-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, YVsoeeYRfFmBM7gRJIwTAALtj9Wc5hqmQIPlgMIi5WlMLtUe+J8eXX5oXyX6eE76 CRw/PWYT/wrLy2iocO+oBQ== 0000034891-94-000008.txt : 19941021 0000034891-94-000008.hdr.sgml : 19941021 ACCESSION NUMBER: 0000034891-94-000008 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940326 FILED AS OF DATE: 19941020 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDERAL PAPER BOARD CO INC CENTRAL INDEX KEY: 0000034891 STANDARD INDUSTRIAL CLASSIFICATION: 2631 IRS NUMBER: 220904830 STATE OF INCORPORATION: NY FISCAL YEAR END: 1229 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-03838 FILM NUMBER: 94554111 BUSINESS ADDRESS: STREET 1: 75 CHESTNUT RIDGE RD CITY: MONTVALE STATE: NJ ZIP: 07645 BUSINESS PHONE: 2013911776 10-Q/A 1 FEDERAL PAPER BOARD COMPANY, INC FORM 10-Q/A SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q/A [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Twelve Weeks Ended March 26, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-3838 FEDERAL PAPER BOARD COMPANY, INC. (Exact name of Registrant as specified in its charter) NORTH CAROLINA 22-0904830 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 75 CHESTNUT RIDGE ROAD, MONTVALE, NEW JERSEY 07645 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (201) 391-1776 The undersigned Registrant hereby amends the following items, financial statements, exhibits or other portions of its Report on Form 10-Q for the twelve weeks ended March 26, 1994 as set forth in the pages attached hereto: PART I FINANCIAL INFORMATION Item 1. Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II OTHER INFORMATION Exhibit 11 Computation of Earnings (Loss) Per Common Share Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this amendment to be signed on its behalf by the undersigned, thereunto duly authorized. FEDERAL PAPER BOARD COMPANY, INC. BY: /s/ QUENTIN J. KENNEDY Quentin J. Kennedy Director, Executive Vice President and Secretary Date: October 19, 1994 FEDERAL PAPER BOARD COMPANY, INC. CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) Restated Restated March 26, January 1, In thousands 1994 1994 ASSETS Cash $ 267 $ 271 Receivables - net 71,345 52,062 Inventories: Raw materials 65,045 58,720 Work in process 15,434 15,469 Finished goods 95,139 99,329 Supplies 51,265 51,701 Subtotal 226,883 225,219 Lifo Reserve (2,900) (2,819) Total inventories 223,983 222,400 Other current assets 35,054 32,392 Total Current Assets 330,649 307,125 Property, plant and equipment 2,694,924 2,666,423 Accumulated depreciation (799,418) (769,869) Property, plant and equipment-net 1,895,506 1,896,554 Timber and timberlands 188,655 189,674 Goodwill and other intangibles 117,045 118,418 Other assets 48,986 50,132 Total Assets $2,580,841 $2,561,903 LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable $ 91,143 $ 90,356 Current portion of long-term debt 54,529 56,148 Short-term bank debt 26,590 25,304 Accrued interest 30,862 18,885 Other current liabilities 98,427 83,450 Total Current Liabilities 301,551 274,143 Long-term debt 983,437 973,825 Other liabilities 77,660 78,872 Deferred tax liability 340,046 342,757 Capital stock 214,115 214,111 Other capital 250,373 249,800 Retained earnings 417,459 432,961 Treasury stock, at cost (3,800) (4,566) Total Shareholders' Equity 878,147 892,306 Total Liabilities and Shareholders' Equity $2,580,841 $2,561,903 See accompanying notes to condensed consolidated financial statements.
-2- FEDERAL PAPER BOARD COMPANY, INC. CONDENSED CONSOLIDATED STATEMENT OF INCOME (Unaudited) For The Twelve Weeks Ended Restated March 26, March 27, In thousands, except per share amounts 1994 1993 Net sales $319,454 $319,844 Costs and expenses: Cost of products sold 246,523 235,674 Depreciation, amortization and cost of timber harvested 32,885 33,839 Selling and administrative expenses 14,999 15,232 Interest expense 19,842 19,794 Other - net 10,644 189 Total costs and expenses 324,893 304,728 Income (loss) before taxes (5,439) 15,116 Provision for income taxes (2,139) 6,016 Net income (loss) (3,300) 9,100 Preferred dividend requirements 1,525 1,526 Net income (loss) available to common shares $ (4,825) $ 7,574 Average Common Shares Outstanding: Assuming no dilution 42,174 41,958 Assuming full dilution 42,174 42,527 Earnings (Loss) Per Common Share: Assuming no dilution $(.11) $.18 Assuming full dilution $(.11) $.18 Dividends Per Common Share $.25 $.25 See accompanying notes to condensed consolidated financial statements.
-3- FEDERAL PAPER BOARD COMPANY, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) For the Twelve Weeks Ended Restated March 26, March 27, In thousands 1994 1993 CASH FLOWS FROM OPERATIONS: Net income (loss) $ (3,300) $ 9,100 Adjustments to reconcile net income (loss) to net cash provided by operations: Depreciation, amortization and cost of timber harvested 32,885 33,839 Deferred income tax provision (3,205) 5,234 Net loss on financial instrument transactions 10,625 140 Other - net 365 2,249 Net changes in current assets and liabilities (6,196) (4,753) NET CASH PROVIDED BY OPERATIONS 31,174 45,809 CASH FLOWS FROM INVESTING ACTIVITIES: Capital expenditures (28,162) (22,201) Net (payments) proceeds for financial instrument transactions (992) 410 Other (144) 112 NET CASH USED FOR INVESTING ACTIVITIES (29,298) (21,679) CASH FLOWS FROM FINANCING ACTIVITIES: Cash dividends paid (12,189) (12,141) Increase in long-term debt 10,267 125 Payments on long-term debt (2,313) (12,294) Issuance of equity capital 1,113 289 Change in short-term bank debt 1,242 (106) NET CASH USED FOR FINANCING ACTIVITIES (1,880) (24,127) INCREASE (DECREASE) IN CASH (4) 3 Cash: Beginning of year 271 280 End of period $ 267 $ 283 See accompanying notes to condensed consolidated financial statements.
-4- FEDERAL PAPER BOARD COMPANY, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) (Unaudited) 1. The accompanying unaudited interim financial statements have been restated to reflect revisions in the market valuation of certain financial instruments at March 26, 1994. The Company previously accounted for certain interest rate swap agreements based on settlement accounting but has now determined that settlement accounting was not an appropriate accounting method. As a result, these instruments have been marked to market at the end of each quarter. In addition, the restatement includes a revision in the market valuation previously recorded for certain foreign currency instruments. Further information on this restatement can be obtained from the Company's Annual Report on Form 10-K, as amended, the fiscal year ended January 1, 1994. The effect of the restatement on the Company's financial results is as follows (in thousands, except per share amounts): For the Twelve Weeks Ended March 26, 1994 [S] [C] Net income as previously reported $ 3,100 Adjustment (6,400) Restated net income (loss) $(3,300) Restated earnings (loss) per common share: Assuming no dilution: As reported $ .04 Adjustment (.15) Restated earnings (loss) per common share $ (.11) Assuming full dilution: As reported $ .04 Adjustment (.15) Restated earnings (loss) per common share $ (.11) 2. In the opinion of management, the accompanying unaudited interim financial statements reflect all adjustments, of a normal and recurring nature, necessary to present fairly the results for the interim periods presented. 3. Net income (loss) used in the computation of earnings (loss) per common share assuming no dilution is reduced by preferred dividend requirements. Earnings (loss) per common share assuming full dilution for the first quarter of 1994 excludes the conversion of the Company's preferred stocks and other common stock equivalents as the effects are antidilutive. Earnings per common share assuming full dilution for the first quarter of 1993 excludes the conversion of the Company's $2.875 convertible preferred stock as the effect is antidilutive. -5- FEDERAL PAPER BOARD COMPANY, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENT (RESTATED) (Unaudited) 4. The Company manages certain portions of its exposure to foreign currency fluctuations through a variety of financial instruments with off-balance-sheet market risk including foreign currency option and foreign currency forward contracts. The risk of loss in the event of non-performance by any party under these agreements is not significant. The Company sold certain foreign exchange contracts. The sold nonhedged contracts outstanding at March 26, 1994 were foreign currency call option contracts with notional amounts of 80.0 million U.S. dollars, 35.0 million British pounds and 8.5 million German marks and foreign currency put option contracts with notional amounts of 50.3 million U.S. dollars and 5.0 million British pounds. The Company purchased certain foreign exchange contracts. The purchased nonhedged contracts outstanding at March 26, 1994 were foreign currency call option contracts with notional amounts of 79.0 million U.S. dollars and 5.0 million British pounds and foreign currency put option contracts with notional amounts of 45.0 million U.S. dollars and 5.0 million British pounds. In addition, at March 26, 1994, the Company had nonhedged forward foreign exchange contracts outstanding which it had sold with notional amounts of 15.0 million U.S. dollars in which the Company's market risk is subject to currency rate changes of the British pound sterling and the German mark, along with changes in U.S. and German interest rates. The estimated fair value of all nonhedged foreign exchange instruments at March 26, 1994 was a loss of $9.7 million. The Company does not believe any reasonably likely change in the estimated fair value of these contracts would be material to its financial condition and results of operations. The Company has entered into a variety of interest rate swap agreements to manage the impact of interest rate fluctuations. At March 26, 1994, the Company had nonhedged interest rate swap agreements outstanding with notional principal amounts of $390 million. The Company's market risk under these agreements is primarily subject to changes in the London Interbank Offered Rate (LIBOR) and various interest rate spreads. The Company does not believe a reasonably likely change in LIBOR rates would have a material impact on its financial position and results of operations. The estimated fair value of all nonhedged interest rate swap agreementsat March 26, 1994 was a loss of $14.5 million. 5. Effective January 2, 1994, the Company adopted Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Postemployment Benefits". SFAS No. 112 requires the Company to accrue for postemployment benefits provided to former or inactive employees, their beneficiaries and covered dependents after employment but before retirement. The impact of adopting this Statement was not material to the Company's financial position and results of operations for the interim period presented. -6- FEDERAL PAPER BOARD COMPANY, INC. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (RESTATED) (Unaudited) 6. Certain loan agreements the Company is party to contain various restrictive covenants. At March 26, 1994, as restated, the Company was unable to comply with the cash flow coverage test in the revolving credit agreements. The Company had $50.0 million outstanding under these agreements at March 26, 1994. The Company has obtained waivers from the syndicate of banks related to this item of default through June 18, 1994, at which time the Company was in compliance with all restrictive covenants. -7- FEDERAL PAPER BOARD COMPANY, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (Unaudited) For the Twelve Weeks Ended March 26, March 27, In thousands 1994 1993 NET SALES: Paper, Paperboard and Pulp $220,424 $221,066 Wood Products 58,835 56,110 Converting Operations 67,491 68,925 Intersegment Eliminations (27,296) (26,257) Total $319,454 $319,844 INCOME (LOSS) BEFORE TAXES: Restated Paper, Paperboard and Pulp $ 10,606 $ 23,007 Wood Products 20,105 18,916 Converting Operations 1,236 (44) Intersegment Eliminations 13 (963) General Corporate Items - Net (17,557) (6,006) Interest Expense (19,842) (19,794) Total $ (5,439) $ 15,116
RESULTS OF OPERATIONS : Paper, Paperboard and Pulp Net sales of paper, paperboard and pulp remained virtually unchanged compared to the first quarter of the prior year. Market pulp sales increased 30% compared to the prior year due to increased volume. Uncoated free-sheet paper sales remained virtually unchanged compared to the prior year as increased volume was offset by decreased average selling prices. Bleached paperboard sales decreased 6% compared to the prior year primarily due to lower average selling prices while recycled paperboard sales increased 4% compared to the prior year as increased demand for this product offset decreased average selling prices. Operating profits for this segment declined 54% from the prior year. The decline in operating profits for this segment is primarily attributable to weather related factors, weaknesses in certain segments of the bleached paperboard market and operating problems which resulted in lost production and higher costs at the Company's major mills. During the quarter, operations at the Augusta and Riegelwood mills were adversely affected by unscheduled shutdowns. Operating results were also negatively impacted by higher wood and energy costs in the first quarter of 1994 resulting from the harsh winter weather. The bleached paperboard market showed continued weakness in certain segments. Average selling prices for this product were lower than in the first quarter of last year mainly due to an increase in lower priced commodity grade business. Despite this decline, demand -8- Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont.) has remained strong, with shipments of this product increasing slightly compared to the first quarter of the prior year. Slightly offsetting the decrease in bleached paperboard operating profits was improved results for market pulp. Operating results increased approximately 40% in the first quarter of 1994 as compared to the first quarter of 1993. Although this product line remained unprofitable in the first quarter, results improved significantly due to increasing demand. A December 1993 pulp price increase was fully implemented during the first quarter, an April price increase is now being implemented and another increase is scheduled to take effect in the second quarter. Operating profits for the Company's uncoated free-sheet paper operation improved from the comparable period of the prior year. Market conditions began to improve during the first quarter, allowing a price increase to be fully implemented with further increases in selling prices expected in the second quarter. Despite this price increase, average selling prices for this product remained below last year's level by approximately 6%. Demand has remained strong with adequate order backlogs and increased shipments of this product compared to the prior year. Profits were also positively impacted by slightly lower operating costs in the first quarter of 1994, resulting from capital improvements completed in 1993 which enhanced production efficiencies. Operating profits for recycled paperboard increased 40% compared to the same quarter of the prior year. The recycled paperboard market remained strong during the first quarter. The Company's mill in Sprague, CT operated efficiently with strong order backlogs and relatively stable pricing. Production and shipments of this product increased 4% and 10% respectively, compared to the first quarter of 1993, while average selling prices decreased 5% compared to the first quarter of the prior year. Improved operating efficiencies and increased demand for this product positively impacted operating profits compared to last year's first quarter. Wood Products The wood products segment recorded higher operating profits in the first quarter of 1994 compared to the prior year. Market conditions for lumber have continued to be favorable with average selling prices increasing approximately 17% compared to the first quarter of last year. However, shipments for lumber declined approximately 8% compared to the first quarter of 1993. The increase in selling price is primarily attributable to the reduced availability of timber from government-owned lands in the Pacific Northwest and from harsh weather conditions. The decline in shipments was primarily caused by poor weather conditions during the first quarter of 1994. Converting Operations Operating profits for this segment were improved while sales declined slightly compared to the first quarter of the prior year. The Company's cup operations experienced improved sales and operating profits compared to the prior year. A strengthening in demand and reduced costs, as a result of cost savings programs which were implemented at each location, are primarily responsible for the improvements. The Company's packaging operations experienced decreased sales and operating profits compared to the prior year. -9- Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont.) Interest Expense Interest expense for the first quarter of 1994 was virtually unchanged compared to the prior year. During the first quarter of 1994, capitalized interest increased while interest savings from the Company's interest rate swap agreements decreased compared to the prior year. The increase in capitalized interest is attributable to higher capital spending on projects qualifying for interest capitalization. Interest expense for the first quarters of 1994 and 1993 includes approximately $.1 million and $1.9 million of savings, respectively, related to the Company's interest rate swap agreements. Other Items The Company enters into nonhedged off-balance-sheet financial instrument transactions. The value of these instruments change as currency markets and interest rates fluctuate, therefore and adjustment of the market value is recorded each quarter. In the first quarter of 1994 and 1993, a pre-tax charge was recorded associated to nonhedged financial instrument transactions of $10.6 million and $.1 million, respectively. These charges are included in Other-net in the accompanying Condensed Consolidated Statement of Income. Accounting Matters Effective January 2, 1994, the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits". The impact of adopting this Statement, for the first quarter of 1994, was not material to the Company's financial position and results of operations. CAPITAL RESOURCES AND LIQUIDITY : Cash provided by operations declined 32% compared to the comparable period of the prior year. The decline was primarily attributable to the lower level of earnings and changes in accounts receivable and inventories in the current year. The increase in receivable levels during the first quarter of 1994 is due to an increase in the average collection period along with a reduction in the amount of receivables sold under an existing agreement. Under this agreement, $83 million and $88 million were sold at March 26, 1994 and January 1, 1994, respectively. Improving market conditions for most of our product lines have caused inventory levels to remain relatively unchanged from the fourth quarter of 1993. However, inventory levels in the first quarter of 1993 increased significantly from the fourth quarter of 1992. Cash used for investing activities increased approximately 35% compared to the prior year. In both periods presented, the majority of cash used for investing activities was related to capital expenditures, predominantly related to a program to expand and modernize the No. 18 paperboard machine at the Riegelwood mill. This program is expected to be completed by mid-year 1994. Capital expenditures for the full year are expected to be consistent with last year's level. -10- Management's Discussion and Analysis of Financial Condition and Results of Operations (Cont.) The Company believes it has adequate resources to finance its operations and future capital spending programs. The Company is a party to two revolving credit agreements with total commitments of $300 million. At April 23, 1994, $75 million was outstanding under these agreements. In addition, the Company has $75 million remaining under a previously filed shelf registration statement which can be used for future debt financings. Certain loan agreements the Company is party to contain various restrictive covenants. At March 26, 1994, as restated, the Company was unable to comply with the cash flow coverage test in the revolving credit agreements. The Company has obtained waivers from the syndicate of banks related to this item of default through June 18, 1994, at which time the Company was in compliance with all restrictive covenants. Future Outlook: The outlook for the remainder of the year is for gradual improvement in market conditions for our major product lines. Demand is expected to improve in the second quarter and throughout the year, which should allow further pricing improvements. Operating problems which occurred in the first quarter are not anticipated to recur and therefore improved operating efficiencies are expected. -11- FEDERAL PAPER BOARD COMPANY, INC. EXHIBIT INDEX Exhibit No. Description Page No. 11 Computation of Earnings (Loss) per Common Share 13-14 -12- EX-11 2 FEDERAL PAPER BOARD COMPANY, INC EXHIBIT 11 EXHIBIT 11 FEDERAL PAPER BOARD COMPANY, INC. COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE (Unaudited) For the Twelve Weeks Ended Restated March 26, March 27, In thousands, except per share amounts 1994 1993 share amounts Assuming No Dilution: Net Income (Loss) $(3,300) $ 9,100 (Deduct) Dividends on Convertible Preferred Stock (1,525) (1,526) Net Income (Loss) Available to Common Shares $(4,825) $ 7,574 Actual Weighted Average Number of Common Shares Outstanding 42,174 41,958 Earnings (Loss) Per Common Share Assuming No Dilution $(.11) $.18 Assuming Full Dilution: Net Income (Loss) $(3,300) $ 9,100 (Deduct) Dividends on Convertible Preferred Stock (1,525) (1,509) Net Income (Loss) Applicable to Common Shares, Common Equivalent Shares and Dilutive Securities $(4,825) $ 7,591 Shares: Adjusted Weighted Average Number of Common Shares Outstanding 42,174 41,959 Dilutive Common Equivalent Shares Issuable Under Stock Option Plans (a) 264 Common Shares Issuable Upon Conversion of $1.20 Convertible Preferred Stock (a) 304 Common Shares Issuable Upon Conversion of $2.875 Convertible Preferred Stock (a) (a) Weighted Average Number of Common and Diluted Common Equivalent Shares and Dilutive Securities 42,174 42,527 Earnings (Loss) Per Common Share Assuming Full Dilution $(.11) $.18
-13- EXHIBIT 11 (Continued) FEDERAL PAPER BOARD COMPANY, INC. COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE (Unaudited) For the Twelve Weeks Ended Restated March 26, March 27, In thousands, except per 1994 1993 share amounts Primary Earnings Per Share (b): Shares: Weighted Average Number of Common Shares Outstanding 42,174 41,958 Dilutive Common Equivalent Shares Issuable Under Stock Option Plans (a) 237 Weighted Average Number of Common and Dilutive Common Equivalent Shares 42,174 42,195 Primary Earnings (Loss) Per Common Share Assuming No Dilution from Common Equivalent Shares $(.11) $.18 (a) Antidilutive issue. (b) The calculation of primary earnings per share is presented in accordance with Securities Exchange Act of 1934 Release No. 9083 although not required by footnote 3 paragraph 14 of APB Opinion No. 15 because it results in dilution of less than 3%. Earnings (loss) applicable to common shares are the same as in the calculation assuming no dilution.
-14- -----END PRIVACY-ENHANCED MESSAGE-----