-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RhJAR0dBB9OBRbN6yqNwobyU/3/bVMenwIwIN5N0XGgSSZTOZczxK7qzt8fgrBrG AHfV9ncnU6aPTXRfKeCwmg== 0000064394-96-000013.txt : 19960808 0000064394-96-000013.hdr.sgml : 19960808 ACCESSION NUMBER: 0000064394-96-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960807 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MEAD CORP CENTRAL INDEX KEY: 0000064394 STANDARD INDUSTRIAL CLASSIFICATION: PAPERBOARD MILLS [2631] IRS NUMBER: 310535759 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02267 FILM NUMBER: 96604820 BUSINESS ADDRESS: STREET 1: MEAD WORLD HEADQUARTERS STREET 2: COURTHOUSE PLZ NORTHEAST CITY: DAYTON STATE: OH ZIP: 45463 BUSINESS PHONE: 5134956323 10-Q 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 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. 1-2267 THE MEAD CORPORATION (Exact name of registrant as specified in its charter) Ohio 31-0535759 (State of Incorporation) (I.R.S. Employer Identification No.) MEAD WORLD HEADQUARTERS COURTHOUSE PLAZA NORTHEAST DAYTON, OHIO 45463 (Address of principal executive offices) Registrant's telephone number, including area code: 513-495-6323 Indicate by check mark 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 reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No __ . The number of Common Shares outstanding at June 30, 1996 was 52,315,486. ================================================================================ THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES -------------------------------------------------- QUARTERLY PERIOD ENDED JUNE 30, 1996 ----------------------------------- PART I - FINANCIAL INFORMATION ------------------------------ ITEM 1. FINANCIAL STATEMENTS -------------------- THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------- BALANCE SHEETS - -------------- (All dollar amounts in millions) June 30, Dec. 31, 1996 1995 -------- -------- ASSETS Current assets: Cash and cash equivalents $ 22.2 $ 292.6 Accounts receivable 690.9 585.7 Inventories 478.6 410.5 Other current assets 91.1 78.5 -------- -------- Total current asset 1,282.8 1,367.3 Investments and other assets: Investees 128.8 141.0 Other assets 544.0 500.4 -------- -------- 672.8 641.4 Property, plant and equipment 4,457.1 4,318.7 Less accumulated depreciation and amortization (2,029.4) (1,954.6) -------- -------- 2,427.7 2,364.1 -------- -------- Total assets $4,383.3 $4,372.8 ======== ======== LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Notes payable $ 39.0 $ Accounts payable 313.3 380.5 Accrued liabilities 362.6 359.3 Income taxes payable 21.1 9.0 Current maturities of long-term debt 7.0 73.0 -------- -------- Total current liabilities 743.0 821.8 Long-term debt 726.8 694.8 Commitments and contingent liabilities Deferred items 722.7 696.0 Shareowners' equity: Common shares 155.7 157.8 Additional paid-in capital 4.8 Foreign currency translation adjustment (2.5) (.8) Retained earnings 2,032.8 2,003.2 -------- -------- 2,190.8 2,160.2 -------- -------- Total liabilities and shareowners' equity $4,383.3 $4,372.8 ======== ======== See notes to financial statements. THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------- STATEMENTS OF EARNINGS - ---------------------- (All dollar amounts in millions, except per share amounts)
Second Quarter Ended First Half Ended -------------------- ------------------- June 30, July 2, June 30, July 2, 1996 1995 1996 1995 -------- -------- -------- -------- Net sales $1,258.5 $1,442.2 $2,325.7 $2,683.0 Cost of products sold 1,000.4 1,130.0 1,863.6 2,148.9 -------- -------- -------- -------- Gross profit 258.1 312.2 462.1 534.1 Selling and administrative expenses 140.0 147.8 274.9 284.5 -------- -------- -------- -------- Earnings from operations 118.1 164.4 187.2 249.6 Other revenues (expenses) - net 1.7 8.0 8.0 21.4 Interest and debt expense (12.7) (17.5) (27.4) (35.8) -------- -------- -------- -------- Earnings from continuing operations before income taxes 107.1 154.9 167.8 235.2 Income taxes 39.0 59.5 61.5 90.1 -------- -------- -------- -------- Earnings from continuing operations before equity in net earnings (loss) of investees 68.1 95.4 106.3 145.1 Equity in net earnings (loss) of investees (1.0) 6.8 (8.3) 18.8 -------- -------- -------- -------- Earnings from continuing operations 67.1 102.2 98.0 163.9 Discontinued operations (Note G) 5.4 -------- -------- -------- -------- Net earnings $ 67.1 $ 102.2 $ 103.4 $ 163.9 ======== ======== ======== ======== Per common and common equivalent share: Earnings from continuing operations $1.26 $1.87 $1.84 $2.92 Discontinued operations .10 -------- -------- -------- -------- Net earnings $1.26 $1.87 $1.94 $2.92 ======== ======== ======== ======== Cash dividends per common share $ .28 $ .28 $ .56 $ .53 ======== ======== ======== ======== Average common and common equivalent shares outstanding (millions) 53.2 54.5 53.4 56.1 ======== ======== ======== ========
See notes to financial statements. THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------- STATEMENTS OF CASH FLOWS - ------------------------ (All dollar amounts in millions) First Half Ended ---------------- June 30, July 2, 1996 1995 ------- ------- Cash flows from operating activities: Net earnings $103.4 $163.9 Adjustments to reconcile net earnings to net cash (used in) operating activities: Depreciation and depletion of property, plant and equipment 97.0 95.6 Amortization of other assets 24.4 22.3 Deferred income taxes 11.1 32.7 Investees-earnings and dividends 13.1 (20.6) Discontinued operations (5.4) Other (12.3) (13.5) Change in current assets and liabilities: Accounts receivable (105.2) (222.0) Inventories (68.1) (60.7) Other current assets (9.1) (19.2) Accounts payable and accrued liabilities (55.1) (274.1) Cash (used in) discontinued operations (1.5) (2.4) ------ ------ Net cash (used in) operating activities (7.7) (298.0) ------ ------ Cash flows from investing activities: Capital expenditures (173.9) (98.3) Additions to equipment rented to others (20.9) (30.5) Restricted funds 461.0 Proceeds from sale of business 19.6 39.8 Other (20.8) 7.2 ------ ------ Net cash provided by (used in) investing activities (196.0) 379.2 ------ ------ Cash flows from financing activities: Additional borrowings 32.8 6.0 Payments on borrowings (67.5) (180.3) Notes payable 39.0 Cash dividends paid (30.6) (29.6) Common shares issued 5.3 29.6 Common shares purchased (45.7) (305.9) ------ ------ Net cash (used in) financing activities (66.7) (480.2) ------ ------ (Decrease) in cash and cash equivalents (270.4) (399.0) Cash and cash equivalents at beginning of year 292.6 484.0 ------ ------ Cash and cash equivalents at end of half $ 22.2 $ 85.0 ====== ====== See notes to financial statements. THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - ----------------------------- (All dollar amounts in millions) A - FINANCIAL STATEMENTS The balance sheet at December 31, 1995 is condensed financial information taken from the audited balance sheet. The interim financial statements are unaudited. In the opinion of management, all adjustments (which consist only of normal recurring adjustments) necessary to present fairly the financial position and results of operations for the interim periods presented have been made. B - ACCOUNTING POLICIES On an interim basis, all costs subject to recurring year-end adjustments have been estimated and allocated ratably to the quarters. Income taxes have been provided based on the estimated tax rate for the respective years after excluding infrequently occurring items whose specific tax effect is reported during the same interim period as the related transaction. C - INVENTORIES The amount of inventories is (principally last-in, first-out method): June 30, Dec. 31, 1996 1995 ------- ------- Finished and semi-finished products $340.8 $270.4 Raw materials 85.0 86.9 Stores and supplies 52.8 53.2 ------- ------- $478.6 $410.5 ======= ======= D - INVESTEES The summarized operating data for all investees is presented in the following table: Second Quarter Ended First Half Ended -------------------- ------------------ June 30, July 2, June 30, July 2, 1996 1995 1996 1995 ------- ------- ------- ------- Revenues $164.2 $196.1 $309.4 $387.3 ======= ======= ======= ======= Gross profit (loss) $ 5.1 $ 31.8 $(10.3) $ 78.1 ======= ======= ======= ======= Net earnings (loss) $ (.5) $ 15.2 $(14.1) $ 41.7 ======= ======= ======= ======= E - ADDITIONAL INFORMATION ON CASH FLOWS First Half Ended ----------------- June 30, July 2, 1996 1995 ------- ------- Cash paid for: Interest $ 28.9 $ 35.0 ======= ======= Income taxes $ 38.2 $365.9 ======= ======= F - SHAREOWNERS' EQUITY During the second quarter of 1996, the Company repurchased approximately 600,000 common shares on the open market. The Company has outstanding authorization from the Board of Directors to repurchase up to five million common shares, of which 1.7 million shares have been repurchased as of the end of the first half of 1996. G - DISCONTINUED OPERATIONS Mead sold its previously discontinued Imaging business during the first quarter of 1996. The sale resulted in a gain of $5.4 million, net of income tax of $3.2 million. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL ------------------------------------------------- CONDITION AND RESULTS OF OPERATIONS ----------------------------------- RESULTS OF OPERATIONS - --------------------- Net Sales - --------- Second quarter 1996 net sales were $1.26 billion, 13% lower than the $1.44 billion of sales generated in the record second quarter of 1995. Most of the decrease occurred at Mead's distribution business because of significantly lower volume and selling prices for commercial printing papers. Lower volume and selling prices for selected products, particularly web publishing grades and corrugating medium also contributed to the decrease. Second quarter 1996 sales for Mead's Coated Board System and carbonless and specialty papers were above second quarter 1995 levels. Net sales for the first half of 1996 were $2.33 billion compared to $2.68 billion for the same period of 1995 as a result of lower volume and selling prices. By the end of the second quarter, however, there were some indications that markets for coated papers and corrugating medium were beginning to recover. Operating Costs and Expenses - ---------------------------- Mead's wholly-owned businesses operated well during the second quarter of 1996. However,weak markets caused the quarter's gross profit ratio to decline from 21.6% in 1995 to 20.5% in 1996. For the first half, gross profit as a percent of sales was 19.9% in each of the two years. Also affecting the ratios were market related downtime taken at the Escanaba, Michigan, publishing paper mill and the expensing of start-up costs related to the new machine at the Stevenson, Alabama, corrugating medium mill. Selling and administrative expenses were $140.0 million for the second quarter of 1996 compared to $147.8 million for the same quarter of 1995. For the first half 1996 and 1995 selling and administrative expenses were $274.9 and $284.5, respectively. The decline is the result of continuing cost curtailment initiatives and, to some extent, lower sales. Other Revenues - Net - -------------------- Other revenues were $1.7 million and $8.0 million for the second quarter and first half of 1996, respectively, compared to $8.0 and $21.4 million for the comparable periods of 1995. Lower investment income in 1996 accounted for most of the reduction. Interest and Debt Expense - ------------------------- Second quarter interest and debt expense declined 27% from $17.5 million in 1995 to $12.7 million in 1996, due to lower debt levels in 1996 and more interest capitalized in 1996 than in 1995. For the same reasons, first half interest and debt expense fell 23% from $35.8 million in 1995 to $27.4 million in 1996. Income Taxes - ------------ Second quarter 1996 income taxes were $39.0 million compared to $59.5 million in 1995. The effective rate for the quarter was 36.4% in 1996 and 38.4% for 1995. Income taxes were $61.5 million and $90.1 million in the first half of 1996 and 1995, respectively, and the effective tax rate fell to 36.7% in 1996 from 38.3% in the prior year. Lower 1996 taxes related to foreign operations was the primary reason for the change. Equity in Net Earnings of Investees - ----------------------------------- Mead's investees, made up primarily by its 50%-owned Northwood companies, reported a loss of $1.0 million for the second quarter of 1996 and a loss of $8.3 million for the first half. These 1996 losses compare to earnings of $6.8 million for the second quarter of 1995 and $18.8 for the first half. Pulp prices during the second quarter were about half of what they were during the same period of 1995. Furthermore, operating problems and market downtime in each of the first two quarters of 1996 hampered earnings performance. Wood products operations, however, fared better. Selling prices increased, with second quarter 1996 prices averaging about 25% higher than the same quarter of 1995 and about 15% higher than the first quarter of 1996. Operating performance for wood products was good in the second quarter of 1996. Looking forward, there are indications that the sharp fall in pulp prices that began in late 1995 has come to an end. Northwood announced a pulp price increase effective July 1st. With regard to wood products, however, oversupply and a May decline in US housing starts may result in lower selling prices. Discontinued Operations - ----------------------- Mead sold its Imaging business during the first quarter of 1996. The sale resulted in an after-tax gain of $5.4 million or $.10 per share. Financial Data by Business - -------------------------- Paper segment Second Quarter First Half ------------------------ ----------------------- 1996 1995 % Change 1996 1995 % Change ---- ---- -------- ---- ---- -------- (All dollar amounts in millions) Net sales (to unaffiliated customers) $303.5 $322.1 (6)% $572.9 $651.4 (12)% Segment earnings before taxes 46.0 84.4 (45)% 92.6 147.0 (37)% Excluding the sales of the Kingsport, Tennessee, fine paper mill, which Mead sold early in the second quarter of 1995, second quarter 1996 sales were about even with those of the prior year, and volume shipped was, in fact, slightly ahead of 1995. Sales and earnings for the Escanaba, Michigan, publishing paper mill for the second quarter and first half of 1996 were significantly below prior year levels due to declines in volume and selling prices for its web grades. Because of the low volume and excess inventories on hand, the mill took market-related down-time equal to thirteen machine days in the second quarter of 1996. Some strengthening of the market due to seasonal demand is expected, but inventories remain higher than desired. The Chillicothe, Ohio, fine paper mill operated well during the second quarter of 1996 and produced sales and earnings that were significantly higher than the same quarter of 1995. The market for carbonless grades continued to be strong throughout the quarter and, though prices for coated free sheet grades were below second quarter 1995 prices, volume was significantly higher. For the half, Chillicothe's 1996 sales exceeded 1995 levels but, due to severance related expenses and temporary operating problems in the first quarter of 1996, earnings were lower than the prior year. Second quarter and first half 1996 sales and earnings for Mead's specialty mills at Menasha, Wisconsin, and South Lee, Massachusetts, also exceeded those of 1995. Packaging and Paperboard segment Second Quarter First Half ------------------------ ----------------------- 1996 1995 % Change 1996 1995 % Change ---- ---- -------- ---- ---- -------- (All dollar amounts in millions) Net sales (to unaffiliated customers) $377.0 $392.0 (4)% $702.8 $709.7 (1)% Segment earnings before taxes 49.2 57.3 (14)% 78.4 90.4 (13)% Mead's Coated Board System performed well in the first half of 1996. Second quarter 1996 sales and earnings for both Mead Coated Board and Mead Packaging increased over the prior year. Operating performance at the coated board mill near Phenix City, Alabama, was excellent, and open market selling prices for Mead's Coated Natural Kraft were improved over 1995, though slightly lower than in the first quarter of 1996. Second quarter volume on the open market was essentially equal to last year. Second quarter sales volume in North America, Europe and Latin America for Mead's Packaging Division improved over the corresponding quarter of 1995. Beverage carton pricing has increased in response to demand in certain markets but continues to be competitive. For Mead Containerboard, second quarter selling prices for medium averaged about half of what selling prices were at the same time last year and were down about 25% from first quarter 1996 levels. Volume at the converting plants was also below second quarter 1995 levels. By the end of the second quarter, there were signs that selling prices had reached bottom. Inventories are down and box shipments have improved. Construction of the new paper machine at the Stevenson, Alabama, corrugating medium mill is progressing on schedule, with a fourth quarter 1996 start-up planned. Efforts to pre-sell tonnage from the new machine have been very successful. Approximately $3 million of labor and other start-up expenses associated with the project were expensed in the first half of 1996. These costs will continue to be expensed throughout the remainder of the construction. Distribution and School and Office Products segment Second Quarter First Half ------------------------ --------------------------- 1996 1995 % Change 1996 1995 % Change ---- ---- -------- ---- ----- -------- (All dollar amounts in millions) Net sales (to unaffiliated customers) $578.0 $728.1 (21)% $1,050.0 $1,321.9 (21)% Segment earnings before taxes 40.4 47.4 (15)% 48.4 55.5 (13)% At Zellerbach, second quarter and first half sales were significantly lower than in 1995. Each of its three business units, but particularly printing papers, reported lower 1996 second quarter volume than in the previous year. Margin percentages, however, did increased and this division's second quarter earnings were substantially higher than the first quarter of 1996 and were also about 10% ahead of the second quarter of 1995. Last year was a record year for Mead's School and Office Products business. Though second quarter 1996 sales and earnings were strong for the division, results have not equaled those of the prior year. The timing of orders and shipments in 1996 is closer to normal compared to what was experienced in the tighter paper market of 1995. This year, with less concern about paper price increases and product shortages, retailers have waited longer to place orders. Mead expects the overall 1996 back-to-school season to be a success, but not as robust as 1995. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- Working capital was $539.8 million at June 30, 1996 compared to $545.5 million at December 31, 1995 and $529.4 million at July 2, 1995. The current ratio was 1.7 at both June 30, 1996 and December 31, 1995 and was 1.6 at July 2, 1995. Receivables are considerably lower and inventories somewhat higher than they were a year ago reflecting the weaker markets experienced in 1996 compared to 1995. The seasonal build in receivables and inventory due to the Mead School and Office Product's back-to-school season was partly financed by short-term notes payable. This short-term borrowing typically occurs each year, with 1995 being the exception due to sufficient cash being available from the late 1994 sale of the Electronic Publishing business. During the second quarter of 1996, Mead paid at maturity $66 million in medium-term notes causing a decrease in current maturities of long-term debt. Mead's June 30, 1996 cash balance was lower than at the prior fiscal year end and at the end of the second quarter of 1995 because of the debt payment and actions described below. Capital expenditures totaled $173.9 million for the first half of 1996 compared to $98.3 million for the same period of 1995. A large percentage of the expenditures relate to the Stevenson, Alabama, corrugating medium mill expansion scheduled for start-up in the fourth quarter of 1996. On June 27, 1996, Mead announced a $224 million project to expand the capacity of the new corrugating medium machine now nearing completion and to upgrade environmental systems at the Stevenson mill. This second phase will add virgin pulp-making capabilities, a wood fuel boiler and additional dryers to the new machine. This expansion will increase the annual capacity of the new machine from 225,000 tons to 390,000 tons and will replace the mill's chemical recovery system. Completion of this second phase is expected in 1999. Borrowed capital (long-term debt) as a percent of total capital (long-term debt plus shareowners' equity) was 24.9% at June 30, 1996 compared to 24.3% at December 31, 1995. Mead borrowed $25 million in the first quarter of 1996 pursuant to a tax exempt financing in connection with the first stage of the Stevenson expansion. Also in the first quarter, Mead completed a $7 million tax exempt financing related to the Coated Board Mahrt mill. In 1996, Mead has repurchased approximately 845,000 shares of its common stock under an April, 1995 Board of Directors authorization. Thus far, Mead has repurchased over 1.7 million shares under that program. As of the end of the second quarter, Mead paid a fixed rate or a capped rate on 80% of its debt and paid a floating rate of interest on the remainder. A change of 1% in the floating interest rate, on an annual basis, would result in a $.04 change in earnings per share for the year. The estimated market value of long-term debt, excluding capital leases, was $10.9 million less than the book value at the end of the second quarter of 1996. PART II - OTHER INFORMATION - --------------------------- ITEM 1. LEGAL PROCEEDINGS ----------------- Reference is made to the first paragraph under "Item 3. Legal Proceedings" in Mead's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, regarding the Storage Depot Site. Mead received a notice on May 11, 1996 from USEPA alleging a failure to operate the groundwater treatment system in violation of the Consent Order. The notice included a demand for stipulated penalties of approximately $250,000. Mead has denied USEPA's allegation of violation and invoked the dispute resolution provisions of the Consent Order. The groundwater treatment system was placed back into operation on May 15, 1996 following extraordinary repairs and maintenance. Reference is made to the third paragraph under "Item 3. Legal Proceedings" in Mead's Annual Report on Form 10-K for the fiscal year ended December 31, 1995, regarding a hazardous substance site involving a closed coke manufacturing facility and the nearby Chattanooga Creek located in Chattanooga, Tennessee. In June, 1996, USEPA announced plans to undertake an interim removal action involving the excavation and treatment/disposal of bulk tar deposits located in or near the Chattanooga Creek. Costs of the proposed removal action are estimated by USEPA to be approximately $5.1 million. Long term remedial action will not be determined until completion of the Remediation Investigation/Feasibility Study. Several parties, including Mead and the U.S. Department of Defense, received special notice letters in July, 1996 from USEPA advising each party of potential liability for the removal action. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS --------------------------------------------------- (a) The Annual Meeting of Shareholders of Mead was held on April 25, 1996. (b) Proxies were solicited for the meeting pursuant to Regulation 14A. There was no solicitation in opposition to management's nominees listed in the proxy statement, and John A. Krol, Steven C. Mason, Paul F. Miller, Jr., and Lee J. Styslinger, Jr. were elected. The other directors whose term of office continued after the meeting also include John C. Bogle, John G. Breen, William E. Hoglund, James G. Kaiser, Susan J. Kropf, Charles S. Mechem, Jr., Thomas B. Stanley, Jr. and Jerome F. Tatar. (c) (1) The results of the election of directors are as follows: Number of Votes --------------- Nominee For Withheld ------- --- -------- J. A. Krol 44,629,895 662,186 S. C. Mason 44,570,523 721,558 P. F. Miller, Jr. 44,611,372 680,709 L. J. Styslinger, Jr. 44,633,177 658,904 Nominee Abstentions Broker Non-Votes ------- ----------- ---------------- J. A. Krol -0- -0- S. C. Mason -0- -0- P. F. Miller, Jr. -0- -0- L. J. Styslinger, Jr. -0- -0- (2) The results on the proposal to approve the 1996 Stock Option Plan are as follows: Number of Votes --------------- For Against Abstain Broker Non-Votes --- ------- ------- ---------------- 28,889,477 13,894,726 309,475 2,198,403 (3) The results on the proposal to amend the Restricted Stock Plan are as follows: Number of Votes --------------- For Against Abstain Broker Non-Votes --- ------- ------- ---------------- 39,497,857 3,244,228 351,592 2,198,404 (4) The results on the proposal to amend the Regulations to declassify the Board of Directors are as follows: Number of Votes --------------- For Against Abstain Broker Non-Votes --- ------- ------- ---------------- 41,886,323 843,183 364,170 2,198,405 (5) The results of a shareholder proposal introduced by the Kentucky State District Council of Carpenters, AFL-CIO Pension Fund urging the Board of Directors to seek shareholder approval for all present and future severance agreements with executive officers are as follows: Number of Votes --------------- For Against Abstain Broker Non-Votes --- ------- ------- ---------------- 21,301,874 20,609,657 1,181,125 2,199,425 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -------------------------------- (a) Exhibits (10) Material Contracts: (1) The Mead Corporation Directors Capital Accumulation Plan (2) Restricted Stock Plan effective December 10, 1987, as amended through April 25, 1996, in which directors and executive officers participate. (11.1), (11.2) Calculations of Net Earnings per Share. (27) Financial Data Schedule. (b) No current reports on Form 8-K were filed with the Commission in the second quarter of 1996. 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. Date: August 7, 1996 THE MEAD CORPORATION - -------------------- (Registrant) By: G. T. GESWEIN _________________________ G. T. Geswein Controller and Chief Accounting Officer WP\H:\WORK\SEC\10Q\96\063096 070396dlw EX-10.1 2 DIRECTORS CAPITAL ACCUMULATION PLAN Exhibit 10(1) THE MEAD CORPORATION DIRECTORS CAPITAL ACCUMULATION PLAN ----------------------------------- TABLE OF CONTENTS SECTION 1 - GENERAL. . . . . . . . . . . . . . . . . . . . . . . . . .. 1 1.1 Purpose and Effective Date . . . . . . . . . . . . . . . .. 1 1.2 Plan Funding and Administration. . . . . . . . . . . . . .. 1 1.3 Applicable Law . . . . . . . . . . . . . . . . . . . . . .. 1 1.4 Gender and Number. . . . . . . . . . . . . . . . . . . . .. 1 1.5 Assignment . . . . . . . . . . . . . . . . . . . . . . . .. 1 1.6 Plan Year. . . . . . . . . . . . . . . . . . . . . . . . .. 2 SECTION 2 - PARTICIPATION. . . . . . . . . . . . . . . . . . . . . . .. 2 2.1 Participation Requirement. . . . . . . . . . . . . . . . .. 2 2.2 Continued Participation. . . . . . . . . . . . . . . . . .. 2 SECTION 3 - DEFERRAL OF INCOME . . . . . . . . . . . . . . . . . . . .. 2 3.1 Deferred Income Amount . . . . . . . . . . . . . . . . . .. 2 3.2 Annual Election to Participate . . . . . . . . . . . . . .. 3 SECTION 4 - PARTICIPANT ACCOUNTS . . . . . . . . . . . . . . . . . . .. 3 SECTION 5 - DCPD ROLLOVERS . . . . . . . . . . . . . . . . . . . . . .. 3 SECTION 6 - CREDITING OPTIONS. . . . . . . . . . . . . . . . . . . . .. 4 6.1 Establishment of Crediting Options . . . . . . . . . . . .. 4 6.2 Participant Change of Crediting Options. . . . . . . . . .. 4 SECTION 7 - ADJUSTMENT OF PARTICIPANT ACCOUNTS . . . . . . . . . . . .. 5 7.1 Adjustment of Participants' Participant Accounts . . . . .. 5 7.2 Quarterly Statement of Participant Accounts Balances . . . . . . . . . . . . . . . . . . . . . . . . .. 6 SECTION 8 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO PARTICIPANTS . . . . . . . . . . . . . . . . . . . . . . . . . .. 6 8.1 Annual Distributions . . . . . . . . . . . . . . . . . . .. 6 8.2 Emergency Distributions. . . . . . . . . . . . . . . . . .. 6 SECTION 9 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO BENEFICIARIES. . . . . . . . . . . . . . . . . . . . . . . . . .. 7 9.1 Distribution to Beneficiary. . . . . . . . . . . . . . . .. 7 9.2 Beneficiary. . . . . . . . . . . . . . . . . . . . . . . .. 7 SECTION 10 - DISTRIBUTIONS TO INCAPACITATED PERSONS. . . . . . . . . .. 7 SECTION 11 - AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . .. 8 THE MEAD CORPORATION DIRECTORS CAPITAL ACCUMULATION PLAN ----------------------------------- SECTION 1 - GENERAL - ------------------- 1.1 Purpose and Effective Date. The Mead Corporation ("Mead"), an -------------------------- Ohio Corporation, has established The Mead Corporation Directors Capital Accumulation Plan (the "Plan"), effective January 1, 1995, to provide recurring annual opportunities for the deferment of payment of certain amounts otherwise currently payable to its "Eligible Directors" (as defined below) who meet the requirements to become a "Participant" set forth in subsection 2.1. The term "Eligible Director" means any member of the Board of Directors of Mead who is not employed by it. 1.2 Plan Funding and Administration. The benefits payable under ------------------------------- the Plan are unfunded and are payable, when due, from the general assets of Mead or, in the sole discretion of the "Committee" (as defined below), from the assets of a benefit trust the assets of which shall be subject to the claims of the unsecured general creditors of Mead. Notwithstanding the foregoing, in the event of a "Potential Change in Control" (as defined in Section 3.02 of Benefit Trust Agreement, a trust agreement established January 9, 1987 by and between Mead and Society Bank, National Association) the provisions of Benefit Trust Agreement shall become operative with respect to the Plan. The Plan shall be administered by the Compensation Committee of the Board of Directors of Mead (the "Committee") which shall have the rights, powers and duties with respect to the Plan that are hereinafter set forth. 1.3 Applicable Law. The Plan will be construed and administered -------------- in accordance with the laws of the State of Ohio to the extent that those laws are not preempted by the laws of the United States of America. 1.4 Gender and Number. Where the context admits, words in any ----------------- gender will include any other gender, words in the singular will include the plural and the plural will include the singular. 1.5 Assignment. No Plan right or interest of any Participant or ---------- Beneficiary shall be assignable or transferable, in whole or in part, either directly or otherwise, including without limitation thereto, by execution, levy, attachment, garnishment, pledge or in any other manner, but excluding transfers by death or mental incompetency; no attempted assignment or transfer thereof shall be effective; and no such right or interest shall be liable for, or subject to, any obligation or liability of any Participant or Beneficiary; except that a Participant may direct that payments be made during his lifetime, when due, to a trust established by him and evidenced to Mead to be a trust treated as a grantor trust within the meaning of section 671 of the Internal Revenue Code of 1986 (the "Code") 1.6 Plan Year. The term "Plan Year" means the calendar year. --------- SECTION 2 - PARTICIPATION - ------------------------- 2.1 Participation Requirement. A Director of Mead on December 1, ------------------------- 1994 will become a Participant in the Plan as of January 1, 1995, or on any subsequent January 1, if on such January 1 he: (a) is an Eligible Director; (b) has executed an Annual Participation Election form (as described in subsection 3.2); and (c) has executed such forms as the Committee may determine necessary to permit Mead (at its discretion and expense) to maintain a policy of insurance on his life under the terms of which Mead shall be the policyholder, owner and beneficiary. Each individual who becomes an Eligible Director on or after December 1, 1994 will become a Participant in the Plan (on a prospective basis) on the earlier of the date on which the Committee has received his executed Annual Participation Election form if that date is within 30 days of the date he becomes an Eligible Director or on any subsequent January 1 if he then meets the requirements set forth in paragraphs (a) through (c) above. 2.2 Continued Participation. Until distribution of the entire ----------------------- balances of a Participant's "Participant Accounts"' (as described in Section 4) has been made, a Participant or, in the event of his death, any "Beneficiary" (as defined in subsection 9.2) of any of the Participant's undistributed Participant Accounts, as the case may be, will be considered and treated as a Participant for all purposes of the Plan, except that any additional compensation deferral (as described in subsection 3.1) shall cease as of the first day of the month next following the date on which he is no longer an Eligible Director. SECTION 3 - DEFERRAL OF INCOME - ------------------------------ 3.1 Deferred Income Amount. Subject to the provisions of ---------------------- subsection 3.2, by entering into a written Annual Election to Participate as provided by subsection 2.1, a Participant may elect to defer all or any portion (expressed in multiples of 1 percent) of the amount of the meeting fees and of the cash portion of the retainer fee that would otherwise be payable to him for services performed as an Eligible Director during the period that the Annual Election to Participate is effective. Amounts deferred by a Participant pursuant to this subsection for any calendar year shall be credited to a single "Participant Account" established for that year pursuant to Section 4. 3.2 Annual Election to Participate. The term "Annual Election to ------------------------------ Participate" means a written agreement, of such text as the Committee shall decide, entered into by and between a Participant and Mead with respect to a calendar year and setting forth: (a) the deferral percentages elected by the Participant in accordance with subsection 3.1 for that calendar year; (b) the percentage of his total deferral that is allocated to each of the "Crediting Options" (as described in subsection 6.1) selected by him; (c) the "Distribution Period" (as defined below) that he elects to be applicable with respect to the amounts deferred pursuant to that Annual Election to Participate; (d) the calendar year in which the Distribution Period is to commence; and (e) the Beneficiary who is to receive the remaining balance of the Participant Accounts established for the Participant by reason of that Annual Election to Participate in the event of the Participant's death prior to distribution of the entire balance of that Account to him. Each Annual Election to Participate shall be irrevocable by the Participant after the last day of the calendar month preceding its effective date. The term "Distribution Period" means, with respect to any Participant Accounts, a period of 5, 10, 15 or 20 calendar years as elected by the Participant for whom the Account is maintained. SECTION 4 - PARTICIPANT ACCOUNTS - -------------------------------- For each calendar year, the Committee shall cause a Participant Accounts to be established and maintained by Mead in the name of each Participant to reflect the amount of any deferrals that are the subject of the Participant's Annual Election to Participate for that calendar year. A Participant's Participant Accounts shall be adjusted monthly as provided in subsection 7.1 and shall be distributed to a Participant in accordance with the provisions of Section 8 or, in the event of the Participant's death, to his Beneficiary in accordance with the provisions of Section 9. SECTION 5 - DCPD ROLLOVERS - -------------------------- Notwithstanding any provision of the Plan to the contrary, a Participant for whose benefit a balance is maintained under the Deferred Compensation Plan for Directors (the "DCPD") may elect, during December, 1994, to have that balance transferred to the Plan and credited to a separate Participant Account (to be identified as his "DCPD Participant Account") established hereunder as of January 1, 1995, subject to the following: (a) In no event may a Participant elect to transfer to this Plan any amount credited under the Supplement to the DCPD. (b) No DCPD rollover to the Plan shall be permitted after January 1, 1995. (c) A Participant's Distribution Period with respect to his DCPD Participant Account shall commence on the date on which payment of his balance under the DCPD would have commenced. (d) To the extent necessary for self-employment tax purposes, the Committee shall maintain a Participant's DCPD Participant Account in the form of sub-accounts. SECTION 6 - CREDITING OPTIONS - ----------------------------- 6.1 Establishment of Crediting Options. The Committee shall ---------------------------------- designate "Crediting Options" (in such number and of such asset character as it shall decide), the investment experience of which shall be applied in adjusting Participants' Participant Accounts, as provided in subsection 7.1. The Crediting Options available as of January 1, 1995 are set forth on Exhibit I of the Plan. On advance written notice to the Participants, the Committee may cause any Crediting Option to be prospectively deleted and may designate other Crediting Options. In no event shall the assets of a Crediting Option be constituted of securities of Mead. Should Mead determine to invest any of its funds in the asset or assets constituting a Crediting Option, amounts representing such investment shall be the sole property of Mead and shall be subject to the claims of its general creditors. No Participant or Beneficiary shall have any claim or right with respect to any such amounts. 6.2 Participant Change of Crediting Options. By writing filed --------------------------------------- with the Committee on or before the last business day of February, May, August or November to be effective as of the first day of the following calendar quarter, a Participant may elect: (a) with respect to amounts to be credited to any Participant Account on and after that day pursuant to subsection 3.1, the portion (expressed as a multiple of 1 percent) thereof that is to be adjusted pursuant to subsection 7.1 to reflect the investment experience of any Crediting Option (referred to below as an "Adjustment Portion"); and (b) that all or a portion (expressed as a multiple of 1 percent) of the balance of any Participant Accounts then maintained for his benefit that constitutes an Adjustment Portion be changed to another Adjustment Portion. SECTION 7 - ADJUSTMENT OF PARTICIPANT ACCOUNTS - ---------------------------------------------- 7.1 Adjustment of Participants' Participant Accounts. As of each ------------------------------------------------ "Accounting Date" (as defined below), the Committee shall cause each Participant's Accounts to be adjusted as follows: (a) first, by charging to the proper Participant Accounts of ----- each Participant the amount of any distribution made to, or on account of, the Participant from the Account since the last preceding Accounting Date, which charges shall be made, pro rata, according to the Adjustment Portions of that Participant Accounts; (b) next, by adjusting each Participant Accounts maintained ---- on behalf of a Participant, upward or downward, as the case may be, so that the balance of the Participant Accounts equals the aggregate investment experience for the month ended on that Accounting Date of the Adjustment Portions elected by him and applicable to that Participant Accounts as of that date; (c) next, by crediting the last Participant Account ---- established on behalf of each Participant with the amount of any deferrals made by him during the month ending on that date, which amount shall be credited, pro raga, according to Adjustment Portions elected by the Participant under that Participant Account; (d) next, if the Accounting Date is December 31, by charging ---- the last Participant Account established on behalf of each Participant with an annual administrative fee of $100, which administrative fee shall be charged, pro raga, according to the Adjustment Portions of that Participant Account; and (e) finally, if the Accounting Date is the last day of a ------- calendar quarter, by executing the Adjustment Portion change elections made pursuant to the provisions of subsection 6.2 that are to be effective as of first day the next following calendar quarter. The term "Accounting Date" means the last business day of each calendar month. 7.2 Quarterly Statement of Participant Accounts Balances. As soon ---------------------------------------------------- as practicable, but not more than 30 days after the last day of each calendar quarter, the Committee shall provide each Participant with a statement of the balances of his Participant Accounts as of that day. SECTION 8 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO PARTICIPANTS - ---------------------------------------------------------------- 8.1 Annual Distributions. Except as otherwise provided in -------------------- subsection 8.2, if a Participant's service as a Director of Mead is terminated for any reason other than his death, and on the June 30 preceding his initial "Distribution Payment Date" (as defined below) the aggregate balances of his Participant Accounts equal at least $50,000, each of the Participant's Participant Accounts will be distributed to him in annual "Installment Distributions" (in the annual amount determined as provided below), made on or about each Distribution Payment Date, beginning on or about the Distribution Payment Date of the calendar year elected by him and continuing for the number of calendar years constituting the Distribution Period he has irrevocably elected with respect to that Participant Account. If on the June 30 preceding his initial Distribution Payment Date the aggregate balances of a Participant's Participant Accounts is an amount that is less than $50,000, those balances shall be distributed to him on or about his initial Distribution Payment Date in a single lump sum. The amount of the annual "Installment Distribution" from a Participant Account for a calendar year shall be equal to the balance of that Participant Account as of June 30 of that year, divided by the number of calendar years remaining in the Distribution Period elected by the Participant with respect to that Account. The term "Distribution Payment Date" means July 20 of each year. 8.2 Emergency Distributions. If, on written application of a ----------------------- Participant, it is determined by the Committee that the Participant has experienced an "Unforeseeable Emergency" (as defined below), then, as of the first day of any calendar month, the Participant may elect to receive an Emergency Distribution from one or more of his Participant Accounts, provided that the aggregate amount of any such distribution shall not exceed the amount reasonably needed to satisfy the Participant's emergency need. The term "Unforeseeable Emergency" means severe financial hardship to the Participant resulting from a sudden and unexpected illness or accident of the Participant or of a "dependent" (as defined in section 152(a) of the Code) of the Participant, loss of the Participant's property due to a casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant. In determining whether an Emergency Distribution should be made to a Participant consideration may be given to the extent to which his Unforeseeable Emergency can be relieved: (a) through reimbursement or compensation by insurance or otherwise; (b) by liquidation of the Participant's assets, to the extent the liquidation of such assets would not itself cause severe financial hardship; (c) by cessation of deferrals under the Plan; or (d) other distributions to be made to the Participant from the Plan. SECTION 9 - DISTRIBUTION OF PARTICIPANT ACCOUNTS TO BENEFICIARIES - ----------------------------------------------------------------- 9.1 Distribution to Beneficiary. If a Participant dies (either --------------------------- prior to or following his termination of service as a Director) the undistributed balance of each of his Participant Accounts will: (a) if distribution has commenced prior to his death, continue to be distributed in annual Installment Distributions, to the deceased Participant's Beneficiary with respect to the Participant Account during the remainder of the Distribution Period applicable to that Account as if the deceased Participant had lived; and (b) if distribution has not commenced prior to his death, be distributed in annual Installment Distributions commencing on the Distribution Payment Date and over the Distribution Period elected by the deceased Participant with respect to that Participant Account. 9.2 Beneficiary. The term "Beneficiary" means, with respect to ----------- any Participant, such natural or legal person or persons as may be designated by him (who may be designated contingently or successively) to receive the remaining balance of one or more of his Participant Accounts if he dies before a total distribution of the balance is made to him. A Beneficiary designation will be effective with respect to a Participant Account only when a signed and dated beneficiary designation form applicable to that Account is filed with the Committee while the Participant is alive, which form will cancel any beneficiary designation form relating to that Participant Account signed and filed earlier. If a Participant is not survived by any Beneficiary of a Participant Account the Committee shall distribute the balance of that Participant Account to the legal representative or representatives of the estate of the Participant. SECTION 10 - DISTRIBUTIONS TO INCAPACITATED PERSONS - --------------------------------------------------- Notwithstanding any other provision of the Plan, if a Participant or other person entitled to a distribution under the Plan is determined by a court of competent jurisdiction to be physically, mentally or legally incapacitated and unable to manage his financial affairs and claim is made by a conservator or other person legally charged by such court with the care of his person, the Committee shall make distributions to such conservator or other person. Any distribution made in accordance with this Section shall fully acquit and discharge all persons from all further liability on account thereof. SECTION 11 - AMENDMENT AND TERMINATION - -------------------------------------- The Board of Directors reserves the right to amend the Plan at any time, except that no amendment shall reduce a Participant's Participant Account balances to less than the amounts that he would have been entitled to receive on the later of the effective date of the amendment or the date on which the amendment is adopted. The Plan will terminate on the date on which it is terminated by the Board of Directors, provided, however, that an amendment or termination shall not change the following: (a) at least two Crediting Options shall be maintained until the aggregate balances of all Participant Accounts have been distributed; and (b) distributions from the Plan shall continue to be made under Section 8 or Section 9, as the case may be, pursuant to elections previously made by Participants or as otherwise provided under Section 8 or 9. EXHIBIT I TO THE MEAD CORPORATION DIRECTORS CAPITAL ACCUMULATION PLAN ----------------------------------- The Crediting Options available under the Plan as of January 1, 1995 are: Fund Managed By --------- ---------- (1) Money Market PacMutual (2) Managed Bond PIMCO (3) Multi Strategy J.P. Morgan (4) Equity Income J.P. Morgan (5) Equity Index Bankers Trust (6) Growth Cap Guardian Trust (7) Growth L.T. Janus Capital (8) International Templeton WP\H:\WORK\SEC\10Q\96\EXHIBITS\2NDQTR\CAPACC 071296dlw EX-10.2 3 THE MEAD CORPORATION RESTRICTED STOCK PLAN Exhibit 10(2) THE MEAD CORPORATION RESTRICTED STOCK PLAN --------------------- ARTICLE I. GENERAL PROVISIONS - ---------- ------------------ Section 1. Purpose. The purpose of The Mead Corporation ---------- -------- Restricted Stock Plan (the "Plan") is to provide certain compensation to eligible directors and employees in the form of Common Shares ("Shares") of The Mead Corporation (the "Company") which are restricted in accordance with the terms and conditions set forth below and to encourage the continued high level of performance of such directors and employees by increasing the identity of interests of such directors and employees with the shareholders of the Company. The Plan is intended to be an unfunded program established for the purpose of providing compensation for eligible directors and a select group of management employees and is exempt from Parts 1 through 4 of Title I of the Employee Retirement Income Security Act of 1974, as amended. Section 2. Definitions. For purposes of the Plan, the following ---------- ------------ terms shall have the following meanings: (a) "Board of Directors" means the Board of Directors of the Company. (b) "Change in Control" means the occurrence of any of the following: (i) any "person" or "group" within the meaning of Sections 13(d) and 14(d) (2) of the Securities Exchange Act of 1934, as amended (the "Act"), becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act) of more than 25% of the then outstanding voting shares of the Company otherwise than through a transaction arranged by, or consummated with the prior approval of, the Board of Directors, or (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board of Directors (and any new director whose election by the Board of Directors or whose nomination for election by the Company's shareholders was approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of such period or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority thereof. (c) "Committee" means the Compensation Committee of the Board of Directors. (d) "Company" means The Mead Corporation; however, when used with reference to employment, "Company" also includes any corporation, partnership or other person or entity at least 10% of the voting or equity interest of which is owned or controlled, directly or indirectly, by the Company. (e) "Eligible Director" means any director of the Company who is not also an employee of the Company. (f) "Eligible Employee" means any employee of the Company selected by the Committee. (g) "Grant Date" means the date on which Restricted Shares are to be granted pursuant to Article II, Section 1. (h) "Market Value" means the average of the highest sale price and the lowest sale price of a Share on the date the value of a Share is to be determined, as reported on the New York Stock Exchange - Composite Transactions Tape (or other similar source) or, if no sale is reported for such date, then on the next preceding date for which a sale is reported. (i) "Participant" means any individual who holds Restricted Shares granted under the Plan. (j) "Restriction Period" means (i) in the case of Restricted Shares granted pursuant to Article II. Section 1(a), (b) or Section 2, the period of five years from the date the Restricted Shares are granted, (ii) in the case of Restricted Shares granted pursuant to Article II. Section 1(c), the date the grantee becomes age 55 or six months from the date the Restricted Shares are granted, whichever is later, and (iii) in the case of Restricted Shares granted pursuant to Article III, the period of six months or longer (as determined by the Committee) from the date Restricted Shares are granted. (k) "Restricted Shares" means any Shares issued or delivered pursuant to the Plan which remain subject to the restrictions set forth in Article I, Section 5 of the Plan. (l) "Shares" means the Common Shares, without par value, of the Company. Section 3. Administration. (a) The Plan shall be administered by ---------- --------------- the Committee. Subject to the express provisions of the Plan, the Committee and the Board of Directors shall each have authority to construe and interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to the Plan, and to make all other determinations necessary or advisable for administering the Plan. The Committee or the Board of Directors may correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent it shall deem expedient to carry it into effect. The determination of the Committee or the Board of Directors on any matters within the scope of this section shall be conclusive. A majority of the Committee shall constitute a quorum for meetings of the Committee, and the act of a majority of the Committee at a meeting, or an act reduced to or approved in writing by all members of the Committee, shall be the act of the Committee. In the case of Restricted Shares granted pursuant to Article III, the Committee may in its discretion impose additional conditions or restrictions as to the attainment of specified performance goals during the Restriction Period for all or a portion of the shares or all or a portion of the years in the Restriction Period. (b) The Committee may waive or modify at any time any condition or restriction (including, without limitation, any of the restrictions set forth in Article I, Section 5) with respect to any Restricted Shares issued pursuant to Article III. Section 4. Shares Subject to the Plan. Subject to adjustment as ---------- --------------------------- provided in Section 1 of Article IV, the maximum number of Shares which may be granted as Restricted Shares under the Plan is 500,000; the maximum number of Shares which may be granted as Restricted Shares to any individual pursuant to Section 2 of Article II is 20,000; and, the maximum number of Shares which may be granted as Restricted Shares to any eligible employee pursuant to Article III is 150,000. Shares granted as Restricted Shares under the Plan may be authorized and unissued Shares or Shares held in the Company's treasury. Any Shares which are granted as Restricted Shares under the Plan and which are thereafter forfeited by the participant may again be granted under the Plan as Restricted Shares. Section 5. Terms and Conditions of Restricted Shares. (a) ---------- ------------------------------------------ Subject to the provisions of paragraph (b) of this Section 5, Restricted Shares issued pursuant to the Plan shall be subject to the following restrictions: (i) the Participant shall not be entitled to receive delivery of the certificate for such Restricted Shares until the expiration of the Restriction Period; (ii) such Restricted Shares shall not be sold, transferred, assigned, pledged or otherwise encumbered or disposed of during the Restriction Period; and (iii) all such Restricted Shares shall be forfeited and all right of the Participant to such Restricted Shares shall terminate without further obligations on the part of the Company if the Participant ceases to be a director of the Company (in the case of a Participant who received Restricted Shares as an Eligible Director) or an employee of the Company (in the case of a Participant who received Restricted Shares as an Eligible Employee) prior to the end of the Restriction Period. Upon the forfeiture of Restricted Shares, such Shares shall be returned to the status of authorized and unissued Shares or treasury Shares, as determined by the Committee. (b) Notwithstanding the provisions of paragraph (a) of this Section 5, in the event a Participant ceases to be a director of the Company (in the case of a Participant who received Restricted Shares as an Eligible Director) or an employee of the Company (in the case of a Participant who received Restricted Shares as an Eligible Employee) prior to the end of a Restriction Period as a result of such Participant's death, disability or normal retirement in accordance with the Company's policies, then the restrictions set forth in paragraph (a) of this Section 5 shall immediately cease to apply to (and all rights of the Participant shall immediately vest with respect to): (i) all of the Restricted Shares, if any, registered in the name of such Participant which were granted pursuant to Section 1(c) or 2 of Article II of the Plan or Article III of the Plan; (ii) a number of the Restricted Shares, if any, registered in the name of such Participant which were granted pursuant to Section 1(a) of Article II of the Plan (rounded to the nearest whole share) determined as if such restrictions had ceased with respect to 20% of such Restricted Shares on the date on which such Restricted Shares were granted and on each anniversary of such date occurring prior to the Participant's death, disability or retirement; and (iii) a number of the Restricted Shares, if any, registered in the name of such Participant which were granted pursuant to Section 1(b) of Article II of the Plan (rounded to the nearest whole share) equal to the number of Restricted Shares which on the date such Restricted Shares were granted had a Market Value equal to the product of $7,500 times the number of full or partial calendar years expiring since such Restricted Shares were granted and prior to the Participant's death, disability or retirement. In any event, all such Restricted Shares shall be forfeited and all rights of the Participant to such Restricted Shares shall terminate without further obligations on the part of the Company if the Participant, directly or indirectly, individually or as an agent, officer, director, employee, shareholder (excluding being the holder of any stock which represents less than 1% interest in a corporation), partner or in any other capacity whatsoever engages prior to the time such restrictions cease to apply in any activity competitive with or adverse to the Company's business or in the sale, distribution, production or attempted sale or distribution of any goods, products or services then sold or being developed by the Company. (c) Upon the occurrence of a Change in Control, all of the restrictions set forth in this Section 5 shall immediately cease to apply to all Restricted Shares issued pursuant to the Plan, except to the extent that the lapse of such restrictions would, in the opinion of counsel selected by the Company's independent auditors, constitute "parachute payments" within the meaning of Section 280G(b)(2)(A) of the Internal Revenue Code (the "Code") and, when added to any other "parachute payments" which would be received by the Participant pursuant to the terms of any other plan, arrangement or agreement with the Company, any person whose actions result in a change in control of the Company or any person affiliated with the Company or such person, would be subject to the tax imposed by Section 4999 of the Code. (d) At the end of the Restriction Period, or at such earlier time as it is provided for in paragraphs (b) or (c) of this Section 5, the restrictions applicable to the Restricted Shares pursuant to this Section 5 shall cease and a share certificate for the number of Restricted Shares with respect to which the restrictions have ceased shall be delivered, free of all such restrictions and all restrictive legends, to the Participant or the Participant's beneficiary or estate, as the case may be. (e) If required by the Committee, each grant of Restricted Shares shall be evidenced by a written agreement between the Company and the Participant. (f) In the event that the restrictions set forth in paragraph (a) of this Section 5 shall cease to apply to any Restricted Shares granted to Eligible Employees subject to Section 16 of the Act prior to the date which is six months after the date of grant of such Restricted Shares, then, notwithstanding any provision to the contrary in this Section 5, the restrictions set forth in paragraphs (a)(i) and (a)(ii) of this Section 5 shall continue in effect until the date which is six months after the date of such grant. (g) Notwithstanding any provision to the contrary in this Section 5, but subject nonetheless to paragraph (c) of this Section 5, in the case of Restricted Shares granted pursuant to Article III, if the Participant fails to attain specified performance goals set forth with respect to such Restricted Shares during the Restriction Period, the Participant will forfeit such Restricted Shares to the extent specified in the grant of such Restricted Shares and the right of the Participant to such Restricted Shares shall terminate to the extent specified in the grant of such Restricted Shares without any further obligations on the part of the Company. Section 6. Rights as a Shareholder. ---------- ------------------------ (a) Upon the grant of Restricted Shares pursuant to Article II or Article III of the Plan, the Company shall issue a share registered in the name of the Participant bearing the following legend and any other legend required by any federal or state securities laws: "The transferability of this certificate and the Common Shares represented hereby are subject to the restrictions, terms and conditions (including forfeiture and restrictions against sale, assignment, transfer, pledge, hypothecation and other disposition) set forth in The Mead Corporation Restricted Stock Plan. Copies of such Plan will be mailed to any shareholder without charge within five days after receipt of written request therefor address to Secretary, The Mead Corporation, Mead World Headquarters, Courthouse Plaza Northeast, Dayton, OH 45463." Each such share shall be retained by the Company until the restrictions set forth in Article I, Section 5(a) cease to apply to the Shares. (b) Upon the issuance of Restricted Shares pursuant to paragraph (a) of this Section 6, the Participant shall, subject to all of the terms, conditions and restrictions set forth in the Plan, have all of the rights of a holder of Shares, including the right to vote and to receive dividends and other distributions with respect thereto. ARTICLE II. RESTRICTED SHARES FOR ELIGIBLE DIRECTORS - ----------- ----------------------------------------- Section 1. Grant of Restricted Shares to Eligible Directors. (a) ---------- ------------------------------------------------- On the third business day of January, 1988 and on each fifth anniversary of such date during the term of the Plan, (each such date is hereinafter referred to as a "Grant Date"), the Company shall grant a number of Restricted Shares to each then Eligible Director determined by dividing $37,500 by the Market Value of a Share on the Grant Date (rounded to the nearest whole shares). (b) If during the term of the Plan any person becomes an Eligible Director on a date other than a Grant Date, the Company shall grant such person a number of Restricted Shares determined by dividing $37,500 (less the product of $7,500 times the number of full years since the last Grant Date) by the Market Value of a Share (rounded to the nearest whole share) on the date of such person's election to the Board of Directors. (c) Each Eligible Director shall automatically receive a grant of a number of Restricted Shares of the Company equal to the quotient obtained by dividing (i) 5,000, by (ii) the Market Value per Share on the date the Plan, as amended, is approved by the Shareholders (the "Initial Grant"). Thereafter, on the third business day of January, 1997 and on each annual anniversary of such date during the term of the Plan, the Company shall grant and each Eligible Director shall automatically receive a number of Restricted Shares which shall equal the product obtained by multiplying the Initial Grant by an adjustment factor (the "Factor"). The Factor shall equal the quotient obtained by dividing (y) the base line number for average total compensation paid to directors by companies with annual sales in excess of $4 billion, as published in the Hay Consulting Group's "Directors Compensation Report" (or comparable successor report) in the calendar year immediately preceding the year in which such grant is made, which report covers compensation paid in the year ending immediately prior to the year of publication, by (z) 36,246. In the event that such Directors Compensation Report (or comparable successor report) is not published with respect to any year, the Factor shall equal one (1). Section 2. Election to Receive Compensation as Restricted Shares. ---------- ------------------------------------------------------ (a) Not later than June 1 of each year during the term of the Plan, the Committee shall cause each Eligible Director to be furnished with an appropriate form which enables the director to elect to receive payment in Restricted Shares of a minimum of 20% up to a maximum of 100% (in increments of 10%) of the annual retainer fee to be earned by such director for service on the Board of Directors during the following calendar year which is paid on or after the first day of such calendar year. In order to be effective, the election form must be signed by the director and must be returned to the Committee or its delegate not later than July 1 of the year prior to the year with respect to which the election is being made. All such elections are irrevocable. (b) A new Eligible Director may, by filing the prescribed election form, elect to receive the annual retainer fee as Restricted Shares as provided in paragraph (a) of this Section 2 only if the election form is signed and filed at least six months prior to the date of payment of the annual retainer fee to such director. (c) If an Eligible Director has elected to receive all or a portion of the annual retainer fee as Restricted Shares as provided in this Section 2, then on the date such fee would otherwise be payable, the Company shall grant to such director a number of Restricted Shares determined by dividing the compensation so to be received by the Market Value of a Share on such date such other compensation would otherwise be payable (rounded to the nearest whole share). ARTICLE III. RESTRICTED SHARES FOR ELIGIBLE EMPLOYEES - ------------ ----------------------------------------- Section 1. Grant of Restricted Shares to Eligible Employees. ---------- ------------------------------------------------- From time to time during the term of the Plan, the Committee may determine that Restricted Shares shall be granted to Eligible Employees either as payment for all or a portion of the compensation to be paid to any Eligible Employee pursuant to the Company's incentive compensation plans, or for any other reason consistent with the purposes of the Plan. Restricted Shares to be granted as payment for all or a portion of incentive compensation shall be granted on the date the compensation is awarded, and the number of Restricted Shares so granted shall be determined by dividing the amount of such compensation by the Market Value of a Share on the date the compensation is awarded (rounded to the nearest whole Share). ARTICLE IV. MISCELLANEOUS - ----------- --------------- Section 1. Adjustments Upon Changes in Capitalization. Upon any ---------- ------------------------------------------- change in the outstanding Shares by virtue of a share dividend or split, recapitalization, merger, consolidation, combination or exchange of shares or other similar change, the number of Restricted Shares which may be granted under the Plan (or the class of shares which may be granted as Restricted Shares) shall be adjusted appropriately by the Committee, whose determination with respect to such adjustment shall be conclusive. Unless the Committee shall otherwise determine, any securities and other property received by a Participant in connection with or as a result of any such change with respect to Restricted Shares (excluding dividends paid in cash) shall be subject to the restrictions then applicable to Restricted Shares under the Plan (including forfeiture), and shall be deposited promptly with the Company to be held in custody until the restrictions cease to apply to the Restricted Shares to which such securities or other property relates. Notwithstanding the foregoing, however, in the event any rights to purchase Shares are issued pursuant to the Company's Shareholder Rights Plan (or any successor plan) with respect to Restricted Shares, such rights shall cease to be subject to the restrictions applicable to the underlying Restricted Shares at such time, if any, as such rights become exercisable. Section 2. Compliance with Laws. The issuance or delivery of ---------- --------------------- Shares pursuant to the Plan shall be subject to, and shall comply with, any applicable requirements of federal and state securities laws, rules and regulations (including, without limitation, the provisions of the Securities Act of 1933, the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder), any securities exchange upon which the Shares may be listed and any other law or regulation applicable thereto, and the Company shall not be obligated to issue or deliver any Shares pursuant to the Plan if such issuance or delivery would violate any such requirements. The foregoing shall not, however, be deemed to require the Company to effect any registration of Shares under any such law or regulation. Section 3. Amendment and Termination. (a) The Board of Directors ---------- -------------------------- may from time to time amend the Plan, or any provision thereof, in such respects as the Board of Directors may deem advisable; provided, however, that any such amendment must be approved by the holders of Shares entitling them to exercise a majority of the voting power of the Company if such amendment would: (i) materially increase the benefits accruing to participants under the Plan; (ii) materially increase the aggregate number of Shares which may be issued and/or delivered or the number of Shares which may be granted to any individual under the Plan; (iii) materially modify the requirements as to eligibility for participation in the Plan. (b) The Plan shall terminate and no additional Restricted Shares shall be granted under the Plan after September 30, 2005; provided, however, that the Board of Directors may earlier terminate the Plan at any time. (c) No amendment to or termination or expiration of the Plan shall adversely affect any Restricted Shares previously granted under the Plan without the consent of the holder thereof. (d) Notwithstanding paragraph (a) of this Section 3, the provisions of Section 1 of Article II may not be amended more than once every six months other than to comport with changes in the Code, ERISA or the rules thereunder. Section 4. Notices. Each notice relating to the Plan shall be in ---------- -------- writing and delivered in person or by mail to the proper address. Each notice shall be deemed to have been given on the date it is delivered or mailed except that an election to receive compensation as Restricted Shares pursuant to Article II, Section 2 shall be deemed to have been given on the date it is received by the Committee. Each notice to the Committee shall be addressed as follows: The Mead Corporation, Mead World Headquarters, Courthouse Plaza Northeast, Dayton, Ohio 45463, Attention: Secretary. Each notice to a Participant shall be addressed to the Participant's address as set forth in the records of the Company. Anyone to whom a notice may be given under this Plan may designate a new address by written notice to the Company or to the Participants, as the case may be. Section 5. Benefits of Plan. The Plan shall inure to the benefit ---------- ----------------- of, and shall be binding upon, each successor and assign of the Company. All rights and obligations imposed upon a Participant and all rights granted to the Company under this Plan shall be binding upon such Participant's heirs, legal representatives and successors. Nothing in the Plan shall be deemed to create any obligation on the part of the Company to nominate any director for re-election or to continue the employment of any employee. Section 6. Taxes. (a) The Company shall have the right to ---------- ------ require, prior to the issuance or delivery of any Restricted Shares, payment by the Participant of any taxes required by law with respect to the issuance or delivery of such Restricted Shares. (b) On any date on or after January 1, 1994 that restrictions applicable to Restricted Shares granted (or to be granted) hereunder shall have ceased pursuant to Article I, Section 5 (the "Lapse Date"), and with respect to persons subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "1934 Act") on any date thereafter through the end of the next following period (the "Window Period") specified in Rule 16b-3(e)(3) (or any successor rule) under the 1934 Act, the Participant to whom such Restricted Shares were granted may elect to have the Company retain, from the Restricted Shares to be delivered at the end of the Restriction Period, Shares having a Market Value on the date of delivery equal to all or any part of the federal, state and local withholding tax payments (whether mandatory or permissive) to be made by the Participant with respect to ceasing of the restrictions (up to the maximum amount determined by the Participant's top marginal tax rate) in lieu of making such payments in cash; provided that such election may also be made in advance of the Lapse Date and will be effective on the date specified in the notice of election (subject, as applicable, to Section 16 of the 1934 Act), and further provided that, with respect to a Lapse Date that has occurred or will occur between January 1, 1994 and October 28, 1994, the election may be made by persons subject to and in accordance with Section 16 of the 1934 Act through the end of the first Window Period which commences on, includes or follows October 28, 1994. The Committee may establish from time to time rules or limitations with respect to the right of a Participant to elect to have the Company retain Restricted Shares in satisfaction of withholding payments; provided, however, that, in any event, any such rules or limitations must be in accordance with Section 16 of the 1934 Act and any applicable rules established under such Section. Section 7. Governing Law. All grants of Restricted Shares shall ---------- -------------- be made and accepted in the State of Ohio. The laws of the State of Ohio shall control the interpretation and performance of the provisions of the Plan. Section 8. Effective Date of the Plan. The effective date of the ---------- --------------------------- Plan shall be December 10, 1987; provided, however, that if the Plan is not approved at the 1988 Annual Meeting of Shareholders by the holders of at least a majority of the outstanding voting power of of the Company, the Plan shall immediately terminate. No dividends shall be paid prior to the 1988 Annual Meeting of Shareholders with respect to any Restricted Shares granted prior to such meeting. If the Plan is not approved at such meeting, all Restricted Shares granted prior thereto shall be retained by the Company, and the Company shall pay to the Participant in whose name such Restricted Shares were registered an amount equal to the Market Value on the date of grant of a number of Shares equal to such number of Restricted Shares. -------------------------------------- NOTE: (1) Adopted by the Board of Directors of the Company on December 11, 1987. (2) Approved by the shareholders of the Company on April 28, 1988. (3) Addition of Article II, Section 2, subsection (d) adopted by the Board of Directors of the Company on December 15, 1989 (deleted February 28, 1991). (4) Amendment to Article I, Section 2, subsection (h) adopted by the Board of Directors of the Company on January 25, 1990. (5) Amendments to Article I, Section 2, subsections (d) and (j); Article I, Section 3, subsection (a); and Article III, Section 1; and addition of Article 2, Section 5, subsection (g), adopted by the Board of Directors of the Company on January 24, 1991, and approved by the shareholders of the Company on April 25, 1991. (6) Amendments to Article II, Section 2, subsections (a) and (b); and addition of Article I, Section 5, subsection (f) and Article IV, Section 3, subsection (d) adopted by the Board of Directors of the Company on February 28, 1991. (7) Amendments to Article I, Section 5, subsection (b); and addition of Article I, Section 5, subsection (b)(iii), adopted by the Board of Directors of the Company on July 23, 1992. (8) Amendment to Article IV, Section 6, subsection (b) adopted by the Board of Directors of the Company on April 28, 1994. (9) Amendments to Article I, Section 2(j), Section 4, Section 5(b)(i), Section 6, Article II, Section 1(c), Article IV, Section 3(b) adopted by the Board of Directors of the Company on October 28, 1995, and approved by the shareholders of the Company on April 25, 1996. WP\H:\WORK\SEC\10Q\96\EXHIBITS\2NDQTR\RESTOCK 072696dlw EX-11.1 4 CALCULATIONS OF NET EARNINGS PER SHARE EXHIBIT (11.1)
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES - -------------------------------------------------- CALCULATION OF PRIMARY NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE - -------------------------------------------------------------------------- (All amounts in thousands, except per share amounts) Second Quarter Ended First Half Ended -------------------- -------------------- June 30, July 2, June 30, July 2, 1996 1995 1996 1995 -------- -------- -------- -------- NET EARNINGS APPLICABLE TO COMMON AND COMMON EQUIVALENT SHARES $ 67,052 $102,160 $103,376 $163,902 ======== ======== ======== ======== AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING: Average number of common shares outstanding 52,527 53,618 52,653 55,197 Dilutive effect of stock options after application of treasury stock method 713 871 701 890 -------- -------- -------- -------- AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 53,240 54,489 53,354 56,087 ======== ======== ======== ======== PRIMARY NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE $ 1.26 $ 1.87 $ 1.94 $ 2.92 ======== ======== ======== ========
EX-11.2 5 CALCULATIONS OF NET EARNINGS PER SHARE EXHIBIT (11.2)
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES CALCULATION OF FULLY DILUTED NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE (1) (All amounts in thousands, except per share amounts) Second Quarter Ended First Half Ended -------------------- -------------------- June 30, July 2, June 30, July 2, 1996 1995 1996 1995 -------- -------- -------- -------- NET EARNINGS APPLICABLE TO COMMON AND COMMON EQUIVALENT SHARES $ 67,052 $102,160 $103,376 $163,902 ======== ======== ======== ======== AVERAGE NUMBER OF SHARES OUTSTANDING ON A FULLY DILUTED BASIS: Shares used in calculating primary earnings per share 53,240 54,489 53,354 56,087 Additional dilutive effect of stock options after application of treasury stock method 266 1 276 -------- -------- -------- -------- AVERAGE NUMBER OF SHARES OUTSTANDING ON A FULLY DILUTED BASIS 53,240 54,755 53,355 56,363 ======== ======== ======== ======== FULLY DILUTED NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE $ 1.26 $ 1.87 $ 1.94 $ 2.91 ======== ======== ======== ======== (1) This calculation is submitted in accordance with 17 CFR 229.601(b)(11) although not required by APB Opinion No. 15 because it results in dilution of less than 3%.
EX-27 6
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY REPORT ON FORM 10-Q OF THE MEAD CORPORATION FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. THIS SCHEDULE SHALL NOT BE DEEMED TO BE FILED FOR PURPOSES OF SECTION 11 OF THE SECURITIES ACT OF 1933, SECTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 323 OF THE TRUST INDENTURE ACT OF 1939, OR OTHERWISE SUBJECT TO THE LIABILITIES OF SUCH SECTIONS, NOR SHALL IT BE DEEMED A PART OF ANY REGISTRATION STATEMENT TO WHICH IT RELATES. 6-MOS DEC-31-1996 JUN-30-1996 22 0 691 0 479 1,283 4,457 2,029 4,383 743 727 0 0 156 2,035 4,383 0 2,326 0 1,864 0 0 27 168 62 106 0 0 0 103 1.94 0
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