<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to __________________
Commission file Number 1-4001
UNION CAMP CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
VIRGINIA 13-5652423
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
1600 VALLEY ROAD, WAYNE, NEW JERSEY 07470
(Address of Principal Executive Offices) (Zip Code)
(201) 628-2000
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to such filing requirements
for the past 90 days.
YES X NO _________
70,142,266 shares of Registrant's Common Stock, Par Value $1 Per Share, were
outstanding as of the close of business on June 30, 1995.
<PAGE>
UNION CAMP CORPORATION
INDEX
Page
----
Part I. FINANCIAL INFORMATION*
Item 1. Financial Statements. 2
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations. 7
Part II. OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 6. Exhibits and Reports on Form 8-K 11
----------------
*A summary of the Registrant's significant accounting policies is contained in
the Registrant's Form 10-K for the year ended December 31, 1994 which has
previously been filed with the Commission.
<PAGE>
PART I. FINANCIAL INFORMATION
Item I. Financial Statements.
UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
($ in thousands, except per share)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------------------- ------------------------------
1995 1994 1995 1994
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
Net Sales $ 1,109,295 $ 827,217 $ 2,130,441 $ 1,617,323
Costs and other charges:
Cost of products sold 693,129 635,131 1,355,958 1,247,103
Selling and administrative expenses 98,634 79,270 189,268 153,564
Depreciation and cost of timber harvested 68,487 62,006 134,851 124,546
Other operating charge - 13,958 - 13,958
------------- -------------- -------------- --------------
Income from operations 249,045 36,852 450,364 78,152
------------- -------------- -------------- --------------
Gross interest expense 31,905 32,405 64,840 64,427
Less capitalized interest (2,153) (5,207) (7,231) (9,737)
Gain on sale of minority interest - (34,698) - (34,698)
Other (income) expense - net 2,514 692 3,529 (3,085)
------------- -------------- -------------- --------------
Income before income taxes, minority
interest and accounting change 216,779 43,660 389,226 61,245
------------- -------------- -------------- --------------
Income taxes:
Current 53,004 (1,664) 97,405 (2,667)
Deferred 27,521 17,684 47,861 24,491
------------- -------------- -------------- --------------
Total income taxes 80,525 16,020 145,266 21,824
------------- -------------- -------------- --------------
Minority interest (net of tax) (3,103) (1,734) (5,802) (2,247)
Effect of change in accounting standard
(net of tax) - - - (3,716)
------------- -------------- -------------- --------------
Net Income $ 133,151 $ 25,906 $ 238,158 $ 33,458
------------- -------------- -------------- --------------
------------- -------------- -------------- --------------
Earnings per share:
Before change in accounting standard $1.90 $0.37 $3.40 $0.53
After change in accounting standard $1.90 $0.37 $3.40 $0.48
Dividends per share $0.41 $0.39 $0.80 $0.78
</TABLE>
Earnings per share are computed on the basis of the average number of common
shares outstanding:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Quarter Ended June 30, 70,074,370 69,935,085
Six Months Ended June 30, 70,055,541 69,919,177
</TABLE>
See also the accompanying notes to consolidated financial statements.
-2-
<PAGE>
UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in thousands)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1995 1994
-------------- --------------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 34,792 $ 13,256
Receivables-net 566,379 469,584
Inventories at lower of cost or market:
Finished goods 222,505 197,086
Raw materials 108,689 98,884
Supplies 116,797 117,839
-------------- --------------
Total inventories 447,991 413,809
-------------- --------------
Assets held for resale 1,796 20,916
Other 45,633 33,568
-------------- --------------
Total current assets 1,096,591 951,133
-------------- --------------
Plant and equipment, at cost 6,203,562 6,175,539
Less: accumulated depreciation 2,812,721 2,745,017
-------------- --------------
3,390,841 3,430,522
Timberlands, less cost of timber harvested 258,379 254,458
-------------- --------------
Total property 3,649,220 3,684,980
-------------- --------------
Other assets 128,407 140,465
-------------- --------------
Total Assets $ 4,874,218 $ 4,776,578
-------------- --------------
-------------- --------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 751,497 $ 883,924
Long-term debt 1,229,764 1,252,249
Deferred income taxes 651,717 605,643
Other liabilities and minority interest 209,220 198,441
Stockholders' equity (Shares outstanding
1995: 70,142,266; 1994: 70,011,944) 2,032,020 1,836,321
-------------- --------------
Total Liabilities and Stockholders' Equity $ 4,874,218 $ 4,776,578
-------------- --------------
-------------- --------------
</TABLE>
See also the accompanying notes to consolidated financial statements.
-3-
<PAGE>
UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------
1995 1994
----------- ----------
<S> <C> <C>
Cash Provided by Operations:
Net income $ 238,158 $ 33,458
Adjustments to reconcile net income
to cash provided by operations:
Depreciation, amortization, and cost of company
timber harvested 142,982 133,159
Deferred income taxes 47,861 24,491
Asset write-down - 13,958
Gain on sale of minority interest - (34,698)
Other 2,474 4,550
Changes in operational assets and liabilities:
Receivables (95,629) (35,434)
Inventories (33,618) 34,503
Other assets (10,376) (17,071)
Accounts payable, taxes and other liabilities (7,471) (57,455)
----------- ----------
Cash Provided By Operations 284,381 99,461
----------- ----------
Cash (Used For) Provided By Investment Activities:
Capital expenditures (109,170) (132,299)
Proceeds from sale of businesses 35,862 -
Proceeds from sale of minority interest - 88,983
Other 4,298 (24,130)
----------- ----------
(69,010) (67,446)
----------- ----------
Cash (Used For) Provided By Financing Activities:
Change in short-term notes payable (122,447) (14,185)
Repayments of long-term debt (15,630) (51,271)
Proceeds from issuance of long-term debt - 57,126
Dividends paid (56,049) (54,543)
----------- ----------
(194,126) (62,873)
----------- ----------
Effect of exchange rate changes on cash 291 866
----------- ----------
Increase (decrease) in cash and cash equivalents 21,536 (29,992)
Balance at beginning of year 13,256 38,287
----------- ----------
Balance at end of period $ 34,792 $ 8,295
----------- ----------
----------- ----------
Supplemental cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $57,616 $54,985
Income taxes $93,555 $12,112
</TABLE>
See also the accompanying notes to consolidated financial statements.
-4-
<PAGE>
UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The information furnished in this report is unaudited but includes
all adjustments which, in the opinion of management, are necessary for
a fair presentation of results for the interim periods reported. The
adjustments made were of a normal recurring nature, except as described
in Notes 2, 3 and 4.
Note 2. Effective January 1, 1994, the company adopted the provisions of
SFAS No. 112, "Employers' Accounting for Postemployment Benefits". The
implementation of this new statement results in a change in the
company's method of accounting for certain disability, health care and
life insurance benefits provided to former or inactive employees after
employment but before retirement, from the "pay-as- you-go" to the
accrual basis.
The accumulated obligation as of January 1, 1994 was $6.0 million. This
obligation, included within "Other Long-Term Liabilities", was recorded
in the first quarter of 1994 on a cumulative basis as a $6.0 million
pre-tax charge against income ($3.7 million after-tax).
Note 3. Included in "Income from Operations" for the second quarter of 1995 is
a net pre-tax gain of $6.4 million relating to the sale of a flexible
packaging operation. In the second quarter of 1994, "Income from
Operations" included an operating charge of $14.0 million ($8.8 million
after tax) to write down the carrying value of assets related to this
business.
Note 4. Second quarter 1994 results included a $34.7 million pre-tax gain on
the sale of a 32% minority interest in the company's Bush Boake Allen
flavor and fragrance business. Union Camp retains a 68% interest in its
Bush Boake Allen subsidiary.
Note 5. "Assets Held For Resale" decreased by $19.1 million from year-end 1994,
which was primarily attributable to the sale of certain assets of the
retail paper bag business previously classified as "Assets Held For
Resale".
-5-
<PAGE>
Note 6. Included in "Current Liabilities" are $219 million and $340 million of
commercial paper borrowings at June 30, 1995 and year-end 1994,
respectively.
Note 7. Included in "Other Liabilities and Minority Interest" for June 30, 1995
and year-end 1994 are $64.5 million and $59.7 million, respectively,
representing the minority interest in Union Camp's 68% owned
subsidiary, Bush Boake Allen.
Note 8. Prior periods have been reclassified to conform with the 1995
presentation.
-6-
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net income for the second quarter of 1995 was $133.2 million or $1.90 per share,
compared to $25.9 million or $.37 per share for the second quarter of last year.
Strong prices in the domestic and export paper products markets, coupled with
significant production gains in the company's mill operations were the primary
factors in this record earnings performance. Last year's second quarter included
a net gain of $.14 per share from non-recurring items; a gain of $.30 per share
from the sale of a minority interest in the company's flavor and fragrance
subsidiary, Bush Boake Allen, offset in part by a charge of $.16 per share
relating to the write down of the carrying value of certain non-strategic
assets.
Net income for the first half of this year was $238.2 million or $3.40 per
share, compared to $33.5 million or $.48 per share for the same period last
year. In addition to the non-recurring gain noted above, last year's results
included a first quarter charge of $.05 per share relating to the adoption of
the new accounting standard (SFAS No.112). Operating income for the first half
of 1995 was $450.4 million, a significant increase from $78.2 million for the
same period last year.
Overall demand for the company's paper and packaging products continues to be
very strong in both the domestic and export markets. Net sales for the second
quarter were $1.1 billion, 34% above the previous year's comparable quarter.
Total paper product shipments for the second quarter were approximately 932,000
tons, a 4% gain over last year's comparable quarter.
Operating income for the paper and paperboard segment was $216.6 million, a
substantial increase over the $18.7 million reported for the second quarter of
last year. Higher average selling prices for the company's major paper products
and significant production gains at the company's paper mill operations
contributed to the record earnings. For the quarter, average prices for the
company's linerboard and uncoated business papers were up over 75% compared to
last year's second quarter. In addition, the increased capacity at the Savannah
mill contributed to an increase in linerboard shipments of over 50% from the
second quarter of last year. Shipments of uncoated business papers were up
slightly over last year's second quarter.
Packaging segment operating income was $18.3 million for the second quarter of
1995, compared to a loss of $8.3 million for last year's second quarter.
Included in this year's second quarter results was a net pre-tax gain of $6.4
million from the sale of a flexible packaging operation. Last year's second
quarter results included a $14 million charge to write down the carrying value
of assets related to this business. Aside from the 1995 non-recurring gain noted
above, the company's corrugated container operations were the primary
contributors to the overall profitability of the segment, with average selling
7
<PAGE>
prices increasing 38% over the second quarter of last year. This significant
increase in selling prices more than offset a softening in corrugated shipments
for the quarter. Second quarter earnings from the company's overseas container
operations more than doubled over last year's comparable quarter. These
improvements reflect the continued favorable market conditions for the company's
domestic and export corrugated container products. Operating earnings from the
company's flexible packaging operations were about level with the second quarter
of last year.
The company's chemical segment reported excellent second quarter results.
Earnings increased 7% over last year's second quarter, reflecting continued
strong results in the Bush Boake Allen flavor and fragrance operations, as well
as the tall-oil-based chemical business. Earnings for the wood products
operations were at $11.3 million, a 42% decrease from the second quarter of last
year. Weaker demand for lumber and panel products led to a downward trend in
selling prices for the quarter.
Depreciation expense increased 10% in the second quarter and 8% in the first
half of 1995 from last year's comparable periods. This primarily reflects the
start-up of a deinking (fiber recycling) plant at the Franklin mill in late
1994, in addition to the start-up of the recovery boiler at the Savannah mill at
the end of the first quarter.
The increase in the deferred tax liability is primarily attributable to a
realization of the `alternative minimum tax' credit and accelerated tax
depreciation.
Cash flow from operations for the first half of 1995 was $284.4 million,
compared to $99.5 million for last year's comparable period, primarily due to
increased earnings. Capital expenditures for the first half of this year totaled
$109.2 million, compared to $132.3 million last year. Total debt was reduced
$138 million during the first half of 1995, compared to a reduction of $8
million in last year's first half. The ratio of long-term debt to total capital
was 31.4% at June 30, 1995, compared to 34.8% at June 30, 1994.
Net working capital was $345.1 million at June 30, 1995, compared to $67.2
million at year-end 1994. The significant increase in working capital was
primarily attributable to a higher level of trade receivables and a lower level
of commercial paper borrowings at the end of the second quarter.
Effective with the second quarter of 1995, the company increased its quarterly
dividend rate by 5% to $.41 per share. In addition, the Board of Directors
authorized the repurchase of up to 5 million shares of the company's common
stock from time to time in the open market, or privately negotiated
transactions, depending on corporate needs and strategy.
8
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In its Annual Report on Form 10-K for the year ended December 31, 1994,
the Company reported that it remained a defendant in approximately 89 suits
filed in federal court in Alabama between October 1990 and January 1992 in which
construction workers alleged 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 was included in the premises owner category
of defendants. These suits are presently under the jurisdiction of the U.S.
District Court for the Eastern District of Pennsylvania and are part of a
consolidated proceeding, styled In Re: Asbestos Products Liability Litigation
(No. VI), Civil Action No. MDL 875, involving all asbestos cases that are
pending in federal courts nationwide.
In its report on Form 10-K the Company also reported it was a defendant in
two law suits brought in Texas state court during the third quarter of 1992 and
in a third lawsuit brought in Texas state court during the fourth quarter of
1993; approximately 4,400 plaintiffs are parties to these law suits. The
plaintiffs are, for the most part, construction workers resident in Alabama who
allege they sustained personal injuries as a result of exposure to asbestos
while performing work at various plant sites in Alabama. Approximately 140 of
these plaintiffs claimed to have worked on the Company's premises as employees
of independent contractors at the Company's Prattville, Alabama mill. These
cases were similar to the 89 cases described in the paragraph above.
Approximately 50 defendants have been named in these cases including 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 was in the premises owner category of defendants.
- 9 -
<PAGE>
In its 10-K the Company reported it had agreed in principle with attorneys
representing virtually all the plaintiffs to settle the above described cases
pending in Texas for an amount which is not material to the Company. During July
1995, the settlement agreement was finalized and an order of dismissal was
signed by the judge presiding over these Texas state court cases. The settlement
included the dismissal of 88 of the 89 cases described above originally filed in
federal court in Alabama which are part of the Multi-District Litigation in the
federal court in Philadelphia.
In the Annual Report on Form 10-K the Company reported it had been named,
but not served, as one of approximately 60 defendants in a lawsuit filed in
Jefferson County, Texas by the same attorneys in the above described Texas state
court cases on behalf of over 2,000 additional plaintiffs who, like those in the
earlier cases, allege that they were exposed to asbestos while performing work
at various plant sites in Alabama. During the second quarter of 1995 the Company
became a party in these cases. Currently these cases have approximately 2,400
plaintiffs of whom less than 100 allege exposure to asbestos while on Union Camp
premises.
During the second quarter of 1995 Union Camp was named as a defendant in
two lawsuits brought in Texas state court in Brazoria County by approximately
2,700 plaintiffs. Plaintiffs, for the most part, allege they sustained personal
injury while performing work at various sites in Alabama. At this time
approximately 31 of these plaintiffs claim to have worked on the Company's
premises in Alabama. Approximately 180 other defendants have been named in these
two suits.
In the cases described in the two paragraphs immediately above the many
defendants named 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 and the amount of damages sought is
unspecified. Although the Company does not believe that these cases are material
to it, an estimate of potential liability cannot be made at this time.
- 10 -
<PAGE>
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
No. Description
--- -----------
11 Statement re computation of per
share earnings.
27 Financial data schedule.
b) Reports on Form 8-K.
No Current Report on Form 8-K was filed by the Registrant during
the second quarter of 1995.
-11-
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNION CAMP CORPORATION
----------------------------------
(Registrant)
Date: AUGUST 10, 1995 /S/ Dirk R. Soutendijk
-------------------- ----------------------------------
DIRK R. SOUTENDIJK
VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
Date: AUGUST 10, 1995 /S/ Robert E. Moore
-------------------- ----------------------------------
ROBERT E. MOORE
VICE PRESIDENT AND COMPTROLLER
(Chief Accounting Officer)
-12-
<PAGE>
EXHIBIT INDEX
SEQUENTIALLY
NUMBERED
NO. DESCRIPTION PAGE
11 Statement re computation of per 14
share earnings
27 Financial data schedule 15
<PAGE>
EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
--------------------------- --------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income ($000) $133,151 $25,906 $238,158 $33,458
Weighted Average Common
Shares Outstanding 70,074,370 69,935,085 70,055,541 69,919,177
Earnings Per Share $1.90 $0.37 $3.40 $0.48
Weighted Average Common
Shares Outstanding
Including Common Stock
Equivalents - Primary Basis 70,680,077 70,236,072 70,596,801 70,263,026
Primary Earnings Per Share $1.88 $0.37 $3.37 $0.48
Weighted Average Common
Shares Outstanding
Including Common Stock
Equivalents - Fully
Diluted Basis 70,917,939 70,239,987 70,899,110 70,263,026
Fully Diluted Earnings Per Share $1.88 $0.37 $3.36 $0.48
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND THE
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 34792
<SECURITIES> 0
<RECEIVABLES> 584537
<ALLOWANCES> 18158
<INVENTORY> 447991
<CURRENT-ASSETS> 1096591
<PP&E> 6461941
<DEPRECIATION> 2812721
<TOTAL-ASSETS> 4874218
<CURRENT-LIABILITIES> 751497
<BONDS> 1229764
<COMMON> 70142
0
0
<OTHER-SE> 1961878
<TOTAL-LIABILITY-AND-EQUITY> 4874218
<SALES> 2130441
<TOTAL-REVENUES> 2130441
<CGS> 1355958
<TOTAL-COSTS> 1680077
<OTHER-EXPENSES> 3529
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 57609
<INCOME-PRETAX> 389226
<INCOME-TAX> 145266
<INCOME-CONTINUING> 238158<F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 238158
<EPS-PRIMARY> 3.40
<EPS-DILUTED> 3.36
<FN>
<F1>Reflects adjustment for minority interest (net of tax) of $5,802.
</FN>
</TABLE>
