SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
|X| ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended December 31, 2002
or
|_| TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the transition period from ____________ to ____________
Commission File Number: 000-00795
A. Full title of the plan and address of the plan, if different from that
of the issuer named below:
BADGER PAPER MILLS, INC.
PROFIT SHARING PLAN AND TRUST FOR UNION EMPLOYEES
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
BADGER PAPER MILLS, INC.
200 West Front Street
Peshtigo, Wisconsin 54157
1
REQUIRED INFORMATION
The following financial statements and schedules of the Badger Paper Mills,
Inc. Profit Sharing Plan and Trust for Union Employees, prepared in accordance
with the financial reporting requirements of the Employee Retirement Income
Security Act of 1974, as amended, are filed herewith.
2
Financial statements and report of independent certified public accountants
Badger Paper Mills, Inc. Profit Sharing Plan and Trust for Union Employees
December 31, 2002 and 2001
CONTENTS
Page
Report Of Independent Certified Public Accountants 4
Financial Statements
Statements Of Net Assets Available For Benefits 5
Statements Of Changes In Net Assets Available For Benefits 6
Notes To Financial Statements 7
Supplementary Information
Report Of Independent Certified Public Accountants On
Supplementary Information 14
Schedule H, Line 4(i) - Schedule Of Assets Held At End Of
Year 15
3
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Badger Paper Mills, Inc.
We have audited the accompanying statements of net assets available for benefits
of Badger Paper Mills, Inc. Profit Sharing Plan and Trust for Union Employees as
of December 31, 2002 and 2001, and the related statements of changes in net
assets available for benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
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 audits 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 our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of Badger Paper
Mills, Inc. Profit Sharing Plan and Trust for Union Employees as of December 31,
2002 and 2001, and the changes in net assets available for benefits for the
years then ended in conformity with accounting principles generally accepted in
the United States of America.
/s/ Grant Thornton LLP
Appleton, Wisconsin
June 11, 2003
4
Badger Paper Mills, Inc.
Profit Sharing Plan and Trust for Union Employees
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
December 31,
2002 2001
----------- -----------
ASSETS
Investments, at fair value
Common trust funds $12,372,012 $11,049,177
Mutual funds 14,839,255 20,109,670
Common stock 72,709 62,114
----------- -----------
27,283,976 31,220,961
Employer contributions receivable 416,343 445,451
Accrued income 9 29
----------- -----------
Total assets 27,700,328 31,666,441
----------- -----------
LIABILITIES
Miscellaneous payable - 30,636
----------- -----------
Total liabilities - 30,636
----------- -----------
NET ASSETS AVAILABLE FOR BENEFITS $27,700,328 $31,635,805
=========== ===========
The accompanying notes are an integral part of these statements.
5
Badger Paper Mills, Inc.
Profit Sharing Plan and Trust for Union Employees
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
Year ended December 31,
2002 2001
------------ ------------
Additions to net assets available for benefits:
Investment income:
Interest income and dividends $ 167,517 $ 184,104
Contributions:
Employee contributions 519,770 488,958
Employer contributions 416,343 445,451
----------- -----------
936,113 934,409
----------- -----------
Total additions 1,103,630 1,118,513
----------- -----------
Deductions from net assets available for
benefits:
Net depreciation in fair value of investments 3,790,274 2,344,550
Benefits paid to participants 1,196,108 2,147,836
Trust and other fees 51,350 34,075
----------- -----------
Total deductions 5,037,732 4,526,461
DECREASE IN NET ASSETS AVAILABLE
FOR BENEFITS (3,934,102) (3,407,948)
Net assets available for benefits at
beginning of year 31,635,805 35,169,593
Transfer to Badger Paper Mills, Inc. Profit
Sharing Plan and Trust for Non-Union Employees (1,375) (125,840)
----------- -----------
Net assets available for benefits at end of year $27,700,328 $31,635,805
=========== ===========
The accompanying notes are an integral part of these statements.
6
Badger Paper Mills, Inc.
Profit Sharing Plan and Trust for Union Employees
NOTES TO FINANCIAL STATEMENTS
December 31, 2002 and 2001
NOTE A - PLAN DESCRIPTION
The following brief description of Badger Paper Mills, Inc. Profit Sharing
Plan and Trust for Union Employees (the "Plan") is provided for general
information purposes only. Participants should refer to the Plan agreement
for more complete information.
1. General
The Plan is a defined contribution plan that covers substantially all union
employees of Badger Paper Mills, Inc. (the "Company") that have attained
the age of 18. Employees who have completed at least two months of service
with the Company are eligible to make 401(K) contributions. Employees are
eligible to receive an allocation of the Company's contribution after at
least 1,000 hours of service during the year and they must be employed at
year-end. It is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA) and subsequent legislation.
2. Contributions
The Company contributes to the Plan each year using the sum of two
calculations. In the first calculation, the Company contributes the greater
of (1) 25% of its adjusted net income, as defined in the Plan, for the year
or (2) 4% of the total compensation paid to Plan participants during the
year plus 4% of the excess compensation as defined in the plan. In the
second calculation, the Company contributes to the Plan an additional
contribution of one percent bonus for each three percent EBIT the Company
earns, up to a maximum contribution of 6% at 15% EBIT. The percent EBIT is
calculated by dividing the earnings before interest and taxes by net sales.
The maximum contribution to the profit sharing accounts on a yearly basis
is 10% in total.
A cash or deferred arrangement plan, known as CODA, as authorized by
Section 401(k) of the Internal Revenue Code (IRC), allows employees to
defer a portion of their compensation up to the applicable IRC limits by
having it contributed by the Company to their individual account in the
Plan.
7
Badger Paper Mills, Inc.
Profit Sharing Plan and Trust for Union Employees
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2002 and 2001
NOTE A - PLAN DESCRIPTION - Continued
3. Vesting
Participants are at all times fully vested in the value of their accounts
attributable to their voluntary contributions.
Effective January 1, 2002, vesting in the Company's profit sharing
contribution is in accordance with the following graduated vesting
schedule:
Years of service Nonforfeitable percentage
---------------- -------------------------
Less than 1 0%
1 33
2 66
3 or more 100
In 2001, participants became 20% vested in the Company's profit sharing
contribution following three years of service and were additionally vested
at 20% for each year of additional service up to seven years of service, at
which time participants were fully vested.
Upon death, disability or retirement, participants are automatically 100%
vested regardless of years of service.
4. Participant Accounts
Each participant's account is credited with the participant's contribution,
an allocation of the Company's profit sharing contribution, Plan earnings
and forfeitures of terminated participants' nonvested accounts. The
participants share in the Company's contributions and forfeitures on the
basis of allocated shares. Shares are determined through a formula based
upon each participant's earnings and number of years of service with the
Company.
5. Investment Options
Upon enrollment in the Plan, a participant may direct investments
consisting of his or her employee contributions and employer contributions
plus actual earnings thereon in 1% increments in any of the investment
options offered by the Plan.
Participants may change their investment options daily.
8
Badger Paper Mills, Inc.
Profit Sharing Plan and Trust for Union Employees
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2002 and 2001
NOTE A - PLAN DESCRIPTION - Continued
6. Benefits
On termination of service due to death, disability or retirement, the
participant or beneficiary is entitled to receive the full value of the
participant's account. Upon a participant's termination from employment
with the Company for a reason other than death, disability or retirement,
the participant is entitled to the vested balance in their account.
The method of distribution for account balances exceeding $5,000 will be
determined by an election made by the Plan participant. The methods
available are lump sum, direct rollover, installment payments or part
installments and lump sum. The standard method for account balances less
than $5,000 is lump sum payments.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of the Plan have been prepared in conformity with
accounting principles generally accepted in the United States of America as
applied to profit sharing plans.
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows.
1. Use of Estimates
In preparation of the financial statements in conformity with accounting
principles generally accepted in the United States of America, management
is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reported period. Actual results
could differ from those estimates.
2. Basis of Accounting
The financial statements of the Plan are prepared on an accrual basis.
9
Badger Paper Mills, Inc.
Profit Sharing Plan and Trust for Union Employees
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2002 and 2001
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
3. Valuation of Investments
The Plan's investments are held by Wells Fargo Bank Minnesota, N.A. (the
"Trustee"). Plan investments are stated at market value as reported by the
Plan Trustee.
Investments in securities traded on a national securities exchange are
valued at the last reported sales price on the last business day of the
year; securities traded in the over-the-counter market and listed
securities for which no sale was reported on that date are valued at the
mean between the last reported bid and asked prices. Investments in mutual
funds are stated at a value based upon the per unit allocation of the
funds' net assets, stated at fair market value on the last business day of
the year.
4. Net Appreciation/(Depreciation) in Fair Value of Investments
Net realized and unrealized appreciation (depreciation) is recorded in the
accompanying statement of changes in net assets available for benefits as
net depreciation in fair value of investments.
5. Payment of Benefits
Benefits are recorded when paid.
10
Badger Paper Mills, Inc.
Profit Sharing Plan and Trust for Union Employees
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2002 and 2001
NOTE C - INVESTMENTS
The following schedule presents the investments held by the Trustee in each
fund at December 31, 2002 and 2001. Investments that represent 5% or more
of the Plan's net assets are separately identified.
2002 2001
----------- -----------
Common Trust Funds:
Wells Fargo Stable Return Fund $12,139,414 $10,668,891
Other 232,598 380,286
Mutual Funds:
Wells Fargo Growth Balanced Fund 4,543,838 5,927,723
Wells Fargo Growth Equity Fund 2,410,421 2,905,872
Wells Fargo Diversified Equity Fund 2,331,060 2,916,188
Janus Overseas Fund 717,385 933,882
Wells Fargo Large Company Growth Fund 1,537,187 1,937,666
Wells Fargo Small Cap Opportunities Fund 2,371,600 3,902,583
Other 927,764 1,585,756
Common stock 72,709 62,114
----------- -----------
$27,283,976 $31,220,961
=========== ===========
The Plan's investments (including investments bought, sold and held during
the year) appreciated (depreciated) in value as follows for the years ended
December 31,:
2002 2001
----------- -----------
Common trust funds $ 554,361 $ 456,735
Mutual funds (4,388,036) (2,810,212)
Common stock 43,401 8,927
----------- -----------
$(3,790,274) $(2,344,550)
=========== ===========
11
Badger Paper Mills, Inc.
Profit Sharing Plan and Trust for Union Employees
NOTES TO FINANCIAL STATEMENTS - CONTINUED
December 31, 2002 and 2001
NOTE C - INVESTMENTS - Continued
In general, the investments provided by the Plan are exposed to various
risks, such as interest rate, credit and overall market volatility risks.
Due to the level of risk associated with certain investment securities, it
is reasonably possible that changes in the values of investment securities
will occur in the near term and that such changes could materially affect
the amounts reported in the statement of net assets available for benefits.
NOTE D - ADMINISTRATIVE EXPENSES
All administrative expenses in connection with the operation of the Plan
are paid from Plan earnings.
NOTE E - PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the
right under the Plan to discontinue its contributions at any time and to
terminate the Plan subject to the provisions of ERISA. Participants will
become fully vested upon termination of the Plan.
NOTE F - INCOME TAX STATUS
The Plan obtained its latest determination letter on February 25, 1999, in
which the Internal Revenue Service stated that the Plan was designed in
accordance with applicable requirements of the IRC. Since receiving the
determination letter, the Plan has been amended. However, the plan
administrator and the Plan's tax counsel believe that the amended Plan is
designed and is currently being operated in compliance with the applicable
requirements of the IRC.
NOTE G - RELATED-PARTY TRANSACTIONS
Certain plan investments are managed by Wells Fargo Bank. Wells Fargo Bank
is the trustee as defined by the Plan and, therefore, these transactions
qualify as party-in-interest transactions.
12
SUPPLEMENTARY INFORMATION
13
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON SUPPLEMENTARY INFORMATION
Badger Paper Mills, Inc.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole of Badger Paper Mills, Inc. Profit Sharing
Plan and Trust for Union Employees as of December 31, 2002 and 2001 and for the
years then ended, which are presented in the preceding section of this report.
The supplementary schedule is presented for the purpose of additional analysis
and is not a required part of the basic financial statements but is
supplementary information required by the Department of Labor's Rules and
Regulations for Reporting and Disclosure under the Employee Retirement Income
Security Act of 1974. Such information has been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, is fairly stated in all material respects in relation to the basic
financial statements taken as a whole.
/s/ Grant Thornton LLP
Appleton, Wisconsin
June 11, 2003
14
Badger Paper Mills, Inc.
Profit Sharing Plan and Trust for Union Employees
SCHEDULE H, LINE 4(i) - SCHEDULE OF ASSETS HELD AT END OF YEAR
Employer ID #39-0143840 - Plan #001
December 31, 2002
(b) Identity of Issuer, (c) Description of investment including
borrower, lessor maturity date, rate of interest,
(a) or similar party collateral, par or maturity value (e) Current value
- --- ----------------------- --------------------------------------- -----------------
* Wells Fargo Bank, N.A. Stable Return Fund $12,139,414
Short-Term Investment Fund 7,956
S & P 500 Collective Fund 224,642
-----------
12,372,012
* Wells Fargo Bank, N.A. Growth Balanced Fund 4,543,838
Growth Equity Fund 2,410,421
Large Company Growth Fund 1,537,187
Strategic Income Fund 774,888
Diversified Equity Fund 2,331,060
Small Cap Opportunities Fund 2,371,600
Janus Overseas Fund 717,385
MSIF Trust Mid Cap Growth Portfolio Fund 152,876
-----------
14,839,255
* Badger Paper Mills, Inc. Common Stock 72,709
-----------
$27,283,976
===========
* Indicates party-in-interest investment.
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Badger
Paper Mills, Inc., the Plan administrator, has duly caused this Annual Report to
be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Peshtigo, and State of Wisconsin, on this 26th day of June, 2003.
BADGER PAPER MILLS, INC. PROFIT
SHARING PLAN AND TRUST FOR UNION EMPLOYEES
By: /s/ Ronald E. Swanson
-----------------------------------------
Ronald E. Swanson
By: /s/ William H. Peters
-----------------------------------------
William H. Peters
16
EXHIBIT INDEX
BADGER PAPER MILLS, INC.
PROFIT SHARING PLAN AND TRUST FOR UNION EMPLOYEES
FORM 11-K
Exhibit No. Exhibit Page No.
- ----------- ------- --------
(23) Consent of Grant Thornton LLP 18
(99.1) Written Statement of the President and Chief
Executive Officer pursuant to 18 U.S.C. ss.
1350 19
(99.2) Written Statement of the Vice President,
President, Chief Financial Officer, Secretary
and Treasurer pursuant to 18 U.S.C.ss.1350 20
17