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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _____________ to ______________
Commission File Number 1-4001
UNION CAMP CORPORATION
VIRGINIA 13-5652423
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(State of Incorporation) (I.R.S. Employer Identification No.)
1600 Valley Road Wayne, New Jersey 07470
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(Address of Principal Executive Offices) (Zip Code)
Telephone: (973) 628-2000
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Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
69,699,832 shares of Registrant's Common Stock, par value $1 Per Share,
were outstanding as of the close of business on September 30, 1997.
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UNION CAMP CORPORATION
INDEX
Page
----
Part I. FINANCIAL INFORMATION*
Item 1. Financial Statements. 2
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations. 6
Part II. OTHER INFORMATION
Item 2. Changes in Securities 8
Item 6. Exhibits and Reports on Form 8-K. 8
----------------------------------------------
* A summary of the Registrant's significant accounting policies is contained in
the Registrant's Form 10-K for the year ended December 31, 1996 which has
previously been filed with the Commission.
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PART I. FINANCIAL INFORMATION
Item I. Financial Statements.
UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
($ in thousands, except per share)
<TABLE>
<CAPTION>
QUARTER ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
--------------------- ----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 1,126,902 $ 1,017,310 $ 3,289,618 $ 2,929,613
Costs and other charges:
Cost of products sold 849,318 779,415 2,505,991 2,149,085
Selling and administrative expenses 125,165 108,970 377,134 319,805
Depreciation, amortization, and
cost of timber harvested 77,064 75,076 232,505 221,756
-------- -------- --------- ---------
Income from operations 75,355 53,849 173,988 238,967
-------- -------- --------- ---------
Gross interest expense 31,852 29,334 95,067 86,407
Less capitalized interest (2,922) (1,046) (7,114) (2,848)
Other (income) expense - net (1,084) (979) (2,619) (2,638)
-------- -------- --------- ---------
Income before income taxes and
minority interest 47,509 26,540 88,654 158,046
-------- -------- --------- ---------
Income taxes:
Current 12,620 6,591 20,480 38,797
Deferred 4,431 3,147 11,794 20,124
-------- -------- --------- ---------
Total income taxes 17,051 9,738 32,274 58,921
-------- -------- --------- ---------
Minority interest (net of tax) (2,899) (2,449) (8,592) (8,130)
-------- -------- --------- ---------
Net Income $ 27,559 $ 14,353 $ 47,788 $ 90,995
============ ============ ============ ===========
Earnings per share: $ 0.40 $ 0.21 $ 0.69 $ 1.32
Dividends per share $ 0.45 $ 0.45 $ 1.35 $ 1.35
</TABLE>
Earnings per share are computed on the basis of the average number of common
shares outstanding:
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Quarter Ended September 30, 69,546,878 69,421,132
Nine Months Ended September 30, 69,359,639 69,164,387
</TABLE>
See also the accompanying notes to consolidated financial statements.
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UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 40,698 $ 44,917
Receivables-net 578,095 544,320
Inventories at lower of cost or market:
Finished goods 278,292 270,123
Raw materials 108,647 110,569
Supplies 111,421 115,741
------- -------
Total inventories 498,360 496,433
------- -------
Assets held for resale 10,933 6,650
Other 35,687 41,790
--------- ---------
Total current assets 1,163,773 1,134,110
--------- ---------
Plant and equipment, at cost 6,722,210 6,562,465
Less: accumulated depreciation 3,338,813 3,161,450
--------- ---------
3,383,397 3,401,015
Timberlands, less cost of timber harvested 359,839 351,334
--------- ---------
Total property 3,743,236 3,752,349
--------- ---------
Other assets 247,755 209,848
--------- ---------
Total Assets $ 5,154,764 $ 5,096,307
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 847,395 $ 779,869
Long-term debt 1,231,366 1,252,475
Deferred income taxes 736,890 723,431
Other liabilities and minority interest 284,223 246,938
Stockholders' equity (Shares outstanding
1997: 69,699,832 ; 1996: 69,217,119) 2,054,890 2,093,594
--------- ---------
Total Liabilities and Stockholders' Equity $ 5,154,764 $ 5,096,307
============ ============
</TABLE>
See also the accompanying notes to consolidated financial statements.
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UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1997 1996
---- ----
<S> <C> <C>
Cash Provided By (Used For) Operations:
Net income $ 47,788 $ 90,995
Adjustments to reconcile net income
to cash provided by operations:
Depreciation, amortization, and cost of company
timber harvested 232,505 221,756
Deferred income taxes 11,794 20,124
Other 21,572 11,041
Changes in operational assets and liabilities:
Receivables (38,422) 25,461
Inventories (5,128) 36,119
Other assets 5,168 1,448
Accounts payable, taxes and other liabilities (2,301) (37,148)
------- -------
Cash Provided By Operations 272,976 369,796
------- -------
Cash (Used For) Provided By Investment Activities:
Capital expenditures:
Plant and equipment (213,828) (191,632)
Timberlands (25,645) (85,878)
Payments for acquired businesses (13,890) (37,269)
Other 19,253 4,460
------- -------
(234,110) (310,319)
------- -------
Cash (Used For) Provided By Financing Activities:
Change in short-term notes payable 57,482 21,003
Repayments of long-term debt (15,206) (48,052)
Proceeds from the issuance of long-term debt 10,000 150,000
Repurchase of common stock -- (65,114)
Dividends paid (93,681) (93,550)
------- -------
(41,405) (35,713)
------- -------
Effect of exchange rate changes on cash (1,680) 52
------- -------
Increase (decrease) in cash and cash equivalents (4,219) 23,816
Balance at beginning of year 44,917 30,332
------- -------
Balance at end of period $ 40,698 $ 54,148
======= =======
Supplemental cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 94,946 $ 88,639
Income taxes $ 22,304 $ 44,275
</TABLE>
See also the accompanying notes to consolidated financial statements.
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UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. The information furnished in this report is unaudited but
includes all adjustments which, in the opinion of management, are
necessary for a fair presentation of results for the interim
periods reported. The adjustments made were of a normal recurring
nature.
Note 2. Results for the third quarter and nine months of 1997 include
sales of $183 million and $506 million, respectively, related to
Alling & Cory, a paper distribution business acquired by the
company in August 1996. Results for the third quarter and nine
months of 1996 included sales of $112 million related to Alling &
Cory.
Note 3. Included in last year's "Income from Operations" for the nine
months ended September 30, 1996 was a $2.9 million pre-tax charge
for estimated severance costs related to the company's decision to
outsource timber harvesting.
Note 4. Included in "Other Income/Expense" for the nine months ended
September 30, 1996 was a $4.2 million pre-tax gain on the sale of
land by the company's Bush Boake Allen flavor and fragrance
business.
Note 5. Included in "Current Liabilities" are $140 million and $114
million of commercial paper borrowings at September 30, 1997 and
year-end 1996, respectively.
Note 6. Included in "Other Liabilities and Minority Interest" at
September 30, 1997 and year-end 1996 are $87.2 million and $79.3
million, respectively, representing the minority interest in Union
Camp's 68% owned subsidiary, Bush Boake Allen.
Note 7. Certain amounts in the Consolidated Statement of Income have
been reclassified for 1996 to conform with the 1997 presentation.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net income for the third quarter of 1997 was $27.6 million or $.40 per share,
compared with $14.4 million or $.21 per share for the third quarter of last year
and $10.6 million or $.15 per share for the second quarter of this year. Income
from operations for the quarter was $75.4 million, a 40% increase from last
year's third quarter and this year's second quarter.
Net income for the first nine months of 1997 was $47.8 million or $.69 per
share, compared with $91.0 million or $1.32 per share for the same period last
year. Operating income for the first nine months of 1997 was $174.0 million, a
27% decrease from the $239.0 million reported for the first nine months of 1996.
Net sales for the third quarter were $1,127 million, 11% above the previous
year's comparable quarter. The third quarter of 1997 included sales of $183
million attributable to The Alling & Cory Company, a paper distribution business
acquired in August 1996. The third quarter of 1996 included sales of $112
million related to Alling & Cory. The impact of this business on third quarter
operating results was not material. Total paper product shipments increased by
5% from last year's third quarter, to approximately 927,000 tons.
Third Third
Operating Profit by Segment ($000) Quarter 1997 Quarter 1996
- --------------------------------- ------------ ------------
Paper and Paperboard $ 45,674 $ 27,649
Packaging Products 6,424 9,577
Wood Products 18,776 16,056
Chemical 20,255 16,441
Corporate Items and Eliminations (15,774) (15,874)
---------- ---------
Income from Operations $ 75,355 $ 53,849
========== =========
Operating income for the Paper and Paperboard segment in the third quarter was
$45.7 million, a 65% increase from the $27.6 million reported for the third
quarter of last year. Higher operating profits from lower manufacturing costs
and increased shipments of both domestic and export linerboard were partially
offset by lower average selling prices. Linerboard shipments increased by 28%,
and uncoated business papers volume increased modestly compared with last year's
third quarter. Paper inventories dropped during the third quarter, primarily due
to increased shipments outpacing high production levels and, to a lesser extent,
approximately 32,000 tons of downtime taken. Third quarter average selling
prices for linerboard decreased 4%, while average selling prices for uncoated
business papers increased 2%, compared with last year. Upward movement in
pricing occurred in both linerboard and uncoated business papers during the
third quarter of 1997. Prices of linerboard and uncoated business papers in
September increased by $22 and $55 per ton, respectively, above this year's
second quarter average with additional upward price movement anticipated in the
fourth quarter.
Packaging segment operating income was $6.4 million for the third quarter of
1997, compared with $9.6 million for last year's comparable quarter. Earnings
for the domestic corrugated container operations decreased by 47% compared with
last year's comparable quarter, due to an 8% decline in average selling prices.
Third quarter earnings from the company's overseas container businesses were
well below last year primarily due to lower selling prices, which were partially
offset by increased volume. Operating profit within the flexible packaging
business increased modestly over the same quarter of last year, while operating
profit within the folding carton business decreased substantially from last
year. In October 1997, the company acquired Phoenix Display & Packaging Corp., a
leading marketing, merchandising and point-of-purchase display company based in
New Jersey, for approximately 188 thousand shares of company common stock. Also,
in October 1997, the company sold its Denver container plant as an ongoing
business. The company expects to record a gain from the sale of this facility.
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The company's non-paper businesses reported an improvement in operating income,
compared with last year's third quarter. The Wood Products segment reported
third quarter earnings of $18.8 million, a 17% increase over last year's third
quarter, due primarily to a 12% increase in the average selling price of lumber
coupled with an 11% increase in volume. The Chemical segment reported operating
income of $20.3 million, 23% above the third quarter of last year. The favorable
results were attributable to increased earnings within both the company's
Chemical Products Division, due to increased sales, and the company's Bush Boake
Allen business which reported a 13% increase in operating profit compared to
last year's third quarter.
Depreciation expense for the third quarter increased 3% from last year's
comparable quarter, and increased 4% for the first nine months of 1997 compared
with last year. The increase is due to various capital projects becoming
operational, and depreciation expense for Alling & Cory. Gross interest expense
in the third quarter increased compared to the same quarter last year,
reflecting the impact of an increase in outstanding debt, offset in part by an
increase in the amount of interest capitalized.
Cash flow from operations for the first nine months of 1997 was $273.0 million,
compared with $369.8 million for last year's comparable period. The decrease was
primarily due to the lower earnings for the first nine months of this year, and
an increase in receivables. Capital expenditures for the first nine months of
this year totaled $239.5 million, compared with $277.5 million last year, which
included a large timberland acquisition. Total debt increased $52 million during
the first nine months of 1997, primarily attributable to increased commercial
paper borrowings and the issuance of $10 million of 6.1%, 30 year solid waste
disposal facilities bonds. The ratio of total debt to total capital employed
increased slightly to 36.2% at September 30, 1997, compared with 35.3% at
year-end 1996.
Net working capital decreased to $316.4 million at September 30, 1997, from
$354.2 million at year-end 1996, primarily attributable to an increase in
short-term borrowings.
In the third quarter, all outstanding stock appreciation rights previously
granted in tandem with nonqualified stock options under the company's management
incentive program were terminated. This did not have a material impact on
reported earnings. The related stock options were not affected by the decision
and remain outstanding.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings per Share".
The company is required to adopt this statement for periods ending after
December 15, 1997. In June 1997, the FASB issued SFAS No. 130 "Reporting
Comprehensive Income" and SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information". The company is required to adopt these
statements for periods beginning after December 15, 1997. The statements will
not have a material impact on reported net income.
The company is currently in the process of evaluating its computer software and
databases to ensure that any modifications required to be "Year 2000" compliant
are made in a timely manner. Management does not expect the financial impact of
such modifications to be material to the company's financial position or results
of operations in any period.
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Statements in this report or in other company announcements that are not
historical are forward-looking statements that are subject to risks and
uncertainties that could cause actual results to differ materially. Such risks
and uncertainties with respect to the company include the effect of general
economic conditions, fluctuations in supply and demand for the company's
products including exports and potential imports, paper industry production
capacity, operating rates and competitive pricing pressures.
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Part II. OTHER INFORMATION
Item 2. Changes in Securities.
On October 23, 1997 the Company issued 188,471 shares of its
Common Stock to Greater New York Box Co., Inc. in consideration
of the acquisition by the Company of all of the outstanding
capital stock of Phoenix Display & Packaging Corp. The value of
the Union Camp Common Stock issued was approximately $11,845,000.
The number of shares issued is subject to possible future
adjustment in accordance with the terms of the acquisition
agreement. The transaction in which the shares of Union Camp
Common Stock were issued was a private placement exempt from
registration under Section 4(2) of the Securities Act of 1933.
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
No. Description
11 Statement re computation of per share earnings.
27 Financial data schedule.
b) Reports on Form 8-K.
No Current Report on Form 8-K was filed by the Registrant
during the third quarter of 1997.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNION CAMP CORPORATION
---------------------------------------
(Registrant)
Date: November 7, 1997 /S/ Dirk R. Soutendijk
----------------------------------------
DIRK R. SOUTENDIJK
VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
Date: November 7, 1997 /S/ John F. Haren
---------------------------------------
CONTROLLER
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EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
-------------- --------------
1997 1996 1997 1996
---------- ----------- -------------- --------------
<S> <C> <C> <C> <C>
Net Income ($000) $ 27,559 $ 14,353 $ 47,788 $ 90,995
Weighted Average Common
Shares Outstanding 69,546,878 69,421,132 69,359,639 69,164,387
Earnings Per Share $ 0.40 $ 0.21 $ 0.69 $ 1.32
Weighted Average Common
Shares Outstanding
Including Common Stock
Equivalents - Primary Basis 70,321,568 69,784,214 69,795,368 69,568,382
Primary Earnings Per Share $ 0.39 $ 0.21 $ 0.68 $ 1.31
Weighted Average Common
Shares Outstanding
Including Common Stock
Equivalents - Fully
Diluted Basis 70,438,622 69,784,214 70,251,383 69,568,382
Fully Diluted Earnings Per Share $ 0.39 $ 0.21 $0.68 $1.31
</TABLE>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED STATEMENT OF INCOME FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND THE CONSOLIDATED
BALANCE SHEET AT SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 40,698
<SECURITIES> 0
<RECEIVABLES> 596,574
<ALLOWANCES> 18,479
<INVENTORY> 498,360
<CURRENT-ASSETS> 1,163,773
<PP&E> 7,082,049
<DEPRECIATION> 3,338,813
<TOTAL-ASSETS> 5,154,764
<CURRENT-LIABILITIES> 847,395
<BONDS> 1,231,366
0
0
<COMMON> 69,700
<OTHER-SE> 1,985,190
<TOTAL-LIABILITY-AND-EQUITY> 5,154,764
<SALES> 3,289,618
<TOTAL-REVENUES> 3,289,618
<CGS> 2,505,991
<TOTAL-COSTS> 3,115,630
<OTHER-EXPENSES> (2,619)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 87,953
<INCOME-PRETAX> 88,654
<INCOME-TAX> 32,274
<INCOME-CONTINUING> 47,788<F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 47,788
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0.68
<FN>
<F1>REFLECTS ADJUSTMENT FOR MINORITY INTEREST (NET OF TAX) OF $8,592
</FN>
</TABLE>
