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, 1996
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, 1996 was 7,862,740.
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MOSINEE PAPER CORPORATION
FORM 10-Q
QUARTER ENDED MARCH 31, 1996
PAGE NO.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of
Income, Three Months Ended
March 31, 1996 (unaudited) and
March 31, 1995 (unaudited) 1
Condensed Consolidated Balance
Sheets March 31, 1996 (unaudited)
and December 31, 1995 (derived from
audited financial statements) 2
Condensed Consolidated Statements
of Cash Flows Three Months
Ended March 31, 1996 (unaudited)
and March 31, 1995 (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 7
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
($ thousands except share data-unaudited) 1996 1995
<S> <C> <C>
Net sales $76,176 $72,578
Cost of sales 58,014 59,379
Gross profit 18,162 13,199
Operating expenses:
Selling 2,534 2,492
Administrative 6,624 4,342
Total operating expenses 9,158 6,834
Income from operations 9,004 6,365
Other income (expense):
Interest expense (1,301) (1,529)
Other 109 862
Income before income taxes 7,812 5,698
Provision for income taxes 3,130 2,293
Net income $4,682 $3,405
Net income per share $ 0.59 $ 0.43
Weighted average common
shares outstanding 7,862,740 7,862,740
</TABLE>
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<TABLE>
<CAPTION>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ thousands) March 31, December 31,
ASSETS 1996* 1995*
<S> <C> <C>
Cash and cash equivalents $ 223 $ 2,416
Receivables 26,805 26,533
Inventories 35,581 33,641
Deferred income taxes 3,799 4,799
Other 552 364
Total current assets 66,960 67,753
Property, plant and equipment 358,216 354,120
Less: accumulated depreciation 161,333 157,555
Net depreciated value 196,883 196,565
Other assets 8,868 8,627
TOTAL ASSETS $272,711 $272,945
LIABILITIES
Accounts payable $16,624 $20,583
Accrued and other liabilities 17,260 19,389
Accrued income taxes 2,334 1,131
Total current liabilities 36,218 41,103
Long-term debt 78,111 79,307
Deferred income taxes 25,356 24,646
Postretirement benefits 15,359 15,001
Other noncurrent liabilities 10,538 10,441
Total liabilities 165,582 170,498
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 - no par value, authorized
30,000,000 shares, 11,433,205 shares issued 58,678 58,678
Retained earnings 64,898 60,216
Subtotals 123,576 118,894
Treasury stock at cost (17,702) (17,702)
Total stockholders' equity 105,874 101,192
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $272,711 $272,945
<FN>
*The consolidated balance sheet at March 31, 1996 is unaudited. The
December 31, 1995 consolidated balance sheet is derived from audited financial
statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
Three Months Ended
March 31,
($ thousands - unaudited) 1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income $ 4,682 $ 3,405
Provision for depreciation, depletion
and amortization 4,237 4,095
Provision for losses on accounts receivable 90 105
Gain on property, plant and equipment
disposals ( 117) ( 859)
Deferred income taxes 1,710 ( 6)
Changes in operating assets and liabilities:
Accounts receivable ( 362) ( 2,178)
Inventories ( 1,940) ( 3,663)
Other assets ( 855) ( 643)
Accounts payable and other liabilities ( 2,746) 2,606
Accrued income taxes 1,203 1,052
Net cash provided by operating activities 5,902 3,914
Cash flows from investing activities:
Capital expenditures ( 6,317) ( 4,899)
Proceeds from property, plant and
equipment disposals 126 903
Net cash used in investing activities ( 6,191) ( 3,996)
Cash flows from financing activities:
Borrowings (payments) under credit agreements ( 1,196) 247
Dividends paid ( 708) ( 643)
Net cash used in financing activities ( 1,904) ( 396)
Net decrease in cash and cash equivalents ( 2,193) ( 478)
Cash and cash equivalents at beginning of year 2,416 1,555
Cash and cash equivalents at end of period $ 223 $ 1,077
Supplemental Cash Flow Information:
Interest paid - net of amount capitalized $1,510 $ 1,741
Income taxes paid 217 1,247
</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. 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,
1996 1995
<S> <C> <C>
Raw material $14,097 $15,827
Finished goods and work in process 20,660 20,693
Supplies 9,055 8,896
Subtotal 43,812 45,416
Less: LIFO reserve 8,231 11,775
Net inventories $35,581 $33,641
</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 dividends.
Sorg Paper Company preferred stock dividends in arrears for the three
months ended March 31, 1996 and 1995 were $17,196.
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, 1996, these plans resulted in an after-tax expense of
$1,284,000, or $0.16 per share, compared to the first quarter of 1995
which produced an after-tax expense of $350,000, or $0.04 per share.
5. Prior year per share data has been restated for the May 18, 1995 ten
percent stock dividend.
6. Refer to notes to the financial statements which appear in the 1995
annual report for the company's accounting policies which are
pertinent to these statements.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(All $ amounts are in thousands, except per share
amounts)
RESULTS OF OPERATIONS
First quarter net sales of $76,176 increased 5% over the $72,578 reported
last year. This sales increase consisted of over $2 million due to
improved pricing and over $2 million for increased volume, but was offset
by over $1 million in less optimal product mix. Specialty paper
<PAGE>
operations at the Pulp and Paper Division and the company's subsidiary,
The Sorg Paper Company, for the first quarter were down slightly from the
amount reported for the same period last year. Sales for the Converted
Products Division's laminated and saturated paper products remained
relatively consistent from quarter to quarter. However, sales at Mosinee
Paper's Bay West Paper subsidiary for towel and tissue products showed
nearly a $5 million improvement over the same period last year, mainly due
to increased volume. Selling prices at Bay West and the specialty plants
held steady or increased slightly while raw material costs for pulp and
wastepaper began to decline.
Cost of sales for the first three months of the year of $58,014 decreased
2% over the year earlier level of $59,379. Cost of sales as a percent of
net sales was at 76% for the first quarter 1996, down from the 82%
reported for the first quarter last year. Lower raw material costs were
principally responsible for the reduction in cost of sales.
Gross profit, reflecting the above, increased 38% to $18,162 for the first
quarter from the $13,199 reported for the same period last year. Gross
profit as a percent of sales for the first quarter 1996 increased to 24%
compared to the 18% for the first quarter last year.
Operating expenses for the first quarter of $9,158 rose $2,324, or 34%,
over the $6,834 reported at this time last year. Selling expenses only
increased 2% over the prior year, while administrative expenses, excluding
the effect of expense for incentive compensation programs based on the
market price of the company's stock, rose $728, or 19% over last year.
Last year, a rise in stock prices increased the liability for incentive
compensation programs resulting in an expense of $585. Higher stock prices
by the end of the first quarter this year reflected an expense of $2,139.
General inflationary increases in operating expenses, along with employee
compensation and retirement expense increases based on increased company
profitability, were partially offset by cost reduction programs in other
areas.
Reflecting the above, income from operations for the first quarter of
$9,004 increased $2,639, or 41% from the year earlier level of $6,365.
Interest expense of $1,301 decreased $228 from the year earlier amount of
$1,529 due to a $11,000 decrease in the average principal balance of
outstanding long-term debt and a slight reduction in interest rates that
were in effect when comparing the first quarter of 1996 to the first
quarter of 1995. Other income and expense included $103 and $867 of gain
on land sales for 1996 and 1995, respectively.
Accordingly, income before taxes reached $7,812 for the first quarter of
1996 compared to $5,698 during the same period in 1995. The provisions for
income taxes of $3,130 and $2,293, for the first quarters of 1996 and 1995
respectively, are based on an effective income tax rate of approximately
40%.
Reflecting the above, net income for the first quarter 1996 of $4,682, or
$0.59 per share, increased from the $3,405, or $0.43 per share reported
for the same period last year.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities of $5,902 increased by over 50% from
$3,914 provided during the first three months of 1995, with improved
income from operations providing most of the additional cash. Cash used
in investing activities included $6,317 of capital expenditures and was
partially offset by cash received of $126 from timberland sales. The
primary capital spending during the quarter was $3,702 for towel and
tissue equipment and a warehouse addition at the Bay West Paper operation.
This new equipment and building addition added capacity to keep pace with
the sales volume increases at Bay West.
Cash utilized in financing activities consisted of payments of credit
agreements totalling $1,196 and payment of cash dividends to shareholders
of $708. Cash provided from operations less amounts utilized in financing
and investing activities reduced cash by $2,193 from the year-end level of
$2,416 to the March 31, 1996 balance of $223.
The company maintains a credit agreement with one bank acting as agent and
certain financial institutions as lenders to issue up to $80,000 of
unsecured borrowing less the amount of commercial paper outstanding. This
agreement has been reduced $10,000 from the $90,000 reported last quarter.
The company also maintains a loan agreement with another bank for $20,000,
making the total amount available for borrowing of $100,000. As of March
31, 1996 the company had issued and outstanding $30,111 of commercial
paper and had other borrowings under the agreements of $48,000 for a total
debt of $78,111. This leaves approximately $22,000 available to supplement
cash provided from operations for uses in the business which, at the
present time, the company believes to be adequate for the operation of the
business and planned capital expenditures.
Long-term debt as a percent of total capitalization declined to 42.5% from
the prior year-end level of 43.9%. Working capital of $30,742 increased
$4,092 from the end of 1995 reflecting increased inventories and a large
decrease in accounts payable. The current ratio, reflecting this increase,
improved to 1.85:1 at the end of the first quarter from the year end level
of 1.65:1.
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, 1996 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 $534,837.
ITEM 5. OTHER INFORMATION:
On April 18, 1996, the company announced a four-for-three stock split
payable May 15, 1996 to shareholders of record as of May 1, 1996. The
company also declared a cash dividend of $0.08 per share payable May 15,
1996 on all shares post-stock split basis to shareholders of record as of
May 1, 1996.
The Board of Directors also approved the establishment of a Dividend
Reinvestment Program for Mosinee Paper Corporation shareholders.
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
(a) Exhibits required by Item 601 of Regulation S-K
None
(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 7 , 1996 GARY P. PETERSON
Gary P. Peterson
Senior Vice President-Finance,
Secretary and Treasurer
(On behalf of the Registrant and as
Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31,
1996 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-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 222,531
<SECURITIES> 0
<RECEIVABLES> 30,056,694
<ALLOWANCES> 3,251,997
<INVENTORY> 35,580,778
<CURRENT-ASSETS> 66,959,684
<PP&E> 358,216,161
<DEPRECIATION> 161,333,227
<TOTAL-ASSETS> 272,710,625
<CURRENT-LIABILITIES> 36,217,943
<BONDS> 78,110,900
<COMMON> 58,678,056
0
0
<OTHER-SE> 64,897,384
<TOTAL-LIABILITY-AND-EQUITY> 272,710,625
<SALES> 76,175,596
<TOTAL-REVENUES> 76,175,596
<CGS> 58,014,426
<TOTAL-COSTS> 67,171,981
<OTHER-EXPENSES> (109,044)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,300,976
<INCOME-PRETAX> 7,811,683
<INCOME-TAX> 3,130,000
<INCOME-CONTINUING> 4,681,683
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,681,683
<EPS-PRIMARY> .59
<EPS-DILUTED> 0
</TABLE>
