<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
===============================================================================
F O R M 1 0 - Q
===============================================================================
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ______________
COMMISSION FILE NO. 0-795
BADGER PAPER MILLS, INC.
(Exact name of registrant as specified in its charter)
WISCONSIN 39-0143840
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
200 WEST FRONT STREET
PESHTIGO, WISCONSIN 54157
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (715) 582-4551
Indicate by checkmark 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(s), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes. [_] No.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the last practicable date: As of April 30, 1995, 1,956,830.
Indicate total number of pages contained in document filed: 10.
<PAGE>
BADGER PAPER MILLS, INC.
INDEX
<TABLE>
<CAPTION>
Pages
-----
<S> <C>
FINANCIAL INFORMATION
Consolidated Interim Statements of Operations and Retained
Earnings - Three Months Ended March 31, 1995 and 1994 3
Consolidated Balance Sheets - March 31, 1995 and
December 31, 1994 4
Consolidated Statements of Cash Flows - Three Months
Ended March 31, 1995 and 1994 5
Notes to Financial Statements 6-7
MANAGEMENT DISCUSSION AND ANALYSIS 7-9
SUBMISSION OF MATTERS TO A VOTE
OF SECURITY HOLDERS 9
OTHER INFORMATION 9
SIGNATURES 10
</TABLE>
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<PAGE>
BADGER PAPER MILLS, INC. AND SUBSIDIARY
CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
--------------------------
MARCH 31, MARCH 31,
1995 1994
------------ ------------
<S> <C> <C>
Net Sales $22,114,107 $17,048,540
Cost of Sales 20,925,118 16,392,820
----------- -----------
Gross Margin 1,188,989 655,720
Selling and Administrative Expenses 877,039 884,295
----------- -----------
Operating Income (Loss) 311,950 (228,575)
Other Income, Net 428,689 (252,198)
Interest Expense (374,757) (334,516)
----------- -----------
Income (Loss) Before Income Taxes 365,882 (815,289)
Income Tax Expense (Benefit) 124,470 (317,975)
----------- -----------
Net Income (Loss) 241,412 (497,314)
----------- -----------
Retained Earnings, Beginning of Period 18,082,078 20,609,089
Cash Dividends - -
----------- -----------
Retained Earnings, End of Period $18,323,490 $20,111,775
=========== ===========
Net Earning (Loss) Per Share $0.12 ($0.25)
Dividends Per Share - -
Average Shares Outstanding 1,956,830 1,957,330
</TABLE>
See Notes to Financial Statements.
-Page 3-
<PAGE>
BADGER PAPER MILLS, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
------------ ------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash & Cash Equivalents $ 842,822 $ 1,375,057
Marketable Securities 3,630,613 3,397,184
Accounts Receivable - Net 7,880,656 6,770,635
Deferred Income Taxes 1,175,908 1,175,908
Inventories 5,436,761 6,318,834
Refundable Income Taxes 299,348 299,348
Other Current Assets 351,156 192,255
------------ ------------
Total Current Assets 19,617,264 19,529,221
Property, Plant, Equipment & Timberlands 74,195,161 73,853,230
Less Allowance for Depreciation & Depletion (43,780,594) (42,959,533)
------------ ------------
Total Property, Plant, Equipment & Timberlands 30,414,567 30,893,697
Other Assets 2,034,143 1,985,210
Restricted Funds from Industrial Revenue Bonds 1,936,343 1,973,595
------------ ------------
TOTAL ASSETS $ 54,002,317 $ 54,381,723
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Revolving Credit Notes Payable $ 12,000,000 $ 12,000,000
Current Portion of Long-Term Debt 111,232 111,232
Accounts Payable 4,442,386 5,110,671
Accrued Liabilities 3,430,728 3,582,795
------------ ------------
Total Current Liabilities 19,984,346 20,804,698
Deferred Income Taxes 2,218,240 2,218,240
Long Term Debt 10,639,904 10,650,714
Other Liabilities 1,798,336 1,587,992
------------ ------------
Total Liabilities 34,640,826 35,261,644
STOCKHOLDERS' EQUITY:
Common stock, no par value:
4,000,000 shares authorized
2,160,000 shares issued 2,700,000 2,700,000
Additional paid-in capital 166,119 166,119
Retained Earnings 18,323,490 18,082,078
------------ ------------
Total Stockholders' Equity 21,189,609 20,948,197
Less treasury shares at cost:
203,170 - 3/31/95; 203,170 - 12/31/94 (1,828,118) (1,828,118)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 54,002,317 $ 54,381,723
============ ============
</TABLE>
See Notes to Financial Statements.
-Page 4-
<PAGE>
BADGER PAPER MILLS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
-------------------------
MARCH 31, MARCH 31,
1995 1994
----------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (Loss) $ 241,412 $ (497,314)
Adjustments to Reconcile to Net Cash
provided by (used in) Operating Activities:
Depreciation 821,532 874,404
Net Change of Marketable Securities 60,000 (40,765)
Unrealized (Gain) Loss on Marketable Securities (293,429) 417,737
(Increase) Decrease in Receivables, Net (1,110,021) 217,350
Decrease (Increase) in Inventories 882,073 (343,179)
Decrease in Accounts Payable and
Accrued Liabilities (820,352) (457,009)
Decrease Other 2,510 3,817
----------- ----------
Net Cash (Used in) Provided by Operating
Activities (216,275) 175,041
----------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to Property, Plant and Equipment, Net (342,402) (525,760)
Decrease in Restricted Funds from
Industrial Revenue Bonds 37,252 35,037
----------- ----------
Net Cash Used in Investing Activities (305,150) (490,723)
----------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on Long-Term Debt (10,810) (9,981)
----------- ----------
Net Cash Used in Financing Activities (10,810) (9,981)
----------- ----------
Net Decrease in Cash and Cash Equivalents (532,235) (325,663)
Cash and Cash Equivalents:
Beginning of Period $ 1,375,057 1,065,215
----------- ----------
End of Period $ 842,822 $ 739,552
=========== ==========
</TABLE>
See Notes to Financial Statements.
-Page 5-
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. BASIS OF PRESENTATION
---------------------
The unaudited financial statements have been prepared by Badger Paper Mills,
Inc. (the "Company") pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC") and, in the opinion of the Company, included all
adjustments necessary for a fair statement of results for each period shown.
These adjustments were of a normal recurring nature. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such SEC rules and regulations. The Company believes that
the disclosures made are adequate to make the information presented not
misleading. It is suggested that these financial statements be read in
conjunction with the financial state ments and notes thereto included in the
Company's latest annual report.
B. INCOME TAXES
------------
The provision for income tax expense or benefit has been computed by applying
an estimated annual effective tax rate. This rate was a 34% expense for the
quarter ended March 31, 1995, and a 39% benefit for the quarter ended March 31,
1994.
C. EARNINGS PER SHARE
------------------
Earnings per share of common stock are based on the weighted average number
of shares of common stock outstanding.
D. INVENTORIES
-----------
The major classes of inventories are as follows (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
--------- ------------
<S> <C> <C>
Raw materials $2,338 $3,033
Work in process and finished stock 3,099 3,286
------ ------
$5,437 $6,319
====== ======
</TABLE>
E. DEBT
----
On March 31, 1994, the Company entered into a 13-month amended revolving
credit agreement, effective through April 30, 1995, with its financing
institutions in the amount of
-Page 6-
<PAGE>
$15,000,000, of which $12,000,000 was used at March 31, 1995. The revolving
credit agreement was amended August 31, 1994, to reduce the credit line to
$14,250,000. This agreement was further amended on February 17, 1995. The
current agreement provides for covenants which are somewhat less restrictive
than the predecessor agreement dated June 30, 1993, and effective to March 31,
1994. The amended agreement also provides that the notes bear interest at LIBOR
rates plus 2%, totaling 8.125% at March 31, 1995; requires the Company to
maintain tangible net worth of at least $19,000,000, provided, however, that
tangible net worth shall not be increased or reduced by any unrealized
appreciation or depreciation on the Company's marketable securities; a current
ratio of at least .90:1.00; and, maintain a leverage ratio of not more than
1.90:1.00. The agreement further states the Company shall not expend or be
obligated for capital expenditures for the period January 1, 1994 through April
30, 1995 in excess of $5,000,000. Capital projects for this period are
projected to fall well within these limitations. The Company may also provide
for limited dividends after October 1, 1994, so long as no default or event of
default exists, and such dividends made during a fiscal quarter shall not exceed
25% of the Consolidated Net Income for the immediately preceding quarter.
Subsequent to the end of the quarter, the Company amended the revolving credit
agreement, extending the maturity to April 30, 1998.
F. CONTINGENCIES
-------------
The Company operates in an industry which is subject to laws and regulations
at both federal and state levels relating to the protection of the environment.
The Company under goes continued environmental testing and analysis, and the
precise cost of compliance with requirements has not been determined.
In addition, the Company is subject to various claims, the ultimate outcomes
of which management cannot predict. Management believes that the outcomes will
not have a material adverse effect on the Company's consolidated financial
position or results of operations.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Sales for the first quarter, 1995, were $22,114,107, or 29.8% over the
$17,048,540 reported for the same period in 1994. Volume of paper shipments
increased 2.7% over the same period in 1994, and average selling price increased
by 26.0% in 1995 compared to 1994. Paper prices, which previously had lagged
behind the increasing fiber market, have finally adjusted to reflect these fiber
prices. The first quarter in 1995 also reflects an increase in the Company's
sale of sulphite pulp over the same period a year earlier.
-Page 7-
<PAGE>
In the first quarter, 1995, cost of sales increased 24.5% to $20,420,852,
compared to $16,392,820 in 1994. The increased volume of shipments plus the
higher costs of purchased fiber were major factors affecting cost of sales.
Also, cost of sales in the first quarter, 1995, included $504,000 taken as a
result of the expense incurred from the voluntary early retire ment incentive
package offered employees.
Gross margins increased to $1,693,255 from $655,720 experienced a year
earlier. In addition to the factors cited above, recent changes instituted in
our manufacturing and converting facilities have resulted in increasing
operating efficiencies and reducing production costs.
Selling and administrative expenses remained constant in the first quarter,
1995 as compared to 1994, $877,039 in 1995 and $884,295 in 1994.
Other income for 1995 increased to $428,689 from a loss of $252,198 in 1994,
the major factor being an unrealized gain in securities of $293,429 in the first
quarter, 1995, as compared to an unrealized loss of $417,737 in 1994. Because
the Company's investment securities are accounted for as a trading account,
unrealized gains and losses are included in the Company's statement of
operations.
LIQUIDITY AND CAPITAL RESOURCES
Capital expenditures during the first quarter, 1995, amounted to $342,000
as com pared to $526,000 in the first quarter of 1994. Capital expenditures
were maintained at levels to sustain manufacturing operations.
During the first quarter, Badger's Oconto Falls subsidiary, Plas-Techs,
Inc., announced an expansion project which will double the size of its existing
facility. Plas-Techs' business has increased in excess of 30% annually since
its acquisition in 1991, and has outgrown its original physical dimensions.
Additional equipment will be installed to support its converting capacity. A
total project cost of approximately $700,000 will be funded primarily through
the utilization of proceeds from the sale of industrial development revenue
bonds originally issued in 1992 and reserved for plant expansion purposes.
The Company operates in an industry which is subject to laws and regulations
at both federal and state levels relating to the protection of the environment.
The Company under goes continued environmental testing and analysis, and the
precise cost of compliance with requirements has not been determined.
As of March 31, 1995, the Company's capital resources for funding ongoing
operations and capital expenditures included $3,630,000 in marketable
securities; $1,936,000 in restricted funds from previous industrial revenue bond
issuances, and a $14,250,000 revolving credit agreement for 13 months, expiring
April 30, 1995, of which $12,000,000 is currently used. Subject to confirmation
of the extension of the revolving credit agreement, the
-Page 8-
<PAGE>
Company believes it has adequate capital resources to meet its near-term capital
and operating needs.
Cash used in operating activities totaled $216,000 for the first quarter of
1995, and compares to cash provided from operating activities of $175,000 for
the first quarter, 1994. The major contributing factors to the decrease in 1995
include an increase of $1,110,000 in receivables and an unrealized gain of
$293,000 on marketable securities, offset by the continued improvement in sales,
resulting in a decrease in inventories of $882,000.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's annual meeting of stockholders held on May 2, 1995, the
four continuing directors who were management's nominees for re-election, were
re-elected. The nominees/directors were re-elected with the following votes:
<TABLE>
<CAPTION>
TERM AUTHORITY FOR
DIRECTORS NOMINATED CLASS EXPIRES VOTES "FOR" VOTING WITHHELD
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Ralph D. Searles I 1997 1,487,627 241,566
Claude L. Van Hefty I 1997 1,487,283 241,910
Thomas J. Kuber II 1998 1,462,551 266,642
Earl R. St. John, Jr. II 1998 1,486,463 242,730
</TABLE>
There were no abstentions or broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits:
(27) Financial data schedules
-Page 9-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BADGER PAPER MILLS, INC.
(Registrant)
DATE: May 12, 1995 By /s/ Claude L. Van Hefty
---------------------------------
Claude L. Van Hefty
President
(Chief Executive Officer)
DATE: May 12, 1995 By /s/ Miles L. Kresl, Jr.
---------------------------------
Miles L. Kresl, Jr.
Vice President/Administration,
Corporate Secretary, & Treasurer
(Principal Financial Officer)
-Page 10-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 842,822
<SECURITIES> 3,630,613
<RECEIVABLES> 7,880,656
<ALLOWANCES> 0
<INVENTORY> 5,436,761
<CURRENT-ASSETS> 19,617,264
<PP&E> 74,195,161
<DEPRECIATION> 43,780,594
<TOTAL-ASSETS> 54,002,317
<CURRENT-LIABILITIES> 19,984,346
<BONDS> 10,639,904
<COMMON> 2,700,000
0
0
<OTHER-SE> 166,119
<TOTAL-LIABILITY-AND-EQUITY> 54,002,317
<SALES> 22,114,107
<TOTAL-REVENUES> 22,114,107
<CGS> 20,925,118
<TOTAL-COSTS> 21,802,157
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 374,757
<INCOME-PRETAX> 365,882
<INCOME-TAX> 124,470
<INCOME-CONTINUING> 241,412
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 241,412
<EPS-PRIMARY> .12
<EPS-DILUTED> .0
</TABLE>
