===============================================================================
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 April 2, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to ______________
Commission File No. 1-2267
THE MEAD CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 31-0535759
(State of Incorporation) (I.R.S. Employer Identification No.)
MEAD WORLD HEADQUARTERS
COURTHOUSE PLAZA NORTHEAST
DAYTON, OHIO 45463
(Address of principal executive offices)
Registrant's telephone number, including area code: 513-495-6323
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days. Yes X No __ .
The number of Common Shares outstanding at April 2, 1995 was 56,336,827.
================================================================================
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
-------------------------------------------------
QUARTERLY PERIOD ENDED APRIL 2, 1995
------------------------------------
PART I - FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
BALANCE SHEETS
- --------------
(All dollar amounts in millions)
April 2, Dec. 31,
1995 1994
-------- --------
ASSETS
- ------
Current assets:
Cash and cash equivalents $ 144.9 $ 484.0
Accounts receivable 644.3 606.6
Inventories 442.4 382.4
Other current assets 100.9 421.0
-------- -------
Total current assets 1,332.5 1,894.0
Investments and other assets:
Investees 122.9 108.2
Other assets 433.4 546.5
-------- --------
556.3 654.7
Property, plant and equipment 4,201.3 4,163.2
Less accumulated depreciation and
amortization (1,882.1) (1,849.3)
-------- --------
2,319.2 2,313.9
-------- --------
Total assets $4,208.0 $4,862.6
======== ========
LIABILITIES AND SHAREOWNERS' EQUITY
- -----------------------------------
Current liabilities:
Accounts payable $ 329.9 $ 373.5
Accrued liabilities 360.8 373.2
Income taxes payable 36.0 324.7
Current maturities of long-term debt 16.2 16.1
-------- --------
Total current liabilities 742.9 1,087.5
Long-term debt 813.1 957.7
Commitments and contingent liabilities
Deferred items 645.0 634.8
Shareowners' equity:
Common shares 162.4 174.9
Foreign currency translation adjustment .1 (4.8)
Net unrealized gain on securities 1.7 3.7
Retained earnings 1,842.8 2,008.8
-------- --------
2,007.0 2,182.6
-------- -------
Total liabilities and
shareowners' equity $4,208.0 $4,862.6
======== ========
See notes to financial statements.
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
STATEMENTS OF EARNINGS
- ----------------------
(All dollar amounts in millions, except per share amounts)
First Quarter Ended
--------------------
April 2, April 3,
1995 1994
-------- --------
Net sales $ 1,240.8 $ 1,007.6
Cost of products sold 1,018.9 845.1
-------- --------
Gross profit 221.9 162.5
Selling, administrative and
research expenses 136.7 124.2
-------- --------
Earnings from operations 85.2 38.3
Other revenues (expenses) - net 13.4 (6.6)
Interest and debt expense (18.3) (24.3)
-------- --------
Earnings before income taxes 80.3 7.4
Income taxes 30.6 2.9
-------- --------
Earnings before equity in net
earnings of investees 49.7 4.5
Equity in net earnings of investees 12.0 11.4
-------- --------
Earnings from continuing operations 61.7 15.9
Discontinued operations 11.7
-------- --------
Net earnings $ 61.7 $ 27.6
======== ========
Per common and common equivalent share:
Earnings from continuing operations $1.07 $ .27
Discontinued operations .19
----- -----
Net earnings $1.07 $ .46
===== =====
Cash dividends per common share $ .25 $ .25
===== =====
Average common and common equivalent
shares outstanding (millions) 57.7 59.8
===== =====
See notes to financial statements.
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
STATEMENTS OF CASH FLOWS
- ------------------------
(All dollar amounts in millions)
First Quarter Ended
--------------------
April 2, April 3,
1995 1994
------- --------
Cash flows from operating activities:
Net earnings $ 61.7 $ 27.6
Adjustments to reconcile net earnings to
net cash (used in) operating activities:
Depreciation, amortization and depletion of
property, plant and equipment 49.0 46.5
Depreciation and amortization of other assets 10.9 8.4
Deferred income taxes 13.3 10.1
Investees-earnings and dividends (13.0) (9.0)
(Income) from discontinued operations (11.7)
Other (9.8) 8.9
Change in assets and liabilities:
Accounts receivable (37.7) (24.3)
Inventories (60.0) (45.5)
Other current assets (12.3) (2.7)
Accounts payable and accrued liabilities (344.8) (71.5)
Cash provided by (used in) discontinued operations (.9) (7.8)
------- ------
Net cash (used in) operating activities (343.6) (71.0)
------- ------
Cash flows from investing activities:
Capital expenditures (54.4) (63.1)
Additions to equipment rented to others (15.1) (12.8)
Restricted funds 461.0
Other (1.9) 7.1
------- ------
Net cash provided by (used in) investing activities 389.6 (68.8)
------- ------
Cash flows from financing activities:
Additional borrowings 154.8
Payments on borrowings (144.9) (166.2)
Notes payable 164.2
Cash dividends paid (14.5) (14.8)
Common shares purchased (241.5)
Common shares issued 15.8 3.4
------- ------
Net cash provided by (used in) financing activities (385.1) 141.4
------- ------
Increase (decrease) in cash and cash equivalents (339.1) 1.6
Cash and cash equivalents at beginning of year 484.0 9.3
------- ------
Cash and cash equivalents at end of quarter $144.9 $10.9
======= ======
See notes to financial statements.
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -----------------------------
(All dollar amounts in millions)
A - FINANCIAL STATEMENTS
The balance sheet at December 31, 1994 is condensed financial information
taken from the audited balance sheet. The interim financial statements
are unaudited. In the opinion of management, all adjustments (which
consist only of normal recurring adjustments) necessary to present fairly
the financial position and results of operations for the interim periods
presented have been made.
B - ACCOUNTING POLICIES
On an interim basis, all costs subject to recurring year-end adjustments
have been estimated and allocated ratably to the quarters. Income taxes
have been provided based on the estimated tax rate for the respective
years after excluding infrequently occurring items whose specific tax
effect is reported during the same interim period as the related
transaction.
C - INVENTORIES
The amount of inventories is (principally last-in, first-out method):
April 2, Dec. 31,
1995 1994
------ ------
Finished and semi-finished products $306.1 $241.0
Raw materials 74.5 78.9
Stores and supplies 61.8 62.5
------ ------
$442.4 $382.4
====== ======
D - INVESTEES
The summarized operating data for all investees is presented in the
following table:
First Quarter Ended
--------------------
April 2, April 3,
1995 1994
-------- --------
Revenues $191.2 $151.8
====== ======
Gross profit $ 46.3 $ 42.1
====== ======
Net earnings $ 26.5 $ 26.0
====== ======
E - ADDITIONAL INFORMATION ON CASH FLOWS
First Quarter Ended
--------------------
April 2, April 3,
1995 1994
-------- --------
Cash paid for:
Interest $ 28.2 $ 32.6
====== ======
Income taxes $308.4 $ 1.8
====== ======
F - SHAREOWNERS' EQUITY
During the first quarter of 1995, the Company repurchased 4.6 million
common shares on the open market for $241.5 million. This brings the
total shares repurchased under the existing $350 million authorization to
$285.9 million as of the end of the first quarter of 1995. On April 27,
1995, the Board of Directors authorized the Company to repurchase up to an
additional five million common shares from time to time.
G - SALE OF ASSETS
In March 1995, the Company announced it had reached an agreement to sell
the Kingsport, Tennessee, paper mill to Willamette Industries. This sale
is expected to close in the second quarter of 1995. The Company recorded
a charge of $60.0 million in 1994 for the anticipated loss on the sale.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
-----------------------------------------------------------
AND RESULTS OF OPERATIONS
-------------------------
RESULTS OF OPERATIONS
- ---------------------
Net Sales
- ---------
Net sales for the first quarter of 1995 were $1.24 billion, a 23% increase
over the $1.01 billion of net sales generated in the first quarter of
1994. Most of Mead's divisions reported higher 1995 revenues compared to
the same quarter of 1994, with major increases coming from the Fine Paper,
Publishing Paper, Containerboard and Zellerbach divisions. On the whole,
markets were considerably stronger and selling prices significantly higher
than a year ago. Furthermore, the addition of Hilroy, a Canadian
manufacturer and distributor of school and office products purchased in
the fourth quarter of 1994, contributed to the sales increase.
Operating Costs and Expenses
- ----------------------------
Gross profit as a percentage of sales improved from 16.1% in the first
quarter of 1994 to 17.9% for the first quarter of 1995. The improvement
is attributed to improved sales volume and selling prices, good operating
performance and productivity gains.
Selling, administrative and research expenses totaled $136.7 million in
the first quarter of 1995 compared to $124.2 million in the first quarter
of 1994. The increase was attributable to acquisitions and expansions
into new foreign markets and additional selling expenses, primarily at
Zellerbach. As a percent of sales, however, these expenses declined to
11% for the first quarter of 1995 compared to 12% for the same quarter of
1994.
Other Revenues (Expenses) - Net
- -------------------------------
Other revenues were $13.4 million in the first quarter of 1995 compared to
net (expenses) of ($6.6) million in the comparable quarter of 1994. In
1995, Mead earned an unusual amount of interest and dividend income on the
temporary investment of the proceeds from the 1994 sale of its Electronic
Publishing business. By the end of the quarter, most of these proceeds
had been spent for other corporate purposes (described below), and future
interest and dividend income is not expected to be significant. In the
first quarter of 1994, Mead incurred $12.1 million ($7.4 million after
tax, or 12 cents per share) in losses related to adjustments to market for
certain financial instruments, principally a one-time loss on the
termination of certain leveraged interest rate options entered into in
conjunction with swap transactions.
Interest and Debt Expense
- -------------------------
First quarter 1995 interest and debt expense declined 25% to $18.3 million
from the 1994 amount of $24.3 million. A portion of the proceeds from the
sale of the Electronic Publishing segment was used to redeem Mead's 6-3/4%
convertible subordinated debentures (December 1994) and its 9% debentures
(early January 1995). Additionally, Mead paid down virtually all short-
term borrowings in 1994 and retired a small amount of medium-term notes
during the first quarter of 1995. Partially offsetting the interest
savings from these paydowns are higher rates on borrowings carrying
variable interest rates.
Income Taxes
- ------------
Federal and state taxes on income increased from $2.9 million for the
first quarter of 1994 to $30.6 million in the first quarter of 1995.
Higher pre-tax earnings in 1995 as compared to 1994 caused the increase.
There was no significant change in the effective tax rate.
Equity in Net Earnings of Investees
- -----------------------------------
Earnings contributed by Mead's investees, primarily its jointly-owned
Northwood companies, increased to $12.0 million for the first quarter of
1995 compared to $11.4 million for the first quarter of 1994. Average
selling prices for market softwood kraft pulp increased about 70% over
first quarter 1994 levels, and demand continues to be strong. As a
result, the Northwood pulp mill is sold out for the next several months.
Higher fiber costs and weaker prices for lumber and other solid wood
products somewhat offset the benefit of the higher pulp selling prices.
Financial Data by Business
- --------------------------
In the Paper segment, net sales, including those to Mead's Zellerbach
distribution business, were $394.8 million in the first quarter of 1995
compared to $309.9 million for the same quarter of 1994. The segment
experienced a 15% increase in tons sold in 1995 compared to 1994 first
quarter levels. Improved selling prices, particularly in the coated
grades, accounted for the rest of the improvement. Earnings for the Paper
segment totaled $62.6 million in the first quarter of 1995, more than
double the $29.0 million reported in the first quarter of 1994. Most of
the improvement came from Mead's Publishing Paper Division in Escanaba,
Michigan, and its Fine Paper mill in Kingsport, Tennessee. The
Chillicothe, Ohio, Fine Paper mill's first quarter 1995 earnings were
considerably higher than 1994 levels despite some pulp mill operating
problems during the middle part of the quarter. Although there are some
signs that economic growth is stabilizing, Mead expects that the current
favorable market conditions will continue and expects that the Paper segment
will perform well for the rest of 1995. In March 1995, Mead announced the
execution of an agreement to sell the Kingsport, Tennessee, mill to
Willamette Industries, Inc. The sale is expected to be completed during
the second quarter of 1995.
First quarter 1995 sales and earnings exceeded first quarter 1994 levels
in the Packaging and Paperboard segment. Net sales to unaffiliated
customers for the first quarter were $317.7 million and $282.8 million for
1995 and 1994, respectively. Earnings improved about 20%, from $27.6
million in the first quarter of 1994 to $33.1 million for the same quarter
of 1995. Most of the increase in earnings and much of the increase in
sales came from Mead's Containerboard Division. Higher market prices for
corrugating medium and containers, coupled with good operating performance
at the Stevenson, Alabama, corrugating medium mill and the converting
operations, drove the improvement. Mead expects that the current
containerboard market conditions will continue throughout the rest of the
year. First quarter results were mixed for Mead's Coated Board system.
1995 worldwide sales volume is higher compared with the same period of
1994, but pricing pressures in the beverage carton market and rising fiber
costs reduced first quarter earnings from 1994 levels. Mead's Coated
Board Division has terminated its operations in the Pacific Rim. This
decision will not have a material effect on the financial condition or
results of operations of the Corporation nor the Packaging and Paperboard
segment. Mead's Packaging Division continues to maintain a significant
presence in this part of the world.
Net sales to unaffiliated customers totaled $593.8 million in the
Distribution and School and Office Products segment for the first quarter
of 1995, a 29% increase over the first quarter of 1994. First quarter
earnings were $8.1 million and $2.3 million for 1995 and 1994,
respectively. Mead's Zellerbach distribution business generated
significantly higher sales in each of its three business units. Earnings
also benefitted from a stronger paper market. The addition of Hilroy
contributed to the increased sales and earnings of the School and Office
Products Division. Without Hilroy, however, the division's sales still
increased over 1994 levels primarily due to higher selling prices. The
division's first quarter earnings also increased over the prior year's
first quarter despite substantially higher raw material costs. Mead
believes the division is poised to have a successful back-to-school season
in spite of reduced paper availability and significantly higher tablet
paper costs.
Liquidity and Capital Resources
- -------------------------------
In the fourth quarter of 1994, Mead sold its Electronic Publishing
business for $1.5 billion. The sale, and the subsequent use of the
proceeds, had a significant positive impact on the financial condition of
The Mead Corporation. Upon the sale, the Board of Directors restricted a
certain amount of cash to be used solely for the payment of federal and
state taxes on the gain (these taxes were paid in the first quarter of
1995) and the redemption of two debenture issues. In December 1994, Mead
redeemed $139.0 million of 6-3/4% convertible debentures originally due
2012. In January 1995, Mead redeemed $130.0 million of 9% debentures,
originally scheduled for payment in the years 2000 through 2017.
Also, as a result of the sale of the Electronic Publishing business, Mead
announced a program to buy back $350 million of common shares. By the end
of the first quarter of 1995, Mead had repurchased 5.5 million shares
($286 million) under this program. Furthermore, in late April 1995, Mead
announced a program authorizing the repurchase of an additional 5 million
shares of Mead common stock from time to time on the open market.
Traditionally, the first quarter School and Office Products back-to-school
inventory build has been financed through short-term borrowings.
Available cash obviated the need for any significant borrowing in the
first quarter of 1995.
The net effect of all these events reduced the long-term debt to total
capital ratio from 45.8% at April 3, 1994 (30.5% at December 31, 1994) to
28.8% at April 2, 1995. Because of the use of the proceeds from the
Electronic Publishing sale, working capital decreased from $806.5 million
at December 31, 1994, to $589.6 million at April 2, 1995. The current
ratio increased slightly to 1.8 at the end of the first quarter of 1995
from 1.7 at December 31, 1994.
First quarter 1995 capital spending totaled $54.4 million compared to
$63.1 million for the first quarter of 1994.
During the first quarter of 1995, Mead also reported two other strategic
initiatives. In March, Mead announced an agreement to sell the Kingsport,
Tennessee mill. The anticipated loss on the sale was provided for in
the fourth quarter of 1994. Also, the Board of Directors approved a $150-
$175 million expansion of Mead's corrugating medium mill in Stevenson,
Alabama. During the early stages of construction, the expansion is
expected to be funded through internally generated cash flow. External
funding may be required at a later date.
At the end of the first quarter, Mead paid a fixed rate or a capped rate
on 74% of its debt and paid a floating rate of interest on the remainder.
A change of 1% in the floating interest rate, on an annual basis, would
result in a $.05 change in net earnings per share for the year. The
estimated market value of long-term debt, excluding capital leases, was
$19.3 million less than the book value at the end of the first quarter of
1995.
PART II - OTHER INFORMATION
- ---------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits
(10) Material Contracts:
(1) Mead Management Incentive Plan for 1995 in which
executive officers participate.
(2) Corporate Long Term Incentive Plan effective 1995
in which executive officers participate.
(11.1), (11.2), (11.3) Calculations of Net Earnings per Share.
(27) Financial Data Schedule
(b) No current reports on Form 8-K were filed with the Commission
in the first quarter of 1995.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
Date: May 12, 1995
THE MEAD CORPORATION
- -------------------
(Registrant)
By GREGORY T. GESWEIN
_________________________
G. T. Geswein
Controller and
Chief Accounting Officer
Exhibit 10(1)
MEAD MANAGEMENT INCENTIVE PLAN
------------------------------
1995
----
OBJECTIVE The objective of the Mead Management Incentive Plan is to
- --------- recognize and reward key managers for achieving and
sustaining superior corporate performance compared to other
industrial companies.
PARTICIPATION All elected officers of the Corporation will participate
ELIGIBILTY in this plan.
- -------------
PAYOUT Participants must be employees of the company, an affiliate
ELIGIBILTY or a subsidiary at the end of the plan year to receive
- ---------- payout from this plan. An appropriate proration of earned
awards may be made in case of death, disability,
retirement, hire or transfer during the plan year. In such
cases, the incentive target will be pro-rated to reflect
the months of service.
INCENTIVE TARGET The Incentive Target for each grade is the difference
- ---------------- between Mead's policy total cash compensation target and
the midpoint. This Target will be adjusted annually, based
on market total cash compensation data. In addition, the
Compensation Committee may increase the incentive targets
in any plan year, to reflect Mead's competitive base salary
position. For the 1995 plan year, incentive targets for
all grades have been increased by 3%. The current year
incentive targets are shown in Attachment 1.
TOTAL PAYOUT Payout under the Mead Management Incentive Plan is the sum
DETERMINATION of the incentive target multiplied by the Competitive
- ------------- Industry Factor (CIF) to determine the final payout.
The CIF is determined as:
Competitive = Mead ROTC X Mead ROTC
----------------- --------------------
Industry Factor All Industry ROTC Forest Products ROTC
ROTC = (EAT + (1-Tax Rate) X Current Interest Expense) X 100
---------------------------------------------
(Average Equity + Average Long-Term Debt)
The incentive payout is determined as:
Incentive = Incentive X CIF
Payout Target
The above calculated payout will be further adjusted
by the manager's assessment of the participant's individual
performance.
For selected MMIP participants, the payout determination
will constitute 80% Competitive Industry Factor (above) and
20% Cash Flow Component. Payout of this component is based
on an assessment of how effectively management has utilized
cash resources to productively grow the business.
The selected MMIP participants with Cash Flow Impact are
shown in Attachment 2.
PAYOUT Senior Executives in grades 26 and above will not be
THRESHOLD eligible for payout unless Mead's annual ROTC is 5% or
- --------- higher.
Other participants will not be eligible for payout unless
there are corporate earnings for the year.
ADMINISTRATION The Plan is administered by the Compensation Committee
- -------------- of the Board. The Compensation Committee has delegated
administration to the Corporate Vice President, Human
Resources.
ACCOUNTING Payout will be estimated periodically and required
FOR PAYOUT corporate accrual of payout will be booked against earnings
- ---------- during the year. Approved incentive checks will be
prepared and expensed to earnings at the time of payout.
RECOMMENDATIONS The Compensation Committee reviews and approves
AND APPROVAL total funding and individual payouts under the plan, and
- --------------- the amount, use and replenishment of any reserve funds.
The Compensation Committee may also determine if payout
will be in cash, restricted stock, or a combination
thereof.
The CEO recommends all individual payouts to the
Compensation Committee of the Board of Directors for
approval. Payout for the CEO is recommended to the Board
of Directors by the Compensation Committee.
RESERVED RIGHTS The Mead Corporation reserves the right to alter,
- --------------- amend, suspend or terminate any or all provisions of the
Mead Management Incentive Plan,except such actions shall
neither inhibit nor hinder the rights of any individual
with respect to earned and credited awards which have been
deferred. Designation of a position as eligible for
participation neither guarantees the individual a right to
an incentive payment nor a right to continued employment.
STEVEN C. MASON
--------------------------------
Approved
April 13, 1995
-------------------------------
Date
Attachment 1
MEAD MANAGEMENT INCENTIVE PLAN
------------------------------
PAYOUT TARGETS
--------------
1995
----
1995 Policy Policy *Annual
Grade Midpoint Annual Target TCC Target Incentive Target
----- -------- ------------- ----------- ----------------
33 $678, 132 $535,900 $1,214,000 $556,200
32 593,364 443,500 1,036,900 461,300
31 519,192 366,200 885,400 381,800
30 454,296 304,100 758,400 317,700
29 397,512 256,000 653,500 267,900
28 347,820 211,800 559,600 222,200
27 304,344 174,900 479,200 184,000
26 266,304 143,400 409,700 151,400
25 233,016 119,400 352,400 126,400
24 203,892 95,800 299,700 101,900
23 178,416 75,000 253,400 80,300
22 162,000 55,500 217,500 60,360
*For 1995 the above Incentive Targets include an addition of 3% of Midpoint.
Attachment 2
MMIP PARTICIPANTS WITH CASH FLOW COMPONENT
------------------------------------------
S. C. Mason Chairman, President & CEO
W. R. Graber VP & CFO
E. M. Karter VP - Operating Officer
R. W. Lane VP - Operating Officer
T. E. Palmer VP & General Counsel
J. F. Tatar VP - Operating Officer
C. J. Mazza VP Human Resources
W. O. Nugent VP Purchasing & Logistics
C. A. Niekamp VP Strategy & Planning
G. T. Geswein Controller
J. T. Matthews Treasurer
Exhibit 10(2)
THE CORPORATE LONG TERM INCENTIVE PLAN
--------------------------------------
1995
----
OBJECTIVE The objective of the Corporate Long Term Incentive
- --------- Plan is to reward executives for adding value to the
Corporation by providing a return that is above the cost of
capital, while strategically managing capital growth.
TERM OF THE PLAN This Corporate Long Term Incentive Plan is a two year
plan, with the performance period ending December 31, 1995.
PARTICIPATION All corporate executives grade 23 and above, plus Division
ELIGIBILTY Presidents.
- -------------
PAYOUT Participants must be employees of the company, an affiliate
ELIGIBILTY or a subsidiary at the end of each plan year to receive
payout from this plan. An appropriate proration of
earned awards may be made in case of death, disability,
retirement, hire or transfer during the year.
INCENTIVE TARGET The 1995 Incentive Target by grade is shown in Attachment 1.
- ---------------- This Target will be adjusted annually, based on competitive
data.
The Incentive Target will be prorated for participants
gaining or losing eligibility, or for changes in grade during
each year of the plan term.
TOTAL PAYOUT This design measures compound capital growth over 2 years,
DETERMINATION and the ROTC achieved in the second year of this two year
- ------------- plan.
A single matrix (Attachment 2) determines the Mead
Performance Factor (MPF).
The Mead Performance Factor (MPF) is then multiplied by the
-----------------------------
Competitive Industry Factor (CIF) to determine the final
payout. The CIF is determined as:
Competitive = Mead ROTC X Mead ROTC
----------------- ----------------------
Industry Factor All Industry ROTC Forest Products ROTC
ROTC = (EAT + ((1-Tax Rate) X Current Interest Expense) X 100
------------------------------------------------
(Average Equity + Average Long-Term Debt)
The incentive payout is determined as:
Incentive = Incentive X MPF X CIF
Payout Target
ADMINISTRATION The Plan is administered by the Compensation Committee
- -------------- of the Board. The Compensation Committee has delegated
administration to the Corporate Vice President, Human
Resources.
ACCOUNTING Payout will be estimated periodically and required corporate
FOR APPROVAL accrual of payout will be booked against earnings during
- ------------ the year. Approved incentive checks will be prepared and
expensed to earnings at the time of payout.
RECOMMENDATIONS The Compensation Committee reviews and approves total
AND APPROVAL funding and individual payouts under the plan, and the
- --------------- amount, use and replenishment of any reserve funds.
The CEO recommends all individual payouts to the
Compensation Committee of the Board of Directors for
approval. Payout for the CEO is recommended to the Board
of Directors by the Compensation Committee.
Form of payout will be determined by the Compensation
Committee. Payout will normally be delivered to all
participants as 30% cash and 70% restricted stock (with a
3-year vesting period).
RESERVED RIGHTS The Mead Corporation reserves the right to alter, amend,
- --------------- suspend or terminate any or all provisions of this Corporate
Long Term Incentive Plan, except such actions shall neither
inhibit nor hinder the rights of any individual with respect
to earned and credited awards which have been deferred.
Designation of a position as eligible for participation
neither guarantees the individual a right to an incentive
payment nor a right to continued employment.
STEVEN C. MASON
--------------------------
Approved
April 13, 1995
-----------------------
Date
Attachment 1
THE CORPORATE LONG TERM INCENTIVE PLAN
--------------------------------------
PAYOUT TARGETS
--------------
1995
Grade Incentive Target
33 $ 535,900
32 443,500
31 366,200
30 304,100
29 256,000
28 211,800
27 174,900
26 143,400
25 119,400
24 95,800
23 75,000
22 55,500
EXHIBIT (11.1)
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
CALCULATION OF PRIMARY NET EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
- ----------------------------------------------------------------------------
(All amounts in thousands, except per share amounts)
First Quarter Ended
--------------------
April 2, April 3,
1995 1994
------- -------
NET EARNINGS APPLICABLE TO COMMON AND COMMON
EQUIVALENT SHARES $61,742 $27,616
======= =======
AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING:
Average number of common shares outstanding 56,759 59,252
Dilutive effect of stock options after
application of treasury stock method 909 594
------- -------
AVERAGE NUMBER OF COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 57,668 59,846
======= =======
PRIMARY NET EARNINGS PER COMMON AND COMMON
EQUIVALENT SHARE $ 1.07 $ .46
======= =======
EXHIBIT (11.2)
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
CALCULATION OF FULLY DILUTED NET EARNINGS PER COMMON AND COMMON EQUIVALENT
- --------------------------------------------------------------------------
SHARE (1)
- ----------
(All amounts in thousands, except per share amounts)
First Quarter Ended
--------------------
April 2, April 3,
1995 1994
------- -------
NET EARNINGS APPLICABLE TO COMMON AND COMMON
EQUIVALENT SHARES $61,742 $27,616
====== ======
AVERAGE NUMBER OF SHARES OUTSTANDING ON A
FULLY DILUTED BASIS:
Shares used in calculating primary earnings
per share 57,668 59,846
Additional dilutive effect of stock options after
application of treasury stock method 43
------- -------
AVERAGE NUMBER OF SHARES OUTSTANDING ON A
FULLY DILUTED BASIS 57,711 59,846
======= =======
FULLY DILUTED NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE $ 1.07 $ .46
======= =======
(1) This calculation is submitted in accordance with 17 CFR
229.601(b)(11) although not required by APB Opinion No. 15 because it
results in dilution of less than 3%.
EXHIBIT (11.3)
THE MEAD CORPORATION AND CONSOLIDATED SUBSIDIARIES
- --------------------------------------------------
CALCULATION OF FULLY DILUTED NET EARNINGS PER COMMON AND COMMON EQUIVALENT
- --------------------------------------------------------------------------
SHARE (1)
- ----------
(All amounts in thousands, except per share amounts)
First Quarter Ended
--------------------
April 2, April 3,
1995 1994
------- -------
NET EARNINGS APPLICABLE TO COMMON AND COMMON
EQUIVALENT SHARES $61,742 $27,616
ADJUSTMENT FOR OTHER POTENTIALLY DILUTIVE
SECURITIES - Interest savings (net of tax) on
Convertible Subordinated Debentures as if converted
at the beginning of the period 1,431
------- -------
NET EARNINGS APPLICABLE TO COMMON AND COMMON
EQUIVALENT SHARES ON A FULLY DILUTED BASIS $61,742 $29,047
======= =======
AVERAGE NUMBER OF SHARES OUTSTANDING ON A
FULLY DILUTED BASIS:
Shares used in calculating primary earnings
per share 57,668 59,846
Dilutive effect of stock options after
application of treasury stock method 43
Adjustment for other potentially dilutive
securities - Dilutive effect of Convertible
Subordinated Debentures as if converted at the
beginning of the period 2,630
------- -------
AVERAGE NUMBER OF SHARES OUTSTANDING ON A
FULLY DILUTED BASIS 57,711 62,476
======= =======
FULLY DILUTED NET EARNINGS PER COMMON AND
COMMON EQUIVALENT SHARE $ 1.07 $ .46
======= =======
(1) This calculation is submitted in accordance with 17 CFR
229.601(b)(11) although it is contrary to paragraph 40 of APB Opinion
No. 15 because it produces an antidilutive result.