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
For the fiscal year ended DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number: 0-1732
MOSINEE PAPER CORPORATION
(Exact name of registrant as specified in charter)
WISCONSIN
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, 1997, the aggregate market value of the common stock shares
held by non-affiliates was approximately $328,662,477.
The number of common shares outstanding at March 1, 1997 was 10,153,681.
DOCUMENTS INCORPORATED BY REFERENCE
Proxy statement dated March 17, 1997 (to the extent noted herein): Part III
<PAGE>
TABLE OF CONTENTS
PAGE
PART I ...................................................... 1
Item 1. BUSINESS ............................................ 1
Item 2. PROPERTIES .......................................... 9
Item 3. LEGAL PROCEEDINGS ................................... 11
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . 12
PART II ..................................................... 13
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER ......................................... 13
Item 6. SELECTED FINANCIAL DATA ............................. 14
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION................... 15
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ......... 22
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.................. 44
PART III .................................................... 45
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT . 45
Item 11. EXECUTIVE COMPENSATION ............................. 45
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.......................................... 45
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS ..... 45
PART IV ..................................................... 46
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K......................................... 46
<PAGE>
PART I
ITEM 1. BUSINESS.
NATURE OF THE BUSINESS AND SEGMENT INFORMATION
Mosinee Paper Corporation was incorporated in Wisconsin in 1910. The
manufacture, converting and sale of paper is the company's only line of
business. During 1996, the company realigned three operating divisions
into the Specialty Papers Division. The company's operations are now
divided among its Specialty Papers Division and the Towel and Tissue
Division.
THE SPECIALTY PAPERS DIVISION
The Specialty Papers Division consists of the company's Pulp and Paper
Division ("Pulp and Paper"), The Sorg Paper Company ("Sorg Paper"), and
the Mosinee Converted Products Division ("Converted Products")
PULP AND PAPER
Principal products of Pulp and Paper include industrial crepe, masking,
gumming, converting and wax-laminating, foil laminating, flame resistant,
specialty metal interleaver, cable wrap, electrical insulation, pressure
sensitive backing, toweling, water base and film coating, ink-jet
printing, packaging, saturating, and grease-resistant papers and toweling.
Pulp and Paper products are sold directly to manufacturers and converters,
mainly in the U.S., in the following industries: housing, steel,
aluminum, and other metal, masking tape and masking paper, electrical
cable, wire and components, automotive, general converters, composite can
packaging and filter.
SORG PAPER
Sorg Paper produces deep-color and white tissue (facial quality, napkin,
and tablecloth), filter paper (vacuum bag, food cooking, and humidity
filter); decorative laminates (print base, solid color core, alpha
overlay, and barrier), and report, menu, construction, U.V. blocker, latex
label, photo background, vulcanizing, perforating tape, flame-resistant,
blotting, soapboard/soapwrap, and saturating papers.
Sorg Paper sells directly to manufacturers and converters with limited
marketing through paper brokers and distributors mainly in the U.S., in
the following industries: housing, consumer product packaging, home
appliances, filters, printing, advertising and promotion, communication,
food processing, consumer and commercial goods, soap and soapwrap,
saturators, and specialized industrial converters.
CONVERTED PRODUCTS
Converted Products is a specialty producer which serves the division's
traditional markets as well as providing new specialty products.
Traditional products include wax-laminated and converted paper products
such as roll, ream and skid wrap paper, roll headers, can body stock, cold
seal packaging, fabric softener, and impregnated medium papers and non-
wovens. Newer specialty products result from laminating and coating
facilities that produce adhesives, latexes, grease barriers and cohesives.
Converted Products sells to manufacturers and converters in the U.S. in
the paper, composite can, corrugated container, industrial packaging and
consumer products industries.
<PAGE>
TOWEL AND TISSUE DIVISION
Operating as the Towel and Tissue Division of the company, Bay West Paper
Corporation ("Bay West") produces, converts and sells towel and tissue
paper products primarily for the commercial and institutional wash room
products markets. Towel and Tissue Division products include washroom
roll and folded towels, soaps, a variety of towel, tissue and soap
dispensers, windshield folded towels, industrial wipes, tissue products,
dairy towels and household roll towels.
Towel and Tissue Division products are sold under the "Bay West" trade and
service marks almost exclusively through sanitary maintenance suppliers
and paper distributors in the U.S. and several foreign countries for use
in the following markets: industrial and commercial washroom, educational
institutions, health care industry, dairy, and automotive service.
EXPORT SALES
Mosinee Paper International, Inc. administers export sales and 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 1996, export sales of the company's products
amounted to approximately $29 million.
SUPPORT OPERATIONS
Mosinee Holdings, Inc., 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. Pulp wood is produced by the Mosinee
Industrial Forest (see "Raw Materials").
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 1996, Pulp and Paper required 34,000 tons, or 27% 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 $870 per ton and
steadily decreased to the year-end average cost of $505 per ton. The
balance, representing unbleached pulp, was produced at its kraft pulp
mill.
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 1996,
Pulp and Paper consumed 31,000 cords of pulpwood, or 15% 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 1997.
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 69% of its fiber requirements at an average cost per
ton ranging from $677 at the start of the year to $446 per ton by year-
<PAGE>
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.
Converted Products utilizes linerboard and various waxes to produce its
laminated papers. Linerboard, purchased from large paper mills in the
United States, was in adequate supply during 1996 as a result of
significant additional capacity in North America. As a result, linerboard
producers experienced flat or declining pricing during the year.
Most of the Towel and Tissue Division's fiber requirements are produced
from its deink and direct entry systems. The fiber source for these
systems is low grade recyclable waste papers. Costs per ton of fiber in
1996 varied, but the average cost was substantially lower than 1995. The
Towel and Tissue Division consumed over 145,000 tons of pre- and post-
consumer waste papers during the year.
All other chemicals, dyes and sundry raw materials have remained readily
available with no anticipated shortages seen during 1997.
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. Unit shipments by the Towel and Tissue Division, 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 1996.
<PAGE>
BACKLOG
The sales backlog at year-end was over $17 million, up $3 million from the
prior year-end, and is at a manageable level. The backlog was over $12
million at specialty paper operations, and amounted to approximately
thirty-six 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 1997.
COMPETITIVE CONDITIONS
SPECIALTY PAPERS DIVISION
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.
The Specialty Papers Division competes 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. The
Specialty Papers Division was successful in raising selling prices for
paper made from pulpwood but had to pass through price decreases for paper
made from purchased pulp as these pulp costs decreased throughout the
year.
Competition in several grades of paper made from Pulp and Paper's natural
kraft pulp comes from other full-integrated large paper companies, such as
Thilmany Paper, Longview Fibre Company and Gilman Paper Company.
Competition in grades of paper made from market pulp comes from several
non-integrated specialty paper mills and large integrated paper companies
such as James River Corporation and Little Rapids Paper Company.
Competition for Sorg Paper products is from both non-integrated specialty
mills and larger integrated paper companies. Competitors in Sorg's major
paper grades of decorative, soapboard, saturating base and vacuum bag
include James River Corporation, Mead Paper, PWA, Inc., Kimberly Clark,
Dexter, Fletcher and Monadnock.
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.
Competition in roll wrap comes from other wax and poly laminators and
includes Laminated Papers, Sonoco Products, Bonar Packaging, Ltd.,
Fortifiber, Inc., Ludlow, Simplex and Fiberlam, Inc. Ream wrap competes
primarily with wax-laminated producers such as Sonoco Products.
<PAGE>
TOWEL AND TISSUE DIVISION
Competition for the Towel and Tissue Division in the commercial and
institutional markets is among several large paper companies. Although the
Division is growing, it is one of the smaller competitors in this market.
Competition for the Towel and Tissue Division comes from major integrated
paper companies who service consumer and food service markets as well as
the industrial and institutional sanitary markets concentrated on by Bay
West. Major competitors include Fort Howard Paper Co., James River
Corporation, Georgia Pacific, Kimberly Clark, Wisconsin Tissue Mills, Inc.
RESEARCH AND DEVELOPMENT
The company is involved in research and development activities at all
locations. Generally, research at specialty paper operations occurs in
both the laboratory and on the paper machines in the form of trial runs.
Research at converting facilities is limited to development, often in
conjunction with suppliers, on new laminating compounds. Tissue operations
perform trial run research in both deinking and paper production to
improve product capability and quality. Additionally, research is
conducted to improve existing, and develop the next generation, of product
dispensers. The amounts spent on research activities are not material in
relation to total operating expenses.
ENVIRONMENT
The paper industry is subject to stringent environmental laws and
regulations which govern the discharge of materials into the air and
ground and surface waters. Environmental regulations have become more
restrictive in the past and additional changes can be anticipated in the
future. The company is committed to full compliance with all rules
designed to protect the environment and compliance with current rules is
not expected to have a material adverse effect on the company's earnings
or competitive position. There are no proposed regulatory changes of
which the company is now aware which are expected to have a material
effect on the business or financial condition of the company, but it can
be anticipated that future environmental regulations will likely increase
the company's capital expenditures and operating costs.
Additional information concerning the company's status as a potentially
responsible party and other environmental matters can be found in Item 3,
Legal Proceedings, and in Note 13 of the Notes to Consolidated Financial
Statements, page 45. 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 1,303 employees at the end of 1996. Most hourly employees
are covered under collective bargaining agreements. Labor agreements at
the Pulp and Paper Division and Bay West's Middletown, Ohio mill will
remain in effect until 2000 and 1999, respectively. The 1993 labor
agreement at Sorg Paper will expire in 1997. The company expects that a
new multi-year contract will be negotiated. The company considers its
relationship with its employees to be excellent.
Eligible employees participate in retirement plans and group life,
disability and medical insurance programs.
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The following information relates to executive officers of the Company as
of March 19, 1997:
SAN W. ORR, JR., 55
Chairman of the Board since 1987
Director since 1972, Vice Chairman of the Board (1978-1987)
Also Attorney, Estates of A.P. Woodson & Family and
Chairman of the Board of Wausau Paper Mills Company, Vice Chairman of
the Board of MDU Resources Group, Inc., and a director of Marshall &
Ilsley Corporation
RICHARD L. RADT, 65
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, 48
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)
GARY P. PETERSON, 48
Senior 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, 50
Senior Vice President, Specialty Papers,
Previously, Senior Vice President-Administration (August, 1993-August,
1996); 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)
DAVID L. CANAVERA, 47
Senior Vice President, Towel and Tissue since August, 1996 Previously,
Vice President and General Manager, Bay West (May, 1994 to August,
1996); Vice President - Resident Manager, Bay West (Harrodsburg,
October, 1993 to May, 1994; Middletown, December 1993 to May, 1994).
DENNIS M. URBANEK, 52
Vice President, Engineering and Environmental Services since August,
1996
Previously, Vice President and General Manager, Pulp and Paper
Division (June, 1992 to August, 1996) and Vice President and General
Manager, Sorg Paper (November 1990 to June, 1992).
<PAGE>
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This Form 10-K, each of the company's annual reports to shareholders,
Forms 10-K, 8-K, and 10-Q, proxy statements, prospectuses, and any other
written or oral statement made by or on behalf of the company subsequent
to the filing of this Form 10-K may include one or more "forward-looking
statements" within the meaning of sections 27A of the Securities Act of
1933 and 21E of the Securities Exchange Act of 1934 as enacted in the
Private Securities Litigation Reform Act of 1995 (the "Reform Act").
Expressions of the company's or company officers' beliefs or expectations
that certain events may occur or are anticipated, projections and
statements of expectations with respect to any aspects of the company's
business (including, but not limited to, net income, the availability or
price of raw materials, or customer demand for company products), the
company's stock performance, the industries within which the company
operates, the economy, and any other expressions of similar import or
covering other matters relating to the Company or its operations, identify
such forward-looking statements of the company. In making forward-looking
statements within the meaning of the Reform Act, the company undertakes no
obligation to publicly update or revise any such statement.
Forward-looking statements of the company are based on information
available to the company as of the date of such statements and reflect the
company's expectations as of such date, but are subject to risks and
uncertainties that may cause actual results to vary materially. In
addition to specific factors which may be described in connection with any
of the company's forward-looking statements, factors which could cause
actual results to differ materially include but are not limited to the
following:
<bullet> Increased competition from either domestic or foreign
paper producers or providers of alternatives to the
company's products, including increases in competitive
production capacity, resulting in sales declines from
reduced shipment volume and/or lower net selling prices in
order to maintain shipment volume.
<bullet> Changes in customer demand for the company's products
due to overall economic activity affecting the rate of
consumption of the company's paper products, growth rates
of the end markets for the company's products,
technological or consumer preference changes or acceptance
of the products by the markets served by the company.
<bullet> Changes in the price of raw materials, principally
pulp, wastepaper and linerboard. A substantial portion of
the company's raw materials are purchased on the open
market and price changes could have a significant impact on
the company's costs. In particular, fiber represents
approximately half the cost of making paper and significant
price increases for fiber could materially affect the
company's financial condition. Raw material prices will
change based on supply and demand on a worldwide spectrum.
Wood costs can also be impacted by availability,
environmental issues or other variables.
<bullet> Unforeseen operational problems at any of the
company's facilities causing significant lost production
and/or cost issues.
<PAGE>
<bullet> Significant changes to the company's strategic plans
such as a major acquisition or expansion, or failure to
successfully execute major capital projects or other
strategic plans.
<bullet> Changes in laws or regulations which affect he
company. The paper industry is subject to stringent
environmental laws and regulations and any changes required
to comply with such laws or regulations may increase the
company's capital expenditures and operating costs.
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 15 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>
SPECIALTY PAPERS DIVISION
PULP AND PAPER
LOCATION AND CAPACITY
Mosinee, WI
Number of employees: 515
<CAPTION>
Practical 1996 Operating
Product Capacity* (Tons) Actual (Tons) Rate
<S> <C> <C> <C>
Paper 112,100 110,700 99%
Pulp 92,500 92,300 100%
</TABLE>
<TABLE>
SORG PAPER
LOCATION AND CAPACITY
Middletown, OH
Number of employees: 192
<CAPTION>
Practical 1996 Operating
Product Capacity* (Tons) Actual (Tons) Rate
<S> <C> <C> <C>
Paper 33,200 32,640 98%
</TABLE>
<PAGE>
<TABLE>
CONVERTED PRODUCTS
LOCATION AND CAPACITY
Columbus, WI
Number of employees: 50
Jackson, MS
Number of employees: 20
<CAPTION>
Practical 1996 Operating
Product Capacity* (Tons) Actual (Tons) Rate
<S> <C> <C> <C>
Laminated
Papers 145,000 41,600 29%
</TABLE>
<TABLE>
TOWEL AND TISSUE DIVISION
LOCATION AND CAPACITY
Towel and Tissue Paper Mill
Middletown, OH
Number of employees: 159
<CAPTION>
Practical 1996 Operating
Product Capacity* (Tons) Actual (Tons) Rate
<S> <C> <C> <C>
Towel 63,000 58,000 92%
Tissue 35,000 32,000 91%
Deink Pulp 105,000 95,000 90%
</TABLE>
<TABLE>
LOCATION AND CAPACITY
Harrodsburg, KY
Number of employees: 336
<CAPTION>
Practical 1996 Operating
Product Capacity* (Tons) Actual (Tons) Rate
<S> <C> <C> <C>
Converted
Towel & Tissue 129,000 94,000 73%
</TABLE>
MOSINEE INDUSTRIAL FOREST
LOCATION AND CAPACITY
Solon Springs, WI
1996 production: 35,500 cords
1996 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") nominated a
landfill, for which the company may be a potentially responsible party,
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 complete.
Based on information now available to the company, the company believes
that any additional costs associated with these landfills 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.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS.
The company's common stock is traded on The Nasdaq Stock Market under
the symbol MOSI. The number of shareholders of record as of February 26,
1997 was 1,710. In addition, the company has received identification of
5,277 non-objecting beneficial owners who own stock in "street name" or
who are institutional owners. The company also believes that it has
approximately 850 beneficial owners who either did not reply or who object
to being disclosed. The total estimated number of shareholders as of
February 26, 1997 is 7,837. Information related to high and low closing
prices and dividends is set forth on page 43 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 15.
<PAGE>
<TABLE>
ITEM 6. SELECTED FINANCIAL DATA.
<CAPTION>
($ thousands except share data)
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Net Sales $314,490 $305,570 $266,707 $244,821 $225,512
Cost of sales 230,485 249,077 217,502 201,317 195,034
Gross profit 84,005 56,493 49,205 43,504 30,478
Operating expenses 34,479 26,787 23,234 25,147 23,287
Income from operations 49,526 29,706 25,971 18,357 7,191
Interest expense 4,412 6,066 5,010 6,040 7,685
Other income (expense)(2) (165) 1,470 580 5,070 553
Income before income taxes 44,949 25,110 21,541 17,387 59
Income taxes 18,050 9,925 8,500 7,750 22
Net income (loss)(1) (3) 26,899 15,185 12,291 9,637 (8,500)
Net cash provided by
operating activities 56,418 30,902 25,926 26,936 16,201
Working capital 27,349 26,650 26,312 21,295 13,413
Capital additions 19,095 17,741 20,377 12,663 14,314
Depreciation, amortization
and depletion 18,064 16,633 15,684 15,017 15,839
Total assets 285,029 272,945 265,083 252,061 247,702
Long-term debt 48,332 79,307 91,383 96,260 100,000
Stockholders' equity 123,897 101,192 88,851 79,133 72,070
Total capitalization 172,229 180,499 180,234 175,393 172,070
Common stock:
Net income (loss) per
share(1)(3)(4)(5) 2.56 1.44 1.16 .92 (.83)
Book value per share(4)(5) 11.85 9.65 8.48 7.55 6.87
Dividends declared
per share (4)(5) .32 .27 .25 .25 .25
Weighted average shares
outstanding (4)(5) 10,479,805 10,483,014 10,483,014 10,483,014 10,427,009
Number of stockholders
at year-end 6,399 4,521 4,626 4,488 4,804
<FN>
(1) 1992 reflects the cumulative effect of a change in accounting principle
of $8.5 million expense for the adoption of SFAS No. 106.
(2) 1993 other income reflects $5.5 million for a patent infringement suit
award.
(3) 1994 reflects the cumulative effect of a change in accounting principle
of $750 thousand expense for adoption of SFAS No. 112.
(4) Prior year share data restated for the May, 1995 10% stock dividend.
(5) Prior year share data restated for the May, 1996 four-for-three stock
split.
</TABLE>
<PAGE>
<TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION.
<CAPTION>
OPERATIONS REVIEW
NET SALES
($ THOUSANDS) 1996 1995 1994
<S> <C> <C> <C>
Net sales $314,490 $305,570 $266,707
Percent increase 3% 15% 9%
</TABLE>
Sales increased $9 million, or 3%, over the prior year. The company's Bay
West subsidiary increased sales $13 million due to large volume increases,
while sales volume at the company's specialty paper operations increased
slightly from the prior year. These volume increases were offset
dramatically by selling price reductions principally due to lower raw
material costs partially passed through to customers.
In 1995, sales increased $39 million, or 15% over the prior year. 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 net gain
in margins. Selling prices continued to increase at our Bay West
operations in the last half of the year while specialty paper prices
remained relatively constant. In summary, price and product mix accounted
for the annual change in sales dollars from 1995 to 1994, while volume
remained constant.
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 $1.5
million.
<TABLE>
GROSS PROFIT ON SALES
<CAPTION>
($ thousands) 1996 1995 1994
<S> <C> <C> <C>
Gross profit on sales $84,005 $56,493 $49,205
Percent increase 49% 15% 13%
Gross profit margin 27% 18% 18%
</TABLE>
In 1996, gross profit of $84 million increased 49% over the $56 million
reported in 1995. The gross profit margin for 1996 rose to 27% from the
18% reported last year due to lower raw material costs for pulp and
wastepaper and continued emphasis on cost reduction and operating
efficiency at all of the company's operating locations.
In 1995, 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
<PAGE>
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 our Pulp and Paper facility, while Sorg's
margins were negatively impacted because selling prices did not keep pace
with pulp cost increases.
In 1994, gross profit rose to $49 million, an increase of 13% over the $44
million reported the prior year. Gross profit margins remained at 18%.
Increased productivity at the Bay West facilities, along with higher
volumes and an improved mix of product sold at all other units,
contributed to the increase in gross profit.
<TABLE>
OPERATING EXPENSES
<CAPTION>
($ THOUSANDS) 1996 1995 1994
<S> <C> <C> <C>
Selling $11,157 $10,383 $ 9,857
Percent increase 7% 5% 7%
Administrative 23,322 16,404 13,377
Percent increase/(decrease) 42% 23% (16%)
Total operating expenses 34,479 26,787 23,234
Percent increase/(decrease) 29% 15% ( 8%)
As a percent of net sales 11% 9% 9%
</TABLE>
Selling expenses increased $0.8 million in 1996 over 1995. Increased
employee incentive compensation and retirement plan costs, promotional
expenses and general inflation account for the majority of the increase.
Administrative expenses increased $7 million in comparison to prior year
levels. Included in administrative expenses are charges for the company's
management incentive programs, such as the Stock Appreciation Rights Plans
(SAR), which are based upon the company's stock price. During 1996,
increases in the market price for the company's stock resulted in a charge
of $5.7 million compared to $0.9 million in 1995. The balance of the
increase was comprised principally of increased incentive compensation
expense and retirement plan expenses along with general inflationary
increases.
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 from 1994 to 1995. 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 for the
company's management incentive programs. 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. General inflationary
increases for salaries and wages along with increased selling incentive
compensation and higher advertising and promotional expenses, primarily at
Bay West, offset reductions in other costs and accounted for the overall
increase.
<PAGE>
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 $1.7 million in 1993. Salaried employment
reductions and cost reduction program efforts offset general inflationary
increases and increased costs to the company's 401(k) plans resulting from
increased company earnings.
<TABLE>
INCOME FROM OPERATIONS
<CAPTION>
($ THOUSANDS) 1996 1995 1994
<S> <C> <C> <C>
Income from operations $49,526 $29,706 $25,971
Percent increase 67% 14% 41%
</TABLE>
The record 1996 income from operations of nearly $50 million out distanced
last year's record of nearly $30 million by 67%. The moderate sales
increase along with the large decrease in cost of goods sold due to lower
raw material costs accounted for most of the improvement.
In 1995, 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 improvement.
In 1994, income from operations increased to $26 million, $8 million ahead
of 1993's level of $18 million. Strong sales volumes and some needed
relief in pricing along with cost reduction efforts principally accounted
for the improvement.
<TABLE>
OTHER INCOME AND EXPENSES
<CAPTION>
($ THOUSANDS) 1996 1995 1994
<S> <C> <C> <C>
Interest expense $4,412 $6,066 $5,010
Percent increase/(decrease) (27%) 21% (17%)
Other income/(expense) (165) 1,470 580
</TABLE>
For 1996, interest expense on commercial paper and other long-term debt
decreased $1.7 million from the prior year due to a significant reduction
in the debt level and minor reductions in the average interest rate.
Interest expense on commercial paper and other long-term debt totaled $6.1
million in 1995 compared to $5 million in 1994. Higher interest rates
offset lower borrowing resulting in the $1.1 million increase.
Other expense of $0.2 million in 1996, resulted principally from a $0.4
million abandonment of old equipment at two of the company's locations
offset by other disposal gains. Other income of $1.5 million in 1995 and
$0.6 million in 1994 resulted principally from the sale of timberlands
incompatible with the company's fiber needs.
<TABLE>
INCOME TAXES
<CAPTION>
($ THOUSANDS) 1996 1995 1994
<S> <C> <C> <C>
Income tax provision $18,050 $9,925 $8,500
Percent increase 82% 17% 10%
Effective tax rate 40.2% 39.5% 39.5%
</TABLE>
<PAGE>
The income tax provision varies with reported income, and federal, state
and local tax rates. The 1996, 1995 and 1994 provisions increased due to
continued improvement in earnings. The 1996 effective tax rate is up
slightly from the 39.5% reported for 1995 and 1994.
<TABLE>
NET INCOME
<CAPTION>
($ THOUSANDS) 1996 1995 1994
<S> <C> <C> <C>
Net income $26,899 $15,185 $12,291
Percent increase 77% 24% 28%
Net income per share* 2.56 1.44 1.16
Percent increase 78% 24% 26%
<FN>
* All applicable information has been restated for 1996 four-for-three
stock split and the 1995 10% stock dividend.
</TABLE>
Reflecting the above, record net income for 1996 of $26.9 million, or
$2.56 per share, rose $11.7 million over the prior year level of $15.2
million, or $1.44 per share.
Net income for 1995 of $15.2 million, or $1.44 per share, rose $2.9
million over the prior year level of $12.3 million, or $1.16 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 $400,000.
<TABLE>
LIQUIDITY AND CAPITAL RESOURCES
<CAPTION>
CASH FLOW AND WORKING CAPITAL
($ THOUSANDS) 1996 1995 1994
<S> <C> <C> <C>
Cash provided by operating
activities $56,418 $30,902 $25,926
Percent increase/(decrease) 83% 19% (4%)
Working capital 27,349 26,650 26,312
Percent increase 3% 1% 24%
Current ratio 1.6:1 1.6:1 1.7:1
</TABLE>
Cash provided by operating activities for 1996 increased 83% over 1995 and
rose to $56.4 million, an all-time record level. The increase in net
income of $11.7 million along with the change in working capital needs of
$4.7 million offset by other non-cash activities account for the change.
Increased inventory quantities more than offset raw material cost
decreases and was the principal for the increase in inventory investment
of $7.6 million. Improved cash collection efforts during the year reduced
receivables by $2.9 million over 1995, even as sales increased. Income
tax paid was reduced due to the utilization of alternative minimum tax
credit carryover.
Capital expenditures were $21.1 million in 1996 compared to $16.7 million
in 1995. Proceeds from capital asset disposals, principally timberland
sales, were $0.5 million, a decrease of $1.1 million from 1995. Major
capital spending in 1996 was for converting equipment and general paper
mill improvements and replacements.
<PAGE>
The strong cash flow and a conservative approach to capital spending
allowed for sufficient cash to reduce the outstanding debt by $31 million
and return $3.2 million in cash dividends to shareholders.
<TABLE>
DEBT AND EQUITY
<CAPTION>
($ THOUSANDS) 1996 1995 1994
<S> <C> <C> <C>
Long-term debt $ 48,332 $ 79,307 $ 91,383
Stockholders' equity 123,897 101,192 88,851
Total capitalization 172,229 180,499 180,234
Debt/capitalization ratio 28% 44% 51%
</TABLE>
While the company's financing arrangements do not require scheduled
repayments of its long-term debt, the company repaid $31 million of
long-term debt outstanding during the year. This reduction exceeded the
company's goal of $12 million established at the beginning of the year.
The ratio of long-term debt to total capitalization of 28% 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, then to $65 million in October 1996 and remains at
that level at December 31, 1996. The company utilizes up to $50 million
of this credit agreement to support its participation in the commercial
paper markets. At year-end, approximately $13 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, planned capital expenditures for property and
equipment of $45 million next year, and the appropriate repurchase of
company stock as authorized by the company's Board of Directors.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
Management's Responsibility For Financial Reporting ..........23
Auditor's Report .............................................24
Consolidated Balance Sheets ..................................25
Consolidated Statements of Stockholders' Equity ..............26
Consolidated Statements of Income ............................27
Consolidated Statements of Cash Flows ........................28
Notes to Consolidated Financial Statements ...................29
Schedules ....................................................49
<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, 1996 and 1995, 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, 1996 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, 1996 and 1995,
and the results of their operations and cash flows for each of the years
in the three year period ended December 31, 1996, 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.
January 30, 1997 WIPFLI ULLRICH BERTELSON LLP
Wausau, Wisconsin
<PAGE>
<TABLE>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
($ thousands) As of
December 31,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,150 $ 2,416
Receivables, net 23,407 26,533
Inventories 41,254 33,641
Deferred income taxes 7,225 4,799
Other current assets 311 364
Total current assets 75,347 67,753
Property, plant and equipment, net 199,475 196,565
Other assets 10,207 8,627
TOTAL ASSETS $285,029 $272,945
LIABILITIES
Current Liabilities:
Accounts payable $ 18,262 $ 20,583
Accrued and other liabilities 27,316 19,389
Accrued income taxes 2,420 1,131
Total current liabilities 47,998 41,103
Long-term debt 48,332 79,307
Deferred income taxes 35,538 24,646
Postretirement benefits 16,125 15,001
Other noncurrent liabilities 11,884 10,441
Total liabilities 159,877 170,498
Commitments and contingencies -- --
Preferred stock of subsidiary 1,255 1,255
STOCKHOLDERS' EQUITY
Preferred stock - $1 par value,
authorized 1,000,000 shares, none issued
Common stock - No par value
- 30,000,000 shares authorized 58,678 58,678
Retained earnings 83,763 60,216
Subtotals 142,441 118,894
Treasury stock at cost (18,544) (17,702)
Total stockholders' equity 123,897 101,192
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $285,029 $272,945
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<CAPTION>
($ thousands except COMMON STOCK Additional Common
Total
share data) Stock
Stock-
Shares Paid-In Retained Treasury Stock Shares
holder's
Issued Amount Capital Earnings Shares Amount
Outstanding Equity
<S> <C> <C> <C> <C> <C> <C> <C>
<C>
Balances December 31, 1993 10,393,823 $25,984 $13,851 $56,986 (3,245,380) ($17,688) 7,148,443 $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) 7,148,443 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) 714,297 ( 14)
Balances December 31, 1995 11,433,205 58,678 0 60,216 (3,570,465) (17,702) 7,862,740 101,192
Net income, 1996 26,899 26,899
Cash dividends declared on
Mosinee common stock (3,352) (3,352)
Four-for-three stock split 3,811,068 (1,190,156) 2,620,912
Purchases of treasury (29,971) (842) (29,971) (842)
shares
BALANCES DECEMBER 31, 1996 15,244,273 $58,678 $0 $83,763 (4,790,592) ($18,544)10,453,681 $123,897
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
($ thousands except share For the Years
data) Ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Net sales $314,490 $305,570 $266,707
Cost of sales 230,485 249,077 217,502
Gross profit on sales 84,005 56,493 49,205
Operating expenses:
Selling 11,157 10,383 9,857
Administrative 23,322 16,404 13,377
Total operating expenses 34,479 26,787 23,234
Income from operations 49,526 29,706 25,971
Other income (expense):
Interest expense (4,412) (6,066) (5,010)
Other ( 165) 1,470 580
Income before income taxes and
cumulative effect adjustment 44,949 25,110 21,541
Provision for income taxes 18,050 9,925 8,500
Income before cumulative effect
of a change in accounting
principle 26,899 15,185 13,041
Cumulative effect of a change in
accounting principle (net of
income taxes) - - (750)
Net income $26,899 $15,185 $12,291
Income per share before cumulative
effect of a change in accounting
principle $ 2.56 $ 1.44 $ 1.24
Cumulative effect of a change in
accounting principle
(net of income taxes) - - ( 0.08)
Net income per share $ 2.56 $ 1.44 $ 1.16
Weighted average common
shares outstanding 10,479,805 10,483,014 10,483,014
<FN>
All share data has been restated for the 1996 four-for-three stock split and
the 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) 1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $26,899 $15,185 $12,291
Provision for depreciation, depletion
and amortization 18,064 16,633 15,684
Recognition of deferred revenue (40) (40) (40)
Provision for losses on accounts receivable 257 443 901
Loss (gain) on property, plant and equipment
disposals 223 (1,417) (462)
Deferred income taxes 8,466 2,213 3,094
Changes in operating assets and liabilities:
Accounts receivable 2,869 ( 769) (5,647)
Inventories (7,613) (3,041) ( 144)
Other assets (3,831) (1,907) (3,339)
Accounts payable and other liabilities 9,835 3,424 3,060
Accrued income taxes 1,289 178 528
Net cash provided by operating activities 56,418 30,902 25,926
Cash flows from investing activities:
Capital expenditures (21,100) (16,741) (19,088)
Proceeds from property, plant and
equipment disposals 457 1,556 647
Net cash used in investing activities (20,643) (15,185) ( 18,441)
Cash flows from financing activities:
Net payments under credit agreements (30,975) (12,076) ( 4,878)
Dividends paid ( 3,224) ( 2,766) ( 2,573)
Payments for purchase of treasury stock ( 842) ( 14) --
Net cash used in financing activities (35,041) (14,856) ( 7,451)
Net increase in cash and cash equivalents 734 861 34
Cash and cash equivalents at beginning of year 2,416 1,555 1,521
Cash and cash equivalents at end of year $ 3,150 $ 2,416 $ 1,555
Supplemental Cash Flow Information:
Interest paid - net of amount capitalized $ 4,710 $ 6,034 $ 4,575
Income taxes paid 8,296 6,734 4,877
<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
estimated future tax effects of the differences between the financial
statement and tax bases of assets and liabilities, as measured by the current
enacted tax rates. 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.
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.
<PAGE>
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 - CHANGE IN ACCOUNTING POLICY
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 $400,000 and represents the entire liability for such benefits earned
through 1993.
<PAGE>
<TABLE>
4 - SUPPLEMENTAL BALANCE SHEET INFORMATION
<CAPTION>
Supplemental information on certain balance sheet items consist of the
following:
($ thousands) December 31,
1996 1995
<S> <C> <C>
Receivables
Trade $25,446 $ 28,498
Other 857 848
26,303 29,346
Less: allowances (2,896) (2,813)
$23,407 $ 26,533
Inventories
Raw materials $18,154 $ 15,827
Finished goods and work in
process 20,764 20,693
Supplies 8,944 8,896
47,862 45,416
Less: LIFO Reserve ( 6,608) (11,775)
$41,254 $ 33,641
Property, plant and equipment
Buildings $ 41,316 $ 35,984
Machinery and equipment 314,517 308,944
Totals 355,833 344,928
Less: accumulated depreciation (170,610) (157,555)
Net depreciated value 185,223 187,373
Land 2,162 2,162
Timber and timberlands, net of
depletion 3,388 3,184
Water power rights 129 129
Construction in progress 8,573 3,717
$199,475 $196,565
Accrued and other liabilities
Payrolls $ 4,415 $ 3,336
Vacation pay 4,761 4,442
Taxes, other than income 2,177 2,324
Employee retirement plans 2,597 1,350
Cash dividends declared 836 708
Insurance 1,649 1,067
Stock appreciation plans 4,730 3,833
Interest 274 643
Other 5,877 1,686
$ 27,316 $ 19,389
</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, 1996:
($ thousands) Operating Leases
<S> <C>
1997 $ 946
1998 765
1999 616
2000 355
2001 107
Total minimum lease payments $2,789
</TABLE>
Rent expense for all operating leases of plant and equipment was
$2,245,000 in 1996, $2,563,000 in 1995 and $2,834,000 in 1994.
6 - RETIREMENT PLANS
PENSIONS
Substantially all employees of the company are covered under various
pension plans. The defined benefit pension plan benefits are based on the
participants' years of service and either compensation earned over certain
final years of employment or fixed benefit amounts for each year of
service. The plans are funded in accordance with federal laws and
regulations.
<TABLE>
The net pension costs for all defined benefit pension plans consist of the
following components:
<CAPTION>
($ thousands) 1996 1995 1994
<S> <C> <C> <C>
Service cost $ 950 $ 775 $ 801
Interest cost 2,177 1,985 1,747
Actual return on assets (4,441) (2,241) ( 315)
Net amortization and
deferral 2,142 ( 146) (1,976)
Net pension cost $ 828 $ 373 $ 257
</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) 1996 1995
PLANS WITH PLANS WITH PLANS WITH PLANS WITH
ASSETS EXCEEDING ASSETS ASSETS EXCEEDING ASSETS
ACCUMULATED LESS THAN ACCUMULATED LESS THAN
BENEFIT ACCUMULATED BENEFIT ACCUMULATED
OBLIGATION BENEFIT OBLIGATION BENEFIT
OBLIGATION OBLIGATION
<S> <C> <C> <C> <C>
ACTUARIAL PRESENT VALUE OF
BENEFIT OBLIGATIONS AT
SEPTEMBER 30
VESTED BENEFIT OBLIGATION ($21,325) ($964) ($20,587) ($ 766)
ACCUMULATED BENEFIT OBLIGATION ($24,619) ($1,829) ($24,204) ($ 1,359)
PROJECTED BENEFIT OBLIGATION ($27,599) ($2,516) ($27,145) ($ 1,686)
FAIR VALUE OF PLAN ASSETS AT
SEPTEMBER 30 28,551 -- 25,505 --
PROJECTED BENEFIT OBLIGATION
(IN EXCESS OF) LESS THAN
PLAN ASSETS AT SEPTEMBER 30 952 ( 2,516) ( 1,640) ( 1,686)
UNRECOGNIZED NET LOSS (GAIN) ( 2,980) 757 ( 436) 273
UNRECOGNIZED PRIOR SERVICE COST 560 472 632 514
UNRECOGNIZED INITIAL NET
OBLIGATION (ASSET) ( 1,121) 93 ( 1,280) 105
UNRECOGNIZED ACQUISITION TAX
BENEFIT 557 -- 641 --
CASH CONTRIBUTIONS TO PLANS
SUBSEQUENT TO SEPTEMBER 30 -- 12 -- 12
ADJUSTMENT REQUIRED TO RECOGNIZE
MINIMUM LIABILITY -- ( 647) -- ( 577)
CONSOLIDATED BALANCE SHEETS AT
DECEMBER 31 ($ 2,032) ($ 1,829) ($ 2,083) ($ 1,359)
</TABLE>
The projected benefit obligations at September 30, were determined using
an assumed discount rate of 7.75% and 7.5% for 1996 and 1995,
respectively, and assumed compensation increases of 5% in 1996 and 1995.
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 $3,459,000 and $2,253,000 in
1996 and 1995, 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 $3,669,000 in 1996, $2,279,000 in
1995, and $2,100,000 in 1994.
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 $157,000,
$155,000, and $161,000 for 1996, 1995, and 1994, respectively.
<PAGE>
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to providing pension benefits, the company provides certain
health care and nominal term life insurance benefits for retired
employees. Substantially all of the company's employees may become
eligible for those benefits if they reach normal retirement age while
working for the company.
Cost-sharing provisions, benefits and eligibility for various employee
groups vary by location and union agreements. Generally, eligibility is
attained after reaching age 55 or 62 with minimum service requirements.
Upon reaching age 65, the benefits become coordinated with Medicare. The
plans are unfunded and the company funds the benefit costs on a current
basis.
<TABLE>
The net postretirement benefit costs consists of the following components:
<CAPTION>
($ thousands) 1996 1995 1994
<S> <C> <C> <C>
Service cost $ 658 $ 474 $ 467
Interest cost 1,443 1,195 1,046
Net amortization and deferral 169 5 72
Net postretirement benefit cost $2,270 $1,674 $1,585
</TABLE>
<TABLE>
The following table sets forth the accumulated postretirement benefit
obligation (APBO) of the plans as reported in the accompanying
consolidated balance sheets:
<CAPTION>
December 31,
($ thousands) 1996 1995
<S> <C> <C>
Retirees and dependents ($8,812) ($8,985)
Fully eligible active participants ( 2,217) ( 1,964)
Other active participants ( 8,272) ( 7,350)
Total APBO (19,301) (18,299)
Unrecognized net loss 3,176 3,298
Accrued postretirement benefit cost ($16,125) ($15,001)
</TABLE>
The 1996 assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation was 9%, declining by 1%
annually for four years to an ultimate rate of 5%. The weighted average
discount rate used was 7.75%. For 1995, the obligation was calculated
using a health care cost trend rate of 10%, declining by 1% annually for
five years to an ultimate rate of 5%. The weighted average discount rate
was 7.5%.
The effect of a 1% increase in the health care cost trend rate would
increase the APBO by $2,174,000 or 11.3% and $2,039,000 or 11.1%, at
December 31, 1996 and 1995, respectively. The effect of this change would
increase the aggregate of the service cost and interest cost by $326,000
or 15.5% in 1996, $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,
1996 1995
<S> <C> <C>
Commercial paper $ 13,332 $ 34,307
Revolving credit agreement 15,000 25,000
Long-term note 20,000 20,000
Total 48,332 79,307
Less: current maturities - -
Long-term debt $ 48,332 $ 79,307
</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, 1996 was 5.7% and 6.0% at
December 31, 1995. 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 five year 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 borrowing less the amount of commercial paper
outstanding. There are no payments required until March 31, 1998, at
which time, all outstanding amounts become due. Under the agreement, the
company may reduce the commitment amount prior to March 31, 1998 without
penalty. As of December 31, 1996, the commitment amount has been reduced
to $65 million. The weighted average interest rate at December 31, 1996
was 5.8% and at December 31, 1995 was 6.0%. 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 $41 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 $20 million on September 30, 1994 with one financial
institution to secure an interest rate of 7.83%. Interest is paid monthly
and the principal is not due until September 1999. The arrangement
provides for various restrictive covenants, which includes maintaining a
minimum net worth, interest coverage and debt to capital ratios.
The difference between the book value and the fair market value of long-
term debt is not material.
<TABLE>
The aggregate annual maturities of long-term debt in future years is shown
below:
<CAPTION>
($ THOUSANDS) 1997 1998 1999
<S> <C> <C>
- $28,332 $20,000
</TABLE>
<PAGE>
The annual maturities on the revolving credit agreement included in the
above schedule are based on the amount outstanding at December 31, 1996.
Annual maturities will be affected by future borrowing under the
agreement.
<TABLE>
8 - INTEREST EXPENSE AND CAPITALIZED INTEREST
<CAPTION>
($ THOUSANDS)
Total Net
Interest Capitalized Interest
December 31, Expense Interest Expense
<S> <C> <C> <C>
1996 $4,601 $189 $4,412
1995 6,247 181 6,066
1994 5,143 133 5,010
</TABLE>
9 - PREFERRED SHARE PURCHASE RIGHTS PLAN
On July 10, 1996, pursuant to the Rights Agreement dated July 1, 1996, the
company paid a dividend of one preferred share purchase right (a "Right")
for each outstanding share of the company's common stock. The Rights
replace the rights granted to shareholders in 1986 which expired July
1996.
In general, the Rights will not become exercisable until 10 days after a
public announcement that a person has acquired 15% of the common stock or
10 business days after a person has announced a tender or exchange offer
in which 15% or more of the common stock would be acquired. A "person"
for purposes of the Rights, includes a group of affiliated or associated
persons.
Each Right provides that, when exercisable, the holder may purchase .01
share of Mosinee series A Junior Participating Preferred Stock ("Preferred
Stock") at a price of $100. Each .01 share of Preferred Stock is entitled
to a dividend equal to the dividend paid on a share of common stock (with
a minimum of $.05 per quarter) and will have one vote. In the event that
the company is liquidated, each .01 share of Preferred Stock would be
entitled to a minimum liquidation preference of $1 and would otherwise
receive the liquidation payment of a share of stock. In the event of a
merger or other exchange involving the common stock, the holder of a share
of Preferred Stock would receive the same amount as that received by the
holder of a share of common stock.
Once a person has acquired at least 15% of the common stock, a holder may
exercise the Rights and receive, in lieu of Preferred Stock, common stock
having a value equal to 200% of the exercise price of each Right. If a
person has acquired at least 15% of the common stock and the company is
acquired in a merger or similar transaction or 50% of its assets are
acquired, the holder may exercise the Rights and receive, in lieu of
Preferred Stock, common stock from the acquiring company which has a value
of twice the exercise price of the Rights.
The company may redeem the Rights for $.01 per Right before a person
acquires 15% of the common stock. If a person acquires 15%, but has not
yet acquired 50% of the common stock, the company may exchange one share
of common stock for each Right.
<PAGE>
The Rights Agreement contains provisions to permit the Board of Directors
to adjust the percentage of stock to be acquired by a person before the
Rights become exercisable and to adjust, among other things, the exercise
price, the redemption price and/or conversion amounts in the event of
stock splits, stock dividends or other events which affect the number,
classes or rights of the common stock. The Rights will expire on July
10, 2006 unless they are redeemed or exchanged earlier by the company as
described above or are exercised by shareholders. The company has
reserved 100,000 shares of preferred stock.
10 - INCOME TAXES
<TABLE>
PROVISION FOR INCOME TAXES
<CAPTION>
The provision for income taxes is as follows:
($ thousands)
1996 1995 1994
<S> <C> <C> <C>
Current tax expense:
Federal $ 7,171 $6,443 $4,406
State 2,413 1,269 1,000
Total current 9,584 7,712 5,406
Deferred tax expense:
Federal 8,374 1,820 2,880
State 92 393 214
Total deferred 8,466 2,213 3,094
Total provision for
income taxes $18,050 $ 9,925 $ 8,500
</TABLE>
<TABLE>
RECONCILIATION FROM FEDERAL STATUTORY TO EFFECTIVE TAX RATE
<CAPTION>
($ thousands)
1996 1995 1994
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
<S> <C> <C> <C> <C> <C> <C>
Federal statutory
rate $15,731 35.0% $8,789 35.0% $7,539 35.0%
State taxes,
net of
federal
benefit 1,628 3.7% 1,080 4.3% 790 3.7%
Other - net 691 1.5% 56 .2% 171 .8%
Consolidated
effective tax $18,050 40.2% $9,925 39.5% $8,500 39.5%
</TABLE>
At the end of 1996, $29,000,000 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, 1996, the company has
unused alternative minimum tax credit carryforwards of approximately
$1,627,000 which can be used to offset future regular tax liabilities.
<PAGE>
<TABLE>
DEFERRED INCOME TAXES
<CAPTION>
Deferred income taxes are provided for the temporary differences between
the financial reporting basis and the tax basis of the company's assets
and liabilities. The tax effects of major temporary differences that give
rise to the deferred tax assets and liabilities at December 31, are as
follows:
($ thousands)
1996 1995
<S> <C> <C>
Deferred tax assets:
Allowances on accounts receivable $ 1,027 $ 1,062
Accrued compensated absences 1,636 1,478
Stock appreciation rights plans 2,883 2,053
Pensions 856 857
Postretirement benefits 6,235 5,800
Postemployment benefits 371 364
Reserves 2,130 866
State net operating loss carryforward 2,724 3,783
Alternative minimum tax credit carryforward 1,627 8,838
Other 180 27
Gross deferred tax assets 19,669 25,128
Less: valuation allowance ( 1,632) ( 1,672)
Net deferred tax assets 18,037 23,456
Deferred tax liabilities:
Property, plant and equipment ( 44,049) ( 41,478)
Deferred expenses ( 2,301) ( 1,825)
Total gross deferred tax liabilities ( 46,350) ( 43,303)
Net deferred tax liability ($28,313) ($19,847)
</TABLE>
<TABLE>
The total deferred tax liabilities (assets) as presented in the
accompanying balance sheets are as follows:
<CAPTION>
($ thousands) 1996 1995
<S> <C> <C>
Net long-term deferred tax liabilities $35,538 $ 24,646
Gross current deferred tax assets ( 8,857) ( 6,471)
Valuation allowance on deferred tax assets 1,632 1,672
Net current deferred tax assets ( 7,225) ( 4,799)
Net deferred tax liability $28,313 $ 19,847
</TABLE>
A valuation allowance has been recognized for a subsidiary's state tax loss
carryforward as cumulative losses create uncertainty about the realization of
the tax benefits in future years.
11 - STOCK OPTIONS AND APPRECIATION RIGHTS
The company has adopted two Executive Stock Option Plans. The 1994 plan,
which was amended effective December 19,1996, subject to shareholder
approval, provides for the granting of either qualified incentive stock
options (ISO) or non-qualified options. Under the 1994 plan, options to
purchase 300,000 shares of common stock may be issued to key employees and
directors 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 later than ten years from the date
of the grant (twenty years from date of grant for non-qualified options).
<PAGE>
The 1985 plan is a non-qualified stock option plan under which options to
purchase 168,597 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.
Effective January 1, 1996, the company has adopted Statement of Financial
Accounting Standards (SFAS) No.123, "Accounting for Stock-Based
Compensation". As permitted under SFAS No.123, the company will continue
to measure compensation cost for stock option plans using the "intrinsic
value based method" prescribed under APB No.25, "Accounting for Stock
Issued to Employees". Accordingly, no compensation cost has been
recognized for the stock option plans. If compensation cost had been
determined consistent with the provision of SFAS No.123, which prescribes
the "fair value based method" on the grant date, the results on the
company's net earnings and earnings per share would not have been
materially different from amounts reported in 1996 and 1995.
<TABLE>
The following table summarizes information relating to the company's stock
option plans:
<CAPTION>
(IN DOLLARS OR NUMBER OF SHARES)
1996 1995 1994
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Options outstand-
iny at beginning
of year 220,000 $21.55 117,333 $23.86 99,000 $23.86
Granted 42,267 28.60 102,667 18.91 18,333 23.87
Options outstanding
at end of year 262,267 22.69 220,000 21.55 117,333 23.86
Options exercisable
at end of year 220,000 21.55 117,333 23.86 99,000 23.86
Option price range
at end of year $18.37-35.78 $18.37-27.27 $20.45-27.27
<FN>
All shares and per share data have been adjusted for the 1996 four-for-
three stock split and the 1995 10% stock dividend.
</TABLE>
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 part and are paid
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
$4,902,000 in 1996, $775,000 in 1995, and ($933,000) in 1994.
<PAGE>
<TABLE>
The following table summarizes the activity relating to the company's
stock appreciation plan:
<CAPTION>
(IN DOLLARS OR NUMBER OF SHARES) 1996 1995 1994
<S> <C> <C> <C>
Rights outstanding at beginning of year 414,579 426,803 439,023
Granted - - 11,000
Exercised (204,846) (12,224) (23,220)
Terminated ( 2,933) - -
Rights outstanding at end
of year 206,800 414,579 426,803
Rights exercisable at end
of year 206,800 407,733 407,733
Price range of outstanding $8.52- $7.50- $7.50-
stock appreciation rights 20.37 20.37 20.37
<FN>
ALL SHARES AND PER SHARE DATA HAVE BEEN ADJUSTED FOR THE 1996 FOUR-FOR-THREE
STOCK SPLIT AND THE 1995 10% STOCK DIVIDEND.
</TABLE>
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 complete.
Based on information now available to the company, the company believes that
any additional costs associated with these landfills 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.
<PAGE>
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, 1996
was $1,405,000. 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 $653,000, $666,000 and
$630,000 in 1996, 1995, and 1994, respectively.
<TABLE>
QUARTERLY INFORMATION (UNAUDITED)
<CAPTION>
($ THOUSANDS EXCEPT SHARE First Second Third Fourth
DATA) QTR. QTR. QTR. QTR. ANNUAL
<S> <C> <C> <C> <C> <C>
1996
Net sales $76,176 $79,193 $81,761 $77,360 $314,490
Gross profit 18,162 22,526 22,997 20,320 84,005
Net income 4,682 7,619 8,279 6,319 26,899
Net income per share .44 .73 .79 .60 2.56
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 .32 .27 .36 .49 1.44
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 .24 .27 .29 .44 1.24
Cumulative effect of a
change in accounting
principle (net of income
taxes) ( .08) - - - ( .08)
Net income per share .16 .27 .29 .44 1.16
<FN>
ALL APPLICABLE INFORMATION HAS BEEN RESTATED FOR THE 1996 FOUR-FOR-THREE STOCK SPLIT
AND THE 1995 10% STOCK DIVIDEND.
</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)
1996 1995 1994
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 $24.56 $18.56 $.08 $19.94 $16.37 $.0675 $24.55 $19.94 $.062
2nd 27.75 23.06 .08 19.77 15.94 .0675 21.98 19.26 .062
3rd 29.00 26.00 .08 19.03 16.13 .0675 22.33 19.77 .062
4th 36.00 27.25 .08 20.06 17.44 .0675 21.31 16.88 .062
</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 1996 four-for-three stock split and the 1995 10% stock dividend.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
<PAGE>
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 17, 1997 (the "1997 Proxy Statement"). Information
relating to executive officers of the company is set forth in Part I, pages 7
and 8.
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 1997 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 1997 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information relating to security ownership of certain beneficial owners is
incorporated into this Form 10-K by this reference to the material set forth
under the caption "Beneficial Ownership of Common Stock", pages 5 and 6, in
the 1997 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 24
to 42 and 49 herein.
(b) REPORTS ON FORM 8-K.
No reports on Form 8-K were filed by the company during the fourth
quarter of fiscal 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.
INCORPORATED
EXHIBIT<dagger>
EXHIBIT 3 - ARTICLES OF INCORPORATION AND BYLAWS
(a) Restated Articles of
Incorporation, as last
amended April 26, 1995 ..............................3(i)(1)
(b) Restated Bylaws, as last
amended April 16, 1992 ..............................3(b)(2)
EXHIBIT 4 - INSTRUMENTS DEFINING THE RIGHTS OF
SECURITY HOLDERS
(a) Preferred Share Rights Agreement
dated as of July 1, 1996 ...............................1(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 October 17, 1996 ........................10(a)(4)
*(b) 1985 Executive Stock Option
Plan dated June 27, 1985 ...........................10(b)(4)
*(c) Mosinee Paper Corporation 1988 Stock
Appreciation Rights Plan, as amended 4/18/91 .......10(c)(5)
*(d) 1996 and 1997 Incentive Compensation
Plan for Corporate Executive Officers
*(e) Supplemental Retirement Benefit
Plan dated October 17, 1991 ..........................10(e)5
*(f) Supplemental Retirement Benefit Agreement
dated November 15, 1991 ............................10(f)(5)
*(g) 1994 Executive Stock Option Plan
*(h) Mosinee Supplemental Retirement Plan ...............10(h)(6)
<PAGE>
EXHIBIT 21 - SUBSIDIARIES OF REGISTRANT ....................22(7)
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
* Denotes Executive Compensation Plans and Arrangements.
<dagger>Where exhibit has been previously filed and is incorporated
herein by reference, exhibit numbers set forth herein correspond to
the exhibit number where such exhibit can be found in the following
reports of the registrant (Commission File No. 0-1732) filed with the
Securities and Exchange Commission:
(1) Registrant's quarterly report on Form 10-Q for the period ended
June 30, 1996
(2) Registrant's annual report on Form 10-K for the fiscal year
ended December 31, 1992
(3) Form 8-A filed on July 2, 1996
(4) Registrant's quarterly report on Form 10-Q for the period ended
September 30, 1996
(5) Registrant's annual report on Form 10-K for the fiscal year
ended December 31, 1995
(6) Registrant's annual report on Form 10-K for the fiscal year
ended December 31, 1993
(7) Registrant's annual report on Form 10-K for the fiscal year
ended December 31, 1992
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
Date March 21, 1997 GARY P. PETERSON
Gary P. Peterson
Senior Vice-President,
Finance, Secretary and
Treasurer
(Principal Financial Officer)
Pursuant to the requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
SAN W. ORR, JR. RICHARD L. RADT
San W. Orr, Jr. Richard L. Radt
Chairman of the Board Vice Chairman of the Board
March 21, 1997 March 21, 1997
DANIEL R. OLVEY HARRY R. BAKER
Daniel R. Olvey Harry R. Baker
President and CEO Director
(Principal Executive Officer) March 21, 1997
March 21, 1997
RICHARD G. JACOBUS WALTER ALEXANDER
Richard G. Jacobus Walter Alexander
Director Director
March 21, 1997 March 21, 1997
<PAGE>
<TABLE>
Schedule II - Valuation and Qualifying Accounts
($ thousands)
<CAPTION>
Allowance
for Allowance for
Doubtful Sales Returns
Total Accounts and Discounts
<S> <C> <C> <C>
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
Charges to cost and expense 6,418 272 6,146
Deductions (6,335) ( 3) (6,332)
Balances at December 31, 1996 $ 2,896 $ 1,719 $ 1,177
</TABLE>
<PAGE>
EXHIBIT INDEX<dagger>
TO
FORM 10-K
OF
MOSINEE PAPER CORPORATION
FOR THE PERIOD ENDED DECEMBER 31, 1996
Pursuant to Section 102(d) of Regulation S-T
(17 C.F.R. <section>232.102(d))
EXHIBIT 10 - MATERIAL CONTRACTS*
(d) 1996 and 1997 Incentive Compensation Plan for Corporate Executive
Officers.
(g) 1994 Executive Stock Option Plan, as amended effective December 19,
1996.
*Exhibit represents executive compensation plan or arrangement.
EXHIBIT 27 - FINANCIAL DATA SCHEDULE
<dagger>Exhibits required by Item 601 of Regulation S-K which have been
previously filed and are incorporated by reference are set forth in Part
IV, Item 14(c) of the Form 10-K to which this Exhibit Index relates.
Exhibit 10(d)
INCENTIVE COMPENSATION PLANS
FOR
EXECUTIVE OFFICERS
(1996 AND 1997)
In 1997, 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 $2.20 to 100% if the 1997 earnings
per share are at least $3.30 per share. Mr. Peterson and Mr. Urbanek will
participate in similar plans which provide for a bonus equal to 75% and
80%, respectively, of their base salary based upon the same $2.20 to $3.30
range of earnings per share. Earnings per share will be adjusted for
accruals on SARs, bonus expense and extraordinary items. Mr. Peterson
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. Mr. Carlson will
participate in an incentive compensation plan under which 65% of his bonus
will be based on the operating profits of the Company's Specialty Paper
Division, 25% on satisfaction of individual performance objectives
established at the beginning of the year by the President and CEO and 10%
of the Company's earnings per share within the range described above.
Mr. Canavara will participate in an incentive compensation plan under
which 65% of his bonus will be based on operating profits at the Towel and
Tissue Division, 25% on satisfaction of individual performance objectives
established at the beginning of the year by the President and CEO and 10%
of the Company's earnings per share within the range described above.
During 1996, Mr. Olvey participated in an incentive compensation plan
which provided for a bonus opportunity ranging from 0% of base salary if
1996 earnings per share were at or below $1.20 to 100% if 1995 earnings
per share were at least $2.03 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 $1.20 to $2.03
range of earnings per share. Earnings per share were adjusted for
accruals on SARs, bonus expense and extraordinary items. Mr. Peterson 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.
Exhibit 10(g)
MOSINEE PAPER CORPORATION
1994 STOCK OPTION PLAN
Mosinee Paper Corporation, a corporation with its principal place of
business located in Mosinee, Wisconsin (the "Company"), hereby adopts the
Mosinee Paper Corporation 1994 Stock Option Plan (the "Plan"), as set
forth herein.
Section 1. PURPOSE. The Plan is intended to attract and retain key
employees and directors by permitting key employees of the Company or any
parent or subsidiary of the Company and directors of the Company to
acquire authorized and unissued, or reacquired, shares of common stock of
the Company pursuant to purchase options. The availability of the options
and grants thereof will furnish additional inducements to such employees
to continue employment with the Company, or any parent or subsidiary of
the Company, and such directors to continue serving as directors of the
Company, and encourage them, by giving them an opportunity to acquire a
greater stake in the Company's success, to increase their efforts to
promote the best interests of the Company and its stockholders.
It is the express intent of the Company that, subject to Section
6.2(h) hereof, all options granted hereunder designated "Incentive Stock
Options" shall meet the requirements of Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or any successor section or
sections. It is the further intent of the Company that options granted
hereunder designated "Non-Qualified Stock Options" shall not meet the
requirements of Section 422 of the Code. A key employee or director may
be granted and may hold one or more options under this Plan.
Section 2. NUMBER OF SHARES AVAILABLE FOR OPTIONS. The aggregate
number of shares of common stock, no par value, of the Company (the
"Shares") which may be issued under options granted pursuant to the Plan
shall be 346.667.
Section 3. ADMINISTRATION OF THE PLAN.
Section 3.1 GENERAL. The Plan shall be administered by a committee
(the "Committee") consisting of at least two members designated by the
Board of Directors of the Company from among those of its members who are
not officers or employees of the Company or a parent or subsidiary of the
Company and who otherwise satisfy the definition of a "Non-Employee
Director" in Rule 16b-3(b)(3) promulgated under Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act") and the definition of
an "Outside Director" in the regulations under Section 162(m) of the Code.
In the absence of specific rules to the contrary, action by the Committee
shall require the consent of a majority of the members of the Committee,
expressed either orally at a meeting of the Committee or in writing in the
absence of a meeting.
Section 3.2 AUTHORITY OF COMMITTEE. The Committee shall have full
and complete authority to grant options to such eligible key employees on
such terms, which need not be the same as to all Employee Optionees, as
will, in its discretion and subject only to the specific limitations
elsewhere contained in the Plan, carry out the purpose of the Plan. The
Committee shall also have full and complete authority to interpret the
Plan and adopt rules governing the administration of the Plan. The
Committee's decision on any matter with respect to the Plan shall be
final.
<PAGE>
Section 3.3 INDEMNIFICATION OF COMMITTEE. To the extent permitted by
applicable law, the members of the Committee and each of them shall be
indemnified and saved harmless by the Company from any liability or claim
of liability which may arise from the administration of the Plan if the
acts giving rise to such liability or claim of liability were taken in
good faith and without negligence.
Section 4. ELIGIBLE EMPLOYEES AND DIRECTORS.
Section 4.1 KEY EMPLOYEES. Key employees (who may also be officers
or directors) of the Company (or any parent or subsidiary of the Company)
shall be eligible to be granted options pursuant to Section 5 of the Plan.
For purposes of the Plan, the term "key employee" shall include all
employees of all participating employers employed in management,
administrative or professional capacities.
Section 4.2 DIRECTORS. Directors of the Company (who may also be key
employees or officers of the Company (or any parent or subsidiary of the
Company)) shall be eligible to be granted options pursuant to Section 7 of
the Plan. Directors of the Company who are not also employees of the
Company (or any parent or subsidiary of the Company) shall not be eligible
to be granted options under Section 5 of the Plan.
Section 5. GRANTING OF OPTIONS TO KEY EMPLOYEES. Options to purchase
Shares shall be granted to such key employees who are eligible to
participate in the Plan as the Committee may, from time to time and at any
time, select. Membership in a class of eligible key employees shall not,
without specific Committee action, entitle a key employee to receive an
option to purchase Shares. Eligible key employees selected by the
Committee shall be referred to herein as "Employee Optionees."
Section 6. TERMS AND CONDITIONS OF THE KEY EMPLOYEE OPTIONS.
Section 6.1 WRITTEN INSTRUMENT. Each option to purchase Shares
granted under Section 5 of the Plan shall be evidenced by a written option
agreement signed on behalf of the Company and the Employee Optionee which
sets forth the name of the Employee Optionee, the date granted, the price
at which the Shares subject to the option may be purchased (the "option
price"), whether the option is an Incentive Stock Option or a
Non-Qualified Stock Option, the number of Shares subject to the option and
such other terms and conditions consistent with the Plan as determined by
the Committee. The Committee may at the time of grant or at any time
thereafter impose such additional terms and conditions on the exercise of
such option as it deems necessary or desirable for compliance with Section
16 of the Exchange Act and the regulations promulgated thereunder. Such
option agreement shall incorporate by reference all applicable terms,
conditions and limitations set forth in the Plan.
Section 6.2 TERMS AND CONDITIONS OF THE KEY EMPLOYEE OPTIONS. In
addition to any other limitations, terms and conditions specified in the
Plan, each option granted under Section 5 of the Plan shall, as to each
Employee Optionee, satisfy the following requirements:
(a) DATE OF GRANT. Options must be granted on or before October
19, 2004.
(b) EXPIRATION. No Incentive Stock Option shall be exercisable
after the expiration of ten years from the date such option is granted.
No Non-Qualified Stock Option shall be exercisable after the expiration of
twenty years from the date such option is granted.
<PAGE>
(c) PRICE. The option price as to any Share subject to either
an Incentive Stock Option or Non-Qualified Stock option granted under
Section 5 of the Plan will be not less than one hundred percent of the
fair market value of the Share on the date the option is granted. For
purposes of the Plan, the fair market value of a Share means:
(i) The mean between the high and the low prices at which
the Shares were traded if the Shares were then listed
for trading on a national or regional securities
exchange or were then traded on a bona fide over-the-
counter market; or
(ii) If the Shares were not traded on an exchange or a bona
fide over-the-counter market, a value determined by an
appraiser selected by the Committee.
In the event that the date on which the fair market value of a Share is to
be determined is a date on which there is no trading of the Shares on a
national or regional securities exchange or on the over-the-counter
market, such fair market value shall be determined by referring to the
next preceding business day on which trading occurs.
(d) TRANSFERABILITY.
(i) No Incentive Stock Option shall be transferable by an
Employee Optionee otherwise than by will or the laws of
descent and distribution nor can it be exercised by
anyone other than the Employee Optionee during the
Employee Optionee's lifetime.
(ii) The Committee may, in its discretion, authorize all or
a portion of any Non-Qualified Stock Options to be
granted to an Employee Optionee under Section 5 of the
Plan or which were granted to any Employee Optionee on
or before October 31, 1996, to permit transfer by the
Employee Optionee to (A) the spouse, children or
grandchildren of the Employee Optionee ("Immediate
Family"), (B) a trust for the exclusive benefit of the
Employee Optionee or the Employee Optionee's Immediate
Family, (C) a partnership in which the Employee
Optionee or the Employee Optionee's Immediate Family
are the only partners, or (D) to a former spouse of the
Employee Optionee pursuant to a domestic relations
order within the meaning of Rule 16a-12 promulgated
under Section 16 of the Exchange Act; provided,
however, that (X) there may not be consideration for
any such transfer, (Y) the written option agreement
required by Section 6.1, or any amendment thereof
approved by the Committee, must expressly provide for
transferability of the option evidenced in such
agreement in a manner consistent with this
Section 6.2(d), and (Z) once transferred pursuant to
the preceding provisions of this Section 6.2(d)(ii), no
subsequent transfer of any options shall be permitted
except a transfer by will or the laws of descent and
distribution. In authorizing all or any portion of an
option to be transferred, the Committee may impose any
conditions on exercise, prescribe a holding period for
the Shares acquired upon such exercise and/or impose
<PAGE>
any other conditions or limitations it deems desirable
or necessary in order to carry out the purposes and
requirements of the Plan. Following transfer, the
terms and conditions of the Plan and the written option
agreement relating to such option shall continue to be
applicable in all respects to the Employee Optionee
making such transfer and each transferred option shall
continue to be subject to the same terms and conditions
as were applicable immediately prior to transfer as if
such option had not been transferred, including, but
not limited to, the terms and conditions with respect
to the lapse and termination of such option. Neither
the Company, the Committee or any Employee Optionee
shall have any obligation to inform any transferee of
the termination or lapse of any option for any reason.
Notwithstanding any other provision of the Plan, (YY)
following the termination of employment of an Employee
Optionee, a transferred option shall be exercisable by
the transferee only to the extent, and for the periods
specified in Section 6(e) as if such option had not
been transferred and (ZZ) no option granted prior to
October 31, 1996, may be transferred until such option
has been held by the Employee Optionee for a period of
not less than six months after the date on which such
option was granted.
(e) EMPLOYMENT. No option granted under Section 5 of the Plan
shall be exercisable unless the Employee Optionee shall have been employed
by the Company (or any present or future parent or subsidiary of the
Company) during the period beginning on the date the option is granted and
ending on a date ninety days before the date of exercise (and subject to
Section 12 herein); provided, however, that in the event an Employee
Optionee dies while in the employ of the Company (or any present or future
parent or subsidiary of the Company) or within ninety days after such
employment had terminated, the employment period requirement described
above shall be deemed to have been satisfied.
(f) MINIMUM HOLDING PERIOD. No option granted prior to November
1, 1996, may be exercised before the date which is six months after the
date on which such option was granted. Each option granted under Section
5 of the Plan shall contain such additional or other restriction or
restrictions with respect to the stated percentage of Shares covered by
such option as to which such option may be exercised as the Committee may
deem desirable or necessary in order to carry out the purposes and
requirements of the Plan.
(g) LIMITATION ON OPTION GRANTS. No Employee Optionee may be
granted options under Section 5 of the Plan in any calendar year with
respect to more than 50,000 Shares.
(h) ADDITIONAL RESTRICTIONS RELATING TO INCENTIVE STOCK OPTIONS.
To the extent that the aggregate fair market value (determined as of the
time the option is granted) of the Shares for which Incentive Stock
Options are exercisable for the first time by an individual during any
calendar year (under this Plan or any other plan of the Company or any of
its subsidiaries) exceeds $100,000 (or such other individual limit as may
be in effect under the Code on the date of grant), such options shall not
be Incentive Stock Options. No Incentive Stock Option shall be granted to
an employee who, at the time such option is granted, owns stock possessing
<PAGE>
more than ten percent of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary of the Company within the
meaning of Section 422(b)(6) of the Code unless: (i) at the time the
option is granted, the option price is at least one hundred ten percent of
the fair market value of the Shares subject to the option, and (ii) such
option by its terms is not exercisable after the expiration of five years
from the date such option is granted.
Section 7. GRANTING OF OPTIONS TO DIRECTORS. On January 1, 1997 Non-
Qualified Stock Options to purchase that number of Shares equal to the
product of 1,000 and the number of years (determined by treating any
partial year as a whole year) then remaining in the term for which the
director has been elected, reelected or appointed shall be granted to each
director of the Company. Such options shall be expressly conditioned upon
the approval of the amendments to the Plan providing for the granting of
options to directors pursuant to this Section 7 and increasing the number
of Shares which may be issued under options granted pursuant to the Plan
by the Company's stockholders at the next annual meeting of the Company's
stockholders, and such options shall not be effective if such amendments
are not so approved. On June 1, 1997 and on each June 1 thereafter Non-
Qualified Stock Options to purchase that number of Shares equal to the
product of 1,000 and the number of years (determined by treating any
partial year as a whole year) in the term for which the director has been
elected, reelected or appointed shall be granted to each director of the
Company who was elected, reelected or appointed to the board of directors
of the Company during the previous twelve months. Directors of the
Company who have been granted Non-Qualified Stock Options pursuant to this
Section 7 shall be referred to herein as "Director Optionees".
Section 8. TERMS AND CONDITIONS OF THE DIRECTOR OPTIONS.
Section 8.1 WRITTEN INSTRUMENT. Each option to purchase Shares
granted under Section 7 of the Plan shall be evidenced by a written option
agreement signed on behalf of the Company and the Director Optionee which
sets forth the name of the Director Optionee, the date granted, the option
price, the number of Shares subject to the option and the other terms and
conditions set forth below. Such option agreement shall incorporate by
reference all applicable terms, conditions and limitations set forth in
the Plan.
Section 8.2 TERMS AND CONDITIONS OF THE OPTIONS. In addition to any
other limitations, terms and conditions specified in the Plan, each option
granted under Section 7 of the Plan shall, as to each Director Optionee,
satisfy the following requirements:
(a) DATE OF GRANT. Options must be granted on or before
October 19, 2004.
(b) EXPIRATION. Each option granted under Section 7 of the Plan
shall cease to be exercisable after the expiration of twenty years from
the date such option is granted.
(c) PRICE. The option price as to any Share subject to an
option granted under Section 7 of the Plan will be one hundred percent of
the fair market value of the Share on the date the option is granted. For
purposes of the Plan, the fair market value of a Share means:
(i) The mean between the high and the low prices at which
the Shares were traded if the Shares were then listed
<PAGE>
for trading on a national or regional securities
exchange or were then traded on a bona fide over-the-
counter market; or
(ii) If the Shares were not traded on an exchange or a bona
fide over-the-counter market, a value determined by an
appraiser selected by the Committee.
In the event that the date on which the fair market value of a Share is to
be determined is a date on which there is no trading of the Shares on a
national or regional securities exchange or on the over-the-counter
market, such fair market value shall be determined by referring to the
next preceding business day on which trading occurs.
(d) TRANSFERABILITY. Options granted under Section 7 of the
Plan may be transferred by the Director Optionee to (A) the spouse,
children or grandchildren of the Director Optionee ("Immediate Family"),
(B) a trust for the exclusive benefit of the Director Optionee or the
Director Optionee's Immediate Family, (C) a partnership in which the
Director Optionee or the Director Optionee's Immediate Family are the only
partners, or (D) to a former spouse of the Director Optionee pursuant to a
domestic relations order within the meaning of Rule 16a-12 promulgated
under Section 16 of the Exchange Act; provided, however, that (X) there
may not be consideration for any such transfer, and (Y) once transferred
pursuant to the preceding provisions of this Section 8.2(d), no subsequent
transfer of any options shall be permitted except a transfer by will or
the laws of descent and distribution. Following transfer, the terms and
conditions of the Plan and the written option agreement relating to such
option shall continue to be applicable in all respects to the Director
Optionee making such transfer and each transferred option shall continue
to be subject to the same terms and conditions as were applicable
immediately prior to transfer as if such option had not been transferred,
including, but not limited to, the terms and conditions with respect to
the lapse and termination of such option. Neither the Company, the
Committee or any Director Optionee shall have any obligation to inform any
transferee of the termination or lapse of any option for any reason.
Notwithstanding any other provision of the Plan, following the termination
of a Director Optionee's membership on the board of directors of the
Company (including for this purpose membership as a director emeritus of
the Company) a transferred option shall be exercisable by the transferee
only to the extent, and for the periods specified in Section 8.2(e) as if
such option had not been transferred.
(e) BOARD MEMBERSHIP. No option granted under Section 7 of the
Plan shall be exercisable unless the Director Optionee shall have been a
member of the board of directors of the Company (including for this
purpose membership as a director emeritus of the Company) during the
period beginning on the date the option is granted and ending on a date
ninety days before the date of exercise (and subject to Section 12
herein); provided, however, that in the event a Director Optionee dies
while a member of the board of directors of the Company (including for
this purpose membership as a director emeritus of the Company) or within
ninety days after such membership had terminated, the board membership
period requirement described above shall be deemed to have been satisfied.
(f) LIMITATION ON OPTION GRANTS. No Director Optionee may be
granted options in any calendar year with respect to more than 4,000
Shares.
<PAGE>
Section 9. EXERCISE AND PAYMENT OF OPTION PRICE.
Section 9.1 EXERCISE OF OPTIONS. Options shall be exercised as to
all or a portion of the Shares by delivery of an irrevocable written
notice to the Company setting forth the exact number of Shares as to which
the option is being exercised and including with such notice payment of
the option price (plus minimum required tax withholding for options held
by Employee Optionees). The date of exercise shall be the date such
written notice and payment have been delivered to the Secretary of the
Company either in person or by depositing said notice and payment in the
United States mail, postage prepaid and addressed to such officer at the
Company's home office. No option may be exercised with respect to a
fractional share of stock. Notwithstanding the fact that an option has
been transferred pursuant to Section 6.2(d)(ii), the Employee Optionee
granted such option shall remain liable for any required tax withholding.
Section 9.2 PAYMENT FOR SHARES. Payment of the option price (plus
minimum required tax withholding for options held by an Employee Optionee
may be made by (a) tendering cash (in the form of a check or otherwise) in
such amount, or (b) with the consent of the Committee, tendering Shares
with a fair market value on the date of exercise equal to such amount, or
(c) delivering a properly executed exercise notice together with
irrevocable instructions to a broker to promptly deliver to the Company
the sale or loan proceeds equal to such amount. Notwithstanding the fact
that an option has been transferred pursuant to Section 6.2(d)(ii), the
Employee Optionee granted such option shall remain liable for any required
tax withholding.
Section 10. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. If the
Company shall, after the Effective Date, change its common stock into a
greater or lesser number of shares through a stock dividend, stock split-
up or combination of shares, then
(i) the number of Shares then subject to the plan but which
are not then subject to any outstanding option;
(ii) the number of Shares subject to each then outstanding
option (to the extent not previously exercised); and
(iii) the price per Share payable upon exercise
of each then outstanding option;
shall all be proportionately increased or decreased as of the record date
for such stock dividend, stock split-up or combination of shares in order
to give effect thereto. Notwithstanding any such proportionate increase
or decrease, no fraction of a Share shall be issued upon the exercise of
an option. If any split-up or combination of shares shall involve a
change of par value, the Shares subject to options theretofore or
thereafter granted shall be the Shares as so changed.
If, after the Effective Date, there shall be any change in the stock
of the Company other than through a stock dividend, stock split-up or
combination of shares, or other change listed in Section 11 herein, then
if (and only if) the Committee shall determine that such change equitably
requires an adjustment in the number or kind or option price of Shares
then subject to an option, or the number or kind of Shares remaining
subject to the Plan, such adjustment as the Committee shall determine is
equitable and as shall be approved by the Board shall be made and shall be
effective and binding for all purposes of such option and the Plan.
<PAGE>
Section 11. MERGER, REORGANIZATION, OR CHANGE IN CONTROL.
(a) Nothing contained in this Plan or in any option granted
under the Plan shall in any way prohibit the Company from merging with or
consolidating into another corporation, or from selling or transferring
all or substantially all of its assets, or from distributing all or
substantially all of its assets to its stockholders in liquidation, or
from dissolving and terminating its corporate existence; and in any such
event (other than a merger in which the Company is the surviving
corporation and after which the Company remains an independent, publicly
held corporation), the Company or any surviving party to any such merger,
consolidation, or sale or transfer of assets may provide by resolution of
its board of directors that all rights of the person or persons entitled
to exercise then outstanding options granted under the Plan, and such
options, shall wholly and completely terminate at the time of any such
merger, consolidation, sale or transfer of assets, liquidation, or
dissolution, except that adequate provision for such person or persons
shall be made in accordance with paragraph (b) below.
(b) In the event that (i) any individual, corporation,
partnership or other person or group of persons or entities becomes the
beneficial owner, directly or indirectly, of 45% or more of the Company's
then outstanding common stock ("Change in Control"), or (ii) any merger,
consolidation, liquidation, dissolution or termination after which the
Company will not survive as an independent, publicly-owned corporation or
any sales or transfer of all or substantially all of the Company's assets
("Reorganization") occurs, then the Company shall pay with respect to each
outstanding option under this Plan an amount equal to (x) the difference
between the Fair Market Value (as defined in (c) below) and the exercise
price of the option, multiplied by (y) the number of Shares subject to
such option. Such payment shall be made in cash within 30 days after, in
the case of a Reorganization requiring approval by the Company
stockholders, the date of such approval and, in the case of a Change in
Control, the date upon which such change occurs.
(c) Solely for purposes of (b) above, "Fair Market Value" shall
mean the greater of (i) the highest price per share of the Company's
common stock paid by the acquiring person within twelve months of the
occurrence of the Change in Control to effect such change or provided for
in any agreement for the Reorganization, or (ii) fair market value
determined in accordance with Sections 6.2(c) and 8.2(c) of this Plan.
Section 12. TERMINATION OR LAPSE OF OPTIONS. Each option granted
under Section 5 of the Plan shall terminate or lapse upon the first to
occur of (a) the expiration date set forth in the applicable stock option
agreement, (b) the applicable date set forth in Section 6.2(b), (c) the
date of the Employee Optionee's voluntary resignation or termination for
cause, or (d) the date which is ninety days after the date of the Employee
Optionee's other termination of employment with the Company or any present
or future parent or subsidiary of the Company; provided, however, that in
the event of an Employee Optionee's death while in the employ of the
Company or a parent or subsidiary of the Company or, if the Employee
Optionee is no longer so employed, in the event of the Employee Optionee's
death within ninety days after such employment had terminated, an option
may be exercised, to the extent exercisable by the Employee Optionee
immediately prior to his death, in whole or in part by the Employee
Optionee's estate or designee by will, or, if applicable, the transferee
of such option pursuant to Section 6.2(d), but only if the date of
exercise is on or before the first to occur of (i) the expiration date set
<PAGE>
forth in the applicable stock option agreement, (ii) the applicable date
set forth in Section 6.2(b), or (iii) the date which is twelve months
after the date of the Employee Optionee's death. For purposes of this
section, "for cause" shall mean affirmative acts in violation of federal,
state, or local criminal law.
Each option granted under Section 7 of the Plan shall terminate or
lapse upon the first to occur at (a) the expiration date set forth in the
applicable stock option agreement, (b) the applicable date set forth in
Section 8.2(b), or (c) the date which is ninety days after the date the
Director Optionee's membership on the board of directors of the Company
(including for this purpose membership as a director emeritus of the
Company) terminated; provided, however, that in the event of a Director
Optionee's death while a member of the board of directors of the Company
(including for this purpose membership as a director emeritus of the
Company) or, if the Director Optionee Is no longer a member, in the event
of the Director Optionee's death within ninety days after such membership
had terminated, an option may be exercised, to the extent exercisable by
the Director Optionee immediately prior to his death, in whole or in part
by the Director Optionee's estate or designee by will, or, if applicable,
the transferee of such option pursuant to Section 8.2(d) but only if the
date of exercise is on or before the first to occur of (i) the expiration
date set forth in the applicable stock option agreement, (ii) the
applicable date set forth in Section 8.2(b), or (iii) the date which is
twelve months after the date of the Director Optionee's death.
Section 13. AMENDMENT AND TERMINATION OF PLAN.
Section 13.1 AMENDMENT OF PLAN. The board of directors of the
Company may amend the Plan from time to time and at any time; provided,
however, that no amendment shall adversely affect any option which has
been granted prior to the amendment and no amendment with respect to the
maximum number of Shares which may be issued pursuant to options or the
class of eligible individuals, or which materially increases benefits
accruing to Optionees under the Plan (within the meaning of Section 162(m)
of the Code) shall be effective unless approved by a majority of the
shares entitled to vote at a meeting of shareholders.
Section 13.2 TERMINATION OF PLAN. The Plan shall terminate on the
first to occur of (a) October 19, 2004 or (b) the date specified by the
board of directors of the Company as the effective date of Plan
termination; provided, however, that the termination of the Plan shall not
limit or otherwise affect any options outstanding on the date of
termination.
Section 14. EFFECTIVE DATE. The effective date of the Plan shall be
October 20, 1994, the date of approval by the board of directors of the
Company.
Section 15. INVESTMENT INTENT. Shares acquired pursuant to the
exercise of an option, if not registered by the Company under the
Securities Act of 1933 (the "Act"), will be "restricted" stock which will
not be freely transferable by the holder after exercise of the option.
Each Employee Optionee, Director Optionee and assignee in interest of an
Optionee accordingly represents, as a condition of participation in the
Plan, that Shares which are unregistered under the Act are being acquired
for the Employee Optionee's, or Director Optionee's (or his or her
assignee's) own account for investment only and not with a view to offer
for sale or for sale in connection with the distribution or transfer
thereof.
<PAGE>
Section 16. AVAILABILITY OF INFORMATION. The Company shall furnish
each Optionee with (a) a copy of the Plan and the Company's most recent
annual report to its shareholders at the time the option agreement
provided for in Section 6.1 or 8.1 is executed by the Optionee and (b) a
copy of each subsequent annual report, on or about the same date as such
report shall be made available to shareholders of the Company. The
Company will furnish, upon written request addressed to the Secretary of
the Company, but at no charge to the Optionee or any duly authorized
representative of the Optionee, copies of all reports filed by the Company
with the Securities and Exchange Commission or the commissioner of
securities of any state, including, but not limited to, the Company's
annual reports on Form 10-K, its quarterly reports on Form 10-Q, and its
proxy statements.
Section 17. CONDITIONS OF EMPLOYMENT. Participation in or
eligibility for participation in the Plan by an Employee Optionee shall
not confer upon any Employee Optionee the right to be continued as an
employee of the Company or any present or future parent or subsidiary of
the Company and the Company and its participating subsidiaries hereby
expressly reserve the right to terminate the employment of any employee,
with or without cause, regardless of the Plan and any options granted
pursuant to it.
Section 18. MISCELLANEOUS.
(a) The transfer of an Employee Optionee from the Company to a
parent or subsidiary of the Company or from a parent or subsidiary of the
Company to the Company or another parent or subsidiary of the Company
shall not be a termination of employment or an interruption of continuous
employment for the purpose of the Plan.
(b) As used in the Plan, the term "parent" and "subsidiary"
shall have the meanings ascribed to them in Sections 421, 422 and 424 of
the Code.
Section 19. GOVERNMENT APPROVALS. If at any time the Company shall
be advised by its counsel that the exercise of any option or the delivery
of Shares upon the exercise of an option is required to be approved,
registered or qualified under any applicable law, or must be accompanied
or preceded by a prospectus or similar circular meeting the requirements
of any applicable law, the Company will use reasonable efforts to obtain
such approval, to effect such registrations and qualifications, or to
provide such prospectus or similar circular within a reasonable time, but
exercise of the options or delivery by the Company of certificates for
Shares may be deferred until such approvals, registrations or
qualifications are effected, or until such prospectus or similar circular
is available.
<PAGE>
IN WITNESS WHEREOF, the Company has caused the Plan as amended
effective December 19, 1996 to be executed by its duly authorized officers
as of the 19th day of December, 1996.
MOSINEE PAPER CORPORATION
By: DANIEL R. OLVEY
Daniel R. Olvey, As its
President
ATTEST:
By: GARY P. PETERSON
Gary P. Peterson, As its secretary
<PAGE>
MOSINEE PAPER CORPORATION
1994 STOCK OPTION PLAN
EMPLOYEE NON-QUALIFIED STOCK OPTION AGREEMENT
Agreement made as of _____________________, 199__ (the "Date of
Grant") between Mosinee Paper Corporation, a corporation with its
principal place of business at Mosinee, Wisconsin (the "Company"), and
______________________________________ (the "Optionee") for the purpose of
granting certain options described below under Section 5 of the Mosinee
Paper Corporation 1994 Stock Option Plan (the "Plan").
1. GRANT OF OPTION. The Company hereby grants the Optionee as of
the Date of Grant the option to purchase _________ shares of no par value
common stock of the Company (the "Shares") upon the applicable terms and
conditions of the Plan, including those hereinafter stated. The grant of
this option is expressly conditioned upon the approval of the amendment to
the Plan increasing the number of Shares which may be issued under options
granted pursuant to the Plan by the Company's stockholders at the next
annual meeting of the Company's stockholders, and this option shall not be
effective if such amendment is not so approved.
2. PURCHASE PRICE. The option price shall be $_________ for each
Share.
3. TIME OF EXERCISE.
(a) EXTENT TO WHICH OPTION IS EXERCISABLE. The option may be
exercised as to any or all of the Shares subject to the option on or after
the Date of Grant.
(b) EXERCISE DURING OPTIONEE'S LIFETIME. This option is
exercisable during the Optionee's lifetime only by the Optionee or a
permitted transferee (as described in Section 7 herein) and only if
the following conditions are met at the time of exercise:
(i) The date of exercise is on or before the 20th
anniversary of the Date of Grant; and
(ii) The Optionee is an employee of the Company (or any
present or future subsidiary of the Company) or, if the
Optionee is no longer such an employee, such employment
had terminated no longer than 90 days prior to the date
of exercise.
(c) EXERCISE AFTER OPTIONEE'S DEATH. In the event of the
Optionee's death while an employee of the Company (or any present or
future subsidiary of the Company) or, if the Optionee is no longer
such an employee, in the event of the Optionee's death within 90 days
after such employment had terminated, this option, to the extent
exercisable by the Optionee immediately prior to the Optionee's death,
may be exercised in whole or in part by the Optionee's estate,
designee by will or permitted transferee (as described in Section 7
herein), but only if the date of exercise is both on or before the
20th anniversary of the Date of Grant and within 12 months after the
date of the Optionee's death.
<PAGE>
4. METHOD OF EXERCISE. The option shall be exercisable by written
notice to the Secretary of the Company at its principal place of business
at Mosinee, Wisconsin. Such notice shall state the exact number of Shares
as to which the option is being exercised and shall be signed by the
person or persons exercising the option. Such notice shall be accompanied
by payment of the full purchase price of such Shares (plus minimum
required tax withholding) by (a) tendering cash (in the form of a check or
otherwise) in such amount, or (b) with the consent of the Plan Committee,
tendering Shares with a fair market value on the date of exercise equal to
such amount, or (c) delivering a properly executed exercise notice
together with irrevocable instructions to a broker to promptly deliver to
the Company the sale or loan proceeds equal to such amount. The date of
exercise shall be the date such written notice and payment have been
delivered to the Secretary of the Company either in person or by
depositing said notice and payment in the United States mail, postage pre-
paid and addressed to the Secretary of the Company at the Company's home
office.
Upon receipt of said notice and payment, the Company shall deliver a
certificate or certificates representing such Shares as soon as
practicable after the notice and payment shall be received. The
certificate or certificates for the Shares as to which the option shall
have been exercised shall be registered in the name of the person or
persons exercising the option and shall be delivered as provided above to
the person or persons exercising the option. All Shares purchased upon
the exercise of the option shall be fully paid and nonassessable.
For purposes of this Agreement, the fair market value of a Share
means:
(i) The mean between the high and the low prices at which
the Shares were traded if the Shares were then listed
for trading on a national or regional securities
exchange or were then traded on a bona fide over-the-
counter market; or
(ii) If the Shares were not traded on an exchange or a bona
fide over-the-counter market, a value determined by an
appraiser selected by the Committee provided for in the
Plan.
In the event that the date of the exercise of this stock option is a date
on which there is no trading of the Shares on a national or regional
securities exchange or on the over-the-counter market, such fair market
value shall be determined by referring to the next preceding business day
on which trading occurs.
5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. If the Company shall,
after the Date of Grant, change its common stock into a greater or lesser
number of shares through a stock dividend, stock split-up or combination
of shares, then
(i) the number of Shares subject to option under the
Agreement (to the extent not previously exercised); and
(ii) the price per Share payable upon exercise of such
outstanding option,
<PAGE>
shall be proportionately increased or decreased as of the record date for
such stock dividend, stock split-up or combination of shares in order to
give effect thereto. Notwithstanding any such proportionate increase or
decrease, no fraction of a Share shall be issued upon the exercise of any
option. If any split-up or combination of Shares shall involve a change
of par value, the Shares subject to options theretofore or thereafter
granted shall be the Shares as so changed.
If, after the Date of Grant, there shall be any change in the stock of
the Company other than through a stock dividend, stock split-up or
combination of shares, or other change listed in Section 6 herein, then if
(and only if) the Committee shall determine that such change equitably
requires an adjustment in the number or kind or option price of Shares
then subject to an option, such adjustment as the Committee shall
determine is equitable and as shall be approved by the Board shall be made
and shall be effective and binding for all purposes of such option and the
Plan.
6. MERGER, REORGANIZATION, OR CHANGE IN CONTROL.
(a) Nothing contained in the Plan or in any option granted under
the Plan shall in any way prohibit the Company from merging with or
consolidating into another corporation, or from selling or
transferring all or substantially all of its assets, or from
distributing all or substantially all of its assets to its
stockholders in liquidation, or from dissolving and terminating its
corporate existence; and in any such event (other than a merger in
which the Company is the surviving corporation and after which the
Company remains an independent, publicly held corporation), the
Company or any surviving party to any such merger, consolidation, or
sale or transfer of assets may provide by resolution of its board of
directors that all rights of the person or persons entitled to
exercise then outstanding options granted under the Plan, and such
options, shall wholly and completely terminate at the time of any such
merger, consolidation, sale or transfer of assets, liquidation, or
dissolution, except that adequate provision for such person or persons
shall be made in accordance with paragraph (b) below.
(b) In the event that (i) any individual, corporation,
partnership or other person or group of persons or entities becomes
the beneficial owner, directly or indirectly, of 45% or more of the
Company's then outstanding common stock ("Change in Control") or (ii)
any merger, consolidation, liquidation, dissolution or termination
after which the Company will not survive as an independent, publicly-
owned corporation or any sales or transfer of all or substantially all
of the Company's assets ("Reorganization") occurs, then the Company
shall pay with respect to each outstanding option under the Plan an
amount equal to (x) the difference between the Fair Market Value (as
defined in (c) below) and exercise price of the option, multiplied by
(y) the number of Shares subject to such option. Such payment shall
be made in cash within 30 days after, in the case of a Reorganization
requiring approval by the Company's stockholders, the date of such
approval and, in the case of a Change in Control, the date upon which
such change occurs.
(c) Solely for purposes of (b) above, "Fair Market Value" shall
mean the greater of (i) the highest price per share of the Company's
common stock paid by the acquiring person within twelve months of the
<PAGE>
occurrence of the Change in Control to effect such change or provided
for in any agreement for the Reorganization, or (ii) fair market value
determined in accordance with Section 8.2(c) of the Plan.
7. TRANSFERABILITY OF OPTION. This option may be transferred by the
Optionee to (A) the spouse, children or grandchildren of the Optionee
("Immediate Family"), (B) a trust for the exclusive benefit of the
Optionee or the Optionee's Immediate Family, (C) a partnership in which
the Optionee or the Optionee's Immediate Family are the only partners, or
(D) to a former spouse of the Optionee pursuant to a domestic relations
order within the meaning of Rule 16a-12 promulgated under Section 16 of
the Exchange Act; provided, however, that (X) there may not be
consideration for any such transfer, and (Y) once transferred pursuant to
the preceding provisions of this Section 7, no subsequent transfer of this
option shall be permitted except a transfer by will or the laws of descent
and distribution. Following transfer, the terms and conditions of the
Plan and this Agreement shall continue to be applicable in all respects to
the Optionee and this option shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer as
if this option had not been transferred, including, but not limited to,
the terms and conditions with respect to the lapse and termination of such
option. Neither the Company, the Committee or the Optionee shall have any
obligation to inform any transferee of the termination or lapse of this
option for any reason. Notwithstanding any other provision of the Plan or
this Agreement, following the termination of the Optionee's employment by
the Company (or any present or future subsidiary of the Company) this
option shall be exercisable by the transferee only to the extent, and for
the periods specified in Section 3(b) as if such option had not been
transferred.
8. RESERVATION OF SHARES. The Company shall at all times reserve
and keep available a number of shares equal to the number of Shares from
time to time remaining subject to the option.
9. SHARES AS INVESTMENT. The Shares acquired pursuant to the
exercise of this option, if not registered by the Company under the
Securities Act of 1933 (the "Act"), will be "restricted" stock which will
not be freely transferrable by the holder after exercise of the option.
The Optionee and any assignee in interest of the Optionee accordingly
represents, as a condition of the granting of this option, that (a) Shares
which are unregistered under the Act are being acquired for the Optionee's
(or his assignee's) own account for investment only and not with a view to
offer for sale or for sale in connection with the distribution or transfer
thereof and (b) the certificates representing Shares purchased pursuant to
this option will bear a legend as to such restrictions on transfer.
10. EMPLOYMENT. This Agreement shall not affect the right of the
Company or any present or future parent or subsidiary of the Company to
terminate the employment of the Optionee, with or without cause, at any
time.
11. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Wisconsin.
12. BINDING EFFECT. This option incorporates by reference all the
terms, conditions and limitations set forth in the Plan, and this
Agreement shall be binding upon and inure to the benefit of the Company
and the Optionee and their successors. In the event of any conflict or
discrepancy between this Agreement and the Plan, the terms and conditions
of the Plan shall take precedence.
<PAGE>
13. RECEIPT OF INFORMATION. The Optionee hereby acknowledges receipt
of a copy of the Plan and of the Company's most recent annual report to
its shareholders.
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its officer, thereunto duly authorized by its Board of Directors, and
the Optionee has signed this Agreement, all as of the Date of Grant.
MOSINEE PAPER CORPORATION
By:________________________________
ATTEST:
___________________________________
Secretary
OPTIONEE:
___________________________________
<PAGE>
MOSINEE PAPER CORPORATION
1994 STOCK OPTION PLAN
DIRECTOR NON-QUALIFIED STOCK OPTION AGREEMENT
Agreement made as of _________________, 199__ (the "Date of Grant")
between Mosinee Paper Corporation, a corporation with its principal place
of business at Mosinee, Wisconsin (the "Company"), and
__________________________________________ (the "Optionee") for the
purpose of granting certain options described below under Section 7 of the
Mosinee Paper Corporation 1994 Stock Option Plan (the "Plan").
1. GRANT OF OPTION. The Company hereby grants the Optionee as of
the Date of Grant the option to purchase ___________ shares of no par
value common stock of the Company (the "Shares") upon the applicable terms
and conditions of the Plan, including those hereinafter stated.
2. PURCHASE PRICE. The option price shall be $__________ for each
Share.
3. TIME OF EXERCISE.
(a) EXTENT TO WHICH OPTION IS EXERCISABLE. The option may be
exercised as to any or all of the Shares subject to the option on or
after the Date of Grant.
(b) EXERCISE DURING OPTIONEE'S LIFETIME. This option is
exercisable during the Optionee's lifetime only by the Optionee or a
permitted transferee (as described in Section 7 herein) and only if
the following conditions are met at the time of exercise:
(i) The date of exercise is on or before the 20th
anniversary of the Date of Grant; and
(ii) The Optionee is a member of the board of directors of
the Company (including for this purpose membership as a
director emeritus of the Company) or, if the Optionee
is no longer such a member, such membership had
terminated no longer than 90 days prior to the date of
exercise.
(c) EXERCISE AFTER OPTIONEE'S DEATH. In the event of the
Optionee's death while a member of the board of directors of the
Company (including for this purpose membership as a director emeritus
of the Company) or, if the Optionee is no longer such a member, in the
event of the Optionee's death within 90 days after such membership had
terminated, this option, to the extent exercisable by the Optionee
immediately prior to the Optionee's death, may be exercised in whole
or in part by the Optionee's estate, designee by will or permitted
transferee (as described in Section 7 herein) but only if the date of
exercise is both on or before the 20th anniversary of the Date of
Grant and within 12 months after the date of the Optionee's death.
4. METHOD OF EXERCISE. The option shall be exercisable by written
notice to the Secretary of the Company at its principal place of business
at Mosinee, Wisconsin. Such notice shall state the exact number of Shares
as to which the option is being exercised and shall be signed by the
<PAGE>
person or persons exercising the option. Such notice shall be accompanied
by payment of the full purchase price of such Shares by (a) tendering cash
(in the form of a check or otherwise) in such amount, or (b) tendering
Shares with a fair market value on the date of exercise equal to such
amount, or (c) delivering a properly executed exercise notice together
with irrevocable instructions to a broker to promptly deliver to the
Company the sale or loan proceeds equal to such amount. The date of
exercise shall be the date such written notice and payment have been
delivered to the Secretary of the Company either in person or by
depositing said notice and payment in the United States mail, postage pre-
paid and addressed to the Secretary of the Company at the Company's home
office.
Upon receipt of said notice and payment, the Company shall deliver a
certificate or certificates representing such Shares as soon as
practicable after the notice and payment shall be received. The
certificate or certificates for the Shares as to which the option shall
have been exercised shall be registered in the name of the person or
persons exercising the option and shall be delivered as provided above to
the person or persons exercising the option. All Shares purchased upon
the exercise of the option shall be fully paid and nonassessable.
For purposes of this Agreement, the fair market value of a Share
means:
(i) The mean between the high and the low prices at which
the Shares were traded if the Shares were then listed
for trading on a national or regional securities
exchange or were then traded on a bona fide over-the-
counter market; or
(ii) If the Shares were not traded on an exchange or a bona
fide over-the-counter market, a value determined by an
appraiser selected by the Committee provided for in the
Plan.
In the event that the date of the exercise of this stock option is a date
on which there is no trading of the Shares on a national or regional
securities exchange or on the over-the-counter market, such fair market
value shall be determined by referring to the next preceding business day
on which trading occurs.
5. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. If the Company shall,
after the Date of Grant, change its common stock into a greater or lesser
number of shares through a stock dividend, stock split-up or combination
of shares, then
(i) the number of Shares subject to option under the
Agreement (to the extent not previously exercised); and
(ii) the price per Share payable upon exercise of such
outstanding option,
shall be proportionately increased or decreased as of the record date for
such stock dividend, stock split-up or combination of shares in order to
give effect thereto. Notwithstanding any such proportionate increase or
decrease, no fraction of a Share shall be issued upon the exercise of any
option. If any split-up or combination of Shares shall involve a change
of par value, the Shares subject to options theretofore or thereafter
granted shall be the Shares as so changed.
<PAGE>
If, after the Date of Grant, there shall be any change in the stock of
the Company other than through a stock dividend, stock split-up or
combination of shares, or other change listed in Section 6 herein, then if
(and only if) the Committee shall determine that such change equitably
requires an adjustment in the number or kind or option price of Shares
then subject to an option, such adjustment as the Committee shall
determine is equitable and as shall be approved by the Board shall be made
and shall be effective and binding for all purposes of such option and the
Plan.
6. MERGER, REORGANIZATION, OR CHANGE IN CONTROL.
(a) Nothing contained in the Plan or in any option granted under
the Plan shall in any way prohibit the Company from merging with or
consolidating into another corporation, or from selling or
transferring all or substantially all of its assets, or from
distributing all or substantially all of its assets to its
stockholders in liquidation, or from dissolving and terminating its
corporate existence; and in any such event (other than a merger in
which the Company is the surviving corporation and after which the
Company remains an independent, publicly held corporation), the
Company or any surviving party to any such merger, consolidation, or
sale or transfer of assets may provide by resolution of its board of
directors that all rights of the person or persons entitled to
exercise then outstanding options granted under the Plan, and such
options, shall wholly and completely terminate at the time of any such
merger, consolidation, sale or transfer of assets, liquidation, or
dissolution, except that adequate provision for such person or persons
shall be made in accordance with paragraph (b) below.
(b) In the event that (i) any individual, corporation,
partnership or other person or group of persons or entities becomes
the beneficial owner, directly or indirectly, of 45% or more of the
Company's then outstanding common stock ("Change in Control") or (ii)
any merger, consolidation, liquidation, dissolution or termination
after which the Company will not survive as an independent, publicly-
owned corporation or any sales or transfer of all or substantially all
of the Company's assets ("Reorganization") occurs, then the Company
shall pay with respect to each outstanding option under the Plan an
amount equal to (x) the difference between the Fair Market Value (as
defined in (c) below) and exercise price of the option, multiplied by
(y) the number of Shares subject to such option. Such payment shall
be made in cash within 30 days after, in the case of a Reorganization
requiring approval by the Company's stockholders, the date of such
approval and, in the case of a Change in Control, the date upon which
such change occurs.
(c) Solely for purposes of (b) above, "Fair Market Value" shall
mean the greater of (i) the highest price per share of the Company's
common stock paid by the acquiring person within twelve months of the
occurrence of the Change in Control to effect such change or provided
for in any agreement for the Reorganization, or (ii) fair market value
determined in accordance with Section 8.2(c) of the Plan.
7. TRANSFERABILITY OF OPTION. This option may be transferred by the
Optionee to (A) the spouse, children or grandchildren of the Optionee
("Immediate Family"), (B) a trust for the exclusive benefit of the
Optionee or the Optionee's Immediate Family, (C) a partnership in which
the Optionee or the Optionee's Immediate Family are the only partners, or
<PAGE>
(D) to a former spouse of the Optionee pursuant to a domestic relations
order within the meaning of Rule 16a-12 promulgated under Section 16 of
the Exchange Act; provided, however, that (X) there may not be
consideration for any such transfer, and (Y) once transferred pursuant to
the preceding provisions of this Section 7, no subsequent transfer of this
option shall be permitted except a transfer by will or the laws of descent
and distribution. Following transfer, the terms and conditions of the
Plan and this Agreement shall continue to be applicable in all respects to
the Optionee and this option shall continue to be subject to the same
terms and conditions as were applicable immediately prior to transfer as
if this option had not been transferred, including, but not limited to,
the terms and conditions with respect to the lapse and termination of such
option. Neither the Company, the Committee or the Optionee shall have any
obligation to inform any transferee of the termination or lapse of this
option for any reason. Notwithstanding any other provision of the Plan or
this Agreement, following the termination of the Optionee's membership on
the board of directors of the Company (including for this purpose
membership as a director emeritus of the Company) this option shall be
exercisable by the transferee only to the extent, and for the periods
specified in Section 3(b) as if such option had not been transferred.
8. RESERVATION OF SHARES. The Company shall at all times reserve
and keep available a number of shares equal to the number of Shares from
time to time remaining subject to the option.
9. SHARES AS INVESTMENT. The Shares acquired pursuant to the
exercise of this option, if not registered by the Company under the
Securities Act of 1933 (the "Act"), will be "restricted" stock which will
not be freely transferrable by the holder after exercise of the option.
The Optionee and any assignee in interest of the Optionee accordingly
represents, as a condition of the granting of this option, that (a) Shares
which are unregistered under the Act are being acquired for the Optionee's
(or his assignee's) own account for investment only and not with a view to
offer for sale or for sale in connection with the distribution or transfer
thereof and (b) the certificates representing Shares purchased pursuant to
this option will bear a legend as to such restrictions on transfer.
10. GOVERNING LAW. This Agreement shall be governed by the laws of
the State of Wisconsin.
11. BINDING EFFECT. This option incorporates by reference all the
terms, conditions and limitations set forth in the Plan, and this
Agreement shall be binding upon and inure to the benefit of the Company
and the Optionee and their successors. In the event of any conflict or
discrepancy between this Agreement and the Plan, the terms and conditions
of the Plan shall take precedence.
12. RECEIPT OF INFORMATION. The Optionee hereby acknowledges receipt
of a copy of the Plan and of the Company's most recent annual report to
its shareholders.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Agreement to be signed
by its officer, thereunto duly authorized by its Board of Directors, and
the Optionee has signed this Agreement, all as of the Date of Grant.
MOSINEE PAPER CORPORATION
By:________________________________
ATTEST:
___________________________________
Secretary
OPTIONEE:
___________________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated financial statements for the twelve months ended December 31,
1996 of Mosinee Paper Corporation and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 3,149,581
<SECURITIES> 0
<RECEIVABLES> 26,534,713
<ALLOWANCES> 3,128,049
<INVENTORY> 41,253,910
<CURRENT-ASSETS> 75,347,278
<PP&E> 370,085,043
<DEPRECIATION> 170,609,929
<TOTAL-ASSETS> 285,029,167
<CURRENT-LIABILITIES> 47,998,095
<BONDS> 48,332,300
0
0
<COMMON> 58,678,056
<OTHER-SE> 83,762,143
<TOTAL-LIABILITY-AND-EQUITY> 285,029,167
<SALES> 314,489,943
<TOTAL-REVENUES> 314,489,943
<CGS> 230,484,792
<TOTAL-COSTS> 264,964,173
<OTHER-EXPENSES> (164,911)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,412,071
<INCOME-PRETAX> 44,948,788
<INCOME-TAX> 18,050,000
<INCOME-CONTINUING> 26,898,788
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 26,898,788
<EPS-PRIMARY> 2.56
<EPS-DILUTED> 0
</TABLE>
