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 September 30, 1997
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 September 30,
1997, 1,950,945.
Indicate total number of pages contained in document filed: 10.
<PAGE>
BADGER PAPER MILLS, INC.
INDEX
Pages
FINANCIAL INFORMATION
Condensed Consolidated Interim Statements of
Operations and Retained Earnings -
Quarter and Nine Months Ended
September 30, 1997 and 1996 3
Condensed Consolidated Balance Sheets -
September 30, 1997 and December 31, 1996 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended September 30, 1997 and 1996 5
Notes to Condensed Consolidated
Financial Statements 6-7
MANAGEMENT DISCUSSION AND ANALYSIS 7-8
OTHER INFORMATION 9
SIGNATURES 10
<PAGE>
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
BADGER PAPER MILLS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF
OPERATIONS AND RETAINED EARNINGS
(UNAUDITED)
(dollars in thousands, except per share data)
<CAPTION>
Three Months Ended Nine Months Ended
Sept. 30, 1997 Sept. 30, 1996 Sept. 30, 1997 Sept. 30, 1996
<C> <C> <C> <C> <C>
Net Sales $19,002 $19,458 $53,034 $58,690
Cost of Sales 17,589 18,020 50,321 54,753
------- ------- ------- -------
Gross Margin 1,413 1,438 2,713 3,937
Selling and Administrative Expenses 1,006 957 3,075 2,923
Pulp Mill Closure Costs - - - 7,430
------- ------- ------- -------
Operating Income (Loss) 407 481 (362) (6,416)
Other Income, Net 213 93 440 123
Gain on Sale of Timberlands - 253 - 4,873
Interest Expense (358) (177) (1,000) (703)
------- ------- ------- -------
Income (Loss) Before Income Taxes 262 650 (922) (2,123)
Income Tax Expense (Benefit) 89 221 (314) (722)
------- ------- ------- -------
Net Earning (Loss) 173 429 (608) (1,401)
------- ------- ------- -------
Retained Earnings, Beginning of Period 17,213 18,610 17,994 20,635
Cash Dividends - (116) - (311)
------- ------- ------- -------
Retained Earnings, End of Period $17,386 $18,923 $17,386 $18,923
======= ======= ======= =======
Net Earnings (Loss) Per Share $0.09 $0.22 ($0.31) ($0.72)
Dividends Per Share - $0.06 - $0.16
Average Shares Outstanding 1,947,268 1,945,130 1,945,892 1,944,570
See Notes to Condensed Consolidated Financial Statements
</TABLE>
<PAGE>
BADGER PAPER MILLS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(dollars in thousands)
September 30, December 30,
ASSETS:
Current Assets:
Cash and Cash Equivalents $2,914 $4,079
Marketable Securities 1,298 1,800
Accounts Receivable, Net 5,834 4,556
Deferred Income Taxes 981 981
Inventories 5,839 6,837
Refundable Income Taxes 394 1,466
Other Current Assets 1,447 1,194
------- -------
Total Current Assets 18,707 20,913
Property, Plant, Equipment and Timberlands 65,522 62,563
Less Allowance for Depreciation and (36,581) (35,158)
------- -------
Total Property, Plant, Equipment and 28,941 27,405
Property, Plant, Equipment Held for Sales, 730 1,410
Other Assets 2,324 2,224
------- -------
TOTAL ASSETS $50,702 $51,952
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Current Portion of Long-Term Debt $119 $119
Accounts Payable 4,407 7,409
Accrued Liabilities 2,639 3,462
------- -------
Total Current Liabilities 7,165 10,990
Deferred Income Taxes 1,621 1,621
Long-Term Debt 21,911 18,617
Other Liabilities 1,734 1,892
------- -------
Total Liabilities 32,431 33,120
STOCKHOLDERS' EQUITY:
Common stock, no par value:
4,000,000 shares authorized
2,160,000 shares issued 2,700 2,700
Additional paid-in capital 187 178
Retained Earnings 17,386 17,994
Less treasury shares at cost:
209,055 - 9/30/97; 214,870 -
12/31/96 (2,002) (2,040)
------- -------
Total Stockholders' Equity 18,271 18,832
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $50,702 $51,952
======= =======
See Notes to Condensed Consolidated Financial Statements
<PAGE>
BADGER PAPER MILLS, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(dollars in thousands)
Nine Months Ended
Sept. 30, Sept. 30,
1997 1996
Cash Flows from Operating Activities:
Net Loss ($608) ($1,401)
Adjustments to Reconcile to Net Cash
Provided by (Used in) Operating Activities:
Depreciation 2,180 2,194
Net Proceeds from Sales of Marketable 491 1,565
Unrealized Loss (Gain) on Marketable 10 (305)
Gain on Sale of Timberlands - (4,873)
Increase in Accounts Receivables, Net (1,278) -
Decrease (Increase) in Refundable Income 1,072 (1,007)
Decrease (Increase) in Inventories 998 (752)
(Increase) Decrease in Accounts Payable and (3,825) 74
Decrease (Increase) Other (463) 618
-------- -------
Net Cash Used in Operating Activities (1,423) (3,887)
-------- -------
Cash Flows from Investing Activities:
(Additions to) Retirements from Property, (3,708) 4,104
Proceeds from Sale of Fixed Assets Held for 672 -
Proceeds from Sale of Timberlands - 5,051
Decrease in Restricted Funds from Industrial - 34
-------- -------
Net Cash (Used in) Provided by Investing (3,036) 9,189
-------- -------
Cash Flows from Financing Activities:
Increase to (Payments on) Long-Term Debt 3,294 (2,603)
Dividends Paid - (311)
-------- -------
Net Cash Provided by (Used in) Financing 3,294 (2,914)
-------- -------
Net (Decrease) Increase in Cash and Cash (1,165) 2,388
Cash and Cash Equivalents:
Beginning of Period 4,079 835
-------- -------
End of Period $2,914 $3,223
======== =======
See Notes to Condensed Consolidated Financial Statements
<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, include all adjustments necessary for a fair statement of results
for each period shown. These adjustments are 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. These financial
statements should be read in conjunction with the financial statements and
notes thereto included in the Company's latest annual report. Certain
reclassifications have been made to the 1996 financial statements to
conform to the 1997 presentation.
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% tax
expense for the third quarter 1997 and a 34% tax benefit for the nine
months ended September 30, 1997, resulting from the Company's operating
gains and losses during such periods. For the quarter and nine months
ended September 30, 1996, the Company provided for a 34% expense, and a
34% tax benefit, respectively.
C. EARNINGS PER SHARE
Earnings per share of common stock are based on weighted average number
of shares of common stock outstanding.
D. INVENTORIES
The major classes of inventories are as follows (in thousands):
Sept. 30, 1997 Dec. 31, 1996
Raw materials $910 $994
Work in process and finished stock 4,080 4,122
Pulpwood inventory to be sold 849 1,721
------- --------
$5,839 $6,837
======= ========
E. 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 undergoes continued environmental testing
and analysis, and the precise cost of compliance with environmental
requirements has not been determined.
In addition, the Company is subject to various claims arising in the
ordinary course of its business, the ultimate outcomes of which management
cannot predict. Management believes, however, that the outcome of these
claims 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
The Company reported net sales of $19,002,000 for the third quarter ended
September 30, 1997, or 2.3% less than the $19,458,000 reported for the
same period in 1996. Volume of shipments for the third quarter of 1997
remained constant compared to the same period in 1996, while the average
selling price of the paper sold decreased approximately 2.4%.
Net sales for the nine-month period ending September 30, 1997 were
$53,034,000, or 9.6% less than the $58,690,000 reported for the same
period a year earlier. Volume of shipments during the first nine months of
1997 was down approximately 4.7% when compared to the same period in 1996,
while the average selling price decreased approximately 5.7%.
Cost of sales decreased 2.4% and 8.1% respectively for the third quarter
and first nine months of 1997 compared to the same periods a year earlier.
The nine-month change is partially due to the elimination of costs
associated with the pulp mill, which was closed in the second quarter of
1996.
Selling and administrative expenses increased 5.1% to $1,006,000 for the
third quarter of 1997 from $957,000 reported for the same period in 1996.
Selling and administrative expenses increased 5.2% to $3,075,000 for the
first nine months of 1997 from $2,923,000 for the first nine months of
1996. The increase in both the third quarter and the first nine months of
1997 was due to the costs associated with market development.
Other income increased 129.0% to $213,000 for the third quarter of 1997,
compared to $93,000 for the third quarter of 1996. For the first nine
months of 1997, other income has increased to $440,000 from $123,000, or
257.7%. The increase is primarily the result of realized gains associated
with trade credits of approximately $105,000 in the third quarter of 1997
and $176,000 for the first nine months of 1997. The Company recognized a
loss in securities of $161,000 for the first nine months of 1996.
Liquidity and capital resources
Capital expenditures during the third quarter and nine months of 1997
amounted to $646,000 and $3,227,000, respectively, compared to $1,211,000
and $2,194,000, respectively, during the same periods in 1996. Capital
expenditures were maintained at levels to sustain manufacturing
operations. The Company's $5.5 million capital expenditure plan for 1997
is nearly complete. The new process control system for the Yankee paper
machine at the Peshtigo facility, which provides control of machine and
cross direction basis weights and sheet moisture, is completed and
operational. Delivery of the eight-color flexographic printing press,
which is to be installed at the Company's subsidiary, Plas-Techs, Inc., is
expected to occur during the first quarter of 1998 and be operational in
the second quarter of 1998.
As of September 30, 1997, the Company's capital resources for funding
ongoing operations and capital expenditures included $4,212,000 of cash
and marketable securities, and a $13,000,000 revolving credit facility
running through April 30, 1999. As of September 30, 1997, borrowings
under this credit facility totaled $12,900,000. The Company's revolving
credit facility was amended in August, 1997 to modify certain financial
covenants. The Company believes it has adequate capital resources to
meet its near-term capital and operating needs.
Cash used in operating activities totaled $1,423,000 for the first nine
months of 1997, compared to the cash used in operating activities for the
first nine months of 1996 of $3,887,000. Net cash used in investing
activities was $3,036,000 for the first nine months of 1997 compared to
$9,189,000 provided by investing activities for the same period in 1996.
Accounting Matters
The Company is required to adopt Statement of Financial Accounting
Standards (SFAS) No. 128, "Earnings Per Share," into its financial
statements for the year ending December 31, 1997. SFAS 128 specifies the
computation, presentation, and disclosure requirements for earnings per
share. The adoption of this statement will result in the presentation by
the Company of basic and, as appropriate, diluted earnings per share, as
defined by the statement, and is not expected to have a material impact on
the earnings per share reported in the financial statements. Upon
adoption of this statement, all prior period earnings per share amounts
will be restated to conform to the provisions of SFAS No. 128.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(4) Seventh Amendment and Waiver dated August 6, 1997 to the
Credit Agreement dated June 30, 1993 between Badger Paper
Mills, Inc., Plas-Techs, Inc., and Harris Trust & Savings
Bank.
(10) Director Stock Grant Plan dated July 23, 1997
(27) Financial data schedules
<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: November 12, 1997 By /s/ Claude L. Van Hefty
Claude L. Van Hefty
President
(Chief Executive Officer)
DATE: November 12, 1997 By /s/ Miles L. Kresl, Jr.
Miles L. Kresl, Jr.
Vice President/Administration,
Corporate Secretary, & Treasurer
(Principal Financial Officer)
SEVENTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER
Harris Trust and Savings Bank
111 West Monroe Street
Chicago, Illinois
Gentlemen:
The undersigned, BADGER PAPER MILLS, INC., a Wisconsin corporation
("Badger"), and PLAS-TECHS, INC., a Wisconsin corporation ("Plas-Techs")
(collectively, Badger and Plas-Techs are hereinafter sometimes referred to
as "Borrowers"), refers to the Credit Agreement dated as of June 30, 1993,
as amended from time to time (the "Agreement") and currently in effect
between the Borrowers and you (the "Bank"). All capitalized terms used
herein without definition shall have the same meanings as they have in the
Agreement.
The Borrowers hereby apply to the Bank for certain modifications to the
Agreement and the Borrowers' borrowing arrangements with the Bank, and for
the waiver of certain covenants of the Agreement.
1. AMENDMENT.
Upon your acceptance hereof in the space provided for that purpose
below, the Agreement shall be and hereby is amended as follows:
(a) Section 7.6 of the Agreement is hereby amended in its entirety to
read as follows:
Section 7.6. Current Ratio. Badger will, as of the
last day of each fiscal month maintain a Consolidated
Current Ratio of not less than 1.90 to 1.0 for each
fiscal month of Badger ending on or prior to June 30,
1997 and not less than 1.70 to 1.0 for each fiscal
month thereafter.
(b) Section 7.7 of the Agreement is hereby amended in its entirety to
read as follows:
Section 7.7. Consolidated Tangible Net Worth. Badger
will, as of the last day of each fiscal month ending
during each of the periods specified below maintain
Consolidated Tangible Net Worth of not less than:
FROM AND INCLUDING TO AND INCLUDING CONSOLIDATED
TANGIBLE NET WORTH
SHALL NOT BE LESS
THAN
July 1, 1997 December 30, 1997 $17,700,000
December 31, 1997 June 29, 1998 $18,800,000
June 30, 1998 December 30, 1998 $20,000,000
December 31, 1998 Thereafter $22,000,000
(c) Section 7.8 of the Credit Agreement is hereby amended in its
entirety to read as follows:
Section 7.8. Leverage. Badger will as of the last day of each
fiscal month of Badger, maintain its Leverage Ratio at not more
than 2.05 to 1.0.
(d) Section 7.10 of the Credit Agreement shall be and hereby is amended
in its entirety and as so amended shall read as follows:
Section 7.10. Liquid Assets. Badger will at all times
maintain on a consolidated basis Liquid Assets in an amount
equal to not less than $3,019,774.
(e) Section 7.13 of the Agreement is hereby amended in its entirety to
read as follows:
Section 7.13. Capital Expenditures. Badger will not, nor will
it permit any Subsidiary to, expend or become obligated for
Capital Expenditures in an aggregate amount in excess of the
following:
Fiscal Year 1997......$6,500,000
Fiscal Year 1998......$5,000,000
Fiscal Year 1999......$4,000,000
(f) Section 10 of the Credit Agreement is hereby amended by amending the
definition of "Eurodollar Margin" in its entirety to read as
follows:
"Eurodollar Margin" means (i) 1.50% for any Pricing Period the
Compliance Certificate delivered by Badger for the most
recently completed fiscal month shows Leverage Ratio of less
than or equal to 1.50 to 1.00; (ii) 1.75% for any Pricing
Period the Compliance Certificate delivered by Badger for the
most recently completed fiscal month shows a Leverage Ratio
greater than 1.50 to 1.00 but less than or equal to 1.65 to
1.00; (iii) 2.00% for any Pricing Period the Compliance
Certificate delivered by Badger for the most recently completed
fiscal month shows a Leverage Ratio in excess of 1.65 to 1.00
but less than or equal to 1.90 to 1.00; and (iv) 2.25% for any
Pricing Period the Compliance Certificate delivered by Badger
for the most recently completed fiscal month shows a Leverage
Ratio in excess of 1.90 to 1.00 or for which Badger has not
delivered a Compliance Certificate as required by Section 7.6
hereof.
2. WAIVER.
Badger has indicated that as of June 30, 1997 it was not in
compliance with the terms of the Agreement as follows and upon
satisfaction of the conditions precedent set forth in Section 3 hereof:
(a) As of such date, Badger's Tangible Net Worth was $18,046,831.
Section 7.7 of the Agreement requires Badger maintain a Consolidated
Tangible Net Worth of not less than $18,500,000. The Bank hereby
waives non-compliance by the Borrowers with Section 7.7 of the
Agreement for the period ending June 30, 1997 through the effective
date of this Amendment.
(b) Section 7.11 of the Credit Agreement restricts Badger's ability to
grant Liens on property owned by the Borrowers. Badger has
requested that we allow the Borrower to grant a Lien on their ABB
Computer Control System for the Yankee Paper Machine. The Lien on
the ABB Computer Control System for the Yankee Paper Machine will
not exceed $750,000. The Bank hereby waives the restriction on
Badger to allow Liens on only the ABB Computer Control System for
the Yankee Paper Machine up to $750,000.
(c) Section 7.16 of the Credit Agreement restricts Badger's ability to
sell assets. Badger has requested that the Bank allow Badger to
sell and lease back a ABB Computer Control System for the Yankee
Paper Machine. The sale of the Computer Control System for the
Yankee Paper Machine will not exceed $750,000. The Bank hereby
waives the restriction on Badger to sell only the ABB Computer
Control System and lease it back, not to exceed $750,000.
(d) The waiver contained in Sections 2(a), 2(b) and 2(c) of this
Amendment is limited to matters set forth in those Sections, and the
Borrowers agree that they remain obligated to comply with the terms
of the Agreement, including Sections 7.7, 7.11 and 7.16 of the
Agreement, and that the Bank shall not be obligated in the future to
waive any provision of the Agreement.
3. CONDITIONS PRECEDENT.
The effectiveness of this Seventh Amendment is subject to the
satisfaction of all of the following conditions precedent:
(a) The Borrowers and the Bank shall have executed this Seventh
Amendment.
(b) The Bank shall have received copies executed or certified (as may be
appropriate) of all legal documents or proceedings taken in
connection with the execution and delivery hereof and the other
instruments and documents contemplated hereby.
(c) All legal matters incident to the execution and delivery hereof and
of the instruments and documents contemplated hereby shall be
satisfactory to the Bank and its counsel.
4. REPRESENTATIONS.
In order to induce the Bank to execute and deliver this Seventh
Amendment, the Borrowers hereby represent to the Bank that as of the date
hereof and as of the time that this Seventh Amendment becomes effective,
each of the representations and warranties set forth in Section 5 of the
Agreement are and shall be and remain true and correct (except that the
representations contained in Section 5 shall be deemed to refer to the
most recent financial statements of the Borrowers delivered to the Bank)
and the Borrowers are in full compliance with all of the terms and
conditions of the Agreement and no Default as defined in the Agreement as
amended hereby nor any Event of Default as so defined, shall have occurred
and be continuing or shall arise after giving effect to this Seventh
Amendment.
5. MISCELLANEOUS.
(a) Collateral Security Unimpaired. The Borrowers hereby agree that
notwithstanding the execution and delivery hereof, the Collateral
Documents shall be and remain in full force and effect and that any
rights and remedies of the Bank thereunder, obligations of the
Borrowers thereunder and any liens or security interests created or
provided for thereunder shall be and remain in full force and effect
and shall not be affected, impaired or discharged hereby. Nothing
herein contained shall in any manner affect or impair the priority
of the liens and security interest created and provided for by the
Collateral Documents as to the indebtedness which would be secured
thereby prior to giving effect hereto.
(b) Effect of Amendment. Except as specifically amended and modified
hereby, the Agreement shall stand and remain unchanged and in full
force and effect in accordance with its original terms. Reference
to this specific Amendment need not be made in any note, instrument
or other document making reference to the Agreement, any reference
to the Agreement in any of such to be deemed to be a reference to
the Agreement as amended hereby.
(c) Costs and Expenses. The Borrowers agree to pay on demand all out-
of-pocket costs and expenses incurred by the Bank in connection with
the negotiation, preparation, execution and delivery of this Seventh
Amendment and the documents and transactions contemplated hereby,
including the fees and expenses of counsel to the Bank with respect
to the foregoing.
(d) Counterparts; Governing Law. This Seventh Amendment may be executed
in any number of counterparts and by different parties hereto on
separate counterparts, each of which when so executed shall be an
original but all of which to constitute one and the same agreement.
This Amendment shall be governed by the internal laws of the State
of Illinois.
Dated as of August 6, 1997.
BADGER PAPER MILLS, INC.
By: /s/ Miles L. Kresl, Jr.
Its: Vice President
PLAS-TECHS, INC.
By: /s/ Miles L. Kresl, Jr.
Its: Secretary & Treasurer
Accepted and agreed to at Chicago, Illinois, as of the date and year
last above written.
HARRIS TRUST AND SAVINGS BANK
By: /s/ George M. Dluhy
Its: Vice President
BADGER PAPER MILLS, INC.
DIRECTOR STOCK GRANT PLAN
1. Purpose. The purpose of the Badger Paper Mills, Inc. Director Stock
Grant Plan (the "Plan") is to promote the best interests of Badger Paper
Mills, Inc. ("Company") and its shareholders by providing a means to
attract and retain competent independent directors and to provide
opportunities for additional stock ownership by such directors which will
further increase their proprietary interest in the Company and,
consequently, their identification with the interests of the shareholders
of the Company.
2. Administration. The Plan shall be administered by the Board of
Directors of the Company (the "Administrator"), subject to review by the
Board of Directors (the "Board"). The Administrator may adopt such rules
and regulations for carrying out the Plan as it may deem proper and in the
best interests of the Company. The interpretation by the Board of any
provision of the Plan or any related documents shall be final.
3. Stock Subject to the Plan. Subject to adjustment in accordance with
the provisions of paragraph 7, the total number of shares of common stock,
no par value, of the Company ("Common Stock") available for awards under
the Plan shall be 25,000. Shares of Common Stock to be delivered under
the Plan shall be made available from presently authorized but unissued
Common Stock or authorized and issued shares of Common Stock reacquired
and held as treasury shares, or a combination thereof. In no event shall
the Company be required to issue fractional shares of Common Stock under
the Plan. Whenever under the terms of the Plan a fractional share of
Common Stock would otherwise be required to be issued, there shall be paid
in lieu thereof one full share of Common Stock.
4. Director Grants. Each member of the Board who is not an employee of
the Company or any subsidiary of the Company shall receive a grant of
Common Stock (a "Director Grant") on the 15th day of March, June,
September and December (each an "Issue Date") in each year in payment of a
portion of his or her retainer fee for serving as a member of the Board.
5. Grant Amount. Each Director Grant shall consist of a stock
certificate for such number of whole shares of Common Stock equal to the
quarterly compensation due the director divided by the average closing
price on the five trading days prior to the 15th day of the third month of
each quarter. Any resultant fractional share is to be adjusted upward to
the next whole share.
6. Restrictions on Transfer. Shares of Common Stock acquired under the
Plan may not be sold or otherwise disposed of except pursuant to an
effective registration statement under the Securities Act of 1933, as
amended, or except in a transaction which, in the opinion of counsel, is
exempt from registration under said Act. All certificates evidencing
shares subject to Director Grants may bear an appropriate legend
evidencing such transfer restriction substantially in the form of Exhibit
A hereto. The Administrator may require each person receiving a Director
Grant under the Plan to execute and deliver the written representation
attached hereto as Exhibit B that such person is acquiring the shares of
Common Stock without a view to the distribution thereof. All dividends
and voting rights for shares awarded under the Plan shall accrue as of the
issue date of the Director Grant.
7. Adjustment Provisions. In the event of any change in the Common
Stock by reason of a declaration of a stock dividend (other than a stock
dividend declared in lieu of an ordinary cash dividend), spin-off, merger,
consolidation, recapitalization, or split-up, combination or exchange of
shares, or otherwise, the aggregate number of shares available under this
Plan shall be appropriately adjusted in order to prevent dilution or
enlargement of the benefits intended to be made available under the Plan.
8. Amendment of Plan. The Board shall have the right to amend the Plan
at any time or from time to time in any manner that it may deem
appropriate.
9. Governing Law. The Plan, all awards hereunder, and all
determinations made and actions taken pursuant to the Plan shall be
governed by the internal laws of the State of Wisconsin and applicable
federal law.
10. Effective Date and Term of Plan. The effective date of the Plan is
as of March 15, 1997. The Plan shall terminate on such date as may be
determined by the Board.
<PAGE>
EXHIBIT A
Form of legend for certificates representing shares issued under the
Badger Paper Mills, Inc. Director Stock Grant Plan:
"The shares represented by this certificate have been issued in a
transaction not registered under the Securities Act of 1933, as
amended (the "Securities Act"), or under any other applicable
securities laws. Such shares may not be sold, transferred, assigned,
pledged or otherwise disposed of at any time unless such disposition
is registered under the Securities Act and such other applicable
securities laws or unless in the opinion of legal counsel for Badger
Paper Mills, Inc. such disposition will not result in a violation of
the Securities Act or any other applicable securities laws."
<PAGE>
EXHIBIT B
BADGER PAPER MILLS, INC.
DIRECTOR STOCK GRANT PLAN
ACKNOWLEDGMENT
The undersigned director of Badger Paper Mills, Inc. hereby
acknowledges receipt of a certificate for ______ shares of common stock,
without par value, of Badger Paper Mills, Inc. under the Badger Paper
Mills, Inc. Director Stock Grant Plan (the "Plan"). Such shares represent
the undesigned's award under the Plan for the __________________ of 199_,
and are valued at $________ per share, the market value of each share on
the date of grant as determined under the Plan. The undersigned
represents and warrants to Badger Paper Mills, Inc. that he or she is
acquiring the above-referenced shares for his or her own account for
investment purposes only and without a view to the distribution thereof.
Dated this _______ day of ____________, 199_.
By: ______________________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS OF BADGER PAPER MILLS, INC. AS OF AND FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,914
<SECURITIES> 1,298
<RECEIVABLES> 5,834
<ALLOWANCES> 0
<INVENTORY> 5,839
<CURRENT-ASSETS> 18,707
<PP&E> 65,522
<DEPRECIATION> 36,581
<TOTAL-ASSETS> 50,702
<CURRENT-LIABILITIES> 7,165
<BONDS> 21,911
2,700
0
<COMMON> 0
<OTHER-SE> 187
<TOTAL-LIABILITY-AND-EQUITY> 50,702
<SALES> 53,034
<TOTAL-REVENUES> 53,034
<CGS> 50,321
<TOTAL-COSTS> 53,396
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,000
<INCOME-PRETAX> (922)
<INCOME-TAX> (314)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (608)
<EPS-PRIMARY> (.31)
<EPS-DILUTED> 0
</TABLE>
