FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 0-1732
MOSINEE PAPER CORPORATION
(Exact name of registrant as specified in charter)
WISCONSIN 39-0486870
(State of incorporation) (I.R.S Employer Identification
Number)
1244 KRONENWETTER DRIVE
MOSINEE, WISCONSIN 54455-9099
(Address of principal executive office)
Registrant's telephone number, including area code: 715-693-4470
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such report), and (2) has been subject to such filing requirements
for the past 90 days.
Yes X No
----- -----
The number of common shares outstanding at March 31, 1995 was
7,148,443.
<PAGE>
MOSINEE PAPER CORPORATION
FORM 10-Q
QUARTER ENDED MARCH 31, 1995
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of
Income, Three Months Ended
March 31, 1995 (unaudited) and
March 31, 1994 (unaudited) 1
Condensed Consolidated Balance
Sheets March 31, 1995 (unaudited)
and December 31, 1994 (derived from
audited financial statements) 2
Condensed Consolidated Statements
of Cash Flows Three Months
Ended March 31, 1995 (unaudited)
and March 31, 1994 (unaudited) 3
Notes to Condensed Consolidated
Financial Statements 4
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations 5
PART II. OTHER INFORMATION
Item 3. Defaults in Senior Securities 7
Item 5. Other Information 7
Item 6. Exhibits and Reports on Form 8-K 8
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended
March 31,
($ thousands except share data -unaudited) 1995 1994
---- ----
<S> <C> <C>
Net sales $72,578 $61,995
Cost of sales 59,379 51,006
------ ------
Gross profit 13,199 10,989
------ ------
Operating expenses:
Selling and advertising 2,492 2,219
Administrative 4,342 3,543
------ -----
Total operating expenses 6,834 5,762
------ -----
Income from operations 6,365 5,227
Other income (expense):
Interest income --- 1
Interest expense ( 1,529) ( 951)
Other 862 ( 57)
------ -----
Income before income taxes and
cumulative effect adjustment 5,698 4,220
Provision for income taxes 2,293 1,700
------ -----
Income before cumulative effect
of a change in accounting
principle 3,405 2,520
Cumulative effect of a change in
accounting principle (net of
income taxes) --- ( 750)
------ -----
Net income $ 3,405 $1,770
====== =====
Income per share
before cumulative effect of a
change in accounting principle $ 0.47 $ 0.35
Cumulative effect of a change in
accounting principle
(net of income taxes) --- ( 0.10)
------ -----
Net income per share $ 0.47 $ 0.25
====== =====
Weighted average common
shares outstanding 7,148,443 7,148,443
========= =========
</TABLE>
<PAGE>
<TABLE>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
($ thousands) March 31, December 31,
1995* 1994*
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,077 $ 1,555
Receivables 28,281 26,207
Inventories 34,263 30,600
Deferred income taxes 3,999 3,999
Other 564 686
------- -------
Total current assets 68,184 63,047
------- -------
Property, plant and equipment 341,091 337,801
Less: accumulated depreciation 147,364 143,780
------- -------
Net depreciated value 193,727 194,021
------- -------
Other assets 8,350 8,015
------- -------
TOTAL ASSETS $270,261 $265,083
======= =======
LIABILITIES
Current Liabilities:
Accounts payable $ 21,509 $ 19,523
Accrued and other liabilities 14,519 16,259
Accrued income taxes 2,005 953
------- -------
Total current liabilities 38,033 36,735
Long-term debt 91,629 91,383
Deferred income taxes 21,627 21,633
Postretirement benefits 14,609 14,427
Other noncurrent liabilities 10,852 10,799
------- -------
Total liabilities 176,750 174,977
------- -------
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 70,109 66,704
------- -------
Subtotals 109,944 106,539
Treasury stock at cost ( 17,688) ( 17,688)
------- -------
Total stockholders' equity 92,256 88,851
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY $270,261 $265,083
======= =======
<FN>
*The consolidated balance sheet at March 31, 1995 is unaudited.
The December 31, 1994 consolidated balance sheet is derived from
audited financial statements.
</TABLE>
<PAGE>
<TABLE>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
<CAPTION>
Three Months Ended
March 31,
($ thousands - unaudited) 1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $3,405 $1,770
Provision for depreciation,
depletion and amortization 4,095 3,788
Recognition of deferred revenue (10) (10)
Provision for losses on accounts
receivable 105 63
(Gain) loss on property, plant and
equipment disposals (859) 51
Deferred income taxes (6) (400)
Changes in operating assets and
liabilities:
Accounts receivable (2,178) (2,010)
Inventories (3,663) (51)
Other assets (643) (293)
Accounts payable and other
liabilities 2,616 (262)
Accrued income taxes 1,052 1,073
----- -----
Net cash provided by operating activities 3,914 3,719
----- -----
Cash flows from investing activities:
Capital expenditures (4,899) (3,029)
Proceeds from property, plant and
equipment disposals 903 23
----- -----
Net cash used in investing activities (3,996) (3,006)
----- -----
Cash flows from financing activities:
Borrowings (payments) under credit
agreements 247 (989)
Dividends paid (643) (643)
----- -----
Net cash used in financing activities (396) (1,632)
----- -----
Net decrease in cash and cash
equivalents (478) (919)
Cash and cash equivalents at beginning
of year 1,555 1,521
----- -----
Cash and cash equivalents at end of
quarter $1,077 $ 602
===== =====
Supplemental Cash Flow Information:
Interest paid - net of amount
capitalized $1,741 $1,067
Income taxes paid 1,247 627
</TABLE>
<PAGE>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying financial statements in the opinion of
management reflect all adjustments which are normal and
recurring in nature and which are necessary for a fair
statement of the results for the periods presented. Some
adjustments involve estimates which may require revision in
subsequent interim periods or at year-end. Such adjustments
include interim LIFO inventory valuations and the effective
income tax rate for the year. In all regards, the financial
statements have been presented in accordance with generally
accepted accounting principles.
<TABLE>
2. Inventories consist of the following:
<CAPTION>
($ thousands) March 31, December 31,
1995 1994
---- ----
<S> <C> <C>
Raw material $16,522 $14,534
Finished goods and work
in process 20,034 17,574
Supplies 8,842 8,759
------ ------
Subtotal 45,398 40,867
Less: LIFO reserve 11,135 10,267
------ ------
Net inventories $34,263 $30,600
====== ======
</TABLE>
3. Earnings per share of common stock is based on the weighted
average number of common shares outstanding and gives effect
to applicable preferred stock dividend requirements.
4. Net income includes expenses, or credits for incentive
compensation plans based upon the company's stock price. The
company calculates this liability using the average price of
Mosinee Paper's stock at the close of each fiscal quarter as
if all earned incentive compensation plans had been exercised
on that day. For the three months ended March 31, 1995,
these plans are an after-tax expense of $350,000, or $0.05
per share, compared to the first quarter of 1994 which
produced an after-tax expense of $28,000, or less than $0.01
per share.
5. The company adopted the provisions of Statement of Financial
Accounting Standards (SFAS) No. 112, "Employers' Accounting
for Postemployment Benefits", as of January 1, 1994. The
cumulative effect for the transition obligation was an
after-tax expense of $750,000, or $0.10 per share.
6. Refer to notes to the financial statements which appear in
the 1994 annual report for the company's accounting policies
which are pertinent to these statements.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
(All $ amounts are in thousands, except per share amounts)
RESULTS OF OPERATIONS
First quarter record net sales of $72,578 were 17% above the
$61,995 reported last year. Specialty paper operations at the Pulp
and Paper Division and the company's subsidiary, Sorg Paper
Company, increased net sales by $5.5 million, or 52%, of the total
improvement over the prior year. Sales of Bay West's towel and
tissue products and Converted Products Division's laminated and
saturated paper products combined for the remaining $5 million
improvement. Stronger volumes at all operations combined with some
selling price relief, generated by unprecedented raw material cost
increase, offset some product mix weakening and provided the
increase in net sales. Strong demand for products of the paper
industry, in general, helped the aggressive marketing and
production programs achieve the record level of sales. Early into
the second quarter the effect of interest rate increases on the
economy is slowing the rate of order improvement. Selective and
general price increases have either been announced, or are
scheduled, at all operations to offset the continuing escalation
of raw materials, mainly purchased pulps, waste papers and
linerboard, for our products. During the first quarter improved
pricing provided $8 million of additional sales while volume
improvements added $3 million. The improvements were partially
offset by $1 million in less optimal product mix.
Cost of sales for the first three months of the year of $59,379
increased 16% over the year earlier level of $51,006. As a percent
of net sales, cost of sales remained steady at 82% for both
periods. The effect of unprecedented raw material cost increases
added nearly $7 million to cost of sales while higher volumes
added approximately $2 million. Some softening of product mix
lowered cost of sales for the balance. Additional increases for
pulpwood, purchased bleached pulp and linerboard are expected.
Management is dedicated to pass these higher costs on through
increased selling prices to the extent possible.
Gross profit, reflecting the above, increased 20% to $13,199 for
the first quarter from the $10,989 reported for the same period
last year. Gross profit as a percent of sales remained at 18% for
both periods.
Operating expenses for the first quarter of $6,834 rose $1,072, or
nearly 19%, over the $5,762 reported at this time last year.
Selling expenses increased 12% over the prior year. General and
administrative expenses, excluding the effect of adjustments to
the accrued liability for incentive compensation programs based on
the market price of the company's stock, rose $261, or 7% over
last year. Last year, slightly higher stock prices increased the
liability resulting in an expense of $47. Higher stock prices by
the end of the first quarter this year caused an expense of $585.
General inflationary increases in operating expenses, principally
employee compensation related, along with incentive compensation
accrual increases and employee training costs were partially
offset by cost reduction programs in other areas.
<PAGE>
Reflecting the above, income from operations for the first quarter
of $6,365 increased $1,138, or 22% from the year earlier level of
$5,227.
Interest expense of $1,529 increased substantially from the year
earlier amount of $951 due to a significant increase in interest
rates in effect when comparing the first quarter of 1994 to the
first quarter of 1995 even though the average debt level decreased
$5,000 for those same periods. Other income and expense of $862
for the first quarter 1995 included $868 of capital gain on land
sales, or $0.07 per share.
Accordingly, income before the cumulative effect of a change in
accounting principle and income taxes reached $5,698 for the first
quarter of 1995 compared to $4,220 during the same period in 1994.
The provisions for income taxes of $2,293 and $1,700, for the
first quarters of 1995 and 1994 respectively, are based on an
effective income tax rate of approximately 40%.
The company adopted Statement of Financial Accounting Standards
No. 112, "Employers' Accounting for Postemployment Benefits"
effective January 1, 1994. The accumulated liability as of
December 31, 1993 for these benefits required an after-tax expense
of $750, or $0.10 per share.
Reflecting the above, net income for the first quarter of $3,405,
or $0.47 per share, increased from the $1,770, or $0.25 per share.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities of $3,914 increased slightly
from $3,719 provided during the first three months of 1994.
Improved income from operations provided the additional cash. Cash
used in investing activities included $4,899 of capital
expenditures and was partially offset by cash received of $903
from timberland sales. The primary capital project during the
quarter was the installation of an automatic roll wrap system at
the company's Pulp and Paper Division. This new equipment will
lower labor costs and provide better roll tracking of the finished
goods inventory. The project became operational near the end of
the first quarter.
Cash utilized in financing activities consisted of additional
borrowing of $247 to fund capital spending and payment of cash
dividends to shareholders totalled $643. Cash provided from
operations and utilized in financing and investing activities
reduced cash by $478 from the year end level of $1,555 to the
March 31, 1995 balance of $1,077.
The company maintains a credit agreement with one bank acting as
agent and certain financial institutions as lenders to issue up to
$90,000 of unsecured borrowing less the amount of commercial paper
outstanding and also maintains a loan agreement with another bank
for $20,000, making the total amount available for borrowing of
$110,000. As of March 31, 1995 the company had issued and
outstanding $45,629 of commercial paper and had other borrowing
under the agreements of $46,000 for a total debt of $91,629. This
leaves approximately $18,000 available to supplement cash provided
<PAGE>
from operations for uses in the business which, at the present
time, the company believes to be adequate for the operation of the
business and normal capital expenditures.
Long-term debt as a percent of total capitalization declined to
50% from the prior year-end level of 51%. Working capital of
$30,151 increased $3,839 from the end of 1994 reflecting increased
accounts receivable from higher sales and decreases in accrued and
other liabilities. The current ratio, reflecting this increase,
improved to 1.8:1 at the end of the first quarter from the year
end level of 1.7:1.
PART II - OTHER INFORMATION
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
The Sorg Paper Company, a subsidiary of the registrant, omitted
the payment of its quarterly cash dividends of $1.37 per share,
payable April 1, 1995 to shareholders of record, on its 5-1/2%
cumulative preferred stock, par value $100. The number of 5-1/2%
cumulative preferred shares outstanding is 12,552 and the amount
of dividends in arrears is $465,801.
ITEM 5. OTHER INFORMATION:
On April 20, 1995, the company announced a 10% stock dividend
payable May 18, 1995 to shareholders of record as of May 4,
1995. The company also declared a cash dividend of $0.09 per
share payable May 18, 1995 on all shares on a post-dividend
basis to shareholders of record as of May 4, 1995.
At the annual meeting of shareholders held April 20, 1995,
the shareholders approved an amendment to the company's
restated articles on incorporation which increased the number
of authorized shares of common stock from 15,000,000 to
30,000,000 and changed the company's authorized common stock
from $2.50 par value per share to shares without par value.
The company has no present plans to issue any of the
additional authorized common stock nor are there any
commitments for the issuance of the additional common stock
at this time except in connection with employee stock option
plans currently in effect.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
Page
(a) Exhibits required by Item 601 of
Regulation S-K.
(11) Computation of earnings per share 10
(b) Reports on Form 8-K:
None
<PAGE> SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
MOSINEE PAPER CORPORATION
May 9, 1995 GARY P. PETERSON
Gary P. Peterson
Senior Vice President-Finance,
Secretary and Treasurer
(On behalf of the Registrant and as
Principal Financial Officer)
Exhibit 11
MOSINEE PAPER CORPORATION
MOSINEE, WISCONSIN
COMPUTATION OF PER SHARE EARNINGS
<PAGE>
EXHIBIT 11
<TABLE>
MOSINEE PAPER CORPORATION
Statement of Computation of Per Share Earnings
For the Periods Ended March 31, 1995 and 1994
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Net Earnings $3,405,123 $1,769,581
Less: The Sorg Paper Company
Preferred Stock Dividends 17,196 17,196
--------- ---------
Earnings Available to Mosinee
Paper Corporation Common Stock $3,387,927 $1,752,385
========= =========
Weighted Average Shares of Mosinee
Paper Corporation Common Stock
Outstanding During the Year 7,148,443 7,148,443
========= =========
Earnings Per Share* $ 0.4739 $ 0.2451
========= =========
Earnings Per Share Rounded
to Nearest Cent $ 0.47 $ 0.25
========= =========
<FN>
*Earnings per Share = Earnings Available to Mosinee Paper
Corporation Common Stock
-----------------------------------
Weighted Average Shares of Mosinee
Paper Corporation Common Stock Outstanding
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS
ENDED MARCH 30, 1995 OF MOSINEE PAPER CORPORATION AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-30-1995
<CASH> 1,077,429
<SECURITIES> 0
<RECEIVABLES> 30,586,072
<ALLOWANCES> 2,305,423
<INVENTORY> 34,262,928
<CURRENT-ASSETS> 68,184,591
<PP&E> 341,090,597
<DEPRECIATION> 147,363,942
<TOTAL-ASSETS> 270,261,411
<CURRENT-LIABILITIES> 38,032,968
<BONDS> 91,629,182
<COMMON> 25,985,181
0
0
<OTHER-SE> 66,271,029
<TOTAL-LIABILITY-AND-EQUITY> 270,261,411
<SALES> 72,578,111
<TOTAL-REVENUES> 72,578,111
<CGS> 59,379,203
<TOTAL-COSTS> 66,213,348
<OTHER-EXPENSES> (861,866)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,528,506
<INCOME-PRETAX> 5,698,123
<INCOME-TAX> 2,293,000
<INCOME-CONTINUING> 3,405,123
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,405,123
<EPS-PRIMARY> .47
<EPS-DILUTED> 0
</TABLE>
