SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
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 1-4001
UNION CAMP CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
VIRGINIA 13-5652423
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1600 VALLEY ROAD, WAYNE, NEW JERSEY 07470
(Address of Principal Executive Offices) (Zip Code)
(201) 628-2000
(Registrant's Telephone Number, Including Area Code)
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,
and (2) has been subject to such filing requirements for the past
90 days.
YES_____X______ NO__________
69,943,154 shares of Registrant's Common Stock, Par Value $1 Per
Share, were outstanding as of the close of business on June 30,
1994.
UNION CAMP CORPORATION
INDEX
Page
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Part I. FINANCIAL INFORMATION*
Item 1. Financial Statements. 2
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations. 7
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
- - ------------
*A summary of the Registrant's significant accounting policies is
contained in the Registrant's Form 10-K for the year ended December
31, 1993 which has previously been filed with the Commission.
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS.
UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
($ in thousands, except per share)
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
-------------------- -----------------------
1994 1993 1994 1993
-------- -------- ---------- ----------
Net Sales $827,217 $786,481 $1,617,323 $1,547,935
Costs and other charges:
Cost of products sold 635,131 592,354 1,247,103 1,168,580
Selling and administrative expenses 79,270 75,716 153,564 152,877
Depreciation and cost of timber harvested 62,006 61,425 124,546 121,134
Special Charge 13,958 -- 13,958 --
-------- -------- ---------- ----------
Income from operations 36,852 56,986 78,152 105,344
-------- -------- ---------- ----------
Gross interest expense 32,405 33,734 64,427 68,765
Less capitalized interest (5,207) (1,346) (9,737) (2,285)
Gain on sale of minority interest 34,698 - 34,698 -
Other (income) expense - net 2,426 937 (838) (3,322)
-------- -------- ---------- ----------
Income before income taxes and
accounting change 41,926 23,661 58,998 42,186
-------- -------- ---------- ----------
Income taxes:
Current (1,664) 4,174 (2,667) 4,900
Deferred 17,684 4,396 24,491 9,676
-------- -------- ---------- ----------
Total income taxes 16,020 8,570 21,824 14,576
-------- -------- ---------- ----------
Income before accounting change 25,906 15,091 37,174 27,610
Effect of change in accounting standard (net of tax) -- -- (3,716) --
-------- -------- ---------- ----------
Net Income $ 25,906 $ 15,091 $ 33,458 $ 27,610
-------- -------- ---------- ----------
-------- -------- ---------- ----------
Earnings per share:
Before change in accounting standard $0.37 $0.22 $0.53 $0.40
After change in accounting standard $0.37 $0.22 $0.48 $0.40
Dividends per share $0.39 $0.39 $0.78 $0.78
Earnings per share are computed on the basis of the average number of common
shares outstanding:
1994 1993
---------- ----------
Quarter Ended June 30, 69,935,085 69,715,709
Six Months Ended June 30, 69,919,177 69,697,899
See also the accompanying notes to consolidated financial statements.
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UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in thousands)
JUNE 30, DECEMBER 31,
1994 1993
---------- ------------
ASSETS
Cash and cash equivalents $ 8,295 $ 38,287
Receivables-net 430,767 389,549
Inventories at lower of cost or market:
Finished goods 197,185 228,863
Raw materials 90,755 91,685
Supplies 117,259 121,970
---------- ----------
Total inventories 405,199 442,518
---------- ----------
Assets held for resale 13,897 4,154
Other 54,055 36,210
---------- ----------
Total current assets 912,213 910,718
---------- ----------
Plant and equipment, at cost 6,037,352 5,938,975
Less: accumulated depreciation 2,642,049 2,540,253
---------- ----------
3,395,303 3,398,722
Timberlands, less cost of timber harvested 249,042 247,368
---------- ----------
Total property 3,644,345 3,646,090
---------- ----------
Other assets 123,366 128,225
---------- ----------
Total Assets $4,679,924 $4,685,033
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 787,458 $ 909,372
Long-term debt 1,285,771 1,244,907
Deferred income taxes 603,256 583,155
Other liabilities and minority interest 196,630 131,751
Stockholders' equity (Shares outstanding
1994: 69,943,154; 1993: 69,833,130) 1,806,809 1,815,848
---------- ----------
Total Liabilities and Stockholders' Equity $4,679,924 $4,685,033
---------- ----------
---------- ----------
See also the accompanying notes to consolidated financial statements.
-3-
UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
($ in thousands)
SIX MONTHS ENDED
JUNE 30,
-------------------------
1994 1993
--------- ---------
Cash Provided by Operations:
Net income $ 33,458 $ 27,610
Adjustments to reconcile net income
to cash provided by operations:
Depreciation, amortization, and cost of company
timber harvested 133,159 130,801
Deferred income taxes 24,491 9,676
Asset write-down 13,958 --
Gain on sale of minority interest (34,698) --
Other 4,550 3,368
Changes in operational assets and liabilities:
Receivables (35,434) 36,313
Inventories 34,503 4,139
Other assets (17,071) 1,842
Accounts payable, taxes and other liabilities (57,455) (34,492)
--------- --------
Cash (Used For) Provided By Operations 99,461 179,257
--------- --------
Cash (Used For) Provided By Investment Activities:
Capital expenditures (132,299) (96,802)
Payments for acquired businesses (3,704) (11,855)
Proceeds from sale of businesses -- 34,451
Proceeds from sale of minority interest 88,983 --
Other (20,426) 1,179
--------- --------
(67,446) (73,027)
--------- --------
Cash (Used For) Provided By Financing Activities:
Change in short-term notes payable (14,185) (32,038)
Repayments of long-term debt (51,271) (71,824)
Proceeds from issuance of long-term debt 57,126 10,950
Dividends paid (54,543) (54,368)
--------- --------
(62,873) (147,280)
--------- --------
Effect of exchange rate changes on cash 866 (1,042)
--------- --------
Increase (decrease) in cash and cash equivalents (29,992) (42,092)
Balance at beginning of year 38,287 67,683
--------- --------
Balance at end of period $ 8,295 $ 25,591
--------- --------
--------- --------
Supplemental cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $54,985 $68,919
Income taxes $12,112 $9,046
See also the accompanying notes to consolidated financial statements.
-4-
UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The information furnished in this report is
unaudited but includes all adjustments which, in
the opinion of management, are necessary for a fair
presentation of results for the interim periods
reported. The adjustments made were of a normal
recurring nature, except as described in Notes 2,
3, 4 and 5.
Note 2. Effective January 1, 1994, the company adopted the
provisions of SFAS No. 112, "Employers' Accounting
for Postemployment Benefits". The implementation
of this new statement results in a change in the
company's method of accounting for certain
disability, health care and life insurance benefits
provided to former or inactive employees after
employment but before retirement, from the "pay-as-
you-go" to the accrual basis.
The accumulated obligation as of January 1, 1994
was $6.0 million. This obligation, included within
"Other Long-Term Liabilities", was recorded in the
first quarter of 1994 on a cumulative basis as a
$6.0 million pre-tax charge against income ($3.7
million after-tax).
Note 3. In the second quarter of 1994, the company recorded
a special charge of $14.0 million ($8.8 million
after tax) to reflect the write down of the
carrying value of certain non-strategic assets.
Note 4. Second quarter 1994 results include a $34.7 million
pre-tax gain on the sale of a 32% minority interest
in the company's Bush Boake Allen flavor and
fragrance business. Union Camp still maintains a
68% interest in its Bush Boake Allen subsidiary.
Note 5. "Other (Income) Expense" for the second quarter of
1993 included a $4.7 million non-recurring charge
related to the disposal of the company's School
Supplies business.
--continued--
-5-
Note 6. Included in "Current Liabilities" are $376 million
and $384 million of Commercial Paper (net of
discount) at June 30, 1994 and year-end 1993,
respectively.
Note 7. Included in "Other Liabilities and Minority
Interest" for June 30, 1994 is $55.5 million
related to the minority interest in Union Camp's
investment in Bush Boake Allen.
Note 8. Prior periods have been reclassified to conform
with the 1994 presentation.
-6-
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Net income for the second quarter of 1994 was $25.9 million or
$.37 per share, compared to $15.1 million or $.22 per share for
last year's second quarter. In the second quarter, Union Camp
recorded a gain of $.30 per share from the sale of a minority
interest in its flavor and fragrance subsidiary, Bush Boake
Allen. This was offset in part by a charge of $.16 per share
relating to the write down of the carrying value of certain
non-strategic assets. Last year's second quarter included a
non-recurring charge of $.04 per share related to the disposal
of the company's School Supplies business.
Net income for the first half of this year was $33.5 million or
$.48 per share, compared to $27.6 million or $.40 per share for
the same period last year. Included in this year's results are
the items noted above plus a first quarter charge of $.05 per
share relating to the adoption of the new accounting standard
SFAS No.112 "Employers Accounting for Postemployment Benefits".
Overall demand for the company's paper and packaging products
continues to be strong, reflecting the improving economic
environment for our products both in the domestic and foreign
markets. Net sales for the second quarter were $827.2 million,
5% above the previous year's comparable quarter. Paper product
shipments were approximately 895,000 tons, 10% above last year's
second quarter and 5% above the first quarter of this year.
Operating income for the paper and paperboard segment was $18.7
million, an 18% decrease over the second quarter of last year.
The decline in earnings was primarily attributable to lower
average selling prices for uncoated business papers, which were
below the depressed levels of last year's second quarter and
more than offset the significant improvement in the company's
linerboard operations. Both the domestic and foreign linerboard
markets further improved during the quarter and average
linerboard prices were up 6% over last year's second quarter and
7% over the first quarter of this year. Also on a positive
note, shipments of uncoated business papers were 5% above the
second quarter of last year and prices began to trend upward.
-7-
The packaging segment reported an $8.3 million loss for the
second quarter, compared to a $9.7 million profit for last
year's comparable quarter. The primary reason for the
significant decrease was a $14 million write down of the
carrying value of certain non-strategic assets. Operating
earnings in the flexible packaging portion of the segment were
affected by lower average selling prices and higher average
product costs. Earnings for the corrugated container operations
were down primarily due to higher raw material costs, despite an
improvement in average selling prices and shipments over last
year's second quarter. Second quarter earnings from the
company's overseas container operations remained relatively
level with last year's second quarter.
The company's non-paper businesses continue to report strong
results for the second quarter of this year, with operating
profits at $40.9 million, 34% above last year's comparable
period. The chemical segment was a major contributor with
operating income of $21.5 million compared to $14.0 million last
year. Both the tall-oil-based chemicals business and the
company's Bush Boake Allen subsidiary contributed to the
improved profitability. Wood products earnings increased 17%
over last year's second quarter. Improved prices for plywood and
particleboard more than offset a downturn in lumber prices which
rebounded by the end of the quarter.
Depreciation expense increased less than 1% in the second
quarter and 3% in the first half of 1994 from last year's
comparable periods. Net interest expense for the second quarter
and first half of 1994 decreased 16% and 18%, respectively from
the comparable periods of 1993. The primary reason for this
decrease was a higher level of capitalized interest.
The increase in the deferred tax liability is primarily
attributable to accelerated tax depreciation and the gain on the
sale of a minority interest in Bush Boake Allen, offset in part
by the adoption of SFAS No.112, "Employers Accounting for
Postemployment Benefits".
Net working capital was $125 million at June 30, 1994, compared
to $1 million at year-end 1993. The increase in working capital
was primarily attributable to a lower level of payables and
accrued liabilities at the end of the second quarter of this
year.
-8-
Cash flow from operations for the first half of 1994 was $99.5
million, as compared to $179.3 million for the same period last
year. Changes in working capital items were the major
contributors to this decrease.
Capital expenditures for the first half of 1994 totaled $132.3
million, compared to $96.8 million for the comparable period
last year. Year-to-date expenditures reflect spending of $77
million at the company's paper mills, primarily attributable to
$17 million for the Savannah, Ga mill recovery boiler and $33
million for the deink facility and paper machine enhancements at
the Franklin, Va mill. In April 1994, the company issued $49.9
million of 30 year tax exempt debt at an interest rate of 6.55%,
for the purpose of financing part of the deink project under
construction at the Franklin, Va mill. The ratio of long-term
debt to total capital employed was 34.8% at June 30, 1994.
In the second quarter of this year, Union Camp's flavor and
fragrance subsidiary, Bush Boake Allen Inc. (BBA) sold to the
public approximately 6.1 million shares of BBA stock
(approximately 32% of BBA's outstanding shares) at an offering
price of $16.00 per share. Union Camp retains approximately 68%
of the 19.215 million shares outstanding after the offering. As
a result of this transaction, Union Camp recognized a $34.7
million pre-tax gain.
-9-
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
No. Description
---- -----------
10.1 Union Camp Corporation Supplemental
Retirement Income Plan for Executive
Officers as amended and restated
April 26, 1994.
10.2 Description of post-retirement
office arrangements between Union
Camp Corporation and Raymond E.
Cartledge.
11 Statement re computation of per
share earnings.
b) Reports on Form 8-K.
No current Report on Form 8-K was filed by the Registrant
during the second quarter of 1994.
-10-
SIGNATURES
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.
UNION CAMP CORPORATION
-------------------------------
(Registrant)
Date: AUGUST 5, 1994 /s/ Dirk R. Soutendijk
-------------------------------
DIRK R. SOUTENDIJK
VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
Date: AUGUST 5, 1994 /s/ Robert E. Moore
-------------------------------
ROBERT E. MOORE
VICE PRESIDENT AND COMPTROLLER
(Chief Accounting Officer)
-11-
EXHIBIT INDEX
SEQUENTIALLY
NUMBERED
NO. DESCRIPTION PAGE
- - ---- ----------- ------------
10.1 Supplemental Retirement Income 14
Plan for Executive Officers
as amended and restated
April 26, 1994
10.2 Description of post-retirement 22
office arrangements between
Union Camp Corporation and
Raymond E. Cartledge
11 Statement re computation of per 23
share earnings.