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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 June 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
- --------------------------------------------------------------------------------
(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 ['ch'] NO [ ]
69,344,975 shares of Registrant's Common Stock, par value $1 Per Share,
were outstanding as of the close of business on June 30, 1997.
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UNION CAMP CORPORATION
INDEX
Page
----
Part I. FINANCIAL INFORMATION*
Item 1. Financial Statements. 2
Item 2. Management's Discussion and
Analysis of Financial Condition
and Results of Operations. 6
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. 8
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* A summary of the Registrant's significant accounting policies is contained in
the Registrant's Form 10-K for the year ended December 31, 1996 which has
previously been filed with the Commission.
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PART I. FINANCIAL INFORMATION
Item I. Financial Statements.
UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
($ in thousands, except per share)
<TABLE>
<CAPTION>
QUARTER ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- --------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 1,105,591 $ 934,048 $ 2,162,716 $ 1,912,303
Costs and other charges:
Cost of products sold 844,540 703,798 1,656,673 1,378,483
Selling and administrative expenses 129,442 98,988 251,969 202,022
Depreciation, amortization, and cost of timber harvested 77,803 73,805 155,441 146,680
----------- ----------- ----------- ----------
Income from operations 53,806 57,457 98,633 185,118
----------- ----------- ----------- ----------
Gross interest expense 32,153 28,841 63,215 57,073
Less capitalized interest (2,039) (942) (4,192) (1,802)
Other (income) expense - net 1,400 (5,199) (1,535) (1,659)
----------- ----------- ----------- ----------
Income before income taxes and minority 22,292 34,757 41,145 131,506
----------- ----------- ----------- ----------
Income taxes:
Current 5,154 9,757 7,860 32,206
Deferred 3,357 3,628 7,363 16,977
----------- ----------- ----------- ----------
Total income taxes 8,511 13,385 15,223 49,183
----------- ----------- ----------- ----------
Minority interest (net of tax) (3,170) (3,233) (5,693) (5,681)
----------- ----------- ----------- ----------
Net Income $ 10,611 $ 18,139 $ 20,229 $ 76,642
----------- ----------- ----------- ----------
----------- ----------- ----------- ----------
Earnings per share: $0.15 $0.26 $0.29 $1.11
Dividends per share $0.45 $0.45 $0.90 $0.90
Earnings per share are computed on the basis of the average number of common shares outstanding:
1997 1996
---- ----
Quarter Ended June 30, 69,287,739 68,960,257
Six Months Ended June 30, 69,264,468 69,034,603
</TABLE>
See also the accompanying notes to consolidated financial statements.
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UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
($ in thousands)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1997 1996
----------- -----------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 39,850 $ 44,917
Receivables-net 564,670 544,320
Inventories at lower of cost or market:
Finished goods 276,054 270,123
Raw materials 105,984 110,569
Supplies 110,653 115,741
---------- ----------
Total inventories 492,691 496,433
---------- ----------
Assets held for resale 11,557 6,650
Other 42,103 41,790
---------- ----------
Total current assets 1,150,871 1,134,110
---------- ----------
Plant and equipment, at cost 6,678,368 6,562,465
Less: accumulated depreciation 3,279,511 3,161,450
---------- ----------
3,398,857 3,401,015
Timberlands, less cost of timber harvested 355,876 351,334
---------- ----------
Total property 3,754,733 3,752,349
---------- ----------
Other assets 218,148 209,848
---------- ----------
Total Assets $5,123,752 $5,096,307
---------- ----------
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities $ 830,938 $ 779,869
Long-term debt 1,252,223 1,252,475
Deferred income taxes 732,423 723,431
Other liabilities and minority interest 257,441 246,938
Stockholders' equity (Shares outstanding
1997: 69,344,975; 1996: 69,217,119) 2,050,727 2,093,594
---------- ----------
Total Liabilities and Stockholders' Equity $5,123,752 $5,096,307
---------- ----------
---------- ----------
</TABLE>
See also the accompanying notes to consolidated financial statements.
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UNION CAMP CORPORATION
AND CONSOLIDATED SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------------
1997 1996
---- ----
<S> <C> <C>
Cash Provided By (Used For) Operations:
Net income $ 20,229 $ 76,642
Adjustments to reconcile net income
to cash provided by operations:
Depreciation, amortization, and cost of company
timber harvested 155,441 146,680
Deferred income taxes 7,363 16,977
Other 14,289 8,496
Changes in operational assets and liabilities:
Receivables (19,768) 5,159
Inventories 2,250 29,230
Other assets (1,032) (6,017)
Accounts payable, taxes and other liabilities (24,784) (16,055)
-------- --------
Cash Provided By Operations 153,988 261,112
-------- --------
Cash (Used For) Provided By Investment Activities:
Capital expenditures:
Plant and equipment (150,976) (117,358)
Timberlands (13,697) (81,031)
Payments for acquired businesses (13,350) (31,850)
Other 1,523 (6,774)
-------- --------
(176,500) (237,013)
-------- --------
Cash (Used For) Provided By Financing Activities:
Change in short-term notes payable 82,600 106,277
Repayments of long-term debt (12,114) (21,048)
Proceeds from the issuance of long-term debt 10,000 --
Repurchase of common stock -- (32,065)
Dividends paid (62,546) (62,085)
-------- --------
17,940 (8,921)
-------- --------
Effect of exchange rate changes on cash (495) (435)
-------- --------
Increase (decrease) in cash and cash equivalents (5,067) 14,743
Balance at beginning of year 44,917 30,332
-------- --------
Balance at end of period $ 39,850 $ 45,075
-------- --------
-------- --------
Supplemental cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 59,109 $ 56,043
Income taxes $ 13,977 $ 38,886
</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 second quarter and six months of 1997 include
sales of $165 million and $323 million, respectively, related to
Alling & Cory, a paper distribution business acquired by the
company in August 1996.
Note 3. Included in last year's "Income from Operations" for the second
quarter 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 second quarter of
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 $176 million and $114
million of commercial paper borrowings at June 30, 1997 and
year-end 1996, respectively.
Note 6. Included in "Other Liabilities and Minority Interest" at June
30, 1997 and year-end 1996 are $84.5 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.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Net income for the second quarter of 1997 was $10.6 million or $.15 per share,
compared with $18.1 million or $.26 per share for the second quarter of last
year and $9.6 million or $.14 per share for the first quarter of this year.
Income from operations for the quarter was $53.8 million, a 6% decrease from
last year's second quarter; however, 20% above this year's first quarter.
Net income for the first half of 1997 was $20.2 million or $.29 per share,
compared with $76.6 million or $1.11 per share for the same period last year.
Operating income for the first half of 1997 was $98.6 million, a 47% decrease
from the $185.1 million reported for the first half of 1996.
Net sales for the second quarter were $1,106 million, 18% above the previous
year's comparable quarter. The second quarter of 1997 included sales of $165
million attributable to The Alling & Cory Company, a paper distribution business
acquired in August 1996. The impact of that business on second quarter operating
results was not material. Total paper product shipments increased by 7% from
last year's second quarter, to approximately 939,000 tons, reaching record
levels.
<TABLE>
<CAPTION>
SECOND SECOND
OPERATING PROFIT BY SEGMENT ($000) QUARTER 1997 QUARTER 1996
---------------------------------- ------------ ------------
<S> <C> <C>
Paper and Paperboard $ 17,642 $ 15,758
Packaging Products 9,529 15,601
Wood Products 20,277 10,268
Chemical 20,617 17,802
Corporate Items and Eliminations (14,259) (1,972)
-------- --------
Income from Operations $ 53,806 $ 57,457
-------- --------
-------- --------
</TABLE>
Despite a difficult pricing environment, operating income for the Paper and
Paperboard segment in the second quarter was $17.6 million, an 11% increase from
the $15.8 million reported for the second quarter of last year. Paper mill
productivity was exceptional during the quarter, resulting in lower unit costs.
Despite high production levels, paper inventories dropped in the second quarter,
primarily due to strong shipments and, to a lesser extent, approximately 60,000
tons of downtime taken. Higher operating profits from increased shipments for
both domestic and export linerboard were partially offset by lower average
selling prices. Linerboard shipments increased by 47%, while uncoated business
papers volume was off modestly compared with last year's second quarter. Second
quarter average selling prices for linerboard and uncoated business papers
decreased 15% and 4%, respectively, compared with last year. Some upward
movement in pricing was noted in uncoated business papers during the second
quarter of 1997. Prices in June were $17 per ton above the first quarter
average. Included in operating income for last year's second quarter was a $2.9
million pre-tax charge for estimated severance costs related to the company's
decision to outsource timber harvesting operations.
Packaging segment operating income was $9.5 million for the second quarter of
1997, compared with $15.6 million for last year's comparable quarter. Earnings
for the domestic corrugated container operations decreased by 36% compared with
last year's comparable quarter, due to a 17% decline in average selling prices
and a slight decrease in shipments, attributable to the sale of two box plants
in the past year. Second quarter earnings from the company's overseas container
businesses were well below last year because of lower volume and selling prices.
Operating profit within the flexible packaging business was also below the same
quarter of last year.
6
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The company's non-paper businesses reported a robust improvement in operating
income, compared with last year's second quarter. The Wood Products segment
achieved record second quarter earnings of $20.3 million, a 97% increase over
last year's second quarter, due primarily to a 21% increase in the average
selling price of lumber coupled with a 7% increase in volume. The Chemical
segment reported operating income of $20.6 million, 16% above the second quarter
of last year. The favorable results were mostly attributable to increased
earnings within the company's Bush Boake Allen business, resulting from
increased sales and reduced manufacturing costs. In addition, the Chemical
Products Division realized improved margins and a 9% increase in volume over
last year's second quarter.
Depreciation expense for the second quarter increased 4% from last year's
comparable quarter, and increased 5% for the first half of 1997 compared with
last year's first half. The increase is due to a higher level of capital
investment as well as the depreciation expense for Alling & Cory. Gross interest
expense increased in the second quarter, reflecting the impact of an increase in
outstanding debt, offset in part by the amount of interest capitalized.
Other income (expense) decreased substantially from the second quarter of last
year, which was primarily attributable to a $4.2 million pre-tax gain on the
sale of assets included in last year's results.
Cash flow from operations for the first half of 1997 was $154.0 million,
compared with $261.1 million for last year's comparable period. The decrease was
primarily due to the lower earnings for the first half of this year, and
increased working capital. Capital expenditures for the first half of this year
totaled $164.7 million, compared with $198.4 million last year, which included a
large timberland acquisition. Total debt increased $80 million during the first
half 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
36.7% at June 30, 1997, compared with 35.3% at year-end 1996.
Net working capital decreased to $319.9 million at June 30, 1997, from $354.2
million at year-end 1996, primarily attributable to an increase in short-term
borrowings.
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 128 "Earnings per Share".
The company will adopt this statement for interim and annual periods ending
after December 15, 1997, which is the statement's effective date. The statement
is not expected to have a material impact on reported earnings.
In June 1997, the FASB issued SFAS No. 131 "Disclosures about Segments of an
Enterprise and Related Information". The company plans to adopt this statement
for interim and annual periods beginning after December 15, 1997.
Statements in this report that are not historical are forward-looking statements
that are subject to risks and uncertainties that could cause actual results to
differ materially. Such risks and uncertainties with respect to the company
include the effect of general economic conditions, fluctuations in supply and
demand for the company's products including exports and potential imports, paper
industry production capacity, operating rates and competitive pricing pressures.
7
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Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
a) Exhibits.
No. Description
--- -----------
11 Statement re computation of per share earnings.
27 Financial data schedule.
b) Reports on Form 8-K.
No Current Report on Form 8-K was filed by the Registrant
during the second quarter of 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: August 13, 1997 /S/ Dirk R. Soutendijk
--------------- ----------------------
DIRK R. SOUTENDIJK
VICE PRESIDENT, GENERAL COUNSEL
AND SECRETARY
Date: August 13, 1997 /S/ John F. Haren
--------------- -----------------
CONTROLLER
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STATEMENT OF DIFFERENCES
The checkmark shall be expressed as ...............................'ch'
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EXHIBIT 11
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
June 30, June 30,
------------------------------ ----------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Income ($000) $10,611 $18,139 $20,229 $76,642
Weighted Average Common
Shares Outstanding 69,287,739 68,960,257 69,264,468 69,034,603
Earnings Per Share $0.15 $0.26 $0.29 $1.11
Weighted Average Common
Shares Outstanding
Including Common Stock
Equivalents - Primary Basis 69,661,028 69,462,050 69,585,214 69,472,760
Primary Earnings Per Share $0.15 $0.26 $0.29 $1.10
Weighted Average Common
Shares Outstanding
Including Common Stock
Equivalents - Fully
Diluted Basis 69,738,945 69,462,050 69,715,674 69,472,760
Fully Diluted Earnings Per Share $0.15 $0.26 $0.29 $1.10
</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 SIX MONTHS ENDED JUNE 30, 1997 AND
THE CONSOLIDATED BALANCE SHEET AT JUNE 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 39,850
<SECURITIES> 0
<RECEIVABLES> 583,005
<ALLOWANCES> 18,335
<INVENTORY> 492,691
<CURRENT-ASSETS> 1,150,871
<PP&E> 7,034,244
<DEPRECIATION> 3,279,511
<TOTAL-ASSETS> 5,123,752
<CURRENT-LIABILITIES> 830,938
<BONDS> 1,252,223
<COMMON> 69,345
0
0
<OTHER-SE> 1,981,382
<TOTAL-LIABILITY-AND-EQUITY> 5,123,752
<SALES> 2,162,716
<TOTAL-REVENUES> 2,162,716
<CGS> 1,656,673
<TOTAL-COSTS> 2,064,083
<OTHER-EXPENSES> (1,535)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,023
<INCOME-PRETAX> 41,145
<INCOME-TAX> 15,223
<INCOME-CONTINUING> 20,229 <F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 20,229
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.29
<FN>
<F1>REFLECTS ADJUSTMENT FOR MINORITY INTEREST (NET OF TAX) OF $5,693
</FN>
</TABLE>
