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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from __________ to __________

COMMISSION FILE NUMBER 1-13923

WAUSAU-MOSINEE PAPER CORPORATION
(Exact name of registrant as specified in charter)

1244 KRONENWETTER DRIVE WISCONSIN
MOSINEE, WISCONSIN 54455 (State of incorporation)
(Address of principal executive office) 39-0690900
(I.R.S. Employer Identification
Number)

Registrant's telephone number, including area code: 715-693-4470

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered
COMMON STOCK, NO PAR VALUE NEW YORK STOCK EXCHANGE

Securities registered pursuant to Section 12(g) of the Act: NONE

Indicate by check whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such report), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No ___

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).
Yes X No ___

As of June 30, 2003, the aggregate market value of the common stock
shares held by non-affiliates was approximately $524,397,760. For purposes of
this calculation, the registrant has assumed its directors and executive
officers are affiliates. As of February 19, 2004, 51,651,251 shares of common
stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
PROXY STATEMENT FOR USE IN CONNECTION WITH 2004 ANNUAL MEETING OF SHAREHOLDERS
(TO THE EXTENT NOTED HEREIN): PART III

TABLE OF CONTENTS

Page
PART I
Item 1. Business............................................................1
Item 2. Properties.........................................................12
Item 3. Legal Proceedings..................................................14
Item 4. Submission of Matters to a Vote of Security Holders................14

PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters..................................................15
Item 6. Selected Financial Data............................................16
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................17
Item 7A. Quantitative and Qualitative Disclosure About Market Risk..........28
Item 8. Financial Statements and Supplementary Data........................29
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosures.....................56
Item 9A. Controls and Procedures............................................56

PART III
Item 10. Directors and Executive Officers of the Registrant.................57
Item 11. Executive Compensation.............................................58
Item 12. Security Ownership of Certain Beneficial Owners and Management
and Related Stockholder Matters..........................58
Item 13. Certain Relationships and Related Transactions.....................58
Item 14. Principal Accountant Fees and Services.............................58

PART IV
Item 15. Exhibits, Financial Statement Schedules, and Reports on Form 8-K...59

PART I

ITEM 1. BUSINESS

GENERAL

Wausau-Mosinee Paper Corporation (the "Company") manufactures, converts, and
sells paper and paper products within three principal operating groups: the
Printing & Writing Group, the Specialty Paper Group and the Towel & Tissue
Group. Its principal office is located in Mosinee, Wisconsin. At December 31,
2003, the Company had approximately 3,100 employees at ten operating facilities
located in six states.

This report contains certain of management's expectations and other forward-
looking information regarding the Company. See the subcaption "Cautionary
Statement Regarding Forward-Looking Statements" in this Item 1.

FINANCIAL INFORMATION ABOUT SEGMENTS

Information relating to the Company's sales, a measure of operating profit or
loss, and total assets by segment is set forth in Note 13 of Notes to
Consolidated Financial Statements.

NARRATIVE DESCRIPTION OF BUSINESS

The Company competes in different markets within the paper industry. Each of
its operating groups serves distinct market niches. The various markets for
the products of the Company are highly competitive, with competition based on
service, quality, and price.

The Company's ten operating facilities are organized into the three operating
groups as described below.

PRINTING & WRITING GROUP

The Printing & Writing Group produces and converts two lines of paper products
in five facilities. At facilities in Appleton and Brokaw, Wisconsin, and
Groveton, New Hampshire, the Group manufactures and converts a broad line of
premium uncoated printing, writing, and imaging papers in various weights,
colors, sizes, and finishes. Approximately 50% of the fine printing and
writing papers produced are colored papers. Distribution warehouses are
currently maintained in Appleton and Brokaw, Wisconsin; Groveton, New
Hampshire; Dallas, Texas; and Los Angeles, California.

Under the Wausau Papers (reg-trade-mark) label, products are marketed under a
variety of brands, including Astrobrights (reg-trade-mark),
Astropaque (reg-trade-mark), Royal and Professional Series (reg-trade-mark)
products. These papers are used for printed and photocopied documents such as
annual reports, brochures, announcements, and greeting cards. Over 80% of
Wausau Papers' products are sold in sheet form to paper distributors, who sell
to commercial printers, in-plant print shops, quick printers, and copy centers
and to office supply stores to reach small- and home-office customers.
Products are also sold in roll form to converters that serve the greeting card,
envelope, and announcement industry.
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The Group's fine printing and writing sales are estimated to be less than 3% of
the total uncoated free-sheet market.

Competition in printing and writing grades comes from specialty divisions of
major integrated paper companies as well as smaller, privately held non-
integrated companies. The Company estimates that the number of principal
competitors in the printing and writing grade papers portion of uncoated free-
sheet market is approximately 14. Competitors include International Paper
Corporation, Domtar, Inc., and Weyerhaeuser Company.

The Mosinee Converted Products facilities, operating in Columbus, Wisconsin,
and Jackson, Mississippi, produce moisture-barrier laminated roll wrap used to
protect rolls of paper during storage and shipment, and related specialty
finishing and packaging products such as custom coating, laminating and

converting. These products are sold to manufacturers and converters who serve
multiple industries including paper, industrial packaging, and corrugated
containers. Effective March 3, 2003, the Company acquired the production
assets and customer base of Laminated Papers, Inc. Mosinee Converted Products'
moisture barrier laminated roll wrap sales were estimated to be approximately
50% of the North American roll wrap market following the acquisition.

Primary competition in roll wrap comes from approximately 6 other wax and poly
laminators and includes Cascades/Sonoco, Inc., Ludlow Coated Products, and
Deluxe Paper Products, Inc.

SPECIALTY PAPER GROUP

The Specialty Paper Group's three facilities produce a wide variety of
technical specialty papers. The technical specialty papers markets are diverse
and highly fragmented. The Group's market position varies by product, but it
is a leading producer of liner papers used for "peel-and-stick" pressure
sensitive labels and the largest domestic producer of unsaturated masking tape
base paper.

The Rhinelander mill located in Rhinelander, Wisconsin, and the Otis mill
located in Jay, Maine, together are one of the nation's largest manufacturers
of supercalendered backing papers that are used as a base from which "peel-and-
stick" pressure sensitive labels are dispensed. These highly engineered
backing papers are designed for high-speed labeling machines, which apply
labels on consumer products such as shampoo and deodorant. These facilities
also manufacture specialty papers for a broad range of food, medical, and
industrial applications, including grease-resistant protective barrier paper
for pet food and microwave popcorn, and lightweight paper for sterilized
medical packaging. These products are sold directly to manufacturers and
converters, mainly in the U.S., that serve a host of industries including
consumer products, food service, pet food, and medical packaging.

Primary competition for supercalendered backing papers comes from approximately
7 paper producing companies including International Paper Corporation, Fraser
Paper, Inc., and UPM Kymmene Corp.

The Mosinee mill in Mosinee, Wisconsin, and the Otis mill together are North
America's largest producers of unsaturated masking tape base paper used in the
production of masking tape. The Mosinee mill also manufactures a wide range of
highly engineered paper products. These
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products include interleaver paper used in steel processing and to protect
polished steel after production, coating and laminating base papers used in
composite can labeling, and liner applications and high-performance industrial
papers chemically treated for wet strength, flame retardancy, anti-static,
corrosion, or grease resistance for various industries such as automotive,
metal, housing, and food processing. These products are sold directly to
manufacturers and converters, mainly in the U.S.

Competition in several grades of paper made from the Mosinee mill's natural
kraft pulp comes from approximately 9 other fully-integrated, large paper
companies including International Paper Corporation, Longview Fibre
Corporation, and Port Townsend Paper Corporation. Competition in grades of
paper made from market pulp comes from approximately 6 specialty paper

producers including MeadWestvaco Corporation and International Paper
Corporation.

TOWEL & TISSUE GROUP

The Towel & Tissue Group produces a broad line of paper towel and tissue
products which are marketed along with soap and dispensing system products for
the industrial and commercial "away-from-home" market.

Under the Bay West (reg-trade-mark) name, towel and tissue products made
primarily from recycled material are marketed under a number of brands
including DublSoft (reg-trade-mark), EcoSoft (trademark) and Dubl-
Tough (reg-trade-mark). These products include washroom roll and folded towels,
tissue products, a variety of towel, tissue, and soap dispensers, windshield
folded towels, industrial wipers, dairy towels, household roll towels, and
other premium towel and tissue products. Products are sold to paper and
sanitary supply distributors in North America that serve factories and other
commercial and industrial locations, health service facilities, office
buildings, restaurants, theme parks, airports, and hotels. The Group's towel
and tissue mill is located in Middletown, Ohio and its converting facility and
main distribution warehouse are located in Harrodsburg, Kentucky. In addition,
the Company currently maintains a distribution warehouse in Los Angeles,
California.

Competition comes from major integrated paper companies and smaller converters
which service consumer and food service markets as well as the industrial and
institutional markets concentrated on by Bay West. Major competitors include
Georgia-Pacific Corporation, Kimberly Clark Corporation, and SCA Hygiene
Products.

EXPORT SALES

In addition to the three operating groups, Wausau-Mosinee International, Inc.,
a wholly-owned subsidiary of the Company, is the commissioned sales agent for
the export sales of the Company. Wausau-Mosinee International, Inc. has
elected to be treated as a foreign sales corporation for federal income tax
purposes. Through 2001, the Company obtained certain U.S. income tax benefits
from the operation of the foreign sales corporation. In response to a World
Trade Organization ("WTO") Appellate Body decision that the tax treatment
accorded such corporations constituted a prohibited export subsidy, the United
States enacted legislation to repeal the foreign sales corporation tax
provisions, subject to transition rules which expired on December 31, 2001, and
enacted replacement legislation in the form of the Extraterritorial Income
Exclusion ("ETI") Act of 2000. The European Union objected to this new
legislation, and in January 2002, the Appellate Body of the WTO held that the
United States had failed to
-3-
withdraw the prohibited export subsidy. The continued status of the ETI regime
after 2003 appears doubtful. The United States is considering enacting
legislation in 2004 that would repeal the ETI provisions. Some of these
proposed provisions contemplate other changes to the tax law that are intended
to mitigate the impact of the repeal of ETI. The Company cannot predict what
impact, if any, the outcome of the proposed legislation, when enacted, will
have on the Company's future earnings, although foreign sales represent less
than 8% of the Company's net sales.

RAW MATERIALS

Pulp is the basic raw material for paper production and represents
approximately one-half of the cost of making paper. The Mosinee and Brokaw
mills are the only Company facilities with pulping operations. These pulp
mills provide a percentage of the fiber needs to our Wisconsin paper operations
as follows: Mosinee, 57%; Brokaw 50%; and Rhinelander, 14%.

Wood fiber required for operation of the Company's pulp mills is purchased on
the open market in the form of pulpwood and chips from independent contractors.
In addition, approximately 8% of the timber consumed in pulping operations is
produced from Company-owned timberlands. Open-market pulpwood is purchased
from approximately 200 independent loggers at market prices under contracts
that typically provide for the delivery of a specified amount of wood and are
entered into on a quarterly basis. Open-market chips are also purchased from
independent sawmills. The balance of the Company's pulp needs at Mosinee and
Brokaw and all of the pulp used at the Company's other facilities (an aggregate
of nearly 400,000 air-dried metric tons annually) is purchased on the open
market, principally from pulp mills throughout the United States and Canada.
The Company has purchased, and may, from time to time in the future, purchase
pulp futures contracts as a hedge against significant future increases in the
market price of pulp.

Recycled, de-inked fiber with a high content of post-consumer waste is
purchased from domestic suppliers as part of the fiber requirements for the
Printing & Writing Group's recycled products. Recycled fiber is in adequate
supply and readily obtainable.

Towel & Tissue fulfills substantially all of its de-inked fiber needs from 100%
recycled waste which is readily available from domestic suppliers.
Approximately 160,000 standard tons of wastepaper is consumed annually. In
addition, approximately 30% of the Towel & Tissue Group's parent roll supply
needs are purchased from outside sources at current market prices.

Various chemicals are used in the pulping and papermaking processes. These
industrial chemicals are available from a number of suppliers and are purchased
at current market prices.

ENERGY

The Company's paper mills require large amounts of electrical and steam energy
which are adequately supplied by public utilities or generated at Company
operated facilities. The Company generates approximately 35% of its electrical
power needs from spent pulping liquor, fuel oil, coal, wood chips, fibercake,
natural gas, and hydropower. Natural gas delivery contracts typically cover
deliveries for one to two years and prices vary monthly based on published
indices. The Company may also purchase, from time to time, natural gas
contracts with fixed
-4-
prices for a certain portion of the Company's requirements. Coal and coal
transportation is generally purchased under multi-year agreements at fixed
prices. Fuel oil is not a significant energy source and is purchased under
spot contracts at spot prices as needed. Spent pulping liquor, wood chips,
and fibercake are byproducts of mill operations. The Company continues to
explore alternative power sources as an ongoing business process and has
entered into an operating lease for a co-generation electrical power facility

for its Groveton mill. The leased facility was completed and operational in
November, 2001.

Under the terms of a natural gas transportation agreement with the Portland
Natural Gas Transmission System, the Company is committed to the transportation
of a fixed volume of natural gas through September, 2019. The contract is only
for the transportation of natural gas from the Company's natural gas suppliers
to the Company's mill in New Hampshire. The Company is not required to buy or
sell minimum gas volumes under the agreement. The Company is required to pay a
minimum transportation fee of approximately $1.4 million annually per the
agreement; however, the Company's natural gas requirements exceed the level
required to be transported.

PATENTS AND TRADEMARKS

The Company develops and files trademarks and patents, as appropriate.
Trademarks include Wausau Papers{reg-trade-mark}, Astrobrights{reg-trade-mark},
Astropaque{reg-trade-mark}, Exact{reg-trade-mark}, FLEXCAL{reg-trade-mark}, Bay
West{reg-trade-mark}, Ecosoft{trademark}, DublSoft{reg-trade-mark}, and Wave `N
Dry{reg-trade-mark}, among others. The Company's patents cover various paper
towel dispensers and metering or other mechanisms for towel dispensers and
cabinets and certain silicone release papers. The Company considers its
trademarks and patents, in the aggregate, to be material to its business,
although the Company believes the loss of any one such mark or patent right
would not have a material adverse effect on its business. The Company does not
own or hold material licenses, franchises or concessions.

SEASONAL NATURE OF BUSINESS

The markets for some of the grades of paper produced by the Company tend to be
somewhat seasonal. However, the marketing seasons for these grades are not
necessarily the same. Overall, the Company generally experiences lower sales
in the first quarter, in comparison to the rest of the year, primarily due to
reduced business activity for many customers following the year-end holiday
season.

WORKING CAPITAL

As is customary in the paper industry, the Company carries adequate amounts of
raw materials and finished goods inventory to facilitate the manufacture and
rapid delivery of paper products to its customers.

MAJOR CUSTOMERS

A substantial portion of the Company's accounts receivable is with customers in
various paper converting, paper merchant, or distribution businesses. No
single customer accounted for 10% or more of the consolidated net sales during
2003.
-5-
BACKLOG

Company-wide order backlogs decreased to 31,632 tons representing $33.4 million
in sales as of December 31, 2003. This compares to 33,458 tons, or $35.3
million in sales as of December 31, 2002, and 27,500 tons, or $30.5 million in
sales at December 31, 2002. The decline in order backlog at December 31, 2003
compared to December 31, 2002 does not necessarily indicate weakening business

conditions, as a large portion of orders is shipped directly from inventory
upon receipt and does not affect backlog numbers. The entire backlog at
December 31, 2003 is expected to be shipped during fiscal 2004.

RESEARCH AND DEVELOPMENT

Research and development projects for the last three fiscal years primarily
involved development of new release liners for Specialty Paper's line of "peel-
and-stick" liner papers, food-packaging/ food-service papers and the
development of new color and writing grades at Printing & Writing.
Expenditures for product development in the last three fiscal years were:


(dollars in thousands)
Specialty Paper Printing & Writing
Year Total Group Group

2003 $2,155 $1,841 $314
2002 2,145 1,816 329
2001 4,058 3,538 520

ENVIRONMENT

The Company is subject to extensive regulation by various federal, state,
provincial, and local agencies concerning compliance with environmental control
statutes and regulations. These regulations impose limitations, including
effluent and emission limitations, on the discharge of materials into the
environment, as well as require the Company to obtain and operate in compliance
with conditions of permits and other governmental authorizations. Future
regulations could materially increase the Company's capital requirements and
certain operating expenses in future years.

The Company has a strong commitment to protecting the environment. Like its
competitors in the paper industry, the Company faces increasing capital
investments and operating costs to comply with expanding and more stringent
environmental regulations. The Company estimates that its capital expenditures
for environmental purposes will approximate $1.4 million in 2004.
The Company believes that capital expenditures associated with compliance with
environmental regulations will not have a material adverse effect on its
competitive position, consolidated financial condition, liquidity, or earnings.

The Company is not involved in any proceedings under the Comprehensive
Environmental Response, Compensation and Liability Act. In 1986, the Wisconsin
Department of Natural Resources ("DNR") notified a subsidiary of the Company
that under Wisconsin environmental laws it may be a potentially responsible
party ("PRP") for the Gorski landfill in Mosinee, Wisconsin, and nominated the
landfill to the Environmental Protection Agency's ("EPA") National Priorities
List. The DNR had identified elevated concentrations of chlorinated volatile
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organic compounds in three private water supply wells located in close
proximity to the landfill. The DNR has identified 10 PRPs. No action was
taken by either the DNR or the EPA until June 2000, when the DNR requested
certain parties who had disposed of waste at the site to form an ad hoc group
to cooperatively investigate the environmental contamination at the site. In
October 2001, the Company entered into an agreement with three other parties to
fund a study of the landfill to determine possible remediation strategies. The

Company worked with the DNR on the development of the study and work plan which
was initiated in early 2003. A report based upon the study is expected to be
submitted to the DNR in March 2004. The Company estimates that the costs of
remediation of the entire site for all parties will be approximately $3
million, based upon the remediation method the Company's consultants believe to
be the most likely to be used. This estimate is preliminary. Actual costs of
remediation of the site could be materially different since the investigative
study report has not been completed and no timetable or decision on the actual
remediation work has yet been developed. The Company's share of the cost of
such remediation cannot be determined with certainty at this time, but based on
the estimated costs at year-end and the number and nature of other potentially
responsible parties, the Company is of the opinion that such costs will not
have a material adverse effect on the operations, financial condition, or
liquidity of the Company. The Company is also pursuing insurance coverage of
its remediation costs following a 2003 Wisconsin Supreme Court decision in an
unrelated case that remediation claims may amount to damages for purposes of
general liability insurance. No determination of insurance coverage has yet
been made, and the Wisconsin court's decision may yet be subject to appeal to
the U.S. Supreme Court.

Item 8, Note 10 of the Notes to Consolidated Financial Statement discusses the
Company's policies with respect to the accrual of remediation costs. Estimates
of costs for future remediation are necessarily imprecise due to, among other
things, the identification of presently unknown remediation sites and the
allocation of costs among potentially responsible parties. The Company
believes that its share of the costs of cleanup for its current remediation
site will not have a material adverse impact on its consolidated financial
position. As is the case with most manufacturing and many other entities,
there can be no assurance that the Company will not be named as a PRP at
additional sites in the future or that the costs associated with such
additional sites would not be material.

EMPLOYEES

The Company had approximately 3,100 employees at the end of 2003. Most hourly
mill employees are covered under collective bargaining agreements. One new
five-year labor agreement with the Paper, Allied-Industrial, Chemical & Energy
Workers International Union at Towel & Tissue's Middletown, Ohio facility was
negotiated in 2003. Labor agreements will expire in other facilities in 2004,
2005, 2006 and 2007. The Company expects that new multi-year contracts will be
negotiated at competitive rates. The Company maintains good labor relations in
all facilities.
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EXECUTIVE OFFICERS OF THE COMPANY

The following information relates to executive officers of the Company as of
March 15, 2004. Unless otherwise specified, current positions listed for an
executive officer have been held for a minimum of five years.

SAN W. ORR, JR., 62
Chairman of the Board of the Company and Advisor, Estate of A. P. Woodson
and family; Chief Executive Officer of the Company (2000; 1994-1995;
1989-1990); formerly Chairman of the Board (1987-1997) and a director
(1972-1997) of Mosinee Paper Corporation; also a director of Marshall &
Ilsley Corporation.

RICHARD L. RADT, 72
Vice Chairman of the Board of the Company. Previously, Chairman (1987-
1988), and President and Chief Executive Officer and a director (1977-
1987) of the Company. Also Vice Chairman (1993-1997), and President and
Chief Executive Officer (1988-1993) of Mosinee Paper Corporation.

THOMAS J. HOWATT, 54
President and Chief Executive Officer of the Company since August, 2000.
Previously, Senior Vice President, Printing & Writing Group (1997-2000),
Vice President and General Manager, Printing & Writing Division (1994-
1997), Vice President and General Manager, Wausau Papers of New Hampshire
(1993-1994), Vice President Operations, Brokaw Division (1990-1993), and
prior thereto, Vice President, Administration, Brokaw Division.

STUART R. CARLSON, 57
Executive Vice President, Administration since August, 2000. Previously,
Senior Vice President, Specialty Paper Group (1997-2000), and Senior Vice
President -Administration (1993-1996), and Vice President Human Resources
(1991-1993) of Mosinee Paper Corporation. Also Director of Human
Resources, Georgia Pacific, Inc. (1990-1991) and Corporate Director of
Industrial Relations, Great Northern Nekoosa Corporation (1989-1990).

SCOTT P. DOESCHER, 44
Senior Vice President, Finance, Secretary and Treasurer since May, 2001.
Previously, Vice President, Finance, Printing & Writing Group (1998-
2001), Director of Finance, Printing & Writing Division (1992-1998) and
Corporate Director Financial Analysis and Internal Audit and Assistant
Secretary/Treasurer (1988-1992).

JOHN J. SCHIEVELBEIN, 61
Senior Vice President, Printing & Writing Group since October, 2000.
Previously, Vice President and General Manager of Mosinee Converted
Products (1990-2000) and Manager of Market Development, Mosinee Pulp and
Paper Division (1986-1990).
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ALBERT K. DAVIS, 56
Senior Vice President, Specialty Paper Group since October, 2000.
Previously, Vice President of Operations & Site Manager (1998 - 2000),
Vice President of Operations (1996-1998), Vice President of Engineering
(1990 - 1996), Rhinelander Paper Company, Inc.

PETE R. CHIERICOZZI, 60
Senior Vice President, Towel & Tissue Group since September, 2003.
Previously, Consultant, Self-employed (2002), Vice President, Sales and
Marketing, SCA Tissue (2001), Executive Vice President, Sales and
Marketing, Georgia-Pacific Tissue (2000), Executive Vice-President,
Wisconsin Tissue (Division of Chesapeake Corporation (1999).

DENNIS M. URBANEK, 59
Senior Vice President, Engineering and Environmental Services since
December, 1997. Previously, Vice President, Engineering and
Environmental Services (1996-1997) of Mosinee Paper Corporation, Vice
President and General Manager of Mosinee's Pulp & Paper Division (1992-
1996), and Vice President and General Manager, Sorg Paper Company (1990-
1992).

AVAILABLE INFORMATION

Information regarding the Company's annual reports on Form 10-K, quarterly
reports on Form 10-Q, current reports on Form 8-K, and any amendments to these
reports, will be made available, free of charge, in the "Corporate Governance"
section of the Company's website at http://www.wausaumosinee.com/corpgov.htm,
as soon as reasonably practicable after the Company electronically files such
reports with or furnishes them to the Securities and Exchange Commission.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995 (the "Reform Act"). In
addition, certain statements in future filings by the Company with the
Securities and Exchange Commission, reports to shareholders, press releases,
and other oral and written statements made by or with the approval of the
Company which are not statements of historical fact will constitute forward-
looking statements within the meaning of the Reform Act.

Forward-looking statements of the Company may be identified by, among other
things, expressions of the Company's or Company officers' beliefs or
expectations that certain events may occur or are anticipated, and projections
or statements of expectations with respect to (i) various aspects of the
Company's business (including, but not limited to, net income, the availability
or price of raw materials, and customer demand for Company products), (ii) the
Company's plans or intentions, (iii) the Company's stock performance, (iv) the
industry within which the Company operates, (v) the economy, and (vi) any other
expressions of similar import or covering other matters relating to the
Company, its business, and its operations. In making forward-looking
statements within the meaning of the Reform Act, the Company undertakes no
obligation to publicly update or revise any such statement.
-9-
Forward-looking statements are not guarantees of performance. Forward-looking
statements of the Company are based on information available to the Company as
of the date of such statements and reflect the Company's expectations as of
such date, but are subject to risks and uncertainties that may cause actual
results to vary materially. Many of the factors that will determine these
results are beyond the Company's ability to control or predict. Shareholders
and others are cautioned not to put undue reliance on any forward-looking
statements.

In addition to specific factors which may be described in connection with any
of the Company's forward-looking statements, factors which could cause actual
results to differ materially include, but are not limited to, the following:

o Increased competition from either domestic or foreign paper
producers or providers of alternatives to the Company's products,
and general over capacity in the paper industry, resulting in sales
declines from reduced shipment volume and/or lower net selling
prices in order to maintain shipment volume. The Company competes
in three segments of the paper industry. The Company has several
competitors in most of its market segments, many of which are
larger and have greater capital and marketing resources than the
Company. Changes within the paper industry, including the
consolidations of producers of products which compete with the
Company and consolidation within the distribution channels for

Company products, have and may continue to occur and may adversely
affect the Company's financial performance.

o The failure to develop new products to attain the Company's
overall goal of generating at least 25% of revenue from products
introduced within the previous three years could adversely affect
the overall demand for Company products. In addition, changes in
customer demand for the Company's products due to overall economic
activity affecting the rate of consumption of the Company's
products, growth rates of the end markets for the Company's
products, and technological or consumer preference changes, may
significantly reduce revenues and income.

o Changes in the price of raw materials, in particular, pulp,
wastepaper and linerboard. A substantial portion of the Company's
raw materials, including approximately two-thirds of the Company's
pulp needs, are purchased on the open market and price changes
could have a significant impact on the Company's costs. Fiber
represents a substantial portion of the cost of making paper and
significant price increases for fiber could materially affect the
Company's financial condition. Raw material prices will change
based on supply and demand on a worldwide spectrum. Pulp price
changes can occur due to worldwide consumption levels of pulp, pulp
capacity additions, expansions or curtailments of the supply of
pulp, inventory building or depletion at pulp consumer levels which
affect short-term demand, and pulp producer cost changes related to
wood availability, environmental issues, or other variables.

o Changes in energy prices or difficulty in obtaining adequate
supplies of needed fuels or sources of power.
-10-
o Unforeseen or recurring operational problems at any of the
Company's facilities causing significant lost production and/or
cost increases.

o Significant changes to the Company's strategic plans such as a
major acquisition or expansion, the disposition of assets or
product lines, the failure to successfully execute major capital
projects or other strategic plans, or the inability to successfully
integrate an acquisition.

o Changes in laws or regulations which affect the Company. The
paper industry is subject to stringent environmental laws and
regulations and any changes required to comply with such laws or
regulations may increase the Company's capital expenditures and
operating costs, and decrease the amount of funds available for
investment in other areas of operation. In addition, the costs of
remediation of known environmental sites, as described in Note 10
of the Notes to Consolidated Financial Statements, may exceed
current estimates and there may be additional sites not now known
to the Company that may require significant remediation expenses in
the future.

o Unforeseen liabilities arising from litigation, particularly
liabilities which may arise from claims under environmental laws
which may impose liability for the release of hazardous materials
whether or not the Company had knowledge of or was responsible for
such release.

NOTICE REGARDING DISPENSING OF CONSENT OF ARTHUR ANDERSEN LLP WITH RESPECT TO
COMPANY'S REGISTRATION STATEMENTS

Arthur Andersen LLP issued an opinion on the Company's audited financial
statements for the year ended December 31, 2001, and performed other services
as the Company's principal accountant between its appointment on October 19,
2001, and its dismissal on June 18, 2002. Representatives of Arthur Andersen
LLP are not available to consent to the incorporation by reference of their
report contained in this Annual Report into the Company's registration
statements on Form S-8, and the Company has dispensed with the requirement to
file their consent in reliance upon Rule 437a promulgated under the Securities
Act of 1933. Because Arthur Andersen LLP has not consented to the
incorporation by reference of their report into these registration statements,
purchasers of stock under these registration statements will not be able to
recover against Arthur Andersen LLP under Section 11 of the Securities Act of
1933 for any untrue statements of a material fact contained in the financial
statements audited by Arthur Andersen LLP that are incorporated by reference
into these registration statements or any omissions of material fact required
to be stated therein.

-11-
ITEM 2. PROPERTIES

The Company's headquarters are located in Mosinee, Wisconsin. Executive
officers and corporate staff who perform corporate accounting, financial and
human resource services are located in the corporate headquarters, as are
certain operating group personnel. The Company's operating facilities consist
of the following:



Number of
Paper Practical 2003
Facility Product Machines Capacity*(tons) Actual(tons)

Printing & Writing
Group
Brokaw, WI Paper 4 177,000 168,000
(Wausau Papers) Pulp 99,000 88,000

Groveton, NH Paper 2 115,000 113,000
(Wausau Papers)

Appleton, WI
(Wausau Papers) Converting N/A 35,000 24,000

Columbus, WI and Laminated/
Jackson, MS Coated Papers N/A 150,000 80,000
(Mosinee Converted
Products)

Specialty Paper
Group
Rhinelander, WI Paper 4 148,000 145,000

Otis, ME Paper 2 73,000 70,000

Mosinee, WI Paper 4 119,000 114,000
Pulp 96,000 75,000

Towel & Tissue
Group
Middletown, OH Towel & Tissue 2 110,000 108,000
Deink Pulp 110,000 104,000

Harrodsburg, KY Converted Towel
& Tissue N/A 190,000 150,000

* "Practical capacity" is the amount of product a mill can produce with
existing equipment and workforce and usually approximates maximum, or
theoretical, capacity. At the Company's converting operations it reflects the
approximate maximum amount of product that can be made on existing equipment,
but would require additional days and/or shifts of operation to achieve.

-12-
The Company currently maintains warehouse distribution facilities in order to
provide prompt delivery of its products. The facilities are:



Owned or
Group Location Square Feet Leased (Expiration Date)

Printing & Writing Appleton, WI 36,000 Owned
Groups
Brokaw, WI 174,000 Owned

Dallas, TX 85,000* Leased (July, 2005)

Groveton, NH 80,000 Owned

Los Angeles, CA 85,000* Leased (March, 2004)(dagger)


Towel & Los Angles, CA 45,000* Leased (March, 2004)(dagger)
Tissue Group
Harrodsburg, KY 460,000 Owned

* guaranteed space

(dagger)The Company intends to combine this square footage into an aggregate of
approximately 130,000 square feet under one agreement which will expire in
September, 2004. The Company is evaluating the size and locations of a
warehouse facility for periods after September, 2004.

The Specialty Paper and Towel & Tissue Groups also lease limited space in
various warehouses to facilitate deliveries to customers.

The Company owns approximately 120,000 acres of timberland in the state of
Wisconsin. The growing stock inventory on Company timberlands is an estimated
13.5 million board feet of saw timber and an estimated 750,000 cords of
pulpwood.

-13-
ITEM 3. LEGAL PROCEEDINGS

The Company has been named as a potentially responsible party with respect to a
Mosinee, Wisconsin landfill. See " -- Environment" in Item 1 of this report.

The Company strives to maintain compliance with applicable environmental
discharge regulations at all times. However, from time to time, the Company's
operating facilities may exceed permitted levels of materials into the
environment or inadvertently discharge other materials. Such discharges may be
caused by equipment malfunction, prevailing environmental conditions, or other
factors. It is the policy of the Company to report any violation of
environmental regulations to the appropriate environmental authority as soon as
it becomes aware of such an occurrence and to work with such authorities to
take appropriate remediatory or corrective actions.

The Company may be involved from time to time in various other legal and
administrative proceedings or subject to various claims in the normal course of
its business. Although the ultimate disposition of legal proceedings cannot be
predicted with certainty, in the opinion of management, the ultimate
disposition of any threatened or pending matters described in this Item 3,

either individually or on a combined basis, will not have a material adverse
effect on the consolidated financial condition, liquidity, or results of
operations of the Company.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of shareholders during the fourth quarter
of 2003.
-14-
PART II

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS

The Company's common stock is traded on the New York Stock Exchange under the
symbol "WMO".

As of the record date of the annual meeting, February 19, 2004, (the "Record
Date") there were approximately 3,700 holders of record of the Company's common
stock. The Company estimates that as of the Record Date there were
approximately 6,700 additional beneficial owners whose shares were held in
street name or in other fiduciary capacities. As of the Record Date, there
were 51,651,251 shares of common stock outstanding.

The following table sets forth the range of high and low sales price
information of the Company's common stock and the dividends declared on the
common stock, for the calendar quarters indicated.


Market Price Cash Dividend
Calendar Quarter High Low Declared

2003
First Quarter $12.08 $ 9.30 *
Second Quarter $12.23 $10.20 $. 17
Third Quarter $13.40 $11.03 $0.85
Fourth Quarter $13.85 $11.75 $0.85

2002
First Quarter $12.97 $10.50 *
Second Quarter $14.00 $11.20 $. 17
Third Quarter $12.09 $ 9.00 $.085
Fourth Quarter $11.81 $ 8.14 $.085

2001
First Quarter $13.00 $ 9.94 *
Second Quarter $14.00 $11.52 $. 17
Third Quarter $13.58 $ 7.85 $.085
Fourth Quarter $12.16 $ 9.65 $.085

*Two dividends of $.085 per share were declared in the second quarter in
2003, 2002, and 2001.

Information required by Item 201(d) of SEC Regulation S-K is set forth under
Item 12, Part III of this report.
-15-

ITEM 6. SELECTED FINANCIAL DATA

WAUSAU-MOSINEE PAPER CORPORATION AND SUBSIDIARIES SELECTED FINANCIAL DATA


(all dollar amounts in thousands,
except per share data) For The Year Ended December 31,
2003 2002 2001 2000* 1999

FINANCIAL RESULTS
Net sales $971,444 $948,698 $943,729 $990,924 $982,735
Depreciation, depletion, and amortization 60,823 60,624 60,948 58,860 55,012
Operating profit 35,278 47,422 28,279 17,785 79,311
Interest expense 10,188 10,845 14,416 15,713 11,823
Earnings before provision for income taxes 25,180 36,618 14,143 2,325 68,017
Net earnings 15,863 23,068 8,913 1,465 42,417
Cash dividends paid 17,527 17,520 17,498 17,207 16,233
Cash flows from operating activities 63,105 76,269 103,866 80,254 89,334

PER SHARE
Net earnings - basic and diluted $0.31 $0.45 $0.17 $0.03 $0.81
Cash dividends declared 0.34 0.34 0.34 0.34 0.32
Stockholders' equity 6.80 6.91 7.09 7.33 7.53
Basic average number of shares outstanding 51,549,000 51,532,000 51,466,000 51,354,000 52,265,000
Price range (low and high closing) $9.45-13.58 $8.26-13.80 $8.82-14.00 $7.63-14.63 $10.94-18.25

FINANCIAL CONDITION
Working capital $136,414 $118,398 $101,724 $138,605 $140,822
Total assets 858,100 873,757 892,008 954,494 941,872
Long-term debt 162,174 162,763 192,264 250,465 220,476
Stockholders' equity 350,316 355,948 364,855 376,112 393,760
Capital expenditures 24,261 19,201 29,791 86,896 80,619

RATIOS
Percent net earnings to sales 1.6% 2.4% 1.0% 0.1% 4.3%
Percent net earnings to average stockholders' equity 4.5% 6.4% 2.6% 0.4% 10.7%
Ratio of current assets to current liabilities 2.2 to 1 2.0 to 1 1.8 to 1 2.1 to 1 2.2 to 1
Percent of long-term debt to total capitalization 31.6% 31.4% 34.5% 40.0% 35.9%

* In 2000, includes after-tax expense of $14.0 million ($22.3 million pretax)
or $0.27 per share for restructuring expense related to the closure of the Sorg
Paper Company.

-16-

ITEM 7. MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS

This report contains certain of management's expectations and other forward-
looking information regarding the Company pursuant to the safe-harbor
provisions of the Private Securities Litigation Reform Act of 1995. While the
Company believes that these forward-looking statements are based on reasonable
assumptions, such statements are not guarantees of future performance, and all
such statements involve risk and uncertainties that could cause actual results
to differ materially from those contemplated in this report. The assumptions,
risks, and uncertainties relating to the forward-looking statements in this

report include general economic and business conditions, changes in the prices
of raw materials or energy, competitive pricing in the markets served by the
Company as a result of economic conditions, overcapacity in the industry and
the demand for paper products, manufacturing problems at Company facilities,
and various other risks and assumptions. These and other assumptions, risks,
and uncertainties are described under the caption "Cautionary Statement
Regarding Forward-Looking Information" in Item 1 of the Company's Annual Report
on Form 10-K for the year ended December 31, 2003, and from time to time, in
the Company's other filings with the Securities and Exchange Commission. The
Company assumes no obligation to update or supplement forward-looking
statements that become untrue because of subsequent events.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States which require the
Company to make estimates and assumptions that affect the reported amounts of
assets and liabilities at the date of the consolidated financial statements and
revenues and expenses during the periods reported. Actual results could differ
from those estimates. The Company believes the following are the accounting
policies which could have the most significant effect on the Company's reported
results and require subjective or complex judgments by management.

SALES RETURNS AND ALLOWANCES

The Company maintains reserves for expected returns and allowances based on
return practices and historical experience. Reserves for returns and
allowances may need to be adjusted if actual sales returns differ from
estimates.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

The Company records allowances for doubtful accounts based upon customer-
specific analysis and general matters such as current assessment of past-due
balances. Additional allowances for doubtful accounts may be required if there
is an increase in past-due balances or for customer-specific circumstances,
such as financial difficulty. The allowance for doubtful accounts was $1.9
million and $2.4 million at December 31, 2003, and 2002, respectively.
-17-
EXCESS AND OBSOLETE INVENTORY

The Company records allowances for excess and obsolete inventory based on
historical and estimated future demand and market conditions. Additional
inventory allowances may be required if future demand or market conditions are
less favorable than the Company has estimated.

IMPAIRMENT OF LONG-LIVED ASSETS

The Company evaluates the recoverability of the carrying amount of long-lived
assets whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be fully recoverable. The Company uses judgment
when applying the impairment rules to determine when an impairment test is
necessary. Factors the Company considers which could trigger an impairment
review include significant underperformance relative to historical or
forecasted operating results, a significant decrease in the market value of an
asset, a significant change in the extent or manner in which an asset is used,

and significant negative or industry trends.

Impairment losses are measured as the amount by which the carrying value of an
asset exceeds its estimated fair value. The Company is required to make
estimates of its future cash flows related to the asset subject to review.
These estimates require assumptions about demand for the Company's products,
future market conditions, and technological developments. Other assumptions
include determining the discount rate and future growth rates.

PENSION BENEFITS

Defined benefit pension costs and obligations are actuarially determined and
are affected by assumptions including discount rate, the expected rate of
return on plan assets, and assumed annual rate of compensation increase for
plan employees, among other factors. Changes in discount rate and differences
from actual results for each assumption will affect the amount of pension
expense recognized in future periods. Additional information regarding pension
benefits is available in "Note 6 - Pension and Other Post-retirement Benefit
Plans" in the Notes to Consolidated Financial Statements.

OTHER POST-RETIREMENT BENEFITS

The costs and obligations for post-retirement benefits other than pension are
also actuarially determined and are affected by assumptions including the
discount rate and expected future increase in per capita costs of covered post-
retirement health care benefits. Changes in the discount rate and differences
between actual and assumed per capita health care costs may affect the recorded
amount of the expense in future periods. Additional information regarding
post-retirement benefits is available in "Note 6 - Pension and Other Post-
retirement Benefit Plans" in the Notes to Consolidated Financial Statements.

LITIGATION, CLAIMS, AND CONTINGENCIES

The Company is subject to extensive regulations by various federal, state,
provincial, and local agencies concerning compliance with environmental control
statutes and regulations. These regulations impose limitations, including
effluent and emission limitations, on the discharge of
-18-
materials into the environment, as well as require the Company to obtain and
operate in compliance with conditions of permits and other governmental
authorizations. Future regulations could materially increase the Company's
capital requirements and certain operating expenses in future years.

The Company records environmental liabilities based on estimates for known
environmental remediation exposures utilizing information received from third-
party experts and the Company's past experience with these matters. At third-
party sites where more than one potentially responsible party has been
identified, the Company records a liability for its estimated allocable share
of costs related to its involvement with the site as well as an estimated
allocable share of costs related to the involvement of insolvent or
unidentified parties. Environmental liability estimates may be affected by
changing determinations of what constitutes an environmental exposure or
acceptable level of cleanup. To the extent that remediation procedures change
or the financial condition of other potentially responsible parties is
adversely affected, the estimate of the Company's environmental liabilities may
change.

ACCOUNTING PRONOUNCEMENTS

On December 8, 2003, the president signed into law the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 (the Act). The Act introduces
a prescription drug benefit under Medicare as well as a federal subsidy to
sponsors of retiree health care benefit plans that override a benefit that is
at least actuarially equivalent to Medicare. In January 2004 the FASB issued
FSP 106-1, Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003. The purpose of
the FSP is to permit a one-time election to defer recognition of the effects of
the Act until the FASB issues clarifying accounting guidance. Additionally, it
provides disclosure guidance for the deferral elections. The Company has
elected to defer recognition until 2004 and provide the related required
disclosures in the December 31, 2003, financial statements. Accordingly, the
accumulated post-retirement benefit obligation and/or net periodic post-
retirement costs presented in "Note 6 - Pension and Other Post-retirement
Benefit Plans" do not reflect the effects of the Act on the Company's post-
retirement plans. Currently, specific authoritative guidance on the accounting
for the federal subsidy is pending, and that guidance, when issued, could
require a change to previously reported information.

OPERATIONS REVIEW

OVERVIEW

Market conditions were difficult in 2003 and 2002. Demand for uncoated free-
sheet and many industrial papers declined during the two-year period, while
demand for "away-from-home" towel and tissue products and other market segments
in which the Company competes increased modestly. Despite the capacity
rationalization that has occurred across the industry in recent years, paper
markets have remained highly competitive. At the same time, market pulp,
wastepaper and natural gas purchase price fluctuations have significantly
impacted gross profit margins. In response to difficult market conditions and
variation in raw material and energy prices, the Company focused on efforts to
reduce costs, improve sales mix and increase production efficiencies. In 2003,
the Company targeted cost reductions equal to 2% of 2002 cost of sales, or
approximately $16.7 million. Equalizing for market pulp and natural gas
purchase
-19-
price variations and production volume differences, the Company exceeded this
goal. Efforts to improve sales mix were driven by the Company's new-product
development target. Specifically, 25% of revenues were targeted to come from
products developed within the previous three years. This target was achieved
with approximately 34% and 32% of revenues coming from products developed
within the prior three years in 2003 and 2002, respectively. The Company also
achieved productivity improvements of 1% in 2003 and 3% in 2002.

NET SALES


(all dollar amounts in thousands) 2003 2002 2001

Net sales $971,444 $948,698 $943,729
Percent increase/(decrease) 2% 1% (5%)


Net sales for the year ended December 31, 2003, were $971.4 million compared to
net sales of $948.7 million for the year ended December 31, 2002. Total
Company shipments increased 2% in 2003 to 844,740 tons from the 831,808 tons
shipped in 2002. Net sales in 2001 were $943.7 million, and total shipments
were 807,318 tons.

Shipments increased each of the last two years in all three of the Company's
business segments. These increases were largely the result of market share
gains as overall market demand remained weak. Driven primarily by sales mix
enhancement, average net selling price increased 1% in 2003, improving net
sales by $9 million. Sales mix enhancement improved average selling price by
approximately 1% and net sales by $8 million. Compared to 2001, 2002 average
net selling price declined nearly 3%. Actual product selling prices were
approximately 5% lower in 2002, affecting net sales by $48 million, while
product mix enhancements improved average selling price and net sales by
approximately 2% and $21 million, respectively.

Discussion of market conditions and trends is included in the segment summaries
that follow. If published market data is available, it is referenced in the
discussion. Certain markets in which the Company competes are small and highly
fragmented. Where industry data is not available, the Company's analysis is
based on more subjective market indicators, such as order patterns for Company
products and discussion with customers regarding overall industry volumes.

Printing & Writing recorded net sales of $395.8 million on total shipments of
359,712 tons for the year ended December 31, 2003, compared with net sales of
$391.2 million on shipments of 353,488 tons for the same period in 2002. Net
sales in 2001 were $392.0 million on shipments of 345,323 tons. Average net
selling price declined approximately 1% in 2003 as compared to 2002, reducing
net sales by $3 million. Actual product selling prices were essentially
unchanged in 2003 with mix differences accounting for the entire decline in
average selling price. Mix differences were largely the result of higher 2003
paper mill packaging shipments following the first quarter acquisition of the
production assets and customer base of Laminated Papers, Inc. Average net
selling price declined 2% in 2002 compared with 2001. Actual product selling
prices declined nearly 4% in 2002, reducing net sales by $15 million while
sales mix improvements increased average selling price and net sales by
approximately 2% and $7 million, respectively. Demand for uncoated freesheet
papers, the broad market category within which Printing & Writing participates,
declined in each of the last four years with demand down 1% in both 2003 and
2002. Demand in the text and cover segments of the uncoated freesheet market
-20-
declined by 9% in both 2003 and 2002. Despite this decline, shipments of
Printing & Writing's premium products, including text and cover, increased 4%
in 2003 and 5% in 2002. Paper mill packaging shipments, comprised primarily of
moisture-barrier laminated roll wrap products, increased 23% in 2003 and 13% in
2002. Partially offsetting these increases were reduced non-core product
shipments such as commodity offset papers. Product shipped through Printing &
Writing's retail distribution channel such as office supply stores increased
24% in 2003 and 27% in 2002 while product shipped through Printing & Writing's
paper merchant distribution channel declined due to reduced commercial printing
activity and a shift in distribution patterns. Despite the industry-wide
capacity rationalization that has occurred in recent years, market conditions
and product pricing have remained very competitive. As 2004 began, no clear
sign of lasting demand improvement was noted.

Specialty Paper net sales were $362.9 million in 2003 on shipments of 334,183
tons compared with 2002 net sales of $349.0 million and shipments of 331,564
tons. Net sales and shipments in 2001 were $354.2 million and 322,518 tons,
respectively. Average net selling price improved nearly 4% in 2003 compared
with 2002, increasing net sales by approximately $13 million. Actual selling
price increases and sales mix enhancement each accounted for half of the
overall improvement. Average net selling price declined approximately 5% in
2002 compared with 2001. Actual product selling prices declined more than 7%
in 2002, reducing net sales by $28 million while sales mix improvements
increased average selling price by 2% and net sales by $8 million. Market
demand for pressure-sensitive backing papers, Specialty Paper's largest product
category, increased 2% in 2003 and 2002, respectively. Demand for food-
packaging/food-service papers, Specialty Paper's second largest product
category, also grew modestly through the two-year period. Demand in other
market categories, influenced by weak economic conditions and reduced activity
in the industrial sector, remained sluggish. Sales mix gains have been driven
by new-product development and volume growth in target markets. In 2003 and
2002, more than 40% of net sales were generated by products developed within
the previous three years. The majority of these products have targeted the
pressure-sensitive release liner and food-packaging/food-service markets.
Shipments of Specialty Paper's pressure-sensitive release liner and food-
packaging/food-service products increased in both 2003 and 2002, respectively.
Shipments of lower-priced noncore products, such as tablet and offset papers,
declined 15% in 2003 and 23% in 2002. Market conditions were essentially
unchanged in early 2004.

Towel & Tissue posted 2003 net sales of $212.7 million and shipments of 150,845
tons compared with 2002 net sales and shipments of $208.5 million and 146,756
tons, respectively. Net sales in 2001 were $197.5 million on shipments of
139,477 tons. Average net selling price declined less than 1% in 2003. Actual
selling prices declined nearly 3% in 2003, impacting net sales by $6 million
while sales mix enhancement and product changes improved average selling price
by 2% and net sales by more than $4 million. The "away-from-home" segment of
the towel and tissue market grew nearly 2% in 2003 after growing nearly 3% in
2002. Towel & Tissue shipments have consistently increased at a rate greater
than the market with overall shipments increasing 3% in 2003 and 5% in 2002.
Shipments of Towel & Tissue's higher-priced, premium products increased 6% in
2003 and 10% in 2002. Market conditions are expected to remain competitive
throughout 2004, as several producers prepare for production capacity increases
planned later in the year.
-21-
GROSS PROFIT ON SALES


(all dollar amounts in thousands) 2003 2002 2001

Gross profit on sales $102,897 $112,384 $96,141
Gross profit margin 11% 12% 10%

Gross profit margin decreased in 2003 to $102.9 million, or 10.6% of net sales,
from $112.4 million, or 11.8% of net sales, in 2002. Gross profit margin in
2001 was $96.1 million, or 10.2%. Sales mix gains, operations efficiency
improvements, and cost reductions partially offset higher natural gas and
market pulp costs, resulting in reduced gross profit margins in 2003. Compared
with 2001, 2002 gross profit margins increased due to reduced costs for natural
gas and market pulp as well as cost reductions and efficiency improvements.

Market pulp and wastepaper prices declined throughout 2001. Market pulp
prices, after holding steady the first half of 2002, began to increase in the
third quarter of 2002 before stabilizing in the fourth quarter. Market pulp
prices increased once again in the second quarter of 2003 with prices holding
relatively steady the second half of the year. Meanwhile, wastepaper prices
increased early in 2002 with prices stabilizing over the second half of the
year before declining once again in the second quarter of 2003. The Company
currently consumes approximately 400,000 air-dried metric tons of market pulp
per year and approximately 160,000 standard tons of wastepaper annually. The
average price of market pulp, the primary raw material used in the production
of paper, increased $51 per air-dried metric ton, or $21 million, in 2003
compared to 2002, after declining $32 per air-dried metric ton, or $13 million,
in 2002 compared to 2001. The average price of wastepaper, used in the
production of towel and tissue products, held even in 2003 compared to 2002
after increasing $24 per standard ton, or $4 million, in 2002 compared to 2001.

Natural gas prices generally declined over the course of 2001 and remained
relatively stable through the first three quarters of 2002 before trending
higher late in the year. Natural gas prices continued their upward trend early
in 2003, peaking in March, before generally declining through the balance of
2003. The average price of natural gas was 69%, or $15 million, higher in 2003
compared to 2002 after declining 27%, or $9 million, in 2002 compared to 2001.
The Company consumes approximately 6 million dekatherms annually and has the
ability to substitute fuel oil and coal for a portion of this draw should
economics dictate. The Company price protects, from time to time, certain
volumes of natural gas through fixed-price contracts. Company policy allows
for the price protection of up to 50% of its expected use on a rolling 12-month
basis. At the end of 2003, the Company had approximately 35% of its expected
first quarter 2004 natural gas consumption protected at a price slightly below
the 2003 average.

Labor and fringe expenses increased 3.7% in 2003 as compared to 2002 and 4.4%
in 2002 as compared to 2001. Pension and post-retirement benefit expenses
increased a combined 26% in 2003 and 9% in 2002. Health insurance costs for
active employees also increased 14% in 2003 and 3% in 2002. Other operating
expenses, including maintenance expenses, were generally lower in 2003 due to
cost reduction efforts. During 2003 the Company recognized, as a reduction of
cost of sales, $4.2 million as a fee for licensing certain patented dispenser
technologies. The Company recorded environmental-related expenses of $0.1
million, $0.4 million, and $1.8 million in 2003, 2002, and 2001, respectively.
The higher expense in 2001 was
-22-
related primarily to one landfill site identified for remediation as discussed
in "Note 10 - Commitments and Contingencies" in the Notes to Consolidated
Financial Statements. Gross margins improved from 8.7% in the first quarter
to a range of 10.3% to 11.9% over the last three quarters of 2003 as natural
gas prices declined from first quarter levels, and sales mix gains and cost
reductions were realized.

Market pulp price increases of $20 per air-dried metric ton to $40 per air-
dried metric ton were announced by several producers for the first quarter of
2004. Natural gas prices were relatively volatile early in 2004 with prices
approximately 5% higher than the 2003 average.

Printing & Writing gross profit margins declined to 8.8% in 2003 as compared to
13.9% in 2002 and 11.9% in 2001. Natural gas and market pulp prices increased

a combined $20 million in 2003 as compared to 2002 after declining $10 million
in 2002 as compared to 2001. First quarter gross profit margins of 7.1%
improved somewhat through the year as natural gas prices moderated.

Specialty Paper gross profit margins were 6.7% in 2003, 4.4% in 2002, and 2.5%
in 2001. Sales mix gains, improved production efficiency, and cost reductions
offset market pulp and natural gas price increases of $15 million to improve
2003 margins. Key to Specialty Paper's gross profit improvement in both 2003
and 2002 was success with the group's cost reduction initiative introduced in
2002. By the end of 2003, nearly all of the originally identified cost
reduction initiatives were implemented. Gross profit margins improved over the
second half of 2003 as select selling price increases were implemented and
sales mix and cost reduction gains were realized.

Towel & Tissue gross profit margin was 20.9% in 2003 compared to 20.4% in 2002
and 20.5% in 2001. Operations efficiency improvements, cost reduction results,
and the receipt of a $4.2 million patent infringement settlement offset an
average selling price reduction and losses associated with the disposal of
certain fixed assets to generate the slight improvement in 2003 margins.
Outside parent rolls, purchased from towel and tissue producers, account for
approximately 30% of Towel & Tissue's paper requirements.

Order backlogs decreased to 31,632 tons representing $33.4 million in sales for
all operating groups as of December 31, 2003. This compares with 33,458 tons
and $35.3 million in sales at the end of 2002, and 27,500 tons and $30.5
million in sales at the end of 2001. The backlog on December 31, 2003, does
not necessarily indicate weakening business conditions, as a large portion of
orders is shipped directly from inventory upon receipt and does not affect
backlog numbers.

LABOR

A new five-year labor agreement with the Paper, Allied-Industrial, Chemical &
Energy Workers International Union was successfully negotiated at Towel &
Tissue's Middletown, Ohio, facility in 2003. The agreement contains wage
increases of 2.75% for each of the first four years and 3.0% in the fifth year
of the contract. Labor agreements will expire at other facilities in 2004,
2005, 2006, and 2007.

The Company maintains good labor relations at all facilities.
-23-
OPERATING EXPENSES


(all dollar amounts in thousands) 2003 2002 2001

Selling and administrative $67,619 $64,962 $67,862
Percent increase/(decrease) 4% (4%) 5%
As a percent of net sales 7% 7% 7%

In 2003, 2002 and 2001, selling and administrative expenses were affected by
stock-incentive program charges or credits, which were determined by the
Company's common stock price change. During 2003, the charge for these
programs was $1.7 million compared to a credit of $0.2 million in 2002 and a
charge of $4.2 million in 2001. For additional information on the Company's
stock-incentive programs, refer to "Note 8 - Stock Options and Appreciation

Rights" in the Notes to Consolidated Financial Statements. Additionally,
selling and administrative costs included wage, benefit, and management
incentive expense increases of $0.6 million in 2003 as compared to 2002 and
$1.8 million in 2002 as compared to 2001. In 2003, a $0.3 million credit for
bad debts was recognized compared with $0.3 million and $1.3 million in expense
recognized in 2002 and 2001, respectively.

OTHER INCOME AND EXPENSE


(all dollar amounts in thousands) 2003 2002 2001

Interest expense $10,188 $10,845 $14,416
Other income 90 41 280

Interest expense decreased in 2003 compared with 2002 and 2001 due to lower
average debt levels. Long-term debt decreased from $192.3 million in 2001 to
$162.8 million in 2002 and $162.2 million in 2003. The reduction in debt since
2001 was due principally to internal initiatives aimed at limiting capital
spending and reducing inventory levels as a component of working capital.

In exchange for cash payments totaling $6.4 million in 2001, the Company
terminated the outstanding interest-rate swap agreements that had effectively
converted $88.5 million of fixed-rate debt to variable-rate debt. Additional
information on the termination of the interest-rate swap agreements and the
related debt is discussed within "Note 4 - Debt" and "Note 12 - Financial
Instruments" in the Notes to Consolidated Financial Statements.

In 2004, interest expense is expected to be comparable to 2003 as debt levels
are expected to remain similar to the December 31, 2003, balance of $162.2
million. Capitalized interest was not significant in each of the three years
presented. The Company's capitalized interest methodology is outlined in "Note
1 - Description of the Business and Summary of Significant Accounting Policies"
in the Notes to Consolidated Financial Statements.

Other income and expense includes interest income of $65,000, $25,000, and
$262,000 in 2003, 2002, and 2001, respectively.
-24-
INCOME TAXES


(all dollar amounts in thousands) 2003 2002 2001

Income tax provision $9,317 $13,550 $5,230
Effective tax rate 37.0% 37.0% 37.0%

The effective tax rates for the years presented are indicative of the Company's
normalized tax rate. The effective rate for 2004 is expected to approximate
37%.

LIQUIDITY AND CAPITAL RESOURCES

CASH FLOWS AND CAPITAL EXPENDITURES


(all dollar amounts in thousands) 2003 2002 2001

Cash provided by operating activities $ 63,105 $ 76,269 $103,866
Percent increase/(decrease) (17%) (27%) 29%
Working capital $136,414 $118,398 $101,724
Percent increase/(decrease) 15% 16% (27%)
Current ratio 2.2:1 2.0:1 1.8:1
Capital expenditures $ 24,261 $ 19,201 $ 29,791
Percent increase/(decrease) 26% (36%) (66%)

Cash provided from operating activities declined in 2003 compared to 2002 due,
in part, to reduced 2003 earnings, increased receivables and decreased
payables. In addition, the Company contributed $23.8 million to defined
benefit pension plans during 2003, compared with contributions of $20.6 million
and $14.7 million in 2002 and 2001, respectively. Benefit plans are discussed
in "Note 6 - Pension and Other Post-retirement Benefit Plans" in the Notes to
Consolidated Financial Statements.

As a result of internal initiatives to generate cash such as continuing
inventory reductions, as well as controlled capital spending and the receipt of
income tax refunds resulting from the utilization of prior-year net operating
tax losses, cash and cash equivalents increased $12.9 million in 2003 from
2002. These changes, when combined with the impact of 2003 earnings, accounted
for the majority of the working capital increase experienced in 2003 compared
with 2002.

In 2003, 2002, and 2001, the Company limited capital spending due to weak
economic conditions and excess production capacity in the paper industry. As a
result, capital expenditures totaled $24.3 million and $19.2 million in 2003
and 2002, respectively, compared with spending of $29.8 million in 2001. The
controlled spending was accomplished by allocating spending to projects which
the Company had identified as providing a return on investment exceeding the
Company's targeted internal rate of return of 17%, and capital projects
required to maintain current production levels or efficiencies. In 2004, it is
expected that capital spending will fall in the range of $40 million to $50
million. Several projects with strong financial returns are expected to
increase spending over 2003 levels.
-25-
During 2003, capital expenditures for projects with total spending expected to
exceed $1.0 million were $3.6 million in Printing & Writing as part of a
capital project to expand premium papers production capabilities at the Brokaw
mill and $0.4 million on a process control system computer replacement at the
Groveton mill. In Towel & Tissue, $2.6 million was spent on a screw press
project, and $2.2 million was spent for various converting lines.

The balance of $15.5 million in 2003 capital spending was related to projects
that individually cost less than $1.0 million. These expenditures included
approximately $10.0 million for essential non- or low-return projects,
including maintenance-related capital and approximately $5.5 million on
projects expected to provide a return in excess of the Company's targeted rate.

During 2002, capital expenditures for projects with total spending expected to
exceed $1.0 million included Printing & Writing's $0.9 million for a pulp mill
digester replacement at the Brokaw mill, and $1.9 million for process control
equipment at the Groveton mill. In Towel & Tissue, $2.9 million was spent on
various converting equipment.

The balance of $13.5 million in 2002 capital spending was related to projects
that individually cost less than $1.0 million. These expenditures include
approximately $10.7 million for essential non- or low-return projects, and
approximately $2.8 million on projects expected to provide a return on
investment that exceeds the Company's cost of capital.

The Company believes that the available credit under its credit agreements and
its earnings for 2004 will be sufficient to meet its cash flow needs for
capital, working capital, and investing activities in 2004. The Company's $150
million revolving-credit facility expires in December 2004. The Company
believes that a suitable agreement will be negotiated prior to the expiration
of the current facility.

DEBT AND EQUITY


(all dollar amounts in thousands) 2003 2002 2001

Short-term debt $ 112 $ - $ -
Long-term debt 162,174 162,763 192,264
Total debt 162,286 162,763 192,264
Stockholders' equity 350,316 355,948 364,855
Total capitalization 512,602 518,711 557,119
Long-term debt/capitalization ratio 32% 31% 35%

At December 31, 2003, total debt was $162.3 million which is comparable to the
$162.8 million reported at December 31, 2002. Debt had declined $29.5 million
in 2002 compared to 2001. Cash provided by operations and reduced capital
spending levels resulted in the repayment of debt obligations in 2002.

The total amount of long-term debt outstanding includes a private placement of
$138.5 million in senior notes. The notes mature in 2007, 2009, and 2011 at
$35 million, $68.5 million, and $35 million, respectively. In conjunction with
the private placement, the Company entered into an interest-rate swap
arrangement that effectively converted $88.5 million of fixed-rate obligations
to variable-rate debt. During 2001, the Company terminated its interest-rate
swap arrangement in exchange for cash payments of $6.4 million. The premium
recorded on debt during the period
-26-
the swaps were outstanding will continue to be amortized using the effective
interest-rate method over the remaining term of the respective debt
instruments.

The Company does not have material market risk associated with interest-rate
risk, foreign currency exchange risk, or commodity-price risk. The Company
conducts U.S. dollar denominated export transactions or immediately exchanges
all foreign currency attributable to export sales for U.S. dollars.

The Company also entered into a revolving-credit facility in December 1999 with
four banks for $200 million. The facility had a 364-day component for $50
million that expired on March 9, 2001, and a $150 million component that
matures in 2004.

The Company maintains a commercial paper placement agreement with one of its
four major banks, which provides for the issuance of up to $50 million of
unsecured debt obligations. The commercial paper placement agreement requires
unused credit availability under the Company's $150 million revolving-credit
agreement equal to the amount of outstanding commercial paper.

In August 1995, the Company obtained $19 million in industrial development bond
financing to fund an upgrade of the Brokaw mill wastewater treatment plant.
The bonds mature in 2023 and bear interest at short-term rates. The bonds are
supported by a letter of credit that was issued under the $150 million
revolving-credit facility.

On December 31, 2003, the Company had a total of $131 million available for
borrowing under existing credit facilities.

The following is a summary of the Company's contractual obligations and
payments due by period subsequent to December 31, 2003:


Payments Due by Period
(all dollar amounts in thousands) Total 2004 2005 2006 2007 2008 Thereafter

Long-term debt $157,500 $ - $ - $ - $35,000 $ - $122,500
Capital lease 257 108 118 31 - - -
Operating leases 27,321 3,423 3,345 3,252 3,147 2,956 11,198
Capital spending commitments 7,585 7,585 - - - - -
Purchase obligations 22,050 1,400 1,400 1,400 1,400 1,400 15,050
Total $214,713 $12,516 $4,863 $4,683 $39,547 $4,356 $148,748

For additional information on debt obligations, please refer to "Note 4 - Debt"
in the Notes to Consolidated Financial Statements. For additional information
on capital and operating leases, please refer to "Note 5 - Lease Commitments"
in the Notes to Consolidated Financial Statements. Commitments for capital
spending and additional information with respect to the purchase obligation
under a natural gas transportation agreement with the Portland Natural Gas
Transmission System Company is described in "Note 10 - Commitments and
Contingencies" in the Notes to Consolidated Financial Statements.

In April 2000, the Company's Board of Directors authorized the repurchase of
2,571,000 shares of the Company's common stock. This authorization added to
the balance remaining on a 1998 authorization to repurchase 5,650,000 shares of
the Company's common stock. There were no repurchases in 2003, 2002 or 2001.
Repurchases may be made from time to time in the open
-27-
market or through privately negotiated transactions. At December 31, 2003,
there were 2,638,674 shares available for purchase under the existing
authorization.

During 2003, 2002 and 2001, the Board of Directors declared cash dividends of
$0.34 per share of common stock.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

The Company does not have a material market risk associated with interest rate
risk, foreign currency exchange risk, or commodity price risk. The Company
conducts U.S. dollar denominated export transactions or immediately exchanges
all foreign currency attributable to export sales for U.S. dollars. On August
31, 1999, the Company issued notes in the amount of $138.5 million that remain
outstanding at December 31, 2003 and 2002. The principal amounts, maturities,
and interest rates on the notes are: (1) $35 million, 8 years, 7.20%; (2) $68.5
million, 10 years, 7.31%; and (3) $35 million, 12 years, 7.43%. The fair value
of this fixed rate debt was $153.7 million at December 31, 2003, and $152.9
million at December 31, 2002. The potential loss in fair value on such fixed-
rate debt obligations from a hypothetical 10% increase in market interest rates
would not be material to the overall fair value of the debt. The Company
currently has no plans to repurchase its outstanding fixed-rate instruments
and, therefore, fluctuations in market interest rates would not have an effect
on the Company's results of operations or stockholders' equity.

In August 1999, the Company also entered into an interest rate swap agreement
under which the interest rate paid by the Company with respect to (1)
$58,500,000 of the 10-year notes was the three month LIBOR rate, plus .4925%
and (2) $30,000,000 of the 12-year notes was the three month LIBOR rate, plus
..55%. During 2001, the Company terminated its swap agreements with respect to
the 10- and 12-year notes. Additional information on the termination of the
interest rate swap agreement and the related debt is discussed in Item 8, Notes
4 and 12 of the Notes to Consolidated Financial Statements.

The Company also has $19,000,000 of Industrial Development Bonds due July 1,
2023, at variable rates of interest outstanding at December 31, 2002 and 2001.
The fair value of these obligations approximated their carrying values at
December 31, 2002 and 2001, and would not have been materially affected by a
10% hypothetical change in market interest rates.
-28-

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEPENDENT AUDITORS' REPORT

To the Shareholders and Board of Directors of Wausau-Mosinee Paper Corporation

We have audited the accompanying consolidated balance sheets of Wausau-Mosinee
Paper Corporation and subsidiaries (the "Company") as of December 31, 2003 and
2002, and the related consolidated statements of income, stockholders' equity,
and cash flows for the years then ended. Our audits also included the
financial statement schedule for the years ended December 31, 2003 and 2002
listed in the Index at Item 15(a)2. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits. The financial statements and
financial statement schedule of the Company as of and for the year ended
December 31, 2001, were audited by other auditors who have ceased operations.
Those auditors expressed an unqualified opinion on those financial statements
In their report dated January 25, 2002 (except with respect to matters
discussed in Note 1 of the prior-year financial statements, as to which the
date was June 12, 2002 and state that such 2001 financial statements and
financial statement schedule fairly state, in all material respects, the
financial data required to be set forth therein in relation to the basic 2001
financial statements taken as a whole).

We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, such 2003 and 2002 consolidated financial statements present
fairly, in all material respects, the financial position of Wausau-Mosinee
Paper Corporation and subsidiaries as of December 31, 2003 and 2002, and the
results of their operations and their cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States
of America. Also, in our opinion, such 2003 and 2002 financial statement
schedule, when considered in relation to the basic 2003 and 2002 consolidated
financial statements taken as a whole, presents fairly in all material
respects, the information set forth therein.


DELOITTE & TOUCHE LLP


Milwaukee, Wisconsin
February 12, 2004
-29-

THIS IS A COPY OF THE AUDIT REPORT PREVIOUSLY ISSUED BY ARTHUR ANDERSEN LLP IN
CONNECTION WITH THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR
ENDED DECEMBER 31, 2001. THIS AUDIT REPORT HAS NOT BEEN REISSUED BY ARTHUR
ANDERSEN LLP IN CONNECTION WITH THIS FORM 10-K. SEE ALSO THE NOTICE REGARDING
THE OMISSION OF THE CONSENT OF ARTHUR ANDERSEN LLP IN ITEM 1, BUSINESS, WITH
RESPECT TO CERTAIN REGISTRATION STATEMENTS OF THE COMPANY FILED ON FORM S-8.

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

To the Shareholders and Board of Directors
Wausau-Mosinee Paper Corporation
Mosinee, Wisconsin

We have audited the accompanying consolidated balance sheet of Wausau-Mosinee
Paper Corporation and Subsidiaries as of December 31, 2001, and the related
consolidated statements of income, cash flows and stockholders' equity for the
year then ended. These financial statements and supplemental schedule referred
to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
supplemental schedule based on our audit. The financial statements of Wausau-
Mosinee Paper Corporation and Subsidiaries as of December 31, 2000 and 1999,
were audited by other auditors whose report dated January 25, 2001, expressed
an unqualified opinion on those statements.

We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,

evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.

In our opinion, the 2001 consolidated financial statements referred to above
present fairly, in all material respects, the financial position of Wausau-
Mosinee Paper Corporation and Subsidiaries at December 31, 2001, and the
results of its operations and cash flows for the year then ended in conformity
with accounting principles generally accepted in the United States.

Our audit was made for the purpose of forming an opinion on the consolidated
financial statements taken as a whole. The supplemental schedule listed in the
index to Item 14 is presented for purposes of complying with Securities and
Exchange Commission's rules and is not part of the basic financial statements.
The supplemental schedule has been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP


Milwaukee, Wisconsin
January 25, 2002
(except with respect to the matters discussed in Note 1, as to which the date
is June 12, 2002)
-30-

WAUSAU-MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS


(all dollar amounts in thousands) As of December 31,
2003 2002

ASSETS
Current assets:
Cash and cash equivalents $ 36,305 $ 23,383
Receivables, net 81,300 70,806
Refundable income taxes 1,668 10,264
Inventories 115,835 119,033
Deferred income taxes 12,616 12,812
Other current assets 3,694 4,100
Total current assets 251,418 240,398
Property, plant, and equipment - net 565,722 597,979
Other assets 40,960 35,380
Total Assets $858,100 $873,757

LIABILITIES
Current liabilities:
Current maturities of long-term debt $ 112 $ -
Accounts payable 55,368 63,422
Accrued and other liabilities 59,524 58,578
Total current liabilities 115,004 122,000

Long-term debt 162,174 162,763
Deferred income taxes 115,879 111,377
Post-retirement benefits 54,197 52,534
Pension 40,829 51,142
Other noncurrent liabilities 19,701 17,993
Total liabilities 507,784 517,809

Commitments and contingencies - -

STOCKHOLDERS' EQUITY
Preferred stock, no par value (500,000 shares authorized; no shares issued) - -
Common stock, no par value (100,000,000 shares authorized;
issued 60,122,812 shares in 2003 and 2002) 173,037 173,081
Retained earnings 320,823 322,485
Subtotals 493,860 495,566
Treasury stock, at cost (8,564,921 and 8,585,921 shares
in 2003 and 2002, respectively) (114,821) (115,103)
Accumulated other comprehensive loss (28,723) (24,515)
Total stockholders' equity 350,316 355,948
Total Liabilities and Stockholders' Equity $858,100 $873,757

See accompanying Notes to Consolidated Financial Statements.
-31-



WAUSAU-MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

(all dollar amounts in thousands,
except per share data) For The Year Ended December 31,
2003 2002 2001

Net sales $971,444 $948,698 $943,729
Cost of sales 868,547 836,314 847,588
Gross profit 102,897 112,384 96,141

Selling and administrative 67,619 64,962 67,862
Operating profit 35,278 47,422 28,279

Other income (expense):
Interest expense (10,188) (10,845) (14,416)
Interest income 65 25 262
Other 25 16 18
Earnings before provision for income taxes 25,180 36,618 14,143
Provision for income taxes 9,317 13,550 5,230

Net earnings $15,863 $23,068 $8,913

Net earnings per share - basic $0.31 $0.45 $0.17

Net earnings per share - diluted $0.31 $0.45 $0.17

See accompanying Notes to Consolidated Financial Statements.
-32-



WAUSAU-MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS

For The Year Ended December 31,
(all dollar amounts in thousands) 2003 2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES:

Net earnings $15,863 $23,068 $8,913
Provision for depreciation, depletion, and amortization 60,823 60,624 60,948
Provision (credit) for losses on accounts receivable (261) 307 1,339
Loss on property, plant, and equipment disposals 3,234 934 1,145
Compensation expense for stock option grants 39 37 3,085
Deferred income taxes 7,154 16,108 598
Changes in operating assets and liabilities:
Receivables (9,396) (1,688) 6,418
Inventories 4,548 5,305 27,011
Other assets (6,198) (9,420) (10,243)
Accounts payable and other liabilities (18,934) (10,211) 247
Accrued and refundable income taxes 6,233 (8,795) 4,405
Net cash provided by operating activities 63,105 76,269 103,866

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (24,261) (19,201) (29,791)
Acquisition of business (8,518) - -
Proceeds from property, plant, and equipment disposals 13 275 607
Net cash used in investing activities (32,766) (18,926) (29,184)

CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under credit agreements - (28,775) (64,190)
Payments under capital lease obligation (89) - (241)
Proceeds from termination of interest-rate swap - - 6,382
Dividends paid (17,527) (17,520) (17,498)
Proceeds from stock option exercises 199 325 2,296
Net cash used in financing activities (17,417) (45,970) (73,251)

Net increase in cash and cash equivalents 12,922 11,373 1,431
Cash and cash equivalents at beginning of year 23,383 12,010 10,579
Cash and cash equivalents at end of year $36,305 $23,383 $12,010

SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid - net of amount capitalized $10,647 $11,521 $13,943
Income taxes paid $6,275 $7,124 $977

See accompanying Notes to Consolidated Financial Statements.

-33-

WAUSAU-MOSINEE PAPER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY


Treasury Stock Accumulated Common
Common Stock Other Stock Total
(all dollar amounts in Shares Retained Comprehensive Shares Stockholders'
thousands, except share data) Issued Amount Earnings Shares Amount (Loss) Outstanding Equity

Balances December 31, 2000 60,122,812 $170,636 $325,544 (8,846,421) $(118,595) $(1,473) 51,276,391 $376,112
Comprehensive earnings, 2001:
Net earnings 8,913 8,913
Minimum pension liability
(Net of $4,446 deferred tax) (8,209) (8,209)
Comprehensive earnings, 2001 704
Cash dividends declared
($0.34 per share) (17,518) (17,518)
Stock options exercised (783) 229,700 3,079 229,700 2,296
Tax benefit related to
stock options 176 176
Stock option expense 3,085 3,085

Balances December 31, 2001 60,122,812 173,114 316,939 (8,616,721) (115,516) (9,682) 51,506,091 364,855
Comprehensive earnings, 2002:
Net earnings 23,068 23,068
Minimum pension liability
(Net of $9,052 deferred tax) (14,833) (14,833)
Comprehensive earnings, 2002 8,235
Cash dividends declared
($0.34 per share) (17,522) (17,522)
Stock options exercised (88) 30,800 413 30,800 325
Tax benefit related to stock
options 18 18
Stock option expense 37 37

Balances December 31, 2002 60,122,812 173,081 322,485 (8,585,921) (115,103) (24,515) 51,536,891 355,948
Comprehensive earnings, 2003:
Net earnings 15,863 15,863
Minimum pension liability
(Net of $2,470 deferred tax) (4,208) (4,208)
Comprehensive earnings, 2003 11,655
Cash dividends declared
($0.34 per share) (17,525) (17,525)
Stock options exercised (83) 21,000 282 21,000 199
Stock option expense 39 39
Balances December 31, 2003 60,122,812 $173,037 $320,823 8,564,921 $(114,821) $(28,723) 51,557,891 $350,316

See accompanying Notes to Consolidated Financial Statements.

-34-




WAUSAU-MOSINEE PAPER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES

Wausau-Mosinee Paper Corporation (the "Company") manufactures, converts, and
sells paper and paper products within three principal segments: the Printing &
Writing Group, the Specialty Paper Group, and the Towel & Tissue Group. The
majority of the Company's products are sold within the United States and
Canada.

Printing & Writing manufactures, converts, and markets a broad line of premium
printing and writing grades. In addition, the Group includes two converting
facilities that produce laminated roll wrap and related specialty finishing and
packaging products.

Specialty Paper produces a wide variety of technical specialty papers that
include supercalendered backing papers for pressure-sensitive labeling
applications, tape backing, and packaging materials for a broad range of food,
medical, and industrial applications.

Towel & Tissue produces a complete line of towel and tissue products that are
marketed along with soap and dispensing systems for the industrial and
commercial "away-from-home" market.

BASIS OF PRESENTATION

The consolidated financial statements include the accounts of Wausau-Mosinee
Paper Corporation and its subsidiaries. All significant intercompany
transactions and accounts have been eliminated in consolidation.

USE OF ESTIMATES

The preparation of the accompanying financial statements in conformity with
accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported
amounts of assets, liabilities, revenue, and expenses. Actual results may
differ from these estimates.

CASH AND CASH EQUIVALENTS

The Company defines cash equivalents as highly liquid, short-term investments
with an original maturity of three months or less. Cash and cash equivalents
are stated at cost, which approximates market.

INVENTORIES

Pulpwood, finished paper products, and approximately 97% of raw materials are
valued at the lower of cost, determined on the last-in, first-out (LIFO)
method, or market. All other inventories are valued at the lower of average


cost or market. Allocation of the LIFO reserve among the components of
inventories is impractical. Liquidations in individual LIFO inventory pools
decreased cost of sales by $577,000 for the year ended December 31, 2003.
-35-
PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment are stated at cost and are depreciated over the
estimated useful lives of the assets using the straight-line method for
financial statement purposes. Land and construction in progress are stated at
cost. The cost and related accumulated depreciation of all plant and equipment
retired or otherwise disposed of are removed from the accounts, and any
resulting gains or losses are included in the statements of income.

Buildings are depreciated over a 20- to 45-year period; machinery and equipment
over a three- to 20-year period. Maintenance and repair costs are charged to
expense as incurred. Improvements that extend the useful lives of the assets
are added to the plant and equipment accounts.

The Company's policy is to capitalize interest incurred on debt during the
course of projects that exceed one year in construction and $1 million, or
projects that exceed $10 million. Interest capitalized in 2003, 2002, and 2001
was not significant.

The Company assesses the recoverability of assets to be held and used by
comparing the carrying amount of an asset to future undiscounted net cash flows
expected to be generated by the asset. If such assets are considered to be
impaired, the impairment to be recognized is measured as the amount by which
the carrying amount of the assets exceed the fair value of the assets, based on
a discounted cash flow analysis.

Timber and timberlands are stated at net depleted value. The Company
capitalizes the cost of purchasing timberlands and reforestation costs.
Interest and taxes related to timberlands are expensed as incurred.
Reforestation costs include site preparation, planting, fertilizing, herbicide
application, and thinning. Temporary logging roads are expensed while long-
term logging roads are capitalized and amortized over the estimated useful
lives of the roads, which is generally 15 to 20 years. Depletion is recorded
as timber is harvested and included in inventory until conversion into saleable
product. Depletion is calculated using the block and units-of-production
methods. Under these methods, the capitalized costs of large land tracts are
divided by the estimated volume of timber anticipated to be harvested on each
tract. As the timber is harvested, depletion is either recorded as each block
is harvested or as a percentage of each block is harvested.

INCOME TAXES

Deferred income taxes have been provided under the liability method. Deferred
tax assets and liabilities are determined based upon the estimated future tax
effects of temporary differences between the financial statement and tax bases
of assets and liabilities, as measured by the current enacted tax rates.
Deferred tax expense is the result of changes in the deferred tax asset and
liability.

STOCK OPTIONS

As permitted under Statement of Financial Accounting Standard (SFAS) No. 123,

the Company continues to measure compensation cost for stock option plans using
the "intrinsic value based method" prescribed under APB No. 25, "Accounting for
Stock Issued to Employees." See Note 8 for pro forma information on the impact
of the fair-value method of accounting for stock options.
-36-
EARNINGS PER SHARE

The Company presents both basic and diluted net earnings per share (EPS)
amounts. Basic EPS is calculated based on the weighted average number of
common shares outstanding during the respective year, while diluted EPS is
calculated based on the weighted average number of common shares and common
stock equivalents (options) outstanding during the respective year. The
difference between basic and diluted EPS for the Company is solely attributable
to stock options. The Company uses the treasury-stock method to calculate the
impact of outstanding stock options. Stock options for which the exercise
price exceeds the average market price over the period have an antidilutive
effect on EPS and, accordingly, are excluded from the calculation.

For the years ended December 31, 2003, 2002, and 2001, options for 801,715,
734,694, and 778,855 shares, respectively, were excluded from the diluted EPS
calculation for Wausau-Mosinee Paper Corporation common stock because the
options were antidilutive.

Basic and diluted earnings per share are reconciled as follows:


(all dollar amounts in thousands, except per share data) 2003 2002 2001

Net earnings $ 15,863 $ 23,068 $ 8,913
Basic weighted average common
shares outstanding 51,549,000 51,532,000 51,466,000
Dilutive securities:
Stock option plans 114,000 111,000 88,000
Diluted weighted average common
shares outstanding 51,663,000 51,643,000 51,554,000
Net earnings per share - basic $0.31 $0.45 $0.17
Net earnings per share - diluted $0.31 $0.45 $0.17

REVENUE RECOGNITION

Revenue is recognized, net of estimated discounts, allowances and returns upon
shipment of goods at which time title passes to the customer. Upon shipment,
the customer is obligated to pay the Company and the Company has no remaining
obligation. The Company grants credit to customers in the ordinary course of
business.

In accordance with Emerging Issues Task Force (EITF) Issue No. 00-10,
"Accounting for Shipping and Handling Fees and Costs," shipping and handling
costs billed to customers are included in net sales, and the related costs are
included in cost of sales in the Consolidated Statements of Income.

DERIVATIVES

In the past, the Company has used derivative instruments to mitigate its
exposure to interest rate risk. The Company does not issue such instruments
for trading purposes. At December 31, 2003, and 2002, there were no derivative

instruments outstanding.
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ACCUMULATED COMPREHENSIVE INCOME (LOSS)

For all periods presented, the accumulated comprehensive loss is comprised
solely of additional minimum pension liability, net of tax.

RESEARCH AND DEVELOPMENT EXPENSES

The Company expenses research and development costs as incurred. Expenditures
for product development were $2,155,000 in 2003, $2,145,000 in 2002, and
$4,058,000 in 2001.

CHANGES IN ACCOUNTING POLICIES

In June 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
143, "Accounting for Asset Retirement Obligations" (SFAS No. 143). SFAS No. 143
requires entities to record the fair value of a liability for an asset
retirement obligation in the period in which it is incurred. When the
liability is initially recorded, the entity capitalizes the cost, thereby
increasing the carrying amount of the related long-lived asset. The
liabilities of the Company which meet the criteria of SFAS No. 143 were
landfill closure costs, which had been previously accrued. Accordingly, the
impact of adoption was not material. At December 31, 2003, the Company had
approximately $1 million of asset retirement obligations included in its other
noncurrent liabilities.

On December 8, 2003, the president signed into law the Medicare Prescription
Drug, Improvement and Modernization Act of 2003 (the Act). The Act introduces
a prescription drug benefit under Medicare as well as a federal subsidy to
sponsors of retiree health care benefit plans that override a benefit that is
at least actuarially equivalent to Medicare. In January 2004 the FASB issued
FSP 106-1, Accounting and Disclosure Requirements Related to the Medicare
Prescription Drug, Improvement and Modernization Act of 2003. The purpose of
the FSP is to permit a one-time election to defer recognition of the effects of
the Act until the FASB issues clarifying accounting guidance. Additionally, it
provides disclosure guidance for the deferral elections. The Company has
elected to defer recognition until 2004 and provide the related required
disclosures in the December 31, 2003 financial statements. Accordingly, the
accumulated post-retirement benefit obligation and/or net periodic post-
retirement costs presented in "Note 6 - Pension and Other Post-retirement
Benefit Plans," do not reflect the effects of the Act on the Company's post-
retirement plans. Currently, specific authoritative guidance on the accounting
for the federal subsidy is pending and that guidance, when issued, could
require a change to previously reported information.

NOTE 2 RESTRUCTURING

During 2000, the Specialty Paper Group announced the decision to close the Sorg
Paper Company mill ("Sorg") in Middletown, Ohio. The restructuring plan
included severance benefits, estimated costs related to the write-down and
disposal of the Sorg property, plant and equipment, curtailment gains or
losses for related pension and post-retirement plans, and other closure related
costs amounting to approximately $25 million. As of December 31, 2000, 160
hourly and salaried employees had been terminated. At December 31, 2003, the
Sorg fixed assets including all buildings, equipment, and spare parts not

usable by the Company's other
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mills continue to be actively marketed to interested parties. At December 31,
2003, and 2002, remaining reserves to market, sell, and close the facility have
been reclassified to other liabilities.

NOTE 3 SUPPLEMENTAL BALANCE SHEET INFORMATION


(all dollar amounts in thousands) 2003 2002

Receivables
Trade $ 82,142 $ 71,655
Other 1,086 1,527
83,228 73,182
Less: allowances for doubtful accounts (1,928) (2,376)
$ 81,300 $ 70,806
Inventories
Raw materials $ 27,282 $ 33,989
Work in process and finished goods 83,757 79,200
Supplies 27,920 27,463
Inventories at cost 138,959 140,652
LIFO reserve (23,124) (21,619)
$ 115,835 $ 119,033
Property, plant, and equipment
Buildings $ 137,604 $ 136,412
Machinery and equipment 1,061,342 1,055,507
1,198,946 1,191,919
Less: accumulated depreciation (652,990) (613,840)
Net depreciated value 545,956 578,079
Land 5,521 5,307
Timber and timberlands, net of depletion 5,818 5,821
Idle assets 98 98
Construction in progress 8,329 8,674
$ 565,722 $ 597,979
Accrued and other liabilities
Payroll $ 6,802 $ 9,478
Vacation pay 12,237 11,769
Employee retirement plans 8,866 7,023
Rebates 9,726 8,974
Other 21,893 21,334
$ 59,524 $ 58,578

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NOTE 4 DEBT

A summary of long-term debt as of December 31 is as follows:


(all dollar amounts in thousands) 2003 2002

Senior notes with interest from 7.20% to 7.43%,
due between August 31, 2007, and August 31, 2011 $138,500 $138,500
Industrial development bonds due July 1, 2023, with weighted
average interest rate of 1.34%in 2003 and 1.69% in 2002 19,000 19,000
Capitalized leases 137 -
Subtotal 157,637 157,500
Premium on senior notes 4,537 5,263
Total long-term debt $162,174 $162,763

The Company has $138.5 million outstanding in unsecured private placement notes
that were closed and funded on August 31, 1999. The principal amounts,
maturities, and interest rates on the notes are (1) $35 million, eight years,
7.20%; (2) $68.5 million, 10 years, 7.31%; and (3) $35 million, 12 years,
7.43%. In connection with the note offering, the Company entered into an
interest-rate swap agreement under which the interest rate paid by the Company
with respect to (1) $58.5 million of the 10-year notes was the three-month
LIBOR rate, plus .4925%, and (2) $30 million of the 12-year notes was the
three-month LIBOR rate, plus .55%. During 2001, the Company terminated its
interest-rate swap arrangement in exchange for cash payments of $6.4 million.
The amounts received from the swap counterparties at termination approximated
the fair values of the swaps at the respective termination dates. The premium
recorded on debt during the period the swaps were outstanding will continue to
be amortized using the effective interest-rate method over the remaining term
of the respective debt instruments.

The Company has a $150 million unsecured revolving-credit agreement with four
participating banks that matures on December 10, 2004. Under the facility, the
Company may elect the base for interest from either domestic or offshore rates.
In addition, the facility provides for competitive bid loan options among the
bank group. The Company pays the banks a facility fee under this agreement
based on quarterly debt/capitalization ratios. Facility fees paid were
$266,000 in 2003 and 2002, and $282,000 in 2001. There were no borrowings
against this agreement at December 31, 2003, and 2002.

In addition to general business and reporting covenants customary in financing
agreements of these types, the senior notes and revolving-credit facility
require that the Company comply quarterly with a consolidated debt-to-capital
ratio of less than 60% and an adjustable minimum net worth covenant ($314.0
million at December 31, 2003) as defined in the agreements. In addition, the
revolving-credit facility includes an interest coverage ratio covenant of 3.5
times. As of December 31, 2003, and 2002, the Company was in compliance with
all required covenants.

The Company maintains an unrated commercial paper placement agreement with a
bank to issue up to $50 million of unsecured debt obligations. The agreement
requires unused credit availability under the Company's revolving-credit
agreement equal to the amount of outstanding commercial paper. There were no
borrowings under this agreement at December 31, 2003, and 2002.
-40-

The aggregate annual maturities of long-term debt are as follows:


(all dollar amounts in thousands) 2004 2005 2006 2007 2008 THEREAFTER

Annual Maturities - - - $35,000 - $122,500

NOTE 5 LEASE COMMITMENTS

The Company has various leases for real estate, mobile equipment, and machinery
that generally provide for renewal privileges or for purchase at option prices
established in the lease agreements. Property, plant and equipment include the
following amount for a lease capitalized during 2003:

(all dollar amounts in thousands)
Machinery and equipment $347
Allowance for amortization (41)
Net value $306

Lease amortization is included in depreciation expense.

Future minimum payments, by year and in the aggregate, under capitalized leases
and noncancelable operating leases with initial or remaining terms of one year
or more consisted of the following at December 31, 2003:


(all dollar amounts in thousands) Capital Operating
Leases Leases

2004 $108 $ 3,423
2005 118 3,345
2006 31 3,252
2007 - 3,147
2008 - 2,956
Thereafter - 11,198
Total minimum payments $257 $27,321

Rental expense for all operating leases was as follows:


(all dollar amounts in thousands) 2003 2002 2001

Rent expense $7,934 $9,039 $7,730

NOTE 6 PENSION AND OTHER POST-RETIREMENT BENEFIT PLANS

The Company and its subsidiaries sponsor defined benefit pension plans covering
substantially all employees. Retirement benefits for salaried and nonunion
employees are based on pay and Company performance. Plans covering hourly
employees provide benefits based on years of service and fixed benefit amounts
for each year of service. The defined benefit pension plans are funded in
accordance with federal laws and regulations.

The Company has supplemental retirement agreements with certain present and
past key officers, directors, and employees. The principal cost of such plans
is being or has been accrued over the
-41-

period of active employment to the full eligibility date. The supplemental
retirement agreements are unfunded.

The Company also provides certain defined benefit post-retirement health and
life insurance plans that cover qualifying retirees. Benefits and eligibility
for various employee groups vary by location and union agreements. The defined
benefit post-retirement plans are unfunded.

The Company selected September 30, 2003, and 2002, as the measurement dates for
plan assets and obligations in 2003 and 2002, respectively.

The following schedules present changes in, and components of, the Company's
net assets (liabilities) for retirement and other post-retirement benefits at
December 31, 2003, and 2002:


Other
Post-retirement
Retirement Benefits Benefits
(all dollar amounts in thousands) 2003 2002 2003 2002

Change in benefit obligation:
Benefit obligation at beginning of year $141,011 $122,677 $ 82,498 $ 62,446
Service cost 5,517 4,916 2,015 1,779
Interest cost 9,317 8,727 5,424 4,366
Amendments 1,604 2,541 - -
Net actuarial loss 10,805 9,026 16,269 19,235
Participant contributions - - 1,446 1,412
Benefits paid (8,082) (6,876) (7,764) (6,740)
Settlement (1,056) - - -
Benefit obligation at end of year $159,116 $141,011 $ 99,888 $ 82,498
Change in plan assets:
Fair value at beginning of year $ 77,337 $ 71,771 $ - $ -
Actual gain (loss) 11,637 (8,197) - -
Company contributions 20,803 9,657 6,318 5,328
Participant contributions - - 1,446 1,412
Benefits paid (8,082) (6,876) (7,764) (6,740
Cash contribution subsequent to measurement date 2,989 10,982 - -
Settlement (1,056) - - -
Fair value at end of year $103,628 $ 77,337 $ - $ -
Net amount recognized:
Funded status $(55,488) $(63,674) $(99,888) $(82,498)
Unrecognized prior service cost 15,132 15,518 (650) (1,007)
Unrecognized transition asset (50) (239) - -
Unrecognized net actuarial loss 49,565 43,171 39,461 24,092
Accrued benefit cost $ 9,159 $ (5,224) $(61,077) $(59,413)
Amounts recognized in the Balance Sheet consist of:
Accrued benefit liability $(51,478) $(59,538) $(61,077) $(59,413)
Intangible asset 15,046 15,400 - -
Accumulated other comprehensive income 45,591 38,914 - -
Net amount recognized $ 9,159 $ (5,224) $(61,077) $(59,413)

The total accumulated benefit obligation for pension plans was $155.1 million
and $136.9 million at December 31, 2003, and 2002, respectively.
-42-



Pension Benefits
Target Percentage of Plan Assets
Allocations at Measurement Date
(all dollar amounts in thousands) 2004 2003 2002

Asset category
Equity securities 80.0% 74.5% 67.2%
Debt securities 20.0% 25.5% 32.8%
Total 100.0% 100.0% 100.0%

The Company's Benefits Committee, as established by the Board of Directors,
monitors pension assets and the performance of pension investments. The
Benefits Committee manages toward an asset allocation consisting of
approximately 80% equity securities and 20% debt securities. Various fund
managers are selected in each asset category to achieve targeted rates of
return while managing overall investment risk. The Benefits Committee seeks
the advice of outside consultants in considering matters such as asset
allocations and rebalancing, fund manager selection and the periodic assessment
of fund manager performance. The Company considers the historical and
projected returns for each asset category and believes that the investment
strategy employed will provide a blended rate of return on pension assets
consistent with current pension valuation assumptions.

In 2004, the Company expects to make contributions of approximately $21.2
million and $6.8 million directly to pension and other post-retirement plans,
respectively.

The components of net periodic benefit costs recognized in the Consolidated
Statements of Income and the weighted average assumptions used in the
calculation of the year-end obligation and net periodic benefit costs are as
follows:



Pension Benefits Other Post-retirement Benefits
(all dollar amounts in thousands) 2003 2002 2001 2003 2002 2001

Components of net periodic benefit cost:
Service cost $5,517 $4,916 $4,177 $2,015 $1,779 $1,501
Interest cost 9,317 8,727 8,170 5,424 4,366 4,287
Expected return on plan assets (8,223) (7,453) (6,469) - - -
Amortization of:
Prior service cost 1,939 1,864 1,670 (357) (357) (357)
Transition (asset) (189) (164) (162) - - -
Actuarial (gain) loss 749 64 (57) 899 (23) (187)
Settlement 248 - - - - -
Net periodic benefit cost $9,358 $7,954 $7,329 $7,981 $5,765 $5,244
Weighted average assumptions used to
determine benefit obligations at December 31:
Discount rate 6.25% 6.75% 7.25% 6.25% 6.75% 7.25%
Expected return on plan assets 8.50% 8.50% 9.0% n/a n/a n/a
Rate of compensation increase 4.25% 4.25% 5.0% n/a n/a n/a
Weighted average assumptions used to
determine net periodic benefit cost for
year ended December 31:
Discount rate 6.75% 7.25% 7.75% 6.75% 7.25% 7.75%
Expected return on plan assets 8.50% 9.0% 9.0% n/a n/a n/a
Rate of compensation increase 4.25% 5.0% 5.0% n/a n/a n/a

-43-
For purposes of determining the obligation for post-retirement medical benefits
in 2003, the Company has assumed a health care cost trend rate of 10%,
declining to an ultimate rate of 5% by 2008, to measure the accumulated post-
retirement benefit. For 2002, the assumed health care cost trend rate used in
measuring the accumulated post-retirement benefit was 10%, declining to an
ultimate rate of 5% by 2007.

Assumed health care cost trend rates significantly affect reported amounts for
retiree medical benefits. For 2003, the effect of a one-percentage-point
change in the assumed health care cost trend rate would have had the following
effects:


One percentage point
(all dollar amounts in thousands) Increase Decrease

Effect on the post-retirement benefit obligation $12,090 $(10,756)
Effect on the sum of the service cost and interest cost components 1,100 (955)

The Company also sponsors defined contribution pension plans, several of which
provide for Company contributions based on a percentage of employee
contributions. The cost of such plans totaled $2,631,000 in 2003, $2,605,000
in 2002, and $2,219,000 in 2001.

The Company has deferred-compensation agreements with certain present and past
key officers, directors, and employees. The principal cost of such plans is
being or has been accrued over the period of active employment to the full
eligibility date. The annual cost of the deferred-compensation agreements is
not significant.

NOTE 7 INCOME TAXES

Deferred tax assets and liabilities are determined based on the estimated
future tax effects of temporary differences between the financial statement and
tax bases of assets and liabilities, as measured by the current enacted tax
rates. Deferred tax expense (benefit) is the result of changes in the deferred
tax asset and liability.


The provision (benefit) for income taxes is comprised of the following:

(all dollar amounts in thousands) 2003 2002 2001

Current tax expense (benefit):
Federal $ 574 $(4,104) $3,308
State 1,589 1,546 1,328
Total current 2,163 (2,558) 4,636

Deferred tax expense (benefit):
Federal 6,447 15,718 1,342
State 707 390 (748)
Total deferred 7,154 16,108 594
Total provision for income taxes $9,317 $13,550 $5,230

-44-
A reconciliation between taxes computed at the federal statutory rate and the
Company's effective tax rate follows:


(all dollar amounts in thousands) 2003 2002 2001

Federal statutory tax rate $8,813 35.0% $12,820 35.0% $4,935 35.0%
State taxes (net of federal tax benefits) 1,644 6.5 1,528 4.2 295 2.0
Other (1,140 ) (4.5) (798) (2.2) - -
Effective tax $9,317 37.0% $13,550 37.0% $5,230 37.0%

At the end of 2003, $117.4 million of unused state operating loss and credit
carryovers existed, which may be used to offset future state taxable income in
various amounts through the year 2018. Because separate state tax returns are
filed, the Company is not able to offset consolidated income with the
subsidiaries' losses. Under the provisions of SFAS No. 109, the benefits of
state tax losses are recognized as a deferred tax asset, subject to appropriate
valuation allowances.

The major temporary differences that give rise to the deferred tax assets and
liabilities at December 31, 2003, and 2002, are as follows:



(all dollar amounts in thousands) 2003 2002

Deferred tax assets:
Accrued compensated absences $ 4,288 $ 4,092
Pensions 6,813 11,756
Post -retirement benefits 24,441 23,772
Restructuring reserve 5,463 5,202
State net operating loss carry forward 8,874 6,651
Other 11,910 12,697
Gross deferred tax asset 61,789 64,170
Less valuation allowance (5,562) (3,259)
Net deferred tax assets 56,227 60,911
Deferred tax liabilities:
Property, plant, and equipment (147,084) (148,017)
Other (12,406) (11,459)
Gross deferred tax liability (159,490) (159,476)
Net deferred tax liability $(103,263) $ (98,565)

The total deferred tax assets (liabilities) as presented in the accompanying
consolidated balance sheets are as follows:


(all dollar amounts in thousands) 2003 2002

Net deferred tax assets $12,616 $12,812
Net long -term deferred tax liabilities (115,879) (111,377)
Net deferred tax liability $(103,263) $(98,565)

A valuation allowance has been recognized for a subsidiary's state loss carry
forward and future deductible items, as cumulative losses create uncertainty
about the realization of the tax benefits in future years.
-45-
NOTE 8 STOCK OPTIONS AND APPRECIATION RIGHTS

The Company maintains various employee stock option plans. The plans specify
purchase price, time, and method of exercise. Payment of the option price may
be made in cash or by tendering an amount of common stock having a fair market
value equal to the option price.

Options are granted for terms up to 20 years; the option price is equal to the
fair market value of the Company's common stock at the date of grant for
incentive and non-qualified options. All fixed options must be held a minimum
of six months before exercise, and performance-based options vest in relation
to achieving operating profit levels.

On April 19, 2001, the Company's shareholders approved the 2000 Stock Option
Plan. As a result, 1,046,013 options issued prior to April 19, 2001, were
approved. Of the total 1,046,013 shares, 783,513 shares related to grants of
fixed options and 262,500 shares related to grants of performance-based options
that subsequently lapsed. Upon shareholder approval, expense was recorded for
these options to the extent that the fair market value of the Company's stock
exceeded the price of the option on the date of shareholder approval. For the
year ended December 31, 2001, the provision for stock options outstanding was
$3,085,000.

In December 2001, the Company issued 315,000 performance-based options that
vested in relation to achieving certain operating profit levels in 2002. As of
December 31, 2002, 213,000 of these options lapsed. No compensation expense
had been recorded for these options in 2001. In 2002, $37,000 of expense was
recognized pertaining to 102,000 options to the extent the fair market value of
the Company's stock exceeded the grant price of the options as certain
performance criteria were met. In December 2002, the Company issued 666,000
performance-based options that vested in relation to achieving certain
operating profit levels in 2003 and 2004. As of December 31, 2003, 342,000
performance-based options lapsed. No compensation expense was recorded for
these options for the years ended December 31, 2003, and 2002.

As of December 31, 2003, there are 1,785,066 stock options reserved for
issuance in the Company's stock option plans.

On December 19, 2003, the Board of Directors approved an amendment to an
existing stock option plan to allow for the grant of restricted shares of
common stock. The plan change is subject to shareholder approval on April 22,
2004. No expense was recognized in connection with this amendment.

The following table summarizes the activity relating to the Company's stock
option plans:


2003 2002 2001
Weighted Weighted Weighted
Average Average Average
2003 Exercise 2002 Exercise 2001 Exercise
Shares Price Shares Price Shares Price

Options outstanding at beginning of year 2,464,768 $11.79 2,057,568 $13.84 1,312,375 $14.19
Granted 140,000 12.29 705,000 11.39 1,228,513 9.58
Terminated (370,000) 11.57 (267,000) 11.44 (253,620) 16.00
Exercised (21,000) 9.47 (30,800) 10.55 (229,700) 10.00
Options outstanding at end of year 2,213,768 $11.88 2,464,768 $11.79 2,057,568 $13.84
Options exercisable at end of year 1,794,768 $11.90 1,733,768 $11.95 1,722,568 $13.86

-46-
The weighted average fair value of options granted was $3.93 in 2003 and $3.46
in 2002.

Additional information regarding the fixed-option grants outstanding and
exercisable at December 31, 2003, is as follows:


Weighted Average
Remaining Weighted Weighted
Range of Outstanding Contractual Average Exercisable Average
Exercise Prices Options Life (years) Exercise Price Options Exercise Price

$ 8.75 - $10.17 897,513 16.00 $9.10 897,513 $9.10
$10.22 - $11.39 175,400 17.69 $10.83 175,400 $10.83
$11.94 - $13.22 335,604 15.92 $12.86 240,604 $12.80
$15.88 - $18.26 408,001 13.38 $16.69 408,001 $16.69
$18.50 - $21.61 73,250 11.80 $19.19 73,250 $19.19
1,889,768 1,794,768


The exercise price for the 324,000 performance-based options outstanding at
December 31, 2003, is $11.39.

Pro forma net earnings and earnings per share had the Company elected to adopt
the "fair-value-based method" of Statement of Financial Accounting Standards
(SFAS) No. 123, "Accounting for Stock-Based Compensation," are as follows:


(all dollar amounts in thousands, except per share data) 2003 2002 2001

Net earnings:
As reported $15,863 $23,068 $8,913
Add: Total stock -based employee compensation expense (credit)
under APB No. 25, net of related tax effects 1,067 (110) 2,622
Deduct: Total stock -based employee compensation expense
determined under fair -value -based method for all awards,
net of related tax effects (1,242) (137) (3,139)
Pro forma $15,688 $22,821 $8,396
Earnings per share - basic:
As reported $0.31 $0.45 $0.17
Pro forma $0.30 $0.44 $0.16
Earnings per share - diluted:
As reported $0.31 $0.45 $0.17
Pro forma $0.30 $0.44 $0.16

The fair value of each option grant has been estimated on the grant date using
the Black-Scholes option-pricing model based on the following weighted average
assumptions:


2003 2002 2001

Risk -free interest rate 3.25% 4.38% 5.84%
Expected life in years 6 6 6
Price volatility 38.97% 38.23% 36.41%
Dividend yield 2.78% 3.83% 3.58%

-47-
STOCK APPRECIATION RIGHTS

The Company maintains various stock appreciation rights plans that entitle
certain management employees to receive cash equal to the sum of the
appreciation in the value of the stock and the hypothetical value of cash
dividends which would have been paid on the stock covered by the grant assuming
reinvestment in Company stock. The stock appreciation rights granted may be
exercised in whole or in such installments and at such times as specified in
the grant. In all instances, the rights lapse if not exercised within 20 years
of the grant date. Additions or reductions to compensation expense are
recorded in each period based upon the quoted market value of the shares and
the exercise provisions.

The following table summarizes the activity relating to the Company's stock
appreciation rights plans:


2003 2002 2001

Rights outstanding at beginning of year
(number of shares) 307,805 307,805 470,855
Terminated - - (101,683)
Exercised (18,333) - (61,367)
Rights outstanding and exercisable at end of year
(number of shares) 289,472 307,805 307,805
Price range of rights exercised $6.26 n/a $5.88-9.42
Price range of outstanding and exercisable rights:
$ 4.06 - $ 9.70 274,597 292,930 292,930
$15.88 - $17.16 14,875 14,875 14,875

At December 31, 2003, the weighted average remaining contractual life on
outstanding stock appreciation rights with an exercise price of between $4.06
and $9.70 was 6.6 years, and with an exercise price of between $15.88 and
$17.16 was 15.0 years.

DIVIDEND EQUIVALENTS

The Company maintains a Dividend Equivalent Plan. Upon termination of
employment, or at the time of exercise of options granted in tandem with the
dividend equivalents, participants are entitled to receive the cash value of
the grant. The cash value is determined by the sum of the value of cash
dividends that would have been paid on the stock covered by the grant had it
been actual stock and assuming all such hypothetical dividends had been
reinvested in Company stock. Additions or reductions to compensation expense
are recorded in each period based upon the quoted market value of the shares
and the exercise provisions.

The following table summarizes the activity relating to the Company's dividend
equivalent plan:


2003 2002 2001

Equivalents outstanding at beginning of year
(number of shares) 174,114 174,114 205,433
Exercised - - (31,319)
Equivalents outstanding and exercisable
at end of year (number of shares) 174,114 174,114 174,114

-48-
The provision (credit) for stock appreciation rights and dividend equivalents
were as follows:


(all dollar amounts in thousands) 2003 2002 2001

Stock appreciation rights $1,024 $(183) $744
Dividend equivalents 169 46 97
Total $1,193 $(137) $841


NOTE 9 ACQUISITION OF BUSINESS

Effective March 3, 2003, the Company acquired certain assets of a laminated
papers producer for approximately $8.5 million in cash. The acquisition was
accounted for as a purchase business combination and, accordingly, the purchase
price was allocated using the fair values of the acquired receivables,
inventory, machinery and equipment, and identifiable intangible assets. No
additional liabilities or goodwill were recorded as a result of this
acquisition. The pro forma disclosures under SFAS No. 141, "Business
Combinations" have not been presented, as the impact of this acquisition does
not materially impact the results of operations.

NOTE 10 COMMITMENTS AND CONTINGENCIES

LITIGATION AND OTHER CLAIMS

The Company may be involved from time to time in various legal and
administrative proceedings or be subject to various claims in the normal course
of its business. Although the ultimate disposition of legal proceedings
cannot be predicted with certainty, in the opinion of management, the ultimate
disposition of any threatened or pending matters, either individually or on a
combined basis, will not have a material adverse effect on the consolidated
financial condition, liquidity, or results of operations of the Company.

As a result of a settlement of all claims of the parties in a patent litigation
case, the Company recognized $4.2 million of income in 2003 as a fee for
licensing certain patented dispenser technologies.

ENVIRONMENTAL MATTERS

The Company is subject to extensive regulation by various federal, state,
provincial, and local agencies concerning compliance with environmental control
statutes and regulations. These regulations impose limitations, including
effluent and emission limitations, on the discharge of materials into the
environment, as well as require the Company to obtain and operate in compliance
with conditions of permits and other governmental authorizations. Future
regulations could materially increase the Company's capital requirements and
certain operating expenses in future years.

In 1986, the Wisconsin Department of Natural Resources (DNR) notified a
subsidiary of the Company that it may be a potentially responsible party (PRP)
for the Gorski landfill in Mosinee, Wisconsin, and nominated the landfill to
the Environmental Protection Agency's (EPA) National Priorities List. The
environmental contamination consists of elevated concentrations of chlorinated
volatile organic compounds documented in three private water supply wells
located
-49-
in proximity to the designated landfill. While the Company believes it
did not contribute to the identified contamination, the laws are designed to
require any party that utilized the landfill to contribute toward the cleanup.
The DNR has identified 10 PRPs. No action was taken by either the DNR or the
EPA until June 2000, when the DNR requested certain parties who had disposed of
waste at the site to form an ad hoc group to cooperatively investigate the
environmental contamination at the site. In October 2001, the Company entered
into an agreement with three other parties to fund a study of the landfill to
determine possible remediation strategies. The Company worked with the DNR on

the development of the study and work plan which was initiated in early 2003.
The Company estimates that the costs of remediation of the entire site for all
parties will be approximately $3 million, based on the remediation method the
Company's consultants believe to be the most likely to be used. This estimate
is preliminary. Actual costs of remediation of the site could be materially
different since the investigative study has not been completed and no timetable
or decision on the actual remediation work has yet been developed. The
Company's share of the cost of such remediation cannot be determined with
certainty at this time, but based on the estimated costs and the number and
nature of the other potential responsible parties, the Company is of the
opinion that such costs will not have a material adverse impact on the
operations, financial condition, or liquidity of the Company. The Company is
also pursuing insurance coverage of its remediation costs following a 2003
Wisconsin Supreme Court decision in an unrelated case that remediation claims
may amount to damages for purposes of general liability insurance. No
determination of insurance coverage has yet been made, and the Wisconsin
court's decision may yet be subject to appeal to the U.S. Supreme Court.

It is the Company's policy to accrue remediation costs when it is probable that
such costs will be incurred and when a range of loss can be reasonably
estimated. Estimates of loss are developed based on currently available
information including environmental studies performed by third-party experts
and the Company's past experience with these matters. The Company's accrued
environmental liabilities, including all remediation and landfill closure
costs, totaled $5.9 million and $5.6 million at December 31, 2003, and 2002,
respectively. The provision for environmental matters was $0.1 million, $0.4
million, and $1.8 million for the years ended December 31, 2003, 2002, and
2001, respectively. In 2001, the increased provision was primarily due to a
landfill site being identified for remediation. The Company periodically
reviews the status of all significant existing or potential environmental
issues and adjusts its accruals as necessary. The accruals do not reflect any
possible future insurance recoveries. Estimates of costs for future
remediation are necessarily imprecise due to, among other things, the
identification of presently unknown remediation sites and the allocation of
costs among potentially responsible parties. The Company believes that its
share of the costs of cleanup for its current remediation site will not have a
material adverse impact on its consolidated financial position. As is the case
with most manufacturing and many other entities, there can be no assurance that
the Company will not be named as a PRP at additional previously or currently
owned sites in the future or that the costs associated with such additional
sites would not be material.

OTHER COMMITMENTS

As of December 31, 2003, the Company was committed to spend approximately $7.6
million on capital projects, which were in various stages of completion.
-50-
The Company's Groveton, New Hampshire, mill is committed to the transportation
of a fixed volume of natural gas through September 2019 under a natural gas
transportation agreement with the Portland Natural Gas Transmission System
Company. The contract is only for the transportation of natural gas from the
Company's natural gas suppliers to the Company's mill in New Hampshire. The
Company is not required to buy or sell minimum gas volumes under the agreement.
The Company is required to pay a minimum transportation fee of approximately
$1.4 million annually per the agreement; however, the Company's natural gas
requirements exceed the level required to be transported.

NOTE 11 PREFERRED SHARE PURCHASE RIGHTS PLAN

The Company maintains a rights plan under which one preferred share purchase
right is issued for each outstanding share of common stock. Each right
entitles its holder to purchase 1 one-thousandth of a share of Series A Junior
Participating Preferred Stock, at an exercise price of $60 per 1 one-thousandth
of a preferred share, subject to adjustment. The rights will become
exercisable only if a person or group (with certain exceptions) acquires
beneficial ownership of 15% or more of the outstanding common stock (an
"Acquiring Person"). Once exercisable, each holder of a right, other than the
Acquiring Person, will thereafter have the right to receive common stock having
a market value of two times the exercise price of the right. Upon the
occurrence of certain events, each holder of a right, other than an Acquiring
Person, will have the right to receive (in lieu of preferred shares) common
stock of the Company (or a successor Company) that has a market value of two
times the exercise price of the right. Until exercisable, the rights will not
be issued or traded in separate form from the common stock. After any person
or group becomes an Acquiring Person, and prior to the acquisition by the
Acquiring Person of 50% or more of the common stock, the Company may exchange
the rights, other than rights owned by the Acquiring Person, at an exchange
ratio of one share per right (subject to adjustment). At any time prior to any
person or group becoming an Acquiring Person, the Company may redeem the rights
at a price of $0.01 per right. The rights will expire on October 31, 2008.

NOTE 12 FINANCIAL INSTRUMENTS

Financial instruments consisted of the following:

CASH AND CASH EQUIVALENTS

The carrying amount approximates fair value due to the relatively short period
to maturity for these instruments.

ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE

The carrying amounts approximate fair value due to the relatively short-term
nature of these instruments.

LONG-TERM DEBT

The fair value of the Company's long-term debt is estimated based on current
rates offered to the Company for debt of the same remaining maturities. At
December 31, 2003, and 2002, the fair
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value of the long-term debt exceeded the carrying value by approximately
$15.2 million and $14.4 million, respectively.

INTEREST RATE AGREEMENT

Interest-rate swaps designated in fair value hedge relationships have been used
by the Company in the past to mitigate the risk of reductions in the fair value
of existing fixed-rate long-term notes due to decreases in LIBOR-based interest
rates. Gains and losses on these instruments were reflected in interest
expense in the period in which they occurred, and an offsetting gain or loss is
also reflected in interest expense based on changes in the fair value of the
debt instrument being hedged due to changes in LIBOR-based interest rates.

During 2001, the interest rate agreements were terminated. The amounts
received from the swap counterparties at termination approximated the fair
values of the swaps at the respective termination dates. Accordingly, the
amount of the swap asset recorded has been eliminated from the balance sheet at
the termination date. The premium recorded on debt during the period the swaps
were outstanding will continue to be amortized using the effective interest
rate method over the remaining term of the respective debt instruments. Debt
premium amortization reduced interest expense by $726,000 for the years ended
December 31, 2003, and 2002, and $367,000 for the year ended December 31, 2001.
The agreement decreased interest expense by $589,000 in 2001.

NOTE 13 SEGMENT DATA

FACTORS USED TO IDENTIFY REPORTABLE SEGMENTS

The Company's operations are classified into three principal reportable
segments: the Printing & Writing Group, the Specialty Paper Group, and the
Towel & Tissue Group, each providing different products. Separate management
of each segment is required because each business unit is subject to different
marketing, production, and technology strategies.

PRODUCTS FROM WHICH REVENUE IS DERIVED

Printing & Writing produces a broad line of premium printing and writing grades
at manufacturing facilities in Brokaw, Wisconsin; and Groveton, New Hampshire.
Printing & Writing also includes two converting facilities that produce
laminated roll wrap and related specialty finishing and packaging products, and
a converting facility that converts printing and writing grades. Specialty
Paper produces specialty papers at its manufacturing facilities in Rhinelander,
Wisconsin; Mosinee, Wisconsin; and Jay, Maine. Towel & Tissue produces a
complete line of towel and tissue products that are marketed along with soap
and dispensing systems for the "away-from-home" market. Towel & Tissue
operates a paper mill in Middletown, Ohio, and a converting facility in
Harrodsburg, Kentucky.

MEASUREMENT OF SEGMENT PROFIT AND ASSETS

The Company evaluates performance and allocates resources based on operating
profit or loss. The accounting policies of the reportable segments are the
same as those described in the summary of significant accounting policies.

-52-

RECONCILIATIONS


The following are reconciliations to corresponding totals in the accompanying
consolidated financial statements:

(all dollar amounts in thousands) 2003 2002 2001

Net sales external customers:
Printing & Writing $395,836 $391,240 $392,026
Specialty Paper 362,935 348,990 354,181
Towel & Tissue 212,673 208,468 197,522
$971,444 $948,698 $943,729
Net sales intersegment:
Printing & Writing $ 7,092 $ 7,024 $ 8,687
Specialty Paper 546 232 462
Towel & Tissue - - -
$ 7,638 $ 7,256 $ 9,149
Operating profit:
Printing & Writing $ 12,880 $ 31,600 $ 25,750
Specialty Paper 6,586 (1,811) 9,417)
Towel & Tissue 28,691 27,411 25,294
Total reportable segment operating profit: 48,157 57,200 41,627
Corporate and eliminations (12,879) (9,778) (13,348)
Interest expense (10,188) (10,845) (14,416)
Other income (expense) 90 41 280
Earnings before income taxes $ 25,180 $ 36,618 $ 14,143
Segment assets:
Printing & Writing $283,711 $284,652
Specialty Paper 334,079 347,380
Towel & Tissue 165,199 170,854
Corporate and unallocated 75,111 70,871
$858,100 $873,757

-53-

OTHER SIGNIFICANT ITEMS


Depreciation, Expenditures
(all dollar amounts in thousands) Interest Depletion, and for Long-Lived
Income Amortization Assets

2003
Printing & Writing $ 6 $17,211 $10,743
Specialty Paper - 24,613 5,025
Towel & Tissue - 18,218 7,574
Corporate and unallocated 59 781 919
$ 65 $60,823 $24,261
2002
Printing & Writing $ - $16,545 $ 8,751
Specialty Paper - 25,084 3,551
Towel & Tissue - 18,077 5,897
Corporate and unallocated 25 918 1,002
$ 25 $60,624 $19,201
2001
Printing & Writing $ - $16,972 $ 9,308
Specialty Paper 15 25,277 8,615
Towel & Tissue - 17,214 10,902
Corporate and unallocated 247 1,485 966
$262 $60,948 $29,791

COMPANY GEOGRAPHIC DATA

The Company has no long-lived assets outside the United States. Net sales to
customers within the United States and other countries are as follows:


(all dollar amounts in thousands) 2003 2002 2001

United States $895,776 $884,213 $884,088
All foreign countries 75,668 64,485 59,641
$971,444 $948,698 $943,729

-54-



QUARTERLY FINANCIAL DATA (UNAUDITED)

(all dollar amounts in thousands, First Second Third Fourth
except per share data) Quarter Quarter* Quarter Quarter Annual

2003
Net sales $239,826 $242,833 $249,529 $239,256 $971,444
Gross profit 20,879 25,096 28,439 28,483 102,897
Operating profit 4,635 7,677 12,013 10,953 35,278
Net earnings 1,335 3,228 5,981 5,319 15,863
Net earnings per share basic and diluted $0.03 $0.06 $0.12 $0.10 $0.31

2002
Net sales $225,928 $237,820 $251,149 $233,801 $948,698
Gross profit 25,328 28,471 28,146 30,439 112,384
Operating profit 8,256 11,768 14,680 12,718 47,422
Net earnings 3,428 5,696 7,577 6,367 23,068
Net earnings per share basic and diluted $0.07 $0.11 $0.15 $0.12 $0.45

2001
Net sales $234,145 $240,637 $245,106 $223,841 $943,729
Gross profit 15,942 23,856 29,931 26,412 96,141
Operating profit (loss) (1,730) 4,678 14,824 10,507 28,279
Net earnings (loss) (3,768) 682 7,250 4,749 8,913
Net earnings (loss) per share
basic and diluted $(0.07) $0.01 $0.14 $0.09 $0.17

* In 2003, includes after-tax income of $2.6 million ($4.2 million pretax) or
$0.05 per share related to the settlement of a patent litigation case.



MARKET PRICES FOR COMMON SHARES (UNAUDITED)

2003 2002 2001
Cash Cash Cash
Dividends Dividends Dividends
Price Price Paid Per Price Price Paid Per Price Price Paid Per
Quarter High Low Share High Low Share High Low Share

1st $12.08 $9.30 $0.085 $12.97 $10.50 $0.085 $13.00 $9.94 $0.085
2nd 12.23 10.20 0.085 14.00 11.20 0.085 14.00 11.52 0.085
3rd 13.40 11.03 0.085 12.09 9.00 0.085 13.58 7.85 0.085
4th 13.85 11.75 0.085 11.81 8.14 0.085 12.16 9.65 0.085

All prices represent the high and the low sales prices for the common stock as
reported on the New York Stock Exchange.

-55-

Schedule II - Valuation and Qualifying Accounts

Allowance for
Doubtful
Accounts

Balance December 31, 2000 $ 3,837
Charges to cost and expense 1,397
Deductions (583)

Balance December 31, 2001 4,651
Charges to cost and expense 342
Deductions (2,617)

Balance December 31, 2002 2,376
Charges to cost and expense (276)
Deductions ( 172)

Balance December 31, 2003 $ 1,928

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURES

On June 18, 2002, Deloitte & Touche LLP was appointed as independent auditor
for the 2002 fiscal year. Information required by Item 304 of Regulation S-K
is incorporated by reference to the Company's Form 8-K dated June 18, 2002.

ITEM 9A. CONTROLS AND PROCEDURES

As of the end of the period covered by this Form 10-K, management, under the
supervision, and with the participation, of the Company's President and Chief
Executive Officer and the Chief Financial Officer, evaluated the effectiveness
of the design and operation of the Company's disclosure controls and procedures
pursuant to Rule 13a-15(e) under the Securities Exchange Act of 1934. Based
upon, and as of the date of such evaluation, the President and Chief Executive
Officer and the Chief Financial Officer concluded that the Company's disclosure
controls and procedures were effective in all material respects. There have
been no significant changes in the Company's internal controls or in other
factors which could significantly affect internal controls subsequent to the
date the Company carried out its evaluation, nor were there any significant
deficiencies or material weaknesses identified which required any corrective
action to be taken.

-56-

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

DIRECTORS AND EXECUTIVE OFFICERS

Information relating to directors of the Company is incorporated into this Form
10-K by this reference to the disclosure in the Company's proxy statement
relating to the 2004 annual meeting of shareholders (the "2004 Proxy
Statement") under the caption "Proposal No. 1 - Election of Directors."

Information relating to the executive officers of the Company is found in Part
I of this Form 10-K.

Information required under Rule 405 of Regulation S-K is incorporated into this
Form 10-K by this reference to the disclosure in the 2004 Proxy Statement under
the subcaption "Stock Ownership - Section 16(a) Beneficial Ownership Reporting
Compliance."

CODE OF ETHICS

The Company has adopted a Code of Business Conduct and Ethics for all
directors, officers, and employees and a Code of Compliance and Reporting
Requirements for Chief Executive Officer and Senior Financial Officers which
covers the Company's Chief Executive Officer, Chief Financial Officer,
Controller, Manger of Corporate Accounting, and Manager of Internal Audit.
Each of these codes is available in the "Corporate Overview - Corporate
Governance" section of the Company's website at
http://www.wausaumosinee.com/corpgov.htm. Shareholders may also obtain a free
copy by writing to the address set forth under the following subcaption.

CORPORATE GOVERNANCE GUIDELINES AND COMMITTEE CHARTERS

The Company has adopted Corporate Governance guidelines and charters for its
Audit, Compensation, and Corporate Governance Committees. These guidelines and
charters are available in the "Corporate Overview - Corporate Governance"
section of the Company's website at http://www.wausaumosinee.com/corpgov.htm.
Shareholders may also request a free copy of these documents by writing to:

Corporate Secretary
Wausau-Mosinee Paper Corporation
1244 Kronenwetter Drive
Mosinee, WI 54455-9099

AUDIT COMMITTEE

The Board of Directors has appointed an Audit Committee in accordance with
Section 3(a)(58)(A) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). The members of the Audit Committee satisfy the NYSE and SEC
rules for independence applicable to audit committees of listed companies. Mr.
Baker (Chairman), Mr. Alexander, Mr. Freels, and Mr. Kuester serve on the Audit
Committee.
-57-
FINANCIAL EXPERT

The Board of Directors has determined that Gary W. Freels is an audit committee
financial expert. Mr. Freels is an independent director under NYSE listing
standards. Mr. Freels has 25 years of experience in commercial banking and,
for the last 8 years, has managed the investment portfolios of the private
foundation he serves as chief executive officer. He has also served on the
Audit Committee of the Company since 1996.

ITEM 11. EXECUTIVE COMPENSATION

Information relating to director compensation is incorporated into this Form
10-K by this reference to the disclosure in the 2004 Proxy Statement under the
subcaption "Proposal No. 1 - Election of Directors - Compensation of
Directors."

Information relating to the compensation of executive officers is incorporated
into this Form 10-K by this reference to (1) the disclosure in the 2004 Proxy
Statement beginning under the caption "Executive Compensation," through the
disclosure ending under the subcaption, "- Retirement Benefits," and (2) the
disclosure in the 2004 Proxy Statement under the subcaption "- Report of the
Compensation Committee - Committee Interlocks and Insider Participation."

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS

Information relating to the Company's equity compensation plans is incorporated
in this Form 10-K by this reference to the disclosure in the 2004 Proxy
Statement under the subcaption "Executive Compensation - Equity Compensation
Plan Information."

Information relating to security ownership of certain beneficial owners and
management is incorporated into this Form 10-K by this reference to the
disclosure in the 2004 Proxy Statement beginning under the caption "Stock
Ownership - Stock Ownership of Directors, Executive Officers, and 5%
Shareholders" and ending at the subcaption "- Section 16(a) Beneficial
Ownership Reporting Compliance."

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Information relating to certain relationships and related transactions with
directors and officers is incorporated into this Form 10-K by this reference to
the disclosure in the 2004 Proxy Statement under the subcaption "Proposal No. 1
- - Election of Directors - Determination of Independence of Directors."

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Information relating to the fees and services of the Company's principal
accountant is incorporated into this Form 10-K by this reference to the
disclosure in the 2004 Proxy Statement under the subcaption "Report of the
Audit Committee and Related Matters - Independent Auditor and Fees," and "Audit
Committee Pre-Approval Policies."
-58-

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K

(a) Documents filed as part of this report.
(1) The following consolidated financial statements of the Company and the
Independent Auditors' Report and Reports of Independent Public
Accountants thereon are filed as part of this report:
(i) Consolidated Balance Sheets as of December 31, 2003 and 2002
(ii) Consolidated Statements of Income for the years ended December 31,
2003, 2002, and 2001
(iii) Consolidated Statements of Cash Flows for the years ended December
31, 2003, 2002, and 2001
(iv) Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2003, 2002, and 2001
(v) Notes to Consolidated Financial Statements

(2) Financial Statement Schedules
The following financial statement schedule is filed as part of this
report:
(i) Schedule II - Valuation and Qualifying Accounts for the years ended
December 31, 2003, 2002, and 2001 (page 56)

All other schedules prescribed by Regulation S-X are not submitted
because they are not applicable or not required, or because the required
information is included in the Consolidated Financial Statements and Notes
thereto.

(3) Exhibits

The following exhibits required by Item 601 of Regulation S-K are filed
as part of this report:

Exhibit
Number Description
3.1 Restated Articles of Incorporation, as amended October 21, 1998
(incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form 8-A dated October 21, 1998)
3.2 Restated Bylaws, as amended December 17, 1997 (incorporated by
reference to Exhibit 4.2 to the Company's Registration Statement on
Form S-8 dated December 17, 1997, Commission File No. 33-42445)
4.1 Rights Agreement, dated as of October 21, 1998, including the Form
of Restated Articles of Incorporation as Exhibit A and the Form of
Rights Certificate as Exhibit B (incorporated by reference to
Exhibit 4.1 to the Company's Registration Statement on Form 8-A
dated October 21, 1998)
4.2 First Amendment dated August 22, 2000 to Rights Agreement dated
October 21, 1998 (incorporated by reference to Exhibit 4.1 (a) to
Amendment No. 1 to the Company's Registration Statement on Form 8-
A, filed on December 19, 2000)
-59-
4.3 Summary of Rights to Purchase Preferred Shares, Exhibit C to Rights
Agreement filed as Exhibit 4.1 thereto (incorporated by reference
to Exhibit 4.2 to the Company's Registration Statement on Form 8-A,
filed on October 29, 1998)
4.4 $138,500,000 Note Purchase Agreement dated August 31, 1999
(incorporated by reference to Exhibit 4.3 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1999)
4.5 Revolving Credit Agreement dated December 10, 1999 among the
Company and Bank of America, N.A., Bank One, NA, M&I Marshall &
Ilsley Bank, and Harris Trust and Savings Bank, as amended April
14, 2000, December 8, 2000, and January 23, 2001 (incorporated by
reference to Exhibit 4.5 to the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 2000)
4.6 $12,500,000.00 364-day Credit Facility Between the Company and
Marshall & Ilsley Bank Dated March 8, 2002 (incorporated by
reference to Exhibit 4.6 to the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 2001)
10.1 Supplemental Retirement Plan, as last amended October 19, 2000
(incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on form 10-Q for the quarterly period ended March
31, 2001)*

10.2 1988 Stock Appreciation Rights Plan, as last amended March 4, 1999
(incorporated by reference to Exhibit 10.4 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998)*
10.3 1990 Stock Appreciation Rights Plan, as last amended March 4, 1999
(incorporated by reference to Exhibit 10.6 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998)*
10.4 Deferred Compensation Agreement dated July 1, 1994, as last amended
March 4, 1999 (incorporated by reference to Exhibit 10.7 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998)*
10.5 1991 Employee Stock Option Plan, as last amended March 4, 1999
(incorporated by reference to Exhibit 10.8 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998)*
10.6 1991 Dividend Equivalent Plan, as last amended March 4, 1999
(incorporated by reference to Exhibit 10.9 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998)*
10.7 Supplemental Retirement Benefit Plan dated January 16, 1992, as
last amended March 4, 1999 (incorporated by reference to Exhibit
10.10 to the Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1998)*
10.8 Directors' Deferred Compensation Plan, as last amended March 4,
1999 (incorporated by reference to Exhibit 10.11 to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31,
1998)*
10.9 Directors Retirement Benefit Policy, as amended April 16, 1998
(incorporated by reference to Exhibit 10.12 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended March
31, 1998)*
10.10 Mosinee Paper Corporation 1985 Executive Stock Option Plan, as last
amended March 4, 1999 (incorporated by reference to Exhibit 10.14
to the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998)*
10.11 Mosinee Paper Corporation 1988 Stock Appreciation Rights Plan, as
last amended March 4, 1999 (incorporated by reference to Exhibit
10.15 to the
-60-
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998)*
10.12 Mosinee Paper Corporation Supplemental Retirement Benefit Agreement
dated November 15, 1991, as last amended March 4, 1999
(incorporated by reference to Exhibit 10.18 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 1998)*
10.13 Mosinee Paper Corporation 1994 Stock Option Plan, as last amended
March 4, 1999 (incorporated by reference to Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 2001)*
10.14 2003 Incentive Compensation Plan for Executive Officers
(incorporated by reference to Exhibit 10.15 to the Company's Annual
Report on Form 10-K for the fiscal year ended December 31, 2002)*
10.15 2004 Incentive Compensation Plan for Executive Officers*
10.16 2000 Stock Option Plan (incorporated by reference to Exhibit 10.19
to the Company's Quarterly Report on Form 10-Q for the quarterly
period ended September 30, 2001)*
10.17 Executive Deferred Compensation Plan (incorporated by reference to
Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended March 31, 2003)*

21.1 Subsidiaries (incorporated by reference to Exhibit 21.1 to the
Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1998)
23.1 Consent of Deloitte & Touche LLP
(Consent of Arthur Andersen LLP omitted pursuant to Rule 437a under
the Securities Act of 1933, as amended)
31.1 Certification of CEO pursuant to Section 302 of Sarbanes-Oxley Act
of 2002
31.2 Certification of CFO pursuant to Section 302 of Sarbanes-Oxley Act
of 2002
32.1 Certification of CEO and CFO furnished pursuant to Section 906 of
Sarbanes-Oxley Act of 2002

* Executive compensation plans or arrangements. All plans are
sponsored or maintained by the Company unless otherwise noted.

(b) Reports on Form 8-K:

Form 8-K Dated September 5, 2003. The Company filed a current report on
Form 8-K on September 5, 2003, reporting, under Item 5, the appointment of Pete
R. Chiericozzi as Senior Vice President, Town & Tissue Group.

Form 8-K Dated October 21, 2003. The Company filed a current report on
Form 8-K on October 21, 2003, reporting earnings and net sales information for
the quarter ended September 30, 2003, under Item 5 and additional related
information under Item 9, Regulation FD Disclosure, and Item 12, Results of
Operation and Financial Condition.


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SIGNATURES



Pursuant to the requirements of Section 13 or 15(d) 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.

WAUSAU-MOSINEE PAPER
CORPORATION


March 15, 2004 SCOTT P. DOESCHER
Scott P. Doescher
Senior Vice President-Finance,
Secretary and Treasurer

(On behalf of the Registrant and as
Principal Financial and Accounting
Officer)

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Pursuant to the requirement of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.

March 15, 2004



THOMAS J. HOWATT RICHARD L. RADT
Thomas J. Howatt Richard L. Radt
President and Chief Executive Officer Vice Chairman of the Board
(Principal Executive Officer)


SAN W. ORR, JR. WALTER ALEXANDER
San W. Orr, Jr. Walter Alexander
Chairman of the Board Director



DENNIS J. KUESTER DAVID B. SMITH, JR.
Dennis J. Kuester David B. Smith, Jr.
Director Director



GARY W. FREELS HARRY R. BAKER
Gary W. Freels Harry R. Baker
Director Director


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EXHIBIT INDEX*
TO
FORM 10-K
OF
WAUSAU-MOSINEE PAPER CORPORATION
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003
PURSUANT TO SECTION 102(D) OF REGULATION S-T
(17 C.F.R. Section 232.102(D))


Exhibit 10.15 2004 Incentive Compensation Plans for Executive Officers

Exhibit 23.1 Consent of Deloitte & Touche LLP

Exhibit 31.1 Certification of CEO pursuant to Section 302 of Sarbanes-Oxley
Act of 2002

Exhibit 31.2 Certification of CFO pursuant to Section 302 of Sarbanes-Oxley
Act of 2002

Exhibit 32.1 Certification of CEO and CFO pursuant to Section 906 of
Sarbanes-Oxley Act of 2002



* Exhibits required by Item 601 of Regulation S-K which have previously been
filed and are incorporated herein by reference are set forth in Part IV, Item
15 of Form 10-K to which this Exhibit Index relates.
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{00031985.TXT/1}