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 September 30, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file Number 1-4001
UNION CAMP CORPORATION
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(Exact Name of Registrant as Specified in Its Charter)
VIRGINIA 13-5652423
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(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1600 VALLEY ROAD, WAYNE, NEW JERSEY 07470
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(Address of Principal Executive Offices) (Zip Code)
(201) 628-2000
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(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
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69,640,369 shares of Registrant's Common Stock, Par Value $1 Per Share, were
outstanding as of the close of business on September 30, 1996.
UNION CAMP CORPORATION
INDEX
Page
Part I. FINANCIAL INFORMATION*
Item 1. Financial Statements. 2
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations. 7
Part II. OTHER INFORMATION
Item 1. Legal Proceedings. 9
Item 6. Exhibits and Reports on Form 8-K. 9
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*A summary of the Registrant's significant accounting policies is contained in
the Registrant's Form 10-K for the year ended December 31, 1995 which has
previously been filed with the Commission.
PART I. FINANCIAL INFORMATION
Item I. Financial Statements.
UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
($ in thousands, except per share)
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
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1996 1995 1996 1995
---- ---- ---- ----
Net Sales $1,017,310 $1,073,494 $2,929,613 $3,203,935
Costs and other charges:
Cost of products sold 794,319 674,033 2,182,609 2,029,991
Selling and administrative expenses 105,454 96,140 308,431 285,408
Depreciation and cost of timber harvested 70,578 68,732 208,492 203,583
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Income from operations 46,959 234,589 230,081 684,953
Gross interest expense 29,334 29,892 86,407 94,732
Less capitalized interest (1,046) (851) (2,848) (8,082)
Other (income) expense - net (7,869) (4,126) (11,524) (597)
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Income before income taxes and
minority interest 26,540 209,674 158,046 598,900
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Income taxes:
Current 6,591 51,915 38,797 149,320
Deferred 3,147 25,167 20,124 73,028
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Total income taxes 9,738 77,082 58,921 222,348
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Minority interest (net of tax) (2,449) (2,846) (8,130) (8,648)
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Net Income $ 14,353 $ 129,746 $ 90,995 $ 367,904
========== ========== ========== ==========
Earnings per share: $0.21 $1.85 $1.32 $5.25
Dividends per share $0.45 $0.41 $1.35 $1.21
Earnings per share are computed on the basis of the average number of common
shares outstanding:
1996 1995
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Quarter Ended September 30, 69,421,132 70,199,410
Nine Months Ended September 30, 69,164,387 70,104,025
See also the accompanying notes to consolidated financial statements.
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UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in thousands)
SEPTEMBER 30, DECEMBER 31,
1996 1995
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ASSETS
Cash and cash equivalents $ 54,148 $ 30,332
Receivables-net 548,303 489,967
Inventories at lower of cost or market:
Finished goods 248,713 242,732
Raw materials 106,902 109,181
Supplies 116,940 116,804
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Total inventories 472,555 468,717
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Assets held for resale - 1,289
Other 41,266 43,512
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Total current assets 1,116,272 1,033,817
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Plant and equipment, at cost 6,517,458 6,304,113
Less: accumulated depreciation 3,126,818 2,918,963
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3,390,640 3,385,150
Timberlands, less cost of timber harvested 349,637 274,935
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Total property 3,740,277 3,660,085
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Other assets 218,936 144,441
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Total Assets $5,075,485 $4,838,343
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 599,538 $ 620,113
Long-term debt 1,337,790 1,151,536
Deferred income taxes 736,496 709,850
Other liabilities and minority interest 259,177 235,152
Stockholders' equity (Shares outstanding
1996: 69,640,369; 1995: 69,078,078) 2,142,484 2,121,692
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Total Liabilities and Stockholders' Equity $5,075,485 $4,838,343
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See also the accompanying notes to consolidated financial statements.
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UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
($ in thousands)
NINE MONTHS ENDED
SEPTEMBER 30,
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1996 1995
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Cash Provided By (Used For) Operations:
Net income $ 90,995 $ 367,904
Adjustments to reconcile net income
to cash provided by operations:
Depreciation, amortization, and cost of company
timber harvested 221,756 215,690
Deferred income taxes 20,124 73,028
Other 11,041 8,544
Changes in operational assets and liabilities:
Receivables 25,461 (68,867)
Inventories 36,119 (50,328)
Other assets 1,448 (4,591)
Accounts payable, taxes and other liabilities (37,148) 6,817
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Cash Provided By Operations 369,796 548,197
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Cash (Used For) Provided By Investment Activities:
Capital expenditures:
Plant and Equipment (191,632) (159,172)
Timberlands (85,878) (18,503)
Proceeds from sale of businesses -- 36,133
Payments for acquired businesses (37,269) --
Other 4,460 7,485
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(310,319) (134,057)
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Cash (Used For) Provided By Financing Activities:
Change in short-term notes payable 21,003 (275,792)
Repayments of long-term debt (48,052) (46,216)
Proceeds from issuance of long-term debt 150,000 22,625
Repurchase of common stock (65,114) --
Dividends paid (93,550) (84,835)
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(35,713) (384,218)
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Effect of exchange rate changes on cash 52 119
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Increase (decrease) in cash and cash equivalents 23,816 30,041
Balance at beginning of year 30,332 13,256
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Balance at end of period $ 54,148 $ 43,297
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Supplemental cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 88,639 $ 93,257
Income taxes $ 44,275 $ 128,559
See also the accompanying notes to consolidated financial statements.
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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 3 and 4.
Note 2. On August 2, 1996, the company acquired The Alling & Cory Company
(Alling & Cory) a paper distribution business, for consideration
totaling $88.5 million, consisting of 1.7 million shares of company
common stock and $5.4 million cash. The acquisition was accounted for
under the purchase method and accordingly, the net assets and results
of operations have been included in the consolidated financial
statements since the date of acquisition. The excess of purchase price
over the estimated fair values of the net tangible and intangible
assets acquired has been treated as goodwill. Goodwill will be
amortized on a straight-line basis over a period not to exceed 40
years. This acquisition did not have a material pro forma impact on
consolidated earnings.
Note 3. Included in "Income from Operations" for the nine months ended
September 30, 1996 is a second quarter pre-tax charge of $2.9 million
for estimated severance costs related to the company's decision to
outsource timber harvesting operations.
Note 4. Included in "Other Income/Expense" for the third quarter of 1996 is a
$3.2 million pre-tax gain from the sale of land.
Note 5. "Other Assets" increased by more than $74 million from year-end 1995,
primarily due to an investment in a 50% interest in a corrugated
container plant in Turkey, and due to goodwill associated with the
acquisition of Alling & Cory in August 1996.
Note 6. Included in "Current Liabilities" are $84 million and $90 million of
commercial paper borrowings at September 30, 1996 and year-end 1995,
respectively.
5
Note 7. The company has included $46 million of commercial paper borrowings in
"Long-Term Debt" for the September 30, 1996 Consolidated Balance Sheet.
Note 8. Included in "Other Liabilities and Minority Interest" at September 30,
1996 and year-end 1995 are $77.2 million and $69.3 million,
respectively, representing the minority interest in Union Camp's 68%
owned subsidiary, Bush Boake Allen.
Note 9. Certain amounts have been reclassified for 1995 to conform with the
1996 presentation.
6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net income for the third quarter of 1996 was $14.4 million or $.21 per share,
compared to $129.7 million or $1.85 per share for the third quarter of last
year. The significant decline in earnings was primarily due to lower product
prices in both the domestic and export paper and paper products markets.
Operating income for the quarter was $47.0 million, an 80% decrease from the
$234.6 million reported for last year's third quarter.
Net income for the first nine months of 1996 was $91.0 million or $1.32 per
share, compared to $367.9 million or $5.25 per share for the same period last
year. Operating income for the first nine months of 1996 was $230.1 million, a
66% decrease from the $685.0 million reported for the first nine months of 1995.
Net sales for the third quarter were $1.0 billion, 5% below the previous year's
comparable quarter. Total paper product shipments were approximately 881,000
tons, a 3% increase from last year's third quarter. However, lower selling
prices for the company's paper and packaging products more than offset the
slight increase in volume. Included in third quarter sales is $112 million from
The Alling & Cory Company (Alling & Cory), a paper distribution business
acquired in August 1996. Their impact on third quarter operating results was not
material.
Operating income for the paper and paperboard segment was $20.5 million, a 90%
decrease from the $215.2 million reported for the third quarter of last year.
The decline in earnings was primarily attributable to lower average selling
prices for both domestic and export linerboard and uncoated business papers,
despite an increase in shipments. Average selling prices for the company's
linerboard and uncoated business papers decreased 44% and 33%, respectively,
compared to last year's third quarter, however, linerboard prices began to
improve during the period. As a result of the market conditions during the third
quarter, the company took approximately 65,000 tons of market-related linerboard
mill downtime, and anticipates taking 26,000 tons of linerboard mill downtime
during the fourth quarter.
Packaging segment operating income was $9.8 million for the third quarter of
1996, compared to $10.9 million for last year's comparable quarter. Average
selling prices decreased for the domestic corrugated container operations,
resulting in a 17% decrease in operating income for the third quarter of 1996
compared to the same period of 1995. However, prices for corrugated containers
began to stabilize near the end of the quarter as demand strengthened. Earnings
for the flexible packaging operations in the third quarter of 1996 improved 16%
over the same quarter of last year, primarily attributable to an improvement in
average selling prices. Overseas corrugated container operations reported a $1.7
million decline in operating income primarily resulting from lower average
selling prices, which was partially offset by an increase in shipments.
The company's non-paper businesses reported an 18% increase in operating income,
compared to last year's third quarter. Operating income for the wood products
segment was $16.1 million for the quarter, compared to $5.1 million for last
year's third quarter. Volume and average selling prices increased compared to
the third quarter of 1995 and the second quarter of 1996, as lumber prices
continued to improve during the year. The chemical group reported operating
income of $16.5 million, 27% below the third quarter of last year. Although
shipments for the specialty chemical operations increased, the combination of
lower average selling prices and higher raw material costs more than offset the
increase, resulting in the decline in operating income. Raw material costs are
continuing to increase into the fourth quarter. Also contributing to the decline
in group earnings was weakness within the company's Bush Boake Allen flavors,
fragrances and aroma chemicals business. The weakness was primarily in aroma
chemicals, reflecting reduced sales volumes and continuing cost pressures on
turpentine based products.
7
Depreciation expense for the first nine months of 1996 increased 1% compared to
the comparable period of 1995, due to the start up of a recovery boiler at the
Savannah mill at the end of the first quarter of last year.
Cash flow from operations for the first nine months of 1996 was $369.8 million,
compared to $548.2 million for last year's comparable period. The decrease was
primarily due to the lower earnings and decreased deferred taxes, partially
offset by decreased working capital (excluding the effect of the Alling & Cory
acquisition). Capital expenditures for the first nine months of this year
totaled $277.5 million, compared to $177.7 million last year. This increase is
primarily due to a large timberland acquisition in early 1996. Total debt
increased $123 million during the first nine months of 1996, primarily
attributable to the issuance of $150 million of 7% 10-year notes. The ratio of
long-term debt to total capital was 31.7% at September 30, 1996, compared to
28.9% at year-end 1995.
On August 2, 1996, the company acquired the outstanding shares of Alling & Cory
for consideration totaling $88.5 million, consisting of 1.7 million shares of
company common stock and $5.4 million cash.
Net working capital was $516.7 million at September 30, 1996, compared to $413.7
million at year-end 1995. The increase in working capital was primarily
attributable to the acquisition of Alling & Cory.
During the third quarter of 1996, the company repurchased 668,000 shares of its
common stock for a total cost of $33.0 million, bringing the total stock
repurchased this year under its stock repurchase program to 1.3 million shares.
In September 1996, the company sold its Kansas City container plant. This sale
did not have a significant impact on the company's operations.
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Statements in this report that are not historical are forward-looking statements
that are subject to risks and uncertainties that could cause actual results to
differ materially. Such risks and uncertainties with respect to the company
include the effect of general economic conditions, fluctuations in supply and
demand for the company's products including exports and potential imports, paper
industry production capacity, operating rates and competitive pricing pressures.
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8
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
During the second quarter of 1995 Union Camp was named as a
defendant in two lawsuits brought in Texas state court in Brazoria County by
approximately 2,700 plaintiffs who, for the most part, alleged they sustained
personal injury while performing work at various sites in Alabama. Approximately
50 of these plaintiffs claimed to have been exposed to asbestos on the Company's
premises in Alabama. Approximately 180 other defendants were named in these two
Brazoria County suits. In February 1996 the Company entered a settlement
agreement with the attorneys for approximately 1,250 of these plaintiffs for an
amount which was not material to the Company. During the third quarter of 1996
settlement was reached with attorneys representing the remaining 1,450
plaintiffs for an amount which is not material to the Company.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
No. Description
3.2 Bylaws of Union Camp Corporation,
as amended September 24, 1996.
11 Statement re computation of per share earnings.
27 Financial data schedule.
b) Reports on Form 8-K.
During the third quarter of 1996, the Registrant filed a Current
Report on Form 8-K dated August 16, 1996 in which it reported
under Item 5 - "Other Events".
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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
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(Registrant)
Date: November 13, 1996 /S/ Dirk R. Soutendijk
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DIRK R. SOUTENDIJK
VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
Date: November 13, 1996 /S/ JAMES M. REED
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VICE CHAIRMAN OF THE BOARD AND
CHIEF FINANCIAL OFFICER
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EXHIBIT INDEX
SEQUENTIALLY
NUMBERED
NO. DESCRIPTION PAGE
3.2 Bylaws of Union Camp Corporation, 13
as amended September 24, 1996
11 Statement re computation of per 34
share earnings
27 Financial data schedule 35