<PAGE>
<PAGE>
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- ----------------------------------------------------------
FORM 10-K/A-2
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
<TABLE>
<S> <C> <C>
FOR THE FISCAL YEAR ENDED
DECEMBER 31, 1997 COMMISSION FILE NUMBER: 1-4001
</TABLE>
------------------------
UNION CAMP CORPORATION
<TABLE>
<S> <C> <C>
A VIRGINIA CORPORATION 13-5652423
(I.R.S. EMPLOYER
IDENTIFICATION NO.)
1600 VALLEY ROAD
WAYNE, NEW JERSEY 07470
TELEPHONE (973) 628-2000
</TABLE>
------------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
- ------------------------------------------------------------ -------------------------
<S> <C>
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
Debentures Due April 15, 2016............................. New York Stock Exchange
</TABLE>
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. [ ]
On March 4, 1998, 69,244,048 shares of Registrant's Common Stock, $1 par
value, were outstanding. On March 4, 1998, 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 $59.3125 and the aggregate market value of the Common Stock
held by non-affiliates of the Registrant was $4,107,037,597.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of Registrant's Annual Report to Stockholders for the fiscal year
ended December 31, 1997 (the 'Union Camp 1997 Annual Report') are incorporated
by reference in Parts I and IV of this Form 10-K.
Portions of Registrant's Proxy Statement, dated March 16, 1998 (the 'Union
Camp 1998 Proxy Statement'), are incorporated by reference in Part III of this
Form 10-K.
________________________________________________________________________________
<PAGE>
<PAGE>
AMENDED
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
QUARTERLY INFORMATION
<TABLE>
<CAPTION>
BASIC DILUTED
NET EARNINGS EARNINGS
GROSS INCOME PER PER DIVIDENDS
NET SALES PROFIT (LOSS) SHARE SHARE PER SHARE
---------- -------- ------- -------- -------- ---------
($ IN THOUSANDS EXCEPT SHARE AND PER SHARE)
<S> <C> <C> <C> <C> <C> <C> <C>
1997 Fourth Quarter................ $1,187,143 $283,841 $33,282 $ 0.48 $ 0.47 $0.45
Third Quarter................. 1,126,902 266,707 27,559 0.40 0.40 0.45
Second Quarter................ 1,105,591 251,809 10,611 0.15 0.15 0.45
First Quarter................. 1,057,125 232,034 9,618 0.14 0.14 0.45
---------- -------- ------- -------- -------- --------
1996 Fourth Quarter................ $1,083,584 $149,955 $(5,687) $(0.09) $(0.09) $0.45
Third Quarter................. 1,017,310 222,814 14,353 0.21 0.21 0.45
Second Quarter................ 934,048 214,397 18,139 0.26 0.26 0.45
First Quarter................. 978,255 286,791 58,503 0.85 0.85 0.45
---------- -------- ------- -------- -------- --------
---------- -------- ------- -------- -------- --------
<CAPTION>
STOCK PRICE*
----------------------
HIGH LOW
------------ --------
<S> <C> <C> <C>
1997 Fourth Quarter................ $ 64 9/16 $ 49 3/4
Third Quarter................. 63 1/8 50 1/4
Second Quarter................ 54 7/8 45 1/8
First Quarter................. 52 1/4 46 7/8
--------- --------
1996 Fourth Quarter................ $ 50 5/8 $ 46 7/8
Third Quarter................. 51 1/2 46 1/4
Second Quarter................ 55 3/8 48 3/4
First Quarter................. 52 3/8 44 7/8
--------- --------
--------- --------
</TABLE>
- ------------
1996 has been restated to conform with the 1997 presentation.
Fourth quarter 1996 includes a special charge relating to restructuring
costs and asset write downs which reduces income from operations by $39.4
million pre-tax and after-tax net income by $24.3 million or $.35 per share.
* 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,
1997 was 7,760.
2
<PAGE>
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
HISTORICAL DATA (1997-1993)
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Operating Results
Net Sales.............................................. $4,476,761 $4,013,197 $4,211,709 $3,395,825 $3,120,421
Costs and Other Charges................................ 4,219,549 3,760,658* 3,370,320 3,111,539 2,889,495
---------- ---------- ---------- ---------- ----------
Income From Operations............................ 257,212 252,539 841,389 284,286 230,926
---------- ---------- ---------- ---------- ----------
Interest Expense, net of capitalized interest.......... 117,290 112,286 113,705 109,172 124,911
Other (Income) Expense-Net........................ (3,888) (10,792) (3,173) (20,050)** 5,877
---------- ---------- ---------- ---------- ----------
Income Before Income Taxes, Minority Interest,
Extraordinary Item, and Accounting Changes...... 143,810 151,045 730,857 195,164 100,138
Income Taxes........................................... 51,804 55,250 268,895 71,420 50,095
Minority Interest, net of tax.......................... (10,936) (10,487) (10,889) (6,518) --
Extraordinary Item, net of tax......................... -- -- -- -- --
Effect of Accounting Changes, net of tax............... -- -- -- (3,716) --
---------- ---------- ---------- ---------- ----------
Net Income........................................ 81,070 85,308 451,073 113,510 50,043
---------- ---------- ---------- ---------- ----------
Per Common Share
Net Income:
Basic Earnings............................... 1.17 1.23 6.45 1.62 0.72
Diluted Earnings............................. 1.16 1.23 6.39 1.61 0.71
Dividends......................................... 1.80 1.80 1.66 1.56 1.56
Stockholders' Equity.............................. 29.39 30.25 30.71 26.23 26.00
---------- ---------- ---------- ---------- ----------
Financial Position
Current Assets.................................... 1,211,577 1,134,110 1,033,817 951,133 910,718
Current Liabilities............................... 803,018 779,869 620,113 883,924 909,372
---------- ---------- ---------- ---------- ----------
Working Capital................................... 408,559 354,241 413,704 67,209 1,346
Total Assets...................................... 5,241,701 5,096,307 4,838,343 4,776,578 4,685,033
---------- ---------- ---------- ---------- ----------
Long-Term Debt.................................... 1,367,450 1,252,475 1,151,536 1,252,249 1,244,907
Deferred Income Taxes............................. 744,677 723,431 709,850 605,643 583,155
Stockholders' Equity.............................. 2,035,718 2,093,594 2,121,692 1,836,321 1,815,848
---------- ---------- ---------- ---------- ----------
Percent of Long-Term Debt to Total Capital........ 33.0% 30.8% 28.9% 33.9% 34.2%
---------- ---------- ---------- ---------- ----------
Additional Data
Cash Provided by Operations....................... 381,116 503,145 758,880 377,587 436,393
Cash Used for Investment Activities............... (330,684) (435,661) (245,307) (232,383) (260,060)
Cash Used for Financing Activities................ (59,771) (54,638) (496,416) (170,582) (204,807)
Capital Expenditures (excluding acquisitions)..... 337,226 386,443 266,799 324,939 310,113
Depreciation, Amortization and Cost of Company
Timber Harvested................................ 310,618 298,457 287,738 270,850 261,518
Tons Sold-Paper and Paperboard Products........... 3,674,476 3,473,415 3,485,221 3,452,604 3,291,255
Average Shares of Common Stock Outstanding........ 69,439,150 69,220,157 69,940,397 69,954,082 69,740,458
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
- ------------
Years prior to 1997 have been restated to reflect the reclassification of
certain items from other (income) expense to income from operations.
* 1996 includes a $39.4 million special charge relating to restructuring costs
and asset write downs.
** Includes $34.7 million pre-tax gain on sale of minority interest in Bush
Boake Allen.
3
<PAGE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The adverse market conditions which had affected paper and packaging prices
in 1996 continued through most of the first half of 1997. Improvements in the
pricing environment became evident by mid-year and this trend progressed through
year-end. The company achieved steady earnings improvement over the last three
quarters of the year. Tight cost control coupled with improvements in volume and
mix were critical factors in this upward trend of earnings.
Consolidated net income was $81.1 million or $1.17 per share in 1997, down
from $85.3 million or $1.23 per share in 1996 after a special charge of $24.3
million or $.35 per share after-tax relating to restructuring costs and asset
write downs. This decline in earnings reflects the impact of significantly lower
average selling prices for linerboard and uncoated free sheet, the company's
principal paper products, but was substantially mitigated by improvements in
manufacturing cost efficiencies and better volume and mix.
Operations in 1997 benefited from the profit enhancement plan announced at
the end of 1996. This two year program has the objective of adding $100 million
to pre-tax earnings through product mix enhancements, cost reductions, and
business process improvements. At year-end 1997, progress on this program was
well ahead of schedule. A portion of the cost reduction plan includes a targeted
job elimination of 400 positions and, by year-end, 75% of this goal was
achieved. Production cost efficiencies represent another element of the plan.
Substantial operating cost savings were recognized within the company's
production facilities throughout 1997.
Paper product shipments in 1997 reached a record level, 3.7 million tons,
6% above prior year shipments, reflecting the improvement in customer demand and
less mill downtime. Consolidated sales in 1997 were also a record $4.5 billion,
12% over 1996. Excluding the Alling & Cory Company, a paper distribution
business acquired in August 1996, sales were up slightly. The increases in cost
of products sold and selling, general and administrative expenses in 1997
reflect, in large part, the full year's effect of the Alling and Cory
acquisition.
In the fourth quarter of 1997, financial market concerns increased relative
to the weakness of Asian economies. The company exported approximately 163,000
tons of linerboard into this region during 1997. Company shipments did not
decrease appreciably in the fourth quarter. In addition, as of March 1998, the
company had not seen significant deterioration in sales activity in 1998.
In 1996, consolidated net income was $85.3 million or $1.23 per share,
after a special charge relating to restructuring costs and asset write downs.
The Special Charge recorded in 1996 was part of the company's 'profit
enhancement program' which was announced at the end of 1996 and included the
goal of adding as much as $100 million to pre-tax earnings through cost
reductions and mix improvements. Before the special charge, 1996's net income
was $109.6 million or $1.58 per share which was significantly lower than the
all-time record reported in 1995 of $451.1 million or $6.45 per share.
Operating results and other financial information for the company's
principal business segments are presented on page 26. A discussion of the
results of these segments follows.
PAPER AND PAPERBOARD
The principal operations in this segment are two kraft paper and board
mills, two bleached paper and board mills, and woodlands operations which
support these mills as well as the company's wood products operation. Almost
one-half of the company's 1997 sales were generated by this segment. Operating
income was $145 million in 1997, compared to $171 million in 1996 and $750
million in 1995. The two year decline in operating income from 1995 reflected
sharply lower demand in the linerboard and uncoated free sheet markets. Higher
than normal inventory levels, particularly in uncoated free sheet, were a major
factor in the decline. By mid 1997, selling prices in these markets began to
increase and by year-end were well above end of year 1996 levels. Sales for the
segment were $2.0 billion, level with 1996, and down from $2.6 billion in 1995.
Kraft Paper & Board: The company is the fifth largest producer of
linerboard within the United States. Operating income from the two kraft mills
declined in 1997. Domestic and export linerboard prices averaged 14% and 4%
below 1996. Pricing began to recover at the beginning of the third quarter.
4
<PAGE>
<PAGE>
Year-end selling prices in the domestic markets were almost 30% above their
mid-year low. Customer shipments increased 18% and 39%, in the domestic and
export markets, respectively, year to year. Operating rates exceeded 100% for
both mills during 1997; record production was achieved at the Savannah mill, for
the first time exceeding one million tons. Also, cost containment initiatives
were successful in achieving improvement in direct manufacturing costs per ton.
Operating profit in 1996 declined significantly compared with 1995,
primarily due to lower average selling prices. Domestic and export linerboard
prices averaged 29% and 33% below 1995, respectively. Further contributing to
the decrease in operating profit for 1996 was a 7% decline in linerboard
shipments from 1995's level, and a slight increase in variable and fixed costs.
Bleached Paper and Board: Operating profits increased slightly in 1997
despite lower average prices in the uncoated free sheet market. Average selling
prices for uncoated free sheet decreased by 4% compared to 1996. However, this
was more than offset by a 3% increase in total shipments from 1996 coupled with
lower manufacturing costs. Operating rates at both bleached paper and board
mills improved over the prior year. The Franklin mill set a new production
record in 1997, exceeding the previous record by 6%.
Operating profit decreased in 1996 compared with 1995, as the decline in
selling prices, which began during the fourth quarter of 1995, continued
throughout 1996. Average selling prices of uncoated business papers were
approximately 25% less in 1996 compared with 1995. Total shipments increased by
8% over 1995, partially offsetting the effect of reduced selling prices.
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 9 locations overseas. Although 1997 shipments for these products
increased modestly over last year, prices in the corrugated container markets
declined significantly throughout the year. Segment sales were $1.3 billion,
down slightly from $1.4 billion in 1996 and $1.5 billion in 1995. Operating
profit declined to $36 million in 1997, from $44 million in 1996 and $51 million
in 1995, which was a record performance for the segment.
The Container Division is the largest unit in this segment, operating 28
plants in the domestic market. Primary products include bulk and triplewall
containers, graphics packaging and display items, and solid fiber containers.
Despite a modest increase in shipments, operating profit declined in 1997. This
reflects lower gross profit margins, despite improved production and stable
converting expenses. Segment results in 1997 include a gain relating to the sale
of the Denver, Colorado container plant as an ongoing business. Offsetting a
substantial portion of the gain was the write down of certain non-performing
assets.
Revenues for the company's International Packaging group, which
manufactures corrugated containers overseas, decreased by 12% in 1997, compared
with a 5% increase in 1996. Despite improved volume, operating profit declined
in 1997, primarily as a result of a 16% decline in selling prices, partially
offset by reduced manufacturing costs. Local market conditions varied by
country.
The Flexible Packaging Division is the second largest operating unit in
this segment, producing a broad variety of industrial and consumer bags,
polyethylene film and other non-rigid packaging at 10 plants in the U.S.
Operating profits declined in 1997, despite a 4% increase in sales over 1996.
Although total shipments for 1997 increased 5% over 1996, lower average selling
prices and higher fixed costs more than offset the increase.
The company's Folding Carton Division operates three plants, which produce
consumer products packaging with high quality graphics, principally for the
cosmetics and pharmaceutical industries. Although sales volume was level year to
year, operating profits decreased from 1996, primarily due to eroding margins
and higher operating costs.
5
<PAGE>
<PAGE>
WOOD PRODUCTS
The Wood Products segment consists of lumber, plywood and particleboard
operations. Segment revenue increased by 16% compared with 1996, and operating
profit surged 39% to $60 million in 1997.
This increase in profits is largely the result of an improvement in overall
market conditions in the lumber business, with prices and volume increasing by
15% and 7%, respectively, during 1997. Lumber operations posted both record
profits and production in 1997. Particleboard and plywood prices remained level
with 1996, while volume increased 2% over 1996 levels.
In 1996, operating profits increased by 33% compared with 1995, primarily
attributable to a 4% increase in lumber prices and a 3% increase in volume. The
favorable lumber operations, coupled with increased particleboard shipments,
more than offset lower prices for plywood and particleboard.
CHEMICAL
Net sales for the Chemical segment were $759 million in 1997, an 8%
increase over 1996 and 14% above 1995. Operating profit for this segment was $74
million, up from the $67 million reported in 1996 and down slightly from the $75
million in 1995.
Bush Boake Allen, the largest operating unit in this segment, conducts
operations on six continents and has locations in 39 countries worldwide. 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 were $491 million in 1997, up from $449 million in 1996, and
$425 million in 1995. Operating profit was $53 million in 1997, a 13% increase
over $47 million in 1996, and a 6% increase over $50 million in 1995. The growth
in 1997 resulted from improved performance in both flavors and fragrances and
chemicals operations.
The company's Chemical Products Division, with facilities in the United
States and United Kingdom, upgrades papermaking by-products and other raw
materials into a wide range of specialized chemicals, primarily for use in inks,
coatings and adhesives. Operating profit in 1997 increased by 3%, although the
cost of crude tall oil, a primary raw material, increased by 6%. The division
benefited from increased sales in its domestic and international markets and the
continued implementation of efficiency enhancing programs. The division's
performance for 1997 was largely driven by an expanded presence in international
markets. Although results from the division's U.K. operations were somewhat
hampered by a strengthening of the pound sterling, higher volumes and throughput
enabled the operation to improve its results from 1996. Shipments increased by
14% during 1997. In 1996, operating profit declined by 18% from 1995.
INTEREST EXPENSE
Net interest expense for 1997 was $117 million, compared to $112 million in
1996 and $114 million in 1995.
The increase in interest expense for 1997 was the result of higher
outstanding debt, in addition to slightly higher short-term interest rates,
offset partially by an increase in capitalized interest. The decrease in
interest expense in 1996 from the prior year was due to lower short-term
interest rates which more than offset an increase in outstanding debt and a
lower level of capitalized interest.
OTHER (INCOME) EXPENSE-NET
In 1997, other income was $4 million, compared with $11 million in 1996 and
$3 million in 1995. Other income for 1996 included $6.1 million related to other
asset disposals.
FINANCIAL POSITION, LIQUIDITY AND CAPITAL RESOURCES
The company's financial condition remained strong. Net working capital (the
excess of current assets over current liabilities) was $409 million at year-end
1997, an increase of $55 million from the end of 1996. The increase was
primarily attributable to higher trade receivables which resulted from higher
sales and the impact of new businesses. The company's current ratio was 1.5 for
both 1997 and 1996.
6
<PAGE>
<PAGE>
The interest coverage ratio for 1997 was 2.0 compared to 2.2 for 1996.
Stockholders' equity decreased by $58 million to $2.0 billion at year-end 1997
or $29.39 per share compared to $30.25 per share at the end of 1996.
Internally generated cash flow has been and will remain a primary source of
capital to fund the company's growth. Cash flow from operations was $381 million
in 1997, $503 million in 1996 and $759 million in 1995. The decline in 1997 was
attributable to increases in working capital items, primarily trade receivables.
Cash used for investment activities was down $105 million in 1997, primarily the
result of a lower level of capital spending. Cash used for financing activities
in 1997 was $60 million compared to $55 million in the prior year. This reflects
a net increase in total debt of $80 million offset by lower level of common
stock repurchases. During the fourth quarter, the company issued $150 million of
6 1/2% 10-year notes, which was used to replace $57 million of expiring debt
with higher interest rates and reduce the level of short-term borrowing.
The ratio of long-term debt to total capital employed (the sum of long-term
debt, deferred taxes and stockholders' equity) was 33.0% at December 31, 1997
compared with 30.8% at year-end 1996. Total debt to total capital for the
current year increased to 36.8% compared with 35.3% at the end of 1996.
FINANCIAL REVIEW
CAPITAL EXPENDITURES
Capital spending totaled $337 million in 1997 compared with $386 million in
1996 and $267 million in 1995. Included in capital expenditures for 1997 is
paper mill spending of $152 million. This includes $34 million to complete the
installation of a $70 million turbine generator and heat recovery steam
generator at the Franklin, Virginia mill and $17 million of a $27 million
turbine generator at the Savannah, Georgia mill.
Also included is $13 million in spending for a sheet finishing facility in
Franklin, Virginia. Investment at domestic and international packaging plants
was $42 million including a joint venture corrugated container plant in China.
Chemical sector spending, including Bush Boake Allen, totaled $57 million.
Spending at Wood Products facilities was $34 million which included $26 million
of a $45 million laminated veneer lumber production facility at Thorsby,
Alabama, which is scheduled for start up in mid 1998. Expenditures related to
the company's timberlands totaled $36 million.
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
($ IN MILLIONS)
<S> <C> <C> <C>
Plant and Equipment
(excludes acquisitions):
Expansion & Cost Reduction............................. $145 $139 $137
Replacement & Other.................................... 146 148 88
Capitalized Interest................................... 10 4 9
Timberlands (acquisition and regeneration)............. 36 95 33
---- ---- ----
Total............................................. $337 $386 $267
---- ---- ----
---- ---- ----
</TABLE>
At year-end 1997, purchase commitments related to capital projects
in-progress were approximately $59 million. Capital spending in 1998 is expected
to be about $300 million.
ACQUISITIONS AND DISPOSITIONS
During 1997, Union Camp made three acquisitions. In October, the company
acquired the outstanding shares of Phoenix Display and Packaging Corporation, a
leading merchandising and point-of-purchase display company based in New Jersey.
This acquisition builds on the company's national display business. In June,
Alling and Cory, the company's paper distribution business, acquired the
Antietam Paper Company. The acquisition strengthens Alling and Cory's position
in Maryland and adds warehouse operations in Virginia. In March, the company
acquired a 75% interest in Puntapel, S.A., a multiwall plant located in San
Luis, Argentina. This acquisition positions the company into a high
7
<PAGE>
<PAGE>
potential international packaging market. The cost of these acquisitions was $20
million in the aggregate.
Also in October 1997, the company sold its Denver, Colorado container
plant. Net sales for the Denver operation in 1997 were $19 million through the
month of sale. In March, the Denton, Texas multiwall plant was closed and
subsequently sold.
In August 1997, the company contributed 25 thousand acres of timberlands
valued at $30.7 million for a 50% equity investment in Forestmax LLC, which has
as its primary assets timberland holdings. The company will recognize a gain of
$27 million over a future period on the basis of timber cut.
In January 1996, the company acquired the operating assets and assumed
certain liabilities of O'Grady Containers, Inc., a graphics oriented, direct
print, sheet plant in Fort Worth, Texas. Later in the first quarter, the company
invested in a 50% interest in a corrugated container operation in Turkey. The
total cost of these purchases was $34 million. In August 1996, the company
acquired the outstanding shares of The Alling & Cory Company for $88.5 million,
consisting of 1.7 million shares of company common stock and $5.4 million cash.
Alling and Cory distributes communications and printing papers, industrial
packaging and business products.
The company sold two corrugated container plants in the second half of
1996. The divestiture of these two plants did not have a significant impact on
the company's operations.
DIVIDENDS AND STOCK REPURCHASES
Cash dividends paid in 1997 were $125.1 million or $1.80 per share compared
with $124.7 million or $1.80 per share in 1996 and $116.1 million or $1.66 per
share in 1995. Stockholders' dividends are paid quarterly. The dividend rate was
raised by 15% in two increments during 1995.
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
1997, 687,600 shares were repurchased. Share repurchases in 1996 and 1995
totaled 2,865,900. The total cost of these repurchases was $183 million.
ENVIRONMENTAL MATTERS
The company invested approximately $31 million in pollution control
facilities in 1997. Over the past five years, the company has invested
approximately $130 million in such facilities, which is about 8% of total
capital spending. In 1997, the company recorded expenses of $9 million for
study, testing and remediation in compliance with environmental regulations.
Regulations known as the Cluster Rule have been adopted by the U.S.
Environmental Protection Agency. As applicable to Union Camp, these regulations
establish various compliance completion dates which fall within the 2001-2006
time frame. Preliminary assessment by the company indicates the capital cost
required to achieve compliance will be in the range of $125 to $150 million.
Compliance involves various initiatives with different completion dates spread
over a six year period. Some degree of flexibility exists with respect to the
timing of required capital spending. However, the company expects a majority of
this spending will be completed by 2001. The incremental operating cost is
estimated to be immaterial. The company believes compliance with these rules
will not adversely affect its competitive position since these regulations also
apply in varying degrees to its domestic competitors.
ACCOUNTING MATTERS
The FASB recently issued Statement of Financial Accounting Standards (SFAS)
No. 131, 'Disclosures about Segments of an Enterprise and Related Information.'
This statement establishes standards for the reporting of financial information
relating to operating segments for both interim and annual periods. In addition,
the FASB also issued SFAS No. 130, 'Reporting Comprehensive Income.' This
statement establishes standards for the reporting and display of comprehensive
income in the company's financial statements and footnotes. These statements,
which will be adopted by the company in 1998, affect financial statement
presentation and disclosure but will not have an impact on the company's
consolidated financial position or results of operations.
8
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<PAGE>
YEAR 2000
The company is currently in the process of evaluating its operations to
ensure that its computer systems and process control equipment are 'Year 2000'
compliant. Management does not expect the financial impact of necessary actions
to be material to the company's financial position or results of operations in
any period.
While the company believes all necessary work will be completed in a timely
fashion, there can be no guarantee that all systems will be compliant by the
year 2000 or that the systems of other companies on which the company relies
will be converted within the same timeframe.
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 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, competitive pricing pressures, and whether capital
and restructuring projects are successfully completed. The company's goal of
enhancing its earnings power during the next 12 months is subject to risks and
uncertainties that planned product mix improvements are not implemented, and
that cost reductions expected to result from investing in information
technology, work flow redesign, shared service activities and other activities
do not materialize. The company's assessment of the effects of complying with
the U.S. Environmental Protection Agency's Cluster Rule is subject to risks and
uncertainties regarding the amount the company will be required to expend
vis-a-vis its competitors and the effect of timing differences in the rate such
required expenditures are made.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not material.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of
UNION CAMP CORPORATION
In our opinion, the accompanying statements listed in the index appearing
under Item 14(a)(1) on page 28 present fairly, in all material respects, the
financial position of Union Camp Corporation and its subsidiaries at December
31, 1997 and 1996, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1997, 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 the 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.
/S/ PRICEWATERHOUSECOOPERS LLP
.....................................
PRICEWATERHOUSE LLP
New York, New York
February 5, 1998
9
<PAGE>
<PAGE>
CONSOLIDATED INCOME
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
--------------------------------------
1997 1996 1995
---------- ---------- ----------
($ IN THOUSANDS, EXCEPT PER SHARE)
<S> <C> <C> <C>
Net sales............................................................... $4,476,761 $4,013,197 $4,211,709
Costs and other charges:
Costs of products sold............................................. 3,399,559 2,972,208 2,680,938
Selling and administrative expenses................................ 509,372 450,558 401,644
Depreciation, amortization and cost of company timber harvested.... 310,618 298,457 287,738
Special charge..................................................... -- 39,435 --
---------- ---------- ----------
Income from operations.................................................. 257,212 252,539 841,389
---------- ---------- ----------
Interest expense, net of capitalized interest........................... 117,290 112,286 113,705
Other (income) expense -- net........................................... (3,888) (10,792) (3,173)
---------- ---------- ----------
Income before income taxes and minority interest................... 143,810 151,045 730,857
---------- ---------- ----------
Income taxes............................................................ 51,804 55,250 268,895
---------- ---------- ----------
Minority interest, net of tax........................................... 10,936 10,487 10,889
---------- ---------- ----------
Net income............................................... $ 81,070 $ 85,308 $ 451,073
---------- ---------- ----------
Earnings per share: Basic............................................... $ 1.17 $ 1.23 $ 6.45
Diluted............................................ $ 1.16 $ 1.23 $ 6.39
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See the accompanying notes to consolidated financial statements.
10
<PAGE>
<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---------- ----------
($ IN THOUSANDS)
<S> <C> <C>
ASSETS
Current Assets
Cash and cash equivalents............................................................. $ 34,878 $ 44,917
Receivables-net....................................................................... 638,130 544,320
Inventories........................................................................... 495,313 496,433
Other................................................................................. 43,256 48,440
---------- ----------
1,211,577 1,134,110
---------- ----------
Property
Plant and equipment, at cost.......................................................... 6,800,477 6,562,465
Less: accumulated depreciation........................................................ 3,404,918 3,161,450
---------- ----------
3,395,559 3,401,015
364,226 351,334
---------- ----------
Timberlands, less cost of company timber harvested.................................... 3,759,785 3,752,349
---------- ----------
Other Assets.......................................................................... 270,339 209,848
---------- ----------
Total Assets..................................................................... $5,241,701 $5,096,307
---------- ----------
Liabilities and Stockholders' Equity
Current Liabilities
Current installments of long-term debt................................................ $ 40,439 $ 95,840
Notes payable......................................................................... 212,900 185,614
Accounts payable...................................................................... 298,641 264,064
Other accrued liabilities............................................................. 212,973 201,319
Income and other taxes................................................................ 38,065 33,032
---------- ----------
803,018 779,869
---------- ----------
Long-Term Debt........................................................................ 1,367,450 1,252,475
---------- ----------
Deferred Income Taxes................................................................. 744,677 723,431
---------- ----------
Other Liabilities and Minority Interest............................................... 290,838 246,938
---------- ----------
Stockholders' Equity
Common stock-par value $1.00 per share................................................ 69,264 69,217
Capital in excess of par value........................................................ 42,820 41,853
Other equity adjustments.............................................................. (20,989) (6,080)
Retained earnings..................................................................... 1,944,623 1,988,604
---------- ----------
Shares outstanding, 1997 -- 69,264,160; 1996 -- 69,217,119
Stockholders' Equity -- Net......................................................... 2,035,718 2,093,594
---------- ----------
Total Liabilities and Stockholders' Equity....................................... $5,241,701 $5,096,307
---------- ----------
---------- ----------
</TABLE>
See the accompanying notes to consolidated financial statements.
11
<PAGE>
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
-----------------------------------
1997 1996 1995
--------- --------- ---------
($ IN THOUSANDS)
<S> <C> <C> <C>
Cash (Used For) Provided By Operations:
Net income........................................................... $ 81,070 $ 85,308 $ 451,073
Adjustments to reconcile net income to cash provided by operations:
Depreciation, amortization and cost of company timber
harvested..................................................... 310,618 298,457 287,738
Deferred income taxes........................................... 17,858 7,877 105,899
Special charge.................................................. -- 39,435 --
Other........................................................... 24,807 25,011 18,885
Changes in operational assets and liabilities:
Receivables................................................ (89,489) 43,963 (23,000)
Inventories................................................ 1,200 13,139 (55,325)
Other assets............................................... 9,139 1,511 (3,637)
Accounts payable, taxes and other liabilities.............. 25,913 (11,556) (22,753)
--------- --------- ---------
Cash Provided By Operations.......................................... 381,116 503,145 758,880
--------- --------- ---------
Cash (Used For) Provided By Investment Activities:
Capital expenditures:
Plant and equipment............................................. (301,517) (291,345) (233,444)
Timberlands..................................................... (35,709) (95,098) (33,355)
--------- --------- ---------
(337,226) (386,443) (266,799)
Acquisitions......................................................... (13,890) (49,452) (7,115)
Sale of businesses-net............................................... -- 5,318 36,133
Sale of assets....................................................... 9,518 22,009 9,822
Other................................................................ 10,914 (27,093) (17,348)
--------- --------- ---------
Cash Used For Investment Activities........................ (330,684) (435,661) (245,307)
--------- --------- ---------
Cash (Used For) Provided By Financing Activities:
Issuance of long-term debt...................................... 160,000 150,000 22,625
Repayments of long-term debt.................................... (108,172) (48,954) (69,338)
Change in short-term notes payable.............................. 28,211 52,156 (279,999)
Proceeds from issuance of common stock.......................... 22,105 3,377 6,042
Common stock repurchases........................................ (36,864) (86,499) (59,614)
Dividends paid.................................................. (125,051) (124,718) (116,132)
--------- --------- ---------
Cash Used For Financing Activities................................... (59,771) (54,638) (496,416)
--------- --------- ---------
Effect of exchange rate changes on cash................................... (700) 1,739 (81)
--------- --------- ---------
Increase (decrease) in cash and cash equivalents.......................... (10,039) 14,585 17,076
Balance at beginning of year............................... 44,917 30,332 13,256
--------- --------- ---------
Balance at end of year.................................................... $ 34,878 $ 44,917 $ 30,332
--------- --------- ---------
--------- --------- ---------
</TABLE>
See the accompanying notes to consolidated financial statements.
12
<PAGE>
<PAGE>
UNION CAMP
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.
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 appropriate periods not to exceed 40 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 $57.3 million in 1997, $55.9 million in
1996, and $55.4 million in 1995.
Capitalized Interest: Interest is capitalized on major capital expenditures
during the period of construction. Total interest costs incurred and amounts
capitalized were:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Total interest........................................... $126,978 $116,748 $122,572
Interest capitalized..................................... (9,688) (4,462) (8,867)
-------- -------- --------
Net interest expense..................................... $117,290 $112,286 $113,705
-------- -------- --------
-------- -------- --------
</TABLE>
Stock-Based Compensation: In accordance with Statement of Financial
Accounting Standards (SFAS) No. 123, 'Accounting for Stock-Based Compensation,'
the company has elected to continue to account for its employee stock option
plans in accordance with Accounting Principles Board Opinion No. 25, 'Accounting
for Stock Issued to Employees,' and to disclose supplementally the pro forma
effect of accounting for these plans as if the provisions of SFAS No. 123 had
been adopted. (See also Note 10.)
Accounting Standards: In June 1997, the Financial Accounting Standards
Board (FASB) issued SFAS No. 130, 'Reporting Comprehensive Income.' This
statement establishes standards for the reporting and display of comprehensive
income and its components in the company's financial statements.
13
<PAGE>
<PAGE>
UNION CAMP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE)
Also in June 1997, the FASB issued SFAS No. 131, 'Disclosures about
Segments of a Business and Related Information.' This statement establishes
revised standards for the reporting of financial information about a company's
operating segments for both interim and annual reporting.
These statements, which will be adopted by the company in 1998, affect
financial statement presentation and disclosure but will not have an impact on
the company's consolidated financial position or results of operations.
Environmental Liabilities: Environmental expenditures that improve the
condition of the property are generally capitalized, all other environmental
expenditures are expensed as incurred. 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.
Income Taxes: Deferred income taxes are recorded using enacted tax rates in
effect for the year temporary 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, 1997, the total of all such undistributed
earnings amounted to $202.4 million. It is not practical to estimate the amount
of tax that might be payable on the distribution of the foreign earnings. The
company has, as required, provided for tax potentially payable on the
distribution of its share of $85.7 million, the undistributed earnings of Bush
Boake Allen Inc. (BBA) and subsidiaries earned subsequent to 1992. (See also
Note 9.)
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 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 $19.3 million at December 31,
1997 and $4.2 million at December 31, 1996.
Derivatives: The company hedges foreign currency transactions by entering
into forward foreign exchange contracts. Gains and losses associated with the
forward contracts are matched with the offsetting gains and losses recorded for
exchange rate fluctuations on the underlying assets and liabilities. Gains and
losses on interest rate swap agreements are charged or credited to interest
expense over the life of the agreement. (See also Note 8.)
Revenue Recognition: The company recognizes revenue upon the passage of
title, which is generally at the time of shipment.
Earnings Per Share: In accordance with the provisions of SFAS No. 128,
'Earnings Per Share,' the company is presenting net income per share on a basic
and diluted basis. Basic earnings per share is computed using the weighted
average number of shares outstanding during the period. Diluted earnings per
share is computed using the weighted average number of shares outstanding
adjusted for dilutive common stock equivalents.
The weighted average number of shares outstanding for basic earnings per
share were 69,439,150 for 1997, 69,220,157 for 1996 and 69,940,397 for 1995. For
diluted earnings per share, these amounts increased by 491,292, 385,379 and
629,140 in 1997, 1996 and 1995, respectively, due to potentially dilutive common
stock equivalents issuable under the company's stock option plan. In 1997 and
1996, 949,700 and 28,000 potential common shares were excluded from the
computation of diluted earnings per share because the effect would have been
antidilutive. There were no antidilutive common stock equivalents in 1995.
14
<PAGE>
<PAGE>
UNION CAMP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE)
Reclassifications: Certain amounts have been reclassified for 1995 and 1996
to conform with the 1997 presentation.
2. SPECIAL CHARGE AND OTHER
Special Charge: During the fourth quarter of 1996, the company recorded a
$39.4 million pre-tax charge ($24.3 million after-tax) to operating income. The
Special Charge related to restructuring costs associated with the company's
profit enhancement plan announced at the end of 1996 and asset write downs.
Included in the charge was $21.0 million for employee severance costs and $18.4
million for asset write downs. The employee severance costs related to the
elimination of approximately 400 positions at various levels within corporate
functions and certain operating divisions. As of December 31, 1997,
approximately 75% of the employees were terminated under this program at a cost
of $15.1 million. No adjustments have been or are currently anticipated to be
made to the special charge reserve established at the end of 1996. Asset
write-downs of $18.4 million consisted of $9.0 million for obsolete equipment,
$6.4 million for a real estate development project and $3.0 million for an
intangible asset related to propriety technology. The business segments affected
by these write-downs were as follows: Paper & Paperboard -- $6.7 million,
Packaging Products -- $2 million, and operations reported under Corporate
Items -- $9.7 million.
Other: Also included in 1996 income from operations are higher than normal
environmental/OSHA remediation expenses of $5 million, demolition costs of $2.1
million, and other costs of $0.4 million which were previously included in the
Special Charge and have been reclassified to Costs of Products Sold and Selling
and Administrative Expenses.
3. OTHER (INCOME) EXPENSE-NET
The year 1996 included a $6.1 million gain related to other asset
disposals.
4. ACQUISITIONS
In October 1997, the company acquired the outstanding shares of Phoenix
Display and Packaging Corporation, a leading merchandising and point-of-purchase
display company. In June, Alling and Cory, the company's paper distribution
business, acquired the Antietam Paper Company. In March, the company acquired a
75% interest in Puntapel, S.A., a multiwall plant located in San Luis,
Argentina. The cost of these acquisitions was $20 million in the aggregate.
In August 1997, the company contributed 25 thousand acres of timberlands
valued at $30.7 million for a 50% equity investment in Forestmax LLC, which has
as its primary assets timberland holdings. The company will recognize a gain of
$27 million over a future period on the basis of timber cut.
In the first quarter of 1996, the company purchased the operating assets
and assumed certain liabilities of O'Grady Containers, Inc. In addition, the
company acquired a 50% interest in a corrugated container joint venture in
Turkey. The total cost of these purchases was $34 million.
On August 2, 1996, the company acquired The Alling & Cory Company (Alling
and Cory), a paper distribution business, for a consideration totaling $88.5
million, consisting of 1.7 million shares of company common stock and $5.4
million cash.
These acquisitions were accounted for under the purchase method and,
accordingly, the net assets and results of operations have been included in the
consolidated financial statements since the date of acquisition. The excess of
purchase price over the estimated fair values of the net assets acquired has
been treated as goodwill.
The pro forma effect of these acquisitions is not material.
15
<PAGE>
<PAGE>
UNION CAMP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE)
5. SUPPLEMENTAL BALANCE SHEET INFORMATION
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Receivables
Trade............................................................ $598,105 $514,799
Other............................................................ 57,810 46,791
-------- --------
655,915 561,590
Less estimated doubtful accounts, discounts and allowances....... 17,785 17,270
-------- --------
Net......................................................... $638,130 $544,320
-------- --------
-------- --------
Inventories
Finished goods................................................... $275,112 $270,123
Raw materials.................................................... 109,352 110,569
Supplies......................................................... 110,849 115,741
-------- --------
Total....................................................... $495,313 $496,433
-------- --------
-------- --------
</TABLE>
At December 31, 1997 and 1996, finished goods and raw materials totaling
$240.1 million and $254.6 million, respectively, were valued at LIFO cost. The
excess of current cost over LIFO value was $99.0 million and $101.7 million in
1997 and 1996, respectively.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Other Current Assets
Prepayments.................................................. $ 24,212 $ 22,745
Short-term timber leases..................................... 19,044 19,045
Assets held for resale....................................... -- 6,650
---------- ----------
Total................................................... $ 43,256 $ 48,440
---------- ----------
---------- ----------
Plant and Equipment, at cost
Land......................................................... $ 36,429 $ 37,151
Buildings and improvements................................... 568,506 561,078
Machinery and equipment...................................... 5,974,738 5,777,737
Construction-in-progress..................................... 220,804 186,499
---------- ----------
Total................................................... $6,800,477 $6,562,465
---------- ----------
---------- ----------
</TABLE>
At December 31, 1997, property (principally machinery and equipment) having
an original cost of approximately $388 million and a net book value of $152
million is pledged against lease obligations and notes payable to industrial
development authorities (see also Note 6). These obligations and notes payable
have outstanding long-term balances totaling approximately $334 million.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Other Assets
Goodwill......................................................... $ 82,783 $ 72,646
Investments in affiliates........................................ 76,019 46,015
Other intangibles................................................ 44,383 30,096
Pension assets................................................... 42,593 28,738
Other............................................................ 24,561 32,353
-------- --------
Total....................................................... $270,339 $209,848
-------- --------
-------- --------
</TABLE>
16
<PAGE>
<PAGE>
UNION CAMP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE)
Short-Term Debt: Included in Notes Payable at December 31, 1997 and 1996
were $112.8 million and $114.0 million, respectively, of commercial paper
borrowings. The weighted average interest rate on these borrowings for the years
1997 and 1996 were 5.76% and 5.60%, respectively.
The company has short-term revolving credit facilities in numerous
countries primarily outside the United States, which provide for aggregate
availability of $157 million. At December 31, 1997 and 1996, approximately $92
million and $60 million, respectively, was outstanding and included in
short-term borrowings. Related commitment fees are either nominal or zero.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Other Accrued Liabilities
Payrolls......................................................... $ 72,276 $ 67,892
Interest......................................................... 29,652 30,758
Special charge reserve........................................... 3,647 11,410
Other............................................................ 107,398 91,259
-------- --------
Total....................................................... $212,973 $201,319
-------- --------
-------- --------
Other Liabilities and Minority Interest
Postretirement and postemployment benefits....................... $130,412 $128,838
Minority interest................................................ 102,429 86,507
Minimum pension liability........................................ 7,210 3,134
Other............................................................ 50,787 28,459
-------- --------
Total....................................................... $290,838 $246,938
-------- --------
-------- --------
</TABLE>
6. LONG-TERM DEBT
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996
---------- ----------
<S> <C> <C>
Sinking fund debentures:
8 5/8% due 1999-2016......................................... $ 42,674 $ 47,474
10% due 2000-2019............................................ 100,000 100,000
9 1/4% due 2002-2021......................................... 117,780 117,780
Debentures:
9 1/2% due 2002.............................................. 100,000 100,000
9 1/4% due 2011.............................................. 124,800 124,800
8 1/2% due 2022.............................................. 100,000 100,000
Notes:
7 3/8% due 1999.............................................. 50,000 50,000
7% due 2006.................................................. 150,000 150,000
6 1/2% due 2007.............................................. 150,000 --
Medium-term notes due 1999-2001; 7.75% to 9.54%; weighted average
rate 8.61%...................................................... 53,000 84,000
Industrial Development Revenue Bonds due 2001-2013; 4.0% to 8.0%;
weighted average rate 6.14%..................................... 36,944 41,575
Pollution Control Revenue Bonds due 1999-2027; 4.7% to 7.45%;
weighted average rate 6.58%..................................... 297,500 289,005
Other notes due 1999-2004......................................... 5,024 5,560
Commercial paper.................................................. 46,000 46,000
Less unamortized discount......................................... (6,272) (3,719)
---------- ----------
Total........................................................ $1,367,450 $1,252,475
---------- ----------
---------- ----------
</TABLE>
17
<PAGE>
<PAGE>
UNION CAMP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE)
The current portion of long-term debt at December 31, 1997 amounted to
$40.4 million. Amounts payable in the years 1999 through 2002 are $70.3 million,
$31.1 million, $38.1 million and $140.9 million, respectively.
At December 31, 1997, $46 million of commercial paper borrowings was
classified as long-term debt, since the company has the ability and intent to
renew these obligations through the year 2000. The effective interest rate on
these borrowings was 5.76%.
The company has revolving credit and term loan agreements which provide for
unsecured borrowings up to $500 million in the United States through the year
2001. 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 1997 under these agreements.
7. 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, 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)
Net Income................................................ -- -- 85,308 --
Cash dividends ($1.80 per share).......................... -- -- (124,718) --
Common stock repurchases.................................. (1,714) (84,785) -- --
Issuance of stock for options and award plans............. 152 6,964 -- (1,326)
Shares issued for business acquisitions................... 1,701 81,330 -- --
Foreign currency translation.............................. -- -- -- 8,990
------- ---------- ---------- -----------
Balance, December 31, 1996..................................... $69,217 $ 41,853 $1,988,604 $ (6,080)
Net Income................................................ -- -- 81,070 --
Cash dividends ($1.80 per share).......................... -- -- (125,051) --
Common stock repurchases.................................. (688) (36,176) -- --
Issuance of stock for options and award plans............. 551 25,760 -- 273
Shares issued for business acquisitions................... 184 11,383 -- --
Foreign currency translation.............................. -- -- -- (15,182)
------- ---------- ---------- -----------
Balance, December 31, 1997..................................... $69,264 $ 42,820 $1,944,623 $ (20,989)
------- ---------- ---------- -----------
------- ---------- ---------- -----------
</TABLE>
The authorized capital stock of the company at December 31, 1997, 1996 and
1995 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 $175 or (ii) common stock of the company
having a market value of two times the exercise
18
<PAGE>
<PAGE>
UNION CAMP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE)
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.
8. 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, 1997, the book value of long-term debt was $1.4 billion and
the fair value was approximately $1.5 billion. The book value of all other
financial instruments approximates their fair value.
Derivative Financial Instruments: Derivative instruments are used by the
company only 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, 1997, the company had outstanding foreign exchange
contracts valued at $103.6 million. The purpose of $87.8 million of these
contracts is to neutralize foreign currency transaction risk generated by the
company's firm foreign currency business commitments resulting from the sale and
purchase of products. The change in value of these 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. These
foreign currency commitment exposures are evaluated on an ongoing basis and the
amount of the related 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.
The additional $15.8 million of foreign exchange contracts at December 31, 1997
represent hedges of specific firm commitments for certain capital expenditure
and raw material purchase transactions denominated in foreign currencies. The
company enters into these contracts, from time to time, to establish with
certainty the U.S. dollar amount of the specific firm commitments. All foreign
exchange contracts are limited to currencies with established forward markets
and to counterparties, which have Moody's credit ratings of A1 or better. As a
result, the company considers the credit risk of counterparty default to be
minimal.
At December 31, 1997, the company had an outstanding interest rate swap
agreement, the purpose of which is to convert $32.5 million of floating rate
commercial paper to fixed rate debt. The swap agreement is based on a declining
principal balance schedule which terminates in April 2000. The differential
between fixed and floating rate obligations is accrued as interest rates change
and is charged or credited to interest expense over the life of the agreement.
Cash settlements are payable semi-annually. The counterparty has a Moody's
credit rating of Aa1.
19
<PAGE>
<PAGE>
UNION CAMP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE)
9. INCOME TAXES
The components of income before income taxes and minority interest are as
follows:
<TABLE>
<CAPTION>
1997 1996 1995
-------- -------- --------
<S> <C> <C> <C>
Domestic................................................. $ 99,071 $ 97,187 $669,487
Foreign.................................................. 44,739 53,858 61,370
-------- -------- --------
Total............................................... $143,810 $151,045 $730,857
-------- -------- --------
-------- -------- --------
</TABLE>
The provision for income taxes is comprised of the following:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- --------
<S> <C> <C> <C>
Current:
Federal................................................ $19,493 $34,313 $124,937
State and local........................................ 3,132 3,831 21,880
Foreign................................................ 11,321 9,229 16,179
------- ------- --------
$33,946 $47,373 $162,996
------- ------- --------
------- ------- --------
Deferred:
Federal................................................ $13,870 $ 2,094 $ 96,601
State.................................................. 1,297 (206) 6,477
Foreign................................................ 2,691 5,989 2,821
------- ------- --------
$17,858 $ 7,877 $105,899
------- ------- --------
Total............................................. $51,804 $55,250 $268,895
------- ------- --------
------- ------- --------
</TABLE>
The company follows the provisions of SFAS No. 109, 'Accounting for Income
Taxes,' 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. The cumulative deferred tax liability at
December 31, 1997 and 1996 was $744.7 million and $723.4 million, respectively.
The significant components of these liabilities (assets) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1997 1996
-------- --------
<S> <C> <C>
Deferred federal taxes:
Accelerated depreciation.............................................. $713,436 $704,912
Alternative minimum tax............................................... (45,540) (43,816)
Postretirement benefits............................................... (44,294) (42,706)
Other................................................................. 26,553 16,601
-------- --------
Total deferred federal taxes.......................................... 650,155 634,991
Deferred state taxes.................................................. 64,467 63,170
Deferred foreign taxes................................................ 30,055 25,270
-------- --------
Total deferred taxes............................................. $744,677 $723,431
-------- --------
-------- --------
</TABLE>
A detailed analysis of the effective tax rate is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory federal tax rate.............................................. 35.0% 35.0% 35.0%
State taxes (net of federal tax impact)................................. 2.4 1.5 2.8
Foreign income taxes.................................................... (1.2) (2.3) (0.3)
Other................................................................... (0.2) 2.4 (0.7)
---- ---- ----
Effective rate..................................................... 36.0% 36.6% 36.8%
---- ---- ----
---- ---- ----
</TABLE>
20
<PAGE>
<PAGE>
UNION CAMP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE)
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 5,678,000 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 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 1997, 230,250 options were available for
future grants under the 1989 plan.
Under the 1989 plan, 1,135,607 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.
Common shares issued as restricted stock under this plan were 4,533 shares
in 1997, 38,890 shares in 1996 and 11,924 shares in 1995. The weighted average
fair value on the date of grant was $48.56 for restricted stock granted in 1997,
$49.50 for restricted stock granted in 1996, and $46.88 for restricted stock
granted in 1995. Unearned compensation, equivalent to the market price of the
restricted shares at date of grant, is included within Stockholders' Equity and
is amortized to expense over the five-year restriction period.
The following table summarizes activity in the company's stock option plans
for 1997, 1996 and 1995. The options outstanding that had related stock
appreciation rights attached were 1,067,101 at December 31, 1996, and 1,207,641
at December 31, 1995.
In the third quarter of 1997, all outstanding stock appreciation rights
previously granted in tandem with nonqualified stock options under the company's
management incentive program were relinquished. This did not have a material
impact on reported earnings. The related stock options were not affected and
remain outstanding.
<TABLE>
<CAPTION>
1997 1996 1995
--------------------------- --------------------------- ---------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
--------- -------------- --------- -------------- --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding at
beginning of year......... 4,120,426 $44.86 3,582,626 $43.57 3,213,253 $41.67
Granted..................... 949,700 58.84 722,000 49.38 664,400 49.45
Exercised................... (544,225) 41.08 (96,427) 38.97 (197,637) 36.03
Forfeited................... (96,065) 35.33 (76,598) 34.24 (78,840) 35.00
Expired..................... -- -- (11,175) 47.90 (18,550) 42.98
--------- ------- --------- ------- --------- -------
Options outstanding at end
of year................... 4,429,836 $48.48 4,120,426 $44.86 3,582,626 $43.57
--------- ------- --------- ------- --------- -------
Options exercisable at end
of year................... 2,758,136 $44.75 2,741,526 $42.57 2,345,510 $41.55
--------- ------- --------- ------- --------- -------
--------- ------- --------- ------- --------- -------
</TABLE>
For options outstanding as of the end of 1997, the range of exercise prices
was $33.69 to $58.84 per share and the weighted average remaining life was 7.1
years. The weighted average fair values of the options granted during 1997, 1996
and 1995 were $12.60, $9.66 and $9.70 per share, respectively.
Fair value was determined through use of the Black-Scholes options pricing
formula. For options granted in 1997, the risk-free interest rate was 5.70%, the
expected life was 7 years, the expected volatility was 19% and expected dividend
yield was 3.4%, all calculated on a weighted average basis. For options granted
in 1996 and 1995, the risk-free interest rate was 5.74% and 5.47%, respectively,
the
21
<PAGE>
<PAGE>
UNION CAMP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE)
expected life was 6 years, the expected volatility was 18% and 19%,
respectively, and the expected dividend yield was 3.4%, all calculated on a
weighted average basis.
Total compensation cost recognized in income for stock-based compensation
awards was $3.3 million in 1997, $0.7 million in 1996 and $1.3 million in 1995.
If the company had elected to adopt the provisions of SFAS No. 123, the pro
forma net income and earnings per share would have been $76.7 million or $1.10
per share in 1997 and $83.1 million or $1.20 per share in 1996. The comparable
pro forma impact on 1995 net income and earnings per share would be
insignificant.
11. 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.
The following table sets forth the status of all funded pension plans for
1997 and 1996:
<TABLE>
<CAPTION>
DECEMBER 31, 1997 DECEMBER 31, 1996
------------------------------------------- -------------------------------
DOMESTIC PLANS DOMESTIC PLANS
-------------------------- --------------
ASSETS IN ACCUMULATED ASSETS IN
EXCESS OF BENEFITS IN EXCESS OF
ACCUMULATED EXCESS OF ACCUMULATED
BENEFITS ASSETS FOREIGN PLANS BENEFITS FOREIGN PLANS
----------- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Actuarial present value of:
Vested benefit obligation............. $ 542,226 $ 250,439 $ 138,797 $696,736 $ 122,859
----------- ----------- ------------- -------------- -------------
----------- ----------- ------------- -------------- -------------
Accumulated benefit obligation... 580,968 264,943 140,249 742,222 123,995
----------- ----------- ------------- -------------- -------------
----------- ----------- ------------- -------------- -------------
Projected benefit obligation..... 685,835 264,943 168,467 821,853 150,340
Plan assets at fair value............. 695,527 259,474 181,667 859,805 160,213
----------- ----------- ------------- -------------- -------------
Plan assets greater (less) than
projected benefit obligation........ 9,692 (5,469) 13,200 37,952 9,873
Unrecognized net (gain) loss.......... (11,974) (26,783) 21,303 (61,864) 20,107
Unrecognized prior service cost....... (2,013) 20,313 (1,351) 10,944 46
Unrecognized transition (asset)
obligation.......................... 147 4,543 (1,486) 6,257 (2,302)
----------- ----------- ------------- -------------- -------------
Pension (liability) asset recorded on
Balance Sheet....................... $ (4,148) $ (7,396) $ 31,666 $ (6,711) $ 27,724
----------- ----------- ------------- -------------- -------------
----------- ----------- ------------- -------------- -------------
</TABLE>
The company has certain supplementary domestic pension plans that are not
funded. At December 31, 1997 and 1996, the projected benefit obligation for
these plans was $32.0 million and $23.0 million of which $25.7 million and $17.4
million represent the accumulated benefit obligation, and $24.2 million and
$17.0 million represent the vested benefit obligation, respectively. The accrued
pension liability for the unfunded plans recorded on the Balance Sheet at
December 31, 1997 and 1996 was $23.8 million and $17.8 million, respectively.
The minimum pension liability for these plans recorded on the Balance Sheet at
December 31, 1997 and 1996 was $7.2 million and $3.1 million, respectively.
The pension expense for all plans included the following components:
22
<PAGE>
<PAGE>
UNION CAMP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
1997 1996 1995
--------- --------- ---------
<S> <C> <C> <C>
Service cost-benefits earned during the period........ $ 28,165 $ 28,747 $ 20,643
Interest cost on projected benefit obligations........ 75,032 68,613 64,548
Actual return on assets............................... (170,551) (137,070) (155,838)
Net amortization and deferral......................... 79,602 56,282 90,824
--------- --------- ---------
Total pension expense............................ $ 12,248 $ 16,572 $ 20,177
--------- --------- ---------
--------- --------- ---------
</TABLE>
The discount rates used to determine the pension benefit obligation for the
domestic plans at December 31, 1997 and 1996 were 7.0% and 7.5%, respectively.
The discount rates used for the foreign plans were 7.0% and 8.0%, respectively,
at December 31, 1997 and 1996.
The compensation progression rate for domestic plans was 4.75% for 1997,
1996 and 1995. The expected long-term rate of return on domestic plan assets was
9.5% for each year.
The compensation progression rates for the foreign plans were 6.0% for 1997
and 1996 and 7.0% for 1995. The expected long-term rate of return on foreign
plan assets was 10.5% for 1997 and 11.5% for 1996 and 1995.
In 1996, the company recorded a charge for special termination benefits of
approximately $8.2 million, primarily attributable to the elimination of
approximately 400 positions in connection with an employee severance program.
Under this program, designated participants in the Union Camp Salaried plan who
met the eligibility requirements were able to retire and receive enhanced
benefits. These benefits involved increased periodic future payments and were
provided for under the pension plan.
12. 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 as of
December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
1997 1996
-------- --------
<S> <C> <C>
Retirees.............................................................. $ 84,786 $ 72,632
Fully eligible active plan participants............................... 8,845 6,904
Other active plan participants........................................ 51,446 44,558
-------- --------
145,077 124,094
Unrecognized net gain (loss).......................................... (16,122) 511
Unrecognized prior service cost....................................... (2,402) (2,587)
-------- --------
Accrued postretirement benefit obligation........................ $126,553 $122,018
-------- --------
-------- --------
</TABLE>
The components of the postretirement benefit expense for the years 1997,
1996 and 1995 are as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
Service cost-benefits earned during period................... $ 4,798 $ 5,311 $ 3,801
Interest cost on accumulated benefit obligation.............. 9,458 8,819 7,954
Net amortization and deferral................................ 185 185 (155)
------- ------- -------
Postretirement benefit expense.......................... $14,441 $14,315 $11,600
------- ------- -------
------- ------- -------
</TABLE>
23
<PAGE>
<PAGE>
UNION CAMP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE)
The discount rates used to determine the accumulated postretirement benefit
obligation at December 31, 1997 and 1996 were 7.0% and 7.5%, respectively.
For measurement purposes, an 8% increase in the medical cost trend rate was
assumed for 1997. This rate decreases incrementally to 5.0% 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, 1997 by $17.4 million and the postretirement
benefit expense for 1997 by $2.1 million.
13. SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for income taxes was $29.7 million in 1997, $52.1 million in 1996
and $161.1 million in 1995. Cash paid for interest, net of amounts capitalized,
was $118.4 million in 1997, $109.4 million in 1996 and $114.2 million in 1995.
The following table summarizes non-cash investing and financing activities
related to the company's acquisitions in 1997, 1996 and 1995.
<TABLE>
<CAPTION>
1997 1996 1995
------- -------- ------
<S> <C> <C> <C>
Fair value of assets acquired................................ $42,085 $235,139 $8,345
Less: cash paid.............................................. 13,890 49,452 7,115
Common stock issued.......................................... 11,567 83,031 --
------- -------- ------
Liabilities incurred or assumed......................... $16,628 $102,656 $1,230
------- -------- ------
------- -------- ------
</TABLE>
14. COMMITMENTS AND CONTINGENT LIABILITIES
The company is involved in various legal proceedings and environmental
actions. Although the outcome of these matters is subject to many variables and
cannot be predicted with any degree of certainty, based upon the company's
evaluation of the information presently available, management believes the
ultimate resolution of any such legal proceedings and environmental actions will
not have a material adverse effect on the company's consolidated financial
position. However, it is remotely possible that such legal proceedings and
environmental actions could have a material effect on quarterly or annual
operating results when they are resolved in future reporting periods.
The company has guaranteed loans of up to $20 million made by a financial
institution to non-controlled entities. The guarantees have terms of 6 years or
less and are either secured by the borrowers' assets and stock or contain
contractual rights to obtain possession of stock in the borrower's business.
15. SEGMENT INFORMATION
Union Camp is a leading manufacturer of paper, packaging, chemicals and
wood products serving both U.S. and international markets. The company derives
approximately three fourths of its sales from paper and packaging products, such
as linerboard, kraft paper, uncoated free sheet, corrugated containers, flexible
packaging and folding cartons. The company's chemical business is involved in
the manufacture of chemicals used in inks, coatings and adhesives, and through
its Bush Boake Allen subsidiary, the manufacture of flavor, fragrance and aroma
chemicals. Chemicals comprise about a sixth of Union Camp's sales. The company
also manages a woodlands base of about 1.6 million acres, supplying raw
materials for its linerboard, packaging and paper making business, as well as
for the manufacture of wood products.
Operating results and other financial data are presented for the principal
business segments of the company for the years ended December 31, 1997, 1996 and
1995. Total revenue and operating profit by
24
<PAGE>
<PAGE>
UNION CAMP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE)
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. Included within Corporate
Items are the company's real estate operation, Branigar, and the company's paper
distribution business, Alling and Cory. Since the date of acquisition, August 2,
1996, Alling and Cory had sales to customers of $279 million in 1996 and $694
million in 1997. Its impact on operating profit for 1997 and 1996 was
insignificant. Capital expenditures are reported exclusive of acquisitions.
Total revenue and operating profit from the company's foreign subsidiaries
were $564 million and $51 million in 1997, $538 million and $48 million in 1996,
and $504 million and $61 million in 1995. 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 $384 million in
1997, $359 million in 1996 and $418 million in 1995.
25
<PAGE>
<PAGE>
UNION CAMP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
($ IN THOUSANDS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
PAPER AND PACKAGING WOOD CORPORATE
PAPERBOARD PRODUCTS PRODUCTS CHEMICAL ITEMS CONSOLIDATED
---------- ---------- -------- -------- --------- ------------
<S> <C> <C> <C> <C> <C> <C>
1997
Sales to Customers.............. $1,336,685 $1,324,726 $326,373 $758,607 $ 730,370 $4,476,761
Intersegment Sales.............. 660,367 10,866 114 347 (671,694)* --
---------- ---------- -------- -------- --------- ------------
Total Revenue................... 1,997,052 1,335,592 326,487 758,954 58,676 4,476,761
Operating Profit................ 144,793 35,857 60,068 74,248 (57,754)** 257,212
Identifiable Assets............. 3,325,112 774,260 163,081 620,851 358,397 5,241,701
Depreciation, Amortization and
Cost of Company Timber
Harvested..................... 228,268 40,320 8,891 26,392 6,747 310,618
Capital Expenditures............ 198,368 41,540 34,589 57,627 5,102 337,226
---------- ---------- -------- -------- --------- ------------
1996
Sales to Customers.............. $1,313,226 $1,402,602 $281,467 $700,662 $ 315,240 $4,013,197
Intersegment Sales.............. 659,096 9,930 72 -- (669,098)* --
---------- ---------- -------- -------- --------- ------------
Total Revenue................... 1,972,322 1,412,532 281,539 700,662 (353,858) 4,013,197
Operating Profit................ 170,623 43,739 43,360 66,500 (71,683)** 252,539
Identifiable Assets............. 3,318,008 702,698 139,040 579,380 357,181 5,096,307
Depreciation, Amortization and
Cost of Company Timber
Harvested..................... 225,262 38,056 7,209 22,065 5,865 298,457
Capital Expenditures............ 235,303 60,393 27,110 54,925 8,712 386,443
---------- ---------- -------- -------- --------- ------------
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................ 750,239 51,437 32,697 74,545 (67,529)** 841,389
Identifiable Assets............. 3,338,311 719,124 118,118 494,865 167,925 4,838,343
Depreciation, Amortization and
Cost of Company Timber
Harvested..................... 215,247 35,503 12,012 20,497 4,479 287,738
Capital Expenditures............ 141,598 55,861 27,775 37,261 4,304 266,799
---------- ---------- -------- -------- --------- ------------
</TABLE>
- ------------
* Elimination of Intersegment Sales.
** Includes intersegment eliminations and unallocated corporate, technology and
engineering expenses of $60,482 in 1997, $65,242 in 1996, and $61,491 in
1995. 1996 includes a $39.4 million special charge relating to restructuring
costs and asset write downs. If this amount had been allocated to segment
operating profits in 1996, Paper and Paperboard operating profits would have
been $152.9 million, Packaging operating profits would have been $37.2
million, Wood Products operating profits would have been $43.4 million,
Chemical operating profits would have been $64.7 million, and Corporate Items
operating loss would have been $45.6 million.
16. SUBSEQUENT EVENT (UNAUDITED)
On November 23, 1998, the Boards of Directors of Union Camp Corporation and
International Paper Company approved a merger of the two companies through an
exchange of Union Camp shares for International Paper shares valued at
approximately $4.9 billion. The transaction, which is expected to be finalized
early in the second quarter of 1999, is subject to shareholder approval. The
merger is expected to be accounted for as a pooling of interests.
26
<PAGE>
<PAGE>
SHIPMENTS
<TABLE>
<CAPTION>
1997 1996 1995 1994 1993
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Paper and Board Products -- Tons
Primary Mill Shipments
Kraft Paper and Board............................... 930,109 755,440 823,585 666,378 663,356
Bleached Paper and Board*........................... 1,374,592 1,366,668 1,318,661 1,321,152 1,257,569
--------- --------- --------- --------- ---------
Total Mills........................................... 2,304,701 2,122,108 2,142,246 1,987,530 1,920,925
--------- --------- --------- --------- ---------
Converter Shipments
Flexible Packaging............................... 187,643 178,817 182,095 274,695 265,810
Containers....................................... 1,172,325 1,161,436 1,150,054 1,180,137 1,088,875
Other............................................ 9,807 11,054 10,826 10,242 15,645
--------- --------- --------- --------- ---------
Total Converted.................................. 1,369,775 1,351,307 1,342,975 1,465,074 1,370,330
--------- --------- --------- --------- ---------
Total Paper and Board Products.............. 3,674,476 3,473,415 3,485,221 3,452,604 3,291,255
--------- --------- --------- --------- ---------
Wood Products
Lumber-M Board Feet................................. 523,429 488,938 476,711 462,978 463,216
Plywood-M Square Feet............................... 203,287 201,653 232,191 226,678 227,235
Particleboard-M Square Feet......................... 109,227 106,155 96,801 100,794 99,724
--------- --------- --------- --------- ---------
</TABLE>
- ------------
* Years 1997-1993 include 113,727, 101,497, 116,564, 100,574, and 87,454 tons
of market pulp, respectively.
PAPER AND PAPERBOARD-MILL PRODUCTION AND CAPACITY
<TABLE>
<CAPTION>
PRODUCTION CAPACITY
----------------------------------
LOCATION 1997 1998 PRINCIPAL PRODUCTS
- -------------------------------------- ----------- ------------------- -------------------------------
(THOUSANDS OF TONS)
(UNAUDITED)
<S> <C> <C> <C>
Prattville, AL........................ 984 985 Linerboard
Linerboard; Kraft Paper;
Savannah, GA.......................... 1,189 1,250 Saturating Kraft
----------- -------------------
Kraft Paper and Board............... 2,173 2,235
----------- -------------------
Printing and Writing Papers;
Eastover, SC........................ 727 750 Market Pulp
Printing and Writing Papers;
Coated and Uncoated Board;
Franklin, VA........................ 800 785 Recycled Fiber
----------- -------------------
Bleached Paper and Board............ 1,527 1,535
----------- -------------------
Total....................... 3,700 3,770
----------- -------------------
----------- -------------------
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
27
<PAGE>
<PAGE>
AMENDED
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Index of financial statements
The following financial statements are included at the indicated page in
this Annual Report on Form 10-K:
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Income for the years ended December 31, 1997, 1996 and 1995....................... 10
Consolidated Balance Sheet -- December 31, 1997 and 1996....................................... 11
Consolidated Statement of Cash Flows for the years ended December 31, 1997, 1996 and 1995...... 12
Notes to Consolidated Financial Statements..................................................... 13
Report of Independent Accountants.............................................................. 9
</TABLE>
(3) All exhibits, including those incorporated by reference:
<TABLE>
<S> <C>
23 Consent of Independent Accountants.
27.1 Financial Data Schedule -- Annual Period Ended December 31, 1997.
27.2 Financial Data Schedule -- Restated for Annual Period Ended December 31, 1996.
</TABLE>
28
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment report to be signed on its behalf by
the undersigned thereunto duly authorized.
UNION CAMP CORPORATION
<TABLE>
<S> <C>
Date: March 29, 1999 /s/ John F. Haren
.........................................................
John F. Haren
Controller
(Principal Accounting Officer)
</TABLE>
29
<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 (No. 333-38249) of Union Camp Corporation of our report
dated February 5, 1998 appearing on page 9 of this Annual Report on Form
10-K/A-2.
PRICEWATERHOUSECOOPERS LLP
New York, New York
March 29, 1999
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE ANNUAL REPORT ON FORM 10-K/A-2 UNION CAMP CORPORATION FOR THE
ANNUAL PERIOD ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
THIS SCHEDULE SHALL NOT BE DEEMED TO BE FILED FOR PURPOSES OF SECTION
11 OF THE SECURITIES ACT OF 1933, SCTION 18 OF THE SECURITIES EXCHANGE
ACT OF 1934 AND SECTION 323 OF THE TRUST INDENTURE ACT OF 1939, OR
OTHERWISE SUBJECT TO THE LIABILITIES OF SUCH SECTIONS, NOR SHALL IT BE
DEEMED A PART OF ANY REGISTRATION STATEMENT TO WHICH IT RELATES.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 34878
<SECURITIES> 0
<RECEIVABLES> 655915
<ALLOWANCES> 17785
<INVENTORY> 495313
<CURRENT-ASSETS> 1211577
<PP&E> 7164703
<DEPRECIATION> 3404918
<TOTAL-ASSETS> 5241701
<CURRENT-LIABILITIES> 803018
<BONDS> 1367450
<COMMON> 69264
0
0
<OTHER-SE> 1966454
<TOTAL-LIABILITY-AND-EQUITY> 5241701
<SALES> 4476761
<TOTAL-REVENUES> 4476761
<CGS> 3399559
<TOTAL-COSTS> 4219549
<OTHER-EXPENSES> (3888)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 117290
<INCOME-PRETAX> 143810
<INCOME-TAX> 51804
<INCOME-CONTINUING> 81070<F1>
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 81070
<EPS-PRIMARY> 1.17
<EPS-DILUTED> 1.16
<FN>
<F1> REFLECTS ADJUSTMENT FOR MINORITY INTEREST (NET OF TAX) OF $10936
</FN>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 44917
<SECURITIES> 0
<RECEIVABLES> 561590
<ALLOWANCES> 17270
<INVENTORY> 496433
<CURRENT-ASSETS> 1134110
<PP&E> 6913799
<DEPRECIATION> 3161450
<TOTAL-ASSETS> 5096307
<CURRENT-LIABILITIES> 779869
<BONDS> 1252475
<COMMON> 69217
0
0
<OTHER-SE> 2024377
<TOTAL-LIABILITY-AND-EQUITY> 5096307
<SALES> 4013197
<TOTAL-REVENUES> 4013197
<CGS> 2972208
<TOTAL-COSTS> 3760658
<OTHER-EXPENSES> (10792)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 112286
<INCOME-PRETAX> 151045
<INCOME-TAX> 55250
<INCOME-CONTINUING> 85308
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 85308
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23
</TABLE>
