FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended June 30, 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, Wisconsin 54495
(Address of principal executive offices)
(Zip Code)
715 422-3111
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock par value $1.00 outstanding July 27, 1995 44,460,622 shares
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<CAPTION>
As Of
June 30 June 30
1995 1994 December 31
(Unaudited) (Unaudited) 1994
ASSETS
<S> <C> <C> <C>
Current Assets
Cash & cash equivalents $ 3,324 $ 3,592 $ 8,155
Receivables (net of reserves of
$4,409 as of June 30, 1995,
$3,799 as of June 30, 1994
and $4,066 as of December 31,
1994) 106,092 86,090 88,462
Inventories
Finished stock 33,266 40,561 24,356
Unfinished stock 5,570 4,158 4,722
Raw materials and supplies 71,700 61,811 58,935
Total inventories 110,536 106,530 88,013
Prepaid expenses 16,515 17,475 14,698
Total current assets 236,467 213,687 199,328
Investments and other assets 341,771 61,267 60,209
Buildings, machinery and equipment 1,935,407 1,853,346 1,907,952
Less: Accumulated depreciation 793,762 718,433 753,263
1,141,645 1,134,913 1,154,689
Land and timberlands 29,952 28,525 29,384
Capital additions in process 90,885 59,853 55,901
Total plant and equipment 1,262,482 1,223,291 1,239,974
$ 1,840,720 $ 1,498,245 $ 1,499,511
LIABILITIES AND SHAREHOLDERS' INVESTMENT
<S> <C> <C> <C>
Current Liabilities
Current maturities of long-term
debt $ 50,000 $ 50,000 $ 50,000
Accounts payable 61,255 42,643 47,436
Other 63,379 74,577 59,514
Total current liabilities 174,634 167,220 156,950
Long-term debt 300,000 102,000 68,000
Deferred income taxes 203,382 169,878 181,778
Postretirement benefits 111,452 102,943 109,558
Other noncurrent liabilities 7,996 4,783 7,338
Shareholders' Investment
Preferred stock, authorized and
unissued 15,000,000 shares - - -
Common stock: shares issued,
44,398,552 as of June 30, 1995,
44,085,816 as of June 30, 1994
and 44,199,736 as of December 31,
1994 44,399 44,086 44,200
Capital in excess of par value 63,728 51,452 56,082
Cumulative translation adjustment (2,084) (2,095) (2,113)
Unrealized net loss on investment
securities - ( 743) (879)
Reinvested earnings 937,213 858,721 878,597
Total shareholders' investment 1,043,256 951,421 975,887
$ 1,840,720 $ 1,498,245 $ 1,499,511
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA - UNAUDITED)
Three Months Ended Six Months Ended
June 30 March 31 June 30
1995 1994 1995 1995 1994
<S> <C> <C> <C> <C> <C>
Net sales $ 336,646 $ 233,855 $ 308,904 $ 645,550 $ 466,046
Cost of goods sold 239,869 184,483 227,433 467,302 375,993
Gross profit 96,777 49,372 81,471 178,248 90,053
Selling, general
and administrative expenses 16,708 15,743 16,003 32,711 31,405
Income from operations 80,069 33,629 65,468 145,537 58,648
Interest expense (1,056) ( 1,291) ( 1,459) ( 2,515) ( 2,411)
Interest income 31 52 348 379 57
Miscellaneous, net 883 5,891 2,383 3,266 7,052
Total other income
(expense), net ( 142) 4,652 1,272 1,130 4,698
Income before provision for
income taxes 79,927 38,281 66,740 146,667 63,346
Provision for income taxes 31,365 14,970 26,135 57,500 24,745
Net Income $ 48,562 $ 23,311 $ 46,605 $ 89,167 $ 38,601
Net Income Per Share $ 1.09 $ 0.53 $ 0.92 $ 2.01 $ 0.88
Average number of
common shares outstanding 44,333,585 44,070,572 44,231,398 44,282,774 44,054,415
CONSOLIDATED STATEMENTS OF REINVESTED EARNINGS
(DOLLARS IN THOUSANDS - UNAUDITED)
Three Months Ended Six Months Ended
June 30 March 31 June 30
1995 1994 1995 1995 1994
<S> <C> <C> <C> <C> <C>
Balance beginning of period $ 905,046 $ 849,509 $ 878,597 $ 878,597 $ 848,311
Add: Net income 48,562 23,311 40,605 89,167 38,601
Deduct: Cash dividends (16,395) (14,099) (14,156) (30,551) (28,191)
Balance end of period $ 937,213 $ 858,721 $ 905,046 $ 937,213 $ 858,721
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS - UNAUDITED)
Six Months Ended
June 30
1995 1994
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 89,167 $ 38,601
Depreciation and depletion 45,269 42,501
Deferred income taxes 21,604 11,430
Earnings of affiliates ( 2,140) ( 1,157)
(Increase) decrease in current assets,
other than cash and cash equivalents ( 41,970) (30,628)
Increase (decrease) in current
liabilities, other than current
maturities of long-term debt 17,684 21,535
Increase (decrease) in postretirement
benefits 1,894 4,167
Increase (decrease) in other noncurrent
liabilities 658 673
Net cash provided by operating activities 132,166 87,122
Cash Flows from Investing Activities:
Capital expenditures ( 67,777) (42,537)
(Increase) decrease in investments and
other assets (278,514) 1,321
Net cash (used in) investing activities (346,291) (41,216)
Cash Flows from Financing Activities:
Cash dividends ( 30,551) (28,191)
Increase (decrease) in long-term debt 232,000 (19,000)
Other 7,845 2,754
Net cash provided by (used in) financing
activities 209,294 (44,437)
Net increase (decrease) in cash and cash
equivalents ( 4,831) 1,469
Cash and cash equivalents -
beginning of period 8,155 2,123
Cash and cash equivalents - end of period $ 3,324 $ 3,592
Cash paid during the year for:
Interest $ 2,385 $ 2,815
Income taxes 36,293 10,573
<FN>
Notes to Financial Statements:
1. Reference is made to the Notes to Financial Statements that appear in the 1994
Annual Report on Form 10-K. The basic principles of those notes are pertinent
to these statements.
2. Results for second quarter 1994 reflect an increase in other income of $5.5
million, $3.3 million after-tax, or 8 cents per share, for a nonrecurring patent
infringement settlement.
3. Effective July 1, 1995, the company acquired Niagara of Wisconsin Paper
Corporation, Lake Superior Paper Industries and Superior Recycled Fiber
Industries for approximately $227 million in cash and extinguished $52 million
of debt. The company entered into new debt agreements totalling $335 million
and borrowed $279 million. The debt proceeds have been recorded in Investments
and other assets as of June 30, 1995.
* * * * *
The financial information furnished is unaudited. It reflects all adjustments
that are, in the opinion of management, necessary to a fair statement of the
results.
Item 2. Management's Discussion and Analysis of Financial Condition and Results of
Operations.
LIQUIDITY AND CAPITAL RESOURCES
During the second quarter, working capital increased by $27 million, primarily due
to receivables increasing by $9 million from higher June sales, and inventories
increasing by $14 million as a result of planned increases prior to scheduled
downtime for the July 4 holiday. Accounts payable increased by $9 million due
mainly to increased purchases of raw materials used to build inventories while other
liabilities decreased by $14 million due to timing of payments.
Capital expenditures in the second quarter of 1995 totaled $40 million compared with
$22 million in the second quarter of 1994. Major second quarter 1995 expenditures
included $10 million expended on the $166 million paper machine at Stevens Point
Division, $6 million expended on the $33 million chlorine reduction project at Kraft
Division, and $5 million expended in preparation for an upcoming paper machine
rebuild at Biron Division.
In late 1994, the Board of Directors approved a $116 million capital approval budget
for 1995. In February 1995, the Board of Directors also approved a $166 million
paper machine project for the Stevens Point Division. Effective July 1, 1995, the
company completed the acquisition of Niagara of Wisconsin Paper Corporation,
Niagara, Wisconsin, together with Lake Superior Paper Industries and Superior
Recycled Fiber Industries, both in Duluth, Minnesota. These three operations had
$13 million in scheduled capital projects at the time of acquisition and the
Consolidated Board of Directors subsequently approved $13 million in additional
projects for initiation in the second half of 1995. The 1995 capital approval
budget therefore now totals $295 million, with projected spending of $171 million
during 1995. The expected 1995 spending includes $49 million for the new No. 35
paper machine project and $17 million for the acquisitions. The company entered
into new debt agreements totaling $335 million and borrowed $279 million to fund the
acquisition. Funded debt increased $277 million during the second quarter to $350
million. A combination of internally generated funds and external financing assures
adequate capital to fund existing and projected projects.
OPERATING RESULTS SECOND QUARTER
AND FIRST HALF YEAR, 1995-1994 COMPARISON
Net sales increased to record levels for the second quarter and first half of 1995.
Second quarter net sales increased $103 million or 44% and first half year increased
$180 million or 39% compared with similar periods in 1994. A strengthened market
for both free-sheet papers and coated groundwood printing papers was the main reason
for the increases. Current demand allowed the company to increase prices during the
quarter approximately 8% for lightweight coated papers and 5% for specialty papers.
Another price increase of approximately 5% for free-sheet web papers and 7% for
lightweight coated papers was announced for July 1, 1995.
Record net income for the second quarter 1995 of $48.6 million or $1.09 per share
was an increase of 108% compared with $23.3 million or $.53 per share for the
comparable period in 1994. The second quarter 1994 included a 8-cents-per-share
adjustment from the favorable settlement of a patent infringement suit. The primary
reasons for the after-tax increase were: higher selling prices and mix,
$43 million; and higher volume, $4 million; partially offset by higher material
costs, mostly pulp, $14 million; and the prior year one-time patent infringement
suit settlement, $3 million.
The lightweight groundwood mills, Biron and Wisconsin River divisions, on a
combined basis, operated at 100% of capacity for the second quarter and first two
quarters 1995, compared with 86.7% and 87.8% for similar periods in 1994. In first
quarter 1994, one lightweight coated paper machine was off-line 37 days for a
quality rebuild and speed-up. The groundwood-free coated paper mill, Wisconsin
Rapids Division, excluding its No. 11 paper machine, operated at 100% of capacity
for the second quarter and first half year of 1995 compared with 84.9% and 83.3% for
similar periods in 1994. The No. 11 paper machine resumed operations in mid-
March 1995 after being put on stand-by with the March, 1992 startup of the company's
No. 16 paper machine. The Converting Division, which converts heavier-weight
groundwood-free rolls into sheets, increased shipments for the second quarter by 8%
and operated at 85.7% of capacity compared with 84.6% in the same period in 1994.
The company's coated specialty paper division (Stevens Point) operated at 100% of
capacity in both the second quarter and first half year of 1995 and 1994. Shipments
of paperboard products increased 10% and corrugated containers increased 3% for the
second quarter 1995 compared with the same period in 1994.
Gross margins as a percent of net sales increased to 28.7% and 27.6% for the second
quarter and first half year of 1995 compared with 21.1% and 19.3% for similar
periods in 1994. Higher selling prices and increased volumes, only partially offset
by higher material costs (mostly pulp), accounted for the improved gross profit
margins.
Selling, general and administrative expenses as a percent of net sales decreased to
5.0% and 5.1% for the second quarter and first six months of 1995, respectively,
compared with 6.7% for both periods in 1994. Selling, general and administrative
expenses are typically considered to be fixed costs.
Other income (expense) decreased by $5 million due to a favorable settlement of
patent infringement litigation recorded in 1994.
The effective tax rate was 39.2% for both periods in 1995 compared with 39.1% in
1994.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Furnish the exhibits required by Item 601 of Regulation S-K.
(27) Financial Data Schedule.
(b) Reports on Form 8-K.
A report on Form 8-K dated June 30, 1995 was filed on July 14, 1995 to report
the purchase of Niagara of Wisconsin Paper Corporation, Lake Superior Paper
Industries and Superior Recycled Fiber Industries.
Items 1, 2, 3, 4, and 5 are not applicable and have been omitted.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant
has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
CONSOLIDATED PAPERS, INC.
Date August 4, 1995
/s/ Richard J. Kenney
By: Richard J. Kenney, Vice President, Finance
Principal Financial Officer
Date August 4, 1995
/s/ Carl R. Lemke
By: Carl R. Lemke
Assistant Secretary
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from the
June 30, 1995 consolidated balance sheet and the consolidated statements of income,
reinvested earnings and cash flows for the six-month period ended 06/30/95 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 3,324
<SECURITIES> 0
<RECEIVABLES> 110,501
<ALLOWANCES> 4,409
<INVENTORY> 110,536
<CURRENT-ASSETS> 236,467
<PP&E> 2,056,244
<DEPRECIATION> 793,762
<TOTAL-ASSETS> 1,840,720
<CURRENT-LIABILITIES> 174,634
<BONDS> 300,000
<COMMON> 44,399
0
0
<OTHER-SE> 998,857
<TOTAL-LIABILITY-AND-EQUITY> 1,043,256
<SALES> 645,550
<TOTAL-REVENUES> 645,550
<CGS> 467,302
<TOTAL-COSTS> 467,302
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,515
<INCOME-PRETAX> 146,667
<INCOME-TAX> 57,500
<INCOME-CONTINUING> 89,167
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 89,167
<EPS-PRIMARY> 2.01
<EPS-DILUTED> 2.01
</TABLE>
