SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
COMMISSION FILE NUMBER 1-4001
UNION CAMP CORPORATION
VIRGINIA 13-5652423
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(State of Incorporation) (I.R.S. Employer Identification No.)
1600 VALLEY ROAD WAYNE, NEW JERSEY 07470
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(Address of Principal Executive Offices) (Zip Code)
TELEPHONE: (201) 628-2000
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. YES [X] NO [ ]
69,260,365 shares of Registrant's Common Stock, par value $1 Per Share,
were outstanding as of the close of business on April 30, 1997.
UNION CAMP CORPORATION
INDEX
Page
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Part I. FINANCIAL INFORMATION*
Item 1. Financial Statements. 2
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations. 6
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security-Holders. 8
Item 6. Exhibits and Reports on Form 8-K. 9
* A summary of the Registrant's significant accounting policies is contained
in the Registrant's Form 10-K for the year ended December 31, 1996 which
has previously been filed with the Commission.
PART I. FINANCIAL INFORMATION
Item I. Financial Statements.
UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
($ in thousands, except per share)
THREE MONTHS ENDED
MARCH 31,
------------------------------------
1997 1996
---- ----
Net Sales $ 1,057,125 $ 978,255
Costs and other charges:
Cost of products sold 812,133 674,685
Selling and administrative expenses 122,527 103,034
Depreciation, amortization, and cost of timber harvested 77,638 72,875
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Income from operations 44,827 127,661
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Gross interest expense 31,062 28,232
Less capitalized interest (2,153) (860)
Other (income) expense -net (2,935) 3,540
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Income before income taxes and minority interest 18,853 96,749
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Income taxes:
Current 2,706 22,449
Deferred 4,006 13,349
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Total income taxes 6,712 35,798
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Minority interest (net of tax) (2,523) (2,448)
Net Income $ 9,618 $ 58,503
=========== ===========
Earnings per share: $ 0.14 $ 0.85
Dividends per share $ 0.45 $ 0.45
Earnings per share are computed on the basis of the average number of common
shares outstanding:
1997: 69,240,938 1996: 69,108,949
See also the accompanying notes to consolidated financial statements.
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UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in thousands)
MARCH 31, DECEMBER 31,
1997 1996
------------ -------------
ASSETS
Cash and cash equivalents $ 57,666 $ 44,917
Receivables-net 560,066 544,320
Inventories at lower of cost or market:
Finished goods 287,056 270,123
Raw materials 104,725 110,569
Supplies 114,830 115,741
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Total inventories 506,611 496,433
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Assets held for resale 1,803 6,650
Other 39,368 41,790
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Total current assets 1,165,514 1,134,110
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Plant and equipment, at cost 6,614,055 6,562,465
Less: accumulated depreciation 3,222,810 3,161,450
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3,391,245 3,401,015
Timberlands, less cost of timber harvested 352,544 351,334
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Total property 3,743,789 3,752,349
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Other assets 222,455 209,848
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Total Assets $ 5,131,758 $ 5,096,307
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 846,166 $ 779,869
Long-term debt 1,250,052 1,252,475
Deferred income taxes 726,856 723,431
Other liabilities and minority interest 243,787 246,938
Stockholders' equity (Shares outstanding
(1997: 69,254,153; 1996: 69,217,119) 2,064,897 2,093,594
----------- -----------
Total Liabilities and Stockholders' Equity $ 5,131,758 $ 5,096,307
=========== ===========
See also the accompanying notes to consolidated financial statements.
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UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
($ IN THOUSANDS)
THREE MONTHS ENDED
MARCH 31,
--------------------------------
1997 1996
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Cash Provided By (Used For) Operations:
Net income $ 9,618 $ 58,503
Adjustments to reconcile net income
to cash provided by operations:
Depreciation, amortization, and cost of company
timber harvested 77,638 72,875
Deferred income taxes 4,006 13,349
Other 5,393 7,887
Changes in operational assets and liabilities:
Receivables (21,336) (6,769)
Inventories (14,007) 8,146
Other assets 2,535 4,389
Accounts payable, taxes and other liabilities (29,812) (17,766)
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Cash Provided By Operations 34,035 140,614
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Cash (Used For) Provided By Investment Activities:
Capital expenditures:
Plant and equipment (67,720) (53,155)
Timberlands (5,141) (74,043)
Payments for acquired businesses (6,750) (31,850)
Other (5,338) (13,410)
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(84,949) (172,458)
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Cash (Used For) Provided By Financing Activities:
Change in short-term notes payable 98,071 82,230
Repayments of long-term debt (2,989) (20,845)
Dividends paid (31,160) (31,103)
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63,922 30,282
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Effect of exchange rate changes on cash (259) 74
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Increase (decrease) in cash and cash equivalents 12,749 (1,488)
Balance at beginning of year 44,917 30,332
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Balance at end of period $ 57,666 $ 28,844
========= =========
Supplemental cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 34,685 $ 33,847
Income taxes $ 4,145 $ 7,147
See also the accompanying notes to consolidated financial statements.
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UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The information furnished in this report is unaudited but includes
all adjustments which, in the opinion of management, are necessary
for a fair presentation of results for the interim periods
reported. The adjustments made were of a normal recurring nature.
Note 2. Results for the first quarter of 1997 include sales of $158
million related to Alling & Cory, a paper distribution business
acquired by the company in August 1996.
Note 3. Included in "Other Income/Expense" for the first quarter of 1997
is a $1.9 million pre-tax gain from the sale of company property
previously recorded in "Assets held for resale".
Note 4. Included in "Current Liabilities" are $198 million and $114
million of commercial paper borrowings at March 31, 1997 and
year-end 1996, respectively.
Note 5. Included in "Other Liabilities and Minority Interest" at March 31,
1997 and year-end 1996 are $81.6 million and $79.3 million,
respectively, representing the minority interest in Union Camp's
68% owned subsidiary, Bush Boake Allen.
Note 6. Certain immaterial amounts in the Consolidated Statement of Income
have been reclassified for 1996 to conform with the 1997
presentation.
5
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net income for the first quarter of 1997 was $9.6 million or $.14 per share,
compared to $58.5 million or $.85 per share for the first quarter of last year.
The significant earnings decrease reflects the continued unfavorable pricing
climate in the company's principal paper product markets. Operating income for
the quarter was $44.8 million, a 65% decrease from the $127.7 million reported
for last year's first quarter.
Net sales for the first quarter were $1,057 million, 8% above the previous
year's comparable quarter. Included in the first quarter sales is $158 million
from The Alling & Cory Company, a paper distribution business acquired in August
1996. The impact of that business on first quarter operating results was not
material. Despite weak market conditions, total paper product shipments
(excluding Alling & Cory) for the quarter were approximately 879,000 tons, a 3%
increase from last year's first quarter shipments of approximately 854,000 tons.
Operating income for the paper and paperboard segment was $20.4 million, an 81%
decrease from the $105.4 million reported for the first quarter of last year.
The decline in earnings was primarily attributable to lower average selling
prices for both domestic and export linerboard and uncoated business papers.
These prices weakened in the fourth quarter of 1996, and continued to move
downward as the year 1997 began. However, some upward movement in pricing, as
well as improved order backlog, were noted in certain uncoated business grades
at the beginning of the second quarter of 1997. For the first quarter, average
prices for the company's domestic linerboard and uncoated business papers were
down 33% and 18%, respectively, compared to last year's first quarter. As a
result of the softness in the market, the company took approximately 30,000 tons
of linerboard downtime during the first quarter. However, during the quarter,
results for the company's primary mills reflected favorable operating costs.
Packaging segment operating income was $10.3 million for the first quarter of
1997, compared to $12.4 million for last year's comparable quarter, although
demand remains healthy. The domestic corrugated container operations were
primarily responsible for the lower level of earnings for the segment. Average
selling prices for these operations decreased by 21% and volume decreased
slightly. First quarter earnings from the company's overseas container
operations increased substantially over last year's comparable quarter due to a
modest increase in volume and improved margins. Earnings for the flexible
packaging operations were down modestly compared to the first quarter of last
year, due to increased manufacturing costs and decreased volume. During the
first quarter of 1997, the company closed its Denton, Texas flexible packaging
plant and consolidated its operations into other plants. Additionally during the
quarter, the company acquired a majority interest in Puntapel S.A., a multiwall
packaging plant in Argentina.
The company's non-paper businesses reported a combined increase in operating
income, compared to last year's first quarter. Operating income for the wood
products segment increased by 139% to $12.9 million for the quarter, compared to
$5.4 million for last year's comparable quarter. The increase is primarily
attributable to a 28% increase in lumber prices combined with a 3% increase in
volume. Operating income for the chemical segment was $15.9 million for the
6
quarter, compared to $17.2 million for last year's first quarter. Unfavorable
foreign exchange rates were a major factor in this difference.
Depreciation expense increased 5% in the first quarter of 1997 from last year's
comparable period. The increase is due to a higher level of capital investment
and depreciation expense for Alling & Cory.
Cash flow from operations for the first quarter of 1997 was $34.0 million,
compared to $140.6 million for last year's comparable period. The decrease was
primarily due to lower earnings for the first quarter of this year, and
increased investment in working capital. Capital expenditures for the first
quarter totaled $72.9 million, compared to $127.2 million in the same quarter of
last year, which included a large timberland acquisition. Total debt increased
$95.1 million during the first quarter of 1997. The ratio of total debt to total
capital was 36.8% at March 31, 1997, compared to 35.3% at year-end 1996.
Net working capital was $319.3 million at March 31, 1997, compared to $354.2
million at year-end 1996. The decrease in working capital was primarily
attributable to an increase in short-term debt at the end of the first quarter.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings per Share".
The company plans to adopt this statement for interim and annual periods ending
after December 15, 1997, which is the statement's effective date. The statement
is not expected to have a material impact on the company.
Statements in this report that are not historical are forward-looking statements
that are subject to risks and uncertainties that could cause actual results to
differ materially. Such risks and uncertainties with respect to the company
include the effect of general economic conditions, fluctuations in supply and
demand for the company's products including exports and potential imports, paper
industry production capacity, operating rates and competitive pricing pressures.
7
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security-Holders.
The Company's annual meeting of its stockholders was held on
April 29, 1997.
At the annual meeting the Company's stockholders voted on six
proposals: (1) the election of four nominees to serve as
directors for three year terms and one nominee to serve as a
director for a one year term; (2) the ratification of the
appointment of Price Waterhouse as independent accountants for
the year 1997; (3) the approval of the Restricted Stock
Performance Plan; (4) the approval of an amendment to the 1989
Stock Option and Stock Award Plan; (5) a stockholder proposal to
establish a timetable to eliminate organochlorines; and (6) a
stockholder proposal to endorse the CERES Principles. The voting
of the Company's stockholders as to these matters was as follows:
1. Election of Directors.
Votes
Nominees Votes For Withheld
-------- --------- --------
Sir Colin Corness 59,747,740 2,072,949
Robert D. Kennedy 59,786,546 2,034,143
W. Craig McClelland 59,724,609 2,096,080
James M. Reed 59,789,668 2,031,021
Jeremiah J. Sheehan 59,753,916 2,066,773
2. Ratification of Appointment of Accountants.
Votes
Votes For Against Abstentions
--------- ------- -----------
61,675,688 58,056 86,945
3. Approval of the Restricted Stock Performance Plan.
Votes
Votes For Against Abstentions
--------- ------- -----------
55,354,813 6,139,657 326,219
4. Amendment to the Stock Option and Stock Award Plan.
Votes
Votes For Against Abstentions
--------- ------- ------------
51,441,454 10,005,105 374,130
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5. Stockholder Proposal to Establish a Timetable to Eliminate
Organochlorines.
Votes Broker
Votes For Against Abstentions Non-Votes
--------- ------- ----------- ---------
2,241,432 50,677,548 4,224,478 4,677,231
6. Stockholder Proposal to Endorse the CERES Principles.
Votes Broker
Votes For Against Abstentions Non-Votes
--------- ------- ----------- ---------
4,166,368 47,990,672 4,986,418 4,677,231
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
No. Description
-- -----------
10.1 Restricted Stock Performance Plan.
11 Statement re computation of per share earnings.
27 Financial data schedule.
b) Reports on Form 8-K.
No Current Report on Form 8-K was filed by the Registrant
during the first quarter of 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNION CAMP CORPORATION
-----------------------------------
(Registrant)
Date: May 13, 1997 /S/ Dirk R. Soutendijk
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DIRK R. SOUTENDIJK
VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
Date: May 13, 1997 /S/ James M. Reed
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VICE CHAIRMAN OF THE BOARD AND
CHIEF FINANCIAL OFFICER
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EXHIBIT INDEX
SEQUENTIALLY
NUMBERED
NO. DESCRIPTION PAGE
10.1 Restricted Stock Performance Plan 13
11 Statement re computation of per 31
share earnings
27 Financial data schedule 32