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Table of Contents

 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 

 
FORM 10-Q
 
[X]
 
Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended: September 29, 2002
 
or
 
[   ]
 
Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from:                      to                     
 
Commission file number: 333-82084
 

 
APPLETON PAPERS INC.
(Exact name of registrant as specified in its charter)
 
Delaware
 
36-2556469
(State or other jurisdiction
 
(I.R.S. Employer
of incorporation)
 
Identification No.)
 
825 East Wisconsin Avenue
   
Appleton, Wisconsin
 
54912-0359
(Address of principal executive offices)
 
(Zip Code)
 
Registrant’s telephone number, including area code: (920) 734-9841
 

 
See Table of Additional Registrants Below
 

 
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes  x    No  ¨
 
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).
 
Yes  ¨    No  x
 
As of November 12, 2002, 100 shares of Appleton Papers Inc. common stock, $100.00 par value, were outstanding. There is no trading market for the common stock of Appleton Papers Inc. As of November 12, 2002, each of the additional registrants had the number of shares outstanding which is shown in the table below. There is no trading market for the common stock of the additional registrants. No shares of the registrant or the additional registrants were held by non-affiliates.
 
Appleton Papers Inc. and WTA Inc. meet the conditions set forth in General Instruction H(1)(a) and (b) and are therefore filing this form with the reduced disclosure format.


Table of Contents
 
ADDITIONAL REGISTRANTS
 

Exact name of Registrant as
specified in its charter
  
State or other
jurisdiction of
incorporation or
organization
  
Number of
Shares Outstanding
as of
September 29,
2002
  
I.R.S.
Employer
Identification
Number
  
Address, including zip
code, and telephone
number, including area
code, of Registrant’s
principal
executive office
  
Registration No.











Paperweight Development Corp.
  
Wisconsin
  
11,602,845
  
39-2014992
  
825 East Wisconsin Avenue, Appleton, Wisconsin 54912-0359 (920) 734-9841
  
333-82084-01











WTA Inc.
  
Delaware
  
1
  
51-0329653
  
c/o Delaware Corporate Management, Inc. Suite 1300 1105 North Market Street Wilmington, Delaware 19899 (302) 651-8339
  
333-82084-02











 


Table of Contents
 
INDEX
 
              
Page
Number

PART I
  
FINANCIAL INFORMATION
    
Item 1
  
Financial Statements (unaudited)
    
            
1
            
2
            
3
            
4
Item 2
     
25
Item 3
     
32
Item 4
     
32
PART II
  
OTHER INFORMATION
    
Item 2
     
33
Item 6
     
33
  
35


Table of Contents
PART I—FINANCIAL INFORMATION
 
Item 1 – Financial Statements
 
PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
 
    
September 29, 2002

  
December 29, 2001

    
(unaudited)
    
ASSETS
             
Current assets
             
Cash and cash equivalents
  
$
19,225
  
$
35,702
Accounts receivable, less allowance for doubtful accounts of $1,664 and $1,585, respectively
  
 
115,094
  
 
105,348
Inventories
  
 
115,866
  
 
134,598
Other current assets
  
 
14,117
  
 
12,010
    

  

Total current assets
  
 
264,302
  
 
287,658
Property, plant and equipment, net
  
 
508,597
  
 
531,776
Intangible assets, less accumulated amortization of $8,386 and $1,289, respectively
  
 
129,382
  
 
136,479
Other assets
  
 
25,439
  
 
46,385
    

  

Total assets
  
$
927,720
  
$
1,002,298
    

  

LIABILITIES, REDEEMABLE COMMON STOCK AND RETAINED EARNINGS
             
Current liabilities
             
Current portion of long-term bank debt
  
$
20,220
  
$
24,125
Accounts payable
  
 
46,687
  
 
49,217
Accrued interest expense
  
 
9,219
  
 
2,403
Accrued income taxes
  
 
23,531
  
 
6,578
Restructuring reserve
  
 
4,877
  
 
5,464
Other accrued liabilities
  
 
65,198
  
 
61,406
    

  

Total current liabilities
  
 
169,732
  
 
149,193
Other long-term bank debt
  
 
136,177
  
 
240,875
Variable rate industrial development bonds
  
 
8,650
  
 
8,650
Capital lease obligation
  
 
4,042
  
 
4,314
Postretirement benefits other than pension
  
 
58,283
  
 
57,178
Accrued pension
  
 
8,476
  
 
15,954
Other long-term liabilities
  
 
19,171
  
 
21,959
Senior subordinated notes payable
  
 
225,068
  
 
250,000
Deferred payment obligation
  
 
152,687
  
 
141,896
Commitments and contingencies (Note 11)
  
 
—  
  
 
—  
Redeemable common stock, $0.01 par value; shares authorized: 30,000,000; shares issued and outstanding: 11,602,845 and 10,684,373, respectively
  
 
133,820
  
 
104,663
Retained earnings
  
 
11,614
  
 
7,616
    

  

Total liabilities, redeemable common stock and retained earnings
  
$
927,720
  
$
1,002,298
    

  

 
The accompanying notes are an integral part of the condensed consolidated financial statements.

1


Table of Contents
PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(dollars in thousands)
 
      
(Successor Basis)

      
(Predecessor Basis)

      
(Successor Basis)

      
(Predecessor Basis)

 
      
Three Months Ended September 29, 2002

      
Three Months Ended September 30, 2001

      
Nine Months Ended September 29, 2002

      
Nine Months Ended September 30, 2001

 
Net sales
    
$
229,030
 
    
$
249,112
 
    
$
682,304
 
    
$
728,610
 
Cost of sales
    
 
158,314
 
    
 
169,092
 
    
 
477,706
 
    
 
515,549
 
      


    


    


    


Gross profit
    
 
70,716
 
    
 
80,020
 
    
 
204,598
 
    
 
213,061
 
Selling, general and administrative
    
 
37,699
 
    
 
35,655
 
    
 
117,882
 
    
 
110,410
 
Restructuring and other charges
    
 
—  
 
    
 
5,517
 
    
 
—  
 
    
 
6,385
 
Environmental expense
    
 
—  
 
    
 
779
 
    
 
—  
 
    
 
21,703
 
Litigation settlement
    
 
—  
 
    
 
361
 
    
 
—  
 
    
 
361
 
Equipment relocation expenses
    
 
—  
 
    
 
141
 
    
 
—  
 
    
 
463
 
      


    


    


    


Operating income
    
 
33,017
 
    
 
37,567
 
    
 
86,716
 
    
 
73,739
 
Other expense (income)
                                           
Interest expense
    
 
15,844
 
    
 
7,678
 
    
 
53,616
 
    
 
22,815
 
Debt extinguishment expenses
    
 
—  
 
    
 
—  
 
    
 
11,754
 
    
 
—  
 
Interest income
    
 
(316
)
    
 
(2,671
)
    
 
(881
)
    
 
(8,216
)
Foreign exchange loss (gain)
    
 
383
 
    
 
304
 
    
 
(46
)
    
 
361
 
      


    


    


    


Income before income taxes
    
 
17,106
 
    
 
32,256
 
    
 
22,273
 
    
 
58,779
 
Provision for income taxes
    
 
128
 
    
 
6,647
 
    
 
167
 
    
 
16,952
 
      


    


    


    


Income from continuing operations
    
 
16,978
 
    
 
25,609
 
    
 
22,106
 
    
 
41,827
 
      


    


    


    


Discontinued operations, net of tax:
                                           
Loss from discontinued operations
    
 
—  
 
    
 
(8,027
)
    
 
—  
 
    
 
(9,496
)
      


    


    


    


Net income
    
$
16,978
 
    
$
17,582
 
    
$
22,106
 
    
$
32,331
 
      


    


    


    


 
 
The accompanying notes are an integral part of the condensed consolidated financial statements.

2


Table of Contents
PAPERWEIGHT DEVELOPMENT CORP. AND SUBSIDIARIES
 
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(dollars in thousands)
 
      
(Successor Basis)

      
(Predecessor Basis)

 
      
Nine Months Ended September 29, 2002

      
Nine Months Ended September 30, 2001

 
Cash flows from operating activities:
                     
Income from continuing operations
    
$
22,106
 
    
$
41,827
 
Adjustments to reconcile income from continuing operations to net cash provided by operating activities of continuing operations:
                     
Depreciation
    
 
44,135
 
    
 
32,151
 
Amortization of intangible assets
    
 
7,097
 
    
 
399
 
Amortization of financing fees
    
 
9,028
 
    
 
55
 
Employer 401(k) noncash matching contributions
    
 
5,789
 
    
 
—  
 
Foreign exchange (gain) loss
    
 
(46
)
    
 
361
 
Loss on disposal of equipment
    
 
1,198
 
    
 
5,079
 
Debt extinguishment expenses
    
 
11,754
 
    
 
—  
 
Accretion of deferred payment and capital lease obligations
    
 
11,022
 
    
 
262
 
(Increase)/decrease in assets and increase/(decrease) in liabilities:
                     
Accounts receivable
    
 
(9,700
)
    
 
13,006
 
Inventories
    
 
18,732
 
    
 
28,549
 
Other current assets
    
 
(2,107
)
    
 
1,185
 
Accounts payable and other accrued liabilities
    
 
7,512
 
    
 
(18,089
)
Accrued income taxes
    
 
16,953
 
    
 
(3,292