<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
(x) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1993
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from to
Commission File Number 1-4001
UNION CAMP CORPORATION
(Exact name of registrant as specified in its charter)
Virginia 13-5652423
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1600 Valley Road, Wayne, New Jersey 07470
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code 201-628-2000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange on
Title of Each Class Which Registered
Common Stock, $1 par value New York Stock Exchange
Pacific Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Pacific Stock Exchange
8 5/8% Sinking Fund New York Stock Exchange
Debentures Due April 15, 2016
Securities registered pursuant to Section 12(g) of the Act:
None
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 (or for such shorter period that the
Registrant was required to file such reports) and (2) has been subject to
such filing requirements for the past 90 days. Yes (x) No ( )
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be con-
tained, to the best of Registrant's knowledge, in definitive proxy or in-
formation statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. ( )
On March 4, 1994, 69,916,299 shares of Registrant's Common Stock, $1 par
value, were outstanding. On March 4, 1994, the closing price per share for
the Common Stock as reported on the Composite Tape for issues listed on the
New York Stock Exchange was $48-3/4 and the aggregate market value of the
Common Stock held by non-affiliates of the Registrant was $3,408,419,576.
Documents Incorporated by Reference
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Portions of Registrant's Annual Report to Stockholders for the fiscal
year ended December 31, 1993 (the "Union Camp 1993 Annual Report") are in-
corporated by reference in Parts I, II and IV of this Form 10-K.
Portions of Registrant's Proxy Statement, dated March 18, 1994 (the
"Union Camp 1994 Proxy Statement"), are incorporated by reference in Part III
of this Form 10-K.
PART I
ITEM 1. BUSINESS
GENERAL
Union Camp Corporation is a Virginia corporation resulting from a merger
in 1956 of Union Bag and Paper Corporation and Camp Manufacturing Company,
Incorporated. Predecessor businesses were started in 1861 and 1887,
respectively. As used in this Report, the terms "Union Camp" and the
"Company" mean Union Camp Corporation and its subsidiaries unless the context
otherwise requires.
Union Camp's principal business segments are the manufacture and sale of
paper and paperboard, packaging products and wood products and the production
and sale of chemicals, including flavors and fragrances. Information about
developments during 1993 relating to Union Camp's business appears in the
following portions of the Union Camp 1993 Annual Report and is incorporated
by reference in this Item 1: the text under the caption "Packaging Group" on
pages 4 and 5, page 6 other than the text after the first sentence of the
carryover paragraph, page 8 other than the second paragraph, and page 9; the
text under the caption "Fine Paper" on page 10, page 11 other than the
carryover paragraph, and the second paragraph on page 13; the text under the
caption "Chemical Group" on pages 14, 15 and 16; the text under the caption
"Overseas" on page 18 other than the last sentence in the third paragraph and
the carryover paragraph and the text on page 19 other than the carryover
sentence from page 18; the text under the caption "Wood Products" on page 20;
and the text under the caption "Wood and Land Resources" in the first two
paragraphs on page 22 and the last paragraph on page 23. Information about
the Company's research and development activities appears under the caption
"Research and Development Costs" in Note 1 of Notes to Consolidated Financial
Statements on page 35 of the Union Camp 1993 Annual Report and is
incorporated by reference in this Item 1.
Revenue, operating profits and other financial data for the principal
business segments and for the foreign and domestic operations and the dollar
amounts of export sales of Union Camp for the years ended December 31, 1993,
1992 and 1991 appear in Note 14 of Notes to Consolidated Financial Statements
on page 40 of the Union Camp 1993 Annual Report and are incorporated by
reference in this Item 1. The international operations of Union Camp and its
subsidiaries are subject to the risks of doing business abroad, including
currency fluctuations, foreign government regulation and changes in political
environments.
During 1993, Union Camp's consolidated sales and operating profit were
generated primarily by domestic operations.
PAPER AND PAPERBOARD
Union Camp's Fine Paper Division produces bleached paper and paperboard
and its Kraft Paper and Board Division produces unbleached paper and
paperboard. Those products are its largest contributors to profits. Union
Camp's total production of bleached and unbleached paper and paperboard in
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1993 was approximately 3,327,000 tons, of which about 59% was unbleached and
41% was bleached.
The Company operates four large paper mills at Savannah, Georgia,
Prattville, Alabama, Franklin, Virginia and Eastover, South Carolina. They
are fully integrated in that all pulp required to support paper manufacturing
is produced at the mill sites. Combined operating capacity is estimated to
be approximately 3.5 million tons in 1994.
The Savannah, Georgia mill produces unbleached kraft linerboard and
paper, including saturating kraft, a specialized paper which is used by
others as a backing material for decorative and industrial laminates.
Unbleached kraft paper is used primarily in the manufacture of retail bags
and sacks and multiwall bags and unbleached kraft linerboard is used
primarily in the manufacture of corrugated shipping containers (see the next
section entitled "Packaging Products"). There are six operational machines
at the Savannah mill. The two paper machines at the Prattville, Alabama
unbleached kraft mill produce kraft linerboard. In 1993, the Company
converted about 66% of its unbleached kraft linerboard and paper production
into packaging products and sold essentially all of the rest to others for
conversion into similar products.
The Franklin, Virginia mill produces bleached uncoated free sheet which
is sold to others in roll and sheet form for conversion into envelopes, forms
and tablets. Bleached uncoated free sheet offset and business papers, also
produced in roll and sheet form, are sold through wholesale distributors to
commercial printers and office end users. The Franklin mill also produces
coated and uncoated bleached bristol grades which are sold to others for a
variety of end uses, such as greeting cards, book covers and file folders.
There are four paper machines and two board machines at this mill. During
1993, and as part of a $165 million modernization program, Union Camp began
construction of an approximately $100 million office paper recycling (deink)
facility at the Franklin, Virginia mill. The recycling facility is described
on page 29 of the Union Camp 1993 Annual Report in the fourth and sixth
sentences of the second paragraph under the caption "Capital Expenditures"
and that text is incorporated by reference in this Item 1.
The Eastover, South Carolina mill produces bleached uncoated free sheet
which, like the Franklin product, is sold to others in roll and sheet form
for the same end uses. The two-machine Eastover mill has an excess of pulp
capacity which is used together with an on-site pulp dryer to produce
bleached pulp for sale to others in domestic and international markets.
In 1993, Union Camp sold about 26% of its bleached paper and paperboard
production in converted or sheet form. This includes approximately 2%
converted by its own plants into folding cartons, bags, and stationery.
The four integrated mills use sulfate pulping chemistry, also referred
to as the kraft process. Both hardwood and pine timber are used at all four
mills. Approximately 22% of the Company's wood pulp production utilizes
timber harvested from lands owned or controlled by the Company. Timber use
at the Prattville and Savannah mills is supplemented with recycled waste
paper acquired from others and the Company's converting plants (see the next
section entitled "Packaging Products").
PACKAGING PRODUCTS
From its mill production of paper and paperboard, Union Camp makes bags
and sacks and corrugated and solid fibre containers.
Union Camp produces paper bags such as grocery bags and grocer sacks
used to package food, merchandise bags for dry goods items, multiwall bags
used to package cement, insulation, feed, fertilizer, clay, pet food,
<PAGE>
chemical and mineral products and specialty bags used in packaging charcoal,
produce, sugar, flour, seed, coffee, microwaveable popcorn and other
miscellaneous items. Union Camp also produces high density plastic bags for
various retail packaging applications and low density plastic products for
industrial applications including stretch packaging and plastic shipping
sacks. In addition, the flexible packaging plant in Asheville, North
Carolina produces extrusion coated and laminated substrates as well as
printed labels for the composite can industry.
Union Camp produces corrugated and solid fibre containers used to ship
and store canned, bottled and packaged products for a wide variety of
customers, including food processors and textile, furniture, chemical and
automotive manufacturers.
Other packaging products include folding cartons, on which Union Camp
does high quality gravure and lithographic printing, which are used for shelf
packaging in retail stores.
In addition, corrugated containers are produced by wholly-owned,
consolidated subsidiaries in Spain, the Canary Islands, the Republic of
Ireland and Puerto Rico. A corrugated container manufacturing plant in
Chile, which is owned by a majority owned consolidated subsidiary of Union
Camp, serves that country's fresh fruit exporters and the country's expanding
industrial base.
WOOD PRODUCTS
Union Camp produces southern pine lumber, plywood and particleboard.
Its wood products mills have the capacity to produce 470,000,000 board feet
of lumber, 235,000,000 square feet (3/8" basis) of plywood and 96,000,000
square feet (3/4" basis) of particleboard annually. Union Camp's wood
products mills produced at 100% of capacity in 1993. Its wood products are
used in home construction and industrial markets such as furniture, cabinets
and fixtures. The wood products mills also produce significant quantities of
wood chips for use in Union Camp's papermaking operations.
CHEMICAL GROUP
The Chemical Group consists of two operating units: Chemical Products
Division and Bush Boake Allen.
The Chemical Products Division produces a variety of wood-based and non-
wood-based chemicals. Wood-based chemicals, which are by-products of pulp
mill operations, include tall oil and turpentine chemicals. Tall oil is a
mixture of rosin and fatty acids which are by-products of the pulping
process. Tall oil rosins are converted into rosin-based resins and fatty
acids are converted into dimer acids and polyamide resins. These products
are used in coatings, adhesives, printing inks, paper sizing and oil field
chemicals. Non-wood-based chemicals, which are complementary to Union Camp's
pulp-derived tall oil fatty acids, are produced by converting vegetable oils
into a variety of esters and other derivatives. These are sold primarily for
use in cosmetics, lubricants, plastics, surfactants and rubber. The Chemical
Products Division has five processing facilities, three of which are in the
United States and two of which are in England.
Bush Boake Allen is a producer of flavors (including essential oils,
seasonings and spice extracts) and fragrance and aroma chemicals. The flavor
products impart a desired taste and smell to a broad range of products,
including soft drinks, confections, dietary foods, snack foods, dairy
products, pharmaceuticals and alcoholic beverages. The fragrance products
are used in a wide variety of household items, including soaps, detergents,
air fresheners, toiletries and related products. The flavor and fragrance
compounds are sold primarily to major consumer product companies which use
<PAGE>
these products in conjunction with other natural and synthetic ingredients to
make their products more appealing to consumers. The aroma chemicals
produced by Bush Boake Allen are primarily used by major multinational
consumer product manufacturers as fragrance raw materials or are used by Bush
Boake Allen in its own fragrance compounds. Bush Boake Allen has developed a
broad-based global presence with operations in 35 countries in North and
South America, Europe, Asia, Australia, The Middle East and Africa.
CAPITAL EXPENDITURES
Information about Union Camp's 1993 and estimated 1994 capital
expenditures appears on page 29 of the Union Camp 1993 Annual Report in the
text under the caption "Capital Expenditures" and is incorporated by
reference in this Item 1.
MARKETING
Most of Union Camp's sales, other than its chemical sales, are made in
the United States east of the Rocky Mountains, through a variety of
distribution methods. Paper and paperboard are sold both directly to
converters and through merchants. Packaging materials are sold directly to
the industrial and agricultural trades, primarily by Union Camp sales
representatives and to a lesser extent through distributors. In addition,
retail bags and wrappings are sold both directly to national chain stores and
through paper merchants and wholesale grocers to independent retail outlets.
Wood products are sold through building supply dealers and directly to
industrial users.
Union Camp chemicals are sold worldwide with most sales being made to
customers in the United States and European Economic Community countries.
Through various English and other overseas subsidiaries and related companies
of Bush Boake Allen, Union Camp sells in the worldwide markets for flavors
and fragrances and related products. Chemical products generally are sold
directly to industrial users and to a lesser extent through agents and
distributors. During 1993, Union Camp's chemical exports from the United
States were about 6% of the total chemical sales of Union Camp and its
subsidiaries. In addition, approximately 51% of such total chemical sales
originated from the production facilities of subsidiaries located outside the
United States.
In 1993, Union Camp sold in the export market approximately 14% of its
production of paper and paperboard.
LAND DEVELOPMENT AND HOUSING
Union Camp's real estate subsidiary, The Branigar Organization, Inc., is
engaged in the development and sale of land for recreational and residential
uses in Georgia and North Carolina. Another subsidiary, Transtates
Properties Incorporated, is developing sites for commercial properties at
highway interchanges in Georgia and South Carolina.
COMPETITION
All of Union Camp's products are sold in highly competitive markets in
which there are many large and well-established companies, of which Union
Camp is one. Competition in each of Union Camp's markets is based on price,
quality of product, service and production innovation.
TIMBER RESOURCES
The basic raw material for Union Camp's business is timber, a renewable
resource. Union Camp controls approximately 1,575,000 acres of timberlands
in Georgia, Alabama, Virginia, Florida, North Carolina and South Carolina, of
<PAGE>
which approximately 1,544,000 acres are owned and the balance is held under
long-term leases. In 1993, Union Camp obtained approximately 28% of its
total timber requirements from its own timberlands and purchased the balance
from others.
Union Camp operates its timberlands on a sustained yield basis. As
Union Camp obtains timber from natural stands of its trees, Union Camp
replaces the harvested woodlands with a "plantation" reforestation program.
Union Camp began reforestation on its timberlands in the mid-1950's and now
has approximately 925,000 acres in plantation growth. It planted about
42,000 acres under the plantation program in 1993 and expects to plant
approximately 42,000 acres in 1994. These plantation programs result in
increased yield per acre. The current growing cycle for most of Union Camp's
plantations averages between 22 and 25 years. Union Camp anticipates that
for the foreseeable future there will be an adequate supply of timber for its
operations from its own lands and other sources.
ENVIRONMENTAL PROTECTION ACTIVITIES
Union Camp is committed to complying with applicable environmental
protection control laws and to assuring that its operations protect public
health and safety. Wastewater treatment facilities and/or atmospheric
emission control equipment at various Union Camp locations, which currently
comply with applicable restrictions, may have to be upgraded to comply with
new limitations that may be imposed when federal and state permits are
renewed and as regulations are promulgated implementing revisions to federal
and state air and water pollution control laws.
The development of new analytical capability, over a thousand times more
sensitive than previously available, revealed minute, trace amounts of dioxin
in the pulp, sludge and wastewater of bleached kraft pulp mills in 1985.
This discovery led to intensive studies of the health effects of exposure to
these trace amounts and, simultaneously, efforts to reduce the minute
quantity of this unwanted by-product which is formed during the bleaching
process. The Company believes that human exposure to dioxin in the trace
concentrations found in the Company's treated wastewater does not cause any
health problem. The basis for the Company's statement that human health
problems are not caused by the trace quantities of dioxin discharged with its
treated wastewater is its internal technical evaluation of various studies
and reports concerning dioxin and the known effects from exposure.
Meanwhile, Union Camp's continuing research and development efforts in
water conservation methods led to the development of a new bleaching process
which has important environmental advantages and, as a collateral benefit,
virtually eliminates dioxin. In general terms, C-Free(TM) pulp is produced
in this new bleaching process developed by Union Camp, through use of ozone
as a primary bleaching agent instead of elemental chlorine, which is used in
most conventional operations. This development, including related bleaching
process improvements in the use of oxygen and in various extraction steps,
resulted in the issuance of twelve patents, with eighteen additional patents
currently pending.
The most significant environmental achievements of this process are
dramatic reductions in chlorinated organics, including dioxin and chloroform,
and the ability to recycle most of the bleach plant's wastewater, which is
not possible when using chlorine because of its corrosive nature. Following
is a list of pollutants and the amount each is reduced by the Company's new
bleaching process as compared to conventional bleaching processes.
<TABLE>
<CAPTION>
APPROXIMATE
<PAGE>
POLLUTANT PERCENT REDUCTION
<S> <C>
Chlorinated organics 95-98%
Chloroform 99%
Biological oxygen demand (BOD) 70-89%
Chemical oxygen demand (COD) 70-91%
Color 96-99%
Wastewater volume 45-86%
</TABLE>
These data are based on extensive laboratory and pilot plant testing and
measurements at the Company's Franklin mill where a commercial ozone
bleaching line has been installed. The Company has installed this new
process on one of the bleaching lines at its Franklin, Virginia mill and the
process is available for licensing by others in the industry.
Union Camp invested approximately $23 million in environmental control
facilities in 1993 and approximately $163 million over the past five years.
The five year figure includes environmental control elements of a large
modernization and expansion program completed in 1991. Over the next two
years, it is estimated that environmental control expenditures will average
approximately 9% of projected capital spending. Environmental control
expenditures divert capital and may increase operating and financing costs.
To that extent, they have an adverse impact on earnings.
During the next several years, the cost of compliance with environmental
control laws will depend upon the application of existing and new regulations
and on revisions to existing statutes. Union Camp believes such costs will
not adversely affect its competitive position within the paper and chemical
industries since most paper and chemical companies have similar air, water
and solid waste disposal concerns. To the extent the current dioxin
controversy has an adverse effect on the U.S. bleached kraft pulp industries,
Union Camp believes it will not be competitively disadvantaged because it
believes it has lower than average dioxin production due to the extensive use
of oxygen instead of chlorine bleaching at both its bleached kraft mills, and
because of its discovery, introduction and commercialization of the
proprietary process for producing C-Free(TM) pulp.
EMPLOYEES
Union Camp and its subsidiaries employ approximately 19,000 people,
approximately 42% of whom are represented by 69 unions under collective
bargaining agreements. Contracts involving approximately 2,608 hourly
employees were negotiated during 1993 and contracts involving approximately
3,301 hourly employees are subject to renegotiation and renewal in 1994.
Union Camp believes that its relationship with its employees is favorable and
it has not experienced a strike at any major facility since mid-1974.
ITEM 2. PROPERTIES
Union Camp's mills and plants, domestic and foreign, are at the
locations listed below and primarily produce the items described in the
heading for each group. Union Camp's corporate headquarters is in Wayne, New
Jersey and its principal research facilities are located in its corporate
technology center in Princeton, New Jersey. Except for a few facilities
which in the aggregate are not material, Union Camp owns all of the following
mills and plants, in some cases subject to financing leases or similar
arrangements.
PAPER AND PAPERBOARD INDUSTRY SEGMENT
Paper and Paperboard
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The four paper mills located at the sites listed below are the Company's
principal facilities. Reference is made to Item 1 of this Report for
information regarding their general character, including the products they
produce, their productive capacity and the extent of utilization.
Eastover, South Carolina
Franklin, Virginia
Prattville, Alabama
Savannah, Georgia
Paper Finishing
The three converting plants listed below are part of the Company's Fine
Paper Division. They convert large rolls of paper produced by the division
into folio sheets for commercial printers and office size sheets for home and
business use.
Franklin, Virginia
Normal, Illinois
Sumter, South Carolina
PACKAGING PRODUCTS INDUSTRY SEGMENT
Paper Bags
The plants listed below produce paper grocery bags and sacks including
shopping bags which are sold principally to retailers, mass merchandisers,
department stores and fast food restaurants.
Richmond, Virginia
Savannah, Georgia
The plants listed below produce multiwall bags of various substrates for
products such as cement, seed, feed, pet food, sugar, cookies and popcorn.
Denton, Texas Seymour, Indiana
Hanford, California Sibley, Iowa
Hazleton, Pennsylvania Spartanburg, South Carolina
Monticello, Arkansas Tifton, Georgia
St. Louis, Missouri
Plastic Products
The plants listed below produce polyethylene packaging and roll stock
for packaging a variety of agricultural and industrial products and such
consumer items as ice, salt, tissues and disposable diapers.
Griffin, Georgia
Monticello, Arkansas
Tomah, Wisconsin
The plant listed below produces single ply plastic bags for sale to
retailers.
Shelbyville, Kentucky
Specialty Flexible Packaging
The plant listed below produces extrusion coated and laminated
substrates as well as printed labels for the composite can industry.
Asheville, North Carolina
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Corrugated Containers
The plants listed below use a corrugator to manufacture corrugated
sheets by gluing a fluted paperboard material called medium between two or
more flat facings of linerboard. These corrugated sheets are then sold or
made into boxes or corrugated containers in a separate operation at these
plants.
Ashbourne, Republic of Ireland Lafayette, Louisiana
Atlanta, Georgia Lakeland, Florida
Auburn, Maine La Laguna, Tenerife, Spain
Bayamon, Puerto Rico Las Palmas de Gran Canaria, Spain
Centerville, Ohio Morristown, Tennessee
Chicago, Illinois Newtown, Connecticut
Cleveland, Ohio Rancagua, Chile
Decatur, Alabama Richmond, Virginia
Denver, Colorado San Antonio, Texas
Gandia, Spain Savannah, Georgia
Houston, Mississippi Spartanburg, South Carolina
Kalamazoo, Michigan Trenton, New Jersey
Kansas City, Missouri Washington, Pennsylvania
Finishing
The plants listed below use equipment that converts corrugated sheets
into boxes or laminates a printed sheet of paper to one panel of a box or
applies a wax coating to a finished box.
Conway, Arkansas
Eaton Park, Florida
Edinburgh, Texas
Flint, Michigan
Kansas City, Missouri
Statesboro, Georgia
Graphics
The first two plants listed below use a process that adheres medium to a
single linerboard sheet to produce singleface and then glues a printed label
to the singleface. These sheets are then made into boxes at these plants.
The remaining facility produces printed rolls of linerboard prior to the
manufacture of corrugated sheets.
Conway, Arkansas
Stockton, California
Savannah, Georgia
Solid Fibre Products
The plant listed below manufactures solid fibre sheets by gluing two or
more flat linerboard sheets together. These solid fibre sheets are then made
into boxes or solid fibre containers in a separate operation.
Lancaster, Pennsylvania
Folding Cartons and Gravure Printing
The plants listed below produce folding cartons with high quality
gravure and lithographic printing which are used to package cosmetics,
toiletries, pharmaceutical and food products.
Clifton, New Jersey
Englewood, New Jersey
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Moonachie, New Jersey
WOOD PRODUCTS INDUSTRY SEGMENT
Lumber
The chip and/or saw mills listed below produce wood chips, small
timbers and/or dimension lumber.
Chapman, Alabama
Folkston, Georgia
Franklin, Virginia
Meldrim, Georgia
Opelika, Alabama
Seaboard, North Carolina
Plywood
The plants listed below produce veneer and/or plywood panels for
sale primarily for industrial applications including furniture, truck
trailers and sound equipment.
Chapman, Alabama
Thorsby, Alabama
Particleboard
The plant listed below uses wood shavings and other wood residues
to produce particleboard which is cut to size and sold primarily to the
furniture industry.
Franklin, Virginia
CHEMICAL INDUSTRY SEGMENT
The Chemical industry segment has two operating units, Bush Boake
Allen and the Chemical Products Division.
The facilities listed below are part of the Bush Boake Allen unit
which produces aroma chemicals, flavors, fragrances, essential oils, spices
and seasonings. The process used and products produced by each facility are
shown below.
<TABLE>
<CAPTION>
Location Products Process
<S> <C> <C>
Carrollton, Texas Seasonings Compounding, i.e., mixing
and blending
Chicago, Illinois Flavors, Vanilla Extraction and Compounding
Extract
Dandenong, Australia Flavors, fragrances Extraction and Compounding
and essential oils
Jacksonville, Florida Terpene derivatives Chemical Processing
and aroma chemicals
Johannesburg, South Flavors and Compounding
Africa Fragrances
<PAGE>
Jurong, Singapore Flavors and Compounding
Fragrances
Long Melford, England Spices and Essential Extraction and
Oils Compounding
Madras, India Flavors and Compounding
Fragrances
Norwood, New Jersey Fragrances Compounding
Sydney, Australia Flavors Compounding
Walthamstow, England Flavors and Compounding
Fragrances
Widnes, England Aroma chemicals Chemical Processing
Witham, England Flavors Compounding
</TABLE>
The chemical processing facilities listed below are part of the
Chemical Products Division which produces a variety of wood-based and non-
wood-based chemicals. Shown below are the principal products of each
facility.
<TABLE>
<CAPTION>
Location Products
<S> <C>
Bedlington, England Ink & Adhesive resins
Chester-le-Street, England Tall oil derivatives &
adhesive resins
Dover, Ohio Adhesive resins, plasticizers
and esters
Savannah, Georgia Tall oil derivatives, ink
and adhesive resins
Valdosta, Georgia Printing ink resins
</TABLE>
In addition, in the Chemical industry segment, Union Camp has small
consolidated subsidiary manufacturing (compounding and mixing) facilities at
the following locations: Kingston, Jamaica; Auckland, New Zealand; Istanbul,
Turkey; Knislinge, Sweden; Bangkok, Thailand; LaSalle, Canada and Bogor,
Indonesia. The aggregate 1993 revenue from these small facilities was
approximately $19.9 million.
Also see Item 1 for a discussion of Union Camp's timberland
holdings used in Union Camp's Paper and Paperboard and Wood Products industry
segments.
ITEM 3. LEGAL PROCEEDINGS
The Company believes there are no pending legal proceedings to
which Union Camp or any of its subsidiaries is a party which will have a
material adverse effect on the financial position or results of operations of
the Company and its subsidiaries taken as a whole.
<PAGE>
While Union Camp has been designated a potentially responsible
party at a number of hazardous waste sites pursuant to the Comprehensive
Environmental Response and Compensation Liability Act and similar state laws,
the Company believes that its designation and the pending legal proceedings
will not have a material adverse effect on the financial position or results
of operations of the Company and its subsidiaries taken as a whole. The
bases for the Company's opinion include: (i) the Company's experience
defending or settling similar matters, the opinions of counsel representing
the Company in such matters and an assessment, to the extent possible, of the
claims made against and the defenses available to the Company; and (ii) in
the case of environmental claims, an analysis of reasonable estimates, to the
extent possible, of the cost of site investigation studies and remedial
activities and the existence of other financially viable, potentially
responsible parties. No credit has been assumed for any potential insurance
reimbursement to the Company when the availability of the insurance coverage
is not established.
The Company is unable to estimate environmental costs/liabilities
for several reasons. In some cases, it has not been established that the
Company is a potentially responsible party. In other cases, it is uncertain
whether the Company will seek, be offered or accept a de minimis settlement
with payment of a premium over otherwise estimated liability in order to
secure full release. In many instances, the cost of remediation is
speculative because remedial investigations and feasibility studies have not
yet been contracted for, have not been completed or, alternatively, have been
completed but acceptable remediation has not been chosen. Some settled cases
also have "reopeners" for contamination discovered after full implementation
of the clean-up remedy. Finally, insurance reimbursement is usually
uncertain until matters are finally resolved.
In September, 1993, a Company facility in Jacksonville, Florida
received a Notice of Violation (the "NOV") from the United States
Environmental Protection Agency (the "EPA") alleging violation of the EPA's
rules governing the burning of a hazardous waste in boilers (the Boiler and
Industrial Furnace Rules or "BIF Rules") in connection with the burning by
this Jacksonville facility of various turpentine fractions as fuels. In
response to the NOV, the Company met with the EPA in November, 1993 to
support the facility's position that burning turpentine fractions is not
covered by the BIF Rules because the materials burned are not wastes, but
historically have been sold as products or burned as fuel when the product's
fuel value exceeded its market value. If it is required to comply with the
BIF Rules, the Company estimates that it would incur capital expenditures of
approximately $200,000. While the EPA has not instituted any enforcement
action and has not sought penalties in connection with the NOV issued to the
Company, there can be no assurances that it will not ultimately be determined
that the BIF Rules apply or that the EPA will not seek penalties for past
violations.
The Company remains a defendant in 89 suits filed in federal court
in Alabama between October 1990 and January 1992 in which construction
workers allege they were exposed to asbestos while performing work at various
plant sites throughout Alabama and elsewhere. The many defendants named in
each of these suits include owners of the premises where the work was being
done, asbestos manufacturers whose equipment was being installed,
distributors of asbestos containing products, insurance companies, and a
safety equipment manufacturer. Union Camp is included in the premises owner
category of defendants.
Union Camp was named as a defendant in two law suits brought in
Texas state court during the third quarter of 1992 and as a defendant in a
third lawsuit brought in Texas state court during the fourth quarter of 1993;
approximately 4,000 plaintiffs are currently parties to these law suits. The
plaintiffs are, for the most part, construction workers resident in Alabama
<PAGE>
who allege they were exposed to asbestos while performing work at various
plant sites in Alabama. These cases are similar to the 89 cases in the
paragraph immediately above. Approximately 50 defendants have been named in
the cases in Texas. They include asbestos manufacturers, distributors of
asbestos-containing products, insurance companies, a manufacturer of safety
equipment, parties who allegedly misrepresented the dangers of asbestos
exposure, and the owners of the premises where the plaintiffs allege they
were working when they were exposed to asbestos. Union Camp is included in
the premises owner category of defendants.
The Company does not believe that these pending legal proceedings
in Alabama and Texas are material. An estimate of potential liability cannot
be made at this time.
In its Quarterly Report on Form 10-Q for the quarter ended June 30,
1991, the Company previously reported that a subsidiary of the Company was
added as a defendant in approximately 7,000 asbestos-related cases which had
been pending in Mississippi state court for several years. During the third
quarter of 1991, this subsidiary was named as a defendant in additional
asbestos-related consolidated actions so that the total number of such cases
was over 7,000. During the second quarter of 1992, the subsidiary was named
in additional similar consolidated actions so that it is a defendant in
excess of 10,000 such cases. The subsidiary was named in these cases because
it allegedly was part of the chain of distribution of asbestos-containing
products to facilities where the plaintiffs worked. The period of alleged
exposure is 1930 through the present. The subsidiary did not manufacture
asbestos or asbestos-containing products. Approximately 80 defendants have
been named in each of these suits, including asbestos manufacturers,
distributors, an insurance company and a manufacturer of safety equipment.
In late March 1993, the Company's subsidiary reached agreement to
settle approximately 10,500 of these cases, with the settlement being funded
by the Company's insurance carrier. This subsidiary remains a defendant in
approximately 2,500 cases of which approximately 450 were filed in April
1993.
An estimate of potential liability cannot be made at this time.
However, the Company does not believe that these pending legal proceedings
are material to it.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Not applicable.
EXECUTIVE OFFICERS OF UNION CAMP
The executive officers of Union Camp as of March 1, 1994 were as
follows:
<TABLE>
<CAPTION>
Name Age Position & Offices With Union Camp
<S> <C> <C>
Raymond E. Cartledge.....64 Chairman of the Board and Chief
Executive Officer; Chairman of the
Executive Committee; Director
W. Craig McClelland......59 President and Chief Operating
Officer; Director
James M. Reed............61 Vice Chairman of the Board and
Chief Financial Officer; Director
<PAGE>
Jerry H. Ballengee.......56 Executive Vice President, Director
William H. Trice.........60 Executive Vice President
Russell W. Boekenheide...63 Senior Vice President
Robert E. Moore..........59 Vice President and Comptroller
Dirk R. Soutendijk.......55 Vice President, General Counsel
and Secretary
Donald W. Barney.........53 Vice President and Treasurer
</TABLE>
The Company's Articles of Incorporation provide that the Board of
Directors shall be divided into three classes, as nearly equal in size as
possible. Each year the directors of one class are elected to serve terms of
three years. Executive officers are elected for one year and until their
successors are elected. There are no family relationships among directors
and executive officers.
All of the executive officers listed above have held their present
positions or other executive offices with Union Camp for the past five years,
except as follows.
Mr. McClelland became President and Chief Operating Officer in
December 1989. He had been an Executive Vice President since November 1988.
Prior to that time, he had been a Director and Executive Vice President of
International Paper Company and President and Chief Executive Officer of
Hammermill Paper Company (a subsidiary of International Paper Company).
Mr. Reed was named Vice Chairman of the Board and Chief Financial
Officer in April 1993. Previously he had been an Executive Vice President
and Chief Financial Officer.
Mr. Barney became Vice President and Treasurer in December 1992.
Previously, he was the Treasurer since November 1988.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
Information in response to the disclosure requirements specified by
this Item 5 appears under the captions and on the pages of the Union Camp
1993 Annual Report indicated below and is incorporated by reference in this
Item 5.
<TABLE>
<CAPTION>
Required Information Annual Report Caption Annual Report Page
<S> <C> <C>
Principal markets for Common Financial Review- 30
Stock; high and low sales prices Quarterly Information
Dividends per share Financial Review- 30
declared Quarterly Information
Approximate number of Financial Review- 30
shareholders of record - Quarterly Information
<PAGE>
December 31, 1993
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
Information in response to the disclosure requirements specified by
this Item 6 appears on pages 42 and 43 of the Union Camp 1993 Annual Report
and is incorporated by reference in this Item 6.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Information in response to the disclosure requirements specified by
this Item 7 appears in the text under the caption "Financial Review" on pages
26 to 30 of the Union Camp 1993 Annual Report and is incorporated by
reference in this Item 7.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information in response to the disclosure requirements specified by
this Item 8 appears on pages 32 to 40 of the Union Camp 1993 Annual Report
and is incorporated by reference in this Item 8.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information in response to the disclosure requirements specified by
this Item 10, with respect to (i) the directors of Union Camp, appears under
the caption "Proposal 1 - Election of Directors" on pages 1 to 5 of the Union
Camp 1994 Proxy Statement, (ii) the executive officers of Union Camp, appears
under the caption "Executive Officers of Union Camp" in Part I of this Annual
Report on Form 10-K and (iii) Section 16(a) of the Securities Exchange Act of
1934, as amended, appears under the caption "Section 16(a) Reporting" on page
18 of the Union Camp 1994 Proxy Statement. Such information is incorporated
by reference in this Item 10.
ITEM 11. EXECUTIVE COMPENSATION
Information in response to the disclosure requirements specified by
this Item 11 appears under the captions "Board of Directors and Committees",
"Executive Compensation", "Retirement Plans" and "Severance Arrangements" on
pages 6 to 7, 9 to 12, 16 to 17 and 17 to 18, respectively, of the Union Camp
1994 Proxy Statement. Such information is incorporated by reference in this
Item 11.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information in response to the disclosure requirements specified by
this Item 12 appears under the captions "Security Ownership of Certain
Beneficial Owners" and "Security Ownership of Management as of December 31,
1993" on pages 8 and 9 of the Union Camp 1994 Proxy Statement and is
incorporated by reference in this Item 12.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
<PAGE>
Information in response to the disclosure requirements specified by
this Item 13 appears in the first footnote under the caption "Proposal 1 -
Election of Directors" on page 5 of the Union Camp 1994 Proxy Statement and
is incorporated by reference in this Item 13.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Index of financial statements
The following financial statements are included at the indicated
page in the Union Camp 1993 Annual Report and are incorporated by reference
in this Annual Report on Form 10-K:
<TABLE>
<CAPTION>
Page
<S> <C>
Consolidated Income for the years ended December 31, 1993, 1992 and 1991. . . . . . . . . . 32
Consolidated Balance Sheet - December 31, 1993 and 1992 . . . . . . . . . . . . . . . . . . 33
Consolidated Statement of Cash Flows for the years ended December 31, 1993,
1992 and 1991. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Notes to Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 35-40
Report of Independent Accountants. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
(2) The following schedules, for the three years ended December
31, 1993, to the Financial Statements are included beginning at the indicated
page in this Annual Report on Form 10-K:
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Accountants on
Financial Statement Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Schedule V -- Plant and Equipment and
Timberland. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28-29
Schedule VI--Accumulated Depreciation
and Amortization of Plant and Equipment;
and Cost of Company Timber Harvested. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Schedule VIII--Valuation and Qualifying Accounts. . . . . . . . . . . . . . . . . . . . . . 31
Schedule IX--Short-Term Borrowings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Schedule X--Supplementary Income Statement Information. . . . . . . . . . . . . . . . . . . 32
</TABLE>
All schedules other than those indicated above are omitted because
of the absence of the conditions under which they are required or because the
required information is set forth in the financial statements and their
notes.
<PAGE>
(3) All exhibits, including those incorporated by reference.
<TABLE>
<CAPTION>
NO. DESCRIPTION
<S> <C>
3.1 Copy of Articles of Incorporation of Union Camp, as amended May 4, 1990 (filed as Exhibit 3(b) to Union
Camp's Quarterly Report on Form 10-Q for the Quarter ended March 31, 1990 and incorporated herein by
reference).
3.2 Copy of By-Laws of Union Camp, as amended April 27, 1993 (filed as Exhibit 3(b) to Union Camp's Quarterly
Report on Form 10-Q for the Quarter ended March 31, 1993 and incorporated herein by reference).
4 Union Camp hereby agrees to furnish copies of instruments defining the rights of holders of long-term debt
of Union Camp and its consolidated subsidiaries to the Commission upon its request.
10.1 Copy of Union Camp's 1982 Stock Option Plan, as amended November 29, 1988 (filed as Exhibit 10(b) to Union
Camp's Annual Report on Form 10-K for the year ended December 31, 1988 and incorporated herein by
reference).
10.2 Copy of Union Camp's 1989 Stock Option and Stock Award Plan, as amended November 30, 1993.
10.3 Copy of Union Camp's Executive Annual Incentive Plan (filed as Exhibit 10(c) to Union Camp's Annual Report
on Form 10-K for the year ended December 31, 1988 and incorporated herein by reference).
10.4 Copy of Union Camp's Policy Group Long-Term Incentive Plan (filed as Exhibit 19(b) to Union Camp's Annual
Report on Form 10-Q for the quarter ended March 31, 1993 and incorporated herein by reference).
10.5 Copy of Union Camp's Directors' Fees Deferral Plan (filed as Exhibit 10(d) to Union Camp's Annual Report on
Form 10-K for the year ended December 31, 1982 and incorporated herein by reference).
10.6 Copy of Union Camp's Retirement Plan for Outside Directors as amended November 26, 1991 (filed as Exhibit
10(g) to Union Camp's Annual Report on Form 10-K for the year ended December 31, 1991 and incorporated
herein by reference).
10.7 Copy of form of Severance Agreement between Union Camp and certain executive officers of Union Camp (filed
as Exhibit 10(g) to Union Camp's Annual Report on Form 10-K for the year ended December 31, 1988 and
incorporated herein by reference), as amended by Amendment No. 1 to Severance Agreement (filed as Exhibit 19
to Union Camp's Quarterly Report on Form 10-Q for the Quarter ended September 30, 1990 and incorporated
herein by reference); as further amended by Amendment No. 2 to Severance Agreement (filed as Exhibit No.
19(a) to Union Camp's Quarterly Report on Form 10-Q for the Quarter ended September 30, 1991 and
incorporated herein by reference).
10.8 Copy of Union Camp's Stock Compensation Plan for Non-Employee Directors as amended January 26, 1993 (filed
as Exhibit 10(h) to Union Camp's Annual Report on Form 10-K for the year ended December 31, 1992 and
incorporated herein by reference), as further amended February 22, 1994.
10.9 Copy of Agreement between Union Camp and James M. Reed dated May 14, 1991 (filed as Exhibit 19(c) to Union
Camp's Quarterly Report on Form 10-Q for the Quarter ended September 30, 1991 and incorporated herein by
reference).
10.10 Copy of Union Camp Corporation Supplemental Retirement Income Plan for Executive Officers (filed as Exhibit
19(c) to Union Camp's Quarterly Report on Form 10-Q for the Quarter ended March 31, 1993 and incorporated
herein by reference).
11 Statement re computation of per share earnings.
13 The portion of Union Camp Corporation's 1993 Annual Report to security holders which is incorporated by
reference into this filing.
21 List of subsidiaries of Union Camp (filed as Exhibit 22 to Union Camp's Annual Report on Form 10-K for the
year ending December 31, 1992 and incorporated herein by reference).
<PAGE>
23 Consent of Independent Accountants.
</TABLE>
(b) Reports on Form 8-K.
No Current Report on Form 8-K was filed by the Registrant during
the quarter ended December 31, 1993.
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) 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, IN
THE TOWNSHIP OF WAYNE, AND STATE OF NEW JERSEY, ON THE 28TH DAY OF MARCH,
1994.
UNION CAMP CORPORATION
By /s/ RAYMOND E. CARTLEDGE
(Raymond E. Cartledge)
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities stated below on March 28, 1994.
<TABLE>
<CAPTION>
Signature Title
<S> <C>
/s/ Raymond E. Cartledge Chairman of the Board,
(Raymond E. Cartledge) Chief Executive Officer and
Director (Principal Executive Officer)
/s/ W. Craig McClelland President, Chief Operating
(W. Craig McClelland) Officer and Director
/s/ James M. Reed Vice Chairman of the Board,
(James M. Reed) Chief Financial Officer and
Director (Principal Financial Officer)
/s/ Robert E. Moore Vice President and Comptroller
(Robert E. Moore) (Principal Accounting Officer)
/s/ Jerry H. Ballengee Executive Vice President and
(Jerry H. Ballengee) Director
/s/ Sir Colin Corness Director
(Sir Colin Corness)
/s/ Robert D. Kennedy Director
(Robert D. Kennedy)
/s/ Gary E. MacDougal Director
(Gary E. MacDougal)
/s/ George J. Sella, Jr. Director
(George J. Sella, Jr.)
<PAGE>
/s/ Ted D. Simmons Director
(Ted D. Simmons)
</TABLE>
SCHEDULE V
<TABLE>
UNION CAMP CORPORATION AND CONSOLIDATED SUBSIDIARIES
PLANT AND EQUIPMENT AND TIMBERLANDS
For The Years Ended December 31, 1993, 1992 and 1991
(thousands of dollars)
<CAPTION>
Column A Column B Column C Column D Column E Column F
Balance at Balance at
Beginning Additions Other Changes End
Classification of Year at Cost Retirements Add (Deduct)(1) of Year
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993:
PLANT AND EQUIPMENT:
Land . . . . . . . . . . . . . . . . . $ 35,345 $ 2,117 $ 171 $ (460) $ 36,831
Buildings and Improvements . . . . . . 507,185 11,958 2,575 (3,673) 512,895
Machinery and Equipment . . . . . . . . 5,078,345 142,726 49,285 (12,884) 5,158,902
Construction-in-Progress . . . . . . . 86,248 148,476 36 (4,333) 230,355
Total . . . . . . . . . . . . . . . 5,707,123 305,277(2) 52,067 (21,350) 5,938,983
TIMBERLANDS. . . . . . . . . . . . . . 340,904 17,955 6,116 (4,253) 348,490
RESTRICTED USE FUNDS . . . . . . . . . 814 - - (822) (8)
TOTAL . . . . . . . . . . . . . . . $6,048,841 $ 323,232 $ 58,183 $ (26,425) $6,287,465
YEAR ENDED DECEMBER 31, 1992:
PLANT AND EQUIPMENT:
Land . . . . . . . . . . . . . . . . . $ 35,041 $ 911 $ 143 $ (464) $ 35,345
Buildings and Improvements . . . . . . 484,840 18,589 1,302 5,058 507,185
Machinery and Equipment . . . . . . . . 4,876,232 266,503 33,802 (30,588) 5,078,345
Construction-in-Progress . . . . . . . 171,184 (83,075) 394 (1,467) 86,248
Total . . . . . . . . . . . . . . . 5,567,297 202,928(3) 35,641 (27,461) 5,707,123
TIMBERLANDS . . . . . . . . . . . . . . 325,706 16,858 2,947 1,287 340,904
RESTRICTED USE FUNDS. . . . . . . . . . 667 - - 147 814
TOTAL . . . . . . . . . . . . . . . $5,893,670 $ 219,786 $ 38,588 $ (26,027) $6,048,841
YEAR ENDED DECEMBER 31, 1991:
PLANT AND EQUIPMENT:
Land . . . . . . . . . . . . . . . . . $ 33,842 $ 1,334 $ 45 $ (90) $ 35,041
Buildings and Improvements . . . . . . 426,379 88,290 32,163 2,334 484,840
Machinery and Equipment . . . . . . . . 3,641,713 1,268,016 34,102 605 4,876,232
Construction-in-Progress . . . . . . . 1,067,539 (887,271) 9,600 516 171,184
Total . . . . . . . . . . . . . . . 5,169,473 470,369 75,910 3,365 5,567,297
TIMBERLANDS . . . . . . . . . . . . . . 319,980 12,269 2,805 (3,738) 325,706
RESTRICTED USE FUNDS. . . . . . . . . . 9,581 - - (8,914) 667
<PAGE>
TOTAL . . . . . . . . . . . . . . . $5,499,034 $ 482,638 $ 78,715 $ (9,287) $5,893,670
NOTES:
(1) Includes transfers, reclassifications, amortization of deferred standing timber maintenance and foreign currency translation
adjustments. Restricted use funds are committed to specific construction projects.
(2) Includes $13.1 million related to the plant and equipment cost resulting from the acquisition of a corrugated container plant
in Puerto Rico.
(3) Includes $132 thousand related to the plant and equipment cost resulting from the acquisition of Texas Laboratories.
</TABLE>
SCHEDULE VI
UNION CAMP CORPORATION AND CONSOLIDATED SUBSIDIARIES
ACCUMULATED DEPRECIATION AND AMORTIZATION OF
PLANT AND EQUIPMENT; AND COST OF COMPANY TIMBER HARVESTED
For the Years Ended December 31, 1993, 1992 and 1991
(thousands of dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
Additions
Balance at Charged to Balance at
Beginning Costs and Other Changes End
Classification of Year Expenses Retirements Add (Deduct)(1) of Year
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993:
PLANT AND EQUIPMENT:
Buildings and Improvements . . . . . . $ 176,522 $ 15,301 $ 961 $ (665) $ 190,197
Machinery and Equipment . . . . . . . . 2,170,235 222,727 37,104 (5,802) 2,350,056
Total . . . . . . . . . . . . . . . 2,346,757 238,028 38,065 (6,467) 2,540,253
TIMBERLANDS . . . . . . . . . . . . . . 96,267 4,855 - - 101,122
TOTAL . . . . . . . . . . . . . . . $2,443,024 $ 242,883 $ 38,065 $ (6,467) $2,641,375
YEAR ENDED DECEMBER 31, 1992:
PLANT AND EQUIPMENT:
Buildings and Improvements . . . . . . $ 160,231 $ 13,539 $ 1,078 $ 3,830 $ 176,522
Machinery and Equipment . . . . . . . . 1,986,107 220,193 25,709 (10,356) 2,170,235
Total . . . . . . . . . . . . . . . 2,146,338 233,732 26,787 (6,526) 2,346,757
TIMBERLANDS . . . . . . . . . . . . . . 92,468 3,799 - - 96,267
TOTAL . . . . . . . . . . . . . . . $2,238,806 $ 237,531 $ 26,787 $ (6,526) $2,443,024
YEAR ENDED DECEMBER 31, 1991:
PLANT AND EQUIPMENT:
Buildings and Improvements . . . . . . $ 151,469 $ 13,679 $ 8,116 $ 3,199 $ 160,231
Machinery and Equipment . . . . . . . . 1,820,768 191,218 26,558 679 1,986,107
Total . . . . . . . . . . . . . . . 1,972,237 204,897 34,674 3,878 2,146,338
TIMBERLANDS . . . . . . . . . . . . . . 88,246 4,223 - (1) 92,468
<PAGE>
TOTAL . . . . . . . . . . . . . . . $2,060,483 $ 209,120 $ 34,674 $ 3,877 $2,238,806
NOTE:
(1) Includes transfers, reclassifications and foreign currency translation adjustments.
</TABLE>
SCHEDULE VIII
<TABLE>
UNION CAMP CORPORATION AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
For The Years Ended December 31, 1993, 1992 and 1991
(thousands of dollars)
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Charged
Balance at Charged to (Credited) Deductions Balance at
Beginning Costs and to Other from End
Description of Year Expenses(1) Accounts(2) Reserves(3) of Year
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993:
Reserves deducted from assets
to which they apply:
Reserve for doubtful accounts . . . $ 12,643 $ 4,235 $ (359) $ 3,817 $ 12,702
Reserve for discounts and
allowances . . . . . . . . . . . . 1,924 - - - 1,924
Total . . . . . . . . . . . . . . . $ 14,567 $ 4,235 $ (359) $ 3,817 $ 14,626
YEAR ENDED DECEMBER 31, 1992:
Reserves deducted from assets
to which they apply:
Reserve for doubtful accounts . . . $ 10,841 $ 5,101 $ (362) $ 2,937 $ 12,643
Reserve for discounts and
allowances . . . . . . . . . . . . 2,125 (201) - - 1,924
Total . . . . . . . . . . . . . . . $ 12,966 $ 4,900 $ (362) $ 2,937 $ 14,567
YEAR ENDED DECEMBER 31, 1991:
Reserves deducted from assets
to which they apply:
Reserve for doubtful accounts . . . $ 9,606 $ 3,909 $ (4) $ 2,670 $ 10,841
Reserve for discounts and
allowances . . . . . . . . . . . . 1,986 139 - - 2,125
Total . . . . . . . . . . . . . . . $ 11,592 $ 4,048 $ (4) $ 2,670 $ 12,966
NOTES:
(1) Discounts and allowances are charged to income as incurred and not to the reserve. The reserve is adjusted at the end of each
period, by a charge or credit to income, for the estimated discounts and allowances applicable to the accounts receivable then
outstanding.
(2) Foreign currency translation adjustments.
(3) Uncollectible accounts written off, net of recoveries.
</TABLE>
SCHEDULE IX
<PAGE>
UNION CAMP CORPORATION AND CONSOLIDATED SUBSIDIARIES
SHORT-TERM BORROWINGS
For The Years Ended December 31, 1993, 1992 and 1991
(thousands of dollars)
<TABLE>
<CAPTION>
Column A Column B Column C Column D Column E Column F
Maximum Average Weighted
Weighted Amount Amount Average
Balance at Average Outstanding Outstanding Interest Rate
Category of Aggregate End Interest During the During the During the
Short-Term Borrowings of Year Rate Year(1) Year(1) Year(1)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993:
Commercial Paper . . . . . . . . . . . $ 385,560 3.50% $ 461,000 $ 381,557 3.45%
Payable to Banks . . . . . . . . . . . 38,298 7.24% 35,631 35,171 7.77%
Total . . . . . . . . . . . . . . . $ 423,858 3.87% $ 496,631 $ 416,728 3.85%
YEAR ENDED DECEMBER 31, 1992:
Commercial Paper . . . . . . . . . . . $ 383,020 3.98% $ 512,500 $ 419,900 3.97%
Payable to Banks . . . . . . . . . . . 29,566 9.81% 33,155 32,314 10.30%
Total . . . . . . . . . . . . . . . . . $ 412,586 4.43% $ 545,655 $ 452,214 4.47%
YEAR ENDED DECEMBER 31, 1991:
Commercial Paper . . . . . . . . . . . $ 370,000 5.01% $ 370,000 $ 303,000 6.58%
Payable to Banks . . . . . . . . . . . 16,191 11.15% 29,488 20,938 12.59%
Total . . . . . . . . . . . . . . . $ 386,191 5.56% $ 399,488 $ 323,938 7.26%
NOTES:
(1) Based upon month-end balances.
</TABLE>
SCHEDULE X
UNION CAMP CORPORATION AND CONSOLIDATED SUBSIDIARIES
SUPPLEMENTARY INCOME STATEMENT INFORMATION
For the Years Ended December 31, 1993, 1992 and 1991
(thousands of dollars)
<TABLE>
<CAPTION>
Column A Column B
Charged to Costs and Expenses
Item 1993 1992 1991
<S> <C> <C> <C>
Maintenance and repairs . . . . . . . . . . $ 245,082 $ 246,571 $ 238,008
Property taxes. . . . . . . . . . . . . . . 37,467 37,755 27,594
</TABLE>
<PAGE>
EXHIBIT 10.2
UNION CAMP CORPORATION
1989 STOCK OPTION AND STOCK AWARD PLAN
1. Purpose
The purpose of this 1989 Stock Option and Stock Award Plan
(the "Plan") is to encourage and enable selected officers and
other key employees of Union Camp Corporation (the "Company") and
its subsidiaries to acquire a proprietary interest in the Company
through the ownership of common stock of the Company. Such
ownership will provide such employees with a more direct stake in
the future welfare of the Company, and encourage them to remain
with the Company and its subsidiaries. It is also expected that
the Plan will encourage qualified persons to seek and accept
employment with the Company and its subsidiaries. Pursuant to
the Plan, such employees will be offered the opportunity to
acquire such common stock through the grant of options, the award
of restricted stock under the Plan, bonuses payable in stock or a
combination thereof.
As used herein, the term "subsidiary" shall mean any present
or future corporation which is or would be a "subsidiary
corporation" of the Company as the term is defined in Section 425
of the Internal Revenue Code of 1986, as amended (the "Code").
2. Administration of the Plan
The Plan shall be administered by a Personnel, Compensation
and Nominating Committee (the "Committee") as appointed from time
to time by the Board of Directors of the Company, which committee
shall consist of not less than three (3) members of such Board of
Directors; none of such members of the Committee shall be
eligible to be granted options or awarded restricted stock under
the Plan or receive bonuses payable in stock or shall have been
so eligible within one year prior to appointment.
In administering the Plan, the Committee may adopt rules and
regulations for carrying out the Plan. The interpretation and
decision with regard to any question arising under the Plan made
by the Committee shall be final and conclusive on all employees
of the Company and its subsidiaries participating or eligible to
participate in the Plan. The Committee shall determine the
employees to whom, and the time or times at which, grants or
awards shall be made and the number of shares to be included in
the grants or awards.
3. Shares of Stock Subject to the Plan
The total number of shares that may be optioned or awarded
under the Plan is 2,896,638 shares of the $1 par value common
stock of the Company (the "Common Stock") plus an additional
amount of shares on January 1 each calendar year, from and
including 1994 to 1999, equal to one percent (1.0%) of the number
of shares of Common Stock outstanding on December 31 of the
immediately preceding year (the "Additional Annual Increment"),
of which (i) 579,327 shares plus an additional amount of shares
each calendar year equal to twenty percent (20%) of the
<PAGE>
Additional Annual Increment with respect to such year may be
awarded as restricted stock, (ii) from November 30, 1993 until
April 24, 1999, the current expiration date of the Plan, no more
than 750,000 shares may be optioned to any one executive and
(iii) no more than one million (1,000,000) shares may be awarded
as Incentive Stock Options, as defined in Section 422 of the
Code, except that, notwithstanding any of the foregoing
limitations set forth in this Paragraph 3, said numbers of shares
shall be adjusted as provided in Paragraph 12. Any shares
subject to an option which for any reason expires or is
terminated unexercised and any restricted stock which is
forfeited may again be optioned or awarded under the Plan.
4. Eligibility
Key employees, including officers, of the Company and its
subsidiaries (but excluding members of the Committee) are
eligible to be granted options and awarded restricted stock under
the Plan and to have their bonuses payable in stock. The
employees who shall receive awards or options under the Plan
shall be selected from time to time by the Committee, in its sole
discretion, from among those eligible, and the Committee shall
determine, in its sole discretion, the number of shares to be
covered by the award or awards and by the options or options
granted to each such employee selected.
5. Duration of the Plan
No award or option may be granted under the Plan after April
24, 1999, but awards or options theretofore granted may extend
beyond that date.
6. Terms and Conditions of Stock Options
All options granted under this Plan shall be either
Incentive Stock Options as defined in Section 422 of the Code or
options other than Incentive Stock Options. Each such option
shall be subject to all the applicable provisions of the Plan,
including the following terms and conditions, and to such other
terms and conditions not inconsistent therewith as the Committee
shall determine.
(a) The option price per share shall be determined by
the Committee, but shall not be less than 100% of the fair
market value at the time the option is granted. The fair
market value shall be the mean of the high and low sales
prices for the Common Stock as reported on the Composite
Tape for New York Stock Exchange issues for the day on which
the option is granted. If there is no sale of the shares on
such Exchange on the date the option is granted, the mean of
the bid and asked prices on such Exchange at the close of
the market on such date shall be deemed to be the fair
market value of the shares. In the event that the method
for determining the fair market value of the shares provided
for in this Paragraph 6(a) shall not be practicable, then
the fair market value per share shall be determined by such
other reasonable method as the Committee shall, in its
discretion, select and apply at the time of grant of the
option concerned.
(b) Each option shall be exercisable during and over
such period ending not later than ten years from the date it
<PAGE>
was granted, as may be determined by the Committee and
stated in the option.
(c) No option shall be exercisable within two years
from the date of the granting of the option, except as
provided in Paragraphs 6(j), 9 and 12 of the Plan.
(d) Each option shall state whether it will or will
not be treated as an Incentive Stock Option.
(e) Each option may be exercised by giving written
notice to the Company specifying the number of shares to be
purchased, which shall be accompanied by payment in full
including applicable taxes, if any. Payment shall be (i) in
cash, or (ii) in shares of Common Stock of the Company
already owned by the optionee (the value of such Stock shall
be its fair market value on the date of exercise as
determined under Paragraph 6(a)), or (iii) by a combination
of cash and shares of Common Stock of the Company. No
option shall be exercised for less than the lesser of 50
shares or the full number of shares for which the option is
then exercisable. No optionee shall have any rights to
dividends or other rights of a shareholder with respect to
shares subject to his option until he has given written
notice of exercise of his option and paid in full for such
shares. Payment of taxes, if any, shall be in cash at time
of exercise or on the applicable tax date under Section 83
of the Code, if later, provided, however, tax withholding
obligations may be met by the withholding of Common Stock
otherwise deliverable to the optionee pursuant to procedures
approved by the Committee. In no event shall Common Stock
be delivered to any optionee until he has paid to the
Company in cash the amount of tax required to be withheld by
the Company or has elected to have his tax withholding
obligations met by the withholding of Common Stock in
accordance with the procedures approved by the Committee,
except that in the case of later tax dates under Section 83
of the Code, the Company may deliver Common Stock prior to
the optionee's satisfaction of tax withholding obligations
if the optionee makes arrangements satisfactory to the
Company that such obligations will be met on the applicable
tax date.
(f) Notwithstanding the foregoing Paragraph 6(e) of
the Plan, each option granted hereunder may provide, or be
amended to provide, the right either (i) to exercise such
option in whole or in part without any payment of the option
price, or (ii) to request the Committee to permit, in its
sole discretion, such exercise without any payment of the
option price. If an option is exercised without a payment
of the option price, the optionee shall be entitled to
receive that number of whole shares as is determined by
dividing (a) an amount equal to the fair market value per
share on the date of exercise as determined under Paragraph
6(a) into (b) an amount equal to the excess of the total
fair market value of the shares on such date as so
determined with respect to which the option is being
exercised over the total cash purchase price of such shares
as set forth in the option. Fractional shares will be
rounded to the next lowest number and the optionee will
receive cash in lieu thereof. At the sole discretion of the
Committee, or as specified in the option, the settlement of
all or part of an optionee's rights under this Paragraph
<PAGE>
6(f) may be made in cash in an amount equal to the fair
market value of the shares otherwise payable hereunder. The
number of shares with respect to which any option is
exercised under this Paragraph 6(f) shall reduce the number
of shares thereafter available for exercise under the
option, and such shares thereafter may not again be optioned
under the Plan.
(g) Each option may provide, or be amended to provide,
that the optionee may exercise the option without payment of
the option price by delivery to the Company of an exercise
notice and irrevocable instructions to deliver shares of
Common Stock directly to the stock broker named therein in
exchange for payment of the option price and withholding
taxes by such broker to the Company.
(h) If an optionee's employment by the Company or a
subsidiary terminates by reason of his retirement under a
retirement plan of the Company or a subsidiary, his option
may thereafter be exercised whenever two years from the date
of grant have elapsed until the expiration of the stated
period of the option; provided, however, that if the
optionee dies after such termination of employment, any
unexercised option may thereafter be immediately exercised
in full by the legal representative of his estate or by the
legatee of the optionee under his last will until the
expiration of the stated period of the option; provided,
further, that any right granted to such an optionee pursuant
to Paragraph 6(f) of the Plan, may be exercised by such
optionee (or his legal representative or legatee in the
event of his death) whenever two years from the date of
grant have elapsed, but may not be exercised after the
expiration of the period of three years from the date of
such termination of employment or the stated period of the
option, whichever period is shorter.
(i) If an optionee's employment by the Company or a
subsidiary terminates by reason of permanent disability, as
determined by the Committee, his option may thereafter be
exercised whenever two years from the date of grant have
elapsed until the expiration of the stated period of the
option; provided, however, that if the optionee dies after
such termination of employment, any unexercised option may
thereafter be immediately exercised in full by the legal
representative of his estate or by the legatee of the
optionee under his last will until the expiration of the
stated period of the option; provided, further, that any
right granted to such an optionee pursuant to Paragraph 6(f)
of the Plan, may be exercised by such optionee (or his legal
representative or legatee in the event of his death)
whenever two years from the date of grant have elapsed, but
may not be exercised after the expiration of the period of
three years from the date of such termination of employment
or the stated period of the option, whichever period is
shorter.
(j) If an optionee's employment by the Company or a
subsidiary terminates by reason of his death, his option may
thereafter be immediately exercised in full by the legal
representative of his estate or by the legatee of the
optionee under his last will until the expiration of the
stated period of the option; provided, however, that any
right granted to such an optionee pursuant to Paragraph 6(f)
<PAGE>
of the Plan, may immediately after his death be exercised in
full by said legal representative or legatee for a period of
three years from the date of his death or the expiration of
the stated period of the option, whichever period is
shorter.
(k) Unless otherwise determined by the Committee, if
an optionee's employment terminates for any reason other
than death, retirement or permanent disability, his option
shall thereupon terminate.
(l) The option by its terms shall be personal and
shall not be transferable by the optionee otherwise than by
will or by the laws of descent and distribution. During the
lifetime of an optionee, the option shall be exercisable
only by him.
(m) Notwithstanding any intent to grant Incentive
Stock Options, an option granted will not be considered an
Incentive Stock Option to the extent that it together with
any earlier Incentive Stock Options permits the exercise for
the first time in any calendar year of more than $100,000 in
value of Common Stock (determined at the time of grant).
7. Terms and Conditions of Restricted Stock Awards
All awards of restricted stock under the Plan shall be
subject to all the applicable provisions of the Plan, including
the following terms and conditions, and to such other terms and
conditions not inconsistent therewith, as the Committee shall
determine.
(a) Awards of restricted stock may be in addition to
or in lieu of option grants.
(b) During a period set by the Committee at the time
of each award of restricted stock (the "restriction
period"), the recipient shall not be permitted to sell,
transfer, pledge, or assign the shares of restricted stock.
(c) Shares of restricted stock shall become free of
all restrictions if the recipient dies or his employment
terminates by reason of permanent disability, as determined
by the Committee, during the restriction period and, to the
extent set by the Committee at the time of the award or
later, if the recipient retires under a retirement plan of
the Company or a subsidiary during such period. The
Committee may require medical evidence of permanent
disability, including medical examinations by physicians
selected by it. If the Committee determines that any such
recipient is not permanently disabled or that a retiree's
restricted stock is not to become free of restrictions, the
restricted stock held by either such recipient, as the case
may be, shall be forfeited and revert to the Company.
(d) Shares of restricted stock shall be forfeited and
revert to the Company upon the recipient's termination of
employment during the restriction period for any reason
other than death, permanent disability or retirement under a
retirement plan of the Company or a subsidiary except to the
extent the Committee, in its sole discretion, finds that
such forfeiture might not be in the best interest of the
Company and, therefore, waives all or part of the
<PAGE>
application of this provision to the restricted stock held
by such recipient.
(e) Stock certificates for restricted stock shall be
registered in the name of the recipient but shall be
appropriately legended and returned to the Company by the
recipient, together with a stock power, endorsed in blank by
the recipient. The recipient shall be entitled to vote
shares of restricted stock and shall be entitled to all
dividends paid thereon, except that dividends paid in Common
Stock or other property shall also be subject to the same
restrictions.
(f) Restricted stock shall become free of the
foregoing restrictions upon expiration of the applicable
restriction period and the Company shall deliver Common
Stock certificates evidencing such stock.
(g) Recipients of restricted stock shall be required
to pay taxes to the Company upon the expiration of
restriction periods or such earlier dates as elected
pursuant to Section 83 of the Code; provided, however, tax
withholding obligations may be met by the withholding of
Common Stock otherwise deliverable to the recipient pursuant
to procedures approved by the Committee. In no event shall
Common Stock be delivered to any awardee until he has paid
to the Company in cash the amount of tax required to be
withheld by the Company or has elected to have his
withholding obligations met by the withholding of Common
Stock in accordance with the procedures approved by the
Committee.
8. Bonuses Payable in Stock
In lieu of cash bonuses otherwise payable under the
Company's compensation practices to employees eligible to
participate in the Plan, the Committee, in its sole discretion,
may determine that such bonuses shall be payable in stock or
partly in stock and partly in cash. Such bonuses shall be in
consideration of services previously performed and shall consist
of shares of Common Stock free of any restrictions imposed by the
Plan. The number of shares of Common Stock payable in lieu of an
amount of each bonus otherwise payable shall be determined by
dividing such amount by the fair market value of one share of
Common Stock on the date the bonus is payable, with the fair
market value determined in accordance with Paragraph 6(a). The
Company shall withhold from any such bonus an amount of cash
sufficient to meet its tax withholding obligations.
9. Limited Rights
Any option granted under the Plan may, at the discretion of
the Committee, contain provisions for limited rights, as
described herein. A limited right shall be exercisable upon the
occurrence of an event specified in the option as an exercise
event, and shall expire thirty (30) days after the occurrence of
such event. Exercise events may include, at the discretion of
the Committee and as specified in the option, consummation of a
tender or exchange offer for at least 20% of the Company's Common
Stock outstanding at the commencement of such offer or a proxy
contest the result of which is the replacement of a majority of
the members of the Company's Board of Directors, or consummation
of a merger or reorganization of the Company in which the Company
<PAGE>
does not survive or in which the shareholders of the Company
receive stock or securities of another corporation or cash, or a
liquidation or dissolution of the Company or other similar
events. Limited rights shall permit optionees to receive in cash
either (i) the highest market price per share for each share
covered by an option, without regard to the date on which the
option otherwise would be exercisable, which the Company's Common
Stock traded on the New York Stock Exchange for the sixty days
immediately preceding the exercise event or (ii) if provided by
the Committee in its discretion at the time of grant, the highest
market price per share for each share covered by the option which
the Company's Common Stock traded on the New York Stock Exchange
on the date of exercise, less the option price per share
specified in the option. In the event the exercise event is
consummation of a tender or exchange offer, the value per share
set by the tenderor or offeror shall be substituted for the
highest market price per share provided in clause (i) in the
preceding sentence. Limited rights shall not extend the exercise
period of any option and, to the extent exercised, shall reduce
the shares of Company Common Stock available under the Plan and
the shares of such Stock covered by the options to which the
limited rights relate.
10. Transfer, Leave of Absence, Etc.
For the purpose of the Plan: (a) a transfer of an employee
from the Company to a subsidiary, or vice versa, or from one
subsidiary to another, and (b) a leave of absence, duly
authorized in writing by the Company, shall not be deemed a
termination of employment.
11. Rights of Employees
(a) No person shall have any rights or claims under the
Plan except in accordance with the provisions of the Plan.
(b) Nothing contained in the Plan shall be deemed to give
any employee the right to be retained in the service of the
Company or its subsidiaries.
12. Changes in Capital
Upon changes in the Common Stock by a stock dividend, stock
split, reverse split, subdivision, recapitalization, merger,
consolidation (whether or not the Company is a surviving
corporation) combination or exchange of shares, separation,
reorganization or liquidation, the number and class of shares
available under the Plan as to which stock options and restricted
stock may be awarded, the number and class of shares under each
option and the option price per share shall be correspondingly
adjusted by the Committee, such adjustments to be made in the
case of outstanding options without change in the total price
applicable to such options; provided, however, no such
adjustments shall be made in the case of stock dividends
aggregating in any fiscal year of the Company not more than 10%
of the Common Stock issued and outstanding at the beginning of
such year or in the case of one or more splits, subdivisions or
combinations of the Common Stock during any fiscal year of the
Company resulting in an increase or decrease of not more than 10%
of the Common Stock issued and outstanding at the beginning of
such year. In the event of a merger, consolidation, combination,
reorganization or other transaction in which the shareowners of
the Company will receive cash or securities (other than stock of
<PAGE>
the Company) or in the event that an offer is made to the holders
of Common Stock to sell or exchange such Common Stock for cash,
securities or stock of another corporation and such offer, if
accepted, would result in the offeror becoming the owner of (a)
at least 50% of the outstanding Common Stock of the Company or
(b) such lesser percentage of the outstanding Common Stock which
the Committee in its sole discretion determines may materially
adversely affect the market value of the Common Stock after the
tender offer, the Committee shall, prior to the shareowners' vote
on such transaction or prior to the expiration date (without
extensions) of the tender or exchange offer, (i) cancel all
restrictions on restricted stock previously awarded to recipients
under the Plan, (ii) accelerate the time of exercise so that all
stock options which are outstanding shall become immediately
exercisable in full without regard to any limitations of time or
amount otherwise contained in the Plan or the options and/or
(iii) determine that the options shall be adjusted and make such
adjustments by substituting for Common Stock subject to options,
stock or other securities of the surviving corporation or offeror
if such stock or other securities of such corporation are
publicly traded or, if such stock or other securities are not
publicly traded, by substituting stock or other securities of a
parent or affiliate of the surviving corporation or offeror if
the stock or other securities of such parent or affiliate are
publicly traded, in which event the aggregate option price shall
remain the same and the amount of shares or other securities
subject to option shall be the amount of shares or other
securities which could have been purchased on the closing day of
such transaction or the expiration date of the offer with the
proceeds which would have been received by the optionee if the
option had been exercised in full prior to such transaction or
expiration date and the optionee had exchanged all of such shares
in the transaction or sold or exchanged all of such shares
pursuant to the tender or exchange offer. No optionee shall have
any right to prevent the consummation of any of the foregoing
acts affecting the number of shares available to the optionee.
13. Use of Proceeds
Proceeds from the sale of shares pursuant to options granted
under this Plan shall constitute general funds of the Company.
14. Amendments
The Board of Directors may amend, alter or discontinue the
Plan, including without limitation any amendment considered to be
advisable by reason of changes to the United States Internal
Revenue Code, but no amendment, alteration or discontinuation
shall be made which would impair the rights of any holder of an
award of restricted stock or option or stock bonus theretofore
granted, without his consent, or which, without the approval of
the shareholders, would:
(a) Except as is provided in Paragraph 12 of the Plan,
increase the total number of shares reserved for the purpose
of the Plan.
(b) Except as is provided in Paragraph 6(f) of the
Plan, decrease the option price of an option to less than
100% of the fair market value on the date of the granting of
the option.
(c) Extend the duration of the Plan.
<PAGE>
The Committee may amend the terms of any award of restricted
stock or option theretofore granted, retroactively or
prospectively, but no such amendment shall impair the rights of
any holder without his consent.
Adopted April 25, 1989
As Amended April 28, 1992
As Amended April 27, 1993
As Amended November 30, 1993
EXHIBIT 10.8
AMENDMENT
FEBRUARY 22, 1994
TO
STOCK COMPENSATION PLAN
FOR
NON-EMPLOYEE DIRECTORS
OF
UNION CAMP CORPORATION
Appendix Number Three
Immediately after the 1994 Annual Meeting of the Stockholders of
the Corporation each member of the Board of Directors of the
Corporation who is not an employee of the Corporation shall
recieve under the Plan whole shares of Common Stock of the
Corporation having a fair market value of approximately $9,000.
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Net Income ($000) $ 50,043 $ 76,233 $ 124,790
Weighted Average Common Shares Outstanding 69,740,458 69,604,174 69,270,992
<PAGE>
Earnings Per Share $ 0.72 $ 1.10 $ 1.80
Weighted Average Common Shares Outstanding
Including Common Stock Equivalents -
Primary Basis 70,048,604 70,131,230 69,716,207
Primary Earnings Per Share $ 0.71 $ 1.09 $ 1.79
Weighted Average Common Shares Outstanding
Including Common Stock Equivalents -
Fully Diluted Basis 70,189,459 70,131,230 69,902,949
Fully Diluted Earnings Per Share $ 0.71 $ 1.09 $ 1.79
</TABLE>
EXHIBIT 13
UNION CAMP CORPORATION'S 1993 ANNUAL REPORT
(Portions Incorporated by Reference)
[The following text appears in the Union Camp 1993 Annual Report
under the caption "Packaging Group" on pages 4 and 5, page 6 other than the
text after the first sentence of the carryover paragraph, page 8 other than
the second paragraph, and page 9 and is incorporated by reference in Item 1
of this report on Form 10-K.]
Union Camp's Packaging Group is the largest operating unit in the
company. With 1993 sales of $1.5 billion, it accounts for approximately half
the company's total sales.
The Packaging Group is comprised of several operating divisions and
includes the company's large-scale kraft mills at Savannah, Georgia and
Prattville, Alabama, which contain a combined total of eight, large paper
machines. The Packaging Group also includes a network of 47 packaging plants
throughout the U.S. These plants, together with six overseas container
plants, consume approximately two-thirds of the company's output of kraft
paper and linerboard. The balance is sold to other package converters in the
U.S. and increasingly to overseas customers.
The Prattville, Alabama mill is dedicated to the production of
kraft linerboard, the principal material used as the facing for corrugated
containers. Prattville has undergone major modernization in recent years and
is considered one of the most efficient linerboard mills in the world.
In addition to linerboard, the recently modernized Savannah,
Georgia mill also produces kraft paper for industrial and retail bags as well
as Unisat(R) saturating kraft, the key substrate material in production of
decorative plastic laminates widely used for the surface of cabinets,
furniture and countertops.
In addition, purchased plastic resins are also converted into a
variety of plastic retail and industrial bags and film at four of the
company's domestic packaging facilities.
Markets for packaging products reflected steady demand in 1993 but
were intensely competitive as slow economic recovery in the U.S., and the
broad European recession, put pressure on prices across the group.
<PAGE>
The corrugated Container Division is the largest package converting
operation within the company's Packaging Group. Corrugated shipping
containers are almost universally used throughout industry to safely carry
virtually every type of manufactured product and were in strong demand
throughout 1993. Union Camp's shipments of containers increased 4% to a
record level. Nevertheless, prices remained under pressure through most of
the year reflecting the anemic economic recovery and the intensely
competitive nature of this business. However, as industrial production
became stronger into the fourth quarter of 1993, markets firmed and there was
some movement toward price recovery as the year ended.
Operating profit in Union Camp's Container Division increased
significantly in 1993, despite the difficult pricing environment, as the
division succeeded in further reducing costs due to improvement programs.
As markets for fiber containers have matured, this business has
become increasingly competitive.
The Flexible Packaging Division is Union Camp's second largest
packaging group and produces paper and plastic bags at 15 domestic bag
manufacturing plants. Product innovation, striking graphics and responsive
customer service are important factors in the market strategy for this
segment of the company's packaging business as well. Given the general
economic conditions in 1993, markets for Union Camp bags were also
competitive and prices for retail paper and plastic bags were also under
pressure throughout the year. Volume of company paper bag shipments were
essentially level with 1992, but plastic products volume increased 4%.
Nevertheless, operating income declined from the prior year.
Union Camp's Folding Carton Division produces folding cartons for
consumer products at three plants in the Northeast. Our Folding Carton
operations have been highly successful in penetrating attractive markets and
strengthening their position with customers in the toiletries, cosmetic,
pharmaceutical, and food products industries, all of which rely heavily on
the sales appeal of the package at the point of purchase. In addition to
possessing superior structural and graphic design skills, the Folding Carton
Division also has an excellent reputation for the high quality of its
printing, stamping, embossing and die cutting, all of which contribute to
total quality and are helping to advance our position in the folding carton
business.
[The following text appears in the Union Camp 1993 Annual Report
under the caption "Fine Paper" on page 10, on page 11 other than the
carryover paragraph, and the second paragraph on page 13 and is incorporated
by reference in Item 1 of this report on Form 10-K.]
Union Camp's Fine Paper Division made substantial progress in
efficiency, quality and new product development in 1993 in spite of
continuing unsettled market conditions that contributed to a difficult
operating environment.
Production of Union Camp fine paper products is centered in two
modern, highly efficient mills located at Eastover, South Carolina and
Franklin, Virginia. In 1993, the two mills, which operate a combined total of
eight large paper machines, produced more than 1.2 million tons of white
paper products including coated and uncoated bristols.
Consumption of uncoated white paper, in the U.S., increased a
healthy 3% in 1993. Union Camp's shipments increased even more, rising 4.2%
over the previous year. Yet even at that level, demand was not strong enough
to absorb the large quantities of uncoated white paper that continued to
enter the market. Given that supply/demand framework, prices weakened and
operating profit in our Fine Paper business was further eroded.
<PAGE>
Although the recent recession was relatively short in duration, the
early stages of the recovery were less vigorous than in the past. The
widespread corporate downsizing and restructuring that took place also
affected the speed of recovery in uncoated white paper markets. As the
economy started to recover, demand for paper also picked up.
What is critical about the current business cycle is the increasing
interdependence between the U.S. economy and worldwide economic activity.
This is especially true in markets for printing and writing paper. Although
market demand growth was respectable in 1993 and close to long-term trend,
foreign suppliers captured an unprecedented share of the growth.
Early in 1993, domestic markets for white papers appeared to be
firming and movement toward price recovery began to get under way. As the
year progressed, however, foreign white paper mills, were able to capitalize
on currency exchange advantages and sharply increased their shipments into
the U.S. At the same time, there were also some further additions to U.S.
capacity. The rapid expansion in the available supply of uncoated paper soon
outran demand and as 1993 ended, prices again weakened, putting further
pressure on margins.
In other developments with important new product significance, work
continues on construction of a deinking facility at the Franklin, Virginia
mill. When completed in late 1994, this operation will be capable of
producing 300 tons per day of recycled pulp from office wastepaper. At the
same time, modifications to five of Franklin's six paper machines will
facilitate development and production of incremental sales in new recycled
products.
[The following text appears in the Union Camp 1993 Annual Report
under the caption "Chemical Group" on pages 14, 15 and 16 and is incorporated
by reference in Item 1 of this report on Form 10-K.]
Union Camp's Chemical operations are the company's largest
non-paper business. Chemical Group sales in 1993 increased 4% to $519 million
and operating profit increased 66% above the previous year's total.
This strong performance was helped by aggressive cost control,
increased volume, improved sales and marketing effectiveness, and the
introduction of new products.
Union Camp's chemical business initially was based upon crude tall
oil and turpentine recovered from the chemical recovery cycle of the kraft
pulping process. Over the years, the crude tall oil and turpentine have been
continuously upgraded to higher, value-added products until today, the
company markets performance based derivatives for adhesives as well as resins
for inks and coatings and aroma chemicals for flavors and fragrances.
With the purchase of Bush Boake Allen in 1982, the product line was
significantly broadened to include compounded flavors and fragrances,
essential oils, spices and seasonings, and additional aroma chemicals based
on hydrocarbon feedstocks.
Today, Bush Boake Allen, the largest of the Chemical Group's two
operating divisions, is a global, aroma chemical, flavor and fragrance
business with locations in 35 countries worldwide. Bush Boake Allen's
business has grown strongly in recent years and in 1993 established new
record sales and earnings.
BBA processes crude sulfate turpentine at a large-scale aroma
chemical plant in Jacksonville, Florida. After the turpentine is separated
into alpha and beta pinene, a series of chemical reactions with these two
<PAGE>
fractions yields aroma chemicals. These operations are carried out in the
Jacksonville, Florida plant and an additional facility at Widnes, England.
The Widnes plant also produces a family of aroma chemicals from
hydrocarbon feedstocks. During 1993, a highly automated new unit for
producing Tetralide(R) and Abbalide(R) also came on stream at Widnes. These
polycyclic musk products are used extensively in fragrances for household
products.
In addition to aroma chemicals, BBA also produces essential oils,
spice ingredients and seasonings and is one of the largest producers of
vanilla and related products. During 1993, a new plant was also started up to
produce a broad range of enzyme modified cheese flavors for processed food
which is a new line of products for BBA.
Aroma chemicals, essential oils and other natural raw materials
produced by BBA are subsequently blended into compounded flavors and
fragrances by Bush Boake Allen and outside customers. This vertical
integration enhances BBA's flavor and fragrance business. The compounded
flavors are widely used in beverages, baked goods, confectionery and dairy
products. Compounded fragrances impart a pleasant aroma to household
products, soaps, detergents and air fresheners.
An important factor in BBA's growth has been an expanding local
presence around the world. These local facilities permit much closer service
on a more personal level and also enable us to gain a better, firsthand
knowledge of local customs, taste and trends. BBA's network was strengthened
in 1993 with the expansion and modernization of manufacturing and laboratory
facilities in Singapore and Australia. A new location was also established at
Guangzhou in The People's Republic of China. Supported by our existing
facilities in Hong Kong, the Guangzhou operation greatly strengthens Bush
Boake Allen's ability to serve vast, growing markets in China.
In Union Camp's other chemical operations, the tall oil-based
Chemical Products Division registered a strong turnaround year in 1993. Sales
revenue increased 9% and volume rose 14% compared to the prior year.
Operating income increased dramatically - nearly double the prior year's
results.
All the Chemical Product Division's product lines showed earnings
gains during 1993. Adhesive resins, ink and coating resins, dimer acid and
polyamides are some of the performance products produced by this division.
Cost control programs that were put in place over the last two years started
to produce significant results. Substantial time and effort has been devoted
to lowering costs and improving throughput, internal communication and
organizational effectiveness. All of these factors played an important part
in strengthening operations and reducing the division's costs and working
capital requirements.
[The following text appears in the Union Camp 1993 Annual Report
under the caption "Overseas" on page 18 other than the last sentence in the
third paragraph and the carryover paragraph and the text on page 19 other
than the carryover paragraph from page 18 and is incorporated by reference in
Item 1 of this report on Form 10-K.]
Paper and paper packaging are closely linked to economic growth.
Per capita consumption of paper has long been widely recognized as a relevant
measure of economic development.
As other regions of the world continue to grow and their economies
strengthen, demand for consumer and industrial packaging and business
communications papers will also increase. Corrugated containers, for example,
which are made from kraft linerboard, are universally used to ship
<PAGE>
manufactured goods and many agricultural products as well - safely and
efficiently.
Uncoated white paper consumption will also increase as more
advanced information technology is adopted that relies on use of computers,
copiers and fax equipment. The United States is the largest per capita
consumer of paper products in the world followed by Japan which consumes
about three-fourths the U.S. total. Europe's per capita consumption is
approximately half that of the U.S. The emerging nations of the world consume
significantly less, but as their economies grow, paper consumption is almost
certain to increase.
Over the last two years, while exports of kraft linerboard to
Europe have declined due to the recession, Union Camp has significantly
increased its shipments to Asia, Latin America and the Middle East. Asia and
Latin America have become more important markets and now account for more
than 60% of our linerboard exports. That's one reason Union Camp's shipments
increased 3.5% in 1993, even as industry shipments declined.
At the same time, we're also strengthening our ability to serve
overseas packaging markets through Union Camp corrugated container plants in
Spain, The Canary Islands, Ireland, Chile and Puerto Rico. During 1993,
combined sales from our international converting operations rose 13% and
earnings advanced significantly. As worldwide markets for paper products
expand, Union Camp is in an excellent position to participate in that growth.
[The following text appears in the Union Camp 1993 Annual Report
under the caption "Wood Products" on page 20 and is incorporated by reference
in Item 1 of this report on Form 10-K.]
Union Camp's Wood Products operations exceeded the company's
expectations in 1993 and eclipsed the prior year's record performance by a
wide margin.
Sales of wood products increased 26% over 1992's record levels.
Operating income in 1993 also set a new record as it more than doubled on
very strong volume. Gains were recorded across all product lines, lumber,
plywood and particleboard.
The economy got off to a slow start during the first half of 1993
with GDP well below forecasts. As the year progressed and interest rates
remained at some of the lowest levels seen in decades, consumer confidence
strengthened and housing starts began a steady rise through the year. Demand
for lumber was strong and with production of West Coast lumber declining,
prices for Southern Yellow Pine lumber rose nearly 30%.
Along with strong housing demand, industrial production was also up
sharply as the year progressed. This contributed to strengthening markets for
Union Camp's industrial grades of plywood and particleboard. In recent years,
our panel operations have followed a strategy of upgrading their commodity
products to more specialized applications. That strategy began to produce
significant results in the early 1990's. As we refined that strategy and
concentrated on producing higher quality specialized panels for industrial
markets, we also worked to improve our ability to provide extensive technical
service to our customers. These early efforts positioned us strongly in
industrial markets and we capitalized on that position in 1993.
[The following text appears in the Union Camp 1993 Annual Report
under the caption "Wood and Land Resources" in the first two paragraphs on
page 22 and the last paragraph on page 23 and is incorporated by reference in
Item 1 of this report on Form 10-K.]
<PAGE>
Union Camp's 1.6 million acres of Southeastern woodlands are one of
the company's most strategically important assets. They not only ensure
continuity of raw material supply to the company's paper mills and wood
products plants, but they also help in our efforts to control the cost of our
principal raw material.
We have, for decades, carefully managed our forest resources to
maximize our yields of fiber from each acre of land. Computer models help
identify optimal sites for harvesting. We also pursue company and cooperative
research to develop the best available techniques for improving tree growth
properties, fiber yield and disease resistance.
In other land related activities, a wholly owned subsidiary The
Branigar Organization is developing two residential communities, The Landings
on Skidaway Island, Georgia, and Champion Hills, near Hendersonville, North
Carolina. Overall activity levels were strong in 1993 and Branigar's sales
and net income increased significantly over the prior year.
[The following text appears on page 35 of the Union Camp 1993
Annual Report under the caption "Research and Development Costs" in Note 1 of
Notes to Consolidated Financial Statements and is incorporated by reference
in Item 1 of this report on Form 10-K.]
Research and development costs are expensed as incurred. These
expenditures totalled $45.9 million in 1993, $44.5 million in 1992 and $42.6
million in 1991.
[The following financial data appears in the Union Camp 1993 Annual
Report in Note 14 of Notes to Consolidated Financial Statements on page 40
and are incorporated by reference in Item 1 of this report on Form 10-K.]
Operating results and other financial data are presented for the
principal business segments of the company for the years ended December 31,
1993, 1992 and 1991.
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 inventory 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. The
company's real estate operations have been included within corporate items.
Capital expenditures are reported exclusive of acquisitions.
Total revenue and operating profit from the company's foreign
subsidiaries were $372 million and $31 million in 1993, $371 million and $26
million in 1992, and $330 million and $22 million in 1991. 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 $209 million in 1993, $249
million in 1992 and $203 million in 1991.
<PAGE>
<TABLE>
Paper and Packaging Wood Corporate
Paperboard Products Products Chemical Items Consolidated
<S> <C> <C> <C> <C> <C> <C>
1993
Sales to Customers. . . . . $ 1,057,100 $1,251,875 $ 261,569 $ 517,090 $ 32,787 $ 3,120,421
Intersegment Sales. . . . . 594,126 6,513 24 1,647 (602,310)* -
Total Revenue . . . . . . . 1,651,226 1,258,388 261,593 518,737 (569,523) 3,120,421
Operating Profit. . . . . . 101,482 29,483 69,080 48,931 (37,352)** 211,624
Identifiable Assets . . . . 3,320,737 666,004 95,997 385,392 216,903 4,685,033
Depreciation & Cost of
Company Timber Harvested . 175,470 35,514 10,708 16,535 4,656 242,883
Capital Expenditures. . . . 228,859 32,948 7,392 38,813 2,101 310,113
1992
Sales to Customers. . . . . $ 1,097,316 $1,235,258 $ 206,826 $ 499,188 $ 25,770 $ 3,064,358
Intersegment Sales. . . . . 617,547 5,392 80 709 (623,728)* -
Total Revenue . . . . . . . 1,714,863 1,240,650 206,906 499,897 (597,958) 3,064,358
Operating Profit. . . . . . 192,816 37,078 26,330 29,446 (105,094)** 180,576
Identifiable Assets . . . . 3,311,033 654,820 93,977 345,800 339,567 4,745,197
Depreciation & Cost of
Company Timber Harvested . 166,718 35,220 10,953 21,778 2,862 237,531
Capital Expenditures. . . . 151,241 33,153 2,774 29,702 2,784 219,654
1991
Sales to Customers. . . . . $ 1,045,862 $1,197,824 $ 167,798 $ 470,880 $ 84,774 $ 2,967,138
Intersegment Sales. . . . . 568,512 5,462 103 146 (574,223)* -
Total Revenue . . . . . . . 1,614,374 1,203,286 167,901 471,026 (489,449) 2,967,138
Operating Profit. . . . . . 251,816 17,404 3,169 25,087 (22,486)** 274,990
Identifiable Assets . . . . 3,304,757 670,502 102,656 357,943 261,856 4,697,714
Depreciation & Cost of
Company Timber Harvested . 133,459 37,781 11,790 21,084 5,006 209,120
Capital Expenditures. . . . 394,987 50,273 2,515 22,799 12,064 482,638
*Elimination of Intersegment Sales.
**Includes intersegment eliminations and unallocated corporate, technology and engineering expenses of $49,075 in 1993,
$50,286 in 1992, and $48,009 in 1991. 1992 also includes a $57.0 million charge for estimated costs to enhance workplace
safety. If this amount had been allocated to segment operating profit in 1992, Paper and Paperboard operating profit would
have been $148.8 million, Packaging operating profit would have been $30.5 million, Wood Products operating profit would have
been $25.6 million, Chemical operating profit would have been $23.8 million and Corporate Items would have been $(48.1)
million.
</TABLE>
[The following text appears on page 29 of the Union Camp 1993
Annual Report in the fourth and sixth sentences of the second paragraph under
the caption "Capital Expenditures" and is incorporated by reference in Item 1
of this report on Form 10-K.]
An initial $51 million was spent at the Franklin mill on a project
now estimated to cost $165 million which includes an office paper recycle
(deink) facility and enhancements to five paper machines. The deink facility
addresses market demand for end-product containing recycled fiber, provides
modest incremental volume and permits the introduction of distinctive, higher
value grades of printing and writing paper.
[The following text appears on page 29 of the Union Camp 1993
Annual Report in the text under the caption "Capital Expenditures" and is
incorporated by reference in Item 1 of this report on Form 10-K.]
Capital spending totaled $310 million in 1993 compared with $220
million in 1992 and $483 million in 1991. The 1993 increase reflects the
<PAGE>
first full year of spending in connection with two large projects at the
Savannah and Franklin mills, each of which is described below.
Paper mill spending of $199 million included $83 million for a
low-odor, energy-efficient, recovery boiler at the Savannah mill. This
project, now estimated at a cost of $165 million, will be completed in late
1994. The new boiler, which replaces two units, is believed to be among the
largest in the world. An initial $51 million was spent at the Franklin mill
on a project now estimated to cost $165 million which includes an office
paper recycle (deink) facility and enhancements to five paper machines.
Certain of the machine modifications were completed in 1993 and the remainder
will be completed around year-end 1994, by which time the deink facility will
be operational. The deink facility addresses market demand for end-product
containing recycled fiber, provides modest incremental volume and permits the
introduction of distinctive, higher value grades of printing and writing
paper.
Chemical sector spending of $38 million included $13 million to
largely complete a $16 million expansion at the Widnes, England chemical
plant. This project provides a 60% increase in the capacity to produce an
aldehyde marketed under the trade name Lilestralis(R). The incremental volume
will be sold as a chemical intermediate used in the production of
agricultural fungicides.
Spending at domestic and international packaging plants totaled $33
million while investment at wood products facilities was $7 million.
At year-end 1993, purchase commitments related to capital
expenditures were approximately $80 million. Capital spending in 1994 is
expected to increase to about $350 million as the two large mill projects are
completed.
[The following information appears on page 30 of the Union Camp
1993 Annual Report under the caption "Quarterly Information" and is
incorporated by reference in Item 5 of this report on Form 10-K.]
Quarterly Information
<TABLE>
<CAPTION>
($ in thousands, except
share and per share)
Dividends Stock Price*
per Share High Low
<S> <C> <C> <C>
1993
Fourth Quarter $.39 $48-1/2 $38-3/4
Third Quarter .39 46-3/8 41-1/8
Second Quarter .39 46-3/8 41-1/2
First Quarter .39 49-1/8 41-1/8
1992
Fourth Quarter $.39 $48-1/4 $40-1/8
Third Quarter .39 48-5/8 41-1/4
Second Quarter .39 54 44-1/2
First Quarter .39 55-1/8 49
1991
Fourth Quarter $.39 $51-1/2 $43-1/8
Third Quarter .39 47-1/2 41
Second Quarter .39 47-5/8 40-5/8
First Quarter .39 44-1/8 34-3/4
* The company's common stock is listed on the New York Stock Exchange and the Pacific Stock Exchange. The number of
stockholders of record at December 31, 1993 was 9,890.
<PAGE>
</TABLE>
[The following information appears on pages 42 and 43 of the Union Camp
1993 Annual Report and is incorporated by reference in Item 6 of this report
on Form 10-K.]
<TABLE>
<CAPTION>
($ in thousands, except per share)
Operating Results 1993 1992 1991 1990
<S> <C> <C> <C> <C>
Net Sales . . . . . . . . . . . . . . . . $ 3,120,421 $ 3,064,358 $ 2,967,138 $ 2,839,704
Costs and Other Charges . . . . . . . . 2,908,797 2,883,782* 2,692,148 2,469,017
Income From Operations . . . . . . . . . 211,624 180,576 274,990 370,687
Interest Expense . . . . . . . . . . . . 124,911 136,240 81,750 31,228
Other (Income)-Net. . . . . . . . . . . . (13,425) (21,074) (11,748) (26,559)
Income Before Income Taxes, Extraordinary
Item, and Accounting Changes . . . . . . 100,138 65,410 204,988 366,018
Income Taxes . . . . . . . . . . . . . . 50,095 22,755 76,978 136,427
Extraordinary Item, net of tax . . . . . - (7,228) (3,220) -
Effect of Accounting Changes, net of tax - 40,806 - -
Net Income . . . . . . . . . . . . . . . 50,043 76,233 124,790 229,591
Per Common Share
Net Income . . . . . . . . . . . . . . . 0.72 1.10 1.80 3.35
Dividends . . . . . . . . . . . . . . . 1.56 1.56 1.56 1.54
Stockholders' Equity . . . . . . . . . . 26.00 27.01 27.88 27.60
Financial Position
Current Assets . . . . . . . . . . . . . 910,718 1,016,117 909,990 859,532
Current Liabilities . . . . . . . . . . 909,372 892,115 764,916 642,776
Working Capital . . . . . . . . . . . . 1,346 124,002 145,074 216,756
Total Assets . . . . . . . . . . . . . . 4,685,033 4,745,197 4,697,714 4,403,354
Long-Term Debt . . . . . . . . . . . . . 1,244,907 1,289,706 1,348,157 1,221,597
Deferred Income Taxes . . . . . . . . . 583,155 553,871 627,120 589,477
Stockholders' Equity . . . . . . . . . . 1,815,848 1,881,878 1,936,256 1,910,643
Percent of Long-Term Debt to Total
Capital . . . . . . . . . . . . . . . . 34.2% 34.6% 34.5% 32.8%
Additional Data
Cash Provided by Operations . . . . . . 418,420 268,865 375,041 386,036
Capital Expenditures (excluding
acquisitions) . . . . . . . . . . . . . 310,113 219,654 482,638 934,452
Depreciation & Cost of Company
Timber Harvested . . . . . . . . . . . . 242,883 237,531 209,120 217,416
Tons Sold-Paper & Paperboard
Products . . . . . . . . . . . . . . . . 3,291,255 3,242,511 3,004,980 2,835,549
Average Shares of Common Stock
Outstanding . . . . . . . . . . . . . . 69,740,458 69,604,174 69,270,992 68,550,315
<CAPTION>
1989 1988 1987 1986
<S> <C> <C> <C> <C>
Net Sales . . . . . . . . . . . . . . . . $2,761,337 $ 2,660,918 $ 2,361,684 $ 2,092,247
Costs and Other Charges . . . . . . . . . 2,266,561 2,167,264 1,979,788 1,844,957
Income From Operations . . . . . . . . . 494,776 493,654 381,896 247,290
<PAGE>
Interest Expense. . . . . . . . . . . . . 47,800 50,527 61,294 59,702
Other (Income)-Net. . . . . . . . . . . . (22,302) (24,882) (22,272) (18,756)
Income Before Income
Taxes, Extraordinary
Item, and Accounting Changes . . . . . 469,278 468,009 342,874 206,344
Income Taxes. . . . . . . . . . . . . . . 169,878 172,863 135,391 76,410
Extraordinary Item, net of tax. . . . . . - - - -
Effect of Accounting Changes,
net of tax . . . . . . . . . . . . . . . - - - -
Net Income . . . . . . . . . . . . . . . 299,400 295,146 207,483 129,934
Per Common Share
Net Income . . . . . . . . . . . . . . . 4.35 4.25 2.83 1.77
Dividends . . . . . . . . . . . . . . . 1.42 1.22 1.14 1.09
Stockholders' Equity . . . . . . . . . . 25.47 22.66 20.24 18.62
Financial Position
Current Assets . . . . . . . . . . . . . 721,195 769,323 753,683 626,481
Current Liabilities . . . . . . . . . . 366,962 326,079 295,618 275,665
Working Capital . . . . . . . . . . . . 354,233 443,244 458,065 350,816
Total Assets . . . . . . . . . . . . . . 3,413,862 3,094,414 2,919,115 2,776,602
Long-Term Debt . . . . . . . . . . . . . 690,149 627,928 632,706 651,539
Deferred Income Taxes . . . . . . . . . 581,835 581,080 538,774 478,829
Stockholders' Equity . . . . . . . . . . 1,754,524 1,559,327 1,452,017 1,370,569
Percent of Long-Term
Debt to Total Capital . . . . . . . . 22.8% 22.7% 24.1% 26.1%
Additional Data
Cash Provided by Operations . . . . . . 526,685 518,978 447,261 336,661
Capital Expenditures (excluding
acquisitions) . . . . . . . . . . . . 556,268 358,671 188,587 212,789
Depreciation & Cost of
Company Timber Harvested . . . . . . . 204,572 190,611 180,015 168,457
Tons Sold-Paper &
Paperboard Products . . . . . . . . . 2,726,105 2,733,205 2,675,541 2,656,920
Average Shares of Common Stock
Outstanding . . . . . . . . . . . . . 68,836,229 69,433,734 73,391,106 73,533,126
<CAPTION>
1985 1984 1983
<S> <C> <C> <C>
Net Sales . . . . . . . . . . . . . . . . $1,865,871 $1,973,781 $1,688,254
Costs and Other Charges . . . . . . . . . 1,697,109 1,689,252 1,518,110
Income From Operations . . . . . . . . . 168,762 284,529 170,144
Interest Expense. . . . . . . . . . . . . 63,771 27,583 38,509
Other (Income)-Net. . . . . . . . . . . . (17,701) (18,355) (29,601)
Income Before Income Taxes, Extraordinary
Item, and Accounting Changes . . . . . 122,692 275,301 161,236
Income Taxes. . . . . . . . . . . . . . . 27,600 93,850 28,500
Extraordinary Item, net of tax. . . . . . - - -
Effect of Accounting Changes, net of tax. - - -
Net Income . . . . . . . . . . . . . . . 95,092 181,451 132,736
Per Common Share
Net Income . . . . . . . . . . . . . . . 1.30 2.48 1.81
Dividends . . . . . . . . . . . . . . . 1.09 1.09 1.00
Stockholders' Equity . . . . . . . . . . 17.92 17.63 16.37
Financial Position
Current Assets . . . . . . . . . . . . . 514,534 493,128 480,943
<PAGE>
Current Liabilities . . . . . . . . . . 344,996 295,757 286,244
Working Capital . . . . . . . . . . . . 169,538 197,371 194,699
Total Assets . . . . . . . . . . . . . . 2,660,609 2,566,880 2,381,204
Long-Term Debt . . . . . . . . . . . . . 592,464 608,180 620,344
Deferred Income Taxes . . . . . . . . . 408,057 371,562 277,427
Stockholders' Equity . . . . . . . . . . 1,315,092 1,291,381 1,197,189
Percent of Long-Term Debt to Total
Capital . . . . . . . . . . . . . . . 25.6% 26.8% 29.6%
Additional Data
Cash Provided by Operations . . . . . . 279,184 354,261 263,962
Capital Expenditures (excluding
acquisitions) . . . . . . . . . . . . 238,958 312,416 408,063
Depreciation & Cost of
Company Timber Harvested . . . . . . . 152,064 125,909 117,875
Tons Sold-Paper & Paperboard Products . 2,328,558 2,421,459 2,193,041
Average Shares of Common Stock
Outstanding . . . . . . . . . . . . . 73,328,341 73,210,921 73,096,215
* Includes a $57 million charge for estimated costs to enhance workplace safety.
Certain amounts have been reclassified to conform with the 1993 presentation.
</TABLE>
[The following information appears on pages 26 to 30 of the
Union Camp 1993 Annual Report in the text under the caption "Financial
Review" and is incorporated by reference in Item 7 of this report on Form
10-K.]
FINANCIAL REVIEW
Results of Operations
1993 was another disappointing earnings year for Union Camp and the
paper industry. Conditions which had adversely affected the previous three
years, namely, slow growth in the U.S. economy and excess paper industry
capacity were compounded by economic weakness overseas. More positively for
Union Camp, the company's non-paper businesses, wood products and chemicals,
posted record operating results in 1993, more than doubling their combined
operating profit over the prior year.
Earnings in 1993 were $50 million or $.72 per share, compared to
$76 million or $ 1.10 per share in 1992 and $125 million or $1.80 per share
in 1991.
Included in the 1993 results was a charge of $.23 per share to
record an increase in the federal income tax rate and a $.04 per share loss
from the sale of the School Supplies business. A $.17 per share gain from the
sale of land partially offset these charges. Earnings of $1.10 per share in
1992 included a gain of $.10 per share from the sale of land and several non-
recurring items which had the net effect of reducing earnings by $.04 per
share. These non-recurring items included the adoption of new accounting
standards for income taxes and postretirement benefits other than pensions,
the establishment of a $57 million reserve for workplace safety and an
extraordinary charge related to the refinancing of higher interest rate debt.
Demand for the company's paper products remained strong in 1993.
Total paper products shipments were 3.3 million tons, level with 1992.
Nevertheless, slow economic growth and the lingering effects of capacity
additions kept competition intense. Prices for the company's principal paper
products, linerboard and uncoated business papers, were under pressure for
<PAGE>
most of the year. However, some price relief was experienced in the
linerboard and corrugated container markets during the fourth quarter.
Overall, consolidated net sales increased almost 2% in 1993, mostly the
result of the wood products business which benefitted from continuing tight
lumber supply.
Turning to a comparison of 1992 with 1991, consolidated net sales
in 1992 were 3% above 1991. This increase was principally attributable to
higher shipments of uncoated free sheet and market pulp. Partially offsetting
this increase were lower price realizations for the company's principal paper
products.
In comparing 1992 earnings with 1991, about two-thirds of the
earnings decrease was attributable to higher interest expense due to a lower
level of capitalized interest following the completion of the mill
modernization and expansion program in 1991.
Operating results and other financial information for the company's
principal business segments are presented on page 40. A discussion of results
of operating segments follows.
Paper and Paperboard
The principal businesses in this segment are the company's kraft
paper and board mills, the bleached paper and board mills and the woodlands
operations, which supply fiber to both the paper mills and wood products
operations. Total mill shipments increased slightly in 1993; however, segment
sales were down 4% from 1992.
Operating profit was $101 million in 1993, compared to $193 million
in 1992 and $252 million in 1991. This decline in earnings began in 1990 and
was primarily the result of lower selling prices in linerboard and uncoated
business paper markets. A sluggish domestic economy, the economic downturn in
Europe and new industry supply in uncoated business papers were the primary
factors exerting the downward pressure on prices in 1993.
Kraft Paper and Board
Operating profit at the company's two kraft mills, Savannah,
Georgia and Prattville, Alabama declined by about 85% in 1993, almost
entirely a result of lower selling prices. Weakness in linerboard export
markets and lingering softness in the U.S. economy combined to exert more
downward pressure on domestic linerboard prices. Higher than normal industry
inventory levels at mid-year also contributed to price weakness. Domestic
linerboard prices averaged 11% below 1992 and volume was down 9%. In the
export markets, linerboard prices were 16% below the average of 1992 despite
an increase in volume.
In the second quarter, the company took machine downtime at the
Savannah mill in response to soft market conditions. Additional downtime was
taken in the third quarter to modify the mill's new linerboard machine.
In the fourth quarter, linerboard market conditions improved as the
demand for end-use corrugated containers increased in an expanding economy.
Domestic linerboard prices began to recover from depressed levels. Domestic
shipments strengthened, with volume up significantly compared to the fourth
quarter of 1992. Export linerboard shipments for the full year 1993 were up
as a result of a surge in linerboard exports late in the year.
Sales of other mill products, saturating kraft and unbleached
paper, were also down in 1993. Shipments of saturating kraft were off 9% and
prices slightly lower. Unbleached paper prices held level in 1993; however,
volume decreased.
<PAGE>
Direct manufacturing costs per ton in 1993 were level with the
prior year.
Fixed costs, principally overhead and administration costs
declined. However, depreciation charges increased slightly.
Operating profit increased by $14 million in 1992 over 1991.
Domestic linerboard volume increased 6%, primarily the result of capacity
additions made in the first half of 1991. Selling prices were flat
year-to-year.
Bleached Paper and Board
The company's Fine Paper Division produces white paper products at
two mills. The Eastover, South Carolina mill produces uncoated white paper
and market pulp. The Franklin, Virginia mill produces uncoated white paper as
well as coated and uncoated board. Customer sales increased 2% in 1993.
However, operating profit declined by about 25%.
In uncoated business papers, customer shipments were 7% ahead of
1992. However, sluggish domestic economic conditions, new industry capacity
and a notable increase in imports combined to reverse an upward trend in
uncoated business paper prices which occurred during the first eight months
of 1993 resulting in prices declining through year-end.
Bleached board volume strengthened 5% but selling prices faltered
as supply increased and prices ended the year below 1992.
Market pulp experienced a further sagging of prices below the
already depressed levels of 1992. Inventory over-supply and the relative
strength of the U.S. dollar were primary factors in this decline. Shipments
were down 21% from 1992.
Direct manufacturing costs per ton were up 2% in 1993, primarily
attributable to higher fiber costs. Fixed costs, excluding depreciation,
increased 5%. This increase occurred primarily in selling expense.
Depreciation charges, which rose 9%, reflected the full year's effect of a
capital project completed in late 1992 to install a new bleaching line at the
Franklin mill.
Shipments of uncoated business papers in 1992 were up 17% as a
result of increased capacity added at the Eastover mill in the third quarter
of 1991. Operating income was down approximately 50% in 1992. Weak pricing in
uncoated business papers was the major factor contributing to this
unfavorable earnings comparison.
Packaging
The Packaging segment includes the corrugated container, paper and
plastic bag, and folding carton businesses. Packaging products are produced
at 47 locations in the U.S. and six locations overseas. Demand for these
products remained strong in 1993. Customer sales were $1.3 billion, an
increase of 1% over 1992 and 5% above the prior year. Shipments were up 5%
and 8% in 1993 and 1992, respectively. Operating profit declined $7.6 million
to $29 million in 1993, primarily the result of lower earnings in paper and
plastic bag operations. In 1992, segment operating profit increased $20
million over 1991.
The Container Division is the largest of Union Camp's packaging
operations with 25 plants in 20 states. Its primary product is corrugated
containers. The division is also the largest domestic producer of heavy-duty
solid fiber containers.
<PAGE>
Operating margins improved in 1993. This was attributable to 4%
higher volume and lower linerboard costs. These factors more than offset a 3%
decline in average selling prices, which trended lower through the first ten
months of 1993 but firmed late in the year. In 1992, operating results were
well above 1991 with increases in volume and selling prices and lower fixed
costs.
International converting operations had another strong year in
1993. Almost 10% of the segment's volume was generated by these overseas
operations. Operating profit climbed 14%, primarily the result of the
increasing profitability of the company's Chilean box operation. Excluding
the Puerto Rico container plant, purchased in January 1993, the volume of
international converting shipments increased 21%.
The second largest of Union Camp's packaging operations, Flexible
Packaging, consists of three product lines: industrial/consumer packaging,
retail bags and specialty products. Operating profit from these lines was 45%
below 1992. The decline was attributable to higher operating and converting
costs within the multiwall bag operations and lower selling prices in grocer
bags and sacks and the plastic bag markets.
In 1992, profits were up almost 25% over the prior year, mostly as
a result of higher average selling prices and better mix in the multiwall bag
markets.
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 profit in 1993 was
level with the prior year and well above 1991.
Wood Products
The Wood Products segment had record earnings across all product
lines in 1993. Segment operating profit was $69 million compared to $26
million in 1992 and $3 million in 1991. Sales in 1993 were 26% above 1992 and
56% over 1991. Lumber operations were particularly strong in 1993 reflecting
continued strong demand and a tightness in supply. Prices averaged 30% above
1992 and volume was up 2%. Plywood profits also increased due to greater
demand for industrial products and prices, which were up 18% from 1992.
Particleboard operations were also very strong in 1993. Process improvements
raised volume 8% and prices were up 3%.
In 1992, favorable year-to-year comparisons also occurred. Prices
were up 15% for lumber and plywood products. Particleboard operating results
rebounded due to process improvements which added volume and led to good
operating efficiencies.
Chemical
The Chemical segment upgrades pulpmill by-products as well as other
raw materials into higher value products. Operating profit was a record $49
million in 1993, compared to $29 million in 1992 and $25 million in 1991. Net
sales were $519 million, an increase of 4% over 1992 and 10% above 1991.
Bush Boake Allen is the larger operating unit in this segment. The
business, an international producer of flavors, fragrances, seasonings,
essential oils and aroma chemicals, had sales of $336 million in 1993,
approximately two-thirds of segment revenues. Revenues and operating profit
increased in 1993 and 1992 driven by a recovery in the international aroma
and terpene chemical markets and strong performance in the U.S. flavor and
fragrance operations. Improved product margins due to lower raw material
prices, along with higher shipments relating to aroma chemicals, were the
primary factors for the earnings increase in both years.
<PAGE>
On February 22, 1994, the company's Board of Directors approved the
sale, in a public stock offering, of a minority interest, approximately 30%
to 35% in Bush Boake Allen, Inc. The establishment of Bush Boake Allen, Inc.
as a public company will provide a trading market for the equity securities
of this business and create additional opportunity to fund future expansion.
If the initial public offering is made, it will be by means of a prospectus
and will likely occur in the first half of 1994.
The company's tall oil business which is operated by the Chemical
Products Division, produces rosins and resins derived as by-products from the
kraft papermaking process. This business achieved significant improvement in
operating profit over 1992. Higher volume and lower raw material and fixed
costs were the primary factors in the earnings increase. In 1992, operating
results were well below the prior year principally due to decreased sales
volume within the oleo chemical business and higher manufacturing costs;
partially offsetting this were lower raw material costs and stronger pricing
in rosin products.
Summary
Income from operations increased $31 million in 1993 to a level of
$212 million. However, it should be noted that 1992 included a charge of $57
million for estimated costs to enhance workplace safety. Operating income in
1991 was $275 million. Earnings in all three years were affected by price
weakness in the company's principal paper products, the result of lingering
economic softness in the United States and an economic slowdown overseas.
Compounding these difficulties were the remaining effect of under-absorbed
business paper capacity.
More positively in 1993, the company's wood products and chemical
segments had record operating results.
Interest Expense
Net interest expense was $125 million in 1993 and $136 million in
1992, well above $82 million in 1991, almost entirely the result of lower
capitalized interest due to completion of the company's mill modernization
and expansion program in 1991.
Gross interest expense in 1993 was $133 million, down $17 million
from 1992 and $11 million below 1991. These reductions largely reflected the
company's program to refinance higher interest rate debt.
Other Income - net
Other income was $13 million in 1993, a decrease of $8 million from
1992 and $2 million above 1991. Included in 1993 were a $4.7 million loss
from the sale of the School Supplies business, lower levels of interest
income and insurance recoveries, higher currency exchange losses and other
non-operating items which more than offset an increase of $7 million in gains
from the sale of land. The increase in other income in 1992 versus 1991
reflects higher levels of interest income, gains from the sale of land and
other non-operating items.
Income Taxes
The effective rate for 1993 was 50% compared to 34.8% in 1992 and
37.6% in 1991. The increased rate in 1993 reflects the effect of a $16
million charge to align the deferred tax reserve with the new federal income
tax rate. Without this charge, the effective rate would have been 34%, almost
level with the prior year.
Financial Position, Liquidity
<PAGE>
and Capital Resources
The company's financial condition remains sound. Cash flow
generated from operations was $418 million in 1993, an increase of $150
million over 1992 and $43 million above 1991. These increases reflect
enhanced cash flow from working capital items including recovery of
approximately $61 million in federal income tax refunds accrued at year-end
1992.
At year-end 1993, the ratio of long-term debt to total capital
employed (the sum of long-term debt, deferred taxes and stockholders' equity)
was 34.2% compared to 34.6% at the end of 1992. Total debt to total capital
dropped from 42.5% to 41.7%. The company expects that total debt in 1994 will
increase slightly due to higher levels of capital spending.
Capital Expenditures
Capital spending totaled $310 million in 1993 compared with $220
million in 1992 and $483 million in 1991. The 1993 increase reflects the
first full year of spending in connection with two large projects at the
Savannah and Franklin mills, each of which is described below.
Paper mill spending of $199 million included $83 million for a
low-odor, energy-efficient, recovery boiler at the Savannah mill. This
project, now estimated at a cost of $165 million, will be completed in late
1994. The new boiler, which replaces two units, is believed to be among the
largest in the world. An initial $51 million was spent at the Franklin mill
on a project now estimated to cost $165 million which includes an office
paper recycle (deink) facility and enhancements to five paper machines.
Certain of the machine modifications were completed in 1993 and the remainder
will be completed around year-end 1994, by which time the deink facility will
be operational. The deink facility addresses market demand for end-product
containing recycled fiber, provides modest incremental volume and permits the
introduction of distinctive, higher value grades of printing and writing
paper.
Chemical sector spending of $38 million included $13 million to
largely complete a $16 million expansion at the Widnes, England chemical
plant. This project provides a 60% increase in the capacity to produce an
aldehyde marketed under the trade name Lilestralis(R). The incremental volume
will be sold as a chemical intermediate used in the production of
agricultural fungicides.
Spending at domestic and international packaging plants totaled $33
million while investment at wood products facilities was $7 million.
At year-end 1993, purchase commitments related to capital
expenditures were approximately $80 million. Capital spending in 1994 is
expected to increase to about $350 million as the two large mill projects are
completed.
Environmental Matters
The company invested approximately $23 million in environmental
control facilities in 1993. Over the past five years the investment was
approximately $163 million or about 7% of the $2.5 billion of capital
spending. This included environmental control elements of a large
modernization and expansion program completed in 1991.
Regulations proposed by the Environmental Protection Agency in late
1993 and currently scheduled for promulgation in late 1995 will require an
estimated capital investment of $200-$300 million during the period 1996
through 1998. At this stage in the process, quantification of cost is quite
<PAGE>
speculative and subject to variation both with respect to timing and
magnitude. Indications are, however, that the required investment can be
managed so that annual spending levels for such projects will not materially
detract from normal capital spending plans. The company also believes that
since its situation, in relative terms, is similar to that of its
competitors, compliance will not adversely affect its competitive position.
Dividends
Cash dividends paid in 1993 were $108.8 million. The annual
dividend rate was $1.56 per share in 1993,1992 and 1991. Stockholders'
dividends are paid quarterly.
Acquisitions and Dispositions
In January 1993, the company acquired a leading manufacturer of
corrugated containers in Puerto Rico at a cost of $16 million. The plant,
which has production capacity of 28 thousand tons, is supplied with
linerboard from the company's mills in Savannah, GA and Prattville, AL.
In May 1993, the company discontinued the operation of its School
Supplies Division and sold a majority of the assets for approximately $32
million. This division had net sales of $9 million in 1993 and $51 million in
1992. In connection with this transaction, the company recognized a pre-tax
loss of $4.7 million
Accounting Matters
In the third quarter of 1993, the company increased its federal
income tax provision to reflect an enacted tax rate increase. Under SFAS No.
109, "Accounting for Income Taxes", the company was required to increase its
deferred tax liability by $16 million to reflect the 1% rate increase.
The 1992 results included the effects of adopting two new
accounting standards, "Employers' Accounting for Postretirement Benefits
Other Than Pensions" and "Accounting for Income Taxes". The new accounting
standards resulted in a cumulative after-tax increase to income of $40.8
million. Income from operations in 1992 included a pre-tax charge of $57
million for estimated costs to enhance workplace safety.
In November 1992, the Financial Accounting Standards Board issued
SFAS No. 112, "Employers' Accounting for Postemployment Benefits" which must
be adopted no later than the first quarter of 1994. This standard pertains to
benefits provided to former or inactive employees after employment but before
retirement. Management currently estimates the amount of this obligation to
be approximately $8 million relating to disability and certain health care
and life insurance benefits.
Impact of Inflation
In 1993, the rate of inflation was minimal.
[The following information appears on pages 32 to 40 of the Union
Camp 1993 Annual Report and is incorporated by reference in Item 8 of this
report on Form 10-K.]
CONSOLIDATED INCOME
<TABLE>
($in thousands, except per share)
<CAPTION>
For The Years Ended December 31, 1993 1992 1991
<PAGE>
<S> <C> <C> <C>
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,120,421 $ 3,064,358 $ 2,967,138
Costs and other charges:
Costs of products sold. . . . . . . . . . . . . . . . . . . . . . . 2,360,298 2,290,717 2,195,299
Selling and administrative expenses . . . . . . . . . . . . . . . . 305,616 298,534 287,729
Depreciation and cost of company timber harvested . . . . . . . . . 242,883 237,531 209,120
Special charge. . . . . . . . . . . . . . . . . . . . . . . . . . . - 57,000 -
Income from operations . . . . . . . . . . . . . . . . . . . . . . 211,624 180,576 274,990
Interest expense. . . . . . . . . . . . . . . . . . . . . . . . . . . 124,911 136,240 81,750
Other (income)-net. . . . . . . . . . . . . . . . . . . . . . . . . . (13,425) (21,074) (11,748)
Income before income taxes, extraordinary item
and cumulative effect of accounting changes . . . . . . . . . . 100,138 65,410 204,988
Income taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50,095 22,755 76,978
Net income before extraordinary item and
cumulative effect of accounting changes . . . . . . . . . . . . 50,043 42,655 128,010
Extraordinary item: loss on early retirement of debt, net of tax. . . - (7,228) (3,220)
Cumulative effect of accounting changes, net of tax . . . . . . . . . - 40,806 -
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,043 $ 76,233 $ 124,790
Earnings per share:
Net income before extraordinary item and
cumulative effect of accounting changes . . . . . . . . . . . . $.72 $.61 $1.85
Extraordinary item . . . . . . . . . . . . . . . . . . . . . . . . - (.10) (.05)
Cumulative effect of accounting changes . . . . . . . . . . . . . - .59 -
Net income per share . . . . . . . . . . . . . . . . . . . . . . . $.72 $1.10 $1.80
See the accompanying notes to consolidated financial statements.
</TABLE>
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, ($ in thousands)
<S> <C> <C>
ASSETS 1993 1992
Current Assets
Cash and cash equivalents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,287 $ 67,683
Receivables-net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 389,549 427,232
Inventories. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 442,518 467,438
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40,364 53,764
910,718 1,016,117
Property
Plant and equipment, at cost. . . . . . . . . . . . . . . . . . . . . . . . . . . 5,938,975 5,707,937
Less: accumulated depreciation. . . . . . . . . . . . . . . . . . . . . . . . . . 2,540,253 2,346,757
3,398,722 3,361,180
Timberlands, less cost of company timber harvested. . . . . . . . . . . . . . . . 247,368 244,637
3,646,090 3,605,817
Other Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128,225 123,263
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,685,033 $4,745,197
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
Current installments of long-term debt. . . . . . . . . . . . . . . . . . . . . . $ 45,869 $ 98,194
Notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 426,229 415,293
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 219,663 183,918
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179,380 166,900
Income and other taxes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,231 27,810
909,372 892,115
Long-Term Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,244,907 1,289,706
Deferred Income Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 583,155 553,871
Other Long-Term Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 131,751 127,627
Stockholders' Equity
Common stock-par value $1.00 per share. . . . . . . . . . . . . . . . . . . . . 69,833 69,664
Capital in excess of par value. . . . . . . . . . . . . . . . . . . . . . . . . 81,491 75,908
Other equity adjustments. . . . . . . . . . . . . . . . . . . . . . . . . . . . (24,176) (11,158)
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,688,700 1,747,464
Shares outstanding, 1993-69,833,130; 1992-69,663,853
Stockholders' Equity-Net . . . . . . . . . . . . . . . . . . . . . . . . . 1,815,848 1,881,878
Total Liabilities and Stockholders's Equity. . . . . . . . . . . . . . . . $ 4,685,033 $4,745,197
See the accompanying notes to consolidated financial statements.
</TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
($ in thousands)
For the Years Ended December 31, 1993 1992 1991
<S> <C> <C> <C>
Cash Provided By Operations:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 50,043 $ 76,233 $ 124,790
Adjustments to reconcile net income to cash provided by
operations:
Depreciation, amortization and cost of company
timber harvested . . . . . . . . . . . . . . . . . . . . . . . . 261,518 253,087 219,210
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . 33,838 62,278 34,590
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6,744) 2,305 (2,517)
Changes in operational assets and liabilities:
Receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . 42,083 (84,879) (8,728)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,382) (23,519) (42,292)
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . 7,264 (10,178) 32,321
Accounts payable, taxes and other liabilities . . . . . . . . . . 33,800 (6,462) 17,667
Cash Provided by Operations . . . . . . . . . . . . . . . . . 418,420 268,865 375,041
Cash (Used For) Provided By Investment Activities:
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . (310,113) (219,654) (482,638)
Payments for acquired businesses . . . . . . . . . . . . . . . . . . (11,855) (11,862) (20,217)
Proceeds from sale of businesses-net . . . . . . . . . . . . . . . . 34,451 - -
Proceeds from sale of assets . . . . . . . . . . . . . . . . . . . . 27,612 15,727 11,913
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,818 5,942 (23,295)
(242,087) (209,847) (514,237)
Cash (Used For) Provided By Financing Activities:
Proceeds from issuance of long-term debt . . . . . . . . . . . . . . 21,278 294,630 353,190
Repayments of long-term debt . . . . . . . . . . . . . . . . . . . . (117,588) (267,126) (224,103)
Change in short-term notes payable . . . . . . . . . . . . . . . . . 310 30,237 128,741
<PAGE>
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . (108,807) (108,592) (108,197)
(204,807) (50,851) 149,631
Effect of exchange rate changes on cash . . . . . . . . . . . . . . . (922) (1,414) (1,257)
Increase (decrease) in cash and cash equivalents. . . . . . . . . . . (29,396) 6,753 9,178
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . 67,683 60,930 51,752
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . $ 38,287 $ 67,683 $ 60,930
See the accompanying notes to consolidated financial statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands, except per share)
1.Significant Accounting Policies
Principles of Consolidation
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.
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 a period not to exceed 20 years.
Research and Development Costs
<PAGE>
Research and development costs are expensed as incurred. These
expenditures totaled $45.9 million in 1993, $44.5 million in 1992 and
$42.6 million in 1991.
Capitalized Interest
Interest is capitalized on major capital expenditures during the period
of construction. Total interest costs incurred and amounts capitalized
were:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Total interest. . . . . . . . . $133,117 $ 149,620 $144,451
Interest capitalized. . . . . . (8,206) (13,380) (62,701)
Net interest expense. . . . . . $124,911 $ 136,240 $ 81,750
</TABLE>
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.
Changes in Accounting Standards
In 1992, the company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) Nos. 106 and 109, "Employers'
Accounting for Postretirement Benefits Other Than Pensions" and "Accounting
for Income Taxes", respectively. The new accounting standards resulted in a
cumulative after-tax increase to income of $40.8 million. (See Notes 7 and
9).
Postemployment Benefits
In November 1992, the Financial Accounting Standards Board issued
SFAS No. 112, "Employers' Accounting for Postemployment Benefits" which must
be adopted no later than the first quarter of 1994. This standard pertains to
benefits provided to former or inactive employees after employment but before
retirement. Management currently estimates the amount of this obligation to
be approximately $8 million relating to disability and certain health care
and life insurance benefits.
Income taxes
As noted above, the company has adopted the provisions of SFAS No.
109, which requires deferred income taxes to be recorded using enacted tax
rates in effect for the year the differences are expected to reverse. In 1993
the federal corporate income tax rate was increased from 34% to 35%.
Consequently, the deferred tax provision and the liability for deferred taxes
include a charge to reflect the full amount of the rate change on amounts
previously recorded.
Federal and state income taxes are not accrued on the cumulative
undistributed earnings of foreign subsidiaries because the earnings have been
reinvested in the businesses of those companies. As of December 31, 1993, the
total of all such undistributed earnings amounted to $103.6 million. (See
also Note 7).
Foreign Currency Translation
<PAGE>
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 reflected in a separate component of
Stockholders' Equity entitled Other Equity Adjustments. The effect of these
cumulative adjustments was to reduce equity by $23.5 million at December 31,
1993 and $9.8 million at December 31, 1992.
Foreign exchange contracts are entered into to hedge the effect of
foreign currency rate fluctuations. The gains and losses on contracts that
are designated as hedges are deferred and recorded on the basis of the
underlying transaction. The gains and losses on other contracts are
recognized as incurred.
At December 31, 1993, foreign currency forward contracts hedging
firm commitments totaled approximately $55 million, primarily denominated in
European currencies. These contracts matured in January 1994.
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 1991 and 1992 to conform
with the 1993 presentation.
2. Special Charge
In the first quarter of 1992, the company recorded a $57 million
pre-tax charge to operating income relating to the establishment of a reserve
for the estimated cost of enhancing workplace safety. The reserve was the
result of a company-wide self-assessment program which identified
expenditures which are expected to be completed in 1994.
3. Other Income
Other income for 1993 includes gains of $18.0 million attributable
to the sale of land. The years 1992 and 1991 included similar gains of $10.6
million and $8.3 million, respectively.
4. Supplemental Balance Sheet Information
Restricted Cash
Included within cash and cash equivalents at December 31, 1992 was
approximately $55 million set aside for the repayment of specific debt in
February 1993.
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
<PAGE>
Receivables
Trade . . . . . . . . . . . . . . . . . . . . . . . . . $365,504 $342,365
Net refundable income taxes . . . . . . . . . . . . . . 7,035 64,728
Other . . . . . . . . . . . . . . . . . . . . . . . . . 31,636 34,706
404,175 441,799
Less: estimated doubtful accounts, discounts
and allowances. . . . . . . . . . . . . . . . . . . . . 14,626 14,567
Net . . . . . . . . . . . . . . . . . . . . . . . . . . $389,549 $427,232
Inventories
Finished goods. . . . . . . . . . . . . . . . . . . . . $228,863 $253,784
Raw materials . . . . . . . . . . . . . . . . . . . . . 91,685 84,902
Supplies. . . . . . . . . . . . . . . . . . . . . . . . 121,970 128,752
Total. . . . . . . . . . . . . . . . . . . . . . . . $442,518 $467,438
</TABLE>
At December 31, 1993 and 1992, finished goods and raw materials totaling
$221.8 million and $240.5 million, respectively, were valued at LIFO cost.
The excess of current cost over LIFO value was $76.0 million and $79.3
million in 1993 and 1992, respectively.
<TABLE>
<S> <C> <C>
Other Current Assets
Short-term timber leases. . . . . . . . . . . . . . . . $ 20,305 $ 21,015
Prepayments . . . . . . . . . . . . . . . . . . . . . . 15,905 19,652
Assets held for resale. . . . . . . . . . . . . . . . . 4,154 13,097
Total . . . . . . . . . . . . . . . . . . . . . . . . . $ 40,364 $ 53,764
Plant and Equipment, at cost
Land. . . . . . . . . . . . . . . . . . . . . . . . . . $ 36,831 $ 35,345
Buildings and improvements. . . . . . . . . . . . . . . 512,895 507,185
Machinery and equipment . . . . . . . . . . . . . . . . 5,158,902 5,078,345
Construction-in-progress. . . . . . . . . . . . . . . . 230,347 87,062
Total . . . . . . . . . . . . . . . . . . . . . . . . . $5,938,975 $5,707,937
</TABLE>
At December 31, 1993, property (principally machinery and
equipment) having an original cost of approximately $347 million and a net
book value of $145 million is pledged against lease obligations and notes
payable to industrial development authorities (see Note 5) which have
outstanding long-term balances totaling approximately $301 million.
The company's capital spending backlog under approved projects was
approximately $300 million at year-end 1993.
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Other Assets
Deferred pre-start-up . . . . . . . . . . . . . . . . . $ 29,108 $ 36,812
Goodwill. . . . . . . . . . . . . . . . . . . . . . . . 22,223 19,582
Pension assets. . . . . . . . . . . . . . . . . . . . . 24,713 13,920
Other intangibles . . . . . . . . . . . . . . . . . . . 19,061 22,948
Other . . . . . . . . . . . . . . . . . . . . . . . . . 33,120 30,001
Total . . . . . . . . . . . . . . . . . . . . . . . . . $128,225 $123,263
</TABLE>
Short-Term Debt
<PAGE>
Included in Notes payable at December 31, 1993 and 1992 were $386
million and $383 million, respectively, of commercial paper borrowings. The
weighted average interest rate on these borrowings for 1993 was 3.5%.
The company has uncommitted revolving credit facilities in numerous
countries outside the United States which provide for aggregate availability
of $46 million. At December 31, 1993 and 1992, approximately $33.5 million
and $29.0 million, respectively, was outstanding and included in short-term
borrowings. Commitment fees are either nominal or zero. Covenants, to the
extent they exist, are presently being met and are expected to be met in the
future.
At December 31, 1993, the company had an outstanding interest rate
swap agreement which effectively converted $25 million of floating rate
commercial paper to fixed rate debt. The swap agreement matured in January
1994. 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.
<TABLE>
<S> <C> <C>
Other Accrued Liabilities
Payrolls. . . . . . . . . . . . . . . . . . . . . . . . $ 54,010 $ 51,697
Interest. . . . . . . . . . . . . . . . . . . . . . . . 29,369 33,761
Special charge reserve. . . . . . . . . . . . . . . . . 21,422 19,318
Other . . . . . . . . . . . . . . . . . . . . . . . . . 74,579 62,124
Total . . . . . . . . . . . . . . . . . . . . . . . . . $179,380 $166,900
Other Long-Term Liabilities
Postretirement benefits . . . . . . . . . . . . . . . . $ 99,820 $ 93,649
Special charge reserve. . . . . . . . . . . . . . . . . - 18,873
Minimum pension liability . . . . . . . . . . . . . . . 10,063 -
Deferred revenue. . . . . . . . . . . . . . . . . . . . 4,808 -
Other . . . . . . . . . . . . . . . . . . . . . . . . . 17,060 15,105
Total . . . . . . . . . . . . . . . . . . . . . . . . $131,751 $127,627
</TABLE>
Fair Value Disclosures of Financial Instruments
The carrying amounts of certain financial instruments: cash,
short-term investments, trade receivables and payables approximate their fair
values. The fair values of long-term debt, forward foreign exchange contracts
and interest rate swaps vary with market conditions and are estimated based
on quoted market prices for similar financial instruments by obtaining quotes
from brokers.
At December 31, 1993, the book value of long-term debt was $1.2
billion and the fair value was approximately $1.4 billion. The book value of
all other financial instruments approximates their fair value.
5. Long-Term Debt
<TABLE>
<CAPTION>
December 31, 1993 1992
<S> <C> <C>
Sinking fund debentures:
8-5/8% due 1997-2016. . . . . . . . . . . . . . . . . $ 100,000 $ 100,000
10% due 2000-2019 . . . . . . . . . . . . . . . . . . 100,000 100,000
9-1/4% due 2002-2021. . . . . . . . . . . . . . . . . 125,000 125,000
Debentures 9-1/2% due 2002. . . . . . . . . . . . . . . 100,000 100,000
Debentures 9-1/4% due 2011. . . . . . . . . . . . . . . 125,000 125,000
Debentures 8-1/2% due 2022. . . . . . . . . . . . . . . 100,000 100,000
<PAGE>
Notes 7-3/8% due 1999 . . . . . . . . . . . . . . . . . 50,000 50,000
Medium-term notes due 1995-2001;
6% to 9-1/2%; weighted average
rate 9% . . . . . . . . . . . . . . . . . . . . . . . 230,000 270,000
Lease obligations under Industrial
Revenue Bonds; due 1995-2012;
4% to 8%; weighted average
rate 6-1/4% . . . . . . . . . . . . . . . . . . . . . 68,287 62,705
Notes payable to Industrial
Development Authorities;
due 1995-2022; 3-1/4% to 8%;
weighted average rate 6-1/2%. . . . . . . . . . . . . . 232,395 232,530
Other notes due 1995-2004 . . . . . . . . . . . . . . . 14,225 24,471
Total . . . . . . . . . . . . . . . . . . . . . . . . . $1,244,907 $1,289,706
</TABLE>
The current portion of long-term debt at December 31, 1993 amounted
to $45.9 million. Amounts payable in the years 1995 through 1998 are $31.3
million, $45.7 million, $96.1 million and $46.7 million, respectively.
In 1992, the company recorded an extraordinary loss of $11.6
million ($7.2 million after-tax) relating to the refinancing of high interest
rate debt. The year 1991 included a similar loss of $5.2 million ($3.2
million after-tax). No similar losses were recorded in 1993.
The company has revolving credit/term loan agreements which provide
for unsecured borrowings up to $500 million in the United States. 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 1993 under these agreements.
6. Supplemental Cash Flow Information
Cash paid for income taxes was $26.1 million in 1993, (offset by a
$64.7 million tax refund), $26.0 million in 1992 and $47.4 million in 1991.
Cash paid for interest, net of amounts capitalized, was $129.3 million in
1993, $135.5 million in 1992 and $73.4 million in 1991.
The following table summarizes non-cash investing and financing
activities related to the company's acquisitions in 1993 and 1992. There
were no significant non-cash investing and financing activities in 1991.
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Fair value of assets acquired . . . . . . . . . . . . . $ 21,399 $ 19,405
Less: cash paid . . . . . . . . . . . . . . . . . . . . 11,855 11,862
Liabilities incurred or assumed . . . . . . . . . . . . $ 9,544 $ 7,543
</TABLE>
7. Income Taxes
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Current:
Federal . . . . . . . . . . . . . . . . . $ 14,180 $(37,213) $ 37,589
State and local . . . . . . . . . . . . . (3,639) (7,953) (617)
Foreign . . . . . . . . . . . . . . . . . 5,716 5,643 5,416
<PAGE>
16,257 (39,523) 42,388
Deferred:
Federal . . . . . . . . . . . . . . . . . 27,317 51,845 25,885
State . . . . . . . . . . . . . . . . . . 3,944 6,807 7,094
Foreign . . . . . . . . . . . . . . . . . 2,577 3,626 1,611
33,838 62,278 34,590
Total . . . . . . . . . . . . . . . . . $ 50,095 $ 22,755 $ 76,978
</TABLE>
In 1992, the company adopted the provisions of SFAS 109. Under the
standard, deferred taxes represent liabilities to be paid or assets to be
received in the future and tax rate changes would immediately affect those
liabilities or assets. The implementation of this standard reduced the
deferred tax liability by $99.3 million at January 1, 1992. This resulted in
an increase in net income. In 1993 the federal corporate income tax rate was
increased from 34% to 35%. Consequently, the deferred tax provision and the
liability for deferred taxes were increased by $15.0 million for prior years
and $1.0 million for 1993 to reflect the full amount of the rate change.
Under this method, the cumulative deferred tax liability at
December 31, 1993 and 1992 was $583.2 million and $553.9 million,
respectively. The significant components of these liabilities (assets) are
as follows:
<TABLE>
<CAPTION>
December 31, 1993 1992
<S> <C> <C>
Deferred federal taxes:
Accelerated depreciation . . . . . . . . . . . . . . . $632,266 $564,699
Alternative minimum tax . . . . . . . . . . . . . . . . (94,253) (55,136)
Postretirement benefits . . . . . . . . . . . . . . . . (36,414) (31,833)
Other . . . . . . . . . . . . . . . . . . . . . . . . . 10,900 10,508
Total deferred federal taxes . . . . . . . . . . . . 512,499 488,238
Deferred state taxes . . . . . . . . . . . . . . . . . 55,424 51,346
Deferred foreign taxes . . . . . . . . . . . . . . . . 15,232 14,287
Total deferred taxes . . . . . . . . . . . . . . . . $583,155 $553,871
</TABLE>
A detailed analysis of the effective tax rate is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Statutory federal tax rate. . . . . . . . 35.0% 34.0% 34.0%
State taxes (net of federal tax impact) . 2.6 2.4 3.3
Foreign income taxes. . . . . . . . . . . (1.2) 1.3 0.1
Rate change . . . . . . . . . . . . . . . 15.0 - -
Other . . . . . . . . . . . . . . . . . . (1.4) (2.9) 0.2
Effective rate. . . . . . . . . . . . . . 50.0% 34.8% 37.6%
</TABLE>
8. Stockholders' Equity
<TABLE>
<CAPTION>
Capital In Other
Common Excess of Retained Equity
Stock Par Value Earnings Adjustments
<S> <C> <C> <C> <C>
Balance, December 31, 1990. . . . . . . . $ 67,420 $ 63,095 $ 1,763,230 $ 16,898
<PAGE>
Net Income. . . . . . . . . . . . . . . - - 124,790 -
Cash dividends ($1.56 per share). . . . - - (108,197) -
Issuance of stock for options and
award plans . . . . . . . . . . . . . . 245 7,620 - 111
Common stock subscribed for
acquisition . . . . . . . . . . . . . . 1,796 (1,796) - -
Foreign currency translation. . . . . . - - - (2,002)
Pension liability adjustment. . . . . . - - - 3,046
Balance, December 31, 1991. . . . . . . . 69,461 68,919 1,779,823 18,053
Net Income. . . . . . . . . . . . . . . - - 76,233 -
Cash dividends ($1.56 per share). . . . - - (108,592) -
Issuance of stock for options
and award plans . . . . . . . . . . . . 203 6,989 - 83
Foreign currency translation. . . . . . - - - (29,294)
Balance, December 31, 1992. . . . . . . . 69,664 75,908 1,747,464 (11,158)
Net Income. . . . . . . . . . . . . . . - - 50,043 -
Cash dividends ($1.56 per share). . . . - - (108,807) -
Issuance of stock for options and
award plans . . . . . . . . . . . . . . 169 5,583 - 758
Foreign currency translation. . . . . . - - - (13,776)
Balance, December 31, 1993. . . . . . . . $ 69,833 $ 81,491 $ 1,688,700 $(24,176)
</TABLE>
The authorized capital stock of the company at December 31, 1993,
1992 and 1991 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.
9. Postretirement 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
company funds its plan on a "pay-as-you-go" basis, in an amount equal to the
retirees' medical claims paid.
Effective January 1, 1992, the company adopted the provisions of
SFAS 106. The implementation of this standard resulted in a change in the
company's method of accounting for postretirement health care benefits from
the "pay-as-you-go" to the accrual basis. In adopting this standard, the
company recorded an accumulated postretirement benefit obligation (APBO) of
$93.6 million as a cumulative charge against income.
The components of the APBO as of December 31, 1993 and 1992 are as
follows:
<TABLE>
<CAPTION>
1993 1992
<S> <C> <C>
Retirees. . . . . . . . . . . . . . . . . . . . . . . . $ 66,715 $ 56,318
Fully eligible active
plan participants . . . . . . . . . . . . . . . . . . 14,579 21,248
Other active plan participants. . . . . . . . . . . . . 27,465 21,083
108,759 98,649
Unrecognized net gain (loss). . . . . . . . . . . . . . (4,584) -
Accrued postretirement
benefit obligation. . . . . . . . . . . . . . . . . . $104,175 $ 98,649
</TABLE>
The components of the postretirement benefit expense for the years
ended December 31, 1993 and 1992 are as follows:
<PAGE>
<TABLE>
<S> <C> <C>
Service cost-benefits earned during period. . . . . . . $ 3,344 $ 2,744
Interest cost on accumulated
benefit obligation. . . . . . . . . . . . . . . . . . 7,369 7,278
Postretirement benefit expense. . . . . . . . . . . . . 10,713 10,022
</TABLE>
The discount rates used to determine the accumulated postretirement
benefit obligation for 1993 and 1992 were 7.25% and 8.0%, respectively. The
discount rate used to determine the annual postretirement benefit expense was
8.0% for both years.
For measurement purposes, a 12% increase in the medical cost trend
rate was assumed for 1993. This rate decreases incrementally to 5.5% after
eleven years 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, 1993 by $12.5 million
and the postretirement benefit expense for 1993 by $1.6 million.
The cost of retiree benefits under the previous "pay-as-you-go"
basis was $4.3 million in 1991.
10. 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 $14.6 million, $9.7 million and $21.8 million
for the years 1993, 1992 and 1991, respectively. The following tables set
forth the funded status of all pension plans for 1993 and 1992 and the
components of pension expense of all pension plans in 1993, 1992 and 1991:
<TABLE>
<CAPTION>
December 31,
1993 1992
Domestic Plans Domestic Plans
Assets in Accumulated Foreign Assets in Accumulated Foreign
excess of benefits in Plans excess of benefits in Plans
accumulated excess of accumulated excess of
benefits assets benefits assets
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation $377,840 $ 214,944 $ 88,117 $ 317,035 $ 189,725 $ 65,254
Accumulated benefit
obligation . . . . . . . . 392,658 227,762 89,049 329,692 201,022 65,866
Projected benefit
obligation . . . . . . . . 480,549 228,657 117,903 405,737 201,877 93,015
Plan assets at fair value . 451,161 198,557 127,592 415,248 186,917 98,698
Projected benefit obligation
in excess of (less than)
plan assets . . . . . . . . 29,388 30,100 (9,689) (9,511) 14,960 (5,683)
Unrecognized net gain (loss) (36,696) 18,914 (8,971) (3,755) 26,751 (11,685)
Unrecognized prior service
cost. . . . . . . . . . . . (112) (16,751) (21) (124) (15,053) (27)
Unrecognized transition
<PAGE>
asset (obligation). . . . . (382) (13,121) 4,123 (449) (15,327) 4,767
Adjustment to recognize
minimum liability . . . . . - 10,063 - - - -
Pension liability (asset)
recorded on Balance Sheet . $ (7,802) $ 29,205 $ (14,558) $ (13,839) $ 11,331 $(12,628)
</TABLE>
At December 31, 1993 and 1992, the discount rates used to determine
the pension benefit obligation were 7.25% and 8.0% for the U.S. plans and
7.5% and 9.5% for the foreign plans, respectively.
The pension expense for these plans included the following
components:
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Service cost-benefits earned during
the period . . . . . . . . . . . . . . . $ 20,936 $ 20,510 $ 19,779
Interest cost on projected benefit
obligations . . . . . . . . . . . . . . . 56,133 53,927 53,630
Actual return on assets . . . . . . . . . (120,589) (60,884) (131,349)
Net amortization and deferral . . . . . . 58,075 (3,868) 79,778
Total pension expense . . . . . . . . . . $ 14,555 $ 9,685 21,838
</TABLE>
The discount rates used to establish annual domestic pension
expense were 8.0% for the years 1993 and 1992 and 8.5% for 1991. The salary
progression rate for domestic plans was 5.5% for each year. The expected
long-term rate of return on domestic plan assets was 9.5% for each year.
For the foreign plans, the discount rates used to establish annual
pension expense were 9.5%, 10.0% and 10.5%, for 1993, 1992 and 1991,
respectively. The salary progression rates were 7.5% for 1993 and 7% for
1992 and 1991. The expected long-term rate of return on plan assets was
11.5% for each year.
11. Employee Stock Option Plans
Under the stock option plans adopted in 1982 and 1989 (as amended),
a maximum of 2,175,000 shares and 2,896,638 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
1993, 392,753 shares were available for future grants under the 1989 plan.
The number of options exercisable at year-end 1993 was 1,729,978.
Under the 1989 plan, 579,327 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. At December 31, 1993,
96,396 common shares have been issued as restricted stock under this plan.
Unearned compensation, equivalent to the market value of the restricted
shares at date of grant, is included within Stockholders' Equity and is
amortized to expense over the restricted period.
<PAGE>
The following table summarizes activity in the company's stock
option plans during 1993, 1992 and 1991. The options outstanding at December
31, 1993 having related stock appreciation rights attached totaled 965,844.
<TABLE>
<CAPTION>
1993 1992 1991
<S> <C> <C> <C>
Options outstanding beginning of year . . . . . . . 2,517,119 2,217,117 2,013,146
Granted - $33.81 to $52.38 per share . . . . . . . 617,860 559,200 496,920
Exercised - $14.75 to $38.31 per share . . . . . . (177,605) (190,071) (217,684)
Cancelled - $14.75 to $45.63 per share . . . . . . (62,736) (69,127) (75,265)
Options outstanding end of year . . . . . . . . . . 2,894,638 2,517,119 2,217,117
</TABLE>
12. Commitments and Contingent Liabilities
The company is involved in various legal proceedings arising in the
ordinary course of business. Based upon the information presently available
and the company's evaluation of the proceedings pending, management believes
that the adverse determination of any such proceedings or all of them
combined will not have a material adverse effect on the company's business or
financial position or results of operations.
The company has guaranteed repayment of a five year term loan up to
$15 million made by a financial institution to an unrelated entity. The
guarantee is secured by the borrower's assets and stock.
13. Subsequent Event
On February 22, 1994, the company's Board of Directors approved the
sale, in a public stock offering of a minority interest, approximately 30% to
35%, in Bush Boake Allen, Inc. Bush Boake Allen, Inc. is the larger
operating unit within the Chemical segment with net sales for 1993 of $336
million and total assets of $303 million as of December 31, 1993. It is
expected that the initial public offering will be made in the first half of
1994.
14. Segment Information
Operating results and other financial data are presented for the
principal business segments of the company for the years ended December 31,
1993, 1992 and 1991.
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 inventory 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. The
company's real estate operations have been included within corporate items.
Capital expenditures are reported exclusive of acquisitions.
<PAGE>
Total revenue and operating profit from the company's foreign
subsidiaries were $372 million and $31 million in 1993, $371 million and $26
million in 1992, and $330 million and $22 million in 1991. 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 $209 million in 1993, $249
million in 1992 and $203 million in 1991.
<TABLE>
Paper and Packaging Wood Corporate
Paperboard Products Products Chemical Items Consolidated
<S> <C> <C> <C> <C> <C> <C>
1993
Sales to Customers. . . . . $ 1,057,100 $1,251,875 $ 261,569 $ 517,090 $ 32,787 $ 3,120,421
Intersegment Sales. . . . . 594,126 6,513 24 1,647 (602,310)* -
Total Revenue . . . . . . . 1,651,226 1,258,388 261,593 518,737 (569,523) 3,120,421
Operating Profit. . . . . . 101,482 29,483 69,080 48,931 (37,352)** 211,624
Identifiable Assets . . . . 3,320,737 666,004 95,997 385,392 216,903 4,685,033
Depreciation & Cost of
Company Timber Harvested . 175,470 35,514 10,708 16,535 4,656 242,883
Capital Expenditures. . . . 228,859 32,948 7,392 38,813 2,101 310,113
1992
Sales to Customers. . . . . $ 1,097,316 $1,235,258 $ 206,826 $ 499,188 $ 25,770 $ 3,064,358
Intersegment Sales. . . . . 617,547 5,392 80 709 (623,728)* -
Total Revenue . . . . . . . 1,714,863 1,240,650 206,906 499,897 (597,958) 3,064,358
Operating Profit. . . . . . 192,816 37,078 26,330 29,446 (105,094)** 180,576
Identifiable Assets . . . . 3,311,033 654,820 93,977 345,800 339,567 4,745,197
Depreciation & Cost of
Company Timber Harvested . 166,718 35,220 10,953 21,778 2,862 237,531
Capital Expenditures. . . . 151,241 33,153 2,774 29,702 2,784 219,654
1991
Sales to Customers. . . . . $ 1,045,862 $1,197,824 $ 167,798 $ 470,880 $ 84,774 $ 2,967,138
Intersegment Sales. . . . . 568,512 5,462 103 146 (574,223)* -
Total Revenue . . . . . . . 1,614,374 1,203,286 167,901 471,026 (489,449) 2,967,138
Operating Profit. . . . . . 251,816 17,404 3,169 25,087 (22,486)** 274,990
Identifiable Assets . . . . 3,304,757 670,502 102,656 357,943 261,856 4,697,714
Depreciation & Cost of
Company Timber Harvested . 133,459 37,781 11,790 21,084 5,006 209,120
Capital Expenditures. . . . 394,987 50,273 2,515 22,799 12,064 482,638
*Elimination of Intersegment Sales.
**Includes intersegment eliminations and unallocated corporate, technology and engineering expenses of $49,075 in 1993,
$50,286 in 1992, and $48,009 in 1991. 1992 also includes a $57.0 million charge for estimated costs to enhance workplace
safety. If this amount had been allocated to segment operating profit in 1992, Paper and Paperboard operating profit would
have been $148.8 million, Packaging operating profit would have been $30.5 million, Wood Products operating profit would have
been $25.6 million, Chemical operating profit would have been $23.8 million and Corporate Items would have been $(48.1)
million.
</TABLE>
[The following text appears on page 31 of the Union Camp 1993
Annual Report under the caption "Report of Independent Accountants" and is
incorporated by reference in Item 14 of this report on Form 10-K.]
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
UNION CAMP CORPORATION
<PAGE>
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, 1993 and 1992, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1993, 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 described in Note I to the consolidated financial statements, the
Company elected to adopt Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions," and
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes," in 1992.
PRICE WATERHOUSE
Morristown, New Jersey
February 11, 1994, except as
to Note 13, which is as of
February 22, 1994
[EXHIBIT 23]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Registration Nos. 2-66214, 33-23952, 33-25455, 33-
25454, 33-28396, 33-30599, 2-91519, 33-60428, 33-60426) of Union Camp
Corporation of our report dated February 11, 1994, except as to Note 13,
which was as of February 22, 1994, appearing on page 31 of the 1993 Annual
Report to Stockholders which is incorporated in this Annual Report on Form
10-K. We also consent to the incorporation by reference of our report on the
Financial Statement Schedules, which appears on page 27 of this Form 10-K.
PRICE WATERHOUSE
Morristown, New Jersey
March 24, 1994
<PAGE>
