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, 1997
Commission file number 0-1051
CONSOLIDATED PAPERS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-0223100
State or other jurisdiction of (I.R.S. Employer
incorporation or organization) 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, 1997
44,800,369 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
1997 1996 December 31
(Unaudited) (Unaudited) 1996
ASSETS
<S> <C> <C> <C>
Current Assets
Cash and cash equivalents $ 22,431 $ 4,117 $ 12,928
Receivables (net of reserves of
$5,546 as of March 31, 1997,
$4,855 as of March 31, 1996,
and $5,313 as of December 31,
1996) 120,605 132,588 126,103
Inventories
Finished stock 49,056 31,263 48,375
Unfinished stock 6,246 6,359 7,099
Raw materials and supplies 88,505 78,724 82,480
Total inventories 143,807 116,346 137,954
Prepaid expenses 32,113 27,467 46,912
Total current assets 318,956 280,518 323,897
Investments and other assets 77,525 75,967 77,337
Restricted cash related to leases 412,375 - 423,618
Goodwill 57,941 72,136 59,034
Plant and Equipment
Buildings, machinery and equipment 2,206,433 2,169,087 2,198,839
Less: Accumulated depreciation 802,450 856,535 775,080
1,403,983 1,312,552 1,423,759
Land and timberlands 36,927 34,093 36,597
Capital additions in process 229,902 151,300 188,000
Total plant and equipment 1,670,812 1,497,945 1,648,356
$ 2,537,609 $ 1,926,566 $ 2,532,242
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities
Current maturities of
long-term debt $ - $ 70,000 $ -
Accounts payable 71,322 68,748 73,147
Other 102,223 113,303 90,609
Total current liabilities 173,545 252,051 163,756
Long-term debt 267,553 132,000 272,467
Capital lease obligations 442,507 - 462,084
Deferred income taxes 256,104 228,987 251,955
Postretirement benefits 101,068 96,583 98,614
Other noncurrent liabilities 15,137 20,994 13,544
Shareholders' Investment
Preferred stock, authorized and
unissued 15,000,000 shares - - -
Common stock: shares issued,
44,817,098 as of March 31, 1997,
44,659,847 as of March 31, 1996
and 44,768,361 as of December 31,
1996 44,817 44,660 44,768
Capital in excess of par value 82,821 75,745 80,818
Cumulative translation adjustment (2,507) (2,375) (2,290)
Treasury stock, at cost, 25,608
shares as of March 31, 1997,
6,800 shares as of March 31, 1996,
and 39,900 shares as of
December 31, 1996 (1,250) ( 384) (2,020)
Reinvested earnings 1,157,814 1,078,305 1,148,546
Total shareholders' investment 1,281,695 1,195,951 1,269,822
$ 2,537,609 $ 1,926,566 $ 2,532,242
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA - UNAUDITED)
Three Months Ended
March 31 December 31
1997 1996 1996
<S> <C> <C> <C>
Net sales $ 379,841 $ 424,139 $ 364,034
Cost of goods sold 315,396 318,282 287,594
Gross profit 64,445 105,857 76,440
Selling, general
and administrative expenses 19,119 17,739 22,606
Income from operations 45,326 88,118 53,834
Interest expense (7,828) (2,480) (6,059)
Interest income 6,150 110 5,722
Miscellaneous, net 1,604 1,584 ( 546)
Total other income
(expense), net ( 74) ( 786) ( 883)
Income before provision for
income taxes 45,252 87,332 52,951
Provision for income taxes 17,196 34,597 15,731
Net income $ 28,056 $ 52,735 $ 37,220
Net income per share $ 0.63 $ 1.18 $ 0.83
Average number of
common shares outstanding 44,750,789 44,620,673 44,714,664
CONSOLIDATED STATEMENTS OF REINVESTED EARNINGS
(DOLLARS IN THOUSANDS - UNAUDITED)
Three Months Ended
March 31 December 31
1997 1996 1996
<C> <C> <C>
Balance beginning of period $ 1,148,546 $ 1,044,317 $ 1,130,104
Add: Net income 28,056 52,735 37,220
Deduct: Cash dividends (18,788) (18,747) (18,778)
Balance end of period $ 1,157,814 $ 1,078,305 $ 1,148,546
CONSOLIDATED PAPERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
DOLLARS IN THOUSANDS - UNAUDITED)
Three Months Ended
March 31
1997 1996
<S> <C> <C>
Cash Flows from Operating Activities:
Net income $ 28,056 $ 52,735
Depreciation and depletion 28,904 26,840
Amortization of intangibles 1,485 2,302
Deferred income taxes 4,149 7,427
Earnings of affiliates ( 868) ( 1,084)
(Increase) decrease in current assets,
other than cash and cash equivalents 14,444 33,044
Increase (decrease) in current
liabilities other than current
maturities of long-term debt 9,789 10,812
Increase (decrease) in postretirement
benefits 2,454 2,881
Increase (decrease) in other noncurrent
liabilities 1,593 231
Net cash provided by operating activities 90,006 135,188
Cash Flows from Investing Activities:
Capital expenditures (51,360) (56,408)
Other ( 8,263) 540
Net cash (used in) investing activities (59,623) (55,868)
Cash Flows From Financing Activities:
Cash dividends (18,788) (18,747)
Increase (decrease) in long-term debt ( 4,914) (65,000)
Other 2,822 3,172
Net cash (used in) financing activities (20,880) (80,575)
Net increase (decrease) in cash and cash
equivalents 9,503 ( 1,255)
Cash and cash equivalents-beginning of period 12,928 5,372
Cash and cash equivalents-end of period $ 22,431 $ 4,117
Cash paid during the year for:
Interest $ 6,041 $ 5,247
Income taxes 1,445 9,815
Notes to Financial Statements:
1. Reference is made to the Notes to Financial Statements that appear in the
1996 Annual Report on Form 10-K. The basic principles of those notes are
pertinent to these statements.
2. The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings per Share." This statement
is effective for fiscal years ending after December 15, 1997 and, when
adopted, will require restatement of prior years' earnings per share. If
adopted in the first quarter, 1997, the company's reported earnings per
share of 63 cents would have been unchanged and diluted earnings per share
would have been 62 cents.
* * * * *
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
On March 31, 1997, the ratio of current assets to current liabilities was
1.8:1 compared with 2.0:1 at December 31, 1996. During the first quarter,
working capital decreased by $15 million. Cash and cash equivalents increased
by $10 million and receivables decreased by $6 million. Inventories decreased
by $6 million. Prepaid expenses decreased by $15 million, primarily due to
lower prepaid taxes at March 31, 1997. Accounts payable and other current
liabilities increased by $10 million due primarily to an increase in income
taxes and payroll taxes payable at March 31, 1997 compared with
December 31, 1996.
The company's debt paydown was $5 million during the quarter. The resulting
balance sheet long-term funded debt to capital ratio on March 31, 1997 was 17%
compared to 18% on December 31, 1996 and 10% on March 31, 1996.
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 6 of the Notes
to Consolidated Financial Statements in the company's 1996 Annual Report.
Capital expenditures totaled $51 million compared with $56 million during the
same period in 1996. The major first quarter 1997 expenditures included $20
million for a new $166 million coated specialty paper machine at Stevens Point
Division, $3 million for a $14 million winder project at Biron Division, $3
million for a $12 million fiber handling system at Niagara Division and $2
million for a $23 million supercalender addition at Niagara Division. The
company expects to spend a total of $200 million during 1997 for capital
additions including approximately $30 million to complete the new No. 35 paper
machine at Stevens Point Division.
OPERATING RESULTS
FIRST QUARTER, 1997-1996 COMPARISON
Net sales for the first quarter were $380 million, a decrease of 10% compared
with the first quarter of 1996. Shipments during the quarter were 430,000
tons compared with 386,000 tons for the same period in 1996. Increased
shipments were more than offset by depressed selling prices compared to the
same quarter of 1996.
Net income for the first quarter 1997 was $28 million, a decrease of 47%
compared to $53 million for the same period in 1996. The decrease is
primarily due to the depressed selling prices.
The groundwood-free coated paper mill, Wisconsin Rapids Division, excluding
its No. 11 paper machine which remained in standby condition, operated at 100%
of capacity compared to 86% during the first quarter of 1996. The lightweight
coated groundwood mills, Biron, Wisconsin River and Niagara Divisions,
operated at 91% of capacity compared to 84% in the same period of 1996. The
two smallest groundwood-free coated paper machines, Nos. 41 and 61, were idle
during the first quarter of 1997. No. 41 paper machine resumed operations on
April 16, 1997. During the first quarter, 1996, the largest lightweight
coated groundwood paper machine was offline 18 days for a quality-related
rebuild. During the first quarter of 1997, the coated specialty paper
division (Stevens Point) operated at 100% of capacity compared to 97% in 1996,
and the supercalendered paper division, Lake Superior Paper Industries,
operated at 96% of capacity compared with 92% for the comparable period in
1996. Shipments of corrugated products and paperboard products both increased
compared with the first quarter of 1996.
Gross profit margin as a percent of net sales decreased to 17.0% from 25.0% in
the first quarter 1997 compared to 1996. Increased volume and productivity
were more than offset by lower selling prices, resulting in the decrease in
gross profit margin. One-time expenses associated with the start-up on
March 21, 1997 of the new No. 35 specialty paper machine at Stevens Point
division were $2 million for the quarter.
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 1996.
The effective tax rate was 38.0% in 1997 compared with 39.7% for the first
quarter 1996.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Shareholders was held on April 28, 1997. At the
meeting, the shareholders elected fourteen directors to hold office until the
next annual meeting of shareholders. Total shares represented in person or by
proxy were 39,769,081, which was 88.81 percent of the 44,779,946 shares
outstanding. The shares represented at the meeting were voted as follows:
Election of directors.
Shares Voted
For
R.B. Barker 39,608,413
P.F. Brennan 39,612,900
W.N. Caldwell 39,608,420
J.D. Ericson 39,607,898
G.M. Evans 39,611,936
S.M. Hands 39,610,482
J.J. King 39,604,175
B.S. Kubale 39,611,632
D.R. Mead, Jr. 39,605,457
G.W. Mead 39,612,775
G.D. Mead 39,612,673
L.R. Nash 39,608,339
G.N. Rupp 39,611,672
J.S. Shiely 39,606,235
Withheld authority
for all directors 156,181
Withheld authority
on some directors 8,725
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.
There were no reports filed on Form 8-K during the quarter ended
March 31, 1997.
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 13, 1997
/s/ Richard J. Kenney
By: Richard J. Kenney, Vice President, Finance
Principal Financial Officer
Date May 13, 1997
/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 March 31, 1997 consolidated balance sheet and the consolidated statements
of income, reinvested earnings and cash flows for the three-month period ended
03/31/97 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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 22,431
<SECURITIES> 0
<RECEIVABLES> 126,151
<ALLOWANCES> 5,546
<INVENTORY> 143,807
<CURRENT-ASSETS> 318,956
<PP&E> 2,473,262
<DEPRECIATION> 802,450
<TOTAL-ASSETS> 2,537,609
<CURRENT-LIABILITIES> 173,545
<BONDS> 267,553
<COMMON> 44,817
0
0
<OTHER-SE> 1,281,695
<TOTAL-LIABILITY-AND-EQUITY> 2,537,609
<SALES> 379,841
<TOTAL-REVENUES> 379,841
<CGS> 315,396
<TOTAL-COSTS> 315,396
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,828
<INCOME-PRETAX> 45,252
<INCOME-TAX> 17,196
<INCOME-CONTINUING> 28,056
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 28,056
<EPS-PRIMARY> 0.63
<EPS-DILUTED> 0.62
</TABLE>
