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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K/A
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(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, 1995
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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
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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
Title of Each Class on 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 contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
On March 4, 1996, 69,118,211 shares of Registrant's Common Stock, $1 par
value, were outstanding. On March 4, 1996, 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 $46.875 and the aggregate market value of the Common Stock
held by non-affiliates of the Registrant was $3,239,916,141.
Documents Incorporated By Reference
Portions of Registrant's Annual Report to Stockholders for the fiscal
year ended December 31, 1995 (the "Union Camp 1995 Annual Report") are
incorporated by reference in Parts I, II and IV of this Form 10-K.
Portions of Registrant's Proxy Statement, dated March 18, 1996 (the
"Union Camp 1996 Proxy Statement"), are incorporated by reference in Part III of
this Form 10-K.
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COPIES OF THE EXHIBITS MAY BE OBTAINED BY STOCKHOLDERS UPON WRITTEN
REQUEST DIRECTED TO THE SECRETARY, UNION CAMP CORPORATION, 1600 VALLEY
ROAD, WAYNE, NEW JERSEY 07470, ACCOMPANIED BY A CHECK IN THE AMOUNT OF
$10.00 PAYABLE TO UNION CAMP CORPORATION TO COVER PROCESSING AND MAILING
COSTS. COSTS OF INDIVIDUAL EXHIBITS ARE AVAILABLE UPON REQUEST TO THE
SECRETARY.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this amended
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 1st Day of July, 1996.
UNION CAMP CORPORATION
By /S/ Dirk R. Soutendijk
---------------------------------------
(Dirk R. Soutendijk)
Vice President, General
Counsel and Secretary
1
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INVESTING IN BUSINESS PROFITABILITY In the past six years, we invested more than
$2 billion to grow our businesses and strengthen cost-effectiveness across our
business groups. This includes 30% more capacity in our kraft and fine paper
mills, expansion of converting and chemical plants and cost-reduction
investments.
At our Franklin mill, which produces business, printing and writing
papers, we completed the first year of operation of our $85 million fiber
recycling facility. The new plant gives us an additional 100 thousand tons of
capacity a year. The plant uses water recycled from the paper mill, resulting in
no net increase in water usage. Our aim is to use this recycled fiber to produce
our own printing and writing paper. This state-of-the art facility allows us to
efficiently expand our leadership in recycled-content product and meet a growing
market opportunity.
In addition, Fine Paper benefited from a $63 million machine rebuild
program at the Franklin mill. First grade production in the division increased
by 6% over 1994. This increased production enabled us to use the new recycled
fiber without backing down existing pulp capacity.
Money was also put to effective use in 1995 with the completion of a
$160 million black liquor recovery boiler system at our Savannah kraft mill.
This state-of-the-art boiler, which replaces two older ones, is approximately 30
percent more energy-efficient than the previous system and provides a 95%
reduction in sulphur emissions.
In another timely investment, we began construction of a corrugated
container facility in Hanford, California, to serve West coast markets. When
operational in 1996, the plant will produce heavy-duty corrugated containers for
agricultural products, such as frozen produce and fresh fruit, and industrial
goods such as plastic resins. It's another major step in preserving our
leadership in U.S. bulk packaging.
ACQUISITIONS In early January 1996, we acquired the assets of O'Grady
Containers, Inc., in Fort Worth, Texas. This sheet plant will expand our
geographic ability to serve customers in another growing market -- high-quality
graphics and point-of-purchase displays.
We also acquired a 16-thousand annual ton corrugated container plant
near Madrid, Spain. The plant, located in the heart of Spain's industrial
region, will provide a better balance to our industrial/agricultural mix in a
country where we have operated for more than 28 years.
In Turkey, we plan to sign an agreement to create a joint venture
company with KAV Orman Sanayii A. S. The company, Turkey's fourth largest
producer of corrugated containers, serves a fast-growing market. Our planned
joint venture partner is a subsidiary of the $12.8 billion KOC Holding Company.
The joint venture would be competing in a market that is rapidly transforming
from an agricultural base to a diversified economy, a development which is
creating increased demand for containers. Looking ahead, we will continue to
pursue acquisitions that complement our core strengths, both in the U.S. and
overseas.
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FINE PAPER
The Fine Paper Division produces uncoated white paper, market pulp and coated
and uncoated bleached paperboard. The core business is uncoated free sheet used
for business communications and direct mail. Another key product is high-quality
coated and uncoated paperboard for greeting cards, book covers and similar
applications. The Division also produces 100,000 tons of market pulp for sale in
U.S. and world markets. We're a major supplier to converters for computer paper
and direct mail, and are among the world's largest producers of envelope paper.
Business and printing papers are sold mainly through distributors, and the
Division is expanding through retail channels to reach the small and home office
market.
CORE STRENGTHS Two mills in Franklin, Virginia and Eastover, South Carolina make
up one of the industry's most efficient manufacturing operations. Eight machines
provide flexibility to position the business in the highest-opportunity markets.
The Eastover mill is one of the most modern and technologically advanced
printing and writing paper mills in the world. The Division is among the
lowest-cost producers of uncoated free sheet, and is building on its established
lines with a growing position in recycled-content business and communications
papers.
In 1995 Fine Paper turned in record earnings performance. Production reached all
time highs and new product sales advanced sharply. A 100 thousand-ton per year
fiber recycling plant was started up at Franklin. The Division launched a
national television advertising campaign to support Great White Recycled Content
Business Paper's push into the small office/home office market.
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Fine Paper not only achieved record production in 1995, but also managed to keep
product quality at superior levels. At least four major customers honored the
group with prestigious awards in 1995, including Communicolor, which granted
Union Camp its Five Star Supplier Award. This performance, achieved while the
division was running at full capacity, reflects our commitment to provide the
best products and service in the industry.
STRATEGIES The Fine Paper Division is expanding its capability to reach two
fast-growing market segments -- the small office/home office and the corporate
information center. Our increased focus on these segments is part of a broader
commitment to strengthen our marketing initiatives across the fine paper
industry. It's leveraging the low-cost advantage of the Eastover mill and
enhancing customer value with new products made in Franklin. The Division
remains a leading supplier to converters of envelopes, forms and specialty
products and also success-fully targets the commercial printing business. In all
these segments, special emphasis is given to direct marketing applications, a
particular strength for the company. The Division is also expanding into
international markets.
PACKAGING GROUP
The Packaging Group, Union Camp's largest operating unit, is among the country's
leading integrated manufacturers of linerboard, kraft paper and packaging, and
is a significant linerboard exporter. It's a major manufacturer of corrugated
containers, folding cartons, heavy duty shipping sacks and other packaging. Its
five divisions are:
Kraft Paper and Board Produces nearly 2 million tons a year of linerboard,
kraft paper and saturating kraft from two mills; two thirds is converted by
Union Camp, one third is sold in domestic and export markets.
Container Division The largest Pack-aging Group converting operation is a
producer of corrugated containers and solid fiber shipping containers and
slipsheets used in a wide range of packaging.
Flexible Packaging Produces industrial and consumer bags made of paper or film
and produces other non-rigid packaging.
Folding Carton Manufactures high value-added consumer packaging for cosmetics,
toiletries, pharmaceuticals and food products.
International Packaging Operates or has an interest in corrugated container
plants in Ireland, Spain, Chile, Argentina and Puerto Rico.
CORE STRENGTHS The Group's two kraft mills in Savannah, Georgia and Prattville,
Alabama are among the largest in the world and are located in the wood-rich
Southeast. More than 40 converting operations effectively serve selected
high-growth markets. A growing international business serves Europe, the Middle
East and Latin America.
In 1995 The Packaging Group reported record results for the year. The group
completed a realignment that enables the divisions to focus their collective
strengths on the most attractive opportunities. In what may be an industry
first, both Kraft mills and all container operations are now ISO 9000 certified.
Construction began on a heavy-duty corrugated container facility in Hanford,
California. In January 1996, the Group acquired O'Grady Containers, a high
graphics sheet plant in Fort Worth, Texas. Two retail bag operations and one
coating and labeling operation were closed or sold, as Flexible Packaging
reorganized to better serve selected markets. Inter-national expansion included
a new business development office in Hong Kong, a planned joint venture in
Turkey and the acquisition of a container plant in Spain.
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CHEMICAL GROUP
The Chemical Products Division converts chemicals from the pulping process into
a variety of products -- tall oil, fatty acids, rosin acid, dimer acid,
rosin-based ink resins and adhesive tackifiers and polyamid adhesives. Key
markets are adhesives, inks, coatings, lubricants, soaps and personal care
products.
CORE STRENGTHS With three plants in the U.S. and two in the United Kingdom, the
Division is well positioned for international growth. The Division has leading
technological strengths in inks, coatings and adhesive resins, and solid
experience in its core markets. A special strength: hot melt and water based
adhesives, which have environmental benefits and are used in a wide range of
applications.
IN 1995 The Division produced record sales and earnings. Offices were opened in
Hong Kong and Mexico City. It was a big year for capacity improvement, with
major investments in the U.S. and U.K. to better serve customers for dimer,
polyamide and rosin resin capacity. The Division increased dimer capacity by
10%, polyamide by 30% and rosin resin 15% on a global basis. It also developed a
range of new products -- improved ink resins; new polyamid adhesives, inks and
coatings and better rosin resins for the adhesive industry.
STRATEGIES The Division is expanding from its U.S. and European base to markets
in South America and Asia. Growth is also coming from continuous new product
development, including new types of raw materials beyond wood by-products, which
help to soften cyclical impacts.
BUSH BOAKE ALLEN, INC. Bush Boake Allen, a subsidiary of Union Camp, operates as
a free standing corporation. BBA is one of the world's leading compounders of
flavors and fragrances and producers of aroma chemicals. Flavors and fragrances
are produced around the world, while aroma chemicals are produced in the U.K.
and U.S.
CORE STRENGTHS BBA has a strong international position and balanced sales across
major geographic and economic markets. The company has expanded to Bulgaria,
China, Ireland, Mexico, Pakistan, Poland, Russia and the United Arab Emirates
and now has a presence in 40 countries. A key advantage in world markets is
leading technologies in fragrances and flavor compounding and our historic
strength in high-end seasonings that separate us from commodity markets.
IN 1995 It was BBA's fourth consecutive year of record results. BBA began
construction of a compounding plant near Guangzhou, China, and opened offices in
Brazil and Switzerland.
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FOREST RESOURCES GROUP
The Forest Resources Group has the responsibility to create long-term maximum
value from the Company's core resource -- more than 1.5 million acres of
woodlands in Alabama, Florida, Georgia, North Carolina, South Carolina and
Virginia.
The Group has three Divisions: Woodlands, which is responsible for supplying
our paper and wood products mills with high-quality, low-cost fiber; Wood
Products, which produces southern pine lumber, plywood and particleboard panels
for industrial and home improvement markets; and The Branigar Organization,
which develops land for residential, recreational and commercial use in selected
Southeastern markets.
CORE STRENGTHS Union Camp's advanced forestry techniques have made its woodlands
among the most productive in the nation. We are fully committed to the
industry's Sustainable Forestry Initiative-- a broad statement of management
principles designed to guide the practice of environmental stewardship. Nine
modern facilities in four states can produce approximately 500 million board
feet of lumber, 240 million square feet of plywood and 120 million square feet
of particleboard a year. These operations are among the most modern and
productive in the industry. The Branigar Organization has an 80 year history,
and brings solid land development experience to the Group. Two of Branigar's
leading residential properties are The Landings at Skidaway Island near
Savannah, Georgia and Champion Hills near Hendersonville, North Carolina.
IN 1995 The Woodlands Division completed its realignment, adopting a matrix
organization well-suited to serving customers across the company. Woodlands also
made plans to acquire 100,000 woodland acres close to Eastover to ensure a
secure source of fiber for that mill. The Division also increased its goals for
its forestry program -- targeting twice the growth from its lands in 40% less
time. A major reorganization of the Folkston, Georgia, lumber mill will be
completed in 1996 at a cost of about $20 million. Output will be increased by
31% and yield by 14%. The Branigar Organization took on greater responsibility
for the management and planning of the company's high-value land in Georgia and
South Carolina and is becoming more active in commercial development.
Strategies The Woodlands Division will continue to develop and practice advanced
forestry techniques in improving the yield from Union Camp lands. The Division
will also consider other low cost sources of fiber -- including potential
sources outside the United States. The Wood Products Division will focus on
improving the productivity and efficiency of its manufacturing operations, while
looking outside current businesses for opportunities to develop new markets. The
Branigar Organization will continue to put more focus on gaining maximum value
from a broader portfolio of Union Camp properties through development,
management or sale.
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FINANCIAL REVIEW
RESULTS OF OPERATIONS Record operating results highlighted the year 1995 with
three of the company's four business segments achieving new earnings highs.
Consolidated net income in 1995 was $451 million or $6.45 per share, four times
the $1.62 per share earned in 1994.
After several years of eroding prices and sluggish demand, paper product
earnings began to recover in late 1994 and accelerated sharply in early 1995.
Strong demand in domestic and export paper products markets raised prices to
record high levels by mid-year 1995. These prices, coupled with production gains
in the company's mill operations, were the primary factors in the 1995 earnings
performance; however, as the year ended demand and prices declined. Total sales
in 1995 were $4.2 billion, an increase of 24% over 1994 and 35% better than
1993.
Income from operations in 1995 was $830 million, an increase of $556 million
over 1994 and $618 million above 1993. The operating profit margin was 20% in
1995 compared with 8% and 7% in 1994 and 1993, respectively.
[GRAPH GOES HERE]
[Chart Omitted:
Income From Operations
(millions of dollars)
1993 $212
1994 $275
1995 $830].
The 1994 earnings included a gain of $.30 per share on the sale of a minority
interest in the company's Bush Boake Allen flavor and fragrance business;
offsetting this gain were non-recurring charges of $.31 per share, most notably
$.26 per share relating to the write down of assets and disposal of a business.
The earnings improvement in 1994 over 1993 reflected the beginning of a strong
cyclical upturn in paper products driven by global economic expansion and tight
supplies. These conditions remained in place through almost all of 1995.
Earnings in 1993 were $.72 per share reflecting slow growth in U.S. markets
and excess paper industry capacity compounded by economic weakness overseas.
Earnings included a charge of $.23 per share to reflect the increase in the
corporate income tax rate and a $.04 per share loss from the sale of the school
supplies business offset partially by a gain of $.17 per share from the sale of
land.
Operating results and other financial information for the company's principal
business segments are presented on page 38. A discussion of these segments
follows.
[GRAPH GOES HERE]
[Chart Omitted:
Paper and Paperboard
Operating Profit
(millions of dollars)
1993 $101
1994 $182
1995 $737].
PAPER AND PAPERBOARD The principal operations in this segment are the two kraft
paper and linerboard mills, the two bleached paper and board mills and the
timberlands which support the mills and wood products operations. Strong
increases in selling prices for the company's major paper products and
production gains at the kraft paper and board mills lifted segment earnings to a
record level. Operating profit in 1995 was $737 million, compared with $182
million in 1994 and $101 million in 1993. Segment sales were $2.6 billion, up
40% over 1994 and 55% above 1993.
Kraft Paper & Board: Favorable worldwide market trends in place since early 1994
continued to provide linerboard operations with earnings growth for most of
1995. Operating profit for the Kraft Paper and Board Division in 1995 increased
over three-fold from the prior year. Average prices for domestic and export
linerboard were up 45% and 67%, respectively, and linerboard shipments were 8%
above 1994. During the second half of 1995, demand slowed as customers worked
down inventories built earlier in 1995. In response, the company took 130,000
tons of downtime. Linerboard selling prices weakened as the fourth quarter
progressed.
Direct manufacturing costs per ton increased 9% in 1995. These increases were
primarily attributable to higher wood and waste fiber costs. Fixed costs
excluding depreciation increased 5% in 1995.
Operating profit in 1994 increased six-fold over 1993, due almost entirely to
higher linerboard prices. At the end of 1994, domestic linerboard selling prices
were up 40% from the prior year-end. Price gains in export markets were even
higher. Company linerboard shipments in 1994 were 8% below the prior year
primarily as a result of an unplanned paper machine outage at the Savannah,
Georgia mill.
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Bleached Paper and Board: Operating profit in 1995 increased sharply over the
prior year. The extremely favorable conditions which existed in uncoated free
sheet markets during the latter half of 1994, namely, high order backlogs,
leveling off of imports, and declining inventories, continued through much of
1995. Expanded demand supported price increases which raised selling prices $200
per ton, matching a similar increase in the last six months of 1994; however,
prices weakened in the fourth quarter as paper distributors adjusted their
inventory levels downward. In response, the company took 40,000 tons of downtime
in the fourth quarter. Total shipments of white paper products in 1995 were
level with 1994.
Direct manufacturing costs per ton increased 8% in 1995, largely the result of
higher recycled waste fiber costs which more than doubled from the prior year.
Depreciation expense was up 8% over 1994 and selling expenses were up
year-to-year.
In 1994, the year began with severe pricing pressure in the white paper
markets; however, demand strengthened rapidly at the end of the second quarter
and prices began a steady rise. Total shipments of white paper products in 1994
increased 4%, mostly the result of uncoated free sheet volume which was up 6%.
These improvements were not enough to keep operating profit from declining 14%
below 1993.
[GRAPH GOES HERE]
[Chart Omitted:
Packaging Operating Profit
(millions of dollars)
1993 $29
1994 $26
1995 $52].
PACKAGING The Packaging segment includes the corrugated container, flexible
packaging, and folding carton businesses. Packaging products are produced at 41
locations in the U.S. and 6 locations overseas. Demand for these products was
very strong in 1995. Customer sales were $1.5 billion, up 11% over 1994 and 22%
above 1993. Operating profit was a record $52 million in 1995 compared to $26
million in 1994 before the inclusion of special items including a charge of $14
million to write down certain non-strategic assets. Operating profit was $29
million in 1993.
The Container Division is the largest unit in this segment operating 27 plants
in the domestic market with sales of almost $900 million in 1995. Primary
products are corrugated containers and solid fiber containers. The division
achieved record sales and earnings in 1995. This was almost entirely the result
of selling prices, which averaged $200 per ton above the prior year. These price
increases allowed the division to build its margin and more than offset the
increasing cost of raw material linerboard consumed. Towards the end of the
fourth quarter, demand began to ease; however, volume for the year 1995 was
unchanged from 1994.
The company's Flexible Packaging Division is the next largest operating unit
in this segment. It produces a broad variety of industrial and consumer bags,
polyethylene film and other non-rigid packaging at 11 plants in the U.S.
Operating profit improved significantly in 1995, primarily the result of overall
cost reductions realized from the closures of the company's retail paper bag
operations in 1994. Customer sales from continuing operations were up 12% over
1994 largely attributable to strong demand in the consumer packaging markets.
Prices for these packaging products rose 6% and volume was up 6%. Manufacturing
material costs increased 11%; however, the effect was mitigated by productivity
gains. Plastic packaging operations experienced an 11% sales gain, entirely the
result of higher selling prices, but earnings declined on lower volume and
higher manufacturing unit costs.
The International Packaging group's operations continued their strong earnings
growth in 1995. Revenues increased 30% following gains of 11% and 13% in 1994
and 1993, respectively. The company's share of earnings from its 30% investment
in Zucamor S.A., a manufacturer of corrugated containers in Argentina, added
significantly to the favorable year-to-year earnings performance.
The company's Folding Carton Division operates three plants which produce
consumer products packaging with high quality graphics. A 13% increase in
shipments was more than offset by lower average selling price and less favorable
product mix. Operating profit declined substantially in 1995 after increasing
12% in 1994.
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[GRAPH GOES HERE]
[Chart Omitted:
Wood Products
Operating Profit
(millions of dollars)
1993 $70
1994 $79
1995 $33].
WOOD PRODUCTS After four consecutive years of earnings growth, the Wood Products
segment experienced a downturn in 1995. Operating earnings were $33 million in
1995, a decrease of $46 million from record 1994 earnings, largely the result of
lower profits in the lumber business. Although lumber volume increased 3% in
1995, prices declined and customer sales dollars were down 10%. Margins were
squeezed further by wood costs which averaged 12% above the prior year; however,
improvements in wood yields partially offset these increases.
Plywood and particleboard profit margins were also down in 1995, though not as
much as lumber due to their specialty nature. Gains in selling price were more
than offset by escalating wood costs. The plywood operation also incurred
non-recurring repair costs in 1995.
In 1994, earnings for all operations increased, almost entirely the result of
higher selling prices, which were up 12% for lumber and plywood operations and
15% for particleboard.
CHEMICAL In 1995, the Chemical segment achieved its third consecutive year of
record operating profit, $76 million, an increase of 13% over 1994 and 55% above
1993. Sales were $667 million in 1995 compared to $576 million and $519 million
in 1994 and 1993, respectively.
[GRAPH GOES HERE]
[Chart Omitted:
Chemical
Operating Profit
(millions of dollars)
1993 $49
1994 $67
1995 $76].
Bush Boake Allen (BBA), which operates world-wide with locations in 40
countries, is the largest operating unit in this segment. Union Camp is a
majority owner of this global business with a 68% holding. BBA supplies flavors
and fragrances for use in foods, beverages, cosmetics and toiletries. Sales in
1995 were $425 million, 13% over the prior year and operating profit reached $50
million, 20% above 1994. Aroma chemical operations recorded a significant
increase in earnings, largely the result of higher selling prices and favorable
product mix which more than offset climbing raw material turpentine costs.
Flavor and fragrance operations in Europe and the Americas also had strong
earnings growth in 1995, in particular, the seasonings business. In 1994, BBA
posted a 24% increase in operating profit. Worldwide flavor and fragrance
operations had strong growth with all regions showing gains. Aroma chemical
operations registered sharp earnings improvement.
Operating profit for the company's other chemical unit, the Chemical Products
Division, was a record $26 million in 1995, up 29% from 1994. This operation
up-grades papermaking by-products and other raw material into a wide range of
specialized chemicals, primarily for use in inks, coatings and adhesives.
Despite a 20% price increase in a key raw material, crude tall oil, margins
increased in 1995 as pricing initiatives kept ahead of the escalating raw
material costs. Significant upward price movement was achieved in merchant
market sales of fatty acids and rosins. These higher prices were also passed
through to the upgraded products. In 1994, operating results improved
significantly over the prior year due to higher prices and a more favorable
product mix.
INTEREST EXPENSE Net interest expense was $114 million in 1995, an increase of
$5 million over 1994 but $11 million below 1993. The increase in 1995 was
entirely the result of a lower level of capitalized interest. Gross interest
expense in 1995 decreased $8 million and $11 million from 1994 and 1993,
respectively.
OTHER (INCOME) EXPENSE - NET Other (income) expense in 1995 was $14 million
income compared with $5 million expense in 1994 and $13 million income in 1993.
The year 1994 included charges of $11.7 million from the disposal of the retail
paper bag business. Also in 1994, the company recorded a pre-tax gain of $34.7
million from the sale of a minority interest in Bush Boake Allen. This gain is
presented as a separate line item, "Gain on Sale of Minority Interest" on the
income statement.
INCOME TAXES The effective rate for 1995 was 36.8% compared with 36.6% in 1994
and 50% in 1993. The increased rate in 1993 reflects a $16 million charge to
adjust the deferred tax liability to reflect a 1% increase in the federal income
tax rate.
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[GRAPH GOES HERE]
[Chart Omitted:
Capital Structure
(millions of dollars)
1993 1994 1995
Shareholders' Equity $1,816 $1,836 $2,122
Preferred Income Taxes $ 583 $ 606 $ 710
Long-Term Debt $1,245 $1,252 $1,198].
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
The company further strengthened its balance sheet in 1995. Net working capital
(the excess of current assets over current liabilities) was $414 million at
year-end 1995 compared with $67 million at the end of 1994. The increase was
primarily the result of a $280 million reduction in short-term borrowings. The
company's current ratio was 1.7 at year-end 1995 compared with 1.0 at the end of
1994 and 1993. Stockholders' equity at year-end 1995 was $2.1 billion, or $30.71
per share, an increase of 17% per share over 1994.
Operations have consistently generated strong cash flow to meet the company's
liquidity needs and fund its growth. Over the last three years, operations have
generated $1.5 billion of cash flow. In 1995, cash flow from operations was a
record $750 million. These funds were used to substantially reduce short-term
borrowings, increase cash dividends paid to $116 million and initiate a stock
repurchase program which expended $59.6 million in 1995. These activities were
in addition to $267 million of capital expenditures.
From time to time, supplemental financing is necessary and the company's
strong financial condition provides substantial additional debt capacity. The
ratio of long-term debt to total capital employed (the sum of long-term debt,
deferred taxes and stockholders' equity) was 28.9% at year-end 1995 compared to
33.9% at the end of 1994. Total debt to total capital dropped from 41.2% at
year-end 1994 to 32.2% at December 31, 1995.
Cash provided by investment activities in 1994 includes $89 million received
as a dividend from Bush Boake Allen in connection with the sale to the public of
approximately 6.1 million shares, 32% of BBA stock.
[GRAPH GOES HERE]
[Chart Omitted:
Cash Provided by Operations
(millions of dollars)
1993 $418
1994 $369
1995 $750].
[GRAPH GOES HERE]
[Chart Omitted:
Capital Expenditures
(millions of dollars)
1993 $310
1994 $325
1995 $267].
CAPITAL EXPENDITURES Capital spending totaled $267 million in 1995 compared with
$325 million in 1994 and $310 million in 1993.
Included in 1995 capital spending is paper mill spending of $93 million.
Chemical sector spending, including Bush Boake Allen, totaled $37 million.
Spending at domestic and international packaging plants was $56 million.
Investment at wood products facilities was $27 million, including $14 million
for a lumber mill modernization and expansion. Timberlands regeneration cost was
$21 million and timberlands acquisitions totaled $12 million.
<TABLE>
<CAPTION>
($ in millions) 1995 1994 1993
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<S> <C> <C> <C>
Plant and Equipment
(excludes acquisitions):
Expansion &
Cost Reduction ....................... $137 $172 $119
Replacement & Other ................... 88 110 165
Capitalized Interest .................. 9 22 8
Timberlands (acquisition
& regeneration) .............................. 33 21 18
- --------------------------------------------------------------------------------
Total ......................................... $267 $325 $310
================================================================================
</TABLE>
At year-end 1995, purchase commitments related to capital projects were
approximately $23 million and the approved project spending backlog for plant
and equipment was approximately $370 million. Capital spending in 1996 will
increase to a more normal level of about $325 million exclusive of potential
timberlands acquisitions.
ACQUISITIONS AND DISPOSITIONS In December 1995, the company acquired, through a
Spanish subsidiary, a corrugated container plant located near Madrid, Spain. The
acquisition provides added industrial end user business and gives greater
balance to the agricultural/industrial mix for the company's operations in
Spain. The cost of the acquisition was $8.3 million including working capital.
<PAGE>
<PAGE>
In early 1995, the company sold its flexible packaging plant in Asheville,
North Carolina and completed its withdrawal from the retail paper bag business
with the sale of the Richmond, Virginia bag plant and shut-down of its Savannah,
Georgia retail bag operations. Sales for these businesses were $110 million in
1994. A pre-tax gain of $6.4 million was recognized from the sale of flexible
packaging assets in 1995.
At year-end 1994, the company closed the Centerville, Ohio corrugated
container plant and redeployed most of the equipment to a new plant in Hanford,
California, which will start up in early 1996. Centerville had net sales of $20
million in 1994.
In September 1994, the company acquired a 30% interest in Zucamor S.A.,
Argentina's largest independent corrugated container manufacturer, at a cost of
$22 million and sold its Shelbyville, Kentucky plastic retail bag operation
recognizing a $3.7 million pre-tax loss on this sale.
In May 1994, the company's flavor and fragrance subsidiary, Bush Boake Allen,
sold a 32% minority interest to the public. The company recorded a $34.7 million
pre-tax gain on the sale.
DIVIDENDS The quarterly dividend rate was raised 15% in 1995. This was done in
two steps: in April, the Board of Directors raised the cash dividend 5% from
$.39 per share to $.41 per share. In September, the Board announced a cash
dividend increase of 10% to $.45 per share effective with the fourth quarter.
Cash dividends paid in 1995 were $116.1 million compared to $109.1 million and
$108.8 million in 1994 and 1993, respectively.
In the second quarter of 1995, the Board of Directors authorized the
repurchase of up to five million shares of the company's common stock. During
1995, 1,151,500 shares of common stock were repurchased at a cost of $59.6
million.
ENVIRONMENTAL MATTERS The company invested approximately $17.4 million in
pollution control facilities in 1995. Over the past five years the company's
investment was approximately $134.7 million or about 8.0% of the $1.6 billion of
capital spending.
During 1995, the company recorded expenses of $12 million for study, testing
and remediation in compliance with environmental regulations.
Regulations scheduled to be issued by the U.S. Environmental Protection Agency
in the second half of 1996 are currently anticipated to require capital
investments on the order of $200 to $250 million in the late 1990's.
Quantification of this cost is both speculative and subject to variation with
respect to precise timing. Indications are that annual spending will not
materially detract from normal capital spending plans. The company believes that
since its situation, in relative terms, is similar to that of its competitors,
compliance will not adversely affect its competitive position.
ACCOUNTING MATTERS In October 1995, the Financial Accounting Standards Board
issued Statement No. 123, "Accounting for Stock-Based Compensation", which will
be effective in 1996. The new standard allows companies to continue applying the
present method of accounting which is based on intrinsic value. The company
expects to continue applying the accounting provisions as previously
established. The pro forma fair value disclosure requirements of the new
standard will be included in the footnotes to the 1996 financial statements.
In the first quarter of 1994, the company adopted the provisions of SFAS No.
112, "Employers' Accounting for Postemployment Benefits". At January 1, 1994,
the accumulated obligation associated with these benefits was $6.0 million. This
obligation, included within other long-term liabilities, was recorded in the
first quarter of 1994 on a cumulative basis as a $3.7 million after-tax charge
against income.
In the third quarter of 1993, the company increased its deferred income tax
liability by $16 million to reflect the 1% rate increase as required under the
provisions of SFAS No. 109, "Accounting for Income Taxes".
<PAGE>
<PAGE>
QUARTERLY INFORMATION
<TABLE>
<CAPTION>
($ in thousands, except share and per share)
- -------------------------------------------------------------------------------------------------------------------------
Net Income Before
Accounting Change Stock Price*
Gross ------------------- Net Income Dividends -----------------
Net Sales Profit Amount Per Share Income Per Share Per Share High Low
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1995 Fourth Quarter ....$1,007,774 $ 295,185 $ 83,169 $1.20 $ 83,169 $1.20 $0.45 $58 1/2 $45 3/4
Third Quarter .... 1,073,494 386,395 129,746 1.85 129,746 1.85 0.41 61 1/4 54 5/8
Second Quarter .....1,109,295 404,132 133,151 1.90 133,151 1.90 0.41 58 1/4 47 7/8
First Quarter ......1,021,146 345,496 105,007 1.50 105,007 1.50 0.39 52 3/8 46 5/8
- -------------------------------------------------------------------------------------------------------------------------
1994 Fourth Quarter ....$ 922,231 $ 265,801 $ 58,319 $0.83 $ 58,319 $0.83 $0.39 $50 $44 3/8
Third Quarter ...... 856,271 194,961 21,733 0.31 21,733 0.31 0.39 50 7/8 45
Second Quarter ..... 827,217 181,013 25,906 0.37 25,906 0.37 0.39 48 3/8 42 1/4
First Quarter ..... 790,106 164,451 11,268 0.16 7,552 0.11 0.39 50 3/4 43 7/8
- -------------------------------------------------------------------------------------------------------------------------
1993 Fourth Quarter ....$ 793,778 $ 181,121 $ 17,552 $0.25 $ 17,552 $0.25 $0.39 $48 1/2 $38 3/4
Third Quarter .... 778,708 171,674 4,881 0.07 4,881 0.07 0.39 46 3/8 41 1/8
Second Quarter .. 786,481 181,072 15,091 0.22 15,091 0.22 0.39 46 3/8 41 1/2
First Quarter .... 761,454 169,755 12,519 0.18 12,519 0.18 0.39 49 1/8 41 1/8
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
Net income for 1994 includes a second quarter gain of $.30 per share on the sale
of a minority interest in Bush Boake Allen. This gain was partially offset by a
second quarter charge of $.16 per share to write down non-strategic assets, a
third quarter charge of $.10 per share to reflect the withdrawal from the retail
paper bag business and a first quarter charge of $.05 per share for the
implementation of SFAS No. 112, "Employers' Accounting for Postemployment
Benefits".
The company's common stock is listed on the New York Stock Exchange and the
Pacific Stock Exchange.
The number of stockholders of record at December 31, 1995 was 8,758.
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
- --------------------------------------------------------------------------------
To the Stockholders and Board of Directors of Union Camp Corporation
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and of cash flows present fairly, in all
material respects, the financial position of Union Camp Corporation and its
subsidiaries at December 31, 1995 and 1994, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for postemployment benefits in 1994.
Price Waterhouse LLP
Morristown, New Jersey
February 7, 1996
<PAGE>
<PAGE>
CONSOLIDATED INCOME
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
($ in thousands, except per share)
For The Years Ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales .................................................................. $ 4,211,709 $ 3,395,825 $ 3,120,421
Costs and other charges:
Costs of products sold ............................................. 2,729,479 2,524,844 2,360,298
Selling and administrative expenses ................................ 386,855 329,087 305,616
Depreciation and cost of company timber harvested .................. 271,696 253,436 242,883
Other operating (income) expense ................................... (6,423) 13,958 --
- ------------------------------------------------------------------------------------------------------------------------
Income from operations ..................................... 830,102 274,500 211,624
- ------------------------------------------------------------------------------------------------------------------------
Interest expense, net of capitalized interest .............................. 113,705 109,172 124,911
Gain on sale of minority interest .......................................... -- (34,698) --
Other (income) expense-net ................................................. (14,460) 4,862 (13,425)
- ------------------------------------------------------------------------------------------------------------------------
Income before income taxes, minority interest and cumulative
effect of accounting change ........................ 730,857 195,164 100,138
- ------------------------------------------------------------------------------------------------------------------------
Income taxes ............................................................... 268,895 71,420 50,095
- ------------------------------------------------------------------------------------------------------------------------
Minority interest, net of tax .............................................. 10,889 6,518 --
- ------------------------------------------------------------------------------------------------------------------------
Net income before cumulative effect of accounting change ... 451,073 117,226 50,043
- ------------------------------------------------------------------------------------------------------------------------
Cumulative effect of accounting change, net of tax ......................... -- (3,716) --
- ------------------------------------------------------------------------------------------------------------------------
Net income ................................................. $ 451,073 $ 113,510 $ 50,043
- ------------------------------------------------------------------------------------------------------------------------
Earnings per share:
Net income before cumulative effect of accounting
change ............................................. $ 6.45 $ 1.67 $ 0.72
Cumulative effect of accounting change ..................... -- (0.05) --
- ------------------------------------------------------------------------------------------------------------------------
Net income per share ....................................... $ 6.45 $ 1.62 $ 0.72
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
See the accompanying notes to consolidated financial statements
<PAGE>
<PAGE>
CONSOLIDATED BALANCE SHEET
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
($ in thousands)
December 31, 1995 1994
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents ............................................................ $ 30,332 $ 13,256
Receivables-net ...................................................................... 489,967 469,584
Inventories .......................................................................... 468,717 413,809
Other ................................................................................ 44,801 54,484
- ------------------------------------------------------------------------------------------------------------------------------------
1,033,817 951,133
- ------------------------------------------------------------------------------------------------------------------------------------
Property
Plant and equipment, at cost ......................................................... 6,304,113 6,175,539
Less: accumulated depreciation ....................................................... 2,918,963 2,745,017
- ------------------------------------------------------------------------------------------------------------------------------------
3,385,150 3,430,522
Timberlands, less cost of company timber harvested ................................... 274,935 254,458
- ------------------------------------------------------------------------------------------------------------------------------------
3,660,085 3,684,980
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets ......................................................................... 144,441 140,465
- ------------------------------------------------------------------------------------------------------------------------------------
Total Assets ......................................................... $ 4,838,343 $ 4,776,578
- ------------------------------------------------------------------------------------------------------------------------------------
Liabilities and Stockholders' Equity
Current Liabilities
Current installments of long-term debt ............................................... $ 43,926 $ 35,899
Notes payable ........................................................................ 148,526 373,384
Accounts payable ..................................................................... 220,243 246,050
Other accrued liabilities ............................................................ 174,432 190,879
Income and other taxes ............................................................... 32,986 37,712
- ------------------------------------------------------------------------------------------------------------------------------------
620,113 883,924
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt ....................................................................... 1,151,536 1,252,249
- ------------------------------------------------------------------------------------------------------------------------------------
Deferred Income Taxes ................................................................ 709,850 605,643
- ------------------------------------------------------------------------------------------------------------------------------------
Other Liabilities and Minority Interest .............................................. 235,152 198,441
- ------------------------------------------------------------------------------------------------------------------------------------
Stockholders' Equity
Common stock-par value $1.00 per share ............................................... 69,078 70,012
Capital in excess of par value ....................................................... 38,344 87,897
Other equity adjustments ............................................................. (13,744) (14,661)
Retained earnings .................................................................... 2,028,014 1,693,073
- ------------------------------------------------------------------------------------------------------------------------------------
Shares outstanding, 1995-69,078,078, 1994-70,011,944
Stockholders' Equity-Net ............................................. 2,121,692 1,836,321
- ------------------------------------------------------------------------------------------------------------------------------------
Total Liabilities and Stockholders' Equity ........................... $ 4,838,343 $ 4,776,578
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
See the accompanying notes to consolidated financial statements
<PAGE>
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
($ in thousands)
For The Years Ended December 31, 1995 1994 1993
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash (Used For) Provided By Operations:
Net income .......................................................... $ 451,073 $ 113,510 $ 50,043
Adjustments to reconcile net income to cash
provided by operations:
Depreciation, amortization and cost of company
timber harvested .................................... 287,738 270,850 261,518
Deferred income taxes ....................................... 105,899 27,268 33,838
Gain on sale of minority interest ........................... -- (34,698) --
Asset write down and business disposal ...................... (6,423) 25,676 --
Other ....................................................... 16,650 13,190 (6,744)
Changes in operational assets and liabilities:
Receivables ................................................. (23,000) (80,593) 42,083
Inventories ................................................. (55,325) 15,880 (3,382)
Other assets ................................................ (3,637) 5,175 7,264
Accounts payable, taxes and other liabilities ............... (22,753) 12,244 33,800
- ----------------------------------------------------------------------------------------------------------------------
Cash Provided by Operations ................. 750,222 368,502 418,420
- ----------------------------------------------------------------------------------------------------------------------
Cash (Used For) Provided By Investment Activities:
Capital expenditures ................................................ (266,799) (324,939) (310,113)
Payments for acquired businesses .................................... (7,115) (25,006) (11,855)
Proceeds from sale of businesses-net ................................ 36,133 8,239 34,451
Proceeds from sale of assets ........................................ 18,480 19,114 27,612
Proceeds from sale of minority interest ............................. -- 88,983 --
Other ............................................................... (11,306) 10,311 17,818
- ----------------------------------------------------------------------------------------------------------------------
Cash Used For Investment Activities ......... (230,607) (223,298) (242,087)
- ----------------------------------------------------------------------------------------------------------------------
Cash (Used For) Provided By Financing Activities:
Proceeds from issuance of long-term debt ............................ 22,625 61,725 21,278
Repayments of long-term debt ........................................ (69,338) (65,574) (117,588)
Common stock repurchases ............................................ (59,614) -- --
Change in short-term notes payable .................................. (279,999) (57,596) 310
Dividends paid ...................................................... (116,132) (109,137) (108,807)
- ----------------------------------------------------------------------------------------------------------------------
Cash Used For Financing Activities .......... (502,458) (170,582) (204,807)
- ----------------------------------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash ..................................... (81) 347 (922)
- ----------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and cash equivalents ............................ 17,076 (25,031) (29,396)
Balance at beginning of year ........................................ 13,256 38,287 67,683
- ----------------------------------------------------------------------------------------------------------------------
Balance at end of year .............................................. $ 30,332 $ 13,256 $ 38,287
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
See the accompanying notes to consolidated financial statements
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
($ in thousands, except per share)
1. Significant Accounting Policies
Principles of Consolidation and Preparation of Financial Statements: The
consolidated financial statements present the operating results and the
financial position of the company and all of its subsidiaries. All significant
intercompany transactions are eliminated.
In accordance with generally accepted accounting principles, the preparation
of financial statements requires management to make estimates and assumptions
that affect the reported amounts of some assets and liabilities and, in some
instances, the reported amounts of revenues and expenses during the reporting
period.
Cash and Cash Equivalents: Cash and cash equivalents include all highly liquid
investment instruments with an original maturity of three months or less.
Inventories: Inventories are stated at the lower of cost or market and include
the cost of materials, labor and manufacturing overhead. Finished goods and raw
materials of domestic operations are valued principally at last in, first out
(LIFO) cost. Supplies and all inventories of foreign operations are valued at
first in, first out (FIFO) or average cost.
Property and Depreciation: Plant and equipment is recorded at cost, less
accumulated depreciation. Upon sale or retirement, the asset cost and related
depreciation are removed from the balance sheet and the resulting gain or loss
is included in income.
Depreciation is principally calculated on a straight-line basis with lives for
buildings from 15 to 33 years and for machinery and equipment from 10 to 20
years. For major expansion projects, the company uses the units-of-production
depreciation method until design level production is reasonably sustained.
Accelerated depreciation methods are used for tax purposes.
The cost of company timber harvested is charged to income as timber is cut.
The charge to income is the product of the volume of timber cut multiplied by
annually developed unit cost rates which are based on the relationship of timber
cost to estimated volume of recoverable timber.
Goodwill: The excess of the cost over the fair value of net assets of acquired
businesses is recorded as goodwill and is amortized on a straight-line basis
over a period not to exceed 20 years. The company reviews the goodwill
recoverability period on a regular basis.
Research and Development Costs: Research and development costs are expensed as
incurred. These expenditures totaled $55.4 million in 1995, $49.2 million in
1994, and $45.9 million in 1993.
Capitalized Interest: Interest is capitalized on major capital expenditures
during the period of construction. Total interest costs incurred and amounts
capitalized were:
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------
<S> <C> <C> <C>
Total interest .............. $ 122,572 $ 130,800 $ 133,117
Interest capitalized ........ (8,867) (21,628) (8,206)
- ------------------------------------------------------------------------
Net interest expense ........ $ 113,705 $ 109,172 $ 124,911
- ------------------------------------------------------------------------
</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: Effective January 1, 1994, the company adopted
the provisions of Statement of Financial Accounting Standards (SFAS) No. 112,
"Employers' Accounting for Postemployment Benefits", which requires companies to
accrue for the cost of certain postemployment benefits including disability
related, health care and life insurance benefits.
In adopting this standard, the company recorded a one-time cumulative charge
of $3.7 million after-tax in the first quarter of 1994. The net periodic expense
for 1995 and 1994 was $2.2 million and $1.3 million, respectively.
Income Taxes: Deferred income taxes are recorded using enacted tax rates in
effect for the year the differences are expected to reverse. Federal and state
income taxes are not accrued on the cumulative undistributed earnings of foreign
subsidiaries because the earnings have been reinvested in the businesses of
those companies. As of December 31, 1995, the total of all such undistributed
earnings amounted to $146.4 million. It is not practical to estimate the amount
of tax that might be payable on the foreign earnings. The company has, as
required, provided for tax potentially payable on distribution of its share of
$42.9 million, the undistributed earnings of Bush Boake Allen, Inc. (BBA) and
subsidiaries earned subsequent to 1992. (See also Note 9)
Environmental Liabilities: Environmental expenditures that relate to current
operations are expensed or capitalized as appropriate. Liabilities are recorded
when remedial efforts are probable and the costs can be reasonably estimated.
The timing of these accruals generally coincides with the completion of a
feasibility study or the company's commitment to a formal plan of action.
Foreign Currency Translation: The assets and liabilities of the company's
foreign subsidiaries and affiliates are translated into U.S. dollars at year-end
exchange rates, while income and expense accounts are translated at average
annual rates. The primary factor used to determine the functional currencies of
the company's foreign subsidiaries is the local currency cash flows resulting
from manufacturing, sales and financing activities. Gains and
<PAGE>
<PAGE>
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 $13.2 million at
December 31, 1995 and $14.3 million at December 31, 1994.
Derivatives: The company hedges foreign currency transactions by entering into
forward foreign exchange contracts. Gains and losses associated with the forward
contracts are matched with the offsetting gains and losses recorded for exchange
rate fluctuations on the underlying assets and liabilities. Gains and losses on
interest rate swap agreements are charged or credited to interest expense over
the life of the agreement. (See also Note 7)
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.
2. OTHER OPERATING (INCOME) EXPENSE Results for 1994 included a $14.0 million
pre-tax charge to write down the carrying value of a flexible packaging
operation. In 1995, the company sold these assets and recorded a net pre-tax
gain of $6.4 million.
3. GAIN ON SALE OF MINORITY INTEREST In 1994 the company's flavor and fragrance
subsidiary, BBA sold to the public approximately 6.1 million shares of BBA stock
(approximately 32% of BBA's outstanding shares) at an offering price of $16.00
per share. The company retains approximately 68% of the 19.215 million shares
outstanding after the offering. As a result of this transaction, the company
recognized a $34.7 million pre-tax gain.
4. OTHER (INCOME) EXPENSE-NET Other (income) expense for 1994 includes an $11.7
million charge to withdraw from the retail paper bag business. The year 1993
included an $18.0 million gain attributable to the sale of land.
5. SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
December 31, 1995 1994
- -------------------------------------------------------------------
<S> <C> <C>
Receivables
Trade ................................... $ 466,786 $434,277
Other ................................... 39,647 51,826
- ------------------------------------------------------------------
506,433 486,103
- ------------------------------------------------------------------
Less estimated doubtful accounts,
discounts and allowances ........ 16,466 16,519
- -------------------------------------------------------------------
Net ..................... $489,967 $469,584
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
December 31, 1995 1994
- -------------------------------------------------------------------
<S> <C> <C>
Inventories
Finished goods .......................... $ 242,732 $ 197,086
Raw materials ........................... 109,181 98,884
Supplies ................................ 116,804 117,839
- -------------------------------------------------------------------
Total ................... $ 468,717 $ 413,809
- -------------------------------------------------------------------
</TABLE>
At December 31, 1995 and 1994, finished goods and raw materials totaling $217.9
million and $196.8 million, respectively, were valued at LIFO cost. The excess
of current cost over LIFO value was $101.0 million and $78.9 million in 1995 and
1994, respectively.
<TABLE>
<CAPTION>
December 31, 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Other Current Assets
Short-term timber leases ................... $ 19,484 $ 14,154
Prepayments ................................ 24,028 19,414
Assets held for resale ..................... 1,289 20,916
- --------------------------------------------------------------------------------
Total ...................... $ 44,801 $ 54,484
- --------------------------------------------------------------------------------
Plant and Equipment, at cost
Land ....................................... $ 35,768 $ 35,435
Buildings and
improvements ....................... 533,236 535,242
Machinery and equipment .................... 5,620,303 5,380,959
Construction-in-progress ................... 114,806 223,903
- --------------------------------------------------------------------------------
Total ...................... $6,304,113 $6,175,539
- --------------------------------------------------------------------------------
</TABLE>
At December 31, 1995, property (principally machinery and equipment) having an
original cost of approximately $381 million and a net book value of $169 million
is pledged against lease obligations and notes payable to industrial development
authorities (see Note 6). These obligations and notes payable have outstanding
long-term balances totaling approximately $333 million.
<TABLE>
<CAPTION>
December 31, 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Other Assets
Deferred pre-start-up ............................. $ 12,891 $ 22,502
Goodwill .......................................... 15,264 21,796
Pension assets .................................... 47,035 26,807
Other intangibles ................................. 18,256 16,774
Investments in affiliates 27,192 24,465
Other ............................................. 23,803 28,121
- --------------------------------------------------------------------------------
Total ............................. $144,441 $140,465
- --------------------------------------------------------------------------------
</TABLE>
Short-Term Debt: Included in Notes Payable at December 31, 1995 and 1994 were
$90 million and $340 million, respectively, of commercial paper borrowings. The
weighted average interest rate on these borrowings for the years 1995 and 1994
were 6.1% and 4.4%, respectively.
The company has short-term revolving credit facilities in numerous countries
primarily outside the United States, which provide for aggregate availability of
$145 million. At December 31, 1995 and 1994, approximately $52 million and $42
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.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
December 31, 1995 1994
<S> <C> <C>
- --------------------------------------------------------------------------------
Other Accrued Liabilities
Payrolls .............................. $ 64,329 $ 61,557
Interest .............................. 27,685 28,219
Other ................................. 82,418 101,103
- --------------------------------------------------------------------------------
Total ................. $ 174,432 $ 190,879
- --------------------------------------------------------------------------------
Other Liabilities and Minority Interest
Postretirement and
postemployment benefits ....... $ 116,461 $ 111,845
Minority interest ..................... 74,917 64,178
Minimum pension liability ............. 24,759 7,511
Other ................................. 19,015 14,907
- --------------------------------------------------------------------------------
Total ................. $ 235,152 $ 198,441
- --------------------------------------------------------------------------------
</TABLE>
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
December 31, 1995 1994
- --------------------------------------------------------------------------------
<S> <C> <C>
Sinking fund debentures:
8 5/8% due 1997-2016 .......... $ 51,974 $ 52,160
10% due 2000-2019 ............. 100,000 100,000
9 1/4% due 2002-2021 .......... 117,780 125,000
Debentures 9 1/2% due 2002 ............ 100,000 100,000
Debentures 9 1/4% due 2011 ............ 124,800 125,000
Debentures 8 1/2% due 2022 ............ 100,000 100,000
Notes 7 3/8% due 1999 ................. 50,000 50,000
Medium-term notes due
1997-2001; 7.5% to 9.54%;
weighted average rate 9.12% ... 168,000 206,000
Industrial Development Revenue
Bonds; due 2001-2026; 5.0%
to 8.0%; weighted average
rate 5.99% .................... 42,636 43,676
Pollution Control Revenue Bonds
due 1997-2024; 4.3% to 7.45%;
weighted average rate 6.52% ... 290,510 291,125
Other notes due 1997-2004 ............. 5,836 13,288
Commercial Paper ...................... -0- 46,000
- --------------------------------------------------------------------------------
Total ................. $1,151,536 $1,252,249
- --------------------------------------------------------------------------------
</TABLE>
The current portion of long-term debt at December 31, 1995 amounted to $43.9
million. Amounts payable in the years 1997 through 2000 are $109.6 million,
$55.7 million, $82.1 million and $33.9 million, respectively.
The company has revolving credit/term loan agreements which provide for
unsecured borrowings up to $275 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 1995 under these agreements.
7. FINANCIAL INSTRUMENTS
Fair Value of Financial Instruments: The carrying amounts of certain financial
instruments: cash, short-term investments, trade receivables and payables
approximate their fair values. The fair value of the company's long-term debt
varies with market conditions and is estimated based on quoted market prices for
similar financial instruments by obtaining quotes from brokers.
At December 31, 1995, the book value of long-term debt was $1.20 billion and
the fair value was approximately $1.33 billion. The book value of all other
financial instruments approximates their fair value.
Derivative Financial Instruments: The company uses derivative instruments
exclusively to hedge the risk associated with underlying business transactions
such as existing floating rate debt and existing foreign currency commitments.
Derivatives are not used for trading or speculative purposes. The book value of
these derivatives approximates their fair value.
At December 31, 1995, the company had outstanding foreign exchange contracts
valued at $46 million. The purpose of these contracts is to neutralize foreign
currency transaction risk generated by the company's firm foreign currency
business commitments. The change in value of the contracts resulting from
changes in the respective foreign currency rates versus the U.S. dollar is
accrued monthly and credited or charged to foreign exchange gain or loss.
Foreign currency commitment exposures are evaluated on an ongoing basis and
foreign currency contracts are adjusted as required to offset the risk
associated with the underlying transactions. Cash settlements are executed
whenever the contracts are adjusted which occurs at least monthly. Currency
contracts are limited to currencies with established forward markets and to
counterparties, which have Moody's credit ratings of A1 or better.
At December 31, 1995, the company had an outstanding interest rate swap
agreement the purpose of which is to convert $46 million of floating rate
commercial paper to fixed rate debt. The effective interest rate on these
commercial paper borrowings was 8.08%, inclusive of the net effect of the
interest rate swap. The swap agreement is based on a declining principal
balance schedule which terminates in April, 2000. The differential between
fixed and floating rate obligations is accrued as interest rates change
and is charged or credited to interest expense over the life of the agreement.
Cash settlements are payable semi-annually. The counterparty has a Moody's
credit rating of AA.
<PAGE>
<PAGE>
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, 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)
Net Income .................................. -- -- 113,510 --
Cash dividends ($1.56 per share) ............ -- -- (109,137) --
Issuance of stock for options and award plans 179 6,406 -- 253
Foreign currency translation ................ -- -- -- 9,262
- -----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1994 .......................... 70,012 87,897 1,693,073 (14,661)
Net Income .................................. -- -- 451,073 --
Cash dividends ($1.66 per share) ............ -- -- (116,132) --
Common stock repurchases .................... (1,152) (58,462) -- --
Issuance of stock for options and award plans 218 8,909 -- (203)
Foreign currency translation ................ -- -- -- 1,120
- -----------------------------------------------------------------------------------------------------------------
Balance, December 31, 1995 .......................... $ 69,078 $ 38,344 $ 2,028,014 $ (13,744)
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
The authorized capital stock of the company at December 31, 1995, 1994 and 1993
consisted of 125,000,000 shares of common stock, $1.00 par value, and 1,000,000
shares of authorized but unissued preferred stock, $1.00 par value. Common stock
repurchased is included in the authorized but unissued shares of the company.
Shareholder Rights Plan: The company has a Shareholders' Rights Plan pursuant to
which preferred stock purchase rights are issued to the common stockholders at
the rate of one right for each share of common stock. Each right entitles
shareholders to purchase, under certain conditions (i) one one-thousandth of a
share of the company's Series A Junior Participating Preferred Stock at an
exercise price of $175 or (ii) common stock of the company having a market value
of two times the exercise price. Alternatively, the Board of Directors may
permit holders to surrender each right in exchange for one share of common
stock. The rights will be exercisable only if a person or group acquires 15% or
more of the outstanding common stock or announces a tender offer for 15% or more
of the common stock. The rights expire February 26, 2006 and may be redeemed for
$.001 per right by the Board of Directors prior to the time the rights become
exercisable. In addition, if after any person acquires 15% or more of the
company's common stock, the company is involved in a merger or other business
combination transaction with another person after which its common stock does
not remain outstanding, or the company sells 50% or more of its assets or
earning power, each right will entitle its holder to purchase, at the then
current exercise price, shares of the acquiring company's common stock having a
market value equal to two times the purchase price.
9. INCOME TAXES The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------
<S> <C> <C> <C>
Current:
Federal ............. $124,937 $ 31,744 $ 14,180
State and local ..... 21,880 3,652 (3,639)
Foreign ............. 16,179 8,756 5,716
162,996 44,152 16,257
Deferred:
Federal ............. $ 96,601 $ 22,005 $ 27,317
State ............... 6,477 1,827 3,944
Foreign ............. 2,821 3,436 2,577
- ---------------------------------------------------------------
105,899 27,268 33,838
- ---------------------------------------------------------------
Total ....... $268,895 $ 71,420 $ 50,095
- ---------------------------------------------------------------
</TABLE>
The company follows the provisions of SFAS No. 109, whereby deferred taxes
represent estimated liabilities to be paid or assets to be received in the
future and tax rate changes would immediately affect those liabilities or
assets. 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 $16.0 million to reflect the full amount of the rate
change.
The cumulative deferred tax liability at December 31, 1995 and 1994 was $709.9
million and $605.6 million, respectively. The significant components of these
liabilities (assets) are as follows:
<TABLE>
<CAPTION>
December 31, 1995 1994
- ------------------------------------------------------------------------------------
<S> <C> <C>
Deferred federal taxes:
Accelerated depreciation ........................... $685,155 $ 657,732
Alternative minimum tax ............................ (44,355) (104,404)
Postretirement benefits ............................ (39,651) (38,297)
Other .............................................. 24,588 14,904
- ------------------------------------------------------------------------------------
Total deferred federal taxes ............... 625,737 529,935
- ------------------------------------------------------------------------------------
Deferred state taxes ....................................... 63,383 56,906
Deferred foreign taxes ..................................... 20,730 18,802
- ------------------------------------------------------------------------------------
Total deferred taxes ....................... $709,850 $ 605,643
- ------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<PAGE>
A detailed analysis of the effective tax rate is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Statutory federal tax rate ................................. 35.0% 35.0% 35.0%
State taxes (net of federal
tax impact) ........................................ 2.8 2.2 2.6
Foreign income taxes ....................................... (0.3) (0.8) (1.2)
Rate change ................................................ -- -- 15.0
Other ...................................................... (0.7) 0.2 (1.4)
- -----------------------------------------------------------------------------------------------------
Effective rate ............................................. 36.8% 36.6% 50.0%
- -----------------------------------------------------------------------------------------------------
</TABLE>
10. EMPLOYEE STOCK OPTION PLANS Under the stock option plans adopted in 1982
and 1989 (as amended), a maximum of 2,175,000 shares and 4,295,000 shares,
respectively, of the company's common stock were made available for the granting
of options and stock appreciation rights to officers and other key employees of
the company and its subsidiaries at prices not less than 100% of fair market
value at the dates of grant. Such options and stock appreciation rights
generally become exercisable two years after the date of grant and expire ten
years from that date. No further options may be granted under the 1982 plan. At
the end of 1995, 577,531 shares were available for future grants under the 1989
plan. The number of options exercisable under both plans at year-end 1995 was
2,345,510.
Under the 1989 plan, as of December 31, 1995, 859,017 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, 1995,
113,866 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 restriction period.
The following table summarizes activity in the company's stock option plans
during 1995, 1994 and 1993. The options outstanding at December 31, 1995 having
related stock appreciation rights attached totaled 1,207,641.
<TABLE>
<CAPTION>
1995 1994 1993
- ---------------------------------------------------------------------------------
<S> <C> <C> <C>
Options outstanding
beginning of year .............. 3,213,253 2,894,638 2,517,119
Granted-$45.00 to
$50.06 per share 664,400 581,316 617,860
Exercised-$25.38 to
$45.63 per share (197,637) (176,550) (177,605)
Canceled-$25.38 to
$46.06 per share (97,390) (86,151) (62,736)
- ---------------------------------------------------------------------------------
Options outstanding
end of year .................... 3,582,626 3,213,253 2,894,638
- ---------------------------------------------------------------------------------
</TABLE>
The Financial Accounting Standards Board recently issued SFAS No. 123,
"Accounting for Stock-Based Compensation". The statement, effective in 1996,
allows companies to continue applying the present method of accounting which is
based on intrinsic value. The company expects to continue applying the
accounting provisions as previously established. The pro forma fair value
disclosure requirements of the new standard will be included in the footnotes to
the 1996 financial statements.
11. 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.
The components of the Accumulated Postretirement Benefit Obligation (APBO) as
of December 31, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
- ---------------------------------------------------------------------
<S> <C> <C>
Retirees .................................... $ 63,179 $ 63,202
Fully eligible active
plan participants ................... 9,095 9,630
Other active plan participants 46,826 29,426
- ---------------------------------------------------------------------
119,100 102,258
Unrecognized net gain (loss) ................ (5,812) 6,851
- ---------------------------------------------------------------------
Accrued postretirement
benefit obligation .................. $113,288 $ 109,109
- ---------------------------------------------------------------------
</TABLE>
The components of the postretirement benefit expense for the years 1995, 1994
and 1993 are as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- -------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits
earned during period ........... $ 3,801 $ 3,980 $ 3,344
Interest cost on accumulated
benefit obligation .. .......... 7,954 7,818 7,369
Net amortization and deferral .......... (155) -- --
- -------------------------------------------------------------------------
Postretirement benefit
expense ........................ $ 11,600 $ 11,798 $ 10,713
- -------------------------------------------------------------------------
</TABLE>
The discount rates used to determine the accumulated postretirement benefit
obligation at December 31, 1995 and 1994 were 7.0% and 8.5%, respectively.
For measurement purposes, a 10% increase in the medical cost trend rate was
assumed for 1995. This rate decreases incrementally to 5.5% by the year 2003 and
will remain at that level thereafter. It is estimated that a 1% increase in the
medical cost trend rate would increase the accumulated postretirement benefit
obligation as of December 31, 1995 by $15.6 million and the postretirement
benefit expense for 1995 by $1.8 million.
<PAGE>
<PAGE>
12. 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 $20.2 million, $14.5 million and $14.6 million for the
years 1995, 1994 and 1993, respectively. The following table sets forth the
funded status of all pension plans for 1995 and 1994:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
- -----------------------------------------------------------------------------------------------------------------------------
Domestic Plans Foreign Plans Domestic Plans Foreign Plans
-----------------------------------------------------------------------------------
Assets in Accumulated Assets in Accumulated
excess of benefits in excess of benefits in
accumulated excess of accumulated excess of
benefits assets benefits assets
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation ........ $436,095 $239,263 $ 99,580 $371,028 $193,027 $ 84,482
- -----------------------------------------------------------------------------------------------------------------------------
Accumulated benefit obligation ... 460,842 253,140 100,534 385,892 203,857 85,400
- -----------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation ..... 552,794 259,044 135,480 438,914 206,555 115,405
Plan assets at fair value ................ 505,942 215,493 137,281 429,140 170,861 122,785
- -----------------------------------------------------------------------------------------------------------------------------
Projected benefit obligation in
excess of (less than) plan assets 46,852 43,551 (1,801) 9,774 35,694 (7,380)
Unrecognized net gain (loss) ............. (40,346) (730) (23,465) (11,872) 20,854 (15,193)
Unrecognized prior service cost .......... 2,441 (21,095) (127) 2,655 (20,462) (142)
Unrecognized transition asset (obligation) (250) (8,834) 2,789 (302) (10,600) 3,382
Adjustment to recognize minimum liability -- 24,759 -- -- 7,511 --
- -----------------------------------------------------------------------------------------------------------------------------
Pension liability (asset) recorded on
Balance Sheet .................... $ 8,697 $ 37,651 $(22,604) $ 255 $ 32,997 $(19,333)
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
At December 31, 1995 and 1994, the discount rates used to determine the pension
benefit obligation were 7.0% and 8.5% for the U.S. plans and 8.0% and 9.0% for
the foreign plans, respectively.
The pension expense for these plans included the following components:
<TABLE>
<CAPTION>
1995 1994 1993
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost-benefits earned
during the period ............. $ 20,643 $ 24,869 $ 20,936
Interest cost on projected
benefit obligations ........... 64,548 59,889 56,133
Actual return on assets ............... (155,838) 17,694 (120,589)
Net amortization
and deferral .................. 90,824 (87,956) 58,075
- -----------------------------------------------------------------------------
Total pension expense ................. $ 20,177 $ 14,496 $ 14,555
- -----------------------------------------------------------------------------
</TABLE>
The salary progression rate for domestic plans was 5.5% for 1995, 1994 and 1993.
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 9.0%, 7.5%, and 9.5%, for 1995, 1994 and 1993, respectively. The
salary progression rates were 7.0% for 1995, 5.5% for 1994 and 7.5% for 1993.
The expected long-term rate of return on plan assets was 11.5% for each year.
In 1994 the company withdrew from the retail paper bag business. As a result,
the company recorded a plan curtailment charge of $1.0 million and special
termination benefits of $1.8 million.
13. SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for income taxes was $161.1
million in 1995, $32.4 million in 1994, and $26.1 million in 1993 (offset by a
$64.7 million tax refund). Cash paid for interest, net of amounts capitalized,
was $114.2 million in 1995, $110.3 million in 1994, and $129.3 million in 1993.
The following table summarizes non-cash investing and financing activities
related to the company's acquisitions in 1995, 1994 and 1993.
<TABLE>
<CAPTION>
1995 1994 1993
- --------------------------------------------------------------------
<S> <C> <C> <C>
Fair value of assets
acquired ...................... $ 8,345 $32,788 $21,399
Less: cash paid ....................... 7,115 25,006 11,855
- --------------------------------------------------------------------
Liabilities incurred or
assumed ....................... $ 1,230 $ 7,782 $ 9,544
- --------------------------------------------------------------------
</TABLE>
14. COMMITMENTS AND CONTINGENT LIABILITIES The company is involved in various
legal proceedings and environmental actions. Based upon the company's evaluation
of the information presently available, management believes that the ultimate
resolution of any such proceedings and environmental actions will not have a
material adverse effect on the company's financial position, liquidity or
results of operations.
The company has guaranteed loans of up to $20 million made by a financial
institution to non-controlled entities. The guarantees have terms of 6 years or
less and are secured by the borrowers' assets and stock.
<PAGE>
<PAGE>
15. SEGMENT INFORMATION Union Camp is a leading manufacturer of paper,
packaging, chemicals and wood products serving both U.S. and international
markets. The company derives approximately three fourths of its sales from paper
and packaging products, such as linerboard, kraft paper, uncoated free sheet,
corrugated containers, flexible packaging and folding cartons. The company's
chemical business is involved in the manufacture of chemicals used in inks,
coatings and adhesives, and through its Bush Boake Allen subsidiary, the
manufacture of flavor, fragrance, and aroma chemicals. Chemicals comprise about
a sixth of Union Camp's sales. The company also manages a woodlands base of over
1.5 million acres, supplying raw materials for our linerboard, packaging and
paper making business, as well as for the manufacture of wood products.
Operating results and other financial data are presented for the principal
business segments of the company for the years ended December 31, 1995, 1994 and
1993. 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
operation, Branigar, has been included within corporate items. Capital
expenditures are reported exclusive of acquisitions.
Total revenue and operating profit from the company's foreign subsidiaries
were $504 million and $61 million in 1995, $417 million and $44 million in 1994,
and $372 million and $31 million in 1993. 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 $418 million in 1995, $247 million in
1994 and $209 million in 1993.
<TABLE>
<CAPTION>
Paper and Packaging Wood Corporate
Paperboard Products Products Chemical Items Consolidated
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1995
Sales to Customers ............. $1,714,009 $1,515,694 $ 283,594 $ 666,794 $ 31,618 $4,211,709
Intersegment Sales ............. 852,589 11,317 71 150 (864,127)* --
---------------------------------------------------------------------------------
Total Revenue .................. 2,566,598 1,527,011 283,665 666,944 (832,509) 4,211,709
Operating Profit ............... 736,509 52,416*** 32,697 75,850 (67,370)** 830,102
Identifiable Assets ............ 3,338,311 719,124 118,118 494,865 167,925 4,838,343
Depreciation & Cost of
Company Timber Harvested 202,767 34,511 12,012 19,192 3,214 271,696
Capital Expenditures ........... 141,598 55,861 27,775 37,261 4,304 266,799
- --------------------------------------------------------------------------------------------------------------------
1994
Sales to Customers ............. $1,123,530 $1,372,084 $ 292,254 $ 575,770 $ 32,187 $3,395,825
Intersegment Sales ............. 697,959 7,367 135 153 (705,614)* --
---------------------------------------------------------------------------------
Total Revenue .................. 1,821,489 1,379,451 292,389 575,923 (673,427) 3,395,825
Operating Profit ............... 182,234 9,335*** 78,520 67,182 (62,771)** 274,500
Identifiable Assets ............ 3,385,220 669,039 105,743 437,740 178,836 4,776,578
Depreciation & Cost of
Company Timber Harvested 185,855 35,541 10,997 17,130 3,913 253,436
Capital Expenditures ........... 247,781 29,545 14,627 27,013 5,973 324,939
- --------------------------------------------------------------------------------------------------------------------
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 ............ 3,320,737 668,069 97,492 389,208 209,527 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
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
* Elimination of Intersegment Sales.
** Includes intersegment eliminations and unallocated corporate, technology and
engineering expenses of $61,491 in 1995, $50,725 in 1994, and $48,071 in
1993.
*** The year 1995 includes a gain of $6,423 relating to the sale of the assets
of a flexible packaging operation. Results for 1994 included a charge of
$13,958 relating to the write down of the carrying value of these assets.
<PAGE>
<PAGE>
HISTORICAL DATA (1995-1985)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994 1993 1992
- ------------------------------------------------------------------------------------------------------------------------------------
Operating Results
<S> <C> <C> <C> <C>
Net Sales ............................................... $ 4,211,709 $ 3,395,825 $ 3,120,421 $ 3,064,358
Costs and Other Charges ................................. 3,381,607 3,121,325 2,908,797 2,883,782
- ------------------------------------------------------------------------------------------------------------------------------------
Income From Operations .......................... 830,102 274,500 211,624 180,576
- ------------------------------------------------------------------------------------------------------------------------------------
Interest Expense, net of capitalized interest ........... 113,705 109,172 124,911 136,240
Other (Income)-Net ...................................... (14,460) (29,836)* (13,425) (21,074)
- ------------------------------------------------------------------------------------------------------------------------------------
Income Before Income Taxes, Minority
Interest, Extraordinary Item, and
Accounting Changes ...................... 730,857 195,164 100,138 65,410
Income Taxes ............................................ 268,895 71,420 50,095 22,755
Minority Interest, net of tax ........................... (10,889) (6,518) -- --
Extraordinary Item, net of tax .......................... -- -- -- (7,228)
Effect of Accounting Changes, net of tax ................ -- (3,716) -- 40,806
- ------------------------------------------------------------------------------------------------------------------------------------
Net Income ...................................... 451,073 113,510 50,043 76,233
- ------------------------------------------------------------------------------------------------------------------------------------
Per Common Share
Net Income ............................................... 6.45 1.62 0.72 1.10
Dividends ................................................ 1.66 1.56 1.56 1.56
Stockholders' Equity ..................................... 30.71 26.23 26.00 27.01
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Position
Current Assets ........................................... 1,033,817 951,133 910,718 1,016,117
Current Liabilities ...................................... 620,113 883,924 909,372 892,115
- ------------------------------------------------------------------------------------------------------------------------------------
Working Capital .......................................... 413,704 67,209 1,346 124,002
Total Assets ............................................. 4,838,343 4,776,578 4,685,033 4,745,197
- ------------------------------------------------------------------------------------------------------------------------------------
Long-Term Debt ........................................... 1,151,536 1,252,249 1,244,907 1,289,706
Deferred Income Taxes .................................... 709,850 605,643 583,155 553,871
Stockholders' Equity ..................................... 2,121,692 1,836,321 1,815,848 1,881,878
- ------------------------------------------------------------------------------------------------------------------------------------
Percent of Long-Term Debt to Total Capital ............... 28.9% 33.9% 34.2% 34.6%
- ------------------------------------------------------------------------------------------------------------------------------------
Additional Data
Cash Provided by Operations .............................. 750,222 368,502 418,420 268,865
Capital Expenditures (excluding acquisitions) ............ 266,799 324,939 310,113 219,654
Depreciation & Cost of
Company Timber Harvested ......................... 271,696 253,436 242,883 237,531
Tons Sold-Paper & Paperboard Products .................... 3,485,221 3,452,604 3,291,255 3,242,511
Average Shares of Common Stock Outstanding ............... 69,940,397 69,954,082 69,740,458 69,604,174
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Includes $34.7 million pre-tax gain on sale of minority interest in Bush Boake
Allen
<PAGE>
<PAGE>
HISTORICAL DATA CONTINUED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
($ in thousands, except per share)
1991 1990 1989 1988 1987 1986 1985
- ------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C> <C>
$ 2,967,138 $ 2,839,704 $ 2,761,337 $ 2,660,918 $ 2,361,684 $ 2,092,247 $ 1,865,871
2,692,148 2,469,017 2,266,561 2,167,264 1,979,788 1,844,957 1,697,109
- ------------------------------------------------------------------------------------------------------------------
274,990 370,687 494,776 493,654 381,896 247,290 168,762
- ------------------------------------------------------------------------------------------------------------------
81,750 31,228 47,800 50,527 61,294 59,702 63,771
(11,748) (26,559) (22,302) (24,882) (22,272) (18,756) (17,701)
- ------------------------------------------------------------------------------------------------------------------
204,988 366,018 469,278 468,009 342,874 206,344 122,692
76,978 136,427 169,878 172,863 135,391 76,410 27,600
-- -- -- -- -- -- --
(3,220) -- -- -- -- -- --
-- -- -- -- -- -- --
- ------------------------------------------------------------------------------------------------------------------
124,790 229,591 299,400 295,146 207,483 129,934 95,092
- ------------------------------------------------------------------------------------------------------------------
1.80 3.35 4.35 4.25 2.83 1.77 1.30
1.56 1.54 1.42 1.22 1.14 1.09 1.09
27.88 27.60 25.47 22.66 20.24 18.62 17.92
- ------------------------------------------------------------------------------------------------------------------
909,990 859,532 721,195 769,323 753,683 626,481 514,534
764,916 642,776 366,962 326,079 295,618 275,665 344,996
- ------------------------------------------------------------------------------------------------------------------
145,074 216,756 354,233 443,244 458,065 350,816 169,538
4,697,714 4,403,354 3,413,862 3,094,414 2,919,115 2,776,602 2,660,609
- ------------------------------------------------------------------------------------------------------------------
1,348,157 1,221,597 690,149 627,928 632,706 651,539 592,464
627,120 589,477 581,835 581,080 538,774 478,829 408,057
1,936,256 1,910,643 1,754,524 1,559,327 1,452,017 1,370,569 1,315,092
- ------------------------------------------------------------------------------------------------------------------
34.5% 32.8% 22.8% 22.7% 24.1% 26.1% 25.6%
- ------------------------------------------------------------------------------------------------------------------
375,041 386,036 526,685 518,978 447,261 336,661 279,184
482,638 934,452 556,268 358,671 188,587 212,789 238,958
209,120 217,416 204,572 190,611 180,015 168,457 152,064
3,004,980 2,835,549 2,726,105 2,733,205 2,675,541 2,656,920 2,328,558
69,270,992 68,550,315 68,836,229 69,433,734 73,391,106 73,533,126 73,328,341
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Registration Nos. 2-62214, 33-23952, 33-25455, 33-25454,
33-28396, 33-30599, 2-91519, 33-60428, 33-60426, 33-54335) and the Registration
Statement on Form S-3 (Registration No. 33-56225) of Union Camp Corporation of
our report dated February 7, 1996 appearing on page 28 of the 1995 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 Schedule, which appears on page 30 of this Form 10-K.
PRICE WATERHOUSE LLP
Morristown, New Jersey
July 1, 1996
