FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from __________ to __________
Commission file number: 0-1732
MOSINEE PAPER CORPORATION
(Exact name of registrant as specified in charter)
WISCONSIN
1244 KRONENWETTER DRIVE (State of incorporation)
MOSINEE, WISCONSIN 54455-9099 39-0486870
(Address of principal (I.R.S. Employer
executive office) Identification Number)
Registrant's telephone number, including area code: 715-693-4470
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, $2.50 PAR VALUE
(Title of each class)
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Indicate by check 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
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Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
As of March 21, 1995, the aggregate market value of the shares of
common stock held by non-affiliates was approximately
$191,519,076.
The number of common shares outstanding at March 1, 1995 was
7,148,443.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy statement dated March 17, 1995; Pages 3 to 10*, 16*
(Part III)
*To the extent noted herein
<PAGE>
TABLE OF CONTENTS
Page
PART I . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Item 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . 1
Item 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . 7
Item 3. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . 9
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. 9
PART II. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS. . . . . . . . . . . . . . . . . 9
Item 6. SELECTED FINANCIAL DATA. . . . . . . . . . . . . . . 10
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION . . . . . . . . . 11
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. . . . . 20
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE. . . . . . . . . 45
PART III . . . . . . . . . . . . . . . . . . . . . . . . . . 46
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. 46
Item 11. EXECUTIVE COMPENSATION. . . . . . . . . . . . . . . 46
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT. . . . . . . . . . . . . . . . . . . . . 46
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . 46
PART IV. . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . 47
<PAGE>
PART I
ITEM 1. BUSINESS.
NATURE OF THE BUSINESS
Mosinee Paper Corporation was incorporated in Wisconsin in 1910.
The company and its subsidiaries (collectively, the "company")
operate in the pulp and paper industry. The company's Pulp and
Paper Division ("Pulp and Paper") produces and sells specialty
papers and its Mosinee Converted Products Division ("Converted
Products") produces and sells wax laminated and converted papers.
Bay West Paper Corporation ("Bay West") produces, converts and
sells towel and tissue paper products and The Sorg Paper Company
("Sorg Paper"), produces and sells specialty papers. Additional
wholly-owned subsidiaries are: Mosinee Paper International Inc.,
which administers export sales for the company and acts as a
foreign sales corporation (FSC); and Mosinee Holdings, Inc., which
operates a power plant in Middletown, Ohio to provide steam and
electricity to Sorg Paper and Bay West's towel and tissue paper
mill located there.
SEGMENT INFORMATION
The manufacture and sale of paper is the company's only line of
business.
PRINCIPAL PRODUCTS AND SERVICES
The principal product groups of the company are specialty papers,
laminated and converted papers and towel and tissue products.
SPECIALTY PAPERS
Specialty paper products are produced and sold by Pulp and Paper
and Sorg Paper. Principal products of Pulp and Paper include
industrial crepe, masking, gumming, converting and wax laminating,
foil laminating, flame resistant, interleaver, cable wrap,
electrical insulation, pressure sensitive backing, toweling, water
base and film coating and packaging papers. Sorg Paper produces
decorative laminate, deep-color and facial tissue, filter,
construction, parchtex, saturating, soapboard and soapwrap and
latex label papers. All products of the company's specialty paper
operations are sold to other manufactures or converters for
further processing and ultimate sale to end users. These
manufacturers and converters are in many industries including
housing, steel, aluminum and other metal producers, automotive,
consumer packaging, food processing, home appliance, consumer
goods and printing.
TOWEL AND TISSUE PRODUCTS
The towel and tissue products produced and sold by Bay West are
primarily for the commercial and institutional wash room products
markets that include recreation, health care, food service,
manufacturing, education, automotive and dairy. The products
include roll and folded towels, tissue products, soaps, windshield
towels, dairy towels, household roll towels and glass cleaner. Bay
<PAGE>
West products are sold through independent distributors to end
users both domestically and internationally.
CONVERTED PRODUCTS
Wax-laminated and converted papers produced by Converted Products
include roll, ream and skid wrap paper, can body stock,
impregnated paper and coated papers. These products are sold to
manufacturers and converters in the paper, can and corrugated
container industries.
EXPORT SALES
Mosinee Paper International, Inc. acts as a commissioned sales
agent for the export sales of the company and has elected to be
treated as a foreign sales corporation, or FSC, for federal income
tax purposes. During 1994, export sales of the company's products
amounted to nearly $26 million.
RAW MATERIALS
For paper making operations, fiber represents approximately half
of the cost of paper. The company satisfies its fiber requirements
using virgin fiber from pulpwood and chips, purchased bleached
pulp and both pre- and post-consumer waste or recyclable papers.
The types of paper being made and their intended uses determine
the type or quality of the fiber used.
During 1994, Pulp and Paper required 36,000 tons, or 29% of total
fiber requirements, of bleached pulp which it purchased on the
open market. The balance, representing unbleached pulp, was
produced at its kraft pulp mill. Sorg Paper is a non-integrated
paper manufacturer and must purchase all required fiber on the
open market. During the year it used 37,000 tons of bleached pulp,
or 99% of its fiber requirements. Pulp prices have risen
dramatically from an average $400/ton at the start of 1994 to
slightly over $700/ton in March, 1995. The balance of purchased
fiber represented waste papers, generally pre-consumer, available
from printers and other paper converters.
Bay West produces all its fiber requirements from its deink and
direct entry systems. The fiber source for these systems is low
grade recyclable waste papers. During the year demand for most
grades of waste papers increased as new deinking facilities were
started in the industry. Increased export of waste papers also
increased demand. Bay West was able to purchase its requirements
although spot shortages did occur. The cost of waste papers used
by Bay West rose dramatically in response to the demand pressures
in the market. As an example, the price of file stock (which is
post-consumer waste paper) rose from a beginning of the year cost
of $90/ton to $235/ton at year-end. It continued to rise to
$280/ton by March, 1995. News (#8) waste paper is the most
plentiful and rose from $38/ton in 1994 to the March, 1995 level
of $210/ton. Bay West consumed over 137,000 tons of pre- and
post-consumer waste papers during the year.
Wood for Pulp and Paper's pulp mill is produced at its Mosinee
Industrial Forest in northwestern Wisconsin and purchased from
private landowners, public forests, and from other forest product
<PAGE>
manufacturers. During 1994, Pulp and Paper consumed 29,000 cords
of pulpwood, or 20% of its total wood requirements, from its own
forests. The balance was available on the open market. During
1994 the demand on pulpwood and woodchips increased resulting in
both lower availability and higher costs. Costs rose from
$63/cord to $67/cord. While some other paper mills experienced
shortages of supply, Mosinee's Pulp and Paper Division did not and
also was not subject to price volatility that exceed the range
mentioned above. The availability of wood has improved in 1995
and prices are expected to remain stable for the year.
Converted Products utilizes linerboard and various waxes to
produce its laminated papers. Linerboard, purchased from large
paper mills in the United States, was subject to high demand in
1994 that continued on into 1995. As a result, linerboard
producers raised prices significantly during the year, resulting
in an increase of $81/ton to $423/ton by the end of 1994. Since
year-end, additional price increases totaling $100-$110/ton have
been implemented or announced. The increased demand also
tightened availability reaching a peak in February of 1995, with
slight easing since then. Converted Products has been able to
procure adequate supplies and temporarily supplemented supplies
with inventory reduction which is now in the gradual process of
being restored.
All other chemicals, dyes and sundry raw materials have remained
readily available with no anticipated shortages seen during 1995.
The company has recovered a portion of raw material cost increases
through higher selling prices for its own products. See
"Competitive Conditions".
ENERGY
The company's paper mills require large amounts of steam and
electricity for production. Both Pulp and Paper and the Sorg
Paper/Bay West Middletown, Ohio complex have their own steam and
electricity generating facilities. Additionally, Pulp and Paper
operates a hydro-electric generating facility that produces a
portion of its electricity requirements. Both facilities have the
capability to purchase electricity from area utilities. The
primary fuel used at the Middletown complex is coal while Pulp and
Paper utilizes a mixture of coal, bark and sludge and also
operates a recovery boiler that recovers inorganic chemicals from
its pulping process.
PATENTS AND TRADEMARKS
The company obtains and files trademarks and patents as
appropriate for newly developed products. The company does not own
or hold material licenses, franchises or concessions.
SEASONAL NATURE OF BUSINESS
None of the products manufactured and sold by the company are
seasonal in nature. Bay West unit shipments, however, are
moderately higher during the summer and early fall months.
<PAGE>
WORKING CAPITAL
As is customary in the paper industry, the company carries
adequate amounts of raw materials and finished goods inventory to
facilitate the manufacture and rapid delivery of paper products to
its customers.
MAJOR CUSTOMERS
No single customer accounted for 10% or more of consolidated net
sales during 1994.
BACKLOG
The sales backlog in dollars climbed to over $21 million, up $6
million from the level at 1993 year-end. The backlog was nearly
$16 million at specialty paper operations. Backlogs at converting
facilities, where customer orders are serviced from inventories,
generally represent orders being prepared for shipment. Backlogs
at all operations existing at year-end are expected to be shipped
during 1995.
COMPETITIVE CONDITIONS
Competition in the paper industry in general has been strong as
capacity in excess of demand for many grades of paper has
heightened pricing pressure. The tissue portion of the industry
saw previous years' capacity additions being absorbed by higher
demand resulting from the strong economy that existed through the
year and into 1995.
Specialty paper operations at Sorg Paper and Pulp and Paper
compete in many different niche markets. The highly technical
nature of specialty paper limits competition since not all paper
mills can produce the required papers. The competition is
generally based more upon quality and service to the customer than
price. However, as quality and service are improving at most paper
manufacturers and becoming expected attributes of the product,
price competition has begun to intensify among competitors in
specialty grades. The less technical specialty grades of paper
encounter more price competition since more paper mills have the
capability to produce them. Additionally, as demand for commodity
grade papers declines, producers of these commodity grades
temporarily may venture into the less technical specialty grades
to maintain production volumes, thereby increasing price
competition. Mosinee's specialty paper operations were partially
successful in raising selling prices to recover the rapid rise in
purchased pulp cost. Additional purchased pulp cost increases
during 1995 are expected to be recovered through higher selling
prices.
Competition in the commercial and institutional tissue markets,
which includes toweling, is among several large paper companies.
Bay West, although growing, is one of the smaller competitors in
this market. The improved economy and less announced capacity
increases provided reductions to the severe price competition
among tissue producers during 1994. With most competitors in this
market feeling the effect of the high waste paper costs, the
recovery of most of such increases has been possible, beginning
primarily in the later part of 1994 and continuing into 1995.
<PAGE>
Wax-laminated and converted products compete with several similar
sized producers. Competition is primarily focused on price.
Additionally, wax-laminated roll wrap, for paper products sold in
roll form by paper mills, competes with polywrap as an alternative
roll wrap material.
RESEARCH AND DEVELOPMENT
The company is involved in research and development activities at
all locations. Generally, research at specialty paper operations
occurs in both the laboratory and actual paper machines in the
form of trial runs. Research at converting facilities is limited
to development, often in conjunction with suppliers, on new
laminating compounds. Tissue operations perform trial run research
in both deinking and paper production to improve product
capability and quality. Additionally, research is conducted to
improve existing, and develop the next generation of, product
dispensers. The amounts spent on research activities are not
material in relation to total operating expenses.
ENVIRONMENT
The paper industry is subject to stringent environmental laws and
regulations which govern the discharge of materials into the air
and ground and surface waters. Environmental regulations have
become more restrictive in the past and additional changes can be
anticipated in the future. The company is committed to full
compliance with all rules designed to protect the environment and
compliance with current rules is not expected to have a material
adverse effect on the company's earnings or competitive position.
There are no proposed regulatory changes of which the company is
now aware which are expected to have a material effect on the
business or financial condition of the company, but it can be
anticipated that future environmental regulations will likely
increase the company's capital expenditures and operating costs.
Additional information concerning the company's status as a
potentially responsible party ("PRP") and other environmental
matters can be found in the first paragraph of Note 12 of the
Notes to Consolidated Financial Statements, page 41. As noted
therein, the company is of the opinion that any costs associated
with its status as a PRP will not have a material adverse effect
on the business and financial condition of the company.
EMPLOYEES
The company had 1,295 employees at the end of 1994. Hourly
employees at the company's paper making operations are covered
under collective bargaining agreements. During 1993 negotiations
were conducted which led to a four-year agreement at Sorg Paper
signed in 1994. During 1994 the company negotiated with the Union
Bargaining Committee at Bay West's Middletown, Ohio mill and
signed a five-year labor agreement. The company considers its
relationship with its employees to be excellent. Eligible
employees participate in retirement plans and group life,
disability and medical insurance programs.
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The following information relates to Executive Officers of the
Company as of March 24, 1995:
SAN W. ORR, JR., 53
Chairman of the Board since 1987
Director since 1972
Also Attorney, Estates of A.P. Woodson & Family and
Chairman of the Board and Chief Executive Officer
of Wausau Paper Mills
Previously, Vice Chairman of the Board (1978-1987)
RICHARD L. RADT, 63
Vice Chairman of the Board since August, 1993
Director since 1988
Previously, President and Chief Executive Officer (1988-1993)
and President and Chief Executive Officer of Wausau Paper
Mills Company (1977-1987)
DANIEL R. OLVEY, 46
President and Chief Executive Officer since August, 1993,
Director since August, 1993
Previously, Executive Vice President and Chief Operating
Officer (1992-1993), Group Vice President-Specialty Paper
(1991-1992), Vice President-Finance; Secretary and Treasurer
(1989-1991); Vice President Finance, Secretary and Treasurer,
Wausau Paper Mills Company (1983-1989)
GARY P. PETERSON, 46
Sr. Vice President-Finance, Secretary and Treasurer since
August, 1993
Previously, Vice President-Finance (1991-1993); partner,
Wipfli Ullrich Bertelson CPAs (1981-1991)
STUART R. CARLSON, 48
Sr. Vice President-Administration since August, 1993
Previously, Vice President-Human Resources (1991-1993);
Director of Human Resources, Georgia Pacific, Inc.
(1990-1991) and Corporate Director of Industrial Relations,
Great Northern Nekoosa Corporation (1989-1990)
ITEM 2. PROPERTIES.
The company's corporate headquarters are located in Mosinee,
Wisconsin. The building, which is owned by the company, was
constructed in 1985, and consists of approximately 38,000 square
feet. Executive officers and a corporate staff of approximately
16 persons who perform corporate accounting and financial, human
resource and MIS services are located in the corporate
headquarters.
<PAGE>
The following paragraphs provide information on the location and
general character of the company's facilities, including their
productive capacity and extent of utilization.
<TABLE>
PULP AND PAPER
LOCATION AND CAPACITY
Mosinee, WI
Number of employees: 535
<CAPTION>
Practical 1994 Operating
Product Capacity* (tons) Actual (tons) Rate
------- ---------------- ------------- ---------
<S> <C> <C> <C>
Paper 109,500 108,000 99%
Pulp 86,000 86,000 100%
</TABLE>
<TABLE>
SORG PAPER
LOCATION AND CAPACITY
Middletown, OH
Number of employees: 196
<CAPTION>
Practical 1994 Operating
Product Capacity* (tons) Actual (tons) Rate
------- ---------------- ------------- ---------
<S> <C> <C> <C>
Paper 32,200 30,900 96%
</TABLE>
<TABLE>
BAY WEST
LOCATION AND CAPACITY
Towel and Tissue Paper Mill
Middletown, OH
Number of employees: 168
<CAPTION>
Practical 1994 Operating
Product Capacity* (tons) Actual (tons) Rate
------- ---------------- ------------- ---------
<S> <C> <C> <C>
Towel 60,000 53,000 88%
Tissue 32,000 30,000 94%
Deink Pulp 105,000 86,000 82%
</TABLE>
<TABLE>
LOCATION AND CAPACITY
Harrodsburg, KY
Number of employees: 335
<CAPTION>
Practical 1994 Operating
Product Capacity* (tons) Actual (tons) Rate
------- ---------------- ------------- ---------
<S> <C> <C> <C>
Converted
Towel & Tissue 104,000 77,000 74%
</TABLE>
<PAGE><TABLE>
CONVERTED PRODUCTS
LOCATION AND CAPACITY
Columbus, WI
Number of employees: 45
Jackson, MS
Number of employees: 20
<CAPTION>
Practical 1994 Operating
Product Capacity* (tons) Actual (tons) Rate
------- ---------------- ------------- ---------
<S> <C> <C> <C>
Laminated
Papers 114,000 40,000 35%
</TABLE>
MOSINEE INDUSTRIAL FOREST
LOCATION AND CAPACITY
Solon Springs, WI
1994 production: 31,520 cords
1994 acreage: 87,145 acres
*"Practical capacity" is the amount of product a mill
can produce with existing equipment and workforce and
usually approximates maximum, or theoretical, capacity.
At the company's converting operations it reflects the
approximate maximum amount of product that can be made
on existing equipment, but would require additional days
and/or shifts of operation to achieve.
ITEM 3. LEGAL PROCEEDINGS.
The company, along with other paper companies, is part of a civil
investigation by the U.S. Department of Justice to determine
whether any violation of U.S. antitrust laws has occurred in the
commercial and industrial market for sanitary paper products. The
company believes it has not violated any antitrust laws.
In the ordinary course of conducting business, the company also
becomes involved in environmental issues, investigations,
administrative proceedings and litigation. While any proceeding
or litigation has an element of uncertainty, the company believes
that the outcome of any pending or threatened claim or lawsuit
will not have a material adverse effect on the business and
financial condition of the company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders in
the fourth quarter.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The company's common stock is traded on the Nasdaq National
Market System under the symbol MOSI. The number of shareholders
of record as of March 1, 1995 was 1,841. In addition, the company
has received identification of 1,356 non-objecting beneficial
owners who own stock in "street name" or who are institutional
owners. The company also believes that it has approximately 1,322
beneficial owners who either did not reply or who object to being
disclosed. The total estimated number of shareholders as of
March 24, 1995 is 4,519. Information related to high and low
closing prices and dividends is set forth in Note 16 of Notes to
Consolidated Financial Statements, page 44. A description of
certain dividend restrictions under the company's credit agreement
is set forth in Note 7 of the Notes to Consolidated Financial
Statements, page 34.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
($ thousands except share data)
<CAPTION>
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Sales $266,707 $244,821 $225,512 $197,424 $210,382
Cost of sales 217,502 201,317 195,034 166,312 167,303
Gross profit 49,205 43,504 30,478 31,112 43,079
Operating expenses(1) 23,234 25,147 23,287 26,819 23,853
Income from operations(1) 25,971 18,357 7,191 4,293 19,226
Interest expense 5,010 5,667 7,685 2,215 1
Other income (expense)(3) 580 4,697 553 (59) 399
Income before income taxes 21,541 17,387 59 2,019 19,624
Income taxes 8,500 7,750 22 1,117 7,654
Net income (loss)(2) (4) 12,291 9,637 (8,500) 902 11,970
Net cash provided by
operating activities 25,926 26,936 16,201 9,722 15,405
Working capital 26,312 21,295 13,413 15,967 24,342
Capital additions 20,377 12,663 14,314 113,546 25,876
Depreciation, amortization
and depletion 15,684 15,017 15,839 10,859 8,661
Total assets 265,083 252,061 247,702 249,485 151,506
Long-term debt 91,383 96,260 100,000 110,085 13,847
Stockholders' equity 88,851 79,133 72,070 80,942 81,692
Total capitalization 180,234 175,393 172,070 191,027 95,539
Common stock:
Net income (loss) per
share(2) (4) 1.71 1.34 (1.21) .12 1.70
Book value per share 12.43 11.07 10.08 11.45 11.65
Dividends declared
per share .36 .36 .36 .36 .32
Weighted average shares
outstanding 7,148,443 7,148,443 7,109,325 7,050,598 7,017,839
Number of stockholders
at year-end 4,626 4,488 4,804 4,520 4,824
<FN>
(1) Includes restructuring and relocation expenses of $1.4 million in 1991.
(2) 1992 reflects the cumulative effect of a change in accounting principle of $8.5
million expense for the adoption of SFAS No. 106.
(3) 1993 other income reflects $5.5 million for a patent infringement suit award.
(4) 1994 reflects the cumulative effect of a change in accounting principle of $750
thousand expense for adoption of SFAS No. 112.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.
<TABLE>
OPERATIONS REVIEW
NET SALES
------------------------------------------------------------------
<CAPTION>
($ thousands) 1994 1993 1992
------------- ---- ---- ----
<S> <C> <C> <C>
Net sales $266,707 $244,821 $225,512
Percent increase 9% 9% -
------------------------------------------------------------------
</TABLE>
Sales increased $22 million, or 9%, over the prior year. All
business units experienced increased sales revenue and volume of
product sold. In the aggregate, tons sold increased to 255,000
tons, over 7%, or 17,000 tons, over the prior year. The majority
of gain, in tons sold, was registered at Bay West, accounting for
over 80% of the total increase. Foreign sales also experienced an
increase to nearly $26 million and now account for nearly 10% of
total net sales. Exports of towel and tissue products increased to
$13 million and specialty paper product sales, which also
registered increases over the prior year, contributed the other
$13 million.
During the year, the strong economy increased demand in most areas
of the paper industry and absorbed prior years' excess capacity.
This helped to restore margins that had eroded over the past
several years and to recover raw material price increases which
occurred with unprecedented frequency during much of the year.
With higher demands for paper, the mix of product sold was
improved by replacing papers that provide minimal profit in favor
of higher margin products. In summary, strong volume increases
added nearly $20 million and a more optimal product mix added $4
million of additional sales. These increases were partially
offset by unfavorable pricing effects of over $1.5 million.
During 1993, sales increased $19 million, or 9%, over the prior
year. Strong price competition in all areas resulting from reduced
demand and capacity additions led to reduced selling prices. Tons
shipped increased to 238,000 tons, an improvement of over 10%.
Strong volume gains, particularly at Bay West which accounted for
41% of the increased tons shipped, added $33 million in sales.
Unfavorable selling prices of over $9 million and less optimal mix
of products of $4 million offset some of the benefit of additional
volume.
Sales increased in 1992 on sales volume which rose to 216,000
tons, or 18% over the prior year. Bay West accounted for 42% of
the change. Pricing for all operations was difficult during 1992
reflecting the general economic slowness that persisted throughout
the year. Highly competitive pricing continued during the year in
the tissue area of our business as it had during 1991. Capacity
increases in excess of existing demand caused serious price
discounting among all tissue producers. Strong volume increases
<PAGE>
added approximately $36 million in sales and was partially offset
by unfavorable pricing effects of over $8 million.
<TABLE>
GROSS PROFIT ON SALES
------------------------------------------------------------------
<CAPTION>
($ thousands) 1994 1993 1992
------------- ---- ---- ----
<S> <C> <C> <C>
Gross profit on sales $49,205 $43,504 $30,478
Percent increase 13% 43% -
Gross profit margin 18% 18% 14%
------------------------------------------------------------------
</TABLE>
Gross profit of over $49 million rose 13% over the $44 million
reported last year. Gross profit margin remained at 18%. Increased
raw material costs that could not always be timely recovered by
higher selling prices reduced gross profit margins at all
locations. Bay West however, reduced costs substantially, more
than overcoming the unfavorable effect of lower selling prices.
Increased productivity at Bay West's facilities and higher volumes
brought cost structures more in line with expectations. In 1994,
production of towel and tissue paper at the Bay West mill
increased 9%, or 7 thousand tons, helping to absorb fixed
production costs. Higher volumes and an improved mix of product
sold at all other units contributed to the increase in gross
profit. Aggressive cost reduction programs at all operations also
aided in offsetting lower selling prices. Increase in the raw
material prices for purchased pulp, waste paper and linerboard
occurred at an unprecedented rate during the year.
Fiber represents approximately half of the cost of paper. The
company satisfies its fiber requirements using virgin fiber from
pulpwood and chips, purchased bleached pulp and both pre- and
post-consumer waste or recyclable papers. The types of paper being
made and their intended uses determine the type and quality of the
fiber used. During the year the Pulp and Paper Division purchased
36,000 tons of bleached pulp, or 29% of its fiber needs, which
were purchased on the open market. The balance, representing
unbleached pulp, was produced at its kraft pulp mill. The pulpwood
used to produce pulp consumed 29,000 cords from Mosinee's
Industrial Forest, or 20% of wood requirements. The balance was
available from the open market. Sorg Paper is a non-integrated
paper manufacturer and must purchase all required fiber on the
open market. During the year it used 37,000 tons of virgin fiber,
or 99% of its total fiber requirements. The balance of purchased
fiber represented waste papers, generally pre-consumer wastes from
printers or paper converters. Bay West's towel and tissue mill
produces all its pulp requirements from its deink or direct entry
systems. The fiber requirements for these systems is low grade
recyclable waste papers that have been subject to sharp increases
in cost resulting from strong demand from new deinking facilities,
increased exports and higher industry operating rates. Bay West
consumed over 137,000 tons of waste paper during the year.
During 1993, gross profit of nearly $44 million rose 43% over the
$30 million reported in the prior year and gross profit margin
<PAGE>
improved to 18%. The improvement in gross profit primarily
resulted from productivity improvements at the Bay West towel and
tissue mill during the year. Gross profit also increased at all
other operating units during the year. Strong volume increases
combined with aggressive cost reduction programs offset lower
selling prices at all units. Raw material prices remained stable
until near the end of the year when price increases were
announced.
During 1992, gross profit of $30 million declined slightly from
the $31 million reported in the prior year and gross profit margin
declined to 14% from the 1991 level of 16%. Gross profit margins
declined at all operating units. The unfavorable gross profit and
gross profit margin comparisons primarily resulted from weak
selling prices. The Bay West towel and tissue mill experienced
excessive operating costs during its first full year of operation.
Higher deink pulp cost from low yields and high raw material cost
also unfavorably effected gross profit.
Gross profit at specialty paper operations remained nearly
constant as additional sales volume, a better product mix, higher
efficiencies and cost reduction programs offset temporary pulp
price increases and lower selling prices.
<TABLE>
OPERATING EXPENSES
------------------------------------------------------------------
<CAPTION>
($ thousands) 1994 1993 1992
------------- ---- ---- ----
<S> <C> <C> <C>
Selling and advertising $ 9,857 $ 9,221 $10,052
Percent increase/(decrease) 7% (8%) -
Administrative 13,377 15,926 13,235
Percent increase/(decrease) (16%) 20% -
Total operating expenses 23,234 25,147 23,287
Percent increase/(decrease) (8%) 8% -
As a percent of net sales 9% 10% 10%
------------------------------------------------------------------
</TABLE>
Operating expenses declined nearly $2 million, or 8%, from the
prior year level of $25 million. As a percent of net sales,
operating expenses declined to 9% reflecting the higher dollar
amount of sales and lower costs.
Selling and advertising expenses increased $0.6 million from the
prior year. Increased selling incentive compensation and higher
advertising and promotional expenses, primarily at Bay West offset
reductions in other costs. General inflation increased salaries
and wages and contributed to the increase in selling expenses.
Administrative expenses declined $2.5 million, or 16%, from the
year earlier level. Included in administrative expenses are
charges or credits for the company's Stock Appreciation Rights
Plans (SAR) further described in Note 11 to the financial
statements. During 1994, the market price of the company's stock
declined, resulting in a credit of $1 million compared to a charge
of $1.7 million in 1993, due to increased market price. Adjusting
<PAGE>total administrative expenses for these affects, result in
$14.3 million in 1994 compared to $14.3 million reported in the
prior year, or no increase. Salaried employment reductions offset
general inflationary increases. Higher profitability increased the
company's contribution to its 401-k plans, a part of the
retirement benefit package offered to employees. Cost reduction
program savings offset other inflation oriented increases in
normal administrative expenses.
During 1993, The costs associated with some promotion programs
were classified as reductions of selling prices and accounted for
the majority of the change in the selling and advertising expenses
in comparison to 1992. This reduction was partially offset by
nominal inflation cost increases, primarily in salaries and
related benefits at all operating units.
The nearly $3 million increase in 1993 for administrative expenses
was generally attributable to the SAR plan. The SAR programs
resulted in a charge of $1.7 million due to a 22% increase in the
stock price in 1993 compared to a $1 million credit to expense in
1992 when the company's stock price had fallen at year-end. Cost
reduction programs helped to offset modest inflationary increases
in salary and benefit expenses incurred at all operating units.
Selling and advertising expenses of $10 million in 1992 reflected
the major promotion and advertising programs at Bay West and Sorg.
Administrative expenses of $13 million reflected a $1 million
credit from SAR programs which partially offset inflationary
increases in most other costs.
<TABLE>
INCOME FROM OPERATIONS
------------------------------------------------------------------
<CAPTION>
($ thousands) 1994 1993 1992
------------- ---- ---- ----
<S> <C> <C> <C>
Income from operations $25,971 $18,357 $7,191
Percent increase 41% 155% -
------------------------------------------------------------------
</TABLE>
Record income from operations climbed to nearly $26 million, 41%
ahead of last year's $18 million. As a percent of net sales,
income from operations improved to nearly 10%, the highest level
reached since 1983. Strong sales volumes and some needed relief
in pricing, necessitated by increased raw material costs, combined
with aggressive cost reduction programs in all facets of the
business led to the record level.
During 1993, selling prices for paper, particularly in the tissue
market, remained below the prior year which had also been
adversely affected by depressed prices. Lower operating costs and
higher sales volumes at all facilities, especially the Bay West
towel and tissue mill during the year, more than offset the lower
selling prices and resulted in the strong improvement.
During 1992, high operating costs at the Bay West towel and tissue
mill along with the depressed tissue selling prices offset
<PAGE>
progress at other facilities and accounted for the modest
improvement over 1991.
<TABLE>
OTHER INCOME AND EXPENSES
------------------------------------------------------------------
<CAPTION>
($ thousands) 1994 1993 1992
------------- ---- ---- ----
<S> <C> <C> <C>
Interest income $82 $17 $146
Percent increase/(decrease) 382% (88%) -
Interest expense 5,010 5,667 7,685
Percent decrease (12%) (26%) -
Patent infringement award - 5,529 -
------------------------------------------------------------------
</TABLE>
Interest income was received on various state and federal income
tax refunds from prior periods and a minimal amount from overnight
investments of excess cash. Interest expense on commercial paper
and other long-term debt totaled $5 million in 1994 compared to
$5.7 million incurred in 1993 before immaterial amounts of
capitalized interest were deducted in each year. During 1992,
interest expense reached $7.7 million on short-term debt,
commercial paper and long-term bank notes.
The average debt level for 1994 of $95 million compared favorably
to $99 million during the prior year. This reduction, combined
with the expiration of the interest rate protection agreement,
accounts for the decrease in interest expense.
In early 1993, the U.S. Court of Appeals for the Federal Circuit
upheld the District Court judgement awarded the company. The
District Court found that James River Corporation had infringed
upon certain washroom towel cabinet roll transfer mechanisms
patented by Bay West Paper Corporation, a subsidiary of the
company. The company received $5.5 million, including interest,
which is included in income before taxes.
The $7.7 million in interest expense recorded in 1992 resulted
from the high debt level following completion of the expansion
program and higher interest rates in effect.
<TABLE>
INCOME TAXES
------------------------------------------------------------------
<CAPTION>
($ thousands) 1994 1993 1992
------------- ---- ---- ----
<S> <C> <C> <C>
Income tax provision $8,500 $7,750 $22
Percent increase 10% N/A -
Effective tax rate 39.5% 44.6% 37.3%
------------------------------------------------------------------
</TABLE>
The income tax provision varies with reported income and federal,
state and local tax rates. The 1994 provision for income taxes
increased due to continued improvement in earnings. The tax
<PAGE>
provision of $8.5 million in 1994 results in an effective tax rate
of 39.5%.
The 1993 provision for income taxes reflected increased earnings
and increased federal tax rates. The tax provision of nearly $8
million in 1993 results in an effective tax rate of 44.6%. This
rate reflects the enactment of Revenue Reconciliation Act of 1993,
which increased the marginal corporate tax rate, requiring a
charge to earnings of nearly $1 million to recognize the
adjustment of current and deferred taxes.
During 1992, the effective tax rate of 37.3% closely reflected the
statutory rates in effect for the year. Also, in 1992, the
adoption of the Statement of Financial Accounting Standards No.
109 (SFAS No. 109), Accounting for Income Taxes, allowed the
recognition of deferred tax assets, subject to a valuation
allowance, for the tax benefit of state income tax loss
carryforwards. The ability to recognize a portion of this asset
minimizes the impact of the company not being able to offset
consolidated income with subsidiary losses, compared to the 1991
effective tax rate.
<TABLE>
NET INCOME
<CAPTION>
------------------------------------------------------------------
($ thousands) 1994 1993 1992
------------- ---- ---- ----
<S> <C> <C> <C>
Net income/(loss) $12,291 $9,637 ($8,500)
Percent increase 28% N/A -
Net income/(loss) per share 1.71 1.34 (1.21)
Percent increase 28% N/A -
------------------------------------------------------------------
</TABLE>
Reflecting the above, record net income of $12.3 million, or $1.71
per share, rose $2.7 million over the prior year level of $9.6
million, or $1.34 per share.
Statement of Financial Accounting Standards (SFAS) No. 112,
Employers' Accounting for Postemployment Benefits, requires that
employers accrue a liability for compensation for future absences
of former or inactive employees and their beneficiaries and
covered dependents. SFAS No. 112 was adopted January 1, 1994, the
required adoption date, by recognizing a cumulative effect expense
of $750,000, net of income taxes of $400,000. The company does
not anticipate routine accrual expenses, but, will record expenses
in accordance with SFAS No. 112 when events occur that require
such accrual.
Net income for 1993 of $9.6 million, or $1.34 per share, increased
over the prior year's loss of $8.5 million, or $1.21 per share.
Strong sales volumes and lowered operating costs at all
operations, especially Bay West, combined to offset lower selling
prices and produce stronger earnings.
Net income for 1992 was adversely affected by the adoption of
Statement of Financial Accounting Standards No. 106, Employers'
Accounting for Postretirement Benefits Other than Pensions. This
<PAGE>
adoption required the company to charge income with the cost of
such benefits earned through December 31, 1991 by current
employees and retirees. The charge to record the entire liability
at January 1, 1992 was $13.3 million which generated a deferred
tax benefit of $4.8 million resulting in a net cumulative effect
of $8.5 million, or $1.20 per share.
<TABLE>
LIQUIDITY AND CAPITAL RESOURCES
CASH PROVIDED BY OPERATING ACTIVITIES AND WORKING CAPITAL
------------------------------------------------------------------
<CAPTION>
($ thousands) 1994 1993 1992
------------- ---- ---- ----
<S> <C> <C> <C>
Cash provided by operating
activities $25,926 $26,936 $16,201
Percent increase/(decrease) (4%) 66% -
Working capital 26,312 21,295 13,413
Percent increase 24% 59% -
Current ratio 1.7:1 1.6:1 1.3:1
------------------------------------------------------------------
</TABLE>
Net cash provided by operating activities decreased slightly to
nearly $26 million, just below last year's record level. Improved
sales of $22 million combined with improved productivity and cost
reduction efforts led to an improved gross profit of $6 million
providing additional cash from operations. Adjusting net income
for non-cash items, cash available in 1994 reached $33 million
compared to $30 million last year. The $3 million increase was
accounted for by $3.6 million in higher accounts receivable
relative to the increase experienced during 1993. Strong control
over inventory growth resulted in $1.7 million less of an increase
compared to the prior year when higher inventory was needed to
facilitate the increased volume of business. During 1993 the
company received additional cash of $2 million from income tax
refunds whereas in 1994 no material amounts were received. The
net effect of these items lowered cash from operations by $1
million when compared to last year's record level.
Gross trade receivables of the company increased over $5 million,
or 24% over the prior year. Accounts receivable allowances
increased by $0.6 million in 1994 principally to provide for
potential losses on Mexican accounts resulting from devaluation of
the Mexican peso.
The company invested $19 million, below the planned level, in
plant and equipment additions in 1994. The major projects
included the spending of $5.2 million on Pulp and Paper's recovery
boiler rebuild and upgrade, and $2.3 million on their automated
roll wrap system. Bay West's mill in Ohio installed new flotation
cells during the year spending $2.3 million. The balance of
capital spending was limited to replacement of equipment required
in normal operations. The strong cash flow and control of capital
projects allowed for sufficient cash to reduce the outstanding
debt by nearly $5 million and return $2.6 million in cash
dividends to shareholders. The effect of all operating, investing
<PAGE>
and financing activities for 1994 was to maintain cash and cash
equivalents of $1.5 million at the end of the year.
Working capital increased 24% to $26 million from the $21 million
reported last year, mainly due to an increase of $5 million in
receivables due to increased sales volume which was partially
offset by increases in accounts payable and other liabilities.
The current ratio, current assets divided by current liabilities,
increased to 1.7:1 from the 1.6:1 reported last year.
<TABLE>
DEBT AND EQUITY
------------------------------------------------------------------
<CAPTION>
($ thousands) 1994 1993 1992
------------- ---- ---- ----
<S> <C> <C> <C>
Long-term debt $ 91,383 $ 96,260 $100,000
Stockholders' equity 88,851 79,133 72,020
Total capitalization 180,234 175,393 172,020
Debt/capitalization ratio 51% 55% 58%
------------------------------------------------------------------
</TABLE>
While the company's financing arrangements do not require
scheduled repayments of its long-term debt, the company repaid $5
million of the long-term debt outstanding during the year. The
reduction in long-term debt to $91 million, however, did not meet
the planned debt level. Higher raw material costs not recovered
in increased selling prices held cash generation below planned
levels. The ratio of long-term debt to total capitalization of
51% improved from the prior year reflecting an increase in
stockholders' equity due to stronger earnings and a lower level of
debt.
Early in the year, the company refinanced a portion of its
existing debt by entering into a $20 million unsecured five-year
loan with a fixed rate of 7.83%. Its unsecured credit facility of
$110 million was reduced to $90 million near the end of the year.
The company currently utilizes $50 million of this credit
agreement to support its participation in the commercial paper
markets. At year-end, approximately $46 million of commercial
paper was outstanding and classified as long-term debt.
Management believes that with prior years' major expansions
running close to designed levels, proper staffing now in place and
a continued strong economy that allows for selling price
improvements, cash flow from operations will adequately allow for
partial repayments of existing debt and allow for planned capital
expenditures for property and equipment of $18 million next year.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Management's Responsibility For Financial Reporting. . . . . . 21
Report of Independent Accountants. . . . . . . . . . . . . . . 22
Consolidated Balance Sheets. . . . . . . . . . . . . . . . . . 23
Consolidated Statements of Stockholders' Equity. . . . . . . . 24
Consolidated Statements of Income. . . . . . . . . . . . . . . 25
Consolidated Statements of Cash Flows. . . . . . . . . . . . . 26
Notes to Consolidated Financial Statements . . . . . . . . . . 27
Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . 45
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL REPORTING
The management of Mosinee Paper Corporation is responsible for the
integrity and objectivity of the consolidated financial
statements. Such financial statements were prepared in conformity
with generally accepted accounting principles. Some of the amounts
included in these financial statements are estimates based upon
management's best judgement of current conditions and
circumstances. Management is also responsible for preparing other
financial information included in this annual report.
The company's management depends on the company's system of
internal accounting controls to assure itself of the reliability
of the financial statements. The internal control system is
designed to provide reasonable assurance, at appropriate cost,
that assets are safeguarded and transactions are executed in
accordance with management's authorizations and recorded properly
to permit the preparation of financial statements in accordance
with generally accepted accounting principles. Periodic reviews of
internal controls are made by management and the internal audit
function and corrective action is taken if needed.
The Audit Committee of the Board of Directors, consisting of
outside directors, provides oversight of financial reporting. The
company's internal audit function and independent public
accountants meet with the Audit Committee to discuss financial
reporting and internal control issues and have full and free
access to the Audit Committee.
The consolidated financial statements have been audited by the
company's independent auditors and their report is presented
below. The independent auditors are approved each year at the
annual shareholders' meeting based on a recommendation by the
Audit Committee and the Board of Directors.
DANIEL R. OLVEY GARY P. PETERSON
President and Sr. Vice President - Finance
Chief Executive Officer and Secretary and Treasurer
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
Mosinee Paper Corporation
Mosinee, Wisconsin
We have audited the accompanying consolidated balance sheets of
MOSINEE PAPER CORPORATION and subsidiaries as of December 31, 1994
and 1993, and the related consolidated statements of stockholders'
equity, income and cash flows for each of the years in the three-
year period ended December 31, 1994 and the supporting schedule
appearing on page 45. These financial statements and supporting
schedules are the responsibility of the company's management. Our
responsibility is to express an opinion on these financial
statements and supporting schedules 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 and supporting schedules are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements and supporting schedules. 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 consolidated financial statements referred to
above appearing on pages 23-44 present fairly, in all material
respects, the financial position of MOSINEE PAPER CORPORATION and
subsidiaries at December 31, 1994 and 1993, and the results of
their operations and cash flows for each of the years in the
three-year period ended December 31, 1994, and the supporting
schedule appearing on page 45 present fairly the information
required to be set forth therein, all in conformity with generally
accepted accounting principles.
As discussed in Note 3 to the consolidated financial statements,
the company changed its method of accounting for postemployment
benefits in 1994 and its methods of accounting for postretirement
benefits other than pensions and income taxes in 1992.
We hereby consent to the incorporation by reference of this report
in the Registration Statement on Form S-8 filed with the
Securities and Exchange Commission by Mosinee Paper Corporation on
April 19, 1991.
WIPFLI ULLRICH BERTELSON
February 2, 1995 Wipfli Ullrich Bertelson
Wausau, Wisconsin Certified Public Accountants
<PAGE>
<TABLE>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
($ thousands) As of
December 31,
ASSETS 1994 1993
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,555 $ 1,521
Receivables, net 26,207 21,461
Inventories 30,600 30,456
Deferred income taxes 3,999 3,541
Other current assets 686 728
------- -------
Total current assets 63,047 57,707
Property, plant and equipment, net 194,021 188,254
Other assets 8,015 6,100
------- -------
TOTAL ASSETS $265,083 $252,061
======== ========
LIABILITIES
Current Liabilities:
Accounts payable $ 19,523 $ 17,481
Accrued and other liabilities 16,259 18,506
Accrued income taxes 953 425
------- -------
Total current liabilities 36,735 36,412
Long-term debt 91,383 96,260
Deferred income taxes 21,633 18,081
Postretirement benefits 14,427 13,959
Other noncurrent liabilities 10,799 6,961
------- -------
Total liabilities 174,977 171,673
------- -------
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 66,704 56,986
------- -------
Subtotals 106,539 96,821
Treasury stock at cost (17,688) (17,688)
------- -------
Total stockholders' equity 88,851 79,133
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $265,083 $252,061
======== ========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Common Additional Total
($ thousands except share Stock-Shares Common Paid-in Retained Treasury Stock Stockholders'
data) Outstanding Stock Capital Earnings Shares Amount Equity
------------ ------ ---------- -------- ------------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balances December 31, 1991 7,069,343 $25,984 $12,087 $60,990 (3,324,480) ($18,119) $80,942
Net loss, 1992 (8,500) (8,500)
Cash dividends declared on
Mosinee common stock (2,567) (2,567)
Sale of treasury stock 79,100 1,764 79,100 431 2,195
--------- ------- ------- ------- ---------- ------- -------
Balances December 31, 1992 7,148,443 25,984 13,851 49,923 (3,245,380) (17,688) 72,070
Net income, 1993 9,637 9,637
Cash dividends declared on
Mosinee common stock (2,574) (2,574)
--------- ------- ------- ------- ---------- ------- -------
Balances December 31, 1993 7,148,443 25,984 13,851 56,986 (3,245,380) (17,688) 79,133
Net income, 1994 12,291 12,291
Cash dividends declared on
Mosinee common stock (2,573) (2,573)
--------- ------- ------- ------- ---------- ------- -------
Balances December 31, 1994 7,148,443 $25,984 $13,851 $66,704 (3,245,380) ($17,688) $88,851
========= ======= ======= ======= =========== ========= =======
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
($ thousands except share For the Years
data) Ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net sales $266,707 $244,821 $225,512
Cost of sales 217,502 201,317 195,034
-------- -------- --------
Gross profit on sales 49,205 43,504 30,478
-------- -------- --------
Operating expenses:
Selling and advertising 9,857 9,221 10,052
Administrative 13,377 15,926 13,235
-------- -------- --------
Total operating expenses 23,234 25,147 23,287
-------- -------- --------
Income from operations 25,971 18,357 7,191
Other income (expense):
Patent infringement award -- 5,529 --
Interest income 82 17 146
Interest expense (5,010) (5,667) (7,685)
Other 498 (849) 407
-------- -------- --------
Income before income taxes and
cumulative effect adjustment 21,541 17,387 59
Provision for income taxes 8,500 7,750 22
-------- -------- --------
Income before cumulative effect
of changes in accounting
principles 13,041 9,637 37
Cumulative effect of changes in
accounting principles (net of
income taxes) (750) -- (8,537)
-------- -------- --------
Net income (loss) $ 12,291 $ 9,637 ($8,500)
======== ======== ========
Income (loss) per share
before cumulative effect of
changes in accounting
principles $ 1.81 $ 1.34 ($ 0.01)
Cumulative effect of changes in
accounting principles
(net of income taxes) (.10) -- ( 1.20)
-------- -------- --------
Net income (loss) per share $ 1.71 $ 1.34 ($ 1.21)
======== ======== ========
Weighted average common
shares outstanding 7,148,443 7,148,443 7,109,325
========= ========= =========
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the Years
Ended December 31,
($ thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $12,291 $ 9,637 ($ 8,500)
Provision for depreciation, depletion
and amortization 15,684 15,017 15,839
Provision for postretirement benefits
other than pensions 1,585 1,550 14,762
Recognition of deferred revenue (40) (40) (40)
Provision for losses on accounts receivable 901 440 247
Gain on property, plant and equipment
disposals (462) (28) (558)
Deferred income taxes 3,094 3,198 (3,312)
Changes in operating assets and liabilities:
Accounts receivable (5,647) (2,058) (3,238)
Refundable income taxes -- 2,005 2,744
Inventories (144) (1,828) (3,919)
Other assets (3,339) (2,977) (2,032)
Accounts payable and other liabilities 1,475 1,712 4,091
Accrued income taxes 528 308 117
------- ------- -------
Net cash provided by operating activities 25,926 26,936 16,201
------- ------- -------
Cash flows from investing activities:
Capital expenditures (19,088) (11,963) (21,508)
Proceeds from property, plant and
equipment disposals 647 190 5,957
------- ------- -------
Net cash used in investing activities (18,441) (11,773) ( 15,551)
------- ------- -------
Cash flows from financing activities:
Net payments under credit agreements (4,878) (11,804) (1,116)
Payment of long-term debt -- (105) (148)
Dividends paid (2,573) (2,574) (2,559)
Proceeds from issuance of company stock -- -- 2,195
------- ------- -------
Net cash used in financing activities (7,451) (14,483) ( 1,628)
------- ------- -------
Net increase (decrease) in cash and
cash equivalents 34 680 (978)
Cash and cash equivalents at beginning of year 1,521 841 1,819
------- ------- -------
Cash and cash equivalents at end of year $ 1,555 $ 1,521 $ 841
======= ======= =======
Supplemental Cash Flow Information:
Interest paid - net of amount capitalized $ 4,575 $ 5,806 $ 7,774
Income taxes paid (refunded) 4,877 2,239 (4,277)
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation - The consolidated financial statements
include the accounts of Mosinee Paper Corporation and its
subsidiaries. All significant intercompany transactions and
balances have been eliminated in consolidation.
Cash Equivalents - The company considers all highly liquid debt
instruments with an original maturity of three months or less to
be cash equivalents.
Inventories - Substantially all inventories are stated at the
lower of cost, determined on the last-in, first-out method (LIFO),
or market. Inventories not on the LIFO method, primarily supply
items, are stated at cost (principally average cost) or market,
whichever is lower. Allocation of the LIFO reserve among the
components of inventories is impractical.
Property, Plant and Equipment - Depreciable property is stated at
cost less accumulated depreciation. Land, water power rights, and
construction in progress are stated at cost and timberlands are
stated at net depleted value. Facilities financed by leases, which
are essentially equivalent to installment purchases, are recorded
as assets and the related obligation as a long-term liability.
When property units are retired, or otherwise disposed of, the
applicable cost and accumulated depreciation thereon are removed
from the accounts. The resulting gain or loss, if any, is
reflected in income.
Depreciation is computed on the straight-line method for financial
statement purposes over 20 to 45 years for buildings and 3 to 20
years for machinery and equipment. Depletion on timberlands is
computed on the unit-of-production method. Depreciation expense
includes amortization on capitalized leases. Maintenance and
repair costs are charged to expense when incurred. Improvements
which extend the useful lives of the assets are added to the plant
and equipment accounts.
Revenue Recognition - Revenue is recognized upon shipment of goods
and transfer of title to the customer. Concentrations of credit
risk with respect to trade accounts receivable are generally
diversified due to the large number of entities comprising the
company's customer base and their dispersion across many different
industries and geographies.
Taxes - Deferred tax assets and liabilities are determined based
on the difference between the financial statement and tax bases of
assets and liabilities, as measured by the enacted tax rates which
will be in effect when these differences are expected to reverse.
Deferred tax expense is the result of changes in the deferred tax
asset and liability. The principal sources giving rise to such
differences are identified in Note 10. See Note 3 for change in
accounting policy for 1992.
<PAGE>
Per Share Data - Income per share is computed by dividing net
income less Sorg Paper preferred stock dividends by the weighted
average number of shares of common stock outstanding.
2 - SEGMENT INFORMATION
The company operates predominantly in the paper and allied
products industry. The company formed Mosinee Paper
International, Inc., a wholly-owned subsidiary located and
domiciled in the U.S. Virgin Islands, to administer the export
sales made by the company.
3 - CHANGES IN ACCOUNTING POLICIES
On January 1, 1994, the company adopted Statement of Financial
Accounting Standards (SFAS) No. 112 "Employers' Accounting for
Postemployment Benefits" which requires the company to accrue for
the estimated cost of benefits provided by an employer to former
or inactive employees after employment but before retirement.
Previously, the cost of these benefits were expensed as they were
incurred. The cumulative effect of $750,000 is shown net of
income taxes of $400,000 and represents the entire liability for
such benefits earned through 1993. The impact of this accounting
change on 1994 operating results is not material.
During 1992, the company adopted the provisions of SFAS No. 106
"Employers' Accounting for Postretirement Benefits Other than
Pensions" and SFAS No. 109 "Accounting for Income Taxes."
In December 1992, the company adopted SFAS No. 106 which requires
the estimated cost of retiree benefit payments, primarily health
and life insurance, to be accrued during the employees' active
service period. Previously, the cost of these benefits was
expensed as incurred. The company elected to immediately
recognize the accumulated liability as of January 1, 1992, which
resulted in a one-time non-cash charge against earnings of
$13,287,000 before taxes and $8,537,000 after taxes, or $1.20 per
share. The effect of this change on 1992 operating results was to
recognize an additional pre-tax expense of $967,000 and after-tax
expense of $585,000, or $.07 per share. Previously reported
quarterly earnings for 1992, as presented in Note 15, have been
restated for the effect of this change as if it had been adopted
on January 1, 1992. Additional information on retirement benefits
can be found in Note 6.
The company also adopted SFAS No. 109 during the first quarter of
1992. The cumulative effect of the accounting change at the time
of adoption and the current year effect on net income was
immaterial as the company had previously been on the liability
method of accounting for deferred taxes.
<PAGE>
4 - SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
Supplemental information on certain balance sheet items consist of
the following:
<CAPTION>
($ thousands)
December 31,
Receivables 1994 1993
---- ----
<S> <C> <C>
Trade $ 27,886 $ 22,428
Other 474 612
-------- --------
28,360 23,040
Less: allowances (2,153) (1,579)
-------- --------
$ 26,207 $ 21,461
======== ========
Inventories
Raw materials $ 14,534 $ 12,794
Finished goods and work in
process 17,574 16,247
Supplies 8,759 8,124
-------- --------
40,867 37,165
Less: LIFO Reserve (10,267) (6,709)
-------- --------
$ 30,600 $ 30,456
======== ========
Property, plant and equipment
Buildings $ 35,314 $ 34,438
Machinery and equipment 292,956 275,389
-------- --------
Totals 328,270 309,827
Less: accumulated depreciation (143,780) (130,064)
-------- --------
Net depreciated value 184,490 179,763
Land 2,055 2,010
Timber and timberlands, net of
depletion 3,000 2,793
Water power rights 129 129
Construction in progress 4,347 3,559
-------- --------
$194,021 $188,254
======== ========
Accrued and other liabilities
Payrolls $ 2,116 $ 1,991
Vacation Pay 4,024 3,834
Taxes, other than income 1,941 1,938
Employee retirement plans 1,123 2,032
Cash dividends declared 643 643
Insurance 1,062 1,414
Stock appreciation plans 3,118 4,163
Interest 702 351
Other 1,530 2,140
-------- --------
$ 16,259 $ 18,506
======== ========
</TABLE>
<PAGE>
5 - LEASES
<TABLE>
The company maintains two leases for equipment that are classified
as capital leases. Property, plant and equipment includes the
following amounts for capitalized leases, amortization of which is
included in depreciation expense:
<CAPTION>
December 31,
($ thousands) 1994 1993
---- ----
<S> <C> <C>
Machinery and
equipment $540 $540
Less: accumulated
amortization 148 115
---- ----
Total $392 $425
==== ====
</TABLE>
The company has various operating leases for machinery and
equipment, automobiles, office equipment and warehouse space.
<TABLE>
Future minimum payments, by year and in the aggregate, under
noncancelable operating leases with initial or remaining terms of
one year or more consisted of the following at December 31, 1994:
<CAPTION>
Operating
($ thousands) Leases
---------
<S> <C>
1995 $1,409
1996 1,192
1997 707
1998 153
1999 118
Thereafter 224
------
Total minimum lease payments $3,803
======
</TABLE>
Rent expense for all operating leases of plant and equipment was
$2,834,000 in 1994, $3,081,000 in 1993 and $2,698,000 in 1992.
6 - RETIREMENT PLANS
PENSIONS
Substantially all employees of the company are covered under
various pension plans. The defined benefit pension plan benefits
are based on the participants' years of service and either
compensation earned over certain final years of employment or
fixed benefit amounts for each year of service. The plans are
funded in accordance with federal laws and regulations.
<PAGE>
<TABLE>
The net pension costs for all defined benefit pension plans
consist of the following components:
<CAPTION>
($ thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service cost $ 801 $ 642 $ 641
Interest cost 1,747 1,740 1,862
Actual return on assets (315) (2,825) (2,343)
Net amortization and
deferral (1,976) 558 225
------- ------- -------
Net pension cost $ 257 $ 115 $ 385
======= ======= =======
</TABLE>
<PAGE>
<TABLE>
The following sets forth the funded status of the company's
defined benefit pension plans and the amounts reflected in the
accompanying consolidated balance sheets:
<CAPTION>
December 31,
---------------------------------------------------
($ THOUSANDS) 1994 1993
------------------------ -------------------------
Plans with Plans with Plans with Plans with
Assets Assets Assets Assets
Exceeding Less than Exceeding Less than
Accumulated Accumulated Accumulated Accumulated
Benefit Benefit Benefit Benefit
Obligation Obligation Obligation Obligation
------------------------ -------------------------
<S> <C> <C> <C> <C>
Actuarial Present value of benefit
obligations at September 30
Vested benefit obligation ($ 6,881) ($15,302) ($ 6,206) ($14,640)
======= ======= ======= =======
Accumulated benefit obligation ($ 7,443) ($15,656) ($ 7,124) ($14,651)
======= ======= ======= =======
Projected benefit obligation ($ 9,641) ($16,018) ($ 9,547) ($14,678)
Fair value of plan assets at
September 30 15,379 9,010 16,277 9,800
------- ------- ------- -------
Projected benefit obligation (in
excess of) less than plan assets
at September 30 5,738 ( 7,008) 6,730 ( 4,878)
Unrecognized net gain ( 1,979) ( 9) ( 3,271) ( 834)
Unrecognized prior service cost 32 1,231 56 427
Unrecognized initial net
obligation (asset) ( 1,687) 365 ( 1,892) 422
Unrecognized acquisition tax
benefit - 733 - 825
Cash contributions to plans
subsequent to September 30 - 25 - 43
Adjustment required to recognize
minimum liability - ( 1,496) - ( 497)
------- ------- ------- -------
Consolidated balance sheets at
December 31 $ 2,104 ($ 6,159) $ 1,623 ($ 4,492)
======= ======= ======= =======
</TABLE>
<PAGE>
The projected benefit obligations at September 30, were determined
using an assumed discount rate of 8% and 7.25% for 1994 and 1993,
respectively, and assumed compensation increases of 5% in 1994 and
1993. The assumed long-term rate of return on plan assets was 9%.
Plan assets consist principally of fixed income and equity
securities and includes Mosinee Paper Corporation common stock of
$2,511,000 and $1,905,000 in 1994 and 1993 respectively.
The company's defined contribution pension plans, covering various
salaried employees, provide for company contributions based on
various formulas. The cost of such plans totaled $2,100,000 in
1994, $1,823,000 in 1993, and $1,324,000 in 1992.
The company has deferred compensation or supplemental retirement
agreements with certain present and past key officers, directors
and employees. The principal cost of such plans is being or has
been accrued over the period of active employment to the full
eligibility date. Certain payments, insignificant in amount, are
charged to expense when paid. Costs charged to operations under
such agreements approximated $161,000, $89,000, and $78,000 for
1994, 1993, and 1992, respectively.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to providing pension benefits, the company provides
certain health care and nominal term life insurance benefits for
retired employees. Substantially all of the company's employees
may become eligible for those benefits if they reach normal
retirement age while working for the company.
Cost-sharing provisions, benefits and eligibility for various
employee groups vary by location and union agreements. Generally,
eligibility is attained after reaching age 55 or 62 with minimum
service requirements. Upon reaching age 65, the benefits become
coordinated with Medicare. The plans are unfunded and the company
funds the benefit costs on a current basis.
<TABLE>
The net postretirement benefit costs consists of the following
components:
<CAPTION>
($ thousands) 1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Service cost $ 467 $ 457 $ 433
Interest cost 1,046 1,112 1,042
Net amortization and deferral 72 ( 19) -
------ ------ ------
Net postretirement benefit cost $1,585 $1,550 $1,475
====== ====== ======
</TABLE>
<PAGE>
<TABLE>
The following table sets forth the accumulated postretirement
benefit obligation (APBO) of the plans as reported in the
accompanying consolidated balance sheets:
<CAPTION>
December 31,
($ thousands) 1994 1993
---- ----
<S> <C> <C>
Retirees and dependents $ 8,295 $ 8,189
Fully eligible active
participants 1,594 1,837
Other active
participants 5,587 6,429
------- -------
Total APBO 15,476 16,455
Unrecognized net loss ( 1,049) ( 2,496)
------- -------
Accrued postretirement
benefit cost $14,427 $13,959
======= =======
</TABLE>
The 1994 assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation was 11%, declining
by 1% annually for six years to an ultimate rate of 5%. The
weighted average discount rate used was 8%. For 1993, the
obligation was calculated using a health care cost trend rate of
12%, declining by 1% annually for 6 years to an ultimate rate of
6%. The weighted average discount rate was 7.25%.
The effect of a 1% increase in the health care cost trend rate
would increase the APBO by $1,610,000 or 11.1% and $1,714,000 or
10.4%, at December 31, 1994 and 1993, respectively. The effect of
this change would increase the aggregate of the service cost and
interest cost by $262,000 or 16.5% in 1994, and $243,000 or 15.7%
in 1993.
7 - LONG-TERM DEBT
<TABLE>
Long-term debt consists of the following:
<CAPTION>
($ thousands) December 31,
1994 1993
---- ----
<S> <C> <C>
Commercial paper $ 46,383 $ 44,260
Revolving credit agreement 25,000 52,000
Long-term note 20,000 -
-------- --------
Total 91,383 96,260
Less: current maturities - -
-------- --------
Long-term debt $ 91,383 $ 96,260
======== ========
</TABLE>
The company has a commercial paper placement agreement to issue up
to $50 million of unsecured debt obligations. The weighted average
<PAGE>
interest rate on commercial paper outstanding at December 31, 1994
was 6.3% compared to 3.6% at December 31, 1993. The amounts have
been classified as long-term as the company intends, and has the
ability to refinance the obligations under the revolving credit
agreement.
A credit agreement with one bank as agent and certain financial
institutions as lenders was established April 16, 1993 to issue up
to $130 million of unsecured borrowings less the amount of
commercial paper outstanding. This agreement was amended
December 28, 1994 to reduce the issue amount to $90 million. The
term of this agreement is five years requiring no payments until
March 31, 1998, at which time, all outstanding amounts become due.
The company may, however, reduce the commitment amount prior to
that date without penalty. The weighted average interest rate at
December 31, 1994 was 6.3% and at December 31, 1993 was 3.7%. The
agreement provides for various restrictive covenants, which
includes maintaining minimum net worth, interest coverage and debt
to equity ratios and limits dividend and other restricted payments
to approximately $16 million.
The credit agreement provides for commitment and facility fees
during the revolving loan period. Commitment fees are 0.1875% per
annum of the unused portions of the commitment, payable quarterly.
Facility fees are 0.125% per annum of the total commitment,
payable quarterly.
The company entered into an unsecured five-year fixed rate debt
arrangement for $20 million on September 30, 1994 with one
financial institution to secure an interest rate of 7.83%.
Interest is paid monthly but the principal is not due until
September 1999. The arrangement provides for various restrictive
covenants, which includes maintaining a minimum net worth,
interest coverage and debt to capital ratios.
The difference between the book value and the fair market value of
long-term debt is not material.
The company maintained an interest rate protection agreement which
expired November 6, 1993 for the revolving credit agreement. This
agreement provided for interest rate protection on $60 million the
first year, $85 million the second year and $50 million in the
third year. Under terms of the agreement, the company received
compensation when the 90 day LIBOR (London Interbank Offered Rate)
exceeds 9.5% in the first year, 10.5% in the second year and 11%
in the third year. The company paid compensation when LIBOR was
less than 7.5% in the first year, 7% the second year and 6.5% the
third year. Amounts paid or received were recognized as interest
rates deviated beyond the stated amounts and were included in
interest expense.
<TABLE>
The aggregate annual maturities of long-term debt in future years
is shown below:
<CAPTION>
($ thousands) 1995 1996 1997 1998 1999 Thereafter
-----------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- - - $71,383 $20,000 -
-----------------------------------------------------------------
</TABLE>
<PAGE>
The annual maturities on the revolving credit agreement included
in the above schedule are based on the amount outstanding at
December 31, 1994. Annual maturities will be affected by future
borrowings under the agreement.
<TABLE>
8 - INTEREST EXPENSE AND CAPITALIZED INTEREST
<CAPTION>
($ thousands)
Total Net
Year Ended Interest Capitalized Interest
December 31, Expense Interest Expense
------------ -------- ----------- --------
<S> <C> <C> <C>
1994 $5,143 $133 $5,010
1993 5,704 37 5,667
1992 7,806 121 7,685
</TABLE>
9 - PREFERRED SHARE PURCHASE RIGHTS PLAN
Under the Rights Agreement dated June 26, 1986, amended February 21, 1991,
each share of the company's common stock entitles its holder to one
nonvoting preferred share purchase right ("Right"). Rights become
exercisable 10 days after a person or group acquires 20% or more of the
company's outstanding common stock (an "Acquiring Person"). The Board may
reduce this threshold amount to 10%. The Right will entitle the holder to
purchase from the company .01 share of Series A Junior Participating
Preferred Stock at a price of $60. If the company is acquired in a merger
or other business combination, the holder may exercise the Right and
receive common stock of the acquiring company having a market value equal
to two times the exercise price of the Right. If a person becomes an
"Acquiring Person" the holder may exercise the Right and receive common
stock of the company having a market value equal to two times the exercise
price of the Right. Rights are subject to redemption by the company for
$.05 per Right until a person or group becomes an Acquiring Person. After
a person or group becomes an Acquiring Person, but before the Acquiring
Person acquires 50% of the company's common stock, the company may
exchange one share of common stock for each Right. Rights expire on July
10, 1996. The company has reserved 100,000 shares of Series A Junior
Participating Preferred Stock.
<PAGE>
10 - INCOME TAXES
<TABLE>
PROVISION FOR INCOME TAXES
The provision for income taxes is as follows:
<CAPTION>
($ thousands)
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Current tax expense
(credit):
Federal $4,406 $3,880 ($2,016)
State 1,000 672 600
------ ------ ------
Total current 5,406 4,552 ( 1,416)
------ ------ ------
Deferred tax expense
(credit):
Federal 2,880 3,412 2,034
State 214 ( 214) ( 596)
------ ------ ------
Total deferred 3,094 3,198 1,438
------ ------ ------
Total provision for
income taxes $8,500 $7,750 $ 22
====== ====== ======
</TABLE>
<PAGE>
<TABLE>
RECONCILIATION FROM FEDERAL STATUTORY TO EFFECTIVE TAX RATE
<CAPTION>
($ thousands)
1994 1993 1992
----------------- ----------------- -----------------
Amount Percent Amount Percent Amount Percent
------ ------- ------ ------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Federal statutory
rate $7,539 35.0% $6,085 35.0% $ 20 34.0%
State taxes,
net of
federal
benefit 790 3.7% 852 4.9% 2 3.3%
Adjustment to
deferred taxes
for enacted
changes in tax
rates - - 800 4.6% - -
Other - net 171 .8% 13 .1% - -
------ ----- ------ ----- ------ -----
Consolidated
effective tax $8,500 39.5% $7,750 44.6% $ 22 37.3%
====== ===== ====== ===== ====== =====
</TABLE>
At the end of 1994, $41,500,000 of unused state operating loss
carryovers existed which may be used to offset future state
taxable income in various amounts through the year 2009. Because
separate state tax returns are filed, the company is not able to
offset consolidated income with the subsidiaries' losses. Under
the provisions of SFAS No. 109, the benefits of state tax losses
are recognized as a deferred tax asset, subject to appropriate
valuation allowances. At December 31, 1994, the company has
unused alternative minimum tax credit carryforward of
approximately $7,853,000 which can be used to offset future
regular tax liabilities.
<TABLE>
DEFERRED INCOME TAXES
The significant components of deferred income tax
expense are as follows:
<CAPTION>
($ thousands) 1994 1993 1992
<S> <C> <C> <C>
Deferred tax expense
(exclusive of the effect
of other component
listed below) $3,094 $2,398 $1,438
Adjustment to deferred
tax assets and liabilities
for enacted changes in
tax laws and rates - 800 -
------ ------ ------
Total deferred tax expense $3,094 $3,198 $1,438
====== ====== ======
</TABLE>
<PAGE>
<TABLE>
Deferred income taxes are provided for the temporary differences
between the financial reporting basis and the tax basis of the
company's assets and liabilities. The tax effects of major
temporary differences that give rise to the deferred tax assets
and liabilities at December 31, are as follows:
<CAPTION>
($ thousands)
Deferred tax assets: 1994 1993
---- ----
<S> <C> <C>
Allowances on accounts receivable $ 857 $ 638
Accrued compensated absences 1,312 1,251
Stock appreciation rights plans 1,628 2,007
Pensions 841 832
Postretirement benefits 5,586 5,397
Postemployment benefits 483 -
Reserves 958 1,020
State net operating loss carryforward 3,369 3,160
Alternative minimum tax credit carryforward 7,853 7,271
Other 167 245
------- -------
Gross deferred tax assets 23,054 21,821
Less: valuation allowance ( 1,146) ( 1,081)
------- -------
Net deferred tax assets 21,908 20,740
------- -------
Deferred tax liabilities:
Property, plant and equipment ( 38,153) ( 34,080)
Deferred expenses ( 1,389) ( 1,200)
------- -------
Total gross deferred tax liabilities ( 39,542) ( 35,280)
------- -------
Net deferred tax liability ($17,634) ($14,540)
======= =======
</TABLE>
<TABLE>
The total deferred tax liabilities (assets) as presented in the
accompanying balance sheets are as follows:
<CAPTION>
($ thousands)
1994 1993
<S> <C> <C>
Net long-term deferred tax
liabilities $21,633 $ 18,081
------- --------
Gross current deferred tax
assets ( 5,145) ( 4,622)
Valuation allowance on
deferred tax assets 1,146 1,081
------- --------
Net current deferred tax
assets ( 3,999) ( 3,541)
------- --------
Net deferred tax liability $17,634 $ 14,540
======= ========
</TABLE>
<PAGE>
A valuation allowance has been recognized for a subsidiary's state
tax loss carryforward as cumulative losses create uncertainty
about the realization of the tax benefits in future years.
11 - STOCK OPTIONS AND APPRECIATION RIGHTS
The company has adopted two Executive Stock Option Plans.
The 1994 plan, which needs shareholder approval at the April 1995
annual meeting, provides for the granting of either qualified
incentive stock options (ISO) or non-qualified options. Under the
1994 plan, options to purchase 100,000 shares of common stock may
be issued to key employees of the company. Options must be
granted at an option price which is not less than fair market
value at the time of the grant. Qualified options can be
exercised no sooner than six months or no later than ten years
from the date of the grant (twenty years from date of grant for
non-qualified options).
The 1985 plan is a non-qualified stock option plan under which
options to purchase 135,000 common shares have been issued to key
executive employees of the company or subsidiaries. The plan
provides for the granting of options at a price which is not less
than market value at the time of the grant. Options can be
exercised no sooner than six months or no later than twenty years
from the date of the grant. No accounting recognition is given
until the stock options are exercised.
Two stock appreciation rights plans are maintained by the company.
The 1988 Stock Appreciation Rights Plan gives certain officers and
key employees the right to receive cash equal to the sum of the
appreciation in value of the stock and the value of reinvested
hypothetical cash dividends which would have been paid on the
stock covered by the grant. The 1988 Management Incentive Plan
gives certain management employees the right to receive similar
cash payments. The stock appreciation rights granted under the
plans may be exercised in whole or in installments and will vest
at such times as specified in the grant. In all instances, the
rights lapse if not exercised within 20 years of the grant date.
Compensation expense is recorded with respect to the rights, based
upon quoted market value of the shares and the exercise
provisions. The provision (credit) for incentive compensation
plans based upon the company's stock price, principally stock
appreciation rights, was ($933,000) in 1994, $1,668,000 in 1993,
and ($1,155,000) in 1992.
<PAGE>
<TABLE>
The following table summarizes the activity relating to the
company's stock option and stock appreciation plans:
<CAPTION>
(In dollars or number of shares) 1994 1993 1992
---- ---- ----
Stock options:
<S> <C> <C> <C>
Options outstanding at
beginning of year 67,500 - -
Granted 12,500 *** 67,500 -
------- ------- -------
Options outstanding at
end of year 80,000 *** 67,500 -
======= ======= =======
Options exercisable at
end of year 67,500 - -
======= ======= =======
Price of outstanding $30.00- $30.00- -
options 40.00 40.00
Stock appreciation rights:
Rights outstanding at 299,334 328,834 314,667
beginning of year
Granted 7,500 5,500 51,500
Exercised (15,832) (29,000) (32,333)
Terminated - ( 6,000) ( 5,000)
------- ------- -------
Rights outstanding at end
of year 291,002 * 299,334 328,834
======= ======= =======
Rights exercisable at end
of year 278,000 ** 278,000 285,500
======= ======= =======
Price range of outstanding $11.00- $11.00- $11.00-
stock appreciation rights 29.88 29.88 29.88
======= ======= =======
<FN>
* 278,000 and 13,002 rights have been granted and remain
outstanding under the 1988 Stock Appreciation Rights Plan and
the 1988 Management Incentive Plan, respectively.
** Issued under the 1988 Stock Appreciation Rights Plan.
*** 8,000 shares granted subject to shareholder approval of the
1994 Executive Stock Option Plan.
</TABLE>
<PAGE>
12 - CONTINGENCIES, LITIGATION, COMMITMENTS, AND RELATED
TRANSACTIONS
The company has been informed by the Wisconsin Department of
Natural Resources ("DNR") that a landfill, for which the company
may be a potentially responsible party, was nominated by the DNR
for inclusion by the Environmental Protection Agency ("EPA") on
the National Priorities List ("NPL"). The EPA has not placed the
landfill on the NPL nor has any other action been taken by the DNR
or the EPA. The company has contributed its allocated portion of
the cost of remediation of a second landfill pursuant to a cost
sharing agreement. The company cannot predict what, if any,
additional costs will be borne by the company. Based on the
information available, the company does not believe that any
additional cost associated with these landfills will have a
material adverse effect on the business and financial condition of
the company.
The company, along with other paper companies, is part of a civil
investigation by the U. S. Department of Justice to determine
whether any violation of U. S. antitrust laws has occurred in the
commercial and industrial market for sanitary paper products. The
company believes it has not violated any antitrust laws.
In the ordinary course of conducting business, the company also
becomes involved in other environmental issues, investigations,
administrative proceedings and litigation. While any proceeding
or litigation has an element of uncertainty, the company believes
that the outcome of any pending or threatened claim or lawsuit
will not have a material adverse effect on the business and
financial condition of the company.
Through the year 2006, the company is to pay a municipality a
minimum annual usage fee of approximately $150,000 paid on a
quarterly basis, to discharge industrial waste into the
municipality's wastewater treatment facility. The aggregate
amount of such required future minimum payments at December 31,
1994 was $1,687,000. In addition, the company is to pay monthly
contingent usage fees to the municipality based on the amount of
industrial waste discharged. Minimum and contingent usage fees
incurred totaled $630,000, $611,000 and $531,000 in 1994, 1993,
and 1992 respectively.
During 1992, the company sold 79,100 shares of its treasury stock
for $2,195,000 to various pension plans it maintains. The sale
price per share was determined using the trading price at the time
of the sale as reflected on Nasdaq.
13 - SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
In 1992, the company exchanged two airplanes with a total book
value of $5,028,000 for an airplane with an estimated value of
$5,200,000. The new equipment is recorded at $5,028,000, which
represents the book value of the items traded.
14 - PATENT INFRINGEMENT AWARD
On February 8, 1993, the U.S. Court of Appeals for the Federal
Circuit upheld the District Court judgement awarded Mosinee Paper
<PAGE>
against James River Corporation. The District Court found that
James River had infringed upon certain washroom towel cabinet roll
transfer mechanisms patented by the Bay West Paper Corporation, a
subsidiary. Mosinee Paper's judgement of approximately $5.5
million, including interest, is included in the 1993 statement of
income.
<TABLE>
15 - QUARTERLY INFORMATION (UNAUDITED)
<CAPTION>
(In thousands except share First Second Third Fourth
data) Qtr. Qtr. Qtr. Qtr. Annual
----- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C>
1994
----
Net sales $61,995 $64,784 $67,811 $72,117 $266,707
Gross profit 10,989 12,612 11,604 14,000 49,205
Income before
cumulative effect of a
change in accounting
principle 2,520 2,879 3,059 4,583 13,041
Cumulative effect of a
change in accounting
principle (net of
income taxes) ( 750) - - - ( 750)
Net income 1,770 2,879 3,059 4,583 12,291
Income per share:
Before cumulative effect
of a change in
accounting principle .35 .40 .42 .64 1.81
Cumulative effect of a
change in accounting
principle (net of
income taxes) ( .10) - - - ( .10)
Net income per share .25 .40 .42 .64 1.71
1993
----
Net sales (1) $57,008 $60,334 $65,351 $62,128 $244,821
Gross profit 8,977 9,825 11,621 13,081 43,504
Net income 4,595 1,354 2,005 1,683 9,637
Net Income per share .64 .19 .28 .23 1.34
1992 (2)
----
Net sales $52,301 $57,551 $59,895 $55,765 $225,512
Gross profit 8,052 7,765 7,233 7,428 30,478
Income (loss) before
cumulative effect of
changes in accounting
principles (625) 730 (13) (55) 37
Cumulative effect of
changes in accounting
principles (net of
income taxes) (8,537) - - - (8,537)
Net income (loss) (9,162) 730 (13) (55) (8,500)
Income (loss) per share:
Before cumulative effect
of changes in
accounting principles (.09) .10 (.01) (.01) (.01)
Cumulative effect of
changes in accounting
principles (net of
income taxes) (1.20) - - - (1.20)
Net income (loss) per share (1.29) .10 (.01) (.01) (1.21)
<FN>
(1) First quarter net sales are different from the first quarter
report to shareholders due to the elimination of intercompany
sales.
(2) Gross profits, net income (loss) and related per share
amounts have been restated as required by SFAS No. 106
"Employers' Accounting for Postretirement Benefits Other Than
Pensions".
</TABLE>
<PAGE>
16 - MARKET PRICES FOR COMMON SHARES (UNAUDITED)
<TABLE>
The Company's common shares are traded on the Nasdaq National
Market System under the Nasdaq symbol, MOSI. Price ranges and
dividends paid per share were as follows:
<CAPTION>
(In dollars)
1994 1993 1992
---- ---- ----
Prices Divi- Prices Divi- Prices Divi-
Qtr. High Low dends High Low dends High Low dends
---- --- ----- ---- --- ----- ---- --- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1st $36.00 $29.25 $.09 $26.50 $21.50 $.09 $37.13 $28.00 $.09
2nd 32.25 28.25 .09 27.00 21.50 .09 33.75 27.00 .09
3rd 32.75 29.00 .09 26.00 21.75 .09 29.50 24.25 .09
4th 31.25 24.75 .09 30.25 22.75 .09 26.25 20.25 .09
</TABLE>
Prices reflect high and low closing price quotations on the Nasdaq
National Market System and do not reflect mark-ups, mark-downs or
commissions and may not represent actual transactions.
<TABLE>
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<CAPTION>
($ THOUSANDS)
Allowance
for Allowance for Other
Doubtful Sales Returns Restructuring
Total Accounts and Discounts Costs
----- -------- ------------- -----
<S> <C> <C> <C> <C>
Balances at December 31, 1991 $ 970 $ 380 $ 590 $ 246
Charges to costs and expenses 3,270 464 2,806
Deductions (3,234) (329) (2,905) (246)
------ ------ ------ ------
Balances at December 31, 1992 $1,006 $ 515 $ 491 $ 0
Charges to costs and expenses 5,426 440 4,986
Deductions (4,853) (602) (4,251)
------ ------ ------ ------
Balances at December 31, 1993 $1,579 $ 353 $1,226 $ 0
Charges to costs and expenses 4,945 901 4,044
Deductions (4,371) ( 10) (4,361)
------ ------ ------ ------
Balances at December 31, 1994 $2,153 $1,244 $ 909 $ 0
====== ====== ====== ======
</TABLE>
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information relating to directors of the company is incorporated
into this Form 10-K by this reference to the material set forth
under the caption "Election of Directors", pages 3 and 4, in the
company's proxy statement dated March 17, 1995 (the "1995 Proxy
Statement"). Information relating to executive officers of the
company is set forth in Part I, page 6.
ITEM 11. EXECUTIVE COMPENSATION.
Information relating to director compensation is incorporated into
this Form 10-K by this reference to the material set forth under
the subcaption "Director Compensation", pages 4 and 5, in the 1995
Proxy Statement. Information relating to the compensation of
executive officers is incorporated into this Form 10-K by this
reference to (1) the material set forth under the caption
"Executive Officer Compensation", pages 8 through 10 and (2) the
material set forth under the subcaption "Compensation Committee
Interlocks and Insider Participation", page 15, in the 1995 Proxy
Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
Information relating to security ownership of certain beneficial
owners is incorporated into this Form 10-K by this reference to
the material set forth under the caption "Beneficial Ownership of
Common Stock", page 6, through the material immediately preceding
final two paragraphs, page 7, in the 1995 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K.
(a) FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES.
Filed as part of this report and required by Item 14(d),
are set forth on pages 22 to 49 herein.
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed by the company during
the fourth quarter of fiscal 1994.
(c) EXHIBITS REQUIRED BY ITEM 601 OF REGULATION S-K.
The following exhibits are filed with the Securities and
Exchange Commission as part of this report.
<PAGE>
EXHIBIT 3 - ARTICLES OF INCORPORATION AND BYLAWS
(a) Restated Articles of
Incorporation, as amended. . . . . . . . . . 12-53(1)
(b) Restated Bylaws, as last
amended April 16, 1992 . . . . . . . . . . . 54-89(1)
EXHIBIT 4 - INSTRUMENTS DEFINING THE RIGHTS OF SECURITY
HOLDERS
(a) Preferred Share Rights Agreement
dated June 26, 1986 as amended . . . . . . . 54-147(4)
(b) Restated Articles of Incorporation
and Restated Bylaws (see Exhibit 3(a) and (b))
EXHIBIT 10 - MATERIAL CONTRACTS
*(a) Deferred Compensation Plan for Directors
as amended and restated June 17, 1993. . . . 148-164(4)
*(b) 1985 Executive Stock Option
Plan dated June 27, 1985 . . . . . . . . . . 83-95(5)
*(c) Mosinee Paper Corporation 1988 Stock
Appreciation Rights Plan, as amended
4/18/91. . . . . . . . . . . . . . . . . . . 41-50(2)
*(d) 1993 and 1994 Incentive Compensation
Plan for Corporate Executive Officers. . . . 165-169(4)
*(e) Supplemental Retirement Benefit
Plan dated October 17, 1991. . . . . . . . . 63-71(2)
*(f) Supplemental Retirement Benefit Agreement
dated November 15, 1991. . . . . . . . . . . 72-76(2)
*(g) 1994 Executive Stock Option Plan . . . . . . 50
*(h) Mosinee Supplemental Retirement Plan . . . . 68
* Denotes Executive Compensation Plans and Arrangements.
EXHIBIT 11 - COMPUTATION OF PER SHARE EARNINGS. . 84
EXHIBIT 22 - SUBSIDIARIES OF REGISTRANT . . . . . 167(1)
Page numbers set forth herein correspond to the page numbers
using the sequential numbering system, where such exhibit can
be found in the following Annual Reports on Form 10-K:
(1) Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992; Commission File Number
0-1732.
(2) Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1991; Commission File Number
0-1732.
<PAGE>
(3) Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1990; Commission File Number
0-1732.
(4) Registrant's Annual Report on Form 10-K for the fiscal
year ended December 31, 1993; Commission File Number
0-1732.
(5) Exhibit 4(e) Form S-8 filed on April 19, 1991.
The above exhibits are available upon request in writing from
the Secretary, Mosinee Paper Corporation, 1244 Kronenwetter
Drive, Mosinee, Wisconsin 54455-9099.
SIGNATURES
Pursuant to the requirements of Section 13 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
Date March 27, 1995 GARY P. PETERSON
------------------------------------
Gary P. Peterson
Senior Vice-President,
Finance, Secretary and
Treasurer
(Principal Financial Officer)
Pursuant to the requirement of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated.
SAN W. ORR, JR. RICHARD L. RADT
------------------------------ -------------------------------
San W. Orr, Jr. Richard L. Radt
Chairman of the Board Vice Chairman of the Board
March 27, 1995 March 27, 1995
DANIEL R. OLVEY STANLEY F. STAPLES, JR.
------------------------------ -------------------------------
Daniel R. Olvey Stanley F. Staples, Jr.
President and CEO Director
(Principal Executive Officer) March 27, 1995
March 27, 1995
<PAGE>
RICHARD G. JACOBUS WALTER ALEXANDER
------------------------------ -------------------------------
Richard G. Jacobus Walter Alexander
Director Director
March 27, 1995 March 27, 1995
DONALD E. JANIS
------------------------------
Donald E. Janis
Corporate Controller
March 27, 1995
(Principal Accounting Officer)
EXHIBIT 10(g)
MOSINEE PAPER CORPORATION
1994 EXECUTIVE STOCK OPTION PLAN
Mosinee Paper Corporation, a corporation with its principal
place of business located in Mosinee, Wisconsin (the "Company"),
hereby adopts the Mosinee Paper Corporation 1994 Executive Stock
Option Plan (the "Plan"), as set forth herein.
Section 1. Purpose. The Plan is intended to attract and
retain key executive employees by permitting such employees of
Mosinee Paper Corporation (the "Company") or any parent or
subsidiary of the Company to acquire authorized and unissued, or
reacquired, shares of common stock of the Company pursuant to
purchase options. The availability of the options and grants
thereof will furnish additional inducements to such employees to
continue employment with the Company, or any parent or subsidiary
of the Company, and encourage them, by giving them an opportunity
to acquire a greater stake in the Company's success, to increase
their efforts to promote the best interests of the Company and its
stockholders.
It is the express intent of the Company that, subject to
Section 6.2(g) hereof, all options granted hereunder designated
"Incentive Stock Options" shall meet the requirements of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"),
or any successor section or sections. It is the further intent of
the Company that options granted hereunder designated "Non-
Qualified Stock Options" shall not meet the requirements of
Section 422 of the Code. A key employee may be granted and may
hold one or more options under this Plan.
Section 2. Number of Shares Available for Options. The
aggregate number of shares of $2.50 par value common stock of the
Company (the "Shares") which may be issued under options granted
pursuant to the Plan shall be 100,000.
Section 3. Administration of the Plan.
Section 3.1 General. The Plan shall be administered by a
committee consisting of at least three members designated by the
Board of Directors of the Company from among those of its members
who are not officers or employees of the Company (the
"Committee"). No person shall be appointed to the Committee who,
during the one year period prior to being appointed, was granted
or awarded equity securities pursuant to the Plan or any other
employee benefit plan of the Company or any of its affiliates,
except for a formula or broad-based plan that satisfies one of the
exceptions contained in Rule 16b-3(c)(i) promulgated under Section
16 of the Securities Exchange Act of 1934 (the "Exchange Act").
In the absence of specific rules to the contrary, action by the
Committee shall require the consent of a majority of the members
of the Committee, expressed either orally at a meeting of the
Committee or in writing in the absence of a meeting.
<PAGE>
Section 3.2 Authority of Committee. The Committee shall
have full and complete authority to grant options to such eligible
employees on such terms, which need not be the same as to all
Optionees, as will, in its discretion and subject only to the
specific limitations elsewhere contained in the Plan, carry out
the purpose of the Plan. The Committee shall also have full and
complete authority to interpret the Plan and adopt rules governing
the administration of the Plan. The Committee's decision on any
matter with respect to the Plan shall be final.
Section 3.3 Indemnification of Committee. To the extent
permitted by applicable law, the members of the Committee and each
of them shall be indemnified and saved harmless by the Company
from any liability or claim of liability which may arise from the
administration of the Plan if the acts giving rise to such
liability or claim of liability were taken in good faith and
without negligence.
Section 4. Eligible Employees.
Section 4.1 Definition of Eligible Employees. Subject to
the limitations of Section 4.2, key employees (who may also be
officers or directors) of the Company (or any parent or subsidiary
of the Company) shall be eligible to participate in the Plan. For
purposes of the Plan, the term "key employee" shall include all
employees of all participating employers employed in management,
administrative or professional capacities.
Section 4.2 Limitations on Eligibility. Directors of the
Company (or its parent or subsidiary) who are not also employees
of such entity shall not be eligible to receive options under the
Plan. No person who is serving as a member of the Committee shall
be eligible to receive an option; provided, however, that options
outstanding prior to an Optionee's becoming a member of the
Committee shall remain in effect.
Section 5. Granting of Options. Subject to the limitations
of Section 4.2, options to purchase Shares shall be granted to
such key employees who are eligible to participate in the Plan as
the Committee may, from time to time and at any time, select.
Membership in a class of eligible key employees shall not, without
specific Committee action, entitle a key employee to receive an
option to purchase Shares. Eligible key employees selected by the
Committee shall be referred to herein as "Optionees." Options to
purchase Shares which are granted prior to the approval of the
Plan by the Company's stockholders shall be expressly conditioned
upon such approval.
Section 6. Terms and Conditions of the Options.
Section 6.1 Written Instrument. Each option to purchase
Shares granted under the Plan shall be evidenced by a written
option agreement signed on behalf of the Company and the Optionee
which sets forth the name of the Optionee, the date granted, the
price at which the Shares subject to the option may be purchased
(the "option price"), whether the option is an Incentive Stock
Option or a Non-Qualified Stock Option, the number of Shares
subject to the option and such other terms and conditions
consistent with the Plan as determined by the Committee. The
<PAGE>
Committee may at the time of grant or at any time thereafter
impose such additional terms and conditions on the exercise of
such option as it deems necessary or desirable for compliance with
Section 16 of the Exchange Act and the regulations promulgated
thereunder. Such option agreement shall incorporate by reference
all terms, conditions and limitations set forth in the Plan.
Section 6.2 Terms and Conditions of the Options. In
addition to any other limitations, terms and conditions specified
in the Plan, each option granted hereunder shall, as to each
Optionee, satisfy the following requirements:
(a) Date of Grant. Options must be granted on or before
October 19, 2004.
(b) Expiration. No Incentive Stock Option shall be
exercisable after the expiration of ten years from the date such
option is granted. No Non-Qualified Stock Option shall be
exercisable after the expiration of twenty years from the date
such option is granted.
(c) Price. The option price as to any Share subject to
either an Incentive Stock Option or Non-Qualified Stock Option
will be not less than one hundred percent of the fair market value
of the Share on the date the option is granted.
For purposes of the Plan, the fair market value of a Share means:
(i) The mean between the high and the low prices at which
the Shares were traded if the Shares were then listed
for trading on a national or regional securities
exchange or were then traded on a bona fide over-
the-counter market; or
(ii) If the Shares were not traded on an exchange or a bona
fide over-the-counter market, a value determined by an
appraiser selected by the Committee.
In the event that the date on which the fair market value of a
Share is to be determined is a date on which there is no trading
of the Shares on a national or regional securities exchange or on
the over-the-counter market, such fair market value shall be
determined by referring to the next preceding business day on
which trading occurs.
(d) Transferability. No option shall be transferable by the
Optionee otherwise than by will or the laws of descent and
distribution nor can it be exercised by anyone other than the
Optionee during the Optionee's lifetime.
(e) Employment. No option shall be exercisable unless the
Optionee shall have been employed by the Company (or any present
or future parent or subsidiary of the Company) during the period
beginning on the date the option is granted and ending on a date
ninety days before the date of exercise (and subject to Section 10
herein); provided, however, that in the event an Optionee dies
while in the employ of the Company (or any present or future
parent or subsidiary of the Company) or within ninety days after
such employment had terminated, the employment period requirement
described above shall be deemed to have been satisfied.
<PAGE>
(f) Minimum Holding Period. No option may be exercised
before the date which is six months after the later of (i) the
date on which the Plan is approved by the shareholders of the
Company or (ii) the date on which such option is granted. Each
option shall contain such additional restriction or restrictions
with respect to the stated percentage of Shares covered by such
option as to which such option may be exercised as the Committee
may deem desirable or necessary in order to carry out the purposes
and requirements of the Plan.
(g) Limitation on Option Grants. No Optionee may be granted
options in any calendar year with respect to more than 50,000
shares.
(h) Additional Restrictions Relating to Incentive Stock
Options. To the extent that the aggregate fair market value
(determined as of the time the option is granted) of the Shares
for which Incentive Stock Options are exercisable for the first
time by an individual during any calendar year (under this Plan or
any other plan of the Company or any of its subsidiaries) exceeds
$100,000 (or such other individual limit as may be in effect under
the Code on the date of grant), such options shall not be
Incentive Stock Options. No Incentive Stock Option shall be
granted to an employee who, at the time such option is granted,
owns stock possessing more than ten percent of the total combined
voting power of all classes of stock of the Company or any parent
or subsidiary of the Company within the meaning of Section
422(b)(6) of the Code unless: (i) at the time the option is
granted, the option price is at least one hundred ten percent of
the fair market value of the Shares subject to the option, and
(ii) such option by its terms is not exercisable after the
expiration of five years from the date such option is granted.
Section 7. Exercise and Payment of Option Price.
Section 7.1 Exercise of Options. Options shall be exercised
as to all or a portion of the Shares by delivery of an irrevocable
written notice to the Company setting forth the exact number of
Shares as to which the option is being exercised and including
with such notice payment of the option price (plus minimum
required tax withholding). The date of exercise shall be the date
such written notice and payment have been delivered to the
Secretary of the Company either in person or by depositing said
notice and payment in the United States mail, postage pre-paid and
addressed to such officer at the Company's home office. No option
may be exercised with respect to a fractional share of stock.
Section 7.2 Payment for Shares. Payment of the option price
(plus minimum required tax withholding) may be made by (a)
tendering cash (in the form of a check or otherwise) in such
amount, or (b) with the consent of the Committee, tendering Shares
with a fair market value on the date of exercise equal to such
amount, or (c) delivering a properly executed exercise notice
together with irrevocable instructions to a broker to promptly
deliver to the Company the sale or loan proceeds equal to such
amount.
Section 8. Adjustment Upon Changes in Capitalization. If
the Company shall, after the Effective Date, change its common
<PAGE>
stock into a greater or lesser number of shares through a stock
dividend, stock split-up or combination of shares, then
(i) the number of Shares then subject to the plan but which
are not then subject to any outstanding option;
(ii) the number of Shares subject to each then outstanding
option (to the extent not previously exercised); and
(iii) the price per Share payable upon exercise of each then
outstanding option.
shall all be proportionately increased or decreased as of the
record date for such stock dividend, stock split-up or combination
of shares in order to give effect thereto. Notwithstanding any
such proportionate increase or decrease, no fraction of a Share
shall be issued upon the exercise of an option. If any split-up
or combination of shares shall involve a change of par value, the
Shares subject to options theretofore or thereafter granted shall
be the Shares as so changed.
If, after the Effective Date, there shall be any change in
the stock of the Company other than through a stock dividend,
stock split-up or combination of shares, or other change listed in
Section 9 herein, then if (and only if) the Committee shall
determine that such change equitably requires an adjustment in the
number or kind or option price of Shares then subject to an
option, or the number or kind of Shares remaining subject to the
Plan, such adjustment as the Committee shall determine is
equitable and as shall be approved by the Board shall be made and
shall be effective and binding for all purposes of such option and
the Plan. If any member of the Board shall, at the time of such
approval, be an Optionee, he shall not participate in action in
connection with such adjustment.
Section 9. Merger, Reorganization, or Change in Control.
(a) Nothing contained in this Plan or in any option granted
under the Plan shall in any way prohibit the Company from merging
with or consolidating into another corporation, or from selling or
transferring all or substantially all of its assets, or from
distributing all or substantially all of its assets to its
stockholders in liquidation, or from dissolving and terminating
its corporate existence; and in any such event (other than a
merger in which the Company is the surviving corporation and after
which the Company remains an independent, publicly held
corporation), the Company or any surviving party to any such
merger, consolidation, or sale or transfer of assets may provide
by resolution of its Board of Directors that all rights of the
person or persons entitled to exercise then outstanding options
granted under the Plan, and such options, shall wholly and
completely terminate at the time of any such merger,
consolidation, sale or transfer of assets, liquidation, or
dissolution, except that adequate provision for such person or
persons shall be made in accordance with paragraph (b) below.
(b) In the event that (i) any individual, corporation,
partnership or other person or group of persons or entities
becomes the beneficial owner, directly or indirectly, of 45% or
more of the Company's then outstanding common stock ("Change in
<PAGE>
Control" or (ii) any merger, consolidation, liquidation,
dissolution or termination after which the Company will not
survive as an independent, publicly-owned corporation or any sales
or transfer of all or substantially all of the Company's assets
("Reorganization") occurs, then the Company shall pay with respect
to each outstanding option under this Plan an amount equal to (x)
the difference between the Fair Market Value (as defined in (c)
below) and exercise price of the option, multiplied by (y) the
number of Shares subject to such option. Such payment shall be
made in cash within 30 days after, in the case of a Reorganization
requiring approval by the Company stockholders, the date of such
approval and, in the case of a Change in Control, the date upon
which such change occurs.
(c) Solely for purposes of (b) above, "Fair Market Value"
shall mean the greater of (i) the highest price per share of the
Company's common stock paid by the acquiring person within twelve
months of the occurrence of the Change in Control to effect such
change or provided for in any agreement for the Reorganization, or
(ii) fair market value determined in accordance with Section
6.2(c) of this Plan.
Section 10. Termination or Lapse of Options. Each option
shall terminate or lapse upon the first to occur of (a) the
expiration date set forth in the applicable Stock Option
Agreement, (b) the applicable date set forth in Section 6.2(b),
(c) the date of the Optionee's voluntary resignation or
termination for cause, or (d) the date which is ninety days after
the date of the Optionee's other termination of employment with
the Company or any present or future parent or subsidiary of the
Company; provided, however, that in the event of an Optionee's
death while in the employ of the Company or a parent or subsidiary
of the Company or, if the Optionee is no longer so employed, in
the event of the Optionee's death within ninety days after such
employment had terminated, an option may be exercised, to the
extent exercisable by the Optionee immediately prior to his death,
in whole or in part by the Optionee's estate or his designee by
will, but only if the date of exercise is on or before the first
to occur of (i) the expiration date set forth in the applicable
Stock Option Agreement, (ii) the applicable date set forth in
Section 6.2(b), or (iii) the date which is twelve months after the
date of the Optionee's death. For purposes of this section, "for
cause" shall mean affirmative acts in violation of federal, state,
or local criminal law.
Section 11. Amendment and Termination of Plan.
Section 11.1 Amendment of Plan. The Board of Directors of
the Company may amend the Plan from time to time and at any time;
provided, however, that no amendment shall adversely affect any
option which has been granted prior to the amendment and no
amendment with respect to the maximum number of Shares which may
be issued pursuant to options or the class of eligible employees,
or which materially increases benefits accruing to Optionees under
the Plan (within the meaning of Rule 16b-3 promulgated by the
Securities and Exchange Commission under the Exchange Act) shall
be effective unless approved by a majority of the shares entitled
to vote at a meeting of shareholders.
<PAGE>
Section 11.2 Termination of Plan. The Plan shall terminate
on the first to occur of (a) October 19, 2004 or (b) the date
specified by the Board of Directors of the Company as the
effective date of Plan termination; provided, however, that the
termination of the Plan shall not limit or otherwise affect any
options outstanding on the date of termination.
Section 12. Effective Date. The Effective Date of the Plan
shall be October 20, 1994, the date of approval by the Board of
Directors of the Company; provided, however, that neither the Plan
nor grants made under the Plan shall be effective unless the
adoption of the Plan is approved at the annual meeting of the
Company's stockholders next following such date by the majority of
the shares entitled to vote at such meeting.
Section 13. Investment Intent. Shares acquired pursuant to
the exercise of an option, if not registered by the Company under
the Securities Act of 1933 (the "Act"), will be "restricted" stock
which will not be freely transferable by the holder after exercise
of the option. Each participating employee and assignee in
interest of the employee accordingly represents, as a condition of
participation in the Plan, that Shares which are unregistered
under the Act are being acquired for the Optionee's (or his
assignee's) own account for investment only and not with a view to
offer for sale or for sale in connection with the distribution or
transfer thereof.
Section 14. Availability of Information. The Company shall
furnish each Optionee with (a) a copy of the Plan and the
Company's most recent annual report to its shareholders at the
time the option agreement provided for in Section 6.1 is executed
by the Optionee and (b) a copy of each subsequent annual report,
on or about the same date as such report shall be made available
to shareholders of the Company. The Company will furnish, upon
written request addressed to the Secretary of the Company, but at
no charge to the Optionee or any duly authorized representative of
the Optionee, copies of all reports filed by the Company with the
Securities and Exchange Commission or the commissioner of
securities of any state, including, but not limited to, the
Company's annual reports on Form 10-K, its quarterly reports on
Form 10-Q, and its proxy statements.
Section 15. Conditions of Employment. Participation in or
eligibility for participation in the Plan shall not confer upon
any employee the right to be continued as an employee of the
Company or any present or future parent or subsidiary of the
Company and the Company and its participating subsidiaries hereby
expressly reserve the right to terminate the employment of any
employee, with or without cause, regardless of the Plan and any
options granted pursuant to it.
Section 16. Miscellaneous.
(a) The transfer of an employee from the Company to a parent
or subsidiary of the Company or from a parent or subsidiary of the
Company to the Company or another parent or subsidiary of the
Company shall not be a termination of employment or an
interruption of continuous employment for the purpose of the Plan.
<PAGE>
(b) As used in the Plan, the term "parent" and "subsidiary"
shall have the meanings ascribed to them in Sections 421, 422A and
425 of the Code.
Section 17. Government Approvals. If at any time the
Company shall be advised by its counsel that the exercise of any
option or the delivery of shares of Stock upon the exercise of an
option is required to be approved, registered or qualified under
any applicable law, or must be accompanied or preceded by a
prospectus or similar circular meeting the requirements of any
applicable law, the Company will use reasonable efforts to obtain
such approval, to effect such registrations and qualifications, or
to provide such prospectus or similar circular within a reasonable
time, but exercise of the options or delivery by the Company of
certificates for shares of Stock may be deferred until such
approvals, registrations or qualifications are effected, or until
such prospectus or similar circular is available.
IN WITNESS WHEREOF, the Company has caused the Plan to be
executed by its duly authorized officers as of October 20, 1994.
MOSINEE PAPER CORPORATION
By:________________________________
ATTEST:
By:___________________________
Secretary
EXHIBIT 10(h)
MOSINEE SUPPLEMENTAL
RETIREMENT PLAN
Page
ARTICLE I
PURPOSE AND ADMINISTRATION OF THE PLAN . . . . . 1
1.1 Purpose . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Administration. . . . . . . . . . . . . . . . . . . 1
1.3 Effective Date. . . . . . . . . . . . . . . . . . . 1
ARTICLE II
DEFINITIONS. . . . . . . . . . . . 2
2.1 Definitions . . . . . . . . . . . . . . . . . . . . 2
2.2 Definitions Incorporated by Reference . . . . . . . 3
ARTICLE III
PARTICIPATION. . . . . . . . . . . . 4
3.1 Participation . . . . . . . . . . . . . . . . . . . 4
3.2 Service . . . . . . . . . . . . . . . . . . . . . . 4
3.3 Termination of Participation and Reemployment . . . 4
ARTICLE IV
BENEFITS . . . . . . . . . . . . . 5
4.1 Normal Retirement Benefits of Corporate Officers. . 5
4.2 Normal Benefits of Other Executive Officers . . . . 5
4.3 Early Retirement Benefits of Executive Officers . . 5
4.4 Surviving Spouse Benefits . . . . . . . . . . . . . 6
4.5 Form, Commencement and Duration of Payments . . . . 6
4.6 Change of Control . . . . . . . . . . . . . . . . . 7
4.7 Forfeiture of Benefits. . . . . . . . . . . . . . . 10
4.8 Inalienability of Benefits. . . . . . . . . . . . . 11
4.9 Facility of Payments. . . . . . . . . . . . . . . . 11
4.10 Claims Procedure. . . . . . . . . . . . . . . . . . 11
ARTICLE V
PROVISION FOR BENEFITS. . . . . . . . . . 12
5.1 Assets of the Company . . . . . . . . . . . . . . . 12
ARTICLE VI
AMENDMENT AND TERMINATION OF THE PLAN . . . . . . 13
6.1 Amendment . . . . . . . . . . . . . . . . . . . . . 13
6.2 Termination . . . . . . . . . . . . . . . . . . . . 13
ARTICLE VII
MISCELLANEOUS . . . . . . . . . . . 14
7.1 Nonguarantee of Employment. . . . . . . . . . . . . 14
7.2 Action by the Company . . . . . . . . . . . . . . . 14
7.3 Agreement Binding on Successors . . . . . . . . . . 14
7.4 Construction. . . . . . . . . . . . . . . . . . . . 14
7.5 Titles. . . . . . . . . . . . . . . . . . . . . . . 14
7.6 Governing Law . . . . . . . . . . . . . . . . . . . 14
<PAGE>
MOSINEE SUPPLEMENTAL RETIREMENT PLAN
Mosinee Paper Corporation, a Wisconsin corporation, hereby
establishes the Mosinee Supplemental Retirement Plan in accordance
with the terms and conditions herein contained.
ARTICLE I
PURPOSE AND ADMINISTRATION OF THE PLAN
1.1 PURPOSE. The Company hereby establishes the Plan for
the purpose of providing deferred compensation (within the meaning
of section 201(2) of the Employee Retirement Income Security Act
of 1974) for executive officers of the Company.
1.2 ADMINISTRATION. The Plan shall be administered by the
Company.
1.3 EFFECTIVE DATE. The effective date of the Plan shall be
September 1, 1994.
ARTICLE II
DEFINITIONS
2.1 DEFINITIONS. The following terms shall have the
meanings set forth below:
(a) "Average Compensation" means (1) an aggregate amount
determined by the sum of (A) the Participant's salary
for a calendar year and earned bonus attributable to
such calendar year and (B) any compensation deferred
under a plan qualified under Section 401(k) of the Code
or under a plan which satisfies the requirements of
section 125 of the Code during such calendar year, for
the 5 calendar years of the Executive Officer's most
recent 10 years of Continuous Service as an Executive
Officer in which the largest aggregate amount of such
compensation was earned and/or deferred for him for
service as an Executive Officer for all or any portion
of each of such calendar years, divided by (2) 12;
provided, however, that if a Participant did not perform
services for 5 calendar years as an Executive Officer,
such determinations shall be based on such earned and/or
deferred compensation for each complete calendar year in
which the Participant was an Executive Officer.
(b) "Early Retirement Age" means the date on which an
Executive Officer has attained age 55 and completed 10
years of Continuous Service as an Executive Officer.
(c) "Executive Officer" means (1) the President and each
corporate Vice President of the Company, (2) the Vice
President and General Manager of each of The Sorg Paper
Company or Bay West Paper Corporation (3) the Vice
President and General Manager of each of the Pulp and
Paper and Converted Products Divisions of the Company
<PAGE>
and (4) such other officer or officers of the Company,
its subsidiaries or divisions as the Board of Directors
of the Company may, from time to time and at any time
designate by resolution as an "Executive Officer" for
purposes of this Plan.
(d) "Normal Retirement Age" means the date on which (1) an
Executive Officer has attained age 62 and completed 10
years of Continuous Service as an Executive Officer or
(2) an Executive Officer has attained age 62 and had
terminated employment with the Company because of
Disability.
(e) "Participant" means an Executive Officer of the Company
who has qualified to be a participant in the Plan in
accordance with Section 3.1.
(f) "Plan" means the Mosinee Supplemental Retirement Plan as
herein set forth.
(g) "Retirement Plan" shall mean the Mosinee Retirement
Plan, as now in effect or hereafter amended, or any
successor plan which is qualified under section 401(a)
of the Code, and maintained for salaried employees of
the Company.
2.2 DEFINITIONS INCORPORATED BY REFERENCE. Each of the
following terms shall have the meaning set forth in the Retirement
Plan and the definition of each such term by the Retirement Plan
is hereby incorporated by this reference to the extent not
inconsistent with the provisions of this Plan:
(a) "Actuarial Equivalent"
(b) "Affiliated Employer"
(c) "Code"
(d) "Company"
(e) "Continuous Service"
(f) "Disability"
(g) "Retirement Benefit"
(h) "Surviving Spouse"
ARTICLE III
PARTICIPATION
3.1 PARTICIPATION. Each Executive Officer shall become a
Participant as of the first day of his employment by the Company
in the capacity of an Executive Officer.
3.2 SERVICE.
(a) All Continuous Service as an Executive Officer shall be
recognized for purposes of this Plan, whether or not
<PAGE>
such Continuous Service was performed prior to the
effective date hereof.
(b) Continuous Service by an individual for the Company in
any capacity other than as an Executive Officer shall
not be recognized for any purpose under this Plan.
(c) In the event a Participant or former Participant is
reemployed by the Company as an Executive Officer, all
periods of Continuous Service with the Company as an
Executive Officer shall be aggregated for purposes of
this Plan.
3.3 TERMINATION OF PARTICIPATION AND REEMPLOYMENT. A
Participant shall cease participation in the Plan on the later of
(a) the earlier of (1) the date his termination of employment with
the Company and all Affiliated Employers occurs or (2) the date he
is no longer employed as an Executive Officer by the Company or an
Affiliated Employer, or (b) the date the final benefit payment to
which the Participant may be entitled pursuant to this Plan is
made.
ARTICLE IV
BENEFITS
4.1 NORMAL RETIREMENT BENEFITS OF CORPORATE OFFICERS.
Subject to the limitations elsewhere contained in this Plan, an
Executive Officer who terminates his employment with the Company
and each Affiliated Employer on or after attaining his Normal
Retirement Age and who was the President or a corporate Vice
President of the Company as of the most recent date on which he
performed service as an Executive Officer shall be entitled to a
normal retirement benefit payable in the form of a single life
annuity equal to the excess of:
(a) an amount equal to 50% of the Participant's Average
Compensation, over
(b) the amount of the Participant's accrued Retirement
Benefit under the Retirement Plan which would then be
payable in the form of a single life annuity.
4.2 NORMAL BENEFITS OF OTHER EXECUTIVE OFFICERS. Subject to
the limitations elsewhere contained in this Plan, an Executive
Officer who terminates his employment with the Company and each
Affiliated Employer on or after attaining his Normal Retirement
Age and who was not the President or a corporate Vice President of
the Company as of the most recent date on which he performed
service as an Executive Officer, shall be entitled to a retirement
benefit payable in the form of a single life annuity determined in
accordance with the formula set forth in section 4.1; provided,
however, that in making such determination, the term "40% of the
Participant's Average Compensation" shall be substituted for the
term "50% of the Participant's Average Compensation" in section
4.1(a).
4.3 EARLY RETIREMENT BENEFITS OF EXECUTIVE OFFICERS.
Subject to the limitations elsewhere contained in this Plan, an
<PAGE>
Executive Officer who terminates his employment with the Company
and each Affiliated Employer on or after attaining his Early
Retirement Age, but prior to attaining his Normal Retirement Age,
shall be entitled to an early retirement benefit in the form of a
single life annuity equal to the amount to which he would have
been entitled to under section 4.1 or section 4.2, as applicable,
if he had then attained his Normal Retirement Age; provided,
however, that such benefit shall be reduced by .4166% for each
full calendar month, from and including the month in which the
Participant's 55th birthday occurs to the month in which his 62nd
birthday occurs, by which the calendar month in which payment of
the early retirement benefit provided for in this section 4.3
precedes the date on which such Participant would have attained
his Normal Retirement Age.
4.4 SURVIVING SPOUSE BENEFITS. Subject to the limitations
elsewhere contained in this Plan, the Surviving Spouse of a
Participant who dies prior to commencement of any other benefit
hereunder, including the Surviving Spouse of a former Participant
who terminated employment because of Disability, shall be eligible
for a Surviving Spouse benefit commencing as of the last to occur
of (1) the first day of the first month following the month in
which the Participant's death occurs or (2) the date on which the
Participant would have been eligible to receive payment of a
benefit under section 4.3, or in the case of a Participant who
terminated employment because of Disability, commencing as of the
date on which the former Participant would have attained age 55,
and such Surviving Spouse benefit shall be equal to 50% of the
monthly benefit which would have been payable to the deceased
Participant under this Plan if he had retired the day before his
death and payment of his benefit had commenced on such date
assuming, in the case of a former Participant who terminated
employment because of a Disability, that the benefit payable to
such former Participant at Normal Retirement Age under section 4.1
or 4.2, as applicable, would have been payable in reduced form at
age 55 pursuant to section 4.3, and, assuming further, that in the
case of a Participant or former Participant who died prior to
attaining age 55 or prior to the date on which the Participant or
former Participant had completed 10 years of Continuous Service,
that a benefit would have been payable to such deceased
Participant or former Participant as of the later of the dates
described in (1) and (2), above; provided, however, that the
benefit payable to the Surviving Spouse of a Participant or former
Participant who died prior to the completion of 5 years of
Continuous Service shall be reduced by 20% for each year of
Continuous Service less than 5 accrued by such deceased
Participant or former Participant.
4.5 FORM, COMMENCEMENT AND DURATION OF PAYMENTS.
(a) A Participant may elect, subject to the approval of the
Board of Directors, (1) to receive the Actuarial
Equivalent of the benefit accrued by a Participant
pursuant to section 4.1, 4.2 or 4.3 in any form of
annuity payment option then available under the
Retirement Plan or (2) to receive the value of the
benefit accrued by a Participant pursuant to section
4.1, 4.2 or 4.3 in the form of a lump sum distribution.
In the event a Participant elects, with the approval of
<PAGE>
the Board of Directors, to receive a lump sum
distribution of the value of the benefit otherwise
provided for in section 4.1, 4.2, or 4.3, the value of
the lump sum distribution under this Plan shall be
determined in accordance with the provisions for
determining the value of a lump sum distribution of the
Participant's Retirement Benefit under the terms of the
Retirement Plan.
(b) Monthly benefit payments to the Participant (and, if
applicable, his Surviving Spouse) under section 4.1,
4.2, 4.3 or 4.4, or a lump sum payment provided for
under section 4.5(a) with respect to a benefit accrued
under section 4.1, 4.2 or 4.3, shall commence on the
first day of the month following the Participant's
termination of employment or, if applicable, the date
specified in section 4.4 as the date on which the
Participant's Surviving Spouse became eligible for a
Surviving Spouse benefit, and shall continue, subject to
the provisions of section 4.7, until the month in which
the death of the Participant (or, if applicable, his
Surviving Spouse) occurs; provided, however, that a
Participant or Surviving Spouse may elect to defer
receipt of an early retirement benefit or Surviving
Spouse benefit, as applicable, for any period of time
not in excess of the date on which the Participant would
have attained his Normal Retirement Age. Despite any
other provision of this Plan, a Participant who receives
a benefit in the form of a lump sum distribution shall
not be entitled to any monthly benefit otherwise
provided for in this Plan.
4.6 CHANGE OF CONTROL.
(a) In the event a Change of Control of the Company occurs,
the Company shall pay to each Participant a lump sum
amount equal to the present value of the Participant's
accrued normal retirement benefit, as determined under
section 4.1, as of the first day of the first month
following such Change of Control of the Company on which
such Participant is not an employee of the Company,
whether or not such Change of Control of the Company
occurred prior to the date on which such Participant
shall have ceased to be an employee of the Company.
Upon payment of the lump sum amount provided for in this
section 4.6(a), the Company shall have no further
obligation to pay any benefits under this Plan.
(b) In the event a Change of Control of the Company occurs
after the Participant's death and whether or not a
benefit shall have then become payable to the
Participant's Surviving Spouse, the Company shall pay to
such Participant's Surviving Spouse, if then living, the
present value of the unpaid Surviving Spouse benefit.
Upon payment of the lump sum amount provided for in this
section 4.6(b), the Company shall have no further
obligation to pay any benefits under this Plan.
(c) For purposes of this plan, a "Change of Control of the
Company" shall be deemed to have occurred when:
<PAGE>
(1) any one of the following events occurs:
(A) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")),
other than (i) the Company or any of its
subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee
benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily
holding securities pursuant to an offering of
such securities, or (iv) a company owned,
directly or indirectly, by the shareholders of
the Company in substantially the same
proportions as their ownership of stock of the
Company, is or becomes the "beneficial owner"
(as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of
the Company (not including in the securities
beneficially owned by such persons any
securities acquired directly from the Company
or its affiliates) representing more than 50%
of the combined voting power of the Company's
then outstanding securities; provided,
however, that for the purpose of determining
whether any shareholder of the Company on the
date hereof becomes the beneficial owner of
securities of the Company representing more
than 50% of the combined voting power of the
Company's then outstanding securities, the
securities of the Company held by such
shareholder on the effective date of this Plan
shall not be taken into account;
(B) the shareholders of the Company approve a
merger or consolidation of the Company or a
share exchange with any other company, other
than a merger or consolidation or share
exchange which would result in the voting
securities of the Company outstanding
immediately prior thereto continuing to
represent (either by remaining outstanding or
by being converted into voting securities of
the surviving entity) in combination with the
ownership of any trustee or other fiduciary
holding securities under an employee benefit
plan of the Company, at least 50% of the
combined voting power of the voting securities
of the Company or such surviving entity
outstanding immediately after such merger or
consolidation or share exchange, or a merger
or consolidation or share exchange effected to
implement a recapitalization of the Company
(or similar transaction) in which no person
acquires more than 50% of the combined voting
power of the Company's then outstanding
securities; or
(C) the shareholders of the Company approve a plan
of complete liquidation of the Company or an
<PAGE>
agreement for the sale or disposition by the
Company of all or substantially all of the
Company's assets; and
(2) a majority of the members of the Board of Directors
who are unaffiliated with an Interested Shareholder
(defined in section 4.6(d)) and who were members of
the Board of Directors as of a date prior to the
date on which the Interested Shareholder became an
Interested Shareholder (a "Current Director") has
not, by resolution prior to (i) the person
described in subparagraph (1)(A) becoming the
beneficial owner of 10% of the combined voting
power of the Company's then outstanding securities
or (ii) the approval of shareholders described in
(1)(B) or (iii) the approval of shareholders
described in (1)(C), approved or recommended such
event.
(d) For purposes of this Plan, the term "Interested
Shareholder" shall mean any person (other than the
Company or any of its subsidiaries or any member of the
Board of Directors as of the effective date of this Plan
or any affiliate of such person) who first became the
beneficial owner of 10% or more of the combined voting
power of the Company's then outstanding securities after
the effective date of this Plan.
(e) For purposes of this Plan, the present value of a
Participant's retirement benefit or the Surviving Spouse
benefit shall be determined by reference to the 1983
Individual Annuity Mortality Table with an assumed
interest rate equal to the "immediate annuity rate" as
then in effect as determined by the Pension Benefit
Guaranty Corporation and promulgated in Appendix B to 29
C.F.R. section 2619.65 or any successor regulation
adopted for the same or substantially similar purpose.
4.7 FORFEITURE OF BENEFITS. Despite any other provision of
this Plan, a Participant's or Surviving Spouse's, as applicable,
eligibility for benefit payments under the Plan is expressly
subject to the following terms and conditions:
(a) The Company is and shall be entitled to the sole benefit
and exclusive ownership of any inventions or
improvements in plant, machinery and processes, and all
patents for the same, and all customer or price lists,
trade secrets and other things of similar type or nature
used in the business of the Company that may be made or
discovered by a Participant while he is employed by the
Company, or, after the termination of his employment
period if arising out of his activities, knowledge or
experience gained while in the employment of the
Company. In the event that a Participant, during or
after the termination of his employment, discloses all
or any portion of the list of the Company's customers or
the Company's pricing structure or all or any portion of
the Company's manufacturing process or any other trade
secrets or confidential information to any person, firm,
corporation, associations or other entity for any reason
<PAGE>
or purpose whatsoever, no payment of any benefit
otherwise due the Participant or his Surviving Spouse
pursuant to this Plan shall be made by the Company.
(b) In the event a Participant, without the prior written
consent of the Company and within a period of two years
beginning on the first day following the Participant's
termination of employment with the Company, directly or
indirectly owns, manages, operates, joins, controls, is
employed by or participates in the ownership,
management, operation or control of, or is connected in
any manner with, any business of a type and character
which, in the opinion of the Company, results in the
Participant then being engaged in the field of
activities in which he was engaged by the Company at the
time of termination (and within one year prior to said
termination) and such business is, in the opinion of the
Company, in direct or indirect competition in any market
area served by the Company with any business then
conducted by the Company in such market area, no payment
of any benefit otherwise due the Participant or his
Surviving Spouse pursuant to this Plan shall be made by
the Company if the Participant fails to cease such
activity within fifteen days of the mailing to him by
the Company of the Company's opinion that he is in
violation of the restrictions contained in this section
4.7(b).
(c) The Company shall have sole discretion to stop payment
of any benefit or refuse to make payments otherwise due
the Participant or his Surviving Spouse pursuant to this
Plan if the Participant's termination of employment with
the Company or his appointment to a position with the
Company as other than an Executive Officer was by reason
of or because of the Participant's fraud, embezzlement,
misappropriation or similar offense against the Company
or any other state or federal felony offense.
(d) Subject to the provisions of section 6.2, no benefit
shall be payable under this Plan to any Participant or
Surviving Spouse who, for any reason, is not eligible
for and does not receive a benefit under the provisions
of the Retirement Plan.
4.8 INALIENABILITY OF BENEFITS. A Participant's right to a
benefit under the Plan shall not be subject to voluntary or
involuntary sale, pledge, hypothecation, transfer or assignment by
the Participant or by his personal representatives or heirs, or
any other person or persons or organization or organizations
succeeding to any of the Participant's rights and benefits
hereunder.
4.9 FACILITY OF PAYMENTS. Any benefit payable hereunder to
any person who is legally incapacitated may be paid to a court
appointed legal representative of such person.
4.10 CLAIMS PROCEDURE. Each Participant or Surviving Spouse
whose claim for benefits is denied, in whole or in part, shall be
provided with a notice, written in a manner calculated to be
understood by such person, setting forth the specific reasons for
<PAGE>
such denial and outlining the review procedure of the Company.
Each such Participant or Surviving Spouse shall be given a
reasonable opportunity for a full and fair review by the Company
of the decision by which the claim was denied.
ARTICLE V
PROVISION FOR BENEFITS
5.1 ASSETS OF THE COMPANY. Benefits which become payable
under the provisions of the Plan shall be paid directly by the
Company out of its assets. No assets of the Company shall be set
aside or segregated for the provision of such benefit payments.
No Participant or Surviving Spouse, nor any other potential or
actual recipient of benefits under the provisions of this Plan
shall acquire any right, title or interest in the assets of the
Company by reason of the Plan and, to the extent that the
Participant, Surviving Spouse or such other recipient shall
acquire a right to receive payments from the Company pursuant to
the Plan, such right shall be no greater than the right of any
unsecured general creditor of the Company.
ARTICLE VI
AMENDMENT AND TERMINATION OF THE PLAN
6.1 AMENDMENT. The Company reserves the right to amend the
Plan from time to time and at any time, effective as of any
specified current, prior or future date; provided, however, that
no such amendment shall modify or reduce a Participant's accrued
benefit as of the date such amendment is adopted.
6.2 TERMINATION. The Company reserves the right to
terminate the Plan at any time and for any reason; provided,
however, that upon termination, each Participant's accrued benefit
shall be fully vested subject only to the provisions of section
4.7. A Participant's "accrued benefit" shall mean the benefit
which would be paid or payable pursuant to this Plan following the
Participant's termination of employment if the Retirement Plan had
terminated as of the same date on which the termination of the
Plan occurs (and provided for payment of accrued Retirement Plan
benefits upon the Participant's termination of employment)
multiplied by a fraction, the numerator of which is a
Participant's years of Continuous Service recognized under section
3.2 and the denominator of which is ten.
ARTICLE VII
MISCELLANEOUS
7.1 NONGUARANTEE OF EMPLOYMENT. Nothing contained in this
Plan shall be construed as a contract of employment between the
Company and any employee, as a right of any employee to be
continued in the employment of the Company as an Executive Officer
or in any other capacity, or as a limitation of the right of the
Company to discharge any of its employees, with or without cause.
7.2 ACTION BY THE COMPANY. Any action by the Company under
this Plan may be by resolution of its Board of Directors, or by
<PAGE>
any officer or officers duly authorized by resolution of said
Board to act with respect to the Plan.
7.3 AGREEMENT BINDING ON SUCCESSORS. This agreement shall
be binding upon all persons entitled to benefits hereunder, and
upon their respective heirs and legal representatives and upon the
Company, its successors and assigns.
7.4 CONSTRUCTION. Except when otherwise indicated by the
context, any masculine terminology herein shall also include
feminine, and the definition of any term herein in singular shall
also include the plural.
7.5 TITLES. Article and section titles are included for
reference purposes only and in the event of a conflict between a
title and its respective text the text shall control.
7.6 GOVERNING LAW. This Plan shall, to the extent not
superseded by the Employee Retirement Income Security Act of 1974,
be governed by the laws of the State of Wisconsin.
IN WITNESS WHEREOF, the Company has caused this Plan to be
executed on its behalf on this ____ day of October, 1994.
MOSINEE PAPER CORPORATION
By:________________________________
Daniel R. Olvey
President and Chief Executive
Officer
EXHIBIT 11
<TABLE>
MOSINEE PAPER CORPORATION
Statement of Computation of Per Share Earnings
For the Years Ended December 31, 1994, 1993 and 1992
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Net Earnings (Loss) for the Year $12,291,480 $9,636,530 ($8,500,464)
Less: The Sorg Paper Company
Preferred Stock Dividends 69,036 69,036 69,036
----------- ---------- ----------
Earnings (Loss) Available to
Mosinee Paper Corporation Common
Stock $12,222,444 $9,567,494 ($8,569,500)
=========== ========== ==========
Weighted Average Shares of Mosinee
Paper Corporation Common Stock
Outstanding During the Year 7,148,443 7,148,443 7,109,325
=========== ========== ==========
Earnings (Loss) Per Share* $ 1.7098 $ 1.3384 ($ 1.2054)
=========== ========== ==========
Earnings (Loss) Per Share Rounded
to Nearest Cent $ 1.71 $ 1.34 ($ 1.21)
=========== ========== ==========
<FN>
*Earnings per Share = Earnings Available to Mosinee Paper Corporation Common Stock
------------------------------------------------------------
Weighted Average Shares of Mosinee Paper Corporation Common
Stock Outstanding During the Year
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1994 OF MOSINEE PAPER CORPORATION AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 1,555
<SECURITIES> 0
<RECEIVABLES> 28,360
<ALLOWANCES> (2,153)
<INVENTORY> 30,600
<CURRENT-ASSETS> 63,047
<PP&E> 337,801
<DEPRECIATION> (143,780)
<TOTAL-ASSETS> 265,083
<CURRENT-LIABILITIES> 36,735
<BONDS> 0
<COMMON> 25,984
0
0
<OTHER-SE> 62,867
<TOTAL-LIABILITY-AND-EQUITY> 265,083
<SALES> 266,707
<TOTAL-REVENUES> 266,707
<CGS> 217,502
<TOTAL-COSTS> 23,234
<OTHER-EXPENSES> (580)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,010
<INCOME-PRETAX> 21,541
<INCOME-TAX> 8,500
<INCOME-CONTINUING> 13,041
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 750
<NET-INCOME> 12,291
<EPS-PRIMARY> 1.71
<EPS-DILUTED> 0
</TABLE>
