Exhibit 13
18 Union Camp Corporation
Fine Paper
The Fine Paper Division produces uncoated white paper, coated and uncoated white
paperboard, and bleached market pulp at mills in Franklin, Virginia, and
Eastover, South Carolina. About half of the paper and board is sold directly to
manufacturers who convert it into products such as envelopes, computer printout
paper, business forms, greeting cards, and folding cartons. The remainder of the
division's output, primarily printing and business papers, is sold to
distributors who supply commercial printers, book publishers, offices, home
users, and organizations with in-house printing capabilities. We also provide
business paper for consumers through retail outlets such as Office Depot and
Wal-Mart.
Operating Highlights
We continued to make progress in penetrating the SOHO (small office/ home
office) market, a segment showing double-digit sales growth. We introduced
product line extensions of Great White'r', our popular, recycled content
business paper, including coated inkjet paper, pads, and envelopes. The company
also began building a converting plant in Franklin, Virginia, dedicated to
packaging SOHO products for retail distribution. For the second year, TV
advertising increased brand awareness for Great White. Sales growth was made in
another niche market, the corporate information center. Our Express
System--encompassing Express Roll'tm', Express Pack'tm', and FiberNet--was
specifically designed to perform in this high-productivity environment. With
FiberNet, we partner with offices that purchase our recycled content paper to
recover all of their paper through a local recycling company that ships it back
to our mill to make more recycled paper. In the converting papers segment, we
built on our leadership position by increasing our market share in envelope
papers and further penetrated the market for external business communications
papers.
Union Camp Corporation 19
Packaging
The Packaging Group integrates the company's Kraft Paper and Board Division
(KP&B) and its packaging businesses. KP&B supplies most of the paper and
paperboard to our packaging plants, which produce corrugated containers and
bags. The Container Division produces corrugated boxes, solid fiber containers
and slip sheets, and display packaging. The Flexible Packaging Division produces
industrial and consumer bags made of paper or plastic film. The International
Packaging Division manufactures corrugated containers at 7 overseas locations.
The Packaging Group also includes the Folding Carton Division, which
manufactures packaging for the cosmetics, toiletries, pharmaceuticals, and food
products industries.
Operating Highlights
We acquired O'Grady Containers, of Fort Worth, Texas, a leading producer of
point-of-purchase displays and containers. Our new container plant in Hanford,
California, began producing heavy-duty corrugated products, including laminated
bulk boxes. Our solid fiber plant in Lancaster, Pennsylvania, earned Star site
status, the highest safety designation awarded by OSHA. Our Hazleton flexible
packaging plant, also in Pennsylvania, has been recommended for Star site
status. We began marketing the UNIPAL'tm' corrugated pallet, a recyclable and
disposable alternative to wood and plastic pallets that is being used by
Nabisco. The Folding Carton Division took on new business from Chesebrough-Ponds
USA, Elizabeth Arden, and Coty, and also installed a new Barco prepress system
at its gravure printing plant in Englewood, New Jersey, that lets us transfer
images directly to printing cylinders. In August, our linerboard mill in
Prattville, Alabama, won the Alabama U.S. Senate Productivity and Quality Award
for outstanding performance in customer satisfaction, process management, and
human resource development. On the international front, we bought out our
minority partner in our corrugated plant in Chile, embarked on a joint venture
for a corrugated facility in China, and entered a packaging joint venture in
Turkey.
20 Union Camp Corporation
Chemicals
The Chemical Group comprises the Chemical Products Division and Bush Boake Allen
Inc. (BBA), which operates as a free-standing corporation. The division converts
chemical byproducts from the paper pulping process into a variety of products
including tall oil fatty acids, rosin acid, dimer acid, rosin, and polyamide
resins. These products are used in adhesives, inks, coatings, lubricants, soaps,
and personal care products. BBA is one of the world's leading compounders of
flavors and fragrances and producers of aroma chemicals.
Operating Highlights: Chemical Products Division
We continued moving into growth markets in Mexico, Latin America, Asia, Eastern
Europe, and India. For example, we formed an alliance to produce rosin-based
resins for inks, adhesives, and coatings in Indonesia, and we began producing
rosin-based ink resins in the U.K. Close to 40 percent of our sales are now
outside the U.S. New products included a line of ink resins for the lithographic
industry and environmentally-friendly polyamide adhesives that are non-solvent
based. We continued to make capital investments in key products for the inks,
adhesive, and coatings industries. In the United States, we increased our
capacity to produce polyamides and rosin ink resins. In Europe, we doubled our
capacity for making ink and adhesive resins and, worldwide, dimer acid capacity
was increased by 30 percent.
Operating Highlights: Bush Boake Allen
BBA's Guangzhou, China, plant, producing flavors and fragrances, started up in
September. BBA's flavor blending plant in London now has a fully-automated,
bar-code manufacturing process that blends up to 800 powder and liquid
ingredients. BBA acquired a fragrances business in Buenos Aires, Argentina. n
BBA acquired the outstanding 50 percent interest of BBA Italia and an additional
24 percent of BBA Philippines, increasing its stake to 74 percent.
Union Camp Corporation 21
Forest Resources
The Forest Resources Group manages the company's woodlands, wood products, and
land development activities. The Woodlands Division intensively manages about
1.6 million acres in Alabama, Florida, Georgia, North Carolina, South Carolina,
and Virginia, and supplies high-quality, low-cost fiber to our paper mills and
wood products plants. The Wood Products Division produces southern pine lumber,
plywood, and particleboard panels for the industrial and home improvement
markets. Wood Products operates nine facilities in Alabama, Georgia, North
Carolina, and Virginia. The third group, The Branigar Organization, is a
wholly-owned subsidiary which develops land for residential, recreational, and
commercial use.
Operating Highlights
We acquired 46,000 acres of timberland in South Carolina and have an option to
acquire an additional 69,000. A global fiber team was formed to identify
countries with favorable fiber supply and availability. And our intensive
culture and research programs continued to show great promise, as intensively
managed forests significantly outperformed conventional plantings. Union Camp
adopted the Sustainable Forestry Initiative (SFI), a landmark program that sets
a new standard for woodlands management. We started Supplier Quality Management
and Logistical Quality Management programs with our wood suppliers and
transportation contractors to create service, quality, and cost advantages
throughout the supply chain. The Folkston, Georgia, sawmill was modernized and
capacity was increased by 33 percent. The mill features curved sawing technology
that generates a higher quality product from smaller logs. We announced plans to
move into the fast growing market for engineered wood products, specifically,
laminated veneered lumber and wood I-joists. The Branigar Organization continued
to have sales success with its largest residential development, The Landings on
Skidaway Island, near Savannah, Georgia. Only 100 of the 4,250 building lots
remain to be sold.
Union Camp Corporation 25
Financial Review
RESULTS OF OPERATIONS
In contrast to the strong market conditions which prevailed during most of 1995,
the markets for paper and packaging products declined significantly in 1996.
Paper product prices, which in the previous year had driven earnings to a record
level, began to soften as 1995 concluded. This decline accelerated through 1996.
As a result, selling prices were severely depressed from year earlier levels,
which had a substantial impact on earnings.
[Chart Omitted:
Income from Operations
(millions of dollars)
1994 $275
1995 $830.1
1996* $241
*1996 includes $46.9 million special charge].
In 1996, consolidated net income was $85.3 million or $1.23 per share, after a
special charge of $28.9 million or $.42 per share after-tax, relating to
restructuring costs and asset write downs. The special charge is part of an
overall profit enhancement program which includes the goal of adding as much as
$100 million to pre-tax earnings through cost reductions and mix improvements
over the next 18-24 months. Before the special charge, 1996's net income was
$114.2 million or $1.65 per share which was significantly lower than the
all-time record reported in 1995 of $451.1 million or $6.45 per share, and
slightly above the $113.5 million or $1.62 per share reported in 1994. Not
including the special charge, which was $46.9 million on a pre-tax basis, income
from operations in 1996 was $287.4 million compared with $830.1 million in 1995
and $274.5 million in 1994. The 1994 earnings included a gain of $.30 per share
on the sale of a minority interest in the company's Bush Boake Allen Inc. (BBA)
flavor and fragrance business; offsetting this gain were non-recurring charges
of $.31 per share, most notably $.26 per share relating to the write down of
assets and disposal of a business.
Despite weak market conditions, total paper product shipments for 1996 were 3.5
million tons, level with the prior year. Total sales in 1996 were $4.0 billion,
a 5% decrease from record sales of $4.2 billion reported in 1995, and an 18%
increase from sales of $3.4 billion in 1994. Included in the results for 1996
were $279 million of sales from The Alling & Cory Company, a paper distribution
business which the company acquired in August 1996.
Operating results and other financial information for the company's principal
business segments are presented on page 42. A discussion of the results of these
segments follows.
PAPER AND PAPERBOARD
The principal operations in this segment are two kraft paper and board mills,
two bleached paper and board mills, and woodlands operations which support these
mills as well as the company's wood products operation. Segment operating income
was $163 million in 1996, compared to $737 million in 1995 and $182 million in
1994. The operating income fluctuations during this three-year period were
primarily the result of sharp changes in the market prices for linerboard and
uncoated business papers. Sales for the segment were $2.0 billion in 1996, a
decrease from $2.6 billion in 1995, and an increase from $1.8 billion in 1994.
[Chart Omitted:
Paper and Paperboard Operating Profit
(millions of dollars)
1994 $182
1995 $737
1996 $163 ].
Kraft Paper & Board: Operating profits for the company's two kraft paper and
board mills declined substantially in 1996, primarily the result of lower
selling prices. Domestic and export linerboard prices averaged 33% and 37% below
1995, respectively. Total linerboard volume declined 7% from the level achieved
in 1995. In response to the drop off in market demand, the company took
approximately 219,000 tons of market-related linerboard downtime during 1996. In
addition to being affected by lower prices and volumes, operating profit
declined due to higher variable and fixed costs, which increased approximately
2% during 1996.
Operating profit in 1995 increased three-fold compared with 1994, primarily due
to the higher domestic and export linerboard selling prices that were
experienced during the first half of 1995. During the second half of 1995,
demand slowed as customers worked down inven tories built earlier in 1995 and
linerboard selling prices weakened. As a result, the company took 130,000 tons
of linerboard downtime.
Bleached Paper and Board: Operating profit declined by approximately 80% in
1996, as the price weakness in the uncoated business papers market, which began
during the fourth quarter of 1995, continued into 1996. Average selling prices
for uncoated business papers were approximately 25% less in 1996 compared with
1995. As a partial offset to this price weakness, total shipments increased 8%
over 1995. Operating profit was also affected by increases in variable costs,
which resulted from higher fiber, fuel and maintenance costs, as well as higher
selling expenses incurred primarily for increased advertising in support of the
company's branded products.
26 Union Camp Corporation
Operating profit in 1995 increased sharply over 1994. 1995 began with favorable
pricing conditions in the uncoated business papers market which was supported by
expanded demand. However, as paper distributors adjusted their inventory levels
downward, prices began to weaken during the fourth quarter. In response, the
company took 40,000 tons of downtime in the fourth quarter. Total shipments of
white paper products in 1995 remained level with 1994.
FINANCIAL REVIEW
PACKAGING
The Packaging segment includes corrugated container, flexible packaging and
folding carton operations. Packaging products are produced at 40 locations in
the U.S. and 7 locations overseas. Although shipments for these products
remained strong in 1996, prices declined throughout the year, predominantly in
the corrugated container market. As a result, customer sales were $1.4 billion,
down slightly from the $1.5 billion recorded in 1995 and level with 1994.
Operating profit was $46 million, down from the record $52 million in 1995, and
significantly above $9 million in 1994. Operating profit in 1994 included a
charge of $14 million to write down certain non-strategic assets, and a $3
million charge to close one container plant and relocate another operation.
[Chart Omitted:
Packaging Operating Profit
(millions of dollars)
1994 $ 9
1995 $52
1996 $46 ].
The Container Division is the largest unit in this segment operating 27 plants
in the domestic market. Primary products are corrugated containers and solid
fiber containers. Sales decreased by 14% from 1995, primarily due to a 14%
decrease in average selling prices and a 1% decrease in total shipments. As a
result, operating profit declined by 39% in 1996. In the second half of 1996,
the company sold its Kansas City, Missouri, and Trenton, New Jersey, container
operations. These divestitures did not have a significant impact on the
company's operations.
Revenues for the company's International Packaging group increased by 5% in
1996, following gains of 30% in 1995 and 11% in 1994. The 1996 increase in
revenues was attributable to an acquisition in Spain. Operating profits declined
by 55% from 1995, primarily due to margin erosion in certain markets with excess
corrugated capacity.
The Flexible Packaging Division is the second largest operating unit in this
segment, producing a broad variety of industrial and consumer bags, polyethylene
film and other non-rigid packaging at 11 plants in the U.S. Operating profits
were up over 50% in 1996, while sales remained level with 1995. The improvement
was primarily attributable to overall cost reductions stemming from lower raw
material costs, increased manufacturing efficiencies and lower fixed costs.
The company's Folding Carton Division operates three plants which produce
consumer products packaging with high quality graphics, principally for the
cosmetics and pharmaceutical industries. Operating profits increased 19% in
1996, after declining substantially in 1995. Decreased average selling prices
during 1996 were more than offset by increased shipments and decreased raw
material costs.
WOOD PRODUCTS
The Wood Products segment consists of lumber, plywood and particleboard
operations. While revenue for the segment remained level with 1995, operating
profit increased by 33% in 1996 to $43 million, up from $33 million recorded in
1995. Lumber prices increased 4%, and lumber volume increased 3% during 1996.
The favorable lumber operations, coupled with increased particleboard shipments
as well as lower wood and fixed costs, more than offset lower prices for plywood
and particleboard.
[Chart Omitted:
Wood Products Operating Profit
(millions of dollars)
1994 $79
1995 $33
1996 $43 ].
In 1995, operating earnings decreased by $46 million from the level achieved in
1994, primarily due to lower profits in the lumber business. Although lumber
volume increased slightly, margins narrowed due to declining prices and rising
wood costs.
CHEMICAL
Net sales for the Chemical segment were $701 million in 1996, an increase of 5%
over 1995 and 22% above 1994. Operating profit for this segment was $67 million
in 1996, down from the $76 million reported in 1995, and level with 1994.
Bush Boake Allen is the largest operating unit in this segment, conducting
operations on six continents and having locations in 41 countries worldwide.
Union Camp is a majority owner of this global business with a 68% holding. BBA
supplies flavors and fragrances for use in foods, beverages, cosmetics and
toiletries. Sales were $449 million in 1996, up from $425 million in 1995 and
$375 million in 1994. Operating profit was $47 million in 1996, compared
Union Camp Corporation 27
to $50 million in 1995 and $42 million in 1994. Higher operating
profits for flavors and fragrances were more than offset by lower results for
aroma chemicals due primarily to higher raw material turpen tine costs. In 1995,
BBA posted a 20% increase in operating profit, due to strong earnings growth in
both its flavor and fragrance business, as well as its aroma chemicals business.
The company's Chemical Products Division upgrades papermaking by-products and
other raw materials into a wide range of specialized chemicals, primarily for
use in inks, coatings and adhesives. Sales in 1996 were $251 million, a 4%
increase over 1995 and a 20% increase over 1994. Operating profit in 1996
declined by 22% from 1995, and remained level with 1994. Although total
shipments increased by 11% in 1996, this was more than offset by an increase in
crude tall oil pricing, a 6% increase in fixed costs due to the Division's
continuing expansion of its global sales and marketing organization and
manufacturing start-up problems in early 1996. In 1995, operating profit rose by
29%, primarily attributable to increased selling prices of upgraded products
from fatty acids and rosins, which more than offset a 20% increase in crude tall
oil prices.
[Chart Omitted:
Chemical Operating Profit
(millions of dollars)
1994 $67
1995 $76
1996 $67 ].
INTEREST EXPENSE
Net interest expense was $112 million in 1996, $114 million in 1995 and $109
million in 1994.
The slightly decreased expense in 1996 resulted from lower short-term interest
rates which more than offset the effects of an increase in outstanding debt
during the year and a decrease in the amount of interest that was capitalized.
The increased expense in 1995 was due to a lower level of capitalized interest.
OTHER (INCOME) EXPENSE--NET
Other income for 1996 was $23 million compared with $14 million of income in
1995 and $5 million of expense in 1994. The income in 1996 includes gains of
$8.0 million attributable to the sale of land and $6.1 million related to other
asset disposals. 1995 other income included a gain of $8.7 million related to
the sale of land. Included in 1994's other expenses was a charge of $11.7
million from the disposal of the retail paper bag business. Also in 1994, the
company recorded a pre-tax gain of $34.7 million from the sale of a minority
interest in Bush Boake Allen, which was presented as a separate line item "Gain
on Sale of Minority Interest" on the consolidated income statement.
INCOME TAXES
The effective tax rate for 1996 was 36.6% compared with 36.8% in 1995, and 36.6%
in 1994.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
Although its operating results were affected by the paper industry's cyclical
downturn in 1996, the company continues to maintain a strong financial position.
Total assets at December 31, 1996 increased to over $5 billion, reflecting $197
million of assets related to the acquisitions of Alling & Cory and O'Grady
Containers. Net working capital (the excess of current assets over current
liabilities) was $354 million at year-end 1996, compared with $414 million at
the end of 1995. The decline was primarily attributable to higher levels of
short-term debt, which more than offset a $34 million increase in working
capital related to acquisitions. The company's current ratio was 1.5 for 1996
compared with 1.7 at the end of 1995. Stock holders' equity decreased by $28
million to $2.1 billion at December 31, 1996 or $30.25 per share compared to
$30.71 per share at the end of 1995.
[Chart Omitted:
Cash Provided By Operations
(millions of dollars)
1994 $369
1995 $750
1996 $495 ].
Cash flow generated by operations was $495 million in 1996, compared with $750
million in 1995, and $369 million in 1994. The 1996 decline in operating cash
flow was primarily attributable to significantly lower net earnings in 1996,
offset slightly by decreases in working capital items, primarily receivables and
inventories. Investment activities in 1996 included $49 million related to
payments for various strategic acquisitions and an increase in capital
expenditures. Cash flow in 1996 also included a higher level of dividend
payments.
[Chart Omitted:
Capital Structure
(millions of dollars)
1994 1995 1996
Shareholders' Equity $1,836 $2,122 $2,094
Deferred Income Taxes $ 606 $ 710 $ 723
Long-Term Debt $1,252 $1,152 $1,252 ].
In 1996, the net increase in long-term debt was $101 million, primarily the
result of the issuance of $150 million of 7% ten-year debentures. The ratio of
long-term debt to total capital employed (the sum of long-term debt, deferred
taxes and stockholders' equity) was 30.8% at
28 Union Camp Corporation
Financial Review
year-end 1996 compared to 28.9% at the end of 1995. The ratio of total debt to
total capital increased to 35.3% at December 31, 1996, from 32.2% at the end of
1995.
CAPITAL EXPENDITURES
Capital spending totaled $386 million in 1996 compared with $267 in 1995, and
$325 million in 1994.
[Chart Omitted:
Capital Expenditures
(millions of dollars)
1994 $325
1995 $267
1996 $386 ].
Included in capital expenditures for 1996, is paper mill spending of $131
million. This figure includes $32 million of a $75 million project to install a
combustion turbine generator and heat recovery steam generator along with
related power plant improvements at the Franklin, Virginia mill. This project
will be completed in the second half of 1997. Investment at domestic and
international packaging plants was $60 million. Chemical sector spending,
including Bush Boake Allen, totaled $54 million and spending at Wood Products
facilities was $26 million. Capitalized costs related to the operation of
timberlands was $23 million and the cost of timberland acquisitions totaled $72
million. The latter in cluded $65 million for the addition of 46,309 acres to
the timberland supporting the Eastover, South Carolina mill.
($ in millions) 1996 1995 1994
- ------------------------------------------------------
Plant and Equipment
(excludes acquisitions):
Expansion & Cost
Reduction $139 $137 $172
Replacement & Other 148 88 110
Capitalized Interest 4 9 22
Timberlands (acquisition
& regeneration) 95 33 21
- ------------------------------------------------------
Total $386 $267 $325
- ------------------------------------------------------
At year-end 1996, purchase commitments related to capital projects in-progress
were approximately $43 million. Capital spending in 1997 is expected to be about
$375 million.
ACQUISITIONS AND DISPOSITIONS
In January 1996, the company acquired the operating assets and assumed certain
liabilities of O'Grady Containers, Inc., a graphics oriented, direct print,
sheet plant located in Fort Worth, Texas, for $11.5 million. This acquisition
provides the company with full spec trum graphics capabilities in the Southwest
and allows for expansion in the growing point of purchase display market.
In 1996, the company invested $22.5 million to acquire a 50% interest in a
corrugated container operation in Turkey, which positions Union Camp in a high
potential international packaging market.
In August 1996, the company acquired the outstanding shares of The Alling & Cory
Company for $88.5 million, consisting of 1.7 million shares of company common
stock and $5.4 million cash. Alling & Cory distributes communications and
printing papers, industrial packaging and business products. The company
operates 15 distribution centers, 21 retail paper shops, mostly in the
Northeast, and an envelope conversion plant in Hamburg, New York. Since the
acquisition, Alling & Cory reported $279 million in sales.
The company sold its Kansas City, Missouri container plant in September 1996,
and its Trenton, New Jersey container plant in December 1996. During 1996, the
company recorded net sales at the Kansas City plant of $14 million and $18
million at the Trenton plant. The divestiture of the two plants did not have a
significant impact on the company's operations.
In October 1996, the company acquired the 30% minority interest in its
corrugated container operation in Chile for $6.1 million, bringing the company's
investment interest to 100%.
In December 1995, the company acquired a corrugated container plant located near
Madrid, Spain for $8.3 million.
In early 1995, the company sold its flexible packaging plant in Asheville, North
Carolina and completed its withdrawal from the retail paper bag business with
the sale of the Richmond, Virginia bag plant and shut-down of its Savannah,
Georgia retail bag operations.
In May 1994, the company's flavor and fragrance subsidiary, Bush Boake Allen,
sold a 32% minority interest to the public. The company recorded a $34.7 million
pre-tax gain on the sale.
DIVIDENDS AND STOCK REPURCHASES
Cash dividends paid in 1996 were $124.7 million. The dividend rate was raised
15% in 1995. This was done in two steps: in April 1995, the quarterly dividend
was increased 5% from $.39 per share to $.41 per share; and in the fourth
quarter of 1995, a second increase of 10% was made to $.45 per share. As a
result, annual dividend payments increased to $1.80 per share in 1996, up from
$1.66 per share in 1995, and $1.56 per share in 1994.
In the second quarter of 1995, the Board of Directors authorized the repurchase
of up to five million shares of the company's common stock. During 1996 and
1995, a total of 2,865,900 shares of common stock were repurchased at a cost of
$146.1 million.
Union Camp Corporation 29
ENVIRONMENTAL MATTERS
The company invested approximately $33 million in pollution control facilities
in 1996. Over the past five years, the company has invested approximately $121.8
million in such facilities, which is about 8% of total capital spending. In
1996, the company recorded expenses of $10 million for study, testing and
remediation in compliance with environmental regulations.
Regulations previously scheduled for earlier promulgation by the U.S.
Environmental Protection Agency, and now expected to become effective in the
third quarter of 1997, will require significant capital investment during the
next ten years. It is the company's current understanding that it may have
several compliance alternatives with respect to the timing and magnitude of such
investment. Over the next five to seven years, the company expects to make a
total investment of about $165 million, with an additional $70 million to be
spent almost entirely eight to ten years from now. Although these current dollar
figures are subject to variation with respect to their amounts and timing, there
is no reason to believe that the spending will materially detract from the
company's normal capital investment plans. The company believes that, since its
situation, in relative terms, is similar to that of its competitors, compliance
will not adversely affect its competitive position.
ACCOUNTING MATTERS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards (SFAS) No.123, "Accounting for Stock-Based Compensation",
which became effective in 1996. In accordance with the alternatives allowed by
this statement, the company has elected to continue to account for its employee
stock option plans pursuant to Accounting Principles Board (APB) Opinion No. 25,
"Accounting for Stock Issued to Employees." Note 12 to the financial statements
provides pro forma earnings for 1996 and 1995 if the costs of stock-based
compensation were accounted for pursuant to SFAS No. 123 rather than APB 25.
In the first quarter of 1994, the company adopted the provisions of SFAS No.112,
"Employers' Accounting for Postemployment Benefits." At January 1, 1994, the
accumulated obligation associated with these benefits 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 $3.7 million after-tax charge
to income.
Statements in this report that are not historical are forward-looking statements
that are subject to risks and uncertainties that could cause actual results to
differ materially. Such risks and uncertainties include the effect of general
economic conditions, fluctuations in supply and demand for the company's
products including exports and potential imports, paper industry production
capacity, operating rates, competitive pricing pressures, and whether capital
and restructuring projects are successfully completed. The company's goal of
enhancing its earnings power during the next 18-24 months is subject to risks
and uncertainties that planned product mix improvements are not implemented, and
that cost reductions expected to result from investing in information
technology, work flow redesign, shared service activities and other activities
do not materialize. The anticipated results of environmental regulations
expected to be adopted later this year are subject to uncertainties regarding
the regulations' final form and their effect on the company vis-a-vis its
competitors.
Quarterly Information
($ in thousands, except share and per share)
- ----------------------------------------------------------------------------------------------------------------
Stock Price*
Gross Net Income (Loss) Dividends -------------------
Net Sales Profit Income (Loss) Per Share Per Share High Low
- ----------------------------------------------------------------------------------------------------------------
1996
Fourth Quarter $1,083,584 $149,248 $ (5,687) $(0.09) $0.45 $50 5/8 $46 7/8
Third Quarter 1,017,310 211,053 14,353 0.21 0.45 51 1/2 46 1/4
Second Quarter 934,048 208,106 18,139 0.26 0.45 55 3/8 48 3/4
First Quarter 978,255 281,736 58,503 0.85 0.45 52 3/8 44 7/8
- ----------------------------------------------------------------------------------------------------------------
1995
Fourth Quarter $1,007,774 $295,185 $ 83,169 $ 1.20 $0.45 $58 1/2 $45 3/4
Third Quarter 1,073,494 386,395 129,746 1.85 0.41 61 1/4 54 5/8
Second Quarter 1,109,295 404,132 133,151 1.90 0.41 58 1/4 47 7/8
First Quarter 1,021,146 345,496 105,007 1.50 0.39 52 3/8 46 5/8
- ----------------------------------------------------------------------------------------------------------------
1994
Fourth Quarter $ 922,231 $265,801 $ 58,319 $ 0.83 $0.39 $50 $44 3/8
Third Quarter 856,271 194,961 21,733 0.31 0.39 50 7/8 45
Second Quarter 827,217 181,013 25,906 0.37 0.39 48 3/8 42 1/4
First Quarter 790,106 164,451 7,552 0.11 0.39 50 3/4 43 7/8
- ----------------------------------------------------------------------------------------------------------------
Fourth quarter 1996 includes a special charge relating to restructuring costs
and asset write downs which reduced income from operations by $46.9 million
pre-tax and after-tax net income by $28.9 million or $0.42 per share.
Net income for 1994 includes a second quarter gain of $.30 per share on the sale
of a minority interest in Bush Boake Allen. This gain was offset by a second
quarter charge of $.16 per share to write down non-strategic assets, a third
quarter charge of $.10 per share to reflect the withdrawal from the retail paper
bag business and a first quarter charge of $.05 per share for the implementation
of SFAS No. 112, "Employers' Accounting for Postemployment Benefits".
*The company's common stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange.
The number of stockholders of record at December 31, 1996 was 8,777.
30 Union Camp Corporation
Report of Independent Accountants
To the Stockholders and Board of Directors of
Union Camp Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and of cash flows present fairly, in all
material respects, the financial position of Union Camp Corporation and its
subsidiaries at December 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1996, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for postemployment benefits in 1994.
Price Waterhouse LLP
Morristown, New Jersey
February 7, 1997
Union Camp Corporation 31
Consolidated Income
($ in thousands, except per share)
- ------------------------------------------------------------------------------------------------------------
For The Years Ended December 31, 1996 1995 1994
- ------------------------------------------------------------------------------------------------------------
Net sales $ 4,013,197 $ 4,211,709 $ 3,395,825
Costs and other charges:
Costs of products sold 3,010,589 2,729,479 2,524,844
Selling and administrative expenses 434,900 386,855 329,087
Depreciation and cost of company timber harvested 280,267 271,696 253,436
Special charge 46,935 -- --
Other operating (income) expense -- (6,423) 13,958
- ------------------------------------------------------------------------------------------------------------
Income from operations 240,506 830,102 274,500
- ------------------------------------------------------------------------------------------------------------
Interest expense, net of capitalized interest 112,286 113,705 109,172
Gain on sale of minority interest -- -- (34,698)
Other (income) expense--net (22,825) (14,460) 4,862
- ------------------------------------------------------------------------------------------------------------
Income before income taxes, minority interest
and cumulative effect of accounting change 151,045 730,857 195,164
- ------------------------------------------------------------------------------------------------------------
Income taxes 55,250 268,895 71,420
- ------------------------------------------------------------------------------------------------------------
Minority interest, net of tax 10,487 10,889 6,518
- ------------------------------------------------------------------------------------------------------------
Net income before cumulative effect of
accounting change 85,308 451,073 117,226
- ------------------------------------------------------------------------------------------------------------
Cumulative effect of accounting change, net of tax -- -- (3,716)
- ------------------------------------------------------------------------------------------------------------
Net income $ 85,308 $ 451,073 $ 113,510
- ------------------------------------------------------------------------------------------------------------
Earnings per share:
Net income before cumulative effect of accounting change $ 1.23 $ 6.45 $ 1.67
Cumulative effect of accounting change -- -- (0.05)
- ------------------------------------------------------------------------------------------------------------
Net income per share $ 1.23 $ 6.45 $ 1.62
- ------------------------------------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements.
32 Union Camp Corporation
Consolidated Balance Sheet
($ in thousands)
- ------------------------------------------------------------------------------------
December 31, 1996 1995
- ------------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and cash equivalents $ 44,917 $ 30,332
Receivables-net 544,320 489,967
Inventories 496,433 468,717
Other 48,440 44,801
- ------------------------------------------------------------------------------------
1,134,110 1,033,817
- ------------------------------------------------------------------------------------
Property
Plant and equipment, at cost 6,562,465 6,304,113
Less: accumulated depreciation 3,161,450 2,918,963
- ------------------------------------------------------------------------------------
3,401,015 3,385,150
Timberlands, less cost of company timber harvest 351,334 274,935
- ------------------------------------------------------------------------------------
3,752,349 3,660,085
- ------------------------------------------------------------------------------------
Other Assets 209,848 144,441
- ------------------------------------------------------------------------------------
Total Assets $ 5,096,307 $ 4,838,343
- ------------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current installments of long-term debt $ 95,840 $ 43,926
Notes payable 185,614 148,526
Accounts payable 264,064 220,243
Other accrued liabilities 201,319 174,432
Income and other taxes 33,032 32,986
- ------------------------------------------------------------------------------------
779,869 620,113
- ------------------------------------------------------------------------------------
Long-Term Debt 1,252,475 1,151,536
- ------------------------------------------------------------------------------------
Deferred Income Taxes 723,431 709,850
- ------------------------------------------------------------------------------------
Other Liabilities and Minority Interest 246,938 235,152
- ------------------------------------------------------------------------------------
Stockholders' Equity
Common stock-par value $1.00 per share 69,217 69,078
Capital in excess of par value 41,853 38,344
Other equity adjustments (6,080) (13,744)
Retained earnings 1,988,604 2,028,014
- ------------------------------------------------------------------------------------
Shares outstanding, 1996--69,217,119; 1995--69,078,078
Stockholders' Equity--Net 2,093,594 2,121,692
- ------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity $ 5,096,307 $ 4,838,343
- ------------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements.
Union Camp Corporation 33
Consolidated Statement of Cash Flows
($ in thousands)
- -------------------------------------------------------------------------------------------
For The Years Ended December 31, 1996 1995 1994
- -------------------------------------------------------------------------------------------
Cash (Used For) Provided By Operations:
Net income $ 85,308 $ 451,073 $ 113,510
Adjustments to reconcile net income to cash
provided by operations:
Depreciation, amortization and cost of company
timber harvested 298,457 287,738 270,850
Deferred income taxes 7,877 105,899 27,268
Gain on sale of minority interest -- -- (34,698)
Special charge 46,935 -- --
Asset write down and business disposal -- (6,423) 25,676
Other 9,513 16,650 13,190
Changes in operational assets and liabilities:
Receivables 43,963 (23,000) (80,593)
Inventories 13,139 (55,325) 15,880
Other assets 1,511 (3,637) 5,175
Accounts payable, taxes and other liabilities (11,556) (22,753) 12,244
- -------------------------------------------------------------------------------------------
Cash Provided By Operations 495,147 750,222 368,502
- -------------------------------------------------------------------------------------------
Cash (Used For) Provided By Investment Activities:
Capital expenditures:
Plant and equipment (291,345) (233,444) (303,840)
Timberlands (95,098) (33,355) (21,099)
------------------------------------
(386,443) (266,799) (324,939)
Acquisitions (49,452) (7,115) (25,006)
Sale of businesses-net 5,318 36,133 8,239
Sale of assets 30,007 18,480 19,114
Sale of minority interest -- -- 88,983
Other (23,716) (11,306) 10,311
- -------------------------------------------------------------------------------------------
Cash Used For Investment Activities (424,286) (230,607) (223,298)
- -------------------------------------------------------------------------------------------
Cash (Used For) Provided By Financing Activities:
Issuance of long-term debt 150,000 22,625 61,725
Repayments of long-term debt (48,954) (69,338) (65,574)
Common stock repurchases (86,499) (59,614) --
Change in short-term notes payable 52,156 (279,999) (57,596)
Dividends paid (124,718) (116,132) (109,137)
- -------------------------------------------------------------------------------------------
Cash Used For Financing Activities (58,015) (502,458) (170,582)
- -------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash 1,739 (81) 347
- -------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents 14,585 17,076 (25,031)
Balance at beginning of year 30,332 13,256 38,287
- -------------------------------------------------------------------------------------------
Balance at end of year $ 44,917 $ 30,332 $ 13,256
- -------------------------------------------------------------------------------------------
See the accompanying notes to consolidated financial statements.
34 Union Camp Corporation
Notes to Consolidated Financial Statements
($ in thousands, except per share)
1. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION AND PREPARATION OF FINANCIAL STATEMENTS: The
consolidated financial statements present the operating results and the
financial position of the company and all of its subsidiaries. All significant
intercompany transactions are eliminated.
In accordance with generally accepted accounting principles, the preparation
of financial statements requires management to make estimates and assumptions
that affect the reported amounts of some assets and liabilities and, in some
instances, the reported amounts of revenues and expenses during the reporting
period.
CASH AND CASH EQUIVALENTS: Cash and cash equivalents include all highly liquid
investment instruments with an original maturity of three months or less.
INVENTORIES: Inventories are stated at the lower of cost or market and include
the cost of materials, labor and manufacturing overhead. Finished goods and raw
materials of domestic operations are valued principally at last in, first out
(LIFO) cost. Supplies and all inventories of foreign operations are valued at
first in, first out (FIFO) or average cost.
PROPERTY AND DEPRECIATION: Plant and equipment is recorded at cost, less
accumulated depreciation. Upon sale or retirement, the asset cost and related
depreciation are removed from the balance sheet and the resulting gain or loss
is included in income.
Depreciation is principally calculated on a straight-line basis with lives
for buildings from 15 to 33 years and for machinery and equipment from 10 to 20
years. For major expansion projects, the company uses the units-of-production
depreciation method until design level production is reasonably sustained.
Accelerated depreciation methods are used for tax purposes.
The cost of company timber harvested is charged to income as timber is cut.
The charge to income is the product of the volume of timber cut multiplied by
annually developed unit cost rates which are based on the relationship of timber
cost to estimated volume of recoverable timber.
GOODWILL: The excess of the cost over the fair value of net assets of acquired
businesses is recorded as goodwill and is amortized on a straight-line basis
over appropriate periods not to exceed 40 years. The company reviews the
goodwill recoverability period on a regular basis.
RESEARCH AND DEVELOPMENT COSTS: Research and development costs are expensed as
incurred. These expenditures totaled $55.9 million in 1996, $55.4 million in
1995, and $49.2 million in 1994.
CAPITALIZED INTEREST: Interest is capitalized on major capital expenditures
during the period of construction. Total interest costs incurred and amounts
capitalized were:
1996 1995 1994
- --------------------------------------------------------------------------------
Total interest $ 116,748 $ 122,572 $ 130,800
Interest capitalized (4,462) (8,867) (21,628)
- --------------------------------------------------------------------------------
Net interest expense $ 112,286 $ 113,705 $ 109,172
- --------------------------------------------------------------------------------
PRE-START-UP COSTS: The company defers pre-start-up costs for major expansion
projects until such projects become operational. Following the completion of
start-up, the deferred costs are amortized on a straight-line basis over a five
year period.
STOCK-BASED COMPENSATION: In accordance with the provisions of Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation", the company has elected to continue to account for its employee
stock option plans in accordance with Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees", and to disclose supplementally
the pro forma effect of accounting for these plans as if the provisions of SFAS
No. 123 had been adopted.
For disclosure purposes, the pro forma effects of applying SFAS No. 123 are
provided for options granted in 1996 and 1995. (See also Note 12.)
CHANGES IN ACCOUNTING STANDARDS: Effective January 1, 1994, the company adopted
the provisions of Statement of Financial Accounting Standards No. 112,
"Employers' Accounting for Postemploy ment Benefits", which requires companies
to accrue for the cost of certain postemployment benefits including
disability-related health care and life insurance benefits.
In adopting this standard, the company recorded a one-time cumulative charge
of $3.7 million after-tax in the first quarter of 1994.The net periodic expense
for 1996, 1995 and 1994 was $4.0 million, $2.2 million and $1.3 million,
respectively.
ENVIRONMENTAL LIABILITIES: Environmental expen ditures that relate to current
operations are expensed or capitalized as appropriate. Liabilities are recorded
when remedial efforts are probable and the costs can be reasonably estimated.
The timing of these accruals generally coincides with the completion of a
feasibility study or the company's commitment to a formal plan of action.
INCOME TAXES: Deferred income taxes are recorded using enacted tax rates in
effect for the year temporary differences are expected to reverse. Federal and
state income taxes are not accrued on the cumulative undistributed earnings of
foreign subsidiaries because the earnings have
Union Camp Corporation 35
been reinvested in the businesses of those companies. As of December 31, 1996,
the total of all such undistributed earnings amounted to $179.1 million. It is
not practical to estimate the amount of tax that might be payable on the
distribution of the foreign earnings. The company has, as required, provided for
tax potentially payable on the distribution of its share of $64.5 million, the
undistributed earnings of Bush Boake Allen Inc. (BBA) and subsidiaries earned
subsequent to 1992. (See also Note 11.)
FOREIGN CURRENCY TRANSLATION: The assets and liabilities of the company's
foreign subsidiaries and affiliates are translated into U.S. dollars at year-end
exchange rates, while income and expense accounts are translated at average
annual rates. The primary factor used to determine the functional currencies of
the company's foreign subsidiaries is the local currency cash flows resulting
from manufacturing, sales and financing activities. Gains and losses resulting
from foreign currency translation are re flected in a separate component of
Stockholders' Equity entitled Other Equity Adjustments. The effect of these
cumulative adjustments was to reduce equity by $4.2 million at December 31, 1996
and $13.2 million at December 31, 1995.
DERIVATIVES: The company hedges foreign currency transactions by entering into
forward foreign exchange contracts. Gains and losses associated with the forward
contracts are matched with the offsetting gains and losses recorded for exchange
rate fluctuations on the underlying assets and liabilities. Gains and losses on
interest rate swap agreements are charged or credited to interest expense over
the life of the agreement. (See also Note 10.)
REVENUE RECOGNITION: The company recognizes revenues upon the passage of title,
which is generally at the time of shipment.
INCOME PER SHARE: Net income per share of common stock is based on the weighted
average number of shares outstanding during the period.
RECLASSIFICATIONS: Certain amounts have been reclassified for 1994 and 1995 to
conform with the 1996 presentation.
2. SPECIAL CHARGE
During the fourth quarter of 1996, the company recorded a $46.9 million pre-tax
charge ($28.9 million after-tax) to operating income. Included in the charge was
$21.0 million for employee severance costs, $18.4 million for asset write downs,
and $7.5 million for other expenses. The asset write downs were taken to
recognize equipment rendered obsolete as a result of replacement equipment and
to reflect the fair value of certain investment properties.
3. OTHER OPERATING (INCOME) EXPENSE
Results for 1994 included a $14.0 million pre-tax charge to write down the
carrying value of a flexible packaging operation. In 1995, the company sold
these assets and recorded a net pre-tax gain of $6.4 million.
4. GAIN ON SALE OF MINORITY INTEREST
In 1994, the company's flavor and fragrance subsidiary, 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. The company
retains approximately 68% of the 19.215 million shares outstanding after the
offering. As a result of this transaction, the company recognized a $34.7
million pre-tax gain.
5. OTHER (INCOME) EXPENSE-NET
Other income for 1996 includes gains of $8.0 million attributable to the sale of
land, and $6.1 million related to other asset disposals. 1995 other income
included a gain of $8.7 million related to the sale of land. The year 1994
included an $11.7 million charge to withdraw from the retail paper bag business.
6. ACQUUISITIONS
In the first quarter of 1996, the company purchased the operating assets and
assumed certain liabilities of O'Grady Containers, Inc. for $11.5 million. In
addition, the company acquired a 50% interest in a corrugated container joint
venture in Turkey for $22.5 million.
On August 2, 1996, the company acquired The Alling & Cory Company (Alling &
Cory), a paper distribution business, for a consideration totaling $88.5
million, consisting of 1.7 million shares of company common stock and $5.4
million cash. The acquisition was accounted for under the purchase method and,
accordingly, the net assets and results of operations have been included in the
consolidated financial statements since the date of acquisition. The excess of
purchase price over the estimated fair values of the net assets acquired has
been treated as goodwill. Goodwill will be amortized on a straight-line basis
over a period not to exceed 40 years.
These acquisitions did not have a material pro forma impact on consolidated
earnings.
36 Union Camp Corporation
Notes to Consolidated Financial Statements
($ in thousands, except per share)
7. SUPPLEMENTAL BALANCE SHEET INFORMATION
DECEMBER 31, 1996 1995
- --------------------------------------------------------------------------------
RECEIVABLES
Trade $514,799 $466,786
Other 46,791 39,647
- --------------------------------------------------------------------------------
561,590 506,433
Less estimated doubtful accounts,
discounts and allowances 17,270 16,466
- --------------------------------------------------------------------------------
Net $544,320 $489,967
- --------------------------------------------------------------------------------
INVENTORIES
Finished goods $270,123 $242,732
Raw materials 110,569 109,181
Supplies 115,741 116,804
- --------------------------------------------------------------------------------
Total $496,433 $468,717
- --------------------------------------------------------------------------------
At December 31, 1996 and 1995, finished goods and raw materials totaling $254.6
million and $217.9 million, respectively, were valued at LIFO cost. The excess
of current cost over LIFO value was $101.7 million and $101.0 million in 1996
and 1995, respectively.
DECEMBER 31, 1996 1995
- --------------------------------------------------------------------------------
OTHER CURRENT ASSETS
Prepayments $ 22,745 $ 24,028
Short-term timber leases 19,045 19,484
Assets held for resale 6,650 1,289
- --------------------------------------------------------------------------------
Total $ 48,440 $ 44,801
- --------------------------------------------------------------------------------
PLANT AND EQUIPMENT, AT COST
Land $ 37,151 $ 35,768
Buildings and improvements 561,078 533,236
Machinery and equipment 5,777,737 5,620,303
Construction-in-progress 186,499 114,806
- --------------------------------------------------------------------------------
Total $6,562,465 $6,304,113
- --------------------------------------------------------------------------------
At December 31, 1996, property (principally machinery and equipment) having an
original cost of approximately $381 million and a net book value of $157 million
is pledged against lease obligations and notes payable to industrial development
authorities (see also Note 8). These obligations and notes payable have
outstanding long-term balances totaling approximately $331 million.
DECEMBER 31, 1996 1995
- --------------------------------------------------------------------------------
OTHER ASSETS
Goodwill $ 72,646 $ 15,264
Investments in affiliates 46,015 27,192
Other intangibles 30,096 18,256
Pension assets 28,738 47,035
Deferred pre-start-up 5,228 12,891
Other 27,125 23,803
- --------------------------------------------------------------------------------
Total $209,848 $144,441
- --------------------------------------------------------------------------------
SHORT-TERM DEBT: Included in Notes Payable at December 31, 1996 and 1995 were
$114 million and $90 million, respectively, of commercial paper borrowings. The
weighted average interest rate on these borrowings for the years 1996 and 1995
were 5.6% and 6.1%, respectively.
The company has short-term revolving credit facilities in numerous countries
primarily outside the United States, which provide for aggregate availability of
$164 million. At December 31, 1996 and 1995, approximately $52 million was
outstanding and included in short-term borrowings. Commitment fees are either
nominal or zero.
DECEMBER 31, 1996 1995
- --------------------------------------------------------------------------------
OTHER ACCRUED LIABILITIES
Payrolls $ 67,892 $ 64,329
Interest 30,758 27,685
Special charge reserve 16,410 --
Other 86,259 82,418
- --------------------------------------------------------------------------------
Total $201,319 $174,432
- --------------------------------------------------------------------------------
OTHER LIABILITIES AND MINORITY INTEREST
Postretirement and
postemployment benefits $128,838 $116,461
Minority interest 86,507 74,917
Minimum pension liability 3,134 24,759
Other 28,459 19,015
- --------------------------------------------------------------------------------
Total $246,938 $235,152
- --------------------------------------------------------------------------------
8. LONG-TERM DEBT
DECEMBER 31, 1996 1995
- --------------------------------------------------------------------------------
Sinking fund debentures:
8 5/8% due 1998-2016 $ 47,474 $ 51,974
10% due 2000-2019 100,000 100,000
9 1/4% due 2002-2021 117,780 117,780
Debentures:
9 1/2% due 2002 100,000 100,000
9 1/4% due 2011 124,800 124,800
8 1/2% due 2022 100,000 100,000
7% due 2006 150,000 --
Notes 7 3/8% due 1999 50,000 50,000
Medium-term notes due
1998-2001; 7.5% to 9.54%;
weighted average rate 8.82% 84,000 168,000
Industrial Development Revenue
Bonds due 2001-2026; 4.0%
to 8.0%; weighted average
rate 6.03% 41,575 42,636
Pollution Control Revenue Bonds
due 1998-2024; 4.5% to 7.45%;
weighted average rate 6.53% 289,005 290,510
Other notes due 1998-2004 1,841 5,836
Commercial paper 46,000 --
- --------------------------------------------------------------------------------
Total $1,252,475 $1,151,536
- --------------------------------------------------------------------------------
Union Camp Corporation 37
The current portion of long-term debt at December 31, 1996 amounted to $95.8
million. Amounts payable in the years 1998 through 2001 are $41.3 million, $68.9
million, $28.5 million and $38.1 million, respectively.
At December 31, 1996, $46 million of commercial paper borrowings was
classified as long-term debt, since the company has the ability and intent to
renew these obligations through the year 2000. The effective interest rate on
these borrowings was 8.08%, inclusive of the net effect of an interest rate
swap. (See also Note 10.)
The company has revolving credit and term loan agreements which provide for
unsecured borrowings up to $500 million in the United States through the year
2001. Any borrowings under these agreements would incur interest at the
prevailing prime rate or other market rates. Nominal commitment fees are paid on
the unused portion. No borrowings were made in 1996 under these agreements.
9. STOCKHOLDERS' EQUITY
Capital in Other
Common Excess of Retained Equity
Stock Par Value Earnings Adjustments
- ----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1993 $69,833 $81,491 $1,688,700 $(24,176)
Net Income -- -- 113,510 --
Cash dividends ($1.56 per share) -- -- (109,137) --
Issuance of stock for options and award plans 179 6,406 -- 253
Foreign currency translation -- -- -- 9,262
- ----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 $70,012 $87,897 $1,693,073 $(14,661)
Net Income -- -- 451,073 --
Cash dividends ($1.66 per share) -- -- (116,132) --
Common stock repurchases (1,152) (58,462) -- --
Issuance of stock for options and award plans 218 8,909 -- (203)
Foreign currency translation -- -- -- 1,120
- ----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 $69,078 $38,344 $2,028,014 $(13,744)
Net Income -- -- 85,308 --
Cash dividends ($1.80 per share) -- -- (124,718) --
Common stock repurchases (1,714) (84,785) -- --
Issuance of stock for options and award plans 152 6,964 -- (1,326)
Shares issued for purchase of Alling & Cory 1,701 81,330 -- --
Foreign currency translation -- -- -- 8,990
- ----------------------------------------------------------------------------------------------------------------------
Balance, December 31, 1996 $69,217 $41,853 $1,988,604 $(6,080)
- ----------------------------------------------------------------------------------------------------------------------
The authorized capital stock of the company at December 31, 1996, 1995 and 1994
consisted of 125,000,000 shares of common stock, $1.00 par value, and 1,000,000
shares of authorized but unissued preferred stock, $1.00 par value. Common stock
repurchased is included in the authorized but unissued shares of the company.
SHAREHOLDER RIGHTS PLAN: The company has a Shareholders' Rights Plan pursuant to
which preferred stock purchase rights are issued to the common stockholders at
the rate of one right for each share of common stock. Each right entitles
shareholders to purchase, under certain conditions (i) one one-thousandth of a
share of the company's Series A Junior Participating Preferred Stock at an
exercise price of $175 or (ii) common stock of the company having a market value
of two times the exercise price. Alternatively, the Board of Directors may
permit holders to surrender each right in exchange for one share of common
stock. The rights will be exercisable only if a person or group acquires 15% or
more of the outstanding common stock or announces a tender offer for 15% or more
of the common stock. The rights expire February 26, 2006 and may be redeemed for
$.001 per right by the Board of Directors prior to the time the rights become
exercisable. In addition, if after any person acquires 15% or more of the
company's common stock, the company is involved in a merger or other business
combination transaction with another person after which its common stock does
not remain outstanding, or the company sells 50% or more of its assets or
earning power, each right will entitle its holder to purchase, at the then
current exercise price, shares of the acquiring company's common stock having a
market value equal to two times the purchase price.
38 Union Camp Corporation
Notes to Consolidated Financial Statements
($ in thousands, except per share)
10. FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments: The carrying amounts of certain financial
instruments: cash, short-term investments, trade receivables and payables
approximate their fair values. The fair value of the company's long-term debt
varies with market conditions and is estimated based on quoted market prices for
similar financial instruments by obtaining quotes from brokers.
At December 31, 1996, the book value of long-term debt was $1.3 billion and
the fair value was approximately $1.4 billion. The book value of all other
financial instruments approximates their fair value.
Derivative Financial Instruments: The company uses derivative instruments
exclusively to hedge the risk associated with underlying business transactions
such as existing floating rate debt and existing foreign currency commitments.
Derivatives are not used for trading or speculative purposes. The book value of
these derivatives approximates their fair value.
At December 31, 1996, the company had outstanding foreign exchange contracts
valued at $103.4 million. The purpose of $56.1 million of these contracts is to
neutralize foreign currency transaction risk generated by the company's firm
foreign currency business commitments resulting from the sale and purchase of
products. The change in value of these contracts resulting from changes in the
respective foreign currency rates versus the U.S. dollar is accrued monthly and
credited or charged to foreign exchange gain or loss. These foreign currency
commitment exposures are evaluated on an ongoing basis and the amount of the
related foreign currency contracts are adjusted as required to offset the risk
associated with the underlying transactions. Cash settlements are executed
whenever the contracts are adjusted, which occurs at least monthly. The
additional $47.3 million of foreign exchange contracts at December 31, 1996
represent hedges of specific firm commitments for certain capital expenditure
and raw material purchase transactions denominated in foreign currencies. The
company enters into these contracts, from time to time, to establish with
certainty the U.S. dollar amount of the specific firm commitments. All foreign
exchange contracts are limited to currencies with established forward markets
and to counterparties, which have Moody's credit ratings of A1 or better. As a
result, the company considers the credit risk of counterparty default to be
minimal.
At December 31, 1996, the company had an outstanding interest rate swap
agreement, the purpose of which is to convert $46 million of floating rate
commercial paper to fixed rate debt. The swap agreement is based on a declining
principal balance schedule which terminates in April 2000. The differential
between fixed and floating rate obligations is accrued as interest rates change
and is charged or credited to interest expense over the life of the agreement.
Cash settlements are payable semi-annually. The counterparty has a Moody's
credit rating of AA1.
11. INCOME TAXES
The components of income before income taxes, minority interest and cumulative
effect of accounting changes are as follows:
1996 1995 1994
- --------------------------------------------------------
Domestic $ 97,187 $669,487 $155,769
Foreign 53,858 61,370 39,395
- --------------------------------------------------------
Total $151,045 $730,857 $195,164
- --------------------------------------------------------
The provision for income taxes is comprised of the following:
1996 1995 1994
- -------------------------------------------------------
Current:
Federal $34,313 $124,937 $31,744
State and local 3,831 21,880 3,652
Foreign 9,229 16,179 8,756
- -------------------------------------------------------
47,373 162,996 44,152
- -------------------------------------------------------
Deferred:
Federal $ 2,094 $ 96,601 $22,005
State (206) 6,477 1,827
Foreign 5,989 2,821 3,436
- -------------------------------------------------------
7,877 105,899 27,268
- -------------------------------------------------------
Total $55,250 $268,895 $71,420
- -------------------------------------------------------
The company follows the provisions of SFAS No. 109, "Accounting For Income
Taxes," whereby deferred taxes represent estimated liabilities to be paid or
assets to be received in the future and tax rate changes would imme diately
affect those liabilities or assets. The cumulative deferred tax liability at
December 31, 1996 and 1995 was $723.4 million and $709.9 million, respectively.
The significant components of these liabilities (assets) are as follows:
December 31, 1996 1995
- -------------------------------------------------------
Deferred Federal Taxes:
Accelerated depreciation $704,912 $685,155
Alternative minimum tax (43,816) (44,355)
Postretirement benefits (42,706) (39,651)
Other 16,601 24,588
- -------------------------------------------------------
Total deferred federal taxes 634,991 625,737
Deferred state taxes 63,170 63,383
Deferred foreign taxes 25,270 20,730
- -------------------------------------------------------
Total deferred taxes $723,431 $709,850
- -------------------------------------------------------
Union Camp Corporation 39
A detailed analysis of the effective tax rate is as follows:
1996 1995 1994
- -------------------------------------------------------
Statutory federal tax rate 35.0% 35.0% 35.0%
State taxes (net of
federal tax impact) 1.5 2.8 2.2
Foreign income taxes (2.3) (0.3) (0.8)
Other 2.4 (0.7) 0.2
- -------------------------------------------------------
Effective rate 36.6% 36.8% 36.6%
- -------------------------------------------------------
12. EMPLOYEE STOCK OPTION PLANS
Under the stock option plans adopted in 1982 and 1989 (as amended), a maximum of
2,175,000 shares and 4,986,000 shares, respectively, of the company's common
stock were made available for the granting of options and stock appreciation
rights to officers and other key employees of the company and its subsidiaries
at prices not less than 100% of fair market value at the dates of grant. Such
options and stock appreciation rights generally become exercisable two years
after the date of grant and expire ten years from that date. No further options
may be granted under the 1982 plan. At the end of 1996, 493,995 options were
available for future grants under the 1989 plan.
Under the 1989 plan, 997,173 shares may be awarded as restricted stock to
selected officers and other key employees of the company and its subsidiaries.
Recipients of restricted stock are entitled to receive cash dividends and to
vote their respective shares. Restrictions limit the sale or transfer of these
shares during a specified period.
During 1996 and 1995, 38,890 and 11,924 common shares, respectively, were
issued as restricted stock under this plan. The weighted average fair value on
the date of grant was $49.50 for restricted stock granted in 1996, and $46.88
for restricted stock granted in 1995. Unearned compensation, equivalent to the
market price of the restricted shares at date of grant, is included within
Stockholders' Equity and is amortized to expense over the five-year restriction
period.
The following table summarizes activity in the company's stock option plans
for 1996 and 1995. The options outstanding that had related stock appreciation
rights attached were 1,067,101 at December 31, 1996, and 1,207,641 at December
31, 1995.
1996 1995
--------------------------------- --------------------------------
Weighted Weighted
Average Average
Shares Exercise Price Shares Exercise Price
- --------------------------------------------------------------------------------------------------------------------------
Option outstanding at beginning of year 3,582,626 $43.57 3,213,253 $41.67
Granted 722,000 49.38 664,400 49.45
Exercised (96,427) 38.97 (197,637) 36.03
Forfeited (76,598) 34.24 (78,840) 35.00
Expired (11,175) 47.90 (18,550) 42.98
- --------------------------------------------------------------------------------------------------------------------------
Options outstanding at end of year 4,120,426 $44.86 3,582,626 $42.57
Options outstanding at end of year 2,741,526 $42.57 2,345,510 $41.55
- --------------------------------------------------------------------------------------------------------------------------
For options outstanding as of the end of 1996, the range of exercise prices
was $33.69 to $52.38 per share and the weighted average remaining life was 6.9
years. The weighted average fair values of the options granted during 1996 and
1995 were $9.66 and $9.70 per share, respectively.
Fair value was determined through use of the Black-Scholes options pricing
formula. For options granted in 1996, the risk-free interest rate was 5.74%, the
expected life was 6 years, the expected volatility was 18% and expected dividend
yield was 3.4%, all calculated on a weighted average basis. For options granted
in 1995, the risk-free interest rate was 5.47%, the expected life was 6 years,
the expected volatility was 19%, and expected dividend yield was 3.4%, all
calculated on a weighted average basis.
Total compensation cost recognized in income for stock-based compensation
awards was $0.7 million in 1996 and $1.3 million in 1995. If the company had
elected to adopt the provisions of SFAS No. 123, the pro forma net income and
earnings per share would have been $83.1 million or $1.20 per share in 1996. The
comparable pro forma im pact on 1995 net income and earnings per share would be
insignificant.
40 Union Camp Corporation
Notes to Consolidated Financial Statements
($ in thousands, except per share)
13. PENSION PLANS
The company and certain foreign subsidiaries have non-contributory defined
benefit pension plans covering substantially all of their employees. Benefits
are based on years of service and, for salaried employees, final average
earnings. The company funds its plans annually based upon a consistently applied
formula which amortizes the unfunded liability adjusted for actuarial gains or
losses. Assets of the plans are primarily fixed income instruments and publicly
traded stocks.
Pension costs were $16.6 million, $20.2 million and $14.5 million for the
years 1996, 1995 and 1994, respectively. The following table sets forth the
status of all funded pension plans for 1996 and 1995:
December 31, 1996 December 31, 1995
----------------------------------------- -------------------------------------------------
Domestic Plans Foreign Plans Domestic Plans Foreign Plans
----------------------------------------- -------------------------------------------------
Assets in Assets in Accumulated
excess in excess in benefits in
accumulated accumulated excess of
benefits benefits assets
- -----------------------------------------------------------------------------------------------------------------------------------
Actuarial present value of:
Vested benefit obligation $696,736 $122,859 $436,095 $221,902 $ 99,580
- -----------------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation 742,222 123,995 460,842 235,210 100,534
- -----------------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation 821,853 150,340 552,794 235,214 135,480
Plan assets at fair value 859,805 160,213 505,942 215,493 137,281
- -----------------------------------------------------------------------------------------------------------------------------------
Plan assets grater (less) than
projected benefit obligation 37,952 9,873 (46,852) (19,721) 1,801
Unrecognized net (gain) loss (61,864) 20,107 40,346 (3,804) 23,465
Unrecognized prior service cost 10,994 46 (2,441) 13,548 127
Unrecogized transition (asset)
obligation 6,257 (2,302) 250 7,572 (2,789)
Adjustment ot recognize minimum
liability -- -- -- (17,316) --
- -----------------------------------------------------------------------------------------------------------------------------------
Pension (liability) asset recorded
on Balance Sheet $ (6,711) $ 27,724 $ (8,697) $(19,721) $ 22,604
- -----------------------------------------------------------------------------------------------------------------------------------
The company has certain supplementary domestic pension plans that are not
funded. At December 31, 1996 and 1995, the projected benefit obligation for
these plans was $23.0 million and $23.8 million of which $17.4 million and $17.9
million represent the accumulated benefit obligation, and $17.0 million and
$17.4 million represent the vested benefit obligation, respectively. The accrued
pension liability for the unfunded plans recorded on the Balance Sheet at
December 31, 1996 and 1995 was $17.8 million and $17.9 million, respectively.
The minimum pension liability for these plans recorded on the Balance Sheet at
December 31, 1996 and 1995 was $3.1 million and $7.4 million, respectively.
The pension expense for all plans included the following components:
1996 1995 1994
- ------------------------------------------------------------------
Service cost-benefits
earned during
the period $ 28,747 $ 20,643 $ 24,869
Interest cost on
projected benefit
obligations 68,613 64,548 59,889
Actual return on
assets (137,070) (155,838) 17,694
Net amortization
and deferral 56,282 90,824 (87,956)
- ------------------------------------------------------------------
Total pension expense $ 16,572 $ 20,177 $ 14,496
- ------------------------------------------------------------------
The discount rates used to determine the pension benefit obligation for the
domestic plans at December 31, 1996 and 1995 were 7.5% and 7.0%, respectively.
The discount rate used for the foreign plans was 8.0% at December 31, 1996 and
1995.
The compensation progression rate for domestic plans was 4.75% for 1996, 1995
and 1994. The expected long-term rate of return on domestic plan assets was 9.5%
for each year.
The compensation progression rates for the foreign plans were 6.0% for 1996,
7.0% for 1995 and 5.5% for 1994. The expected long-term rate of return on
foreign plan assets was 11.5% for each year.
In 1996, the company recorded a charge for special termination benefits of
approximately $8.2 million, pri marily attributable to the elimination of
approximately 400 positions in connection with an employee severance program. In
1994, the company withdrew from the retail paper bag business. As a result, the
company recorded a plan curtailment charge of $1.0 million and special
termination benefits of $1.8 million.
Union Camp Corporation 41
14. POSTRETIRMEENT BENEFITS
The company has a contributory postretirement health care plan covering
primarily its U.S. salaried employees. Employees become eligible for these
benefits when they meet minimum age and service requirements. The com-pany funds
its plan on a "pay-as-you-go" basis, in an amount equal to the retirees' medical
claims paid.
The components of the Accumulated Postretirement Benefit Obligation as of
December 31, 1996 and 1995 are as follows:
1996 1995
- ------------------------------------------------------------
Retirees $ 72,632 $ 63,179
Fully eligible active plan
participants 6,904 9,095
Other active plan participants 44,558 46,826
- ------------------------------------------------------------
124,094 119,100
Unrecognized net gain (loss) 511 (5,812)
Unrecognized prior service cost (2,587) --
- ------------------------------------------------------------
Accrued postretirement
benefit obligation $122,018 $113,288
- ------------------------------------------------------------
The components of the postretirement benefit expense for the years 1996, 1995
and 1994 are as follows:
1996 1995 1994
- ---------------------------------------------------------------------------
Service cost-benefits
earned during period $ 5,311 $ 3,801 $ 3,980
Interest cost on accumulated
benefit obligation 8,819 7,954 7,818
Net amortization
and deferral 185 (155) --
- ---------------------------------------------------------------------------
Postretirement
benefit expense $14,315 $11,600 $11,798
- ---------------------------------------------------------------------------
The discount rates used to determine the accumulated postretirement benefit
obligation at December 31, 1996 and 1995 were 7.5% and 7.0%, respectively.
For measurement purposes, a 9% increase in the medical cost trend rate was
assumed for 1996. This rate decreases incrementally to 5.0% by the year 2003 and
will remain at that level thereafter. It is estimated that a 1% increase in the
medical cost trend rate would increase the accumulated postretirement benefit
obligation as of December 31, 1996 by $13.8 million and the postretirement
benefit expense for 1996 by $1.9 million.
15. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes was $52.1 million in 1996, $161.1 million in 1995,
and $32.4 million in 1994. Cash paid for interest, net of amounts capitalized,
was $109.4 million in 1996, $114.2 million in 1995, and $110.3 million in 1994.
The following table summarizes non-cash investing and financing activities
related to the company's acquisitions in 1996, 1995 and 1994.
1996 1995 1994
- -------------------------------------------------------------------------------
Fair value of assets
acquired $235,139 $8,345 $32,788
Less: cash paid 49,452 7,115 25,006
Common stock issued 83,031 -- --
- -------------------------------------------------------------------------------
Liabilities incurred or
assumed $102,656 $1,230 $ 7,782
- -------------------------------------------------------------------------------
16. COMMITMENT AND CONTINGENT LIABILITIES
The company is involved in various legal proceedings and environmental actions.
Although the outcome of these matters is subject to many variables and cannot be
predicted with any degree of certainty, based upon the company's evaluation of
the information presently available, management believes the ultimate resolution
of any such legal proceedings and environmental actions will not have a material
adverse effect on the company's consolidated financial position. However, it is
remotely possible that such legal proceedings and environmental actions could
have a material effect on quarterly or annual operating results when they are
resolved in future reporting periods.
The company has guaranteed loans of up to $20 million made by a financial
institution to non-controlled entities. The guarantees have terms of 5 years or
less and are secured by the borrowers' assets and stock.
17. SEGMENT INFORMATION
Union Camp is a leading manufacturer of paper, packaging, chemicals and wood
products serving both U.S. and international markets. The company derives
approximately three fourths of its sales from paper and packaging products, such
as linerboard, kraft paper, uncoated free sheet, corrugated containers, flexible
packaging and folding cartons. The company's chemical business is involved in
the manufacture of chemicals used in inks, coatings and adhesives, and through
its Bush Boake Allen subsidiary, the manufacture of flavor, fragrance and aroma
chemicals. Chemicals comprise about a sixth of Union Camp's sales. The company
also manages a woodlands base of about 1.6 million acres, supplying raw
materials for its linerboard, packaging and paper making business, as well as
for the manufacture of wood products.
42 Union Camp Corporation
Notes to Consolidated Financial Statements
($ in thousands, except per share)
Operating results and other financial data are presented for the principal
business segments of the company for the years ended December 31, 1996, 1995 and
1994. Total revenue and operating profit by business segment include both sales
to customers, as reported in the company's consolidated income statement, and
intersegment sales, which are accounted for at prices charged to customers and
eliminated in consolidation. The amount of the elimination of intersegment
profit on any product that remains in inven-tory at the end of the period is
determined by changes in quantities of inventory and changes in the margins of
profit.
Operating profit by business segment is total revenue less operating
expenses. In computing operating profit by business segment, none of the
following items has been added or deducted: other income, portions of
administrative expenses, interest expense, income taxes and unusual items.
Identifiable assets by business segment are those assets used in company
operations in each segment. Corporate assets are principally cash, intangible
assets, deferred charges and assets held for resale. Included within Corporate
Items are the company's real estate operation, Branigar, and in 1996 the
company's paper distribution business, Alling & Cory. Since the date of
acquisition, August 2, 1996, Alling & Cory had sales to customers of $279
million. Its impact on operating profit for 1996 was insignificant. Capital
expenditures are reported exclusive of acquisitions.
Total revenue and operating profit from the company's foreign subsidiaries
were $538 million and $48 million in 1996, $504 million and $61 million in 1995,
and $417 million and $44 million in 1994. No geographic area outside the United
States was material relative to consolidated revenues, operating profits or
identifiable assets. Export sales from the United States were $359 million in
1996, $418 million in 1995 and $247 million in 1994.
Paper and Packaging Wood Corporate
Paperboard Products Products Chemical Items Consolidated
- --------------------------------------------------------------------------------------------------------------------------------
1996
Sales to Customers $1,313,226 $1,402,602 $281,467 $700,662 $ 315,240 $4,013,197
Intersegment Sales 659,096 9,930 72 -- (669,098)* --
- --------------------------------------------------------------------------------------------------------------------------------
Total Revenue 1,972,322 1,412,532 281,539 700,662 (353,858) 4,013,197
Operating Profit 162,820 46,411 43,360 66,656 (78,741)** 240,506
Identifiable Assets 3,318,008 702,698 139,040 579,380 357,181 5,096,307
Depreciation, Amortization & Cost
of Company Timber Harvested 225,262 38,056 7,209 22,065 5,865 298,457
Capital Expenditures 235,303 60,393 27,110 54,925 8,712 386,443
- --------------------------------------------------------------------------------------------------------------------------------
1995
Sales to Customers $1,714,009 $1,515,694 $283,594 $666,794 $ 31,618 $4,211,709
Intersegment Sales 852,589 11,317 71 150 (864,127)* --
- --------------------------------------------------------------------------------------------------------------------------------
Total Revenue 2,566,598 1,527,011 283,665 666,944 (832,509) 4,211,709
Operating Profit 736,509 52,416*** 32,697 75,850 (67,370)** 830,102
Identifiable Assets 3,338,311 719,124 118,118 494,865 167,925 4,838,343
Depreciation, Amortization & Cost
of Company Timber Harvested 215,247 35,503 12,012 20,497 4,479 287,738
Capital Expenditures 141,598 55,861 27,775 37,261 4,304 266,799
- --------------------------------------------------------------------------------------------------------------------------------
1994
Sales to Customers $1,123,530 $1,372,084 $292,254 $575,770 $ 32,187 $3,395,825
Intersegment Sales 697,959 7,367 135 153 (705,614)* --
- --------------------------------------------------------------------------------------------------------------------------------
Total Revenue 1,821,489 1,379,451 292,389 575,923 (673,427) 3,395,825
Operating Profit 182,234 9,335*** 78,520 67,182 (62,771)** 274,500
Identifiable Assets 3,385,220 669,039 105,743 437,740 178,836 4,776,578
Depreciation, Amortization & Cost
of Company Timber Harvested 198,074 38,015 10,997 18,464 5,300 270,850
Capital Expenditures 247,781 29,545 14,627 27,013 5,973 324,939
- --------------------------------------------------------------------------------------------------------------------------------
*Elimination of Intersegment Sales.
**Includes intersegment eliminations and unallocated corporate, technology and
engineering expenses of $64,801 in 1996, $61,491 in 1995, and $50,725 in
1994. 1996 also includes a $46.9 million special charge relating to
restructuring costs and asset write downs. If this amount had been allocated
to segment operating profits in 1996, Paper and Paperboard operating profits
would have been $139.7 million, Packaging operating profits would have been
$38.2 million, Wood Products operating profits would have been $43.4 million,
Chemical operating profits would have been $64.9 million, and Corporate Items
operating loss would have been $45.6 million.
***The year 1995 included a gain of $6,423 relating to the sale of the assets of
a flexible packaging operation. Results for 1994 included a charge of $13,958
relating to the write down of the carrying value of these assets.
44 Union Camp Corporation
Historical Data (1996-1986)
- ----------------------------------------------------------------------------------------------------------------------
1996 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------
OPERATING RESULTS
Net Sales $ 4,013,197 $ 4,211,709 $ 3,395,825 $ 3,120,421
Costs and Other Charges 3,772,691* 3,381,607 3,121,325 2,908,797
- ----------------------------------------------------------------------------------------------------------------------
Income From Operations 240,506 830,102 274,500 211,624
- ----------------------------------------------------------------------------------------------------------------------
Interest Expense, net of capitalized interest 112,286 113,705 109,172 124,911
Other (Income)-Net (22,825) (14,460) (29,836)** (13,425)
- ----------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes, Minority
Interest, Extraordinary Item, and
Accounting Changes 151,045 730,857 195,164 100,138
Income Taxes 55,250 268,895 71,420 50,095
Minority Interest, net of tax (10,487) (10,889) (6,518) --
Extraordinary Item, net of tax -- -- -- --
Effect of Accounting Changes, net of tax -- -- (3,716) --
- ----------------------------------------------------------------------------------------------------------------------
Net Income 85,308 451,073 113,510 50,043
- ----------------------------------------------------------------------------------------------------------------------
Per Common Share
Net Income 1.23 6.45 1.62 0.72
Dividends 1.80 1.66 1.56 1.56
Stockholders' Equity 30.25 30.71 26.23 26.00
- ----------------------------------------------------------------------------------------------------------------------
Financial Position
Current Assets 1,134,110 1,033,817 951,133 910,718
Current Liabilities 779,869 620,113 883,924 909,372
- ----------------------------------------------------------------------------------------------------------------------
Working Capital 354,241 413,704 67,209 1,346
Total Assets 5,096,307 4,838,343 4,776,578 4,685,033
- ----------------------------------------------------------------------------------------------------------------------
Long-Term Debt 1,252,475 1,151,536 1,252,249 1,244,907
Deferred Income Taxes 723,431 709,850 605,643 583,155
Stockholders' Equity 2,093,594 2,121,692 1,836,321 1,815,848
- ----------------------------------------------------------------------------------------------------------------------
Percent of Long-Term Debt to Total Capital 30.8% 28.9% 33.9% 34.2%
- ----------------------------------------------------------------------------------------------------------------------
Additional Data
Cash Provided by Operations 495,147 750,222 368,502 418,420
Capital Expenditures (excluding acquisitions) 386,443 266,799 324,939 310,113
Depreciation & Cost of
Company Timber Harvested 280,267 271,696 253,436 242,883
Tons Sold-Paper & Paperboard Products 3,473,415 3,485,221 3,452,604 3,291,255
Average Shares of Common
Stock Outstanding 69,220,157 69,940,397 69,954,082 69,740,458
- ----------------------------------------------------------------------------------------------------------------------
*1996 includes a $46.9 million special charge relating to restructuring costs
and asset write downs.
**Includes $34.7 million pre-tax gain on sale of minority interest in Bush Boake
Allen.
Union Camp Corporation 45
(in thousands)
- ------------------------------------------------------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987 1986
- ------------------------------------------------------------------------------------------------------------------------
$ 3,064,358 $ 2,967,138 $ 2,839,704 $ 2,761,337 $ 2,660,918 $ 2,361,684 $ 2,092,247
2,883,782 2,692,148 2,469,017 2,266,561 2,167,264 1,979,788 1,844,957
- ------------------------------------------------------------------------------------------------------------------------
180,576 274,990 370,687 494,776 493,654 381,896 247,290
- ------------------------------------------------------------------------------------------------------------------------
136,240 81,750 31,228 47,800 50,527 61,294 59,702
(21,074) (11,748) (26,559) (22,302) (24,882) (22,272) (18,756)
- ------------------------------------------------------------------------------------------------------------------------
65,410 204,988 366,018 469,278 468,009 342,874 206,344
22,755 76,978 136,427 169,878 172,863 135,391 76,410
-- -- -- -- -- -- --
(7,228) (3,220) -- -- -- -- --
40,806 -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------------
76,233 124,790 229,591 299,400 295,146 207,483 129,934
- ------------------------------------------------------------------------------------------------------------------------
1.10 1.80 3.35 4.35 4.25 2.83 1.77
1.56 1.56 1.54 1.42 1.22 1.14 1.09
27.01 27.88 27.60 25.47 22.66 20.24 18.62
- ------------------------------------------------------------------------------------------------------------------------
1,016,117 909,990 859,532 721,195 769,323 753,683 626,481
892,115 764,916 642,776 366,962 326,079 295,618 275,665
- ------------------------------------------------------------------------------------------------------------------------
124,002 145,074 216,756 354,233 443,244 458,065 350,816
4,745,197 4,697,714 4,403,354 3,413,862 3,094,414 2,919,115 2,776,602
- ------------------------------------------------------------------------------------------------------------------------
1,289,706 1,348,157 1,221,597 690,149 627,928 632,706 651,539
553,871 627,120 589,477 581,835 581,080 538,774 478,829
1,881,878 1,936,256 1,910,643 1,754,524 1,559,327 1,452,017 1,370,569
- ------------------------------------------------------------------------------------------------------------------------
34.6% 34.5% 32.8% 22.8% 22.7% 24.1% 26.1%
- ------------------------------------------------------------------------------------------------------------------------
268,865 375,041 386,036 526,685 518,978 447,261 336,661
219,654 482,638 934,452 556,268 358,671 188,587 212,789
237,531 209,120 217,416 204,572 190,611 180,015 168,457
3,242,511 3,004,980 2,835,549 2,726,105 2,733,205 2,675,541 2,656,920
69,604,174 69,270,992 68,550,315 68,836,229 69,433,734 73,391,106 73,533,126
- ------------------------------------------------------------------------------------------------------------------------