FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 0-1732
MOSINEE PAPER CORPORATION
(Exact name of registrant as specified in charter)
WISCONSIN 39-0486870
(State of incorporation) (I.R.S Employer
Identification Number)
1244 KRONENWETTER DRIVE
MOSINEE, WISCONSIN 54455-9099
(Address of principal executive office)
Registrant's telephone number, including area code: 715-693-4470
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 report), and (2) has been subject to such filing
requirements
for the past 90 days.
Yes X No
----- -----
The number of common shares outstanding at March 31, 1994 was
7,148,443.
<PAGE>
MOSINEE PAPER CORPORATION
FORM 10-Q
QUARTER ENDED MARCH 31, 1994
Page
No.
- - --------
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of
Income, Three Months Ended
March 31, 1994 (unaudited) and
March 31, 1993 (unaudited). . . . . . . . . . . .
1
Condensed Consolidated Balance
Sheets March 31, 1994 (unaudited)
and December 31, 1993 (derived from
audited financial statements) . . . . . . . . . .
2
Condensed Consolidated Statements
of Cash Flows Three Months
Ended March 31, 1994 (unaudited)
and March 31, 1993 (unaudited). . . . . . . . . .
3
Notes to Condensed Consolidated
Financial Statements. . . . . . . . . . . . . . .
4
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations . . . . . . . . . . . .
5
PART II. OTHER INFORMATION
Item 3. Defaults in Senior Securities . . . . . . . . .
8
Item 6. Exhibits and Reports on Form 8-K. . . . . . . .
8
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended
March 31,
($ thousands except share data - unaudited) 1994 1993
- - ------------------------------------------- ---- ----
<S> <C> <C>
Net sales $61,995 $57,053
Cost of sales 51,006 48,812
------ ------
Gross profit on sales 10,989 9,241
------ ------
Operating expenses:
Selling and advertising 2,219 2,243
Administrative 3,543 2,982
------ ------
Total operating expenses 5,762 5,225
------ ------
Income from operations 5,227 4,016
Other income (expense):
Patent infringement award -- 5,529
Interest income 1 16
Interest expense (951) (1,578)
Other (57) (324)
------ ------
Income before income taxes and
cumulative effect adjustment 4,220 7,659
Provision for income taxes 1,700 3,064
------ ------
Income before cumulative effect
of changes in accounting
principles 2,520 4,595
Cumulative effect of a change in
accounting principle (net of
income taxes) (750) --
------ ------
Net income $ 1,770 $ 4,595
======= =======
Income per share
before cumulative effect of
changes in accounting principle $ 0.35 $ 0.64
Cumulative effect of a change in
accounting principle
(net of income taxes) (0.10) --
------ ------
Net income per share $ 0.25 $ 0.64
======= =======
Weighted average common
shares outstanding 7,148,443 7,148,443
========= =========
</TABLE>
<PAGE>
<TABLE>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
($ thousands) March 31, December 31,
- - ------------- 1994* 1993*
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 602 $ 1,521
Receivables, net 23,408 21,461
Inventories 30,506 30,456
Deferred income taxes 3,541 3,541
Other current assets 479 728
------- -------
Total current assets 58,536 57,707
------- -------
Property, plant and equipment 321,117 318,318
Less: accumulated depreciation 133,458 130,064
------- -------
Net depreciated value 187,659 188,254
------- -------
Other assets 6,309 6,100
------- -------
TOTAL ASSETS $252,504 $252,061
======== ========
LIABILITIES
Current Liabilities:
Accounts payable $ 17,951 $ 17,481
Accrued and other liabilities 15,683 18,506
Accrued income taxes 940 425
------- -------
Total current liabilities 34,574 36,412
Long-term debt 95,271 96,260
Deferred income taxes 18,239 18,081
Postretirement benefits 14,150 13,959
Other noncurrent liabilities 8,112 6,961
------- -------
Total liabilities 170,346 171,673
------- -------
Commitments and contingencies -- --
Preferred stock of subsidiary 1,255 1,255
------- -------
STOCKHOLDERS' EQUITY
Preferred stock - $1 par value, authorized
- 1,000,000 shares, none issued
Common stock - $2.50 par value
- 15,000,000 shares authorized
- 10,393,823 shares issued 25,984 25,984
Additional paid-in capital 13,851 13,851
Retained earnings 58,756 56,986
------- -------
Subtotals 98,591 96,821
Treasury stock at cost (17,688) (17,688)
------- -------
Total stockholders' equity 80,903 79,133
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $252,504 $252,061
======== ========
<FN>
*The consolidated balance sheet at March 31, 1994 is unaudited.
The December 31, 1993 consolidated balance sheet is derived from
audited financial statements.
</TABLE>
<PAGE>
<TABLE>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<CAPTION>
Three Months Ended
March 31,
($ thousands - unaudited) 1994 1993
- - ------------------------- ---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,770 $ 4,595
Provision for depreciation, depletion
and amortization 3,788 3,663
Recognition of deferred revenue (10) (10)
Provision for losses on accounts receivable 63 114
(Gain) loss on property, plant and equipment
disposals 51 (31)
Deferred income taxes 158 342
Changes in operating assets and liabilities:
Accounts receivable (2,010) 770
Inventories (51) (1,602)
Other assets (293) (346)
Accounts payable and other liabilities (262) (672)
Accrued income taxes 515 2,555
------ ------
Net cash provided by operating activities $3,719 $9,378
====== ======
Cash flows from investing activities:
Capital expenditures (3,029) (664)
Proceeds from property, plant and
equipment disposals 23 31
------ ------
Net cash used in investing activities (3,006) (633)
------ ------
Cash flows from financing activities:
Payments under credit agreements (989) (8,347)
Repayment of long-term debt -- (39)
Dividends paid (643) (643)
------ ------
Net cash used in financing activities (1,632) (9,029)
------ ------
Net decrease in cash and cash equivalents (919) (284)
Cash and cash equivalents at beginning of year 1,521 841
------ ------
Cash and cash equivalents at end of quarter $ 602 $ 557
====== ======
Supplemental Cash Flow Information:
Interest paid - net of amount capitalized $1,067 $1,620
Income taxes paid (refunded) 627 (1,838)
</TABLE>
<PAGE>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying financial statements in the opinion of
management reflect all adjustments which are normal and
recurring in nature and which are necessary for a fair
statement of the results for the periods presented. Some
adjustments involve estimates which may require revision in
subsequent interim periods or at year-end. Such adjustments
include interim LIFO inventory valuations and the effective
income tax rate for the year. In all regards, the financial
statements have been presented in accordance with generally
accepted accounting principles.
<TABLE>
2. Inventories consist of the following:
<CAPTION>
($ thousands) March 31, December 31,
------------- 1994 1993
---- ----
<S> <C> <C>
Raw material $12,434 $12,794
Finished goods and work in process 16,847 16,247
Supplies 8,200 8,124
------ ------
Subtotal 37,481 37,165
Less: LIFO reserve 6,975 6,709
------ ------
Net inventories $30,506 $30,456
======= =======
</TABLE>
3. Earnings per share of common stock is based on the weighted
average number of common shares outstanding and gives effect
to applicable preferred stock dividend requirements.
4. Net income includes expenses, or credits, for incentive
compensation plans based upon the company's stock price.
The
company calculates this liability using the average price of
Mosinee Paper's stock at the close of each fiscal quarter as
if all earned incentive compensation plans had been
exercised
on that day. For the three months ended March 31, 1994,
these plans are an after-tax expense of $28,000, or less
than
$0.01 per share, compared to the first quarter of 1993 which
produced after-tax income of $235,000 or $0.03 per share.
5. The company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 112, "Accounting for
Postemployment Benefits", as of January 1, 1994. The
cumulative effect for the transition obligation was an
after-tax expense of $750,000 or $0.10 per share.
<PAGE>
6. On February 8, 1993, the U.S. District Court of Appeals for
the Federal Circuit upheld the District Court's judgment
awarded the company against James River Corporation. The
District Court had held that James River had infringed upon
certain washroom towel cabinet roll transfer mechanisms
patented by the company's Bay West Corporation subsidiary.
The judgment of $5,529,000, including interest was received
and recorded as income in March, 1993.
7. The first quarter 1993 income statement has been
reclassified
to conform with December 31, 1993 presentation by increasing
sales $45,000, decreasing cost of sales $219,000 and
increasing selling and administrative expenses $264,000.
8. Refer to notes to the financial statements which appear in
the 1993 Annual Report for the company's accounting policies
which are pertinent to these statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(All $ amounts are in thousands, except per share
amounts)
RESULTS OF OPERATIONS
First quarter net sales of $61,995 were nearly 9% above the
$57,053 reported last year. Bay West accounted for over 50% of
the increase on 27% higher case volume that more than offset
continued unfavorable pricing and a weaker mix of products sold.
The balance of the improvement was spread among the other
operating units. The difficult paper market that has persisted
for the past three years continued as evidenced by all operating
units reporting unfavorable price variances when compared to the
prior year. In the aggregate, lower prices reduced net sales by
nearly $2 million. Selective and general price increases have
either been announced, or are scheduled, at most operations.
Those price increases that have been implemented have been
moderately successful.
Cost for sales for the first three months of the year of $51,006
increased 7% over the year earlier level of $47,812. As a
percent
of net sales, cost of sales declined from nearly 84% to slightly
above 82%. Bay West's towel and tissue mill lowered operating
and
material costs while increasing volume of products manufactured
providing this favorable improvement. The increase in costs at
our other locations were generally raw material driven. Prices
have increased for pulpwood, purchased bleached pulp and
linerboard. In some instances it has been difficult to pass
these
higher costs on through increased selling prices.
<PAGE>
Gross profit, reflecting the above, increased 19% to $10,989 for
the first quarter from the $9,241 reported for the same period
last year. Gross profit as a percent of sales improved to nearly
18% from the year earlier 16% level.
Operating expenses for the first quarter of $5,762 rose $537, or
10%, over the $5,225 reported at this time last year. Selling
expenses declined slightly from the prior year. General and
administrative expenses, excluding the effect of adjustments to
the accrued liability for incentive compensation programs based
on
the market price of the company's stock, rose $122, or 3% over
last year. Last year, lower stock prices reduced this same
liability resulting in an income increase of $392, while slightly
higher stock prices by the end of the first quarter this year
caused an expense of $47. General inflationary increases in
operating expenses, principally employee compensation related,
were mostly offset by cost reduction programs in other areas.
Cost of sales and operating expenses in 1994 include a charge for
postemployment benefits required by the mandatory adoption of
Statement of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" of $20 representing the
interest charge on the discounted obligation for these benefits.
Also, the first quarter income statement has been reclassified to
conform with the December 31, 1993, presentation by increasing
revenues $45, decreasing cost of sales $219 and increasing
operating expenses $264.
Reflecting the above, income from operations for the first
quarter
of $5,227 increased $1,211, or 30% from the year earlier level of
$4,016.
Interest expense of $951 declined substantially from the year
earlier amount of $1,578 due to a lower debt level, lower
interest
rates in effect during the respective periods and the expiration
during the fourth quarter of 1993 of an interest rate protection
program that increased interest expense last year when actual
rates dropped below the guaranteed floor. Other income last year
of $5,529, or $0.46 per share, was reported in the first quarter
of 1993 from the award of the company's settlement of a patent
infringement lawsuit.
Accordingly income before the cumulative effect of a change in
accounting principle and income taxes reached $4,220 for the
first
quarter of 1994 compared to $7,659 during the same period in
1993.
The provisions for income taxes of $1,700 and $3,064, for the
first quarters of 1994 and 1993, respectively, are based on
respective effective income tax rates of 40.3% and 40.0%.
The company adopted Statement of Financial Accounting Standards
No. 112, "Employers' Accounting for Postemployment Benefits"
effective January 1, 1994. The accumulated liability as of
December 31, 1993 for these benefits was $1,150 and required an
after-tax expense of $750 or $0.10 per share.
<PAGE>
Reflecting the above, net income for the first quarter of $1,770
or $0.25 per share, declined from the $4,595 or $0.64 per share.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities of $3,719 declined from the
$9,378 provided during the first three months of 1993. The
principal transactions accounting for the decline were last
year's
receipt of the $5,529 award for a patent infringement lawsuit and
tax payments of $1,027 made this year compared to the tax refund
of $1,838 received in 1993. Improved income from operations
provided additional cash. Cash used in investing activities
included $3,029 of capital expenditures. The primary capital
project during the quarter was the installation of flotation
cells
in the deink plant at Bay West's towel and tissue mill. This new
equipment will lower bleached deink fiber cost and improve
quality
and brightness of the deink pulp. The project became operational
near the end of the first quarter.
Cash utilized in financing activities consisted of debt repayment
of $989 and cash dividends paid to shareholders totalling $643.
Cash provided from operations and utilized in financing and
investing activities reduced cash by $919 from the year end level
of $1,521 to the March 31, 1994 balance of $602.
The company maintains a credit agreement with one bank acting as
agent and certain financial institutions as lenders to issue up
to
$110,000 of unsecured borrowing less the amount of commercial
paper outstanding. As of March 31, 1994 the company had issued
and outstanding $43,271 of commercial paper and had other
borrowings under the agreement of $52,000 for a total debt of
$95,271. This leaves approximately $15,000 available to
supplement cash provided from operations for uses in the business
which, at the present time, the company believes to be adequate
for the operation of the business and planned capital
expenditures.
Long-term debt, which was reduced $1,000 from the prior year end
level, as a percent of total capitalization declined to 54%.
Working capital of $23,962 increased $2,667 from the end of 1993
reflecting increased accounts receivable from higher sales and
decreases in accrued and other liabilities. The current ratio,
reflecting this increase, improved to 1.7:1 at the end of the
first quarter from the year end level of 1.6:1.
<PAGE>
PART II - OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Sorg Paper Company, a subsidiary of the registrant, omitted
the payment of its quarterly cash dividends of $1.37 per share,
payable April 1, 1994 to shareholders of record, on its 5-1/2%
cumulative preferred stock, par value $100. The number of 5-1/2%
cumulative preferred shares outstanding is 12,552 and the amount
of dividends in arrears is $396,765.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
Page
- - ----
(a) Exhibits required by Item 601 of
Regulation S-K.
(11) Computation of earnings per share 9
(b) Reports on Form 8-K:
None
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.
MOSINEE PAPER CORPORATION
May 13, 1994 GARY P. PETERSON
-----------------------------------
Gary P. Peterson
Senior Vice President-Finance,
Secretary and Treasurer
(On behalf of the Registrant and as
Principal Financial Officer)
<PAGE>
Exhibit 11
MOSINEE PAPER CORPORATION
MOSINEE, WISCONSIN
<PAGE> COMPUTATION OF PER SHARE EARNINGS
EXHIBIT 11
<TABLE>
MOSINEE PAPER CORPORATION
Statement of Computation of Per Share Earnings
For the Periods Ended March 31, 1994 and 1993
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Net Earnings $1,769,581 $4,595,292
Less: The Sorg Paper Company
Preferred Stock Dividends 17,196 17,196
--------- ---------
Earnings Available to Mosinee
Paper Corporation Common Stock $1,752,385 $4,578,096
========== ==========
Weighted Average Shares of Mosinee
Paper Corporation Common Stock
Outstanding During the Year 7,148,443 7,148,443
========== ==========
Earnings Per Share* $ 0.2451 $ 0.6404
========== ==========
Earnings Per Share Rounded
to Nearest Cent $ 0.25 $ 0.64
========== ==========
<FN>
*Earnings per Share = Earnings Available to Mosinee Paper
Corporation Common Stock
----------------------------------------
Weighted Average Shares of Mosinee Paper
Corporation Common Stock Outstanding
</TABLE>
