FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(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, 1995
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 executive office) (I.R.S. Employer
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, NO PAR VALUE
(Title of each class)
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
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 20, 1996, the aggregate market value of the common stock shares
held by non-affiliates was approximately $244,273,872.
The number of common shares outstanding at March 1, 1996 was 7,862,740.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy statement dated March 19, 1996; Pages 3 to 11* and 15* (Part III)
*To the extent noted herein
<PAGE>
TABLE OF CONTENTS
PAGE
PART I ...................................................... 1
Item 1. BUSINESS ............................................ 1
Item 2. PROPERTIES .......................................... 6
Item 3. LEGAL PROCEEDINGS ................................... 8
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . 8
PART II ..................................................... 8
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS..................................... 8
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 ......... 17
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE..................... 38
PART III .................................................... 38
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . 38
Item 11. EXECUTIVE COMPENSATION ............................. 38
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT............................................... 39
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ..... 39
PART IV ..................................................... 40
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K..................................... 40
<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 West products are sold through independent
distributors to end users both domestically and internationally.
<PAGE>
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 1995,
export sales of the company's products amounted to nearly $28 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 1995, Pulp and Paper required 32,000 tons, or 26% of total fiber
requirements, of bleached pulp which it purchased on the open market. The
average cost of this bleached pulp began the year at $630 per ton and
increased steadily to the year-end average cost of $870 per ton. 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 Sorg used 27,000
tons of bleached pulp, or 74% of its fiber requirements at average cost
per ton ranging from $540 at the start of the year to $775 per ton by
year-end. The balance of purchased fiber represented waste papers,
generally pre-consumer, available from printers and other paper
converters. Pulp remains readily available with price being subject to
market demand.
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 the cost per ton of waste fiber increased
dramatically in response to the increased demand by deink facilities here
and overseas. Costs per ton of file stock waste paper ranged from $240 at
the start of the year, peaked at $280 in May and finished the year at $105
due to the market glut of wastepaper. Bay West consumed over 125,000 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 manufacturers. During 1995,
Pulp and Paper consumed 33,000 cords of pulpwood, or 16% of its total wood
requirements, from its own forests. The balance was available on the open
market. The average price for market pulpwood remained virtually the same
throughout the year. The availability of adequate pulpwood and chips is
satisfactory with prices expected to rise slightly during 1996.
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 for the first half of 1995. As
a result, linerboard producers raised prices significantly during that
time period. Demand began softening during the last part of the year with
price relief being experienced very late in the year. While linerboard
<PAGE>
became difficult to get through the first three quarters, Converted
Products was able to procure adequate supplies due to long-term
relationships with major suppliers. By year-end 1995, linerboard was in
ample supply.
All other chemicals, dyes and sundry raw materials have remained readily
available with no anticipated shortages seen during 1996.
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.
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 1995.
BACKLOG
The sales backlog at year-end was almost $14 million, down $7 million from
the record prior year-end, but it is at a more manageable level. The
backlog was nearly $11 million at specialty paper operations, and amounted
to approximately twenty-eight days. 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 1996.
<PAGE>
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 year over
capacity amounts being absorbed by higher demand resulting from a strong
economy throughout the year.
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, if 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
successful in raising selling prices to recover a significant portion of
the rise in purchased pulp costs. A stabilization of these pulp costs into
1996 will enable the company to regulate selling prices based on the
competition and not on the rapid increases in raw material costs.
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
improving economy and a reduction in market capacity increases has enabled
Bay West to increase prices to keep up with purchased waste paper cost
increases which showed signs of stabilizing and even declining by year-
end.
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 on the 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
<PAGE>
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
Item 3, Legal Proceedings, and in Note 13 of the Notes to Consolidated
Financial Statements, page 36. As noted therein, the company is of the
opinion that any costs associated with environmental claims will not have
a material adverse effect on the company's operations, liquidity or
consolidated financial condition.
EMPLOYEES
The company had 1,284 employees at the end of 1995. Hourly employees at
the company's paper making operations are covered under collective
bargaining agreements. During 1993 negotiations were conducted which led
to four year agreement at Sorg Paper. During 1994 the company negotiated
and signed a five-year labor agreement at Bay West's Middletown, Ohio
mill. During 1995, the company agreed to a five-year labor contract at
Mosinee's Pulp and Paper Division. 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.
EXECUTIVE OFFICERS OF THE COMPANY
The following information relates to executive officers of the Company as
of March 19, 1996:
SAN W. ORR, JR., 54
Chairman of the Board since 1987
Director since 1972
Also Attorney, Estates of A.P. Woodson & Family and
Chairman of the Board of Wausau Paper Mills Company
Previously, Vice Chairman of the Board (1978-1987);
RICHARD L. RADT, 64
Vice Chairman of the Board since August, 1993
Director since 1988
Previously, President and Chief Executive Officer (1987-1993) and
President and Chief Executive Officer of Wausau Paper Mills Company
(1977-1987)
DANIEL R. OLVEY, 47
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 (1985-
1989)
<PAGE>
GARY P. PETERSON, 47
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, 49
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 17 persons who perform corporate
accounting and financial, human resource and MIS services are located in
the corporate headquarters
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: 512
<CAPTION>
Practical 1995 Operating
PRODUCT CAPACITY* (TONS) ACTUAL (TONS) RATE
<S> <C> <C> <C>
Paper 109,800 109,800 100%
Pulp 91,900 91,200 99%
</TABLE>
<TABLE>
SORG PAPER
LOCATION AND CAPACITY
Middletown, OH
Number of employees: 210
<CAPTION>
Practical 1995 Operating
PRODUCT CAPACITY* (TONS) ACTUAL (TONS) RATE
<S> <C> <C> <C>
Paper 32,200 31,300 97%
</TABLE>
<PAGE>
<TABLE>
BAY WEST
LOCATION AND CAPACITY
Towel and Tissue Paper Mill
Middletown, OH
Number of employees: 165
<CAPTION>
Practical 1995 Operating
PRODUCT CAPACITY* (TONS) ACTUAL (TONS) RATE
<S> <C> <C> <C>
Towel 63,000 54,000 86%
Tissue 35,000 30,000 86%
Deink Pulp 105,000 87,000 83%
</TABLE>
<TABLE>
LOCATION AND CAPACITY
Harrodsburg, KY
Number of employees: 309
<CAPTION>
Practical 1995 Operating
PRODUCT CAPACITY* (TONS) ACTUAL (TONS) RATE
<S> <C> <C> <C>
Converted
Towel & Tissue 129,000 80,000 62%
</TABLE>
<TABLE>
CONVERTED PRODUCTS
LOCATION AND CAPACITY
Columbus, WI
Number of employees: 46
Jackson, MS
Number of employees: 21
<CAPTION>
Practical 1995 Operating
PRODUCT CAPACITY* (TONS) ACTUAL (TONS) RATE
<S> <C> <C> <C>
Laminated
Papers 145,000 41,100 28%
</TABLE>
MOSINEE INDUSTRIAL FOREST
LOCATION AND CAPACITY
Solon Springs, WI
1995 production: 35,000 cords
1995 acreage: 82,700 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.
<PAGE>
ITEM 3. LEGAL PROCEEDINGS.
The company, along with other paper companies, is part of a civil
investigation by the U.S. Department of Justice begun in 1994 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 1986, the Wisconsin Department of Natural Resources ("DNR") determined
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 and remediation work at the site is now substantially
complete.
The company has been named as a defendant in an action brought on behalf
of the DNR in which the DNR seeks unspecified forfeitures. The DNR
alleges that, beginning in August 1994, the company exceeded certain
permitted air emissions and that the modification of the Pulp and Paper
Division's recovery boiler and smelt tank increased the amount of
emissions of certain pollutants in violation of the company's emission
permit. The company has denied liability for such claims and intends to
vigorously defend this action. Under the terms of the new proposed draft
permit issued by the DNR on July 21, 1995, the operation of the Division's
recovery boiler and smelt tank are in compliance with DNR requirements.
Based on information now available to the company, the company believes
that any additional costs associated with these landfills or any liability
incurred by the company in connection with recovery boiler and smelt tank
litigation will not have a material adverse effect on the company's
operations, liquidity or consolidated financial condition.
In the ordinary course of conducting business, the company also becomes
involved in other issues, investigations, administrative proceedings and
litigation including matters relating to the environment. 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 or adverse effect on the operations, liquidity or
consolidated 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.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The company's common stock is traded on The Nasdaq Stock Market under
the symbol MOSI. The number of shareholders of record as of February 29,
1996 was 1,760. In addition, the company has received identification of
<PAGE>
2,755 non-objecting beneficial owners who own stock in "street name" or
who are institutional owners. The company also believes that it has
approximately 631 beneficial owners who either did not reply or who object
to being disclosed. The total estimated number of shareholders as of
February 29, 1996 is 5,146. Information related to high and low closing
prices and dividends is set forth on page 38. 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 30.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
<CAPTION>
($ thousands except share data)
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Net Sales $305,570 $266,707 $244,821 $225,512 $197,424
Cost of sales 249,077 217,502 201,317 195,034 166,312
Gross profit 56,493 49,205 43,504 30,478 31,112
Operating expenses(1) 26,787 23,234 25,147 23,787 26,819
Income from operations(1) 29,706 25,971 18,357 7,191 4,293
Interest expense 6,066 5,010 6,040 7,685 2,215
Other income (expense)(3) 1,470 580 5,070 553 (59)
Income before income taxes 25,110 21,541 17,387 59 2,019
Income taxes 9,925 8,500 7,750 22 1,117
Net income (loss)(2) (4) 15,185 12,291 9,637 (8,500) 902
Net cash provided by
operating activities 30,902 25,926 26,936 16,201 9,722
Working capital 26,650 26,312 21,295 13,413 15,967
Capital additions 17,741 20,377 12,663 14,314 113,546
Depreciation, amortization
and depletion 16,633 15,684 15,017 15,839 10,859
Total assets 272,945 265,083 252,061 247,702 249,485
Long-term debt 79,307 91,383 96,260 100,000 110,085
Stockholders' equity 101,192 88,851 79,133 72,070 80,942
Total capitalization 180,499 180,234 175,393 172,070 191,027
Common stock:
Net income (loss) per
share(2) (4) (5) 1.92 1.55 1.22 (1.10) .11
Book value per share (5) 12.87 11.30 10.06 9.16 10.41
Dividends declared
per share (5) .36 .33 .33 .33 .33
Weighted average shares
outstanding (5) 7,862,740 7,862,740 7,862,740 7,820,257 7,755,658
Number of stockholders
at year-end 4,521 4,626 4,488 4,804 4,520
<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 $750 thousand expense for adoption of SFAS No. 112.
(5) Prior year share data restated for the May 18, 1995 10% stock dividend.
</TABLE>
<PAGE>
<TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
<CAPTION>
OPERATIONS REVIEW
NET SALES
($ THOUSANDS) 1995 1994 1993
<S> <C> <C> <C>
Net sales $305,570 $266,707 $244,821
Percent increase 15% 9% 9%
</TABLE>
Sales increased $39 million, or 15%, over the prior year. All business
units experienced increased revenue. In aggregate, tons sold were flat in
comparison to the tonnage sold in 1994. Foreign sales increased to $28.7
million, or 10% over the prior year and comprise 9% of total sales.
During the first half of 1995, the strong economy increased demand in most
areas of the paper industry. At the same time, raw material costs
increased dramatically. Both factors propelled selling prices with little
gain in net margins. Selling prices continued to increase at the Bay West
facility in the last half of the year while specialty paper prices
remained relatively constant. In summary, volume remained relatively
consistent while price and product mix accounted for the annual change in
sales dollars from 1995 to 1994.
During 1994, sales increased $22 million, or 9% over the prior year. All
business units experienced increased sales revenue and volume of product
sold. Tons sold increased 7% over the prior year's level of 238,000 tons,
with Bay West accounting for over 80% of the total increase. The strong
economy of 1994 aided in not only increasing volumes, but also margins as
the mix of product sold improved. Strong volume increases added nearly
$20 million and a more optimal product mix added $4 million. These
increases were partially offset by unfavorable pricing 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 $4 million offset some of
the benefit of additional volume.
<TABLE>
GROSS PROFIT ON SALES
<CAPTION>
($ thousands) 1995 1994 1993
<S> <C> <C> <C>
Gross profit on sales $56,493 $49,205 $43,504
Percent increase 15% 13% 43%
Gross profit margin 18% 18% 18%
</TABLE>
<PAGE>
Gross profit of $56 million increased 15% over the $49 million reported in
1994. Gross profit margins remained relatively constant from year to year,
but increased dramatically in the last quarter of 1995 to 21% because of
improved selling prices and lower raw material costs at the Bay West
facility. Bay West's selling prices continued to increase throughout the
year, while raw material costs increased during the first half of 1995 and
then rapidly decreased in the second half of the year resulting in a
significant change in gross margin. Specialty paper margins remained
constant at the Pulp and Paper facility, while Sorg's margins were
negatively impacted because of selling prices not keeping pace with pulp
cost increases.
Fiber represents approximately half 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 Bay West facility obtains 100% of its fiber needs
from the wastepaper market. Wastepaper prices rose during the first half
of 1995 and then fell 63% during the last half of 1995 from its peak
price. Prices of pulp and linerboard used by specialty papers and the
Converted Products Division, respectively, rose steadily through the fall
of 1995 and then began to decrease in the fourth quarter. Both Pulp and
Paper and Converted Products selling prices generally kept pace with these
raw material costs. The Sorg operations were unable to pass along all raw
material cost increases and saw gross profit decrease during the year.
In 1994, gross profit rose to $49 million, an increase of 13% over the $44
million reported the prior year. Gross profit margins remained at 18%.
Increased productivity at the Bay West facilities, along with 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 offset lower selling prices and aided in the
improvement of gross profit.
During 1993 gross profit of nearly $44 million rose 43% over the $30
million reported in the prior year and gross profit margin improved to
18%. The improvement in gross profit primarily resulted from productivity
improvements at the Bay West towel and tissue mill during the year. Gross
profit also increased at all other operating units during the year. Strong
volume increases combined with aggressive cost reduction programs offset
lower selling prices at all units. Raw material prices remained stable
until near the end of the year when price increases were announced.
<TABLE>
OPERATING EXPENSES
<CAPTION>
($ THOUSANDS) 1995 1994 1993
<S> <C> <C> <C>
Selling $10,383 $9,857 $9,221
Percent increase/(decrease) 5% 7% (8%)
Administrative 16,404 13,377 15,926
Percent increase/(decrease) 23% (16%) 20%
Total operating expenses 26,787 23,234 25,147
Percent increase/(decrease) 15% (8%) 8%
As a percent of net sales 9% 9% 10%
</TABLE>
Selling expenses increased $0.5 million in 1995 over 1994. Increased
employee relocation costs, promotional expenses and general inflation
account for the majority of the increase. Administrative expenses
increased $3 million in comparison to prior year levels. Included in
<PAGE>
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 1995, the market price for the company's
stock increased, resulting in a charge of $0.9 million compared to a
credit of $1 million in 1994. The balance of the difference of $1.1
million is comprised principally of increased incentive compensation
expense, retirement plan expenses and legal expenses along with general
inflationary increases.
Selling expenses increased $0.6 million in 1994 over that of 1993.
General inflationary increases for salaries and wages along with increased
selling incentive compensation and higher promotional expenses, primarily
at Bay West, offset reductions in other costs and accounted for the
overall increase.
The $2.5 million decline in administrative expenses in 1994 from the prior
year level was caused principally by the SAR plans. During 1994, the
market price for the company's stock declined, resulting in a credit of $1
million compared to a charge of $1.7 million in 1993, due to an increase
in the market price. Salaried employment reductions and cost reduction
program efforts offset general inflationary increases and increased costs
to the company's 401-k plans due to increased company earnings.
During 1993, the costs associated with some promotion programs were
classified as reduction of selling prices and accounted for the majority
of the change in selling 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 $1 million credit to expense in 1992 when the company's
stock price had fallen at year end. Cost reduction programs helped to
offset modest inflationary increases in salary and benefit expenses
incurred at all operating units.
<TABLE>
INCOME FROM OPERATIONS
<CAPTION>
($ THOUSANDS) 1995 1994 1993
<S> <C> <C> <C>
Income from operations
$29,706 $25,971 $18,357
Percent increase 14% 41% 155%
</TABLE>
Record income from operations rose to $30 million, 14% over the prior
year. Increased selling prices and improved Bay West profit margins,
combined with aggressive cost reduction programs in all operating units
led to the record level.
In 1994, income from operations increased to $26 million, $8 million ahead
of 1993's level of $18 million. Strong sales volumes and some needed
relief in pricing along with cost reduction efforts principally accounted
for the improvement.
<PAGE>
During 1993, selling prices for paper, particularly in the tissue market,
remained below the prior year which had also been adversely affected by
depressed prices. Lower operating costs and higher sales volumes at all
facilities, especially the Bay West towel and tissue mill during the year,
more than offset the lower selling prices and resulted in the strong
improvement.
<TABLE>
OTHER INCOME AND EXPENSES
<CAPTION>
($ THOUSANDS) 1995 1994 1993
<S> <C> <C> <C>
Patent infringement award - - $5,529
Interest expense $6,066 $5,010 6,040
Percent increase/(decrease) 21% (17%) (21%)
Other income/(expense) 1,470 580 (459)
</TABLE>
Interest expense on commercial paper and other long-term debt totalled
$6.1 million in 1995 compared to $5 million in 1994. Higher interest
rates offset lower borrowings resulting in the $1.1 million increase. The
average debt level for 1994 was also reduced from the prior year. This,
along with expiration of the interest rate protection agreement, accounted
for the decrease in interest expense. In 1993, interest expense was $6
million and was impacted by higher borrowings and the cost of an interest
rate protection agreement. Immaterial amounts of interest were
capitalized in all years.
Other income of $1.5 million in 1995 and $0.6 million in 1994 resulted
principally from the sale of timberlands incompatible with the company's
fiber needs. Other expense in 1993 of $0.5 million was comprised of a
number of immaterial items, the largest of which was a legal settlement
with the Institute of Paper Chemistry for past dues of $0.1 million.
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 $5.5
million, including interest.
<TABLE>
INCOME TAXES
<CAPTION>
($ THOUSANDS) 1995 1994 1993
<S> <C> <C> <C>
Income tax provision $9,925 $8,500 $7,750
Percent increase 17% 10% N/A
Effective tax rate 39.5% 39.5% 44.6%
</TABLE>
The income tax provision varies with reported income, and federal, state
and local tax rates. The 1995 and 1994 provisions increased due to
continued improvement in earnings. The effective tax rates were 39.5% for
1995 and 1994.
<PAGE>
The 1993 provision for income taxes reflected an increase in earnings and
increased federal tax rates. The tax provision of nearly $8 million in
1993 resulted 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 earning of nearly $1
million to recognize the adjustment of current and deferred taxes.
<TABLE>
NET INCOME
<CAPTION>
($ THOUSANDS) 1995 1994 1993
<S> <C> <C> <C>
Net income $15,185 $12,291 $9,637
Percent increase 24% 28% N/A
Net income per share* 1.92 1.55 1.22
Percent increase 24% 27% N/A
<FN>
* All applicable information has been restated for the May 18, 1995 10%
stock dividend.
</TABLE>
Reflecting the above, record net income of $15.2 million, or $1.92 per
share, rose $2.9 million over the prior year level of $12.3 million, or
$1.55 per share.
Net income in 1994 of $12.3 million was impacted by Statement of Financial
Accounting Standards (SFAS) No. 112, Employers' Accounting for
Postemployment Benefits. SFAS NO.112 was adopted as of January 1, 1994,
the required adoption date, by recognizing a cumulative effect expense of
$750,000, net of income taxes of $400,000.
Net income for 1993 of $9.6 million, or $1.22 per share, increased over
the prior year's loss of $8.5 million, or $1.10 loss per share. Strong
sales volumes and lowered operating costs at all operations produced the
stronger earnings.
<TABLE>
LIQUIDITY AND CAPITAL RESOURCES
<CAPTION>
CASH FLOW & AND WORKING CAPITAL
($ THOUSANDS) 1995 1994 1993
<S> <C> <C> <C>
Cash provided by operating
activities $30,902 $25,926 $26,936
Percent increase/(decrease) 19% (4%) 66%
Working capital 26,650 26,312 21,295
Percent increase 1% 24% 59%
Current ratio 1.6:1 1.7:1 1.6:1
</TABLE>
Cash provided by operating activities increased 19% over 1994 and rose to
$30.9 million, an all-time record level. The increase in net income of
$2.9 million along with the change in working capital needs of $3.3
million offset by other non-cash and non-operating activities account for
the change. The investment in inventory increased $3.0 million.
Receivables increased $0.8 million over 1994, however declined as a
percentage of sales due to improved cash collection efforts. Due
principally to increased earnings, income taxes paid increased by $1.9
million.
<PAGE>
Capital expenditures were $16.7 million compared to $19.1 million in 1994.
Proceeds from capital asset disposals, principally timberland sales, were
$1.6 million, an increase of $1 million over 1994. Major capital spending
in 1995 was for converting equipment, a roll wrap system and general paper
mill improvements and replacements.
The strong cash flow and control of capital spending allowed for
sufficient cash to reduce the outstanding debt by $12.1 million and return
$2.8 million in cash dividends to shareholders.
<TABLE>
DEBT AND EQUITY
<CAPTION>
($ THOUSANDS) 1995 1994 1993
<S> <C> <C> <C>
Long-term debt $ 79,307 $ 91,383 $ 96,260
Stockholders' equity 101,192 88,851 79,133
Total capitalization 180,499 180,234 175,393
Debt/capitalization ratio 44% 51% 55%
</TABLE>
While the company's financing arrangements do not require scheduled
repayments of its long-term debt, the company repaid $12.1 million of
long-term debt outstanding during the year. This reduction exceeded the
company's goal of $10 million established at the beginning of the year.
The ratio of long-term debt to total capitalization of 44% improved from
the prior year reflecting an increase in stockholders' equity due to
stronger earnings and a lower level of debt.
In 1994, 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 1994 and remains at such level currently. The company
utilizes $50 million of this credit agreement to support its participation
in the commercial paper markets. At year-end, approximately $34 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 stable
economy, cash flow from operations will adequately allow for partial
repayments of existing debt and planned capital expenditures for property
and equipment of $20 million next year.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Management's Responsibility For Financial Reporting ..........20
Auditor's Report .............................................21
Consolidated Balance Sheets ..................................22
Consolidated Statements of Stockholders' Equity ..............23
Consolidated Statements of Income ............................24
Consolidated Statements of Cash Flows ........................25
Notes to Consolidated Financial Statements ...................26
Schedules ....................................................46
<PAGE>
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 on the following page.
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 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, 1995 and 1994, 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, 1995 and the supporting schedule listed in the accompanying index to
financial statements. These financial statements and supporting schedule
are the responsibility of the company's management. Our responsibility is
to express an opinion on these financial statements and supporting
schedule 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 schedule 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 schedule. 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
present fairly, in all material respects, the financial position of
MOSINEE PAPER CORPORATION and subsidiaries at December 31, 1995 and 1994,
and the results of their operations and cash flows for each of the years
in the three year period ended December 31, 1995, and the supporting
schedule presents 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.
We hereby consent to the incorporation by reference of this report in the
Registration Statements on Form S-8 filed with the Securities and Exchange
Commission by Mosinee Paper Corporation on October 20, 1995.
WIPFLI ULLRICH BERTELSON
January 30, 1996 Wipfli Ullrich Bertelson
Wausau, Wisconsin Certified Public Accountants
<PAGE>
<TABLE>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
($ thousands) As of
December 31,
1995 1994
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,416 $ 1,555
Receivables, net 26,533 26,207
Inventories 33,641 30,600
Deferred income taxes 4,799 3,999
Other current assets 364 686
Total current assets 67,753 63,047
Property, plant and equipment, net 196,565 194,021
Other assets 8,627 8,015
TOTAL ASSETS $272,945 $265,083
LIABILITIES
Current Liabilities:
Accounts payable $ 20,523 $ 19,523
Accrued and other liabilities 19,389 16,259
Accrued income taxes 1,131 953
Total current liabilities 41,103 36,735
Long-term debt 79,307 91,383
Deferred income taxes 24,646 21,633
Postretirement benefits 15,001 14,427
Other noncurrent liabilities 10,441 10,799
Total liabilities 170,498 174,977
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 - No par value
- 30,000,000 shares authorized - 1995
- 15,000,000 shares authorized - 1994 58,678 25,984
Additional paid-in capital -- 13,851
Retained earnings 60,216 66,704
Subtotals 118,894 106,539
Treasury stock at cost (17,702) (17,688)
Total stockholders' equity 101,192 88,851
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $272,945 $265,083
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
Common Additional Total
($ thousands except share Stock-Shares Common Paid-in Retained Treasury Stock Stockholders'
data) ISSUED STOCK CAPITAL EARNINGS SHARES AMOUNT EQUITY
<S> <C> <C> <C> <C> <C> <C> <C>
Balances December 31, 1992 10,393,823 $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 10,393,823 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 10,393,823 25,984 13,851 66,704 (3,245,380) (17,688) 88,851
Net income, 1995 15,185 15,185
Cash dividends declared on
Mosinee common stock (2,830) 2,830
Elimination of par value 13,851 (13,851)
10% Stock dividend 1,039,382 18,843 (18,843) (325,085) (14) (14)
Balances December 31, 1995 11,433,205 $58,678 $ 0 $60,216 (3,570,465) ($17,702) $101,192
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
($ thousands except share For the Years
data) Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Net sales $305,570 $266,707 $244,821
Cost of sales 249,077 217,502 201,317
Gross profit on sales 56,493 49,205 43,504
Operating expenses:
Selling 10,383 9,857 9,221
Administrative 16,404 13,377 15,926
Total operating expenses 26,787 23,234 25,147
Income from operations 29,706 25,971 18,357
Other income (expense):
Patent infringement award -- -- 5,529
Interest expense (6,066) (5,010) (6,040)
Other 1,470 580 (459)
Income before income taxes and
cumulative effect adjustment 25,110 21,541 17,387
Provision for income taxes 9,925 8,500 7,750
Income before cumulative effect
of a change in accounting
principle 15,185 13,041 9,637
Cumulative effect of a change in
accounting principle (net of
income taxes) -- (750) --
Net income $ 15,185 $12,291 $ 9,637
Income per share before cumulative
effect of a change in accounting
principle $ 1.92 $ 1.65 $ 1.22
Cumulative effect of a change in
accounting principle
(net of income taxes) -- (0.10) --
Net income per share $ 1.92 $ 1.55 $ 1.22
Weighted average common
shares outstanding 7,862,740 7,862,740 7,862,740
<FN>
All per share data has been restated for the May 18, 1995 10% stock dividend.
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) 1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $15,185 $12,291 $ 9,637
Provision for depreciation, depletion
and amortization 16,633 15,684 15,017
Provision for postretirement benefits
other than pensions 1,674 1,585 1,550
Recognition of deferred revenue (40) (40) (40)
Provision for losses on accounts receivable 443 901 440
Gain on property, plant and equipment
disposals (1,417) (462) (28)
Deferred income taxes 2,213 3,094 3,198
Changes in operating assets and liabilities:
Accounts receivable (769) (5,647) (2,058)
Refundable income taxes -- -- 2,005
Inventories (3,041) (144) (1,828)
Other assets (1,907) (3,339) (2,977)
Accounts payable and other liabilities 1,750 1,475 1,712
Accrued income taxes 178 528 308
Net cash provided by operating activities 30,902 25,926 26,936
Cash flows from investing activities:
Capital expenditures (16,741) (19,088) (11,963)
Proceeds from property, plant and
equipment disposals 1,556 647 190
Net cash used in investing activities (15,185) (18,441) ( 11,773)
Cash flows from financing activities:
Net payments under credit agreements (12,076) (4,878) (11,804)
Payment of long-term debt -- -- (105)
Dividends paid (2,766) (2,573) (2,574)
Payments for purchase of treasury stock (14) -- --
Net cash used in financing activities (14,856) (7,451) (14,483)
Net increase in cash and cash equivalents 861 34 680
Cash and cash equivalents at beginning of year 1,555 1,521 841
Cash and cash equivalents at end of year $ 2,416 $ 1,555 $ 1,521
Supplemental Cash Flow Information:
Interest paid - net of amount capitalized $ 6,034 $ 4,575 $ 5,806
Income taxes paid 6,734 4,877 2,239
<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.
USE OF ESTIMATES IN PREPARATION OF CONSOLIDATED STATEMENTS - The
preparation of the accompanying financial statements in conformity with
generally accepted accounting principles requires the use of certain
estimates and assumptions that directly affect the results of reported
assets, liabilities, revenue and expenses. Actual results may differ from
these estimates.
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.
<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 $400,000 and represents the entire liability
for such benefits earned through 1993. The impact of this accounting
change on 1995 and 1994 operating results was not material.
<PAGE>
<TABLE>
4 - SUPPLEMENTAL BALANCE SHEET INFORMATION
<CAPTION>
Supplemental information on certain balance sheet items consist of the
following:
($ thousands)
December 31,
1995 1994
<S> <C> <C>
Receivables
Trade $28,498 $27,886
Other 848 474
29,346 28,360
Less: allowances (2,813) (2,153)
$26,533 $26,207
Inventories
Raw materials $15,827 $14,534
Finished goods and work in
process 20,693 17,574
Supplies 8,896 8,759
45,416 40,867
Less: LIFO Reserve (11,775) (10,267)
$33,641 $30,600
Property, plant and equipment
Buildings $ 35,984 $ 35,314
Machinery and equipment 308,944 292,956
Totals 344,928 328,270
Less: accumulated depreciation (157,555) (143,780)
Net depreciated value 187,373 184,490
Land 2,162 2,055
Timber and timberlands, net of
depletion 3,184 3,000
Water power rights 129 129
Construction in progress 3,717 4,347
$196,565 $194,021
Accrued and other liabilities
Payrolls $ 3,336 $ 2,116
Vacation Pay 4,442 4,024
Taxes, other than income 2,324 1,941
Employee retirement plans 1,350 1,123
Cash dividends declared 708 643
Insurance 1,067 1,062
Stock appreciation plans 3,833 3,118
Interest 643 702
Other 1,686 1,530
$19,389 $16,259
</TABLE>
5 - LEASES
The company has no significant capital lease liabilities. The company has
various operating leases for machinery and equipment, automobiles, office
equipment and warehouse space.
<PAGE>
<TABLE>
<CAPTION>
Future minimum payments, by year and in the aggregate, under noncancelable
operating leases with initial or remaining terms of one year or more
consisted of the following at December 31, 1995:
($ thousands) Operating Leases
<S> <C>
1996 $ 960
1997 811
1998 629
1999 579
2000 572
Thereafter 334
Total minimum lease payments $3,885
</TABLE>
Rent expense for all operating leases of plant and equipment was
$2,563,000 in 1995, $2,834,000 in 1994 and $3,081,000 in 1993.
6 - RETIREMENT PLANS
PENSIONS
Substantially all employees of the company are covered under various
pension plans. The defined benefit pension plan benefits are based on the
participants' years of service and either compensation earned over certain
final years of employment or fixed benefit amounts for each year of
service. The plans are funded in accordance with federal laws and
regulations.
<TABLE>
The net pension costs for all defined benefit pension plans consist of the
following components:
<CAPTION>
($ thousands) 1995 1994 1993
<S> <C> <C> <C>
Service cost $ 775 $ 801 $ 642
Interest cost 1,985 1,747 1,740
Actual return on assets (2,241) (315) (2,825)
Net amortization and
deferral (146) (1,976) 558
Net pension cost $ 373 $ 257 $ 115
</TABLE>
<PAGE>
<TABLE>
In 1995, various underfunded defined benefit pension plans of the company
were merged with an overfunded defined benefit pension plan. 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) 1995 1994
PLANS WITH ASSETS PLANS WITH PLANS WITH PLANS WITH
EXCEEDING ASSETS ASSETS ASSETS
ACCUMULATED LESS THAN EXCEEDING LESS THAN
BENEFIT ACCUMULATED ACCUMULATED ACCUMULATED
OBLIGATION BENEFIT BENEFIT BENEFIT
OBLIGATION OBLIGATION OBLIGATION
<S> <C> <C> <C> <C>
ACTUARIAL PRESENT VALUE OF BENEFIT
OBLIGATIONS AT SEPTEMBER 30
VESTED BENEFIT OBLIGATION ($20,587) ($ 766) ($6,881) ($15,302)
ACCUMULATED BENEFIT OBLIGATION ($24,204) ($1,359) ($7,443) ($15,656)
PROJECTED BENEFIT OBLIGATION ($27,145) ($1,686) ($9,641) ($16,018)
FAIR VALUE OF PLAN ASSETS AT
SEPTEMBER 30 25,505 -- 15,379 9,010
PROJECTED BENEFIT OBLIGATION (IN
EXCESS OF) LESS THAN PLAN ASSETS
AT SEPTEMBER 30 (1,640) (1,686) 5,738 ( 7,008)
UNRECOGNIZED NET LOSS (GAIN) (436) 273 (1,979) ( 9)
UNRECOGNIZED PRIOR SERVICE COST 632 514 32 1,231
UNRECOGNIZED INITIAL NET
OBLIGATION (ASSET) (1,280) 105 ( 1,687) 365
UNRECOGNIZED ACQUISITION TAX
BENEFIT 641 -- - 733
CASH CONTRIBUTIONS TO PLANS
SUBSEQUENT TO SEPTEMBER 30 - 12 - 25
ADJUSTMENT REQUIRED TO RECOGNIZE
MINIMUM LIABILITY - ( 577) - ( 1,496)
CONSOLIDATED BALANCE SHEETS AT
DECEMBER 31 $(2,083) ($1,359) $2,104 ($6,159)
</TABLE>
The projected benefit obligations at September 30, were determined using
an assumed discount rate of 7.5% and 8% for 1995 and 1994, respectively,
and assumed compensation increases of 5% in 1995 and 1994. 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 $2,253,000 and $2,511,000 in 1995 and
1994, 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 $2,279,000 in 1995, $2,100,000 in
1994, and $1,823,000 in 1993.
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 $155,000,
$161,000, and $89,000 for 1995, 1994, and 1993, respectively.
<PAGE>
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to providing pension benefits, the company provides certain
health care and nominal term life insurance benefits for retired
employees. Substantially all of the company's employees may become
eligible for those benefits if they reach normal retirement age while
working for the company.
Cost-sharing provisions, benefits and eligibility for various employee
groups vary by location and union agreements. Generally, eligibility is
attained after reaching age 55 or 62 with minimum service requirements.
Upon reaching age 65, the benefits become coordinated with Medicare. The
plans are unfunded and the company funds the benefit costs on a current
basis.
<TABLE>
The net postretirement benefit costs consists of the following components:
<CAPTION>
($ thousands) 1995 1994 1993
<S> <C> <C> <C>
Service cost $ 474 $ 467 $ 457
Interest cost 1,195 1,046 1,112
Net amortization and deferral 5 72 ( 19)
Net postretirement benefit cost $1,674 $1,585 $1,550
</TABLE>
<TABLE>
The following table sets forth the accumulated postretirement benefit
obligation (APBO) of the plans as reported in the accompanying
consolidated balance sheet:
<CAPTION>
December 31,
($ thousands) 1995 1994
<S> <C> <C>
Retirees and dependents ($8,985) ($8,295)
Fully eligible active
participants ( 1,964) ( 1,594)
Other active
participants ( 7,350) ( 5,587)
Total APBO (18,299) (15,476)
Unrecognized net loss 3,298 1,049
Accrued postretirement
benefit cost ($15,001) ($14,427)
</TABLE>
The 1995 assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation was 10%, declining by 1%
annually for five years to an ultimate rate of 5%. The weighted average
discount rate used was 7.5%. For 1994, the obligation was calculated using
a health care cost trend rate of 11%, declining by 1% annually for six
years to an ultimate rate of 5%. The weighted average discount rate was
8%.
The effect of a 1% increase in the health care cost trend rate would
increase the APBO by $2,039,000 or 11.1% and $1,610,000 or 10.4%, at
December 31, 1995 and 1994, respectively. The effect of this change would
increase the aggregate of the service cost and interest cost by $251,000
or 15.0% in 1995, and $262,000 or 16.5% in 1994.
<PAGE>
<TABLE>
7 - LONG-TERM DEBT
<CAPTION>
Long-term debt consists of the following:
($ thousands) December 31,
1995 1994
<S> <C> <C>
Commercial paper $ 34,307 $ 46,383
Revolving credit agreement 25,000 25,000
Long-term note 20,000 20,000
Total 79,307 91,383
Less: current maturities - -
Long-term debt $ 79,307 $ 91,383
</TABLE>
The company has a commercial paper placement agreement to issue up to $50
million of unsecured debt obligations. The weighted average interest rate
on commercial paper outstanding at December 31, 1995 was 6.0% compared to
6.3% at December 31, 1994. 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, 1995 was 6.0% and at December 31, 1994 was 6.3%. 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 $25
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
and 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 $50 million in the third year. Under terms of
the agreement, the company received compensation when the 90 day LIBOR
(London Interbank Offered Rate) exceeds 9.5% in the first year, 10.5% in
the second year and 11% in the third year. The company paid compensation
when LIBOR was less than 7.5% in the first year, 7% the second year and
<PAGE>
6.5% the third year. Amounts paid or received were recognized as interest
rates deviated beyond the stated amounts and are included in interest
expense.
<TABLE>
The aggregate annual maturities of long-term debt in future years is shown
below:
<CAPTION>
($ THOUSANDS) 1997 1998 1999 THEREAFTER
<S> <C> <C> <C>
- $59,307 $20,000 -
</TABLE>
The annual maturities on the revolving credit agreement included in the
above schedule are based on the amount outstanding at December 31, 1995.
Annual maturities will be affected by future borrowings under the
agreement.
<TABLE>
8 - INTEREST EXPENSE AND CAPITALIZED INTEREST
<CAPTION>
($ THOUSANDS)
Total Net
Year Ended Interest Capitalized Interest
DECEMBER 31, EXPENSE INTEREST EXPENSE
<S> <C> <C> <C>
1995 $6,247 $181 $6,066
1994 5,143 133 5,010
1993 6,077 37 6,040
</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
$.05 per Right until a person or group becomes an Acquiring Person. After
a person or group becomes an Acquiring Person, but before the Acquiring
Person acquires 50% of the company's common stock, the company may
exchange one share of common stock for each Right. Rights expire on July
10, 1996. The company has reserved 100,000 shares of Series A Junior
Participating Preferred Stock.
<PAGE>
10 - INCOME TAXES
<TABLE>
PROVISION FOR INCOME TAXES
<CAPTION>
The provision for income taxes is as follows:
($ thousands)
1995 1994 1993
<S> <C> <C> <C>
Current tax expense:
Federal $6,443 $4,406 $ 3,880
State 1,269 1,000 672
Total current 7,712 5,406 4,552
Deferred tax expense
(credit):
Federal 1,820 2,880 3,412
State 393 214 ( 214)
Total deferred 2,213 3,094 3,198
Total provision for
income taxes $9,925 $8,500 $ 7,750
</TABLE>
<TABLE>
RECONCILIATION FROM FEDERAL STATUTORY TO EFFECTIVE TAX RATE
<CAPTION>
($ thousands)
1995 1994 1993
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
<S> <C> <C> <C> <C> <C> <C>
Federal statutory
rate $8,789 35.0% $7,539 35.0% $6,085 35.0%
State taxes,
net of
federal
benefit 1,080 4.3% 790 3.7% 852 4.9%
Adjustment to
deferred taxes
for enacted
changes in tax
rates - - - - 800 4.6%
Other - net 56 .2% 171 .8% 13 .1%
Consolidated
effective tax $9,925 39.5% $8,500 39.5% $7,750 44.6%
</TABLE>
At the end of 1995, $40,000,000 of unused state operating loss carryovers
existed which may be used to offset future state taxable income in various
amounts through the year 2010. 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, 1995, the company has
unused alternative minimum tax credit carryforward of approximately
$8,838,000 which can be used to offset future regular tax liabilities.
<PAGE>
<TABLE>
DEFERRED INCOME TAXES
<CAPTION>
The significant components of deferred income tax
expense are as follows:
($ thousands) 1995 1994 1993
<S> <C> <C> <C>
Deferred tax expense
(exclusive of the effect
of other component
listed below) $2,213 $3,094 $2,398
Adjustment to deferred
tax assets and liabilities
for enacted changes in
tax laws and rates - - 800
Total deferred tax expense $2,213 $3,094 $3,198
</TABLE>
<TABLE>
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the tax basis of the company's assets
and liabilities. The tax effects of major temporary differences that give
rise to the deferred tax assets and liabilities at December 31, are as
follows:
<CAPTION>
($ thousands)
1995 1994
<S> <C> <C>
Deferred tax assets:
Allowances on accounts receivable $ 1,062 $ 857
Accrued compensated absences 1,478 1,312
Stock appreciation rights plans 2,053 1,628
Pensions 857 841
Postretirement benefits 5,800 5,586
Postemployment benefits 364 483
Reserves 866 958
State net operating loss carryforward 3,783 3,369
Alternative minimum tax credit carryforward 8,838 7,853
Other 27 167
Gross deferred tax assets 25,128 23,054
Less: valuation allowance ( 1,672) ( 1,146)
Net deferred tax assets 23,456 21,908
Deferred tax liabilities:
Property, plant and equipment ( 41,478) ( 38,153)
Deferred expenses ( 1,825) ( 1,389)
Total gross deferred tax liabilities ( 43,303) ( 39,542)
Net deferred tax liability ($19,847) ($17,634)
</TABLE>
<TABLE>
The total deferred tax liabilities (assets) as presented in the
accompanying balance sheets are as follows:
<CAPTION>
($ thousands) 1995 1994
<S> <C> <C>
Net long-term deferred tax
liabilities $24,646 $ 21,633
Gross current deferred tax
assets ( 6,471) ( 5,145)
Valuation allowance on
deferred tax assets 1,672 1,146
Net current deferred tax
assets ( 4,799) ( 3,999)
Net deferred tax liability $19,847 $ 17,634
</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 provides for the granting of either qualified incentive
stock options (ISO) or non-qualified options. Under the 1994 plan,
options to purchase 110,000 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 142,200 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 $775,000
in 1995, ($933,000) in 1994, and $1,668,000 in 1993.
<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) 1995 1994 1993
<S> <C> <C> <C>
Stock options:
Options outstanding at
beginning of year 88,000 74,250 -
Granted 77,000 13,750 74,250
Options outstanding at
end of year 165,000 88,000 74,250
Options exercisable at
end of year 88,000 74,250 -
Price of outstanding $24.50- $27.27- $27.27-
options 36.36 36.36 36.36
Stock appreciation rights:
Rights outstanding at 320,102 329,267 361,717
beginning of year
Granted - 8,250 6,050
Exercised ( 9,168) (17,415) (31,900)
Terminated - - ( 6,600)
Rights outstanding at end
of year 310,934 320,102 329,267
Rights exercisable at end
of year 305,800 305,800 305,800
Price range of outstanding $10.00- $10.00- $10.00-
stock appreciation rights 27.16 27.16 27.16
<FN>
ALL SHARES AND PER SHARE DATA HAVE BEEN ADJUSTED FOR THE 10% STOCK DIVIDEND ON
MAY 18, 1995.
</TABLE>
FUTURE ACCOUNTING CHANGE
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for
Stock Based Compensation" enacted by the Financial Accounting Standards Board
in October 1995, will be adopted January 1, 1996. SFAS No. 123 establishes
financial accounting and reporting standards for stock-based employee
compensation plans using a "fair value based method" of accounting. The
company will continue to measure compensation cost for stock option plans
using the "intrinsic value based method" of accounting prescribed by APB
Opinion No. 25, "Accounting for Stock Issued to Employees." In accordance
with SFAS No. 123, the company will make pro forma disclosures of net income
and earnings per share, as if the fair value based method had been applied.
<PAGE>
12 - STOCKHOLDERS' EQUITY
On April 20, 1995, the shareholders of the company approved a resolution which
amended the company's Restated Articles of Incorporation to increase the
number of authorized shares of common stock from 15,000,000 shares, par value
$2.50, to 30,000,000 shares, without par value. The additional paid-in
capital account has been combined with common stock as presented in the
Consolidated Statements of Stockholders' equity.
13 - CONTINGENCIES, LITIGATION, & COMMITMENTS
In 1986, the Wisconsin Department of Natural Resources ("DNR") determined 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 and remediation work
at the site is now substantially complete.
The company has been named as a defendant in an action brought on behalf of
the DNR in which the DNR seeks unspecified forfeitures. The DNR alleges that,
beginning in August 1994, the company exceeded certain permitted air emissions
and that the modification of the Pulp and Paper Division's recovery boiler and
smelt tank increased the amount of emissions of certain pollutants in
violation of the company's emission permit. The company has denied liability
for such claims and intends to vigorously defend this action. Under the terms
of the new proposed draft permit issued by the DNR on July 21, 1995, the
operation of the Division's recovery boiler and smelt tank are in compliance
with DNR requirements.
Based on information now available to the company, the company believes that
any additional costs associated with these landfills or any liability incurred
by the company in connection with recovery boiler and smelt tank litigation
will not have a material adverse effect on the company's operations, liquidity
or consolidated financial condition.
The company, along with other paper companies, is part of a civil
investigation begun in 1994 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, from time to time,
also becomes involved in other issues, investigations, administrative
proceedings and litigation including matters relating to the environment.
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 operations, liquidity or
consolidated 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, 1995
was $1,545,000. 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 $666,000, $630,000 and
$611,000 in 1995, 1994, and 1993, respectively.
<PAGE>
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 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>
QUARTERLY INFORMATION (UNAUDITED)
<CAPTION>
(IN THOUSANDS EXCEPT SHARE First Second Third Fourth
DATA) (1) QTR. QTR. QTR. QTR. ANNUAL
<S> <C> <C> <C> <C> <C>
1995
Net sales $72,578 $74,672 $79,423 $78,897 $305,570
Gross profit 13,199 11,634 14,779 16,881 56,493
Net income 3,405 2,886 3,792 5,102 15,185
Net income per share .43 .36 .48 .65 1.92
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 .32 .36 .39 .58 1.65
Cumulative effect of a
change in accounting
principle (net of
income taxes) ( .10) - - - ( .10)
Net income per share .22 .36 .39 .58 1.55
1993
Net sales (2) $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 .58 .17 .26 .21 1.22
<FN>
(1) ALL APPLICABLE INFORMATION HAS BEEN RESTATED FOR THE MAY 18, 1995 10% STOCK
DIVIDEND.
(2) FIRST QUARTER NET SALES ARE DIFFERENT FROM THE FIRST QUARTER REPORT TO
SHAREHOLDERS DUE TO THE ELIMINATION OF INTERCOMPANY SALES.
</TABLE>
<PAGE>
<TABLE>
MARKET PRICES FOR COMMON SHARES (UNAUDITED)
The Company's common shares are traded on The Nasdaq Stock Market under the
symbol, MOSI. Price ranges and dividends paid per share were as follows:
<CAPTION>
(In dollars)
1995 1994 1993
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> <C>
1st $26.59 $21.82 $.09 $32.73 $26.59 $.0825 $24.09 $19.55 $.0825
2nd 26.36 21.25 .09 29.31 25.68 .0825 24.55 19.55 .0825
3rd 25.38 21.50 .09 29.77 26.36 .0825 23.64 19.77 .0825
4th 26.75 23.25 .09 28.41 22.50 .0825 27.50 19.77 .0825
</TABLE>
Prices reflect high and low closing price quotations on the Nasdaq Stock
Market and do not reflect mark-ups, mark-downs or commissions and may not
represent actual transactions. All applicable amounts have been restated for
the May 18, 1995 10% stock dividend.
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 in the table under the
caption "Election of Directors", pages 3 and 4, in the company's proxy
statement dated March 19, 1996 (the "1996 Proxy Statement"). Information
relating to executive officers of the company is set forth in Part I, pages 6
and 7.
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", page 5, in the 1996 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 7 through the material ending
immediately before the subcaption "Committees' Report on Executive
Compensation Policies", page 11, and (2) the material set forth under the
subcaption "Compensation Committee Interlocks and Insider Participation",
page 15, in the 1996 Proxy Statement.
<PAGE>
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", pages 5 and 6, in
the 1996 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
<PAGE>
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 19
to 37 and 43 herein.
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed by the company during the fourth
quarter of fiscal 1996.
(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. Exhibits incorporated by reference
indicated by footnote reference to incorporated filing.
EXHIBIT 3 - ARTICLES OF INCORPORATION AND BYLAWS
(a) Restated Articles of
Incorporation, as last
amended April 26, 1995 ...........................12-48(5)
(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(3)
(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(3)
*(b) 1985 Executive Stock Option
Plan dated June 27, 1985 .........................83-95(4)
*(c) Mosinee Paper Corporation 1988 Stock
Appreciation Rights Plan, as amended 4/18/91 ......44
*(d) 1994 and 1995 Incentive Compensation
Plan for Corporate Executive Officers .............49
*(e) Supplemental Retirement Benefit
Plan dated October 17, 1991 .......................50
*(f) Supplemental Retirement Benefit Agreement
dated November 15, 1991 ...........................54
*(g) 1994 Executive Stock Option Plan .................50-67(2)
*(h) Mosinee Supplemental Retirement Plan .............68-83(2)
* Denotes Executive Compensation Plans and Arrangements.
<PAGE>
EXHIBIT 21 - SUBSIDIARIES OF REGISTRANT ...............167(1)
Footnotes indicate exhibits incorporated by reference; page numbers set
forth herein correspond to the page numbers, using the sequential
numbering system, where each exhibit can be found in the following
Commission filings:
(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, 1994; Commission File Number 0-1732.
(3) Registrant's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993; Commission File Number 0-1732.
(4) Exhibit 4(e) to Form S-8 filed on April 19, 1991.
(5) Exhibit (3)(i) to Registrant's quarterly report on Form 10-Q for the
period ended June 30, 1996, Commission File Number 0-1732.
The above exhibits are available upon request in writing from the
Secretary, Mosinee Paper Corporation, 1244 Kronenwetter Drive, Mosinee,
Wisconsin 54455-9099.
<PAGE>
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
GARY P. PETERSON
Date March 25, 1996 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 25, 1996 March 25, 1996
DANIEL R. OLVEY HARRY R. BAKER
Daniel R. Olvey Harry R. Baker
President and CEO Director
(Principal Executive Officer) March 25, 1996
March 25, 1996
RICHARD G. JACOBUS WALTER ALEXANDER
Richard G. Jacobus Walter Alexander
Director Director
March 25, 1996 March 25, 1996
<PAGE>
<TABLE>
Schedule II - Valuation of and Qualifying Accounts
($ thousands)
<CAPTION>
Allow for Allow and for
Doubtful Sales Returns
TOTAL ACCOUNTS AND DISCOUNTS
<S> <C> <C> <C>
Balances at December 31,1992 $ 1,006 $ 515 $ 491
Charges to cost and expense 5,426 440 4,986
Deductions (4,853) (602) (4,251)
Balances at December 31,1993 $ 1,579 $ 353 $ 1,226
Charges to cost and expense 4,945 901 4,044
Deductions (4,371) ( 10) (4,361)
Balances at December 31,1994 $ 2,153 $ 1,244 $ 909
Charges to cost and expense 5,591 401 5,190
Deductions (4,931) (195) (4,736)
Balances at December 31,1995 $ 2,813 $ 1,450 $ 1,363
</TABLE>
Exhibit 10(c)
MOSINEE PAPER CORPORATION
1988 STOCK APPRECIATION RIGHTS PLAN
1. PURPOSE.
The purpose of the Mosinee Paper Corporation 1988 Stock
Appreciation Rights Plan (the "Plan") is to attract and retain
outstanding individuals as officers and key employees of Mosinee
Paper Corporation (the "Corporation") and its subsidiaries, and to
furnish incentives to such individuals through rewards based upon
the performance of the common stock of the Corporation. To this
end, the Committee hereinafter designated may grant stock
appreciation rights to officers and other key employees of the
Corporation and its subsidiaries, on the terms and subject to the
conditions set forth in this Plan.
2. PARTICIPANTS.
Participants in the Plan shall consist of such officers
and other key employees of the Corporation and its subsidiaries as
the Committee in its sole discretion may select from time to time
to receive stock appreciation rights.
3. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by a Committee (the
"Committee") of at least three members appointed by the Board of
Directors of the Corporation from among its members. No person
shall be appointed a member of the Committee if, during the one
year prior to the date on which such person's service as a member
of the Committee is to commence, such person was granted or
awarded equity securities of the Corporation (within the meaning
of Securities and Exchange Commission Rule 16a-1(d)) under the
Plan or any other plan of the Corporation or any subsidiary of the
Corporation. Subject to the provisions of the Plan, the Committee
shall have authority (i) to determine which employees of the
Corporation and its subsidiaries shall be eligible for
participation in the Plan; (ii) to select employees to receive
grants under the Plan; (iii) to determine the number of stock
appreciation rights subject to the grant, the time and conditions
of exercise or vesting, the fair market value of the common stock
of the Corporation for purposes of the Plan, and all other terms
and conditions of any grant; and (iv) to prescribe the form of
agreement, certificate or other instrument evidencing the grant.
The Committee shall also have authority to interpret the Plan and
to establish, amend and rescind rules and regulations for the
administration of the Plan, and all such interpretations, rules
and regulations shall be conclusive and binding on all persons,
provided, however, that the Committee shall not exercise such
authority in a manner adversely and significantly affecting rights
previously granted unless the action taken is required to comply
with any applicable law or regulation.
<PAGE>
4. EFFECTIVE DATE AND TERM OF PLAN.
The Plan shall become effective on June 16, 1988, the
date of its approval by the Board of Directors of the Corporation.
The Plan shall terminate ten years after it becomes effective,
unless terminated sooner by action of the Board of Directors. No
further grants may be made under the Plan after its termination,
but the termination of the Plan shall not affect the rights of any
participant under, or the authority of the Committee with respect
to, any grants made prior to termination.
5. SHARES SUBJECT TO THE PLAN.
Subject to adjustment as provided in paragraph 7 hereof,
the aggregate number of shares of common stock of the Corporation
with respect to which stock appreciation rights may be granted
under the Plan shall not exceed 350,000. Whenever a stock
appreciation right granted under the Plan can no longer under any
circumstances be exercised, the shares, if any, then remaining
subject to such stock appreciation right shall thereupon be
released from such stock appreciation right and shall thereafter
be available for additional grants of stock appreciation rights
under the Plan.
6. STOCK APPRECIATION RIGHTS.
(a) Grants. Stock appreciation rights entitling the
grantee to receive cash equal to the sum of (i) the appreciation
in value of and (ii) the value of the reinvested cash dividends
which would have been paid with respect to a stated number of
shares of common stock of the Corporation between the date of
grant and the date of exercise (the "hypothetical reinvested cash
dividends") may be granted from time to time to such officers and
other key employees of the Corporation and its subsidiaries as may
be selected by the Committee.
(b) Terms of Grant. Stock appreciation rights shall
be exercisable in whole or in such installments and at such times
as may be determined by the Committee, provided that no stock
appreciation right shall be exercisable more than twenty years
after the date of grant. The Committee may at the time of grant
or at any time thereafter impose such additional terms and
conditions on the exercise of stock appreciation rights as it
deems necessary or desirable for compliance with Section 16(a) or
16(b) of the Securities Exchange Act of 1934 and the rules and
regulations thereunder.
(c) Termination of Employment or Death. If a grantee
ceases to be employed by the Corporation and any of its
subsidiaries for any reason other than death, any stock
appreciation right held by such grantee may be exercised for a
period ending on the earlier of the 90th day following the date of
such cessation of employment or the date of expiration of such
stock appreciation right, but only with respect to that number of
shares of common stock for which such right was exercisable
immediately prior to the date of cessation of employment.
If a grantee ceases to be employed by the Corporation or
any of its subsidiaries by reason of death, or dies within 90 days
<PAGE>
after termination of his employment by the Corporation or any of
its subsidiaries, any stock appreciation right held by such
grantee may be exercised, with respect to all or any part of the
common stock of the Corporation with respect to which such stock
appreciation right was exercisable by the grantee immediately
prior to his death, for a period ending on the earlier of the
first anniversary of the date of such grantee's death or the date
of expiration of such stock appreciation right.
(d) Payment on Exercise. Upon exercise of a stock
appreciation right the grantee shall be paid within five business
days an amount in cash equal to the sum of (i) the amount by which
the fair market value of one share of the Corporation's common
stock on the date of exercise exceeds the date of grant value
thereof multiplied by the number of shares in respect of which the
stock appreciation right is being exercised and (ii) the value of
the hypothetical reinvested cash dividends associated therewith.
The value of the hypothetical reinvested cash dividends associated
with a share in respect of which the stock appreciation right is
being exercised (the "exercised share") shall be equal to the fair
market value on the date of exercise of the number of additional
shares (or fraction thereof) of the Company's common stock the
grantee would have owned if it is assumed (1) that cash dividends
which would have been paid with respect to the exercised share if
the exercised share had been outstanding from the time of grant
had been paid in cash to the grantee and then immediately
reinvested by the grantee in the Company's common stock at the
fair market value thereof on the applicable dividend payment date,
and (2) that, once assumed issued, hypothetical shares resulting
from assumed dividend reinvestment themselves paid cash dividends
(at the same time and in the same amount as shares of the
Corporation's outstanding common stock) which were reinvested in a
similar manner.
For purposes of this paragraph, the fair market value of
a share of common stock of the Corporation means:
(A) The mean between the high and low prices at
which the common stock of the Corporation was traded if the
common stock of the Corporation was then listed for trading
on a national or regional securities exchange; or
(B) The mean between the published high and low
prices of the common stock of the Corporation if the common
stock of the Corporation was then traded on a bona fide
over-the-counter market; or
(C) If the common stock of the Corporation was not
traded on an exchange or on a bona fide over-the-counter
market, a value determined by an appraiser selected by the
Committee.
In the event that the date of the exercise of a stock appreciation
right is a date on which there is no trading of the common stock
of the Corporation on a national or regional securities exchange
or is a date for which there is no published bid and asked prices
if the stock is traded 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 or on which
published prices are available.
<PAGE>
(e) Additional Terms and Conditions. The agreement or
instrument evidencing the grant of stock appreciation rights may
contain such other terms, provisions and conditions not
inconsistent with the Plan as may be determined by the Committee
in its sole discretion.
7. ADJUSTMENTS FOR CHANGES IN CAPITALIZATION, ETC.
Stock appreciation rights shall be subject to adjustment
by the Committee in its sole discretion as to the number, kind and
date of grant value of shares or other consideration subject to
such grants in the event of changes in the outstanding common
stock by reason of stock dividends, stock splits,
recapitalizations, reorganizations, mergers, consolidations,
combinations, exchanges or other relevant changes in corporate
structure or capitalization occurring after the date of the grant
of any stock appreciation right, provided that if the Corporation
shall change its common stock into a greater or lesser number of
shares through a stock dividend, stock split-up, or combination of
shares, outstanding rights shall be adjusted proportionately,
consistent with existing law and regulation, to prevent
inequitable results.
8. EFFECT OF LIQUIDATION, MERGER, CONSOLIDATION OR OTHER
EVENTS.
Nothing contained in the Plan or in any stock
appreciation right granted under the Plan shall in any way
prohibit the Corporation 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, all outstanding stock
appreciation rights granted under the Plan shall be deemed to have
been exercised at the time of any such merger, consolidation, sale
or transfer of assets, liquidation, or dissolution, except to the
extent that any agreement or undertaking of any party to such
merger, consolidation, or sale or transfer of assets, or any plan
pursuant to which such liquidation or dissolution is effected,
shall make specific provision to continue such stock appreciation
rights and the rights of such person or persons entitled to
exercise such stock appreciation rights.
9. AMENDMENT AND TERMINATION OF PLAN.
The Plan may be amended or terminated by the Board of
Directors of the Corporation in any respect, provided, however,
that the Board shall not exercise such authority in a manner
adversely and significantly affecting rights previously granted
unless the action taken is required to comply with any applicable
law or regulation.
10. MISCELLANEOUS.
(a) No Right to a Grant. Neither the adoption of the
Plan nor any action of the Board of Directors or of the Committee
shall be deemed to give any employee any right to be selected as a
participant or to be granted a stock appreciation right.
<PAGE>
(b) Rights as Stockholder. No person shall have any
rights as a stockholder of the Corporation with respect to any
shares covered by a stock appreciation right.
(c) Employment. Nothing contained in this Plan shall
be deemed to confer upon any employee any right of continued
employment with the Corporation or any of its subsidiaries or to
limit or diminish in any way the right of the Corporation or any
such subsidiary to terminate his or her employment at any time
with or without cause.
(d) Taxes. The Corporation shall be entitled to deduct
from any payment under the Plan the amount of any tax required by
law to be withheld with respect to such payment or may require any
participant to pay such amount to the Corporation prior to and as
a condition of making such payment.
(e) Nontransferability. No stock appreciation right
shall be transferable except by will or the laws of descent and
distribution. During the holder's lifetime, stock appreciation
rights shall be exercisable only by such holder.
Exhibit 10(d)
INCENTIVE COMPENSATION PLAN
FOR
EXECUTIVE OFFICERS
In 1994, Mr. Olvey participated in an incentive compensation plan
which provided for a bonus equal to 1% of base salary for each
$0.01 of earnings in excess of $1.35, but not to exceed $2.35 per
share. Mr. Peterson and Mr. Carlson participated in similar plans
which provided for a bonus equal to .75% and .55%, respectively,
of their base salary for each $0.01 of earnings in excess of
$1.35, but not to exceed $2.35, per share. Earnings per share
were adjusted for accruals on SARs, bonus expense and
extraordinary items. Mr. Peterson and Mr. Carlson also
participated in plans which provided for maximum bonus of 25% of
base salary upon satisfaction of individual performance objectives
established at the beginning of the year by the President and CEO,
and Mr. Carlson participated in an incentive compensation plan
based on the operating profit of the Converted Products Division
which provided for a maximum bonus of 20% of Mr. Carlson's base
salary.
During 1995, Mr. Olvey participated in an incentive compensation
plan which provided for a bonus opportunity ranging from 0% of
base salary if 1995 earnings per share were at or below $1.36 to
100% if 1995 earnings per share were at least $2.09 per share.
Mr. Peterson and Mr. Carlson participated in similar plans which
provided for a bonus equal to 75% and 50%, respectively, of their
base salary based upon the same $1.36 to $2.09 range of earnings
per share. Earnings per share were adjusted for accruals on SARs,
bonus expense and extraordinary items. Mr. Peterson and
Mr. Carlson also participated in plans which provided for a
maximum bonus of 25% of base salary upon satisfaction of
individual performance objectives established at the beginning of
the year by the President and CEO, and Mr. Carlson participated in
an incentive compensation plan based on the operating profit of
the Converted Products Division which provided for a maximum bonus
of 25% of Mr. Carlson's base salary.
In 1996, Mr. Olvey will participate in an incentive compensation
plan which provides for a bonus opportunity ranging from 0% of
base salary if 1996 earnings per share are at or below $1.60 to
100% if 1996 earnings per share are at least $2.70 per share.
Mr. Peterson and Mr. Carlson will participate in similar plans
which provide for a bonus equal to 75% and 50%, respectively, of
their base salary based upon the same $1.60 to $2.70 range of
earnings per share. Earnings per share will be adjusted for
accruals on SARs, bonus expense and extraordinary items.
Mr. Peterson and Mr. Carlson will also be entitled to a maximum
bonus of 25% of base salary upon satisfaction of individual
performance objectives established at the beginning of the year by
the President and CEO, and Mr. Carlson will participate in an
incentive compensation plan based on the operating profit of the
Converted Products Division which will provide for a maximum bonus
of 25% of his base salary.
Exhibit 10(e)
SUPPLEMENTAL RETIREMENT BENEFIT PLAN
This Supplemental Retirement Benefit Plan (the "Plan") is
adopted effective as of this 17th day of October, 1991, by Mosinee
Paper Corporation, a Wisconsin corporation, ("Mosinee") for the
purposes of providing deferred compensation in the form of
supplemental retirement benefits for San W. Orr, Jr. ("Mr. Orr")
in recognition of his service to Mosinee as its Chairman of the
Board of Directors.
1. Normal Supplemental Retirement Benefit. Beginning on
the first day of the first month following the last to occur of
(a) Mr. Orr's termination of employment with Mosinee or (b) Mr.
Orr's 60th birthday, and continuing on the first day of each
succeeding month, Mosinee shall pay to Mr. Orr, if he is then
living, a monthly supplemental retirement benefit (Mr. Orr's
"Normal Supplemental Retirement Benefit") in an amount equal to
50% of one-twelfth of Mr. Orr's highest final average W-2
compensation for the five consecutive calendar year period in
which such compensation was paid. Mr. Orr's Normal Supplemental
Retirement Benefit shall not be reduced or offset by the amount of
any other payment then due him from Mosinee or any other plan or
program now or hereafter maintained by Mosinee.
2. Surviving Spouse Benefit. From and after the first day
of the first month following the later of (a) the month in which
Mr. Orr's death occurs or (b) the month in which Mr. Orr would
have attained his 60th birthday if Mr. Orr's death occurs before
he has attained age 60, and continuing on the first day of each
succeeding month, Mosinee shall pay to Mr. Orr's spouse, if then
living (Mr. Orr's "Surviving Spouse"), a monthly benefit (the
"Supplemental Surviving Spouse Benefit") in an amount equal to 50%
of the Normal Supplemental Retirement Benefit to which Mr. Orr
would have then been entitled had he then been living.
3. Change of Control of Mosinee.
(a) In the event a Change of Control of Mosinee occurs
prior to Mr. Orr's death, Mosinee shall pay to Mr. Orr a lump
sum amount equal to the present value of Mr. Orr's Normal
Supplemental Retirement Benefit, as determined hereunder, as
of the first day of the first month following such Change of
Control of Mosinee on which Mr. Orr is neither an employee
nor a director of Mosinee, whether or not such Change of
Control occurred prior to the date on which Mr. Orr shall
have ceased to be an employee or a director of Mosinee. Upon
payment of the lump sum amount provided for in this
subparagraph (a), Mosinee shall have no further obligation to
pay any benefits under this Plan.
(b) In the event a Change of Control occurs after Mr.
Orr's death and whether or not the Supplemental Surviving
Spouse Benefit shall have then become payable, Mosinee shall
pay to Mr. Orr's Surviving Spouse, if then living, the
present value of the unpaid Supplemental Surviving Spouse
Benefit. Upon payment of the lump sum amount provided for in
this subparagraph (b), Mosinee shall have no further
obligation to pay any benefits under this Plan.
<PAGE>
(c) For purposes of this plan, a "Change of Control of
Mosinee" shall be deemed to have occurred when:
(i) 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 (A) Mosinee or any of its
subsidiaries, (B) a trustee or other fiduciary
holding securities under an employee benefit plan
of Mosinee or any of its subsidiaries, (C) an
underwriter temporarily holding securities
pursuant to an offering of such securities, or (D)
a company owned, directly or indirectly, by the
shareholders of Mosinee in substantially the same
proportions as their ownership of stock of
Mosinee, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Mosinee
(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 Mosinee's then outstanding securities;
provided, however, that for the purpose of
determining whether any shareholder of Mosinee on
the date hereof becomes the beneficial owner of
securities of Mosinee representing more than 50%
of the combined voting power of Mosinee's then
outstanding securities, the securities of Mosinee
held by such shareholder on the date hereof shall
not be taken into account;
(B) the shareholders of Mosinee approve a
merger or consolidation of Mosinee 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 Mosinee
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 Mosinee, at least 50% of the combined voting
power of the voting securities of Mosinee 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
Mosinee (or similar transaction) in which no
person acquires more than 50% of the combined
voting power of Mosinee's then outstanding
securities; or
<PAGE>
(C) the shareholders of Mosinee approve a
plan of complete liquidation of Mosinee or an
agreement for the sale or disposition by Mosinee
of all or substantially all of Mosinee's assets
and
(ii) a majority of the members of the Board of
Directors who are unaffiliated with an Interested
Shareholder (defined in subparagraph (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 (A) the person described in
subparagraph (i)(A) becoming the beneficial owner of 10%
of the combined voting power of Mosinee's then
outstanding securities or (B) the approval of
shareholders described in (i)(B) or (C) the approval of
shareholders described in (i)(C), approved or
recommended such event.
(d) For purposes of this Plan, the term "Interested
Shareholder" shall mean any person (other than Mosinee 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 Mosinee's then
outstanding securities after the effective date of this Plan.
(e) For purposes of this Plan, the present value of
Mr. Orr's Normal Supplemental Retirement Benefit or the
Supplemental 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. Supplemental Retirement Benefits in Addition to Other
Rights and Benefits. The rights and benefits conferred upon
Mr. Orr (and Mr. Orr's Surviving Spouse) pursuant to this Plan
shall be in addition to all other rights and benefits conferred
upon Mr. Orr by Mosinee by reason of his employment.
5. Nature of Mosinee's Obligations and Mr. Orr's Rights.
Neither Mr. Orr nor his Surviving Spouse, if any, shall acquire
any right, title or interest in the assets of Mosinee by reason of
this Plan. To the extent Mr. Orr or his Surviving Spouse shall
acquire a right to receive payments from Mosinee pursuant to this
Plan, such right shall be no greater than the right of any
unsecured general creditor of Mosinee.
6. Assignment by Mr. Orr Prohibited. This Plan and Mr.
Orr's rights and benefits hereunder (and the rights of his
Surviving Spouse, if any) shall not be subject to voluntary or
involuntary sale, pledge, hypothecation, transfer or assignment by
Mr. Orr or such Surviving Spouse, their personal representatives
or heirs or any other person or persons or organization or
organizations succeeding to any of their rights and benefits
hereunder.
<PAGE>
7. Funding. All benefits paid or payable pursuant to the
terms of this Plan shall be paid out of the general assets of
Mosinee.
8. Claims Procedure. The claims procedure set forth in the
Mosinee Retirement Plan or any successor to such plan is
incorporated herein by this reference as the claims procedure for
this Plan.
9. Plan Administrator. The plan administrator and named
fiduciary of the Plan shall be Mosinee.
10. Binding Effect. This Plan shall be binding upon and
inure to the benefit of (1) Mr. Orr and his Surviving Spouse and
their personal representatives and heirs and any other person or
persons or organization or organizations succeeding to any of Mr.
Orr's rights or benefits hereunder, and (2) Mosinee and its
successors and assigns.
11. Severability. The invalidity or unenforceability of any
provision of this Plan shall not invalidate or render
unenforceable any other provision of this agreement.
12. Governing Law. This Plan shall be governed by the
Employee Retirement Income Security Act of 1974, as amended, and
to the extent not preempted by such Act, by the laws of the State
of Wisconsin.
IN WITNESS WHEREOF, Mosinee has caused this agreement to be
executed by its President thereunto duly authorized as of the day
and year first above written.
MOSINEE PAPER CORPORATION
By: RICHARD L. RADT
Richard L. Radt
As its President
Exhibit 10(f)
SUPPLEMENTAL RETIREMENT BENEFIT AGREEMENT
Agreement made as of this 15th day of November, 1991 by and
between Mosinee Paper Corporation, a Wisconsin corporation (the
"Corporation") and Richard L. Radt, of Wausau, Wisconsin
("Mr. Radt").
WITNESSETH:
WHEREAS, Mr. Radt is employed as President and Chief
Executive Officer of the Corporation and has performed his duties
in a manner highly satisfactory to the Corporation; and
WHEREAS, the Corporation has determined to provide Mr. Radt
with deferred compensation in the form of a supplemental
retirement benefit in recognition of Mr. Radt's agreement to
continue to perform services for the Corporation as its President
and Chief Executive Officer;
NOW, THEREFORE, the Corporation and Mr. Radt agree as
follows:
1. Payment of Supplemental Retirement Benefit.
(a) On the last to occur of (1) August 1, 1992, or (2)
the date which is fifteen days after the date of Mr. Radt's
termination of employment with each of the Corporation and
the Corporation's subsidiaries, the Corporation shall pay to
Mr. Radt, if then living, otherwise to Mr. Radt's Beneficiary
or Beneficiaries (determined in accordance with paragraph 3)
an amount equal to the Supplemental Retirement Benefit Amount
(determined in accordance with paragraph 2); provided,
however, that no payment shall be made to Mr. Radt's
Beneficiary or Beneficiaries pursuant to this subparagraph
(a) if a payment to such Beneficiary or Beneficiaries has
been made pursuant to subparagraph (b).
(b) If Mr. Radt dies prior to August 1, 1992, the
Corporation shall, within fifteen days of the date of his
death, pay to Mr. Radt's Beneficiary or Beneficiaries
(determined in accordance with paragraph 3) an amount equal
to the Supplemental Retirement Benefit Amount (determined in
accordance with paragraph 2).
2. Supplemental Retirement Benefit Amount.
(a) Subject to the provisions of subparagraph (b), the
"Supplemental Retirement Benefit Amount" shall be an amount
equal to the excess of (1) $214,312, over (2) that portion
of the lump sum present value of the monthly retirement
benefit payable to Mr. Radt under the Mosinee Retirement Plan
which is attributable to Credited Service accrued by Mr.
Radt, as determined under the Mosinee Retirement Plan,
through July 31, 1992. For purposes of this
subparagraph (a):
<PAGE>
(1) the lump sum present value of the monthly
retirement benefit payable under the Mosinee Retirement
Plan shall be determined in accordance with the
provisions of such plan governing lump sum payment
options, and
(2) the portion of the lump sum present value of
the monthly retirement benefit payable to Mr. Radt under
the Mosinee Retirement Plan which is attributable to
Credited Service accrued by Mr. Radt through July 31,
1992 shall be determined by multiplying the lump sum
present value of such retirement benefit by a fraction,
(i) the numerator of which is the number of months of
Credited Service accrued by Mr. Radt under the Mosinee
Retirement Plan as of July 31, 1992 and (ii) the
denominator of which is the total number of months of
Credited Service accrued by Mr. Radt under the Mosinee
Retirement Plan as of the date his employment with each
of the Corporation and the Corporation's subsidiaries
terminates.
(b) Despite any other provision of this Agreement, in
the event that Mr. Radt's termination of employment with each
of the Corporation and the Corporation's subsidiaries occurs
after July 31, 1992, the "Supplemental Retirement Benefit
Amount" shall be equal to (1) the amount of the "Supplemental
Retirement Benefit Amount" otherwise determined in
subparagraph (a) plus (2) interest on such amount calculated
for each calendar quarter, or portion thereof, at an annual
rate equal to the prime rate published in The Wall Street
Journal on the first day of such calendar quarter from and
after August 1, 1992 through the day immediately preceding
payment of the Supplemental Retirement Benefit Amount.
3. Mr. Radt's Beneficiary or Beneficiaries. For purposes
of this agreement, Mr. Radt's "Beneficiary or Beneficiaries" shall
mean such person or persons or organization or organizations as
Mr. Radt from time to time may designate by a written designation
filed with the Corporation during Mr. Radt's life. Any amounts
payable hereunder to Mr. Radt's Beneficiary or Beneficiaries shall
be paid in such proportions and subject to such trusts, powers and
conditions as Mr. Radt may provide in such designation. Each such
designation, unless otherwise expressly provided therein, may be
revoked by Mr. Radt by a written revocation filed with the
Corporation during Mr. Radt's life. If more than one such
designation shall be filed by Mr. Radt with the Corporation, the
last designation so filed shall control over any revocable
designation filed prior to such filing. To the extent that any
amounts payable under this agreement to Mr. Radt's Beneficiary or
Beneficiaries are not effectively disposed of pursuant to the
above provisions of this paragraph, either because no designation
was in effect at Mr. Radt's death or because a designation in
effect at Mr. Radt's death failed to dispose of such amounts in
their entirety, then for purposes of this agreement, Mr. Radt's
"Beneficiary or Beneficiaries" as to such undisposed of amounts
shall be Mr. Radt's estate.
<PAGE>
4. Supplemental Retirement Benefit in Addition to Other
Rights and Benefits. The rights and benefits conferred upon
Mr. Radt pursuant to this agreement shall be in addition to all
other rights and benefits conferred upon Mr. Radt by the
Corporation by reason of Mr. Radt's employment.
5. Nature of Corporation's Obligations and Mr. Radt's
Rights. Neither Mr. Radt nor any Beneficiary or Beneficiaries of
Mr. Radt shall acquire any right, title or interest in the assets
of the Corporation by reason of this agreement. To the extent
Mr. Radt or his Beneficiary or Beneficiaries shall acquire a right
to receive payments from the Corporation pursuant to this
agreement, such right shall be no greater than the right of any
unsecured general creditor of the Corporation.
6. Assignment by Mr. Radt Prohibited. This agreement and
Mr. Radt's rights and benefits hereunder shall not be subject to
voluntary or involuntary sale, pledge, hypothecation, transfer or
assignment by Mr. Radt or by his personal representatives or heirs
or any other person or persons or organization or organizations
succeeding to any of Mr. Radt's rights and benefits hereunder.
7. Binding Effect. This agreement shall be binding upon
and inure to the benefit of (1) Mr. Radt, his personal
representatives and heirs and any other person or persons or
organization or organizations succeeding to any of Mr. Radt's
rights or benefits hereunder, and (2) the Corporation and its
successors and assigns.
8. Severability. The invalidity or unenforceability of any
provision of this agreement shall not invalidate or render
unenforceable any other provision of this agreement.
9. Counterparts. This agreement may be executed in several
counterparts, each of which shall be an original and all of which
shall constitute but one and the same instrument.
10. Governing Law. This agreement shall be governed by the
laws of the State of Wisconsin.
IN WITNESS WHEREOF, the Corporation has caused this agreement
to be executed by an officer thereunto duly authorized, and
Mr. Radt has hereunto set his hand and seal, as of the day and
year first above written.
MOSINEE PAPER CORPORATION
By: DANIEL R. OLVEY
Daniel R. Olvey
As its Vice President - Finance
RICHARD L. RADT (Seal)
Richard L. Radt
<PAGE>
SUPPLEMENTAL RETIREMENT BENEFIT AGREEMENT
DESIGNATION OF BENEFICIARY
I, Richard L. Radt, designate the following person or persons
or organization or organizations as my Beneficiary or
Beneficiaries of any amounts otherwise due me under the
Supplemental Retirement Benefit Agreement dated November 15, 1991
and entered into by and between Mosinee Paper Corporation and me:
The acting trustee of that certain trust created by me under the
terms of a declaration of trust known as the Richard L. Radt Trust
Dated August 7, 1979, of which I now am trustee and Harris Trust
and Savings Bank, of Chicago, Illinois, now is named as successor
trustee. Said amounts shall be added to and disposed of as a part
of the trust property of said trust in accordance with the terms
of said declaration of trust, as in effect at my death.
Date: November___, 1991 ______________________________
Richard L. Radt
<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, 1995 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-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 2,416
<SECURITIES> 0
<RECEIVABLES> 29,346
<ALLOWANCES> (2,813)
<INVENTORY> 33,641
<CURRENT-ASSETS> 67,753
<PP&E> 354,120
<DEPRECIATION> (157,555)
<TOTAL-ASSETS> 272,945
<CURRENT-LIABILITIES> 41,103
<BONDS> 0
0
0
<COMMON> 58,678
<OTHER-SE> 42,514
<TOTAL-LIABILITY-AND-EQUITY> 272,945
<SALES> 305,570
<TOTAL-REVENUES> 305,570
<CGS> 249,077
<TOTAL-COSTS> 26,787
<OTHER-EXPENSES> (1,470)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,066
<INCOME-PRETAX> 25,110
<INCOME-TAX> 9,925
<INCOME-CONTINUING> 15,185
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,185
<EPS-PRIMARY> 1.92
<EPS-DILUTED> 0
</TABLE>
