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, 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 April 30, 1997,
1,945,430.
<PAGE>
BADGER PAPER MILLS, INC.
INDEX
Pages
FINANCIAL INFORMATION
Condensed Consolidated Interim Statements of
Operations and Retained Earnings -
Three Months Ended March 31, 1997 and 1996 3
Condensed Consolidated Balance Sheets -
March 31, 1997 and December 31, 1996 4
Condensed Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated
Financial Statements 6-7
MANAGEMENT'S DISCUSSION AND ANALYSIS 7-8
OTHER INFORMATION
Submission of Matters to a
Vote of Security Holders 8
Exhibits and Reports on Form 8-K 9
SIGNATURES 10
<PAGE>
BADGER PAPER MILLS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS
(UNAUDITED)
(dollars in thousands, except per share amounts)
Three Months Ended
March 31, 1997 March 31, 1996
Net Sales $16,213 $18,454
Cost of Sales 16,275 18,299
------- -------
Gross (Loss) Margin (62) 155
Selling and Administrative Expenses 1,052 929
------- -------
Operating Loss (1,114) (774)
Other Income, Net 102 30
Interest Expense (293) (259)
------- -------
Loss Before Income Taxes (1,305) (1,003)
Income Tax Benefit (444) (341)
------- -------
Net Loss (861) (662)
------- -------
Retained Earnings, Beginning of Period 17,994 20,635
Cash Dividends - (97)
Unrealized Loss on Securities
Held for Sale - (6)
------- -------
Retained Earnings, End of Period $17,133 $19,870
======= =======
Net Loss Per Share ($0.44) $(0.34)
Dividends Per Share - $0.05
Average Shares Outstanding 1,945,130 1,943,730
See Notes to Condensed Consolidated Financial Statements
<PAGE>
BADGER PAPER MILLS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(dollars in thousands)
March 31, 1997 December 31, 1996
ASSETS:
Current Assets:
Cash & Cash Equivalents $ 2,802 $ 4,079
Marketable Securities 1,296 1,800
Accounts Receivable - Net 5,189 4,556
Deferred Income Taxes 981 981
Inventories 7,688 6,837
Refundable Income Taxes 394 1,466
Other Current Assets 1,042 1,194
------- --------
Total Current Assets 19,392 20,913
Property, Plant, Equipment &
Timberlands 64,342 62,563
Less Allowance for Depreciation
& Depletion (35,564) (35,158)
------- --------
Total Property, Plant,
Equipment & Timberlands 28,778 27,405
Property, Plant, Equipment Held for
Sale, Net 1,009 1,410
Other Assets
2,353 2,224
------- --------
TOTAL ASSETS $51,532 $51,952
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Current Portion of Long-Term Debt
$ 119 $ 119
Accounts Payable 6,475 7,409
Accrued Liabilities 2,512 3,462
-------- -------
Total Current Liabilities 9,106 10,990
Deferred Income Taxes 1,621 1,621
Long Term Debt 21,004 18,617
Other Liabilities 1,830 1,892
------- -------
Total Liabilities 33,561 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 178 178
Retained Earnings 17,133 17,994
Less treasury shares at cost:
214,870 - 3/31/97; 214,870 - 12/31/96 (2,040) (2,040)
------- -------
Total Stockholders' Equity 17,971 18,832
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $51,532 $51,952
======= =======
See Notes to Condensed Consolidated Financial Statements
<PAGE>
BADGER PAPER MILLS, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(dollars in thousands)
Three Months Ended
March 31, 1997 March 31, 1996
Cash Flows from Operating Activities:
Net Loss ($861) ($662)
Adjustments to Reconcile to Net Cash
used in Operating Activities:
Depreciation 733 866
Net Proceeds from Sales
of Marketable Securities, Trading - 437
Increase in Accounts Receivables, Net (633) (406)
Increase in Inventories (851) (880)
Decrease in Accounts Payable
and Accrued Liabilities (1,354) (271)
Decrease (Increase) Other 1,036 (276)
------- -------
Net Cash Used In Operating Activities (1,930) (1,192)
------- -------
Cash Flows From Investing Activities:
Additions to Property, Plant
and Equipment, Net (2,234) (425)
Sales of Marketable Securities 500 100
Purchase of Marketable Securities - (740)
------- -------
Net Cash Used In Investing Activities (1,734) (1,065)
------- -------
Cash Flows from Financing Activities:
Increase in Long-Term Debt, Net 2,387 1,988
Dividends Paid - (97)
------- -------
Net Cash Provided by
Financing Activities 2,387 1,891
------- -------
Net Decrease in Cash and Cash Equivalents (1,277) (366)
Cash and Cash Equivalents:
Beginning of Period 4,079 835
------- -------
End of Period $ 2,802 $ 469
======= =======
See Notes to Condensed Consolidated Financial Statements
<PAGE>
NOTES TO CONDENSED 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 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 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%
benefit for the quarters ended March 31, 1997 and 1996.
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):
March 31, December 31,
1997 1996
Raw materials $ 963 $ 994
Work in process and finished stock 5,066 4,122
Pulpwood inventory to be sold 1,659 1,721
------ ------
$ 7,688 $ 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 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, 1997, were $16,213,000 or 12.1% less than the
$18,454,000 reported for the same period in 1996. The volume of paper
shipments remained relatively constant as compared to the first quarter of
1996, but paper pricing continued to be soft as the average selling price
was down approximately 14% in the first quarter of 1997 as compared to the
first quarter of 1996. Paper prices continuously deteriorated over the
past six months and have modestly recovered in the early stages of the
second quarter of 1997.
In the first quarter, 1997, cost of sales decreased by 11.1% to
$16,275,000, compared to $18,299,000 in 1996. The major decrease in cost
of sales are the reduction of costs associated with the pulp mill, which
was closed in the second quarter of 1996. The Company experienced a
negative gross margin as it took approximately 10% downtime in its
papermaking operations as a result of the weak demand across all grade
structures.
Selling and administrative expenses increased by 13.2% in the first
quarter, 1997, as compared to 1996, $1,052,000 in 1997 and $929,000 in
1996. The increase was in part due to costs associated with professional
outside services.
Liquidity and Capital Resources
Cash used in operating activities totaled $1,930,000 for the first quarter
of 1997 and compares to cash used in operating activities of $1,192,000
for the first quarter of 1996. The major factors contributing to the
increase in 1997 include a $851,000 increase in inventories, $1,354,000
decrease in accounts payable and accrued liabilities, and a $633,000
increase in accounts receivable.
Capital expenditures during the first quarter, 1997 exceeded depreciation.
Capital expenditures increased as the result of the new stock preparation
system and the purchase of an eight-color central impression flexographic
printing press at Plas-Techs in Oconto Falls.
As of March 31, 1997, the Company's capital resources for funding ongoing
operations and capital expenditures included $1,296,000 in marketable
securities and a $13,000,000 revolving credit agreement through 1999, of
which $11,900,000 is currently used. The Company believes it has adequate
capital resources to meet its near-term capital and operating needs.
Accounting Matters
The Company is required to adopt Statement of Financial Accounting
Standard (SFAS) No. 128, "Earnings Per Share," into its financial
statements in 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.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) On Thursday, January 23, 1997, at 10:00 a.m., a special
meeting of shareholders of Badger Paper Mills, Inc. was held
at the Best Western Riverfront, 1821 Riverside Avenue,
Marinette, Wisconsin 54143.
(b) Shareholders voted against a shareholder proposal to approve
the restoration of voting power pursuant to Section 180.1150
of the Wisconsin Business Corporation Law. The vote tallied
1,166,087 shares "Against," 416,176 shares "For", and 27,701
shares abstaining.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
(27) Financial data schedule
(b) Reports on Form 8-K:
There were no reports filed on Form 8-K in the first quarter
of 1997.
<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 15, 1997 By /s/ Claude L. Van Hefty
Claude L. Van Hefty
President
(Chief Executive Officer)
DATE: May 15, 1997 By /s/ Miles L. Kresl, Jr.
Miles L. Kresl, Jr.
Vice President/Administration,
Corporate Secretary, & Treasurer
(Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF BADGER PAPER MILLS, INC. AS OF AND FOR THE THREE
MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,802
<SECURITIES> 1,296
<RECEIVABLES> 5,189
<ALLOWANCES> 0
<INVENTORY> 7,688
<CURRENT-ASSETS> 19,392
<PP&E> 64,342
<DEPRECIATION> 35,564
<TOTAL-ASSETS> 51,532
<CURRENT-LIABILITIES> 9,106
<BONDS> 21,004
2,700
0
<COMMON> 0
<OTHER-SE> 178
<TOTAL-LIABILITY-AND-EQUITY> 51,532
<SALES> 16,213
<TOTAL-REVENUES> 16,213
<CGS> 16,275
<TOTAL-COSTS> 17,327
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 293
<INCOME-PRETAX> (1,305)
<INCOME-TAX> (444)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (861)
<EPS-PRIMARY> (.44)
<EPS-DILUTED> 0
</TABLE>
