrease) in current liabilities
other than current maturities of long-
term debt and accounts payable (5,068,448) 1,694,181
Increase (decrease) in lease payable 1,228,198 -
Increase (decrease) in environmental accrual - 8,000,000
Increase (decrease) in postretirement
benefits 551,680 (560,021)
Net cash provided by operating activities (84,276) 6,667,624
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (19,368,046) (17,758,845)
Net cash used in investing activities (19,368,046) (17,758,845)
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirements of long-term debt - (1,000,000)
Increase (decrease) in due corporate office 19,421,072 12,117,943
Net cash provided by financing activities 19,421,072 11,117,943
Net (decrease) increase in cash (31,250) 26,722
CASH, beginning of year 176,002 149,280
CASH, end of year $ 144,752 $ 176,002
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.
NIAGARA OF WISCONSIN PAPER CORPORATION
STATEMENTS OF SHAREHOLDER'S EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1994 AND 1993
<TABLE>
<CAPTION>
Common Pension Retained
Stock Adjustment Earnings Total
<S> <C> <C> <C> <C>
BALANCE, December 31, 1992 $500 $( 695,720) $(5,916,555) $(6,611,775)
Pension adjustment - (2,235,076) - (2,235,076)
Net loss - - (5,574,920) (5,574,920)
BALANCE, December 31, 1993 500 (2,930,796) (11,491,475) (14,421,771)
Pension adjustment - 1,402,136 - 1,402,136
Net loss - - (4,228,844) (4,228,844)
Merger of entity under
common control - - 13,099,437 13,099,437
BALANCE, December 31, 1994 $500 $(1,528,660) $(2,620,882) $(4,149,042)
</TABLE>
The accompanying notes to financial statements are an integral part of these
statements.<PAGE>
NIAGARA OF WISCONSIN PAPER CORPORATION
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994 AND 1993
(1) Description of Business -
Niagara of Wisconsin Paper Corporation (the "Company") manufactures
coated groundwood publication papers and markets these products to
numerous customers primarily throughout the United States and Canada.
The Company is a wholly owned subsidiary of Pentair, Inc. ("Pentair").
Effective June 30, 1995, the Company was purchased from Pentair by
Consolidated Papers, Inc.
(2) Summary of Accounting Policies -
Inventories -
The Company values its inventories at the lower of cost or market using
the first-in, first-out (FIFO) method of accounting.
Property, plant and equipment -
Plant and equipment are stated at cost. Depreciation is calculated on
the straight-line method for financial reporting purposes and on
accelerated methods for income tax purposes.
The range of useful lives is summarized as follows:
Land improvements 3-30
Buildings 10-33
Machinery and equipment 3-16
The cost and accumulated depreciation for retired property are removed
from the accounts and the remaining net cost, less salvage recovered, is
included in net income. Maintenance and repair costs are charged to
expense as incurred and renewals and improvements are added to plant and
equipment accounts.
The Company's policy is to capitalize interest incurred on debt during
the course of major projects that exceed one year in construction. The
amount of interest capitalized in 1994 and 1993 was approximately
$560,000 and $262,000, respectively.
Income taxes -
The Company is included in the consolidated Federal income tax return of
Pentair. The Company calculates a provision (benefit) for income taxes
on a stand alone basis using Pentair's Federal tax rate (35%). Income
taxes payable represent amounts owed to Pentair for the Company's Federal
income tax liabilities.
(3) Employee Pension and Other Benefit Plans -
The Company has a noncontributory defined benefit plan for its bargaining
employees (the Jointly Trusteed Pension Plan for Bargaining Employees of
Niagara of Wisconsin Corporation, "the Plan"). Employees covered under
this plan are eligible to participate at the time of employment and the
benefits are based on a fixed amount for each year of service. The
Company's funding policy is to make quarterly contributions as required
by applicable regulations.<PAGE>
The Plan's net periodic pension cost in 1994 and 1993 includes the
following components:
1994 1993
Service Cost-benefits earned during the year $ 378,605 $ 283,041
Interest cost on projected benefits 1,360,914 1,269,800
Actual return on plan assets (449,497) (1,126,874)
Net amortization and deferral 483,717 919,490
Net periodic pension cost $1,773,739 $1,345,457
The following table sets forth the Plan's funded status and the net
amount recognized in the Company's balance sheets:
1994 1993
Actuarial present value of benefit obligation:
Vested benefit obligation $16,659,096 $18,811,592
Nonvested benefit obligation 1,121,432 1,355,699
Accumulated benefit obligation 17,780,528 20,167,291
Projected benefit obligation $17,780,528 $20,167,291
Plan assets at market value 11,935,177 11,685,431
(5,845,351) (8,481,860)
Plan assets less than projected
benefit obligation -
Unrecognized transition liability 2,772,075 3,234,087
Unrecognized net loss 2,506,479 4,805,136
Unrecognized prior service cost 21,452 393,593
Accrued pension cost $ (545,345) $ (49,044)
The following are the additional minimum liabilities and intangible
assets recorded in the accompanying financial statements pursuant to SFAS
No. 87, "Employers' Accounting for Pensions:"
1994 1993
Additional minimum liability $ 5,300,008 $ 8,432,818
Intangible asset 2,793,527 3,827,880
The actuarial assumptions used to determine the present value of the
projected benefit obligation, as measured on December 31,1994 and 1993,
are as follows:
1994 1993
Discount rate 8.5% 7.0%
Expected long-term rate of return on the
market-related value of the plan 8.5% 8.5%
Plan assets are comprised primarily of corporate and U.S. debt securities
and corporate equities.
The Company, through Pentair, provides certain health care, medical,
dental and life insurance benefits to qualifying retirees.
Postretirement benefit costs for 1994 and 1993 include the following
components:
1994 1993
Service cost-benefits earned during the year $ 162,159 $ 125,874 <PAGE>
Interest cost on accumulated post-
retirement benefit obligation 1,014,889 939,600
Net amortization and deferral (17,978) (20,759)
Total postretirement benefits cost $ 1,159,070 $ 1,044,715
The Plan's status at December 31, 1994 and 1993 was as follows:
1994 1993
Actuarial present value of benefit obligation:
Retirees $(11,269,975) $(10,983,923)
Fully eligible active participants (1,318,610) (1,776,356)
Other active participants (2,288,824) (2,101,160)
Accumulated postretirement benefit
obligation $(14,877,409) $(14,861,439)
Plan assets at market - -
Accumulated postretirement benefit
obligation in excess of plan assets $(14,877,409) $(14,861,439)
Unrecognized net loss 1,709,784 2,319,472
Unrecognized prior service cost (163,542) (181,520)
Accrued postretirement benefit cost $(13,331,167) $(12,723,487)
The discount rate used to determine the accumulated postretirement
benefit obligation was 8.50% and 7.0% as of December 31, 1994 and 1993,
respectively. The increase in the discount rate in 1994 resulted in a
$600,000 decrease in the accumulated benefit obligation. An 8.0% annual
rate of increase in the per capita cost of covered health, dental and
life insurance benefits was assumed through the year 2001; the rate was
then assumed to decrease to 5.5% and remain at that level thereafter.
Pentair's actuaries have not determined the impact of a 1% change in the
per capita cost of these benefits.
(4) Long-Term Debt -
The long-term debt consists of a ten year, $2.2 million Industrial
Development Revenue Bond with the Village of Niagara, Wisconsin. The
interest rate fluctuates annually, equal to a calculated percentage of
the prime rate. The calculated rates for 1994 and 1993 were
approximately 5.4% and 4.4%, respectively. The bond matured and was paid
in fiscal year 1995.
(5) Lease Obligations -
The Company leases certain manufacturing facilities, office space and
machinery and equipment under various operating lease agreements.
Minimum rental commitments under such leases having initial or remaining
terms of greater than one year are as follows:
Fiscal Year Amount
1995 $ 8,430,235
1996 5,611,275
1997 5,421,685
1998 5,218,306
1999 4,665,893
2000 and thereafter 25,254,192
Total $54,601,586
Rent expense under all operating lease was approximately $8,538,851 and
$11,169,498 in 1994 and 1993, respectively.<PAGE>
(6) Merger of Entity Under Common Control -
On January 1, 1994, the Pentair Financial Corporation, a wholly owned
subsidiary of Pentair, was merged into the Company. Pentair Financial
Corporation was a special purpose subsidiary of Pentair that entered into
certain leasing transactions. The Company accounted for the merger using
the pooling-of-interests method of accounting. The merger increased the
Company's receivables from Pentair and affiliates by $17.6 million,
increased leases payable by $4.5 million, reduced the deferred tax asset
by $126,000 and increased retained earnings by $13.1 million. These
adjustments relate to leasing activities related to the Company that were
recorded in Pentair Financial Corporation's financial statements.
(7) Income Taxes -
The provision (benefit) for income taxes includes the following
components:
1994 1993
Current:
Federal $(2,327,000) $ 871,000
State (200,000) 90,000
Total Current $(2,527,000) $ 961,000
Deferred $ 227,000 $(4,461,000)
Total $(2,300,000) $(3,500,000)
The following summarizes the major differences between the U.S. statutory
tax rates and the Company's effective tax rates:
1994 1993
Statutory tax rate (35.0)% (35.0)%
State income taxes (3.1) (3.0)
Other items 2.9 (.6)
Effective tax rates (35.2) (38.6)%
Deferred taxes are determined based on the estimated future tax effects
of differences between the financial statement and tax bases of assets
and liabilities given the provisions of the enacted tax laws. The net
deferred tax asset (liability) is comprised of the following:
1994 1993
Postretirement benefits $ 5,200,000 $ 5,000,000
Environmental accrual 3,100,000 3,100,000
Accrued leases 1,918,000 -
Employee benefits 1,173,000 1,200,000
Pension benefits 977,000 1,900,000
Plant and equipment (7,750,000) (7,087,000)
Other 215,000 947,000
Total deferred taxes $ 4,833,000 $ 5,060,000
(8) Research and Development -
Research and development expenses in 1994 and 1993 were approximately
$74,000 and $47,000, respectively.
(9) Capital Commitments -
As of December 31, 1994, the Company had capital expenditure purchase
commitments outstanding of approximately $2.1 million.<PAGE>
(10) Related Party Transactions -
Pentair, Inc.
During 1994 and 1993, Pentair charged the Company management fees for
general and administrative functions performed by Pentair. Such fees are
included in selling, general and administrative expenses and totalled
$1,992,000 and $1,908,000, respectively.
Pentair, Inc. borrows money on behalf of its subsidiaries. The money is
used to fund capital projects, improvement and operating needs for its
subsidiaries. Pentair allocates interest expense to its subsidiaries
based on the subsidiary's portion of current assets and net fixed assets
less accounts payable in proportion to all subsidiaries. The amount of
interest expense allocated to the Company in 1994 and 1993 was $2,461,264
and $1,861,609, respectively.
(11) Environmental Matters
The Company has exposure to environmental liabilities related to its
disposal of sludge prior to June, 1995 and the long-term costs of its
landfills. The Company has entered into a Consent order with the
Michigan Department of Natural Resources whereby the Company must close
ten lagoons it previously used to dispose of sludge. Under the order,
the Company must also conduct an investigation into groundwater
contamination caused by sludge disposal practices and develop and
implement a plan to remediate the contamination. The Company has
evaluated the cost to close the lagoons and to monitor and remediate
groundwater contamination and estimates that such closure, monitoring and
remediation costs may range from $8 million to $15 million. The
accompanying financial statements reflect a pretax charge of $8.0 million
in the 1993 statement of operations for expected future environmental
costs.<PAGE>
EXHIBIT 99.f
NIAGARA OF WISCONSIN PAPER CORPORATION
BALANCE SHEETS
AS OF JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
ASSETS
<S> <C>
CURRENT ASSETS:
Cash $ 852,151
Accounts receivable, net 18,790,588
Inventories
Raw materials 6,331,619
Work-in-process 214,350
Finished goods 509,039
Total inventories 7,055,008
Prepaid expenses 142,418
Other supplies 1,110,515
Total current assets 27,950,680
PROPERTY, PLANT AND EQUIPMENT:
Land and land improvements 3,218,621
Buildings 14,932,049
Machinery and equipment 147,438,488
Construction-in-progress 1,870,794
167,459,952
Less accumulated depreciation 96,321,262
Net property, plant, and equipment 71,138,690
OTHER ASSETS 3,252,650
DEFERRED INCOME TAXES 4,323,000
Total assets $106,665,020
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 10,613,719
Lease payable 4,889,900
Payroll and employee benefits 3,192,352
Accrued liabilities 7,305,088
Total current liabilities 26,001,059
NONCURRENT LIABILITIES:
Environmental accrual 8,000,000
Pension benefits 4,185,000
Postretirement benefits 13,170,984
Due corporate office 46,972,562
Total noncurrent liabilities 72,328,546
SHAREHOLDER'S EQUITY:
Common stock $1.00 par value, 50,000
shares authorized in 1995,
500 issued and outstanding 500
Pension adjustment (991,660)
Retained earnings 9,326,575
Total shareholder's equity 8,335,415<PAGE>
Total liabilities and stockholder's equity $106,665,020
</TABLE>
NIAGARA OF WISCONSIN PAPER CORPORATION
STATEMENTS OF OPERATIONS
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
June 30,
1995
<S> <C>
NET SALES $114,821,673
COSTS OF GOODS SOLD 88,366,643
Gross profit 26,455,030
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 5,585,629
Income from operations 20,869,401
OTHER INCOME (EXPENSE):
Interest expense (1,437,944)
Interest income -
Total other income (expense) (1,437,944)
Income before provision for income taxes 19,431,457
PROVISION FOR INCOME TAXES 7,484,000
Net income $ 11,947,457
</TABLE>
NIAGARA OF WISCONSIN PAPER CORPORATION
STATEMENT OF CASH FLOWS
FOR THE SIX-MONTH PERIOD ENDED JUNE 30, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $11,947,457
Adjustments to reconcile net income
to net cash provided by operating
activities-
Depreciation 3,742,875
Changes in assets and liabilities -
Increase in current assets (6,285,664)
Decrease in current liabilities (242,475)
Decrease in other assets 1,412,371
Change in pension and postretirement benefits (605,840)
Net cash provided by operating activities 9,968,724<PAGE>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (2,676,207)
Net cash used in investing activities (2,676,207)
CASH FLOWS FROM FINANCING ACTIVITIES:
Retirement of long-term debt (2,200,000)
Decrease in due corporate office (4,385,118)
Net cash used in financing activities (6,585,118)
Net increase in cash 707,399
CASH, beginning of period 144,752
CASH, end of period $ 852,151
</TABLE>
NIAGARA OF WISCONSIN PAPER CORPORATION
NOTES TO UNAUDITED FINANCIAL STATEMENTS
JUNE 30, 1995
Note 1 - The accompanying unaudited financial statements do not include certain
footnotes and other information necessary for a fair presentation of
financial position, results of operations, and changes in financial
position in conformity with generally accepted accounting principles.
In the opinion of management, the statements include all adjustments
necessary for a fair presentation of the results for the interim
period. Results of operations for interim periods are not necessarily
indicative of the results that may be expected for the year.<PAGE>
EXHIBIT 99.g
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
Consolidated
Papers, Inc.
Acquired and Acquired
Consolidated Businesses Pro Forma Businesses
Papers, Inc. Combined(1) Adjustments Combined
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $1,027,551 $356,294 $(11,203)(2) $1,372,642
Cost of goods sold 827,448 332,647 (12,673)(3) 1,147,422
Gross profit 200,103 23,647 1,470 225,220
Selling, general and
administrative expenses 63,479 17,880 7,171 (4) 88,530
Income from operations 136,624 5,767 (5,701) 136,690
OTHER INCOME (EXPENSE)
Interest expense (5,244) (10,386) (15,598)(5) (31,228)
Interest income 142 757 0 899
Miscellaneous, net 11,083 1,701 0 12,784
Total 5,981 (7,928) (15,598) (17,545)
Income before provision
for income taxes 142,605 (2,161) (21,299) 119,145
Provision for income taxes 55,871 (1,705) (7,491)(6) 46,675
Net income $ 86,734 $ (456) $(13,808) $ 72,470
Net income per share $ 1.97 $ 1.64
Average number of common
shares outstanding 44,106,953 44,106,953
</TABLE>
The accompanying notes to the unaudited pro forma combined statement of
income are an integral part of this statement.
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED
STATEMENTS OF INCOME FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994
(1) Reflects results for the twelve months ended December 31, 1994 for Lake
Superior Paper Industries, Niagara of Wisconsin Paper Corporation,
Superior Recycled Fiber Industries and other smaller subsidiaries
acquired. Certain income statement accounts of the Acquired Businesses
have been reclassified to conform with Consolidated Papers, Inc.'s
presentation. The accompanying unaudited proforma information reflects
the allocation of the purchase price in the above-referenced
transaction. Management is continuing to accumulate additional
information to determine the fair value of tangible and intangible
assets acquired. As a result, the pro forma adjustments are subject
to change.
(2) To eliminate intercompany sales between the Acquired Business and
Consolidated Papers, Inc.
(3) To eliminate intercompany sales and to adjust depreciation expense for
the adjustment to fair market value of plant and equipment.
(4) To record amortization, up to fifteen years, of goodwill and other
intangible assets resulting from the purchase of the Acquired Businesses.
(5) To record interest expense on debt incurred in the acquisitions at an
assumed interest rate of 6.5%, which represents long-term financing cost
at the time of the acquisitions.
(6) To adjust provision for income taxes for the effect of the pro forma
adjustments, and to record an income tax provision (benefit) for the
entities of the Acquired Businesses that were partnerships and did not
provide income taxes at the entity level.
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA STATEMENT OF INCOME
SIX MONTHS ENDED JUNE 30, 1995
<TABLE>
<CAPTION>
Consolidated
Papers, Inc.
Acquired and Acquired
Consolidated Businesses Pro Forma Businesses
Papers, Inc. Combined(1) Adjustments Combined
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C>
Net sales $645,550 $250,415 $ (8,817)(2) $887,148
Cost of goods sold 467,302 198,950 (9,602)(3) 656,650
Gross profit 178,248 51,465 785 230,498
Selling, general and
administrative expenses 32,711 12,844 3,586(4) 49,141
Income from operations 145,537 38,621 (2,801) 181,357
OTHER INCOME (EXPENSE)
Interest expense (2,515) (6,282) (7,799)(5) (16,596)
Interest income 379 574 0 953
Miscellaneous, net 3,266 (538) 0 2,728
Total 1,130 (6,246) (7,799) (12,915)
Income before provision
for income taxes 146,667 32,375 (10,600) 168,442
Provision for income taxes 57,500 2,540 6,055(6) 66,095
Net income $ 89,167 $ 29,835 $(16,655) $102,347
Net income per share $ 2.01 $ 2.31
Average number of common
shares outstanding 44,282,774 44,282,774
</TABLE>
The accompanying notes to the unaudited pro forma combined statement of
income are an integral part of this statement.
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA COMBINED
STATEMENTS OF INCOME FOR THE SIX MONTHS ENDED JUNE 30, 1995<PAGE>
(1) Reflects results for the six months ended June 30, 1995 for Lake Superior
Paper Industries, Niagara of Wisconsin Paper Corporation, Superior
Recycled Fiber Industries and other smaller subsidiaries acquired.
Certain income statement accounts of the Acquired Businesses have been
reclassified to conform with Consolidated Papers, Inc.'s presentation.
The accompanying unaudited proforma information reflects the allocation
of the purchase price in the above-referenced transaction. Management is
continuing to accumulate additional information to determine the fair
value of tangible and intangible assets acquired. As a result, the pro
forma adjustments are subject to change.
(2) To eliminate intercompany sales between the Acquired Businesses and
Consolidated Papers, Inc.
(3) To eliminate intercompany sales and to adjust depreciation expense for
the adjustment to fair market value of plant and equipment.
(4) To record amortization, up to fifteen years, of goodwill and other
intangible assets resulting from the purchase of the Acquired Businesses.
(5) To record interest expense on debt incurred in the acquisitions at an
assumed interest rate of 6.5%, which represents long-term financing cost
at the time of the acquisitions.
(6) To adjust provision for income taxes for the effect of the pro forma
adjustments, and to record an income tax provision (benefit) for the
entities of the Acquired Businesses that were partnerships and did not
provide income taxes at the entity level.
CONSOLIDATED PAPERS, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
JUNE 30, 1995
(In thousands)
<TABLE>
<CAPTION>
Pro Forma
Consolidated
Papers, Inc.
Acquired and Acquired
Consolidated Businesses Pro Forma Businesses
Papers, Inc. Combined(1) Adjustments Combined
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,324 $ 14,007 $ 0 $ 17,331
Receivables, net 106,092 58,809 (3,468)(2) 161,433
Inventories
Finished stock 33,266 1,422 342 (3) 35,030
Unfinished stock 5,570 214 304 (3) 6,088
Raw materials and
supplies 71,700 23,984 24 (3) 95,708
Total inventories 110,536 25,620 670 136,826
Prepaid expenses 16,515 18,645 (7,496)(4) 27,664
Total current assets 236,467 117,081 (10,294) 343,254
Investments and other
assets 341,771 79,238 (348,122)(5) 72,887
PLANT AND EQUIPMENT
Buildings, machinery <PAGE>
and equipment 1,935,407 328,900 (159,950)(6) 2,104,357
Less accumulated
depreciation 793,762 129,735 (129,735)(6) 793,762
1,141,645 199,165 (30,215) 1,310,595
Land and timberlands 29,952 16,355 (13,831)(6) 32,476
Capital additions in
process 90,885 6,130 0 97,015
Total plant and equipment 1,262,482 221,650 (44,046) 1,440,086
Goodwill 0 0 54,072 (7) 54,072
$1,840,720 $417,969 $(348,390) $1,910,299
CURRENT LIABILITIES
Current maturities of
long-term debt $ 50,000 $ 10,000 $ (10,000)(8) $ 50,000
Accounts payable 61,255 33,937 (3,468)(2) 91,724
Other 63,379 21,206 (6,119)(9) 78,466
Total current
liabilities 174,634 65,143 (19,587) 220,190
Long-term debt 300,000 41,864 (41,864)(8) 300,000
Deferred income taxes 203,382 0 (5,346)(10) 198,036
Postretirement benefits 111,452 13,750 2,384 (11) 127,586
Other noncurrent
liabilities 7,996 34,216 (20,921)(12) 21,291
SHAREHOLDER'S INVESTMENT
Preferred stock,
authorized - - - -
Common stock issued and
outstanding 44,399 0 0 44,399
Capital in excess of
par value 63,728 187,312 (187,312)(13) 63,728
Cumulative translation
adjustment (2,084) 0 0 (2,084)
Reinvested earnings 937,213 75,684 (75,744)(13) 937,153
Total shareholder's
investment 1,043,256 262,996 (263,056) 1,043,196
$1,840,720 $417,969 $(348,390) $1,910,299
</TABLE>
The accompanying notes to the unaudited pro forma combined balance sheet are
an integral part of this statement.
CONSOLIDATED PAPERS, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED BALANCE SHEET AS OF JUNE 30, 1995
(1) Reflects balances at June 30, 1995 for Lake Superior Paper Industries,
Niagara of Wisconsin Paper Corporation, Superior Recycled Fiber
Industries and other smaller subsidiaries acquired. Certain balance
sheet accounts of the Acquired Businesses have been reclassified to
conform with Consolidated Papers, Inc.'s presentation. The accompanying
unaudited proforma information reflects the allocation of the purchase
price in the above-referenced transaction. Management is continuing to
accumulate additional information to determine the fair value of
tangible and intangible assets acquired. As a result, the pro forma
disclosures are subject to change.
(2) To eliminate intercompany receivables and payables between Consolidated
Papers and the Acquired Businesses.
(3) To adjust Acquired Businesses' inventories to estimated fair market<PAGE>
value.
(4) To adjust leases to estimated fair market value.
(5) To eliminate Consolidated Papers, Inc.'s investment in Acquired
Businesses as of June 30, 1995 and to revalue other long-term assets.
(6) To restate Acquired Businesses' plant and equipment to estimated fair
market value and to eliminate prior accumulated depreciation.
(7) To reflect goodwill.
(8) To eliminate Acquired Business debt which is already reflected on the
Consolidated Papers, Inc. June 30, 1995 balance sheet.
(9) To reflect liabilities incurred to purchase the Acquired Businesses.
(10) To record deferred income taxes on the differences between the book and
tax basis of assets and liabilities acquired.
(11) To revalue postretirement liabilities of Acquired Businesses at June 30,
1995.
(12) To revalue long-term liabilities and to record estimated costs for
environmental liabilities.
(13) To eliminate Acquired Businesses' equity.<PAGE>
