UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2000
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: 1,988,417 as of September 30,
2000.
<PAGE>
BADGER PAPER MILLS, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Interim Statement of Income
Three Months and Nine Months Ended
September 30, 2000 and 1999 3
Condensed Consolidated Balance Sheet
September 30, 2000 and December 31, 1999 4
Condensed Consolidated Statement of Cash Flow
Nine Months Ended September 30, 2000 and 1999 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 11
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES
<PAGE>
<TABLE>
BADGER PAPER MILLS, INC.
CONDENSED CONSOLIDATED INTERIM STATEMENTS OF INCOME
(UNAUDITED)
(Dollars in thousands, except per share data)
<CAPTION>
For Three Months Ended For Nine Months Ended
September 30 September 30
----------------------- ------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $17,830 $17,413 $56,008 $49,407
Cost of Sales 17,520 16,873 53,485 44,855
---------- ---------- ---------- ----------
Gross Margin 310 540 2,523 4,552
Selling and Administrative Expenses 1,105 1,126 3,689 3,617
---------- ---------- ---------- ----------
Operating Income (Loss) (795) (586) (1,166) 935
Interest Expense (307) (259) (898) (795)
Interest Income 12 12 39 69
Non Recurring Life Insurance Proceeds - - - 391
Other Income 71 42 143 122
---------- ---------- ---------- ----------
Income (Loss) Before Income Taxes (1,019) (791) (1,882) 722
Income Tax Expense (Benefit) (346) (268) (640) 246
---------- ---------- ---------- ----------
Net Income (Loss) (673) $(523) (1,242) $476
---------- ---------- ---------- ----------
Net Earnings Per Share - Basic $(0.34) $(0.27) $(0.63) $0.24
Net Earnings Per Share - Diluted $(0.34) $(0.27) $(0.63) $0.24
Average Shares Outstanding - Basic 1,985,254 1,968,100 1,979,706 1,964,479
Average Shares Outstanding - Diluted 1,985,254 1,968,100 1,979,706 1,964,479
Cash Dividends - - - -
Dividends Per Share - - - -
</TABLE>
See Notes to Consolidated Financial Statements.
<PAGE>
BADGER PAPER MILLS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(Dollars in thousands)
September 30 December 31,
2000 1999
------------ ------------
ASSETS:
Current Assets:
Cash & Cash Equivalents $ 1,033 $ 669
Certificates of Deposit 100 500
Marketable Securities 109 137
Accounts Receivable, Net 7,447 6,080
Deferred Income Taxes 1,160 1,160
Inventories 8,652 7,819
Refundable Income Taxes 410 220
Other Current Assets 691 606
-------- --------
Total Current Assets 19,602 17,191
Property, Plant, Equipment & Timberlands 69,969 67,856
Less: Allowance for Depreciation &
Depletion (42,817) (40,616)
-------- --------
Total Property, Plant, Equipment &
Timberlands, Net 27,152 27,240
Trade Credits 453 609
Other Assets 1,620 1,854
-------- --------
TOTAL ASSETS $ 48,827 $ 46,894
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current Liabilities:
Current Portion of Long-Term Debt $ 755 $ 1,060
Accounts Payable 8,864 4,746
Accrued Liabilities 2,873 3,126
Income Taxes Payable (344) -
-------- --------
Total Current Liabilities 12,148 8,932
Deferred Income Taxes 1,840 1,840
Long-Term Debt 15,936 15,705
Other Liabilities 597 933
-------- --------
TOTAL LIABILITIES 30,521 27,410
-------- --------
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 170 201
Retained Earnings 17,191 18,432
Less Treasury Shares at Cost:
171,583 Shares at 9/30/00 and
185,832 Shares at 12/31/99 (1,755) (1,849)
-------- --------
TOTAL STOCKHOLDERS' EQUITY 18,306 19,484
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 48,827 $ 46,894
======== ========
See Notes to Consolidated Financial Statements
<PAGE>
BADGER PAPER MILLS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(Dollars in thousands)
For Nine Months Ended
September 30
-----------------------
2000 1999
-------- --------
Cash Flows from Operating Activities:
Net Income $(1,242) $ 476
Adjustments to Reconcile to Net Cash
Provided By (Used in) Operating Activities:
Depreciation 2,208 2,138
Director's Fees Paid in Stock 64 70
Deferred Income Taxes - (1)
Gain Life Insurance Benefits - 391
Changes in Assets and Liabilities:
(Increase) Decrease in Accounts Receivable, Net (1,367) (896)
(Increase) Decrease in Inventories (833) (1,226)
Increase (Decrease) in Accounts Payable 4,118 1,055
Increase (Decrease) in Accrued Liabilities (253) 70
Income Taxes Refundable (Payable) (534) (170)
(Increase) Decrease in Other (31) (280)
------- -------
Net Cash Provided by (Used in)
Operating Activities 2,130 1,627
------- -------
Cash Flows From Investing Activities:
Additions to Property, Plant and Equipment, Net (2,120) (1,895)
Net Acquisition of Certificates of Deposit 400 496
Purchase of Marketable Securities - -
Proceeds from Sales of Marketable Securities 28 1,218
------- -------
Net Cash (Used in) Provided by
Investing Activities (1,692) (181)
------- -------
Cash Flows from Financing Activities:
Increase to (Payments on) Long-Term Debt (74) (2,772)
Increase to (Decrease in) Revolving
Credit Borrowings - (100)
------- -------
Net Cash (Used in) Provided by
Financing Activities (74) (2,872)
------- -------
Net (Decrease) Increase in Cash
and Cash Equivalents 364 (1,426)
Cash and Cash Equivalents:
Beginning of Period 669 2,229
------- -------
End of Period $ 1,033 $ 803
======= =======
See Notes to Consolidated Financial Statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1. Basis of Presentation
The accompanying condensed financial statements, in the opinion of management,
include all adjustments that are normal and recurring in nature and are
necessary for a fair statement of results for each period shown. Some
adjustments involve estimates, which may require revision in subsequent interim
periods or at year-end. In all regards, the financial statements have been
presented in accordance with generally accepted accounting principles. Refer to
the financial statement notes in the Company's Form 10K and Annual Report for
the year ended December 31, 1999, for the accounting policies which are
pertinent to these statements.
Note 2. Income Taxes
The provision for income tax expense has been computed by applying an estimated
annual effective tax rate. This rate was 34% for the nine-month period ended
September 30, 2000 and 1999.
Note 3. Earnings per Share
Basic earnings per share amounts are computed based on the weighted average
number of shares outstanding during each period. Diluted per share amounts
equals net earnings divided by common shares outstanding after giving effect to
dilutive stock options granted under the incentive stock options plan approved
at the annual meeting on May 12, 1999. The stock options became outstanding in
the second quarter of 1999 had an immaterial effect on the weighted average
number of shares outstanding and therefore basic and diluted per share amounts
are the same.
Note 4. Stock Option Plan
Badger Paper Mills, Inc. has elected to follow Accounting Principles Board
Opinion No. 25, Accounting for Stock issued to Employees (APB 25) and related
interpretations in accounting for its employee stock option plan. Under APB 25,
because the exercise price of employee stock options equals the market price of
the underlying stock on the date of grant, no compensation expense is recorded.
Badger Paper is subject to the disclosure rules of SFAS 123, Accounting for
Stock Based Compensation. Management has determined that the impact of SFAS 123
on net income and stockholders' equity was not material as of and for the
quarter ended September 30, 2000.
Note 5. Inventories
The major components of inventories were as follows:
(In thousands of dollars) September 30, December 31,
2000 1999
------------- ------------
Raw Materials $ 3,635 $ 2,551
Finished Goods and Work in Process 9,211 9,339
------- -------
$12,846 $11,890
Less: LIFO Reserve $(4,194) $(4,071)
------- -------
Total Inventories $ 8,652 $ 7,819
Note 6. Contingencies
The Company operates in an industry that 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.
<PAGE>
In addition, the Company is subject to various claims, the ultimate outcomes of
which management cannot predict. Management believes, however, that the outcomes
will not have a material adverse effect on the Company's consolidated financial
position or results of operations.
Note 7. Operating Segments
Badger Paper adopted SFAS 131 (Disclosures about Segments of an Enterprise and
Related Information) in 1999. Prior years' information has been restated to
present segment information for the Company's two business segments, paper
products and printing and converting. The paper products segment produces a
variety of paper products including fine paper, business paper, colored paper,
waxed paper, specialty coated base papers and twisting papers. The printing and
converting segment prints and converts flexible packaging materials for the
paper products segment as well as films and non-woven materials from other
customers.
The following provides information on the Company's operating segments for the
three-month and nine-month periods ended September 30:
(Dollars in thousands)
<TABLE>
<CAPTION>
PAPER PRODUCTS PRINTING & CONVERTING TOTAL
For Three Months For Three Months For Three Months
Ended September 30 Ended September 30 Ended September 30
------------------- --------------------- -------------------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net sales $15,495 $15,116 $2,335 $2,297 $17,830 $17,413
Intersegmental revenues 560 656 307 320 867 976
Segment income before tax (1,414) (1,074) 395 283 (1,019) (791)
Segment assets 43,450 42,755 6,297 5,909 49,747 48,664
For Nine Months For Nine Months For Nine Months
Ended September 30 Ended September 30 Ended September 30
------------------- --------------------- -------------------
2000 1999 2000 1999 2000 1999
---- ---- ---- ---- ---- ----
Net sales $48,592 $43,389 $7,416 $6,018 $56,008 $49,407
Intersegmental revenues 2,031 2,054 914 1,263 2,945 3,317
Segment income before tax (3,221) 102 1,339 620 (1,882) 722
Segment assets 43,450 40,366 6,297 5,909 49,747 46,275
</TABLE>
The following is a reconciliation of segment information to consolidated
information:
<TABLE>
<CAPTION>
For Three Months For Nine Months
Ended September 30 Ended September 30
------------------ -------------------
2000 1999 2000 1999
<S> <C> <C> <C> <C>
Revenues:
Total net sales for segment $18,697 $18,389 $58,953 $52,724
Elimination of intersegment revenues (867) (976) (2,945) (3,317)
------- ------- ------- -------
Total consolidated revenues $17,830 $17,413 $56,008 $49,407
======= ======= ======= =======
Assets:
Total assets for reporting segments $49,747 $48,664 $48,664
$49,747
Elimination of intersegment revenues (170) (1,639) (170) (1,639)
Elimination of intersegmental investments (750) (750) (750) (750)
------- ------- ------- -------
Total consolidated assets $48,827 $46,275 $48,827 $46,275
======= ======= ======= =======
</TABLE>
<PAGE>
Total segment income, assets and other significant items are the same as the
consolidated information. All operations of the Company are located in the
United States. Revenues from foreign countries are primarily from Canada and
Mexico and are immaterial to total revenues.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Statement Regarding Forward-Looking Information
This Form 10-Q 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"). 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 that could cause actual results to differ materially
include, but are not limited to the following:
o 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.
o Changes in 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.
o Changes in the price of pulp, the Company's main raw material. All of the
Company's pulp needs are purchased on the open market and price changes for
pulp have a significant impact on the Company's costs. Pulp price changes
can occur due to worldwide consumption levels of pulp, pulp capacity
additions, expansions or curtailments affecting the supply of pulp,
inventory building or depletion at pulp consumer levels which affect
short-term demand, and pulp producer cost changes related to wood
availability, environmental issues, or other variables.
o Unforeseen operational problems at any of the Company's facilities causing
significant lost production and/or cost issues.
o Changes in laws or regulations that affect the Company.
Results of Operations
Net Sales
Consolidated net sales for the third quarter ended September 30, 2000 were
$17,830,000, up slightly from the net sales of $17,413,000 for the same
three-month period ended in 1999. Shipping volumes in the third quarter of 2000
decreased 7 percent from the same period in 1999 because of weak market
conditions in the industry, especially the commodity markets. The average
selling price for the third quarter increased 10 percent due to price increases
implemented in early September and shedding of lower-priced commodity grades.
<PAGE>
Consolidated net sales for the nine months ended September 30, 2000 were
$56,008,000, an increase of $6,601,000 from net sales of $49,407,000 for the
same nine-month period ended in 1999. Shipping volumes in the first nine months
of 2000 increased 7 percent from 1999 despite weak market conditions in the
industry. The average selling price for the three quarters increased 5 percent.
Net sales for the paper products segment were $15,495,000 for the three months
ended September 30, 2000, which is a $379,000 or 3 percent increase from
$15,116,000 for the same period in 1999. Shipping volumes for the third quarter
decreased 7 percent in a very soft market from the comparative period in 1999.
The average selling price increased 10 percent from the third quarter last year
because of price increases implemented in early September. The net sales of the
paper products segment represented 87 percent of consolidated net sales during
the three-month period.
Net sales for the paper products segment were $48,592,000 for the nine months
ended September 30, 2000, which represented a 12 percent increase from the
$43,389,000 in the same period in 1999. Shipping volumes for the first nine
months increased 7 percent, over the comparative period in 1999, and average
selling prices increased 5 percent from last year. The increase in the average
selling prices results from our Company's efforts to move away from selling
traditional lower priced commodity products, and price increases implemented
during the year to pass along the cost of rising pulp prices. However, market
pressures have prevented the company from increasing selling prices sufficiently
to fully recover all costs associated with increased pulp prices. The net sales
of the paper products segment represented 87 percent of consolidated net sales
during the nine-month period.
Net sales for the printing and converting segment were $2,335,000 for the three
months ended September 30, 2000, which is a $38,000 improvement over the
$2,297,000 of net sales reported for the same period in 1999. The net sales of
the printing and converting segment represented 13 percent of the consolidated
net sales during the three-month period.
The printing and converting segments net sales for the nine months ended
September 30, 2000 were $7,416,000, which is a $1,398,000 or 23 percent
improvement over the $6,018,000 of net sales reported for the same period in
1999. The net sales of the printing and converting segment represented 13
percent of the consolidated net sales during the nine-month period
Gross Profit
Consolidated gross profit for the third quarter ended September 30, 2000 was
$310,000 or 2 percent of net sales, compared to gross profit for the same period
in 1999 of $540,000 or 3 percent of net sales.
The consolidated gross profit for the nine months ended September 30, 2000 was
$2,523,000 or 5 percent of net sales, compared to gross profit of $4,552,000 for
the same period in 1999.
Gross profit for the paper products segment was an $186,000 loss for the three
months ended September 30, 2000, a $311,000 decrease from the $125,000 of gross
profit reported for the same period in 1999. The decrease in gross profit in the
third quarter is attributed to the escalation of pulp prices, scheduled down
time on the paper machines, operating efficiencies of the paper machines and
increased natural gas prices.
The gross profit for the nine months ended September 30, 2000 for the paper
products segment was $855,000, a decrease of $2,690,000 from gross profit of
$3,545,000 in the same period in 1999. The decrease in gross profit in the first
nine months of 2000 is attributed to the escalating pulp, paper machine
operating efficiencies and increased natural gas prices.
Pulp prices remained flat during the third quarter and have increased 29 percent
since September 30, 1999. In the last twelve months, pulp prices have generally
been escalating more rapidly than the market prices of our paper products. We
continue our efforts to increase selling prices as the market permits. Paper
machines operating efficiencies were negatively impacted by a scheduled ten days
of downtime in July for maintenance and upgrades.
<PAGE>
Yankee paper machine efficiencies were also negatively affected by the initial
start-up after the installation of an upgrade to increase the speed of the
Yankee paper machine. Finally, there were an additional fourteen days of
scheduled downtime on the Yankee paper machine due to a seasonal slowdown in
production orders. Natural gas prices have remained relatively flat during the
third quarter, but have increased 85 percent since December 31, 1999.
The printing and converting segment's gross profit was $498,000 for the three
months ended September 30, 2000, an $83,000 or 20 percent improvement over the
$415,000 of gross profit reported for the same period in 1999. The printing and
converting segment's gross profit for the nine months ended September 30, 2000
was $1,669,000, a or 65 percent improvement over the $1,007,000 of gross profit
reported in 1999. The dramatic increase in gross profit is attributed to an
increase in the volume of higher-margin tissue wrap business and more efficient
operations due to longer production runs.
Selling and Administration
Consolidated selling and administration expenses were $1,105,000 for the three
month period ended September 30,2000. This represents a decrease of $21,000 from
the same period of 1999. Selling and administration expenses for the nine months
ended September 30, 2000 were $3,689,000, or a $72,000 increase over the same
period in 1999.
The selling and administration expenses for the paper products segment were
$927,000 for the three month period ended September 30,2000 or a decrease of
$38,000 from the same period of 1999. Selling and administration expenses for
the nine months ended September 30, 2000 was $3,140,000 or a $3,000 increase
over the same period in 1999.
The printing and converting segment's selling and administration expenses were
$178,000 for the three month period ended September 30,2000, an increase of
$16,000 over the same period of 1999. Selling and administration expenses for
the nine months ended September 30, 2000 were $549,000, compared to $480,000 for
the same period in 1999.
Other Income and Expense
Other expense for the three-month period ended September 30, 2000 was $224,000
compared to $205,000 of other income for the same period last year. Other
expense for the nine-month period ended September 30, 2000 was $716,000 compared
to $213,000 for the same period last year. A majority of the other expense in
both the third quarter of 2000 and for the first nine months of 2000 is interest
on long-term debt.
In the second quarter of 1999, Badger Paper received $622,000 of life insurance
proceeds as beneficiary upon the death of a former President on March 23, 1999.
The proceeds include $231,000 of cash surrender value carried as other assets on
our balance sheet and $391,000 of non-recurring income. The funds were used for
debt reduction.
Net Income
Consolidated net earnings for the three months ended September 30, 2000 was a
loss of $673,000, which is $150,000 greater than the $523,000 loss for the same
period in 1999. The net loss of the paper products segment was $885,000 for the
three months ended September 30, 2000 compared to the $685,000 net loss for the
same period in 1999. The net income of the printing and converting segment was
$212,000 for the three months ended September 30, 1999, compared to $162,000 net
income for the same period in 1999.
Consolidated net earnings for the nine months ended September 30, 2000 was a
loss of $1,242,000, which is a $1,718,000 decrease from the $476,000 profit for
the same period in 1999. The net loss of the paper products segment was
$1,978,000 for the nine months ended September 30, 2000 compared to $141,000 of
net income for the same period in 1999. The net income of the printing and
converting segment was $736,000 for the nine months ended September 30, 1999,
compared to $335,000 of net income for the same period in 1999.
<PAGE>
Capital Resources and Liquidity
As of September 30, 2000, the Company's capital resources for funding ongoing
operations included $1,242,000 of cash and marketable securities and borrowings
under its $12,000,000 revolving credit facility. Borrowings under this facility
totaled $11,500,000 as of September 30, 2000. Pursuant to the terms of the
revolving credit facility, the Company is making quarterly payments of $140,000
and made an annual payment of $400,000 on July 1, 2000 on its Industrial
Development Revenue Bonds.
On May 25, 2000, the City of Peshtigo refinanced the Company's Urban Development
Action Grant ("UDAG"), which was scheduled to mature in April 2000. The terms of
the refinanced $1,500,000 note provide for a 5 percent interest rate resulting
in monthly payments of $15,091 for ten years through 2010.
The Company was not in compliance with the minimum required cumulative EBITDA
covenant contained in its revolving credit facility as of September 30, 2000,
and subsequently obtained a waiver related to this non-compliance for the period
ending September 30, 2000. Additionally, the Company does not expect to be in
compliance with the same minimum required cumulative EBITDA covenant as of the
end of each subsequent month, and anticipates requesting a waiver of such
non-compliance or the amendment of the covenant. The Company has begun
discussions with the lender under the revolving credit facility with respect to
the anticipated waiver request or amendment, and believes that it will obtain
any required waivers if the covenant is not amended. The Company has also begun
to explore the refinancing of the existing revolving credit facility with a
replacement revolving credit facility with another lender. However, if the
Company is unable to obtain any required waivers or amend the covenant under the
existing revolving credit facility, and is unable to refinance the existing
revolving credit facility with a replacement facility, the resulting failure to
comply with the covenant could cause a default under the existing revolving
credit facility and the acceleration of the maturity of the entire amount
borrowed under the facility.
Except as qualified by the information regarding the revolving credit facility
set forth above, the Company believes that cash provided by operations and the
revolving credit facility are expected to meet current and anticipated working
capital needs, as well as fund the Company's planned capital expenditures.
Capital Expenditures
Capital expenditures during the first nine months of 2000 were $2,120,000,
compared to $1,895,000 for the same period in 1999. Major projects in 2000 for
the paper products segment include the speed-up of the Yankee paper machine, a
hole detector on the Fourdrinier paper machine, and a precision folio size
sheeter and drive replacements on the Fourdrinier paper machine. Major projects
at the printing and converting segment are a slitter/rewinder and press
department improvements.
Cash Flows
Cash provided by operating activities was $2,130,000 for the nine months ended
September 30, 2000, which compares to $1,627,000 of cash provided for the same
period in 1999. The material changes in cash provided by operations were
increased accounts payables due to escalating pulp prices and extended aging on
vendor invoices. Growth in sales has increased the accounts receivable balances
while maintaining acceptable aging on the accounts. Proceeds from a life
insurance policy for which the Company is the beneficiary is included in the
1999 cash provided operating activities.
Net cash used in investing activities was $1,692,000 for the nine-month period
ended September 30, 2000, compared to $181,000 for the same period in 1999. A
majority of the funds in 1999 was from the proceeds from the sale of marketable
securities used to make payments on the Company's Industrial Development Revenue
Bonds.
<PAGE>
Net cash used in financing activities was $74,000 for the first nine months
ended September 30, 2000, compared to a $2,872,000 for the same period in 1999.
Payments on long-term debt in 1999 included special payments of $1,885,000 on
the Company's Industrial Development Revenue Bonds.
Item 3. Quantitative and Qualitative Disclosure about Market Risk
The Company is exposed to market risk from changes in interest on its long-term
debt. Information with respect to interest rates is disclosed in the Company's
annual report on Form 10-K for the year-ended December 31, 1999, and has not
materially changed.
Although a majority of the Company's debt is at variable interest rates, the
Company believes its exposure to interest rate fluctuations is immaterial to the
consolidated statements.
The Company does not use financial instruments for trading purposes and is not a
party to any leveraged derivatives.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Number Description
------ -----------
(10.1) Third Amendment to Amended and Restated Credit
Agreement dated as of September 12, 2000 (but
effective as of August 14, 2000), by and
between Badger Paper Mills, Inc. (individually
and as successor by merger to Badger Paper
Mills Flexible Packaging Division, Inc.), the
Lenders, and Harris Trust and Savings Bank, as
Agent.
(27) Financial Data Schedules
(b) Reports on Form 8-K:
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
BADGER PAPER MILLS, INC.
(Company)
DATE: November 13, 2000 /s/ Michael J. Bekes
Michael J. Bekes
Vice President & COO
(Chief Operating Officer)
DATE: November 13, 2000 /s/ George J. Zimmerman
George J. Zimmerman
Treasurer
(Principal Financial Officer)
