FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended March 31,1996
Commission file number 0-1051
CONSOLIDATED PAPERS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin
(State or other jurisdiction of incorporation or organization)
39-0223100
(I.R.S. Employer Identification No.)
Wisconsin Rapids, WI 54495
(Address of principal executive offices)
(Zip Code)
715 422-3111
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common stock par value $1.00 outstanding April 26, 1996 44,659,041 shares
<TABLE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<CAPTION>
As Of
March 31 March 31
1996 1995 December 31
(Unaudited) (Unaudited) 1995
ASSETS
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 4,117 $ 3,244 $ 5,372
Receivables (net of reserves of
$4,855 as of March 31, 1996,
$4,230 as of March 31, 1995,
and $4,628 as of December 31,
1995) 132,588 96,737 140,072
Inventories
Finished stock 31,263 28,584 42,844
Unfinished stock 6,359 4,955 6,807
Raw materials and supplies 78,724 63,461 82,792
Total inventories 116,346 97,000 132,443
Prepaid expenses 27,467 16,851 36,930
Total current assets 280,518 213,832 314,817
Investments and other assets 75,967 60,144 76,466
Goodwill 72,136 - 73,401
Plant and Equipment
Buildings, machinery and equipment 2,169,087 1,914,227 2,160,907
Less: Accumulated depreciation 856,535 772,782 830,764
1,312,552 1,141,445 1,330,143
Land and timberlands 34,093 29,505 33,996
Capital additions in process 151,300 74,190 104,238
Total plant and equipment 1,497,945 1,245,140 1,468,377
$ 1,926,566 $ 1,519,116 $ 1,933,061
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Current maturities of
long-term debt $ 70,000 $ 50,000 $ 70,000
Accounts payable 68,748 51,966 72,278
Other 113,303 77,241 98,961
Total current liabilities 252,051 179,207 241,239
Long-term debt 132,000 23,000 197,000
Deferred income taxes 228,987 192,687 221,560
Postretirement benefits 96,583 110,406 93,702
Other noncurrent liabilities 20,994 7,691 20,763
Shareholders' Investment
Preferred stock, authorized and
unissued 15,000,000 shares - - -
Common stock, shares issued,
44,659,847 as of March 31, 1996,
44,290,350 as of March 31, 1995
and 44,623,881 as of December 31,
1995 44,660 44,290 44,624
Capital in excess of par value 75,745 59,661 74,325
Cumulative translation adjustment (2,375) (2,108) (2,369)
Unrealized net loss on investment
securities - ( 764) -
Treasury stock, at cost, 6,800
shares as of March 31, 1996 and
38,000 shares as of December 31,
1995 ( 384) - (2,100)
Reinvested earnings 1,078,305 905,046 1,044,317
Total shareholders' investment 1,195,951 1,006,125 1,158,797
$ 1,926,566 $ 1,519,116 $ 1,933,061
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA - UNAUDITED)
Three Months Ended
March 31 December 31
1996 1995 1995
<S> <C> <C> <C>
Net sales $ 424,139 $ 308,904 $ 452,650
Cost of goods sold 318,282 227,433 309,799
Gross profit 105,857 81,471 142,851
Selling, general
and administrative expenses 17,739 16,003 17,346
Income from operations 88,118 65,468 125,505
Interest expense (2,480) (1,459) ( 4,150)
Interest income 110 348 1,429
Miscellaneous, net 1,584 2,383 1,642
Total other income
(expense), net ( 786) 1,272 ( 1,079)
Income before provision for
income taxes 87,332 66,740 124,426
Provision for income taxes 34,597 26,135 51,356
Net Income $ 52,735 $ 40,605 $ 73,070
Net income per share $ 1.18 $ 0.92 $ 1.64
Average number of
common shares outstanding 44,620,673 44,231,398 44,594,405
CONSOLIDATED STATEMENTS OF REINVESTED EARNINGS
(DOLLARS IN THOUSANDS - UNAUDITED)
Three Months Ended
March 31 December 31
1996 1995 1995
Balance beginning of period $ 1,044,317 $ 878,597 $ 987,743
Add: Net income 52,735 40,605 73,070
Deduct: Cash dividends (18,747) (14,156) (16,496)
Balance end of period $ 1,078,305 $ 905,046 $ 1,044,317
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS - UNAUDITED)
Three Months Ended
March 31
1996 1995
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 52,735 $ 40,605
Depreciation and depletion 26,840 22,775
Amortization of intangibles 2,302 -
Deferred income taxes 7,427 10,909
Earnings of affiliates ( 1,084) ( 1,081)
(Increase) decrease in current assets,
other than cash and cash equivalents 33,044 (19,415)
Increase (decrease) in current
liabilities, other than current
maturities of long-term debt 10,812 22,257
Increase (decrease) in postretirement
benefits 2,881 848
Increase (decrease) in other noncurrent
liabilities 231 353
Net cash provided by operating activities 135,188 77,251
Cash Flows from Investing Activities:
Capital expenditures (56,408) (27,941)
(Increase) decrease in investments
and other assets 540 1,266
Net cash (used in) investing activities (55,868) (26,675)
Cash Flows From Financing Activities:
Cash dividends (18,747) (14,156)
Increase (decrease) in long-term debt (65,000) (45,000)
Other 3,172 3,669
Net cash (used in) financing activities (80,575) (55,487)
Net increase (decrease) in cash and cash
equivalents ( 1,255) ( 4,911)
Cash and cash equivalents-beginning of period 5,372 8,155
Cash and cash equivalents-end of period $ 4,117 $ 3,244
Cash paid during the year for:
Interest $ 5,247 $ 1,398
Income taxes 9,815 3,755
Notes to Financial Statements:
1. Reference is made to the Notes to Financial Statements which appear in the 1995
Annual Report on Form 10-K. The basic principles of those notes are pertinent to
those statements.
2. Effective July 1, 1995, the company acquired Niagara of Wisconsin Paper
Corporation, Lake Superior Paper Industries and Superior Recycled Fiber Industries.
This acquisition was accounted for as a purchase and, accordingly, assets and
liabilities have been stated at their fair values. The purchase price allocation is
subject to change as management continues to refine the estimated fair value of the
assets acquired and liabilities assumed. Results of the operations of the acquired
companies are included in the consolidated financial statements subsequent to the
acquisition.
The following unaudited consolidated pro forma results of operations for the period
ended March 31, 1995 assume the acquisition occurred as of January 1, 1995. This
pro forma information is provided for information purposes only. It is based on
historical information and, therefore, is not necessarily indicative of either the
results that would have occurred had the acquisition been made as of that date nor
of future results:
Three Months Ended
March 31, 1995
(Unaudited)
(dollars in thousands, except per share data)
Net sales $ 421,468
Net income 44,588
Net income per share 1.01
* * * * *
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
Effective July 1, 1995, the company completed the acquisition of Niagara of
Wisconsin Paper Corporation, located in Niagara, Wisconsin, together with Lake
Superior Paper Industries and Superior Recycled Fiber Industries, both located
in Duluth, Minnesota. This acquisition was accounted for as a purchase. The
assets and liabilities, which have been stated at their fair value, will
affect the comparison to prior periods.
On March 31, 1996, the ratio of current assets to current liabilities was
1.1:1 compared with 1.3:1 at December 31, 1995. During the first quarter,
working capital decreased by $45 million with inventories decreasing by $16
million. Accounts receivable decreased by $7 million due to lower March sales
and cash and cash equivalents decreased by $1 million. Accounts payable and
other current liabilities increased by $11 million due primarily to a $14
million increase in income and payroll taxes payable at March 31, 1996
compared with December 31, 1995.
The company's debt paydown was $65 million during the quarter, largely through
the $34 million decrease in current assets and a $11 million increase in
current liabilities. The resulting balance sheet long-term funded debt to
capital ratio on March 31, 1996 was 10% compared to 15% on December 31, 1995
and 2% on March 31, 1995.
The company also has operating leases for machinery and equipment which commit
the company to annual lease payments of approximately $30 million. Additional
detail regarding the operating leases is included in footnote 8 of the Notes
to Consolidated Financial Statements in the company's 1995 Annual Report.
Capital expenditures totaled $56 million compared with $28 million during the
same period in 1995. The major first quarter 1996 expenditures included $21
million for a $166 million paper machine addition at Stevens Point Division,
$8 million for a $35 million chlorine reduction project at Kraft Division, and
$5 million for a paper machine rebuild at Biron Division. The company
continues to expect to spend a total of $240 million during 1996 for capital
additions.
OPERATING RESULTS
FIRST QUARTER, 1996-1995 COMPARISON
Net sales for the first quarter were $424 million, an increase of 37% compared
with the first quarter of l995. The net sales increase due to the July, 1995
acquisition was partially offset by the slowdown in demand for coated papers
that began in the fourth quarter of l995 and continued during the first
quarter of 1996.
Net income for the first quarter 1996 was $53 million, an increase of 30%
compared to $41 million for the same period in 1995. The increase to net
income was primarily due to the favorable results from the newly acquired
companies, but net income would have been slightly higher without the acquired
companies.
An unaudited pro forma of consolidated results of operations for the first
quarter period ended March 31, 1995 is provided for information purposes only.
The pro forma assumes the acquisition occurred on January 1, 1995 and is shown
in the footnotes to the financial statements. It is based on historical
information and, therefore, is not necessarily indicative of either the
results that would have occurred had the acquisition been made as of that date
or of future results.
Due to the slowdown in demand for coated paper, the company operated at less
than full capacity during the first quarter resulting in approximately 80,000
fewer tons than maximum available of salable production. The groundwood-free
coated paper mill, Wisconsin Rapids Division, excluding its No. 11 paper
machine, operated at 86% of capacity compared to 100% during the first quarter
of 1995. Biron and Wisconsin River divisions, the lightweight coated
groundwood mills, operated at 90% of capacity as compared to 100% in the same
period of 1995. During the quarter, the largest lightweight coated groundwood
paper machine was also off line for l8 days for a quality-related rebuild.
The company's newly acquired operations, Niagara of Wisconsin Paper
Corporation, Lake Superior Paper Industries and Superior Recycled Fiber
Industries operated at 64%, 92% and 74%, respectively, during the first
quarter of 1996. The coated specialty paper division (Stevens Point) operated
at 97% of capacity compared to 100% in 1995. Shipments of corrugated products
and paperboard products were stable compared with the first quarter of 1995.
Gross profit margins as a percent of net sales decreased to 25.0% from 26.4%
in the first quarter l996 compared to l995. Increased volume and higher
selling prices were more than offset by the impact of less than full capacity
operations, thus, the decrease in gross profit margin.
Selling, general, and administrative expenses held steady when compared with
last year's first quarter.
Other income (expense) also held steady during the quarter as compared with
first quarter l995.
The effective tax rate was 39.6% in l996 compared with 39.2% for the first
quarter l995.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Shareholders was held on April 22, 1996. At the
meeting, the shareholders elected eleven directors to hold office until the
next annual meeting of shareholders. Total shares represented in person or by
proxy were 39,168,556, which was 87.73 percent of the 44,646,828 shares
outstanding. The shares represented at the meeting were voted as follows:
Election of directors.
Shares Voted
For
R.B. Barker 38,377,796
P.F. Brennan 38,378,873
W.N. Caldwell 38,379,057
S.M. Hands 38,376,575
B.S. Kubale 38,372,290
D.R. Mead, Jr. 38,368,585
G.W. Mead 38,379,812
G.D. Mead 38,378,762
L.R. Nash 38,375,139
G.N. Rupp 38,374,001
J.S. Shiely 38,379,313
Withheld authority
for all directors 788,744
Withheld authority
on some directors 11,227
In addition, the shareholders, by a vote of 33,560,325 for; 5,402,458 against;
and 205,773 abstain, approved an amendment to Article III of the Restated
Articles of Incorporation to increase the number of shares of common stock,
$1.00 par value, authorized for issuance from 93,750,000 to 200,000,000.
Item 6. Exhibits and Reports on Form 8-K.
(a) Furnish the exhibits required by Item 601 of Regulation S-K.
(3)(i) Articles of Incorporation.
(27) Financial Data Schedule.
(b) Reports on Form 8-K.
There were no reports filed on Form 8-K during the quarter ended
March 31, 1996.
Items 1, 2, 3, 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 May 14, 1996
/s/ Richard J. Kenney
By: Richard J. Kenney, Vice President, Finance
Principal Financial Officer
Date May 14, 1996
/s/ Carl R. Lemke
By: Carl R. Lemke
Assistant Secretary
Exhibit (3)(i) TO Form 10-Q For
Consolidated Papers, Inc. For
The Quarter Ended March 31, 1996
RESTATED ARTICLES OF INCORPORATION OF
CONSOLIDATED PAPERS, INC.
ADOPTED JULY 22, 1953 AND EFFECTIVE JULY 28, 1953
LAST AMENDED APRIL 22, 1996 AND EFFECTIVE UPON FILING
WITH WISCONSIN SECRETARY OF STATE
ARTICLE I
The name of the corporation is Consolidated Papers, Inc.
(As amended April 18, 1962. Effective April 24, 1962.)
ARTICLE II
The purpose of the corporation is to engage in any lawful activity within the
purposes for which corporations may be organized under Chapter 180 of the
Wisconsin Statutes.
ARTICLE III
A. The aggregate number of shares which the corporation shall have authority
to issue is (i) two hundred million (200,000,000) shares of common stock,
par value one dollar ($1.00) per share; and (ii) 15,000,000 shares of
Class A Preferred Stock, par value one cent ($.01) per share.
B. A description of each class of shares and a statement of the voting
rights, designations, preferences, qualifications, privileges,
limitations, options, restrictions, conversion rights and other special or
relative rights granted to or imposed upon the shares of each class and of
the authority vested in the Board of Directors of the Corporation to
establish series of Class A Preferred Stock and to fix and determine the
relative rights and preferences as between series of Class A Preferred
Stock, and the variations therein, are as follows:
1. The Board of Directors is hereby expressly authorized, at any time or
from time to time, to divide any or all of the shares of Class A
Preferred Stock into one or more series, and in the resolution or
resolutions establishing a particular series, before issuance of any
of the shares thereof, to fix and determine the number of shares and
the designation of that series, so as to distinguish it from the
shares of all other series and classes, and to fix and determine the
voting rights, preferences, qualifications, privileges, limitations,
options, conversion rights, restrictions, and other special or
relative rights of such series. Each series may differ from every
other series previously authorized, as may be determined by the Board
of Directors in any or all respects, to the fullest extent now or
hereafter permitted by the laws of the State of Wisconsin, including,
but not limited to, the variations between different series in the
following respects:
(a) the distinctive designation of the series and the number of shares
which shall constitute the series, which number may be increased
or decreased (but not below the number of shares thereof then
outstanding) from time to time by the Board of Directors;
(b) the annual dividend or dividend rate for the series, and the date
or dates from which dividends shall commence to accrue;
(c) the price or prices at which, and the terms and conditions on
which, if any, the shares of the series may be redeemed;
(d) the amount payable upon shares of the series in the event of
voluntary or involuntary liquidation of the Corporation;
(e) the sinking fund provisions, if any, for the redemption of shares
of the series;
(f) the terms and conditions, if any, upon which shares of the series
may be converted;
(g) the voting rights, if any, of the shares of the series; and
(h) any other terms, preferences, qualifications, privileges,
limitations, options, restrictions and other special rights, if
any, of shares of the series as the Board of Directors may, at the
time of its resolution or resolutions, lawfully fix or determine
under the laws of the State of Wisconsin.
All shares within each series of Class A Preferred Stock shall be alike in
every particular, except with respect to the dates from which dividends,
if any, shall commence to accrue.
2. The holders of Common Stock shall have one vote per share.
3. The Common Stock shall be subject to the prior rights of holders of
any series of Class A Preferred Stock outstanding, according to the
preferences, if any, of that series.
4. The Corporation may issue shares of Common Stock, Class A Preferred
Stock, option rights, or securities having conversion or option
rights, without first offering them to the holders of Class A
Preferred Stock or Common Stock. (As amended April 22, 1996. Effective
upon filing with Wisconsin Secretary of State.)
ARTICLE IV
The corporation shall have the right to purchase, take, receive, or otherwise
acquire, hold, own, pledge, transfer, or otherwise dispose of its own shares
of capital stock.
ARTICLE V
The address of the registered office of the corporation at the time of
adoption of these restated articles is 231 First Avenue North, Wisconsin
Rapids, Wisconsin, and the name of its registered agent at such address is
Thomas A. Duda.
ARTICLE VI
The number of Directors constituting the Board of Directors of the corporation
shall be such number (not less than three) as is fixed from time to time by
the Bylaws.
ARTICLE VII
These restated Articles of Incorporation supersede and take the place of all
heretofore existing Articles of Incorporation of the corporation and all
amendments thereto.
ARTICLE VIII
No holder of capital stock shall have any pre-emptive rights to subscribe to
any shares of the corporation now or hereafter authorized or to securities of
the corporation convertible into shares of the corporation now or hereafter
authorized. (As amended April 19, 1972. Effective June 21, 1972.)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
the March 31, 1996 consolidated balance sheet and the consolidated statements
of income, reinvested earnings and cash flows for the three-month period ended
03/31/96 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 4,117
<SECURITIES> 0
<RECEIVABLES> 137,443
<ALLOWANCES> 4,855
<INVENTORY> 116,346
<CURRENT-ASSETS> 280,518
<PP&E> 2,354,480
<DEPRECIATION> 856,535
<TOTAL-ASSETS> 1,926,566
<CURRENT-LIABILITIES> 252,051
<BONDS> 132,000
<COMMON> 44,660
0
0
<OTHER-SE> 1,195,951
<TOTAL-LIABILITY-AND-EQUITY> 1,926,566
<SALES> 424,139
<TOTAL-REVENUES> 424,139
<CGS> 318,282
<TOTAL-COSTS> 318,282
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,480
<INCOME-PRETAX> 87,332
<INCOME-TAX> 34,597
<INCOME-CONTINUING> 52,735
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 52,735
<EPS-PRIMARY> 1.18
<EPS-DILUTED> 1.18
</TABLE>
