UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996
COMMISSION FILE NUMBER 1-3013
WESTVACO CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 299 Park Avenue
(State of incorporation) New York, New York 10171
Telephone 212-688-5000
13-1466285 (Address and telephone number of
(I.R.S. Employer Identification No.) registrant's principal executive offices)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
Name of each exchange
Title of each class on which registered
Common Stock- $5 par value New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Preferred Stock Purchase Rights New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Sinking Fund Debentures:
8 1/8%, due 1997-2007 New York Stock Exchange
10 1/4%, due 1999-2018 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such filing requirements for the past
90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
At November 30, 1996, the latest practicable date, the number of
shares of common stock outstanding and aggregate market value of
voting common stock held by nonaffiliates were 101,895,051 and
$2,853,061,428, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders for
the fiscal year ended October 31, 1996 (the "1996 Westvaco Annual
Report") are incorporated by reference into Parts I, II and IV of
this Form 10-K.
Portions of the registrant's definitive Proxy Statement for the
Annual Meeting of Shareholders to be held February 25, 1997
("Westvaco's 1997 Proxy Statement") are incorporated by reference
into Part III of this Form 10-K.
PART I
ITEM 1. BUSINESS
GENERAL
Westvaco Corporation, a Delaware Corporation incorporated in 1899
as West Virginia Pulp and Paper Company, is one of the major
producers of paper and paperboard in the United States. It
converts paper and paperboard into a variety of end-products,
manufactures a variety of specialty chemicals, produces lumber,
sells timber from its timberlands and is engaged in land
development. In Brazil, it is a major producer of paperboard and
corrugated packaging for the markets of that country. It also
exports products from both the United States and Brazil to other
countries throughout the world. The term "Westvaco" or "the
company" includes Westvaco Corporation and its consolidated
subsidiaries unless otherwise noted.
BUSINESS SEGMENTS
The company's principal business segments are the manufacture of
(i) bleached paper, paperboard and packaging products, (ii)
unbleached paper, paperboard and packaging products and (iii)
specialty chemicals. Financial information about the company's
business segments is contained in Note O to the consolidated
financial statements, included in the 1996 Westvaco Annual Report
on pages 30 to 31, and is incorporated herein by reference.
MARKETING AND DISTRIBUTION
The principal markets for Westvaco's products are in the United
States. Sales to customers outside the United States made up
approximately 23% of Westvaco's total sales in 1996 (1995-21%,
1994-19%). Substantially all products are sold through the
company's own sales force. Westvaco maintains 31 sales offices
located throughout the United States and 28 in foreign countries.
TIMBERLANDS
The principal raw material used in the manufacture of paper,
paperboard and pulp is wood. Westvaco owns 1,452,000 acres of
forest land in the United States and southern Brazil (more than
1,000 miles from the Amazon rainforests). Westvaco's 40-year-old
Cooperative Forest Management Program provides an additional
source of wood fiber from the 1,386,000 acres owned by
participating landowners and managed with assistance from
Westvaco foresters.
Westvaco's strategy, based on the location of its mills and the
composition of surrounding forest land ownership, is to provide a
portion of its wood fiber from company-owned land and to rely on
private woodland owners and residues from independent solid wood
products plants for substantial quantities of wood. During 1996,
Westvaco furnished 39% (1995-37%, 1994-36%) of its wood
requirements from company-owned land, and an additional 7%
(1995-8%, 1994-9%) was purchased from landowners in the Cooperative
Forest Management Program. The remainder was purchased from
other private landowners and sawmills by mill wood procurement
organizations. The wood procurement system includes 31 pulpwood
concentration and processing yards that are strategically located
to store and ship wood to the mills as needed. Westvaco supplied
93% of the wood for its Brazilian mill from company plantations.
Westvaco timberlands are stocked with pine plantations and
natural hardwoods. The inventory of growing trees, the basis for
volume production, has increased steadily over the last decade in
spite of a steady rise in the volume of wood harvested. Most of
the pine stands harvested are plantations that are regenerated by
establishing new pine plantations. Most hardwood stands that are
harvested are re-established by planned natural regeneration from
seeds and sprouts. Westvaco's hardwood plantation program is
expanding and involves several domestic species. The quantity of
wood harvested by Westvaco from its lands in any year is
primarily controlled by long-range forest management programs
based on integrated wood supply plans.
PATENTS
Westvaco has obtained a number of patents as a result of its
research and product development efforts. Westvaco is the owner
of many registered trademarks for its products. Westvaco is not
materially dependent on trademarks, patents or licenses under
patents held by others.
DEPENDENCE UPON A SINGLE CUSTOMER
Westvaco's largest single customer is Philip Morris Companies,
Inc., a global consumer products company, which purchases
packaging materials from the bleached segment.
COMPETITION
Westvaco's strategy is to compete by developing distinctive and
innovative products and services for our customers in the United
States and world markets. There are many large, well established
and highly competitive sellers competing in these markets as
well.
RESEARCH
Westvaco operates major research facilities at Laurel, MD,
Charleston, SC, and Covington, VA, and a forest science
laboratory at Summerville, SC. Forest research centers at
Wickliffe, KY, Rupert, WV, and Tres Barras, State of Santa
Catarina, Brazil, are working on research relating to growing and
sustaining the production of timber and fiber, such as genetics,
tree nutrition, regeneration, stand management, environmental
protection and forest measurements. The company's larger
divisions and subsidiaries also have product development staffs
which work on product-related projects directed toward specific
opportunities of the individual units.
In 1996, the company incurred $38.3 million (1995-$31.4 million,
1994-$30.6 million) of research and development costs.
Substantially all of the research projects are company sponsored.
Approximately 220 scientists were employed in research and
development activities.
ENVIRONMENTAL PROTECTION
Westvaco is subject to federal and state environmental laws and
regulations in all jurisdictions in which it has operating
facilities. Compliance with these requirements involves the
diversion of capital from production facilities and increases
operating costs. In the opinion of Westvaco's management,
environmental protection requirements will not adversely affect
the company's competitive industry position since other domestic
companies are subject to similar requirements. Capital
expenditures for pollution control facilities are expected to
approximate $160 million and $130 million in 1997 and 1998,
respectively, which includes the investment for the removal of
elemental chlorine as noted below. Future capital expenditures
for pollution control facilities are expected to increase
substantially as a result of proposed EPA air and water quality
regulations for the U. S. paper industry. Currently, the company
does not expect final rules until sometime in 1997 with
implementation required over several years thereafter. In 1995,
the company authorized the final step in a long-term program
initiated in 1989 which will result in the removal of elemental
chlorine from all of our pulp bleaching processes. To accomplish
this, Westvaco authorized an expenditure of $140 million in the
spring of 1995, and we expect the program to be complete in 1997.
This is an initial step in addressing the anticipated
regulations. Total required expenditures related to EPA's
proposals could fall in the range of $175 to $400 million.
Additional operating costs, including depreciation, for these new
facilities could fall in the range of $25 to $50 million pretax
annually. It will be difficult to develop more precise estimates
until the proposed rules become final.
EMPLOYEES
At November 30, 1996, Westvaco employed approximately 13,440
persons, of whom 6,500 domestic employees are represented by
various labor unions under collective bargaining agreements.
Approximately 2,110 employees of Rigesa, Ltda. ("Rigesa"),
Westvaco's Brazilian subsidiary, are represented under collective
bargaining arrangements. Westvaco believes its labor relations
are good.
INTERNATIONAL OPERATIONS
In Brazil, Rigesa operates a paperboard mill, corrugated box
plant and a consumer packaging plant in Valinhos, State of Sao
Paulo; a paperboard mill in Tres Barras, State of Santa Catarina;
and corrugated box plants in Blumenau, State of Santa Catarina;
Manaus, State of Amazonia; and Pacajus, State of Ceara. Rigesa
is one of the few paper companies in Brazil which is integrated
from the forests to the markets. This fact, combined with
technology drawn from Westvaco's U.S. experience, has provided
Rigesa with a history of high-quality products and strong growth.
Rigesa accounted for approximately 40% of unbleached segment
operating profit in 1996. Operating results at Rigesa continue
to be subject to the uncertain economic and political conditions
in Brazil.
Westvaco's Czech Republic subsidiary, Westvaco Svitavy, spol. s
r.o. ("Svitavy"), began operating a consumer packaging plant in
that country during the 1995 fiscal fourth quarter. Svitavy
supplies consumer packaging to the markets of Eastern, Central
and Western Europe. The packaging is made primarily from
distinctive paper and paperboard produced by Westvaco in the
United States.
Export sales from Westvaco's U.S. operations made up
approximately 15% of Westvaco's 1996 sales (1995-14%, 1994-13%).
Rigesa's sales, including exports, were 8% of Westvaco's total
sales (1995-7%, 1994-6%). For information concerning the income
of Westvaco's foreign subsidiaries for the three years ended
October 31, 1996 and the assets for the two-year period then
ended, see Note J to the consolidated financial statements,
incorporated by reference in Part II of this report. While there
are risks inherent in foreign investments, Westvaco does not
believe at this time that such risks are material to its overall
business prospects.
ITEM 2. PROPERTIES
The location of Westvaco's production facilities and their
principal products in each business segment as of October 31,
1996 were as follows:
BLEACHED PAPER, PAPERBOARD AND PACKAGING PRODUCTS
Location Product
Covington, Virginia Bleached paperboard
Luke, Maryland White printing and converting papers
Wickliffe, Kentucky White printing and converting
papers, and market pulp
Tyrone, Pennsylvania White printing and converting papers
Low Moor, Virginia Extrusion coated bleached paperboard
Cleveland, Tennessee Folding cartons
Newark, Delaware Folding cartons
Richmond, Virginia Folding cartons
Svitavy, Czech Republic Folding cartons
Valinhos, Sao Paulo, Brazil Folding cartons
Richmond, Virginia Cartons for liquid products
Atlanta, Georgia Envelopes
Dallas, Texas Envelopes
Enfield, Connecticut Envelopes
Indianapolis, Indiana Envelopes
Kenosha, Wisconsin Envelopes
Los Angeles, California Envelopes
Springfield, Massachusetts Envelopes
Williamsburg, Pennsylvania Envelopes
Springfield, Massachusetts Flexible packaging and paper cups
UNBLEACHED PAPER, PAPERBOARD AND PACKAGING PRODUCTS
Location Product
Charleston, South Carolina Containerboard, saturating kraft and
folding carton stock
Covington, Virginia Corrugating medium
Tres Barras, Santa Catarina, Brazil Containerboard and kraft papers
Valinhos, Sao Paulo, Brazil Corrugating medium (principally
from waste papers)
Blumenau, Santa Catarina, Brazil Corrugated boxes
Pacajus, Ceara, Brazil Corrugated boxes
Manaus, Amazonia, Brazil Corrugated boxes
Valinhos, Sao Paulo, Brazil Corrugated boxes
Cameron, South Carolina Building products
Summerville, South Carolina Building products
CHEMICALS
Location Product
Charleston, South Carolina Lignin-based surfactants and tall
oil derivatives
Covington, Virginia Activated carbon products and
services
DeRidder, Louisiana Printing ink resins and tall oil
derivatives
Mulberry, Florida Tall oil derivatives
Wickliffe, Kentucky* Activated carbon products and
services
OTHER
Location Product
Summerville, South Carolina Land development
* Opening mid-1997
CAPACITY AND PRODUCTION
Capacity estimates are based on the expected operations and product
mix of each of the locations. Whether these estimates can in
practice be attained or exceeded is dependent upon a variety of
factors such as actual product mix, quantity and timing of
production runs, required maintenance time and labor conditions.
The approximate annual productive capacity is 3,181,000 tons for
the paper and paperboard mills and 715,000 tons for the converting
plants. The 1996 production from these facilities was 3,001,000
and 590,000 tons, respectively. The mills supplied 73% of the
paper and paperboard needs of the converting plants. The annual
productive capacity for the chemical plants is 497,000 tons. In
1996, 454,000 tons of specialty chemicals were produced.
LEASES
See Note H to the consolidated financial statements, incorporated
by reference in Part II of this report, for financial data on
leases. Substantially all of the leases of production facilities
contain options to purchase or renew for future periods.
TIMBERLANDS
Westvaco owns 1,452,000 acres of timberlands. There are 1,100,000
acres in the South and Middle Atlantic United States, 236,000 acres
in the Central United States and 116,000 acres in Brazil.
OTHER INFORMATION
Certain of the facilities at the Wickliffe mill, the Indianapolis
envelope plant and minor components of other plants, owned by
municipal or other public authorities pursuant to standard
industrial revenue bond financing arrangements, are accounted for
as property owned by Westvaco. Westvaco holds options under which
it may purchase each of these facilities from such authorities by
paying a nominal purchase price and assuming the indebtedness owing
on the industrial revenue bonds at the time of the purchase.
The company owns in fee all of the mills, plants and timberlands
listed in Item 2, except leased facilities and those described
above.
Westvaco's mills and plants and related machinery and equipment are
considered by the company to be well maintained and in good
operating condition.
ITEM 3. LEGAL PROCEEDINGS
The company is involved in contractual disputes, administrative and
legal proceedings and investigations of various types, generally
incidental to its business. In addition, the company is currently
named as a potentially responsible party with respect to the
cleanup of several hazardous waste sites under the Comprehensive
Environmental Response, Compensation, and Liability Act (CERCLA)
and similar state laws. While joint and several liability is
authorized under CERCLA, as a practical matter, remediation costs
will be allocated among the waste generators and others involved.
The company has, as of October 31, 1996, accrued approximately $5
million for estimated potential cleanup costs based upon its close
monitoring of ongoing activities and its past experience with these
matters. The company periodically reviews the status of the
hazardous waste sites and adjusts its accrual as appropriate.
While any litigation, proceeding or investigation has an element of
uncertainty, the company and its general counsel do not believe
that the outcome of any proceeding, lawsuit or claim that is
pending or threatened, or all of them combined, will have a
material adverse effect on its consolidated financial position or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of security holders,
through the solicitation of proxies or otherwise, during the fourth
quarter ended October 31, 1996.
Executive officers of the registrant
The following table sets forth certain information concerning the
executive officers of Westvaco Corporation:
Year in which
service in present
Name Age Present position position began
John A. Luke, Jr.* 48 Chairman, 1996
President and
Chief Executive Officer 1992
Rudolph G. Johnstone, Jr.* 60 Executive Vice President 1995
E. Lee Andrews 61 Senior Vice President 1988
Philip H. Emery, Jr. 62 Senior Vice President 1995
Frederick C. Haas 60 Senior Vice President 1982
Jack A. Hammond 58 Senior Vice President 1992
James E. Stoveken, Jr. 57 Senior Vice President 1996
Brantley D. Thomas, Jr. 63 Senior Vice President 1987
Samuel L. Torrence 56 Senior Vice President 1996
R. Scott Wallinger 57 Senior Vice President 1987
Wendell L. Willkie, II 45 Senior Vice President and
General Counsel 1996
William S. Beaver 45 Vice President 1996
and Treasurer 1987
John W. Hetherington 58 Vice President and 1987
Secretary 1978
Ned W. Massee 46 Vice President 1991
John E. Banu 49 Comptroller 1995
* Director of Westvaco
Westvaco's officers are elected by the Board of Directors annually
for one-year terms. Westvaco's executive officers have served in
their present capacities for the past five years or longer with the
following exceptions:
John A. Luke, Jr., Executive Vice President, 1990-1992; Rudolph G.
Johnstone, Jr., Senior Vice President, 1990-1995; Philip H. Emery,
Jr., Vice President, 1987-1995; Jack A. Hammond, Vice President and
Assistant Manager of the Bleached Board Division, 1987-1992; James
E. Stoveken, Jr., Vice President, 1986-1996, Comptroller, 1979-1995;
Samuel L. Torrence, Vice President, 1991-1996; Wendell L.
Willkie, II, Vice President and Associate General Counsel 1995-1996,
served as a Fellow in legal policy and international trade at
the American Enterprise Institute, 1993-1995, prior to which he
held several senior law and management positions with the U. S.
government; William S. Beaver, Treasurer 1987-1996; John E. Banu,
Assistant Comptroller, 1980-1995.
Information required by Item 405 of Regulation S-K will be
included in Westvaco's 1997 Proxy Statement, pursuant to
Regulation 14A, to be filed with the Securities and Exchange
Commission by January 29, 1997, and is incorporated herein by
reference.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
(a) Market and price range of common stock
The company's common stock is traded on the New York,
Chicago and Pacific Stock Exchanges under the symbol W. The
New York Stock Exchange is the principal market on which the
common stock is traded.
The quarterly price range of common stock and the quarterly
dividends per share for 1996 and 1995 are included on page 2
of the 1996 Westvaco Annual Report under the captions
"Quarterly price ranges of stock" and "Quarterly dividends
per share," and are incorporated herein by reference.
(b) Approximate number of common shareholders
At October 31, 1996, the number of record holders of
Westvaco common stock was approximately 8,500. In addition,
there were 12,260 current or former employees of the company
who were Westvaco shareholders by virtue of their
participation in the company's savings and investment plans.
(c) Dividends
The company's record of uninterrupted quarterly cash
dividends extends 101 years. There were no restrictions on
dividends at October 31, 1996.
ITEM 6. SELECTED FINANCIAL DATA
Information required by this item is included on pages 34-35 of
the 1996 Westvaco Annual Report under the caption "An eleven-year
comparison," and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Information required by this item is included on pages 14-17 of
the 1996 Westvaco Annual Report under the captions "Liquidity and
capital resources," "Analysis of operations," "Fiscal year 1995"
and "Fiscal year 1994," and is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information required by this item is included on pages 18-33 of
the 1996 Westvaco Annual Report under the captions "Consolidated
statement of income," "Consolidated balance sheet," "Consolidated
statement of cash flows," "Notes to financial statements" and
"Report of independent accountants," and is incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this item for the company's directors
will be contained in Westvaco's 1997 Proxy Statement, pursuant to
Regulation 14A, to be filed with the Securities and Exchange
Commission by January 29, 1997, and is incorporated herein by
reference. Information required by this item for the company's
executive officers is contained in Part I of this report under
the caption "Executive officers of the registrant."
ITEM 11. EXECUTIVE COMPENSATION
Information required by this item will be contained in Westvaco's
1997 Proxy Statement, pursuant to Regulation 14A, to be filed
with the Securities and Exchange Commission by January 29, 1997,
and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information required by this item will be contained in Westvaco's
1997 Proxy Statement, pursuant to Regulation 14A, to be filed
with the Securities and Exchange Commission by January 29, 1997,
and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by this item will be contained in Westvaco's
1997 Proxy Statement, pursuant to Regulation 14A, to be filed
with the Securities and Exchange Commission by January 29, 1997,
and is incorporated herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Consolidated financial statements
The consolidated financial statements of Westvaco
Corporation and consolidated subsidiaries listed below are
incorporated herein by reference to the following pages of
the Westvaco's 1996 Annual Report:
Page
Consolidated statement of income for fiscal years
ended October 31, 1996, 1995 and 1994 18
Consolidated balance sheet at October 31, 1996 and 1995 19
Consolidated statement of cash flows for fiscal years
ended October 31, 1996, 1995 and 1994 20
Notes to financial statements 21-32
Report of independent accountants 33
2. Consolidated financial statement schedules
All financial statement schedules have been omitted
because they are inapplicable, not required, or shown
in the consolidated financial statements and notes
thereto contained in Westvaco's 1996 Annual Report and
incorporated herein by reference.
3. Exhibits
3.i Restated Certificate of Incorporation, previously filed
as Exhibit 3b to the company's Annual Report on Form 10-K for
the fiscal year ended October 31, 1992, File No. 1-3013, and
incorporated herein by reference.
3.ii Bylaws of Westvaco Corporation, previously filed as Exhibit 3a
to the company's Quarterly Report on Form 10-Q/A for the
nine-months ended July 31, 1996, File No. 1-3013, and
incorporated herein by reference.
4.a Credit Agreement dated June 21, 1993, as amended August 22, 1994,
previously filed as Exhibit 4(a) to the company's Quarterly
Report on Form 10-Q for the third quarter ended July 31, 1993
and July 31, 1994, incorporated herein by reference.
4.b Form of Indenture, dated as of March 1, 1983, between Westvaco
Corporation and The Bank of New York (formerly Irving Trust
Company), as trustee, previously filed as Exhibit 2 to
the company's Registration Statement on Form 8-A,
File No. 1-3013, dated January 24, 1984.
4.c The company agrees to furnish copies of other instruments
defining the rights of holders of long-term debt to the
Commission upon its request.
4.d Rights Agreement dated as of November 24, 1987 between Westvaco
Corporation and The Chase Manhattan Bank (formerly Chemical Bank)
previously filed as Exhibit 1 to the company's Form 8-A dated
December 7, 1987, File No. 1-3013, incorporated herein by
reference.
4.e Amendment No. 1 to Rights Agreement, dated as of October 25, 1988,
previously filed as Exhibit 28(a) to the company's Form 8-K dated
November 10, 1988, File No. 1-3013, incorporated herein by
reference.
4.f Amendment No. 2 to Rights Agreement, dated as of October 24,
1989, previously filed as Exhibit 4 to the company's Form
8-K dated October 24, 1989, File No. 1-3013, incorporated
herein by reference.
4.g Amendment No. 3 to Rights Agreement, dated as of November 11,
1996, previously filed as Exhibit 5 to the company's Form 8-A/A
dated November 11, 1996, File No. 1-3013, incorporated
herein by reference.
10.a The 1983 Stock Option and Stock Appreciation Rights Plan, as
amended, previously filed as Exhibit 28(b) to Post-Effective
Amendment No. 1 to Registration Statement on Form S-8, File
No. 2-94699, incorporated herein by reference.
10.b The 1988 Stock Option and Stock Appreciation Rights Plan, as
amended, previously filed as Exhibit 28(c) to Registration
Statement on Form S-8, File No. 33-26823, incorporated herein by
reference.
10.c Copies of Westvaco Corporation Savings and Investment Restoration
Plan, as amended, effective January 1, 1990, and Retirement
Income Restoration Plan and Excess Benefit Plan, as amended,
effective January 1, 1990, previously filed as Exhibit 10(d)
to the company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1989, incorporated herein by reference.
10.d Amendment to the Savings and Investment Restoration Plan,
effective January 1, 1991, previously filed as Exhibit 10(e)
to the company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1991, incorporated herein by reference.
10.e Amendment to the Savings and Investment Restoration plan,
effective October 1, 1995.
10.f The 1995 Salaried Employee Stock Incentive Plan, effective
February 28, 1995, previously filed as Exhibit 99 to
Registration Statement on Form S-8, File No. 33-57879,
incorporated herein by reference.
10.g The Westvaco Corporation Annual Incentive Compensation Plan,
effective November 1, 1995, previously filed as Appendix A to
the company's Notice of 1996 Annual Meeting of Shareholders
and Proxy Statement dated December 29, 1995, File No. 1-3013,
incorporated herein by reference.
10.h The 1995 Non-Employee Director Stock Incentive Plan, effective
February 28, 1995, previosuly filed as Exhibit 99 to
Registration Statement on Form S-8, File No. 33-57881,
incorporated herein by reference.
10.i Westvaco Corporation Retirement Plan for Outside Directors dated
December 1, 1988, which will terminate February 25, 1997.
10.j Westvaco Corporation Deferred Compensation Plan for Outside
Directors dated December 1986.
10.k Form of Indemnification Contract between the company and
each of its officers and directors as listed in the Westvaco
Corporation 1996 Annual Report to Shareholders, incorporated
herein by reference.
13 Pages 2 and 14 through 35 of the Westvaco Corporation 1996
Annual Report to Shareholders. Except for the information
that is expressly incorporated by reference, the Annual Report
to Shareholders is furnished for the information of the
Securities and Exchange Commission and is not deemed to be
filed as part of this report.
21 Subsidiaries of the registrant.
23 Consent of independent accountants.
27 Financial data schedules.
(b) Reports on Form 8-K
A report on Form 8-K covering Item 5, Other Events, was filed
on November 12, 1996 reporting the adjustment of the Rights
Agreement for the October 2, 1995, three-for-two stock split.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WESTVACO CORPORATION
(Registrant)
December 17, 1996 By
John A. Luke, Jr.
Chairman, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons
on behalf of the registrant and in the capacities and on the
dates indicated.
Signature Title Date
John A. Luke, Jr. Chairman, President, Chief
Executive Officer and Director December 17, 1996
Rudolph G. Johnstone, Jr. Executive Vice President and
Director December 17, 1996
James E. Stoveken, Jr. Senior Vice President
(Principal Financial Officer) December 17, 1996
John E. Banu Comptroller
(Principal Accounting Officer) December 17, 1996
Samuel W. Bodman III Director December 17, 1996
W. L. Lyons Brown, Jr. Director December 17, 1996
Dr. Thomas W. Cole, Jr. Director December 17, 1996
David L. Hopkins, Jr. Director December 17, 1996
Douglas S. Luke Director December 17, 1996
John A. Luke Director December 17, 1996
William R. Miller Director December 17, 1996
Katherine G. Peden Director December 17, 1996
Richard A. Zimmerman Director December 17, 1996
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR FISCAL YEAR ENDED OCTOBER 31, 1996
COMMISSION FILE NUMBER 1-3013
WESTVACO CORPORATION
(A Delaware Corporation)
(I.R.S. Employer Identification No. 13-1466285)
299 Park Avenue, New York, New York 10171
Telephone 212-688-5000
EXHIBITS
INDEX TO EXHIBITS
Exhibit
No.
3.i Restated Certificate of Incorporation, previously
filed as Exhibit 3b to the company's Annual Report
on Form 10-K for the fiscal year ended October 31,
1992, File No. 1-3013, and incorporated herein by
reference.
3.ii Bylaws of Westvaco Corporation, previously filed as
Exhibit 3a to the company's Quarterly Report on Form
10-Q/A for the nine-months ended July 31, 1996,
File No. 1-3013, and incorporated herein by
reference.
4.a Credit Agreement dated June 21, 1993, as amended
August 22, 1994, previously filed as Exhibit 4(a) to
the company's Quarterly Report on Form 10-Q for the
third quarter ended July 31, 1993 and July 31, 1994,
incorporated herein by reference.
4.b Form of Indenture, dated as of March 1, 1983,
between Westvaco Corporation and The Bank of New
York (formerly Irving Trust Company), as trustee,
previously filed as Exhibit 2 to the company's
Registration Statement on Form 8-A,File No. 1-3013,
dated January 24, 1984.
4.c The company agrees to furnish copies of other
instruments defining the rights of holders of long-term
debt to the Commission upon its request.
4.d Rights Agreement dated as of November 24, 1987
between Westvaco Corporation and The Chase Manhattan
Bank (formerly Chemical Bank) previously filed as
Exhibit 1 to the company's Form 8-A dated
December 7, 1987, File No. 1-3013, incorporated
herein by reference.
4.e Amendment No. 1 to Rights Agreement, dated as of
October 25, 1988, previously filed as Exhibit 28(a)
to the company's Form 8-K dated November 10, 1988,
File No. 1-3013, incorporated herein by reference.
4.f Amendment No. 2 to Rights Agreement, dated as of
October 24, 1989, previously filed as Exhibit 4 to
the company's Form 8-K dated October 24, 1989, File
No. 1-3013, incorporated herein by reference.
4.g Amendment No. 3 to Rights Agreement, dated as of
November 11, 1996, previously filed as Exhibit 5 to
the company's Form 8-A/A dated November 11, 1996,
File No. 1-3013, incorporated herein by reference.
10.a The 1983 Stock Option and Stock Appreciation Rights
Plan, as amended, previously filed as Exhibit 28(b)
to Post-Effective Amendment No. 1 to Registration
Statement on Form S-8, File No. 2-94699,
incorporated herein by reference.
10.b The 1988 Stock Option and Stock Appreciation Rights
Plan, as amended, previously filed as Exhibit 28(c)
to Registration Statement on Form S-8, File No. 33-26823,
incorporated herein by reference.
10.c Copies of Westvaco Corporation Savings and
Investment Restoration Plan, as amended, effective
January 1, 1990, and Retirement Income Restoration
Plan and Excess Benefit Plan, as amended, effective
January 1, 1990, previously filed as Exhibit 10(d) to
the company's Annual Report on Form 10-K for the fiscal
year ended October 31, 1989, incorporated herein by reference.
10.d Amendment to the Savings and Investment Restoration
Plan, effective January 1, 1991, previously filed as
Exhibit 10(e) to the company's Annual Report on Form
10-K for the fiscal year ended October 31, 1991,
incorporated herein by reference.
10.e Amendment to the Savings and Investment Restoration
plan, effective October 1, 1995.
10.f The 1995 Salaried Employee Stock Incentive Plan,
effective February 28, 1995, previously filed as
Exhibit 99 to Registration Statement on Form S-8,
File No. 33-57879, incorporated herein by reference.
10.g The Westvaco Corporation Annual Incentive
Compensation Plan, effective November 1, 1995, previously
filed as Appendix A to the company's Notice of 1996 Annual
Meeting of Shareholders and Proxy Statement dated
December 29, 1995, File No. 1-3013, incorporated herein
by reference.
10.h The 1995 Non-Employee Director Stock Incentive Plan,
effective February 28, 1995, previously filed as
Exhibit 99 to Registration Statement on Form S-8,
File No. 33-57881, incorporated herein by reference.
10.i Westvaco Corporation Retirement Plan for Outside
Directors dated December 1, 1988, which will
terminate February 25, 1997.
10.j Westvaco Corporation Deferred Compensation Plan for
Outside Directors dated December 1986.
10.k Form of Indemnification Contract between the company
and each of its officers and directors as listed in
the Westvaco Corporation 1996 Annual Report to
Shareholders, incorporated herein by reference.
13 Pages 2 and 14 through 35 of the Westvaco
Corporation 1996 Annual Report to Shareholders.
Except for the information that is expressly
incorporated by reference, the Annual Report to
Shareholders is furnished for the information of the
Securities and Exchange Commission and is not deemed
to be filed as part of this report.
21 Subsidiaries of the registrant.
23 Consent of independent accountants.
27 Financial data schedules.
EXHIBIT 10.e
AMENDMENTS TO THE WESTVACO CORPORATION
SAVINGS AND INVESTMENT RESTORATION PLAN
AND EXCESS BENEFIT PLAN
RESOLVED that, effective October 1, 1995, Paragraph 6
of the Corporation's Savings and Investment Restoration Plan
and Paragraph 6(a) and (b) of the Corporation's Excess
Benefit Plan shall each be revised as follows:
(a) Restored S&I Account - Lump Sum Distributions -
Living Member
Westvaco shall pay in cash to each Member who is
living on the date the Member's Continuous Service
terminates for any reason an amount equal to the
value of the Member's Restored S&I Account as of
the S&I Plan Valuation Date subsequent to such
termination date. Such payment shall be made as
soon as practicable following the applicable S&I
Plan Valuation Date.
(b) Restored S&I Account - Lump Sum Distributions -
Deceased Member
If a Member dies before his Continuous Service is
broken, the value of the Member's Restored Vested
Account as of the S&I Plan Valuation Date
subsequent to the date of death shall be paid in
cash by Westvaco to the party eligible to receive
the Member's S&I Plan Account as of the date of
death. Such payment shall be made as soon as
practicable following the applicable S&I Plan
Valuation Date.
(c) Restored S&I Account - Installment Payment
Election
A Member may elect to receive all or any portion of
the Member's Restored S&I Account in a series of
equal monthly payments commencing any time after
Continuous Service terminates and extending no
later than 10 years after Continuous Service
terminates. An irrevocable election must be made
at least six months prior to the date the Member's
Continuous Service terminates.
If the Member elects distribution by a series of
monthly payments, payment will be made on the basis
of the value of a Member's Restored S&I Account
subject to such distribution as of the first S&I
Plan Valuation Date for the month payments are to
commence and for each subsequent month thereafter.
Each monthly payment will reflect an equal
distribution of the value of the Member's Restored
S&I Account subject to such distribution over the
remaining period of such distribution. Payment
shall be made as soon as practicable following the
applicable S&I Plan Valuation Date.
Payment will be structured for continued treatment
of the Member's Restored S&I Account as deferred
compensation.
(d) Restored S&I Account - Annuity Election
A Member may elect to have Westvaco pay an annuity
with all or any portion of the Member's Restored
S&I Account as of the S&I Plan Valuation Date
subsequent to the date the Member's Continuous
Service terminates. The election must be made at
least six months prior to the date the Member's
Continuous Service terminates.
Payment will be structured for continued treatment
of the Member's Restored S&I Account as deferred
compensation.
(e) Interest on Unpaid Benefits
If Westvaco does not pay Benefits to Plan
Beneficiaries within the time periods specified in
this Paragraph, it shall pay the Plan Beneficiaries
interest on such unpaid amounts daily at a rate
which is two times the Prime Rate. However,
Westvaco shall be excused for any delay in payment
attributable to Westvaco being unable in good faith
to locate the applicable Plan Beneficiaries.
EXHIBIT 10.i
WESTVACO CORPORATION
RETIREMENT PLAN FOR OUTSIDE DIRECTORS
(As Amended Effective December 1, 1988)
DEFINITIONS
1. The following terms shall have the following
meanings:
(a) "Westvaco" shall mean Westvaco Corporation, a Delaware
corporation, and its successors and assigns.
(b) "Director" shall mean any person who serves or has
served on the Westvaco Board of Directors.
(c) "Member" shall mean any Director other than (1) a
Director who is or has been a full-time employee of
Westvaco or of a subsidiary or affiliate of Westvaco;
or (2) a Director who is entitled to receive a
pension from a Westvaco qualified retirement or
pension plan.
(d) "Allowed Service" shall mean the period of time during
which a Member is a Member.
(e) "Plan" shall mean this Westvaco Corporation Retirement
Plan for Outside Directors.
(f) "Pension" shall mean any payment owed pursuant to the
Plan to a Member, or a surviving spouse or joint
annuitant of a Member.
(g) "Single-Life Annuity" shall mean a Pension payable for
the life of a Member as provided for in Paragraph 3.
(h) "J&S Annuity" shall mean a reduced Pension which is
the actuarial equivalent of a Single-Life Annuity to
which a Member is entitled under Paragraph 3 payable
to a Member for his or her life and, thereafter, to
his or her joint annuitant, for his or her life.
RETIREMENT
2. Each Member shall retire effective as of the first
day of the month following the date of termination of
his or her Allowed Service.
AMOUNT OF PENSION
3. Each Member who retires after November 30, 1988 shall
be entitled to receive, beginning on the effective
date of retirement, a Single-Life Annuity equal to
$1,666.67 per month ($1,125.00 per month for Members
who retired before November 1, 1984; $1,250.00 per
month for Members who retired after October 31, 1984
and before August 1, 1987; and $1,458.33 per month
for Members who retired after July 31, 1987 and
before December 1, 1988), reduced by 10% for each
full year by which his or her retirement date falls
short of his or her 70th birthday, and further reduced
by 10% for each full year by which the amount of his
or her Allowed Service prior to age 72 falls short of
ten years.
SURVIVOR'S BENEFIT
4. If a Member dies prior to the date his or her Pension
commences, his or her surviving spouse, if any, shall
receive a monthly Pension beginning on the first
month following the date of the Member's death and
ending on the date of death of such surviving spouse
in an amount equal to 50% of the monthly Single-Life
Annuity that the Member would have received if he or
she had retired on the date of death.
OPTIONAL ANNUITIES
5. A Member whose Pension has not commenced may elect,
in a form and manner prescribed by Westvaco, to
receive his or her Pension in the form of a J&S
Annuity, in lieu of the Single-Life Annuity to which
he or she is entitled under Paragraph 3, which J&S
Annuity shall be the actuarial equivalent of such
Single-Life Annuity and shall be payable in a smaller
monthly amount during the life of the Member, with
either 50% or 100% of such smaller amount, as elected
by the Member, continued after his or her death to
and for the life of any other person designated by
the Member as the joint annuitant. If either the
Member or the joint annuitant dies before the Pension
commences, the election of this form of Pension will
be automatically cancelled, in which event, the
Member, if living, may then elect a J&S Annuity
designating another person as the joint annuitant.
MISCELLANEOUS
6. (a) Administration
The Plan shall be administered by Westvaco.
Elections and designations shall be in writing on
forms prescribed by Westvaco.
(b) Financing and Payment
Payments shall be made from the general funds of
Westvaco. Westvaco may elect to insure or guarantee
payments of benefits, but shall have no obligation to
do so.
(c) Assignments and Alienability
Persons entitled to payments from the Plan may not
assign the rights to such payments and such payments
shall not be subject to any liens or other rights of
creditors against any such persons.
(d) Amendments and Liability
Westvaco may amend or terminate the Plan, but it may
not amend the Plan to deprive any member or other
payee of (i) rights accrued under the Plan up to the
effective date of the amendment; or (ii) the right to
payments payable after the effective date of any such
amendment which accrued before such date. Members
and other payees shall have contractual rights to
enforce their rights under the Plan against Westvaco,
and such rights are irrevocable.
(e) Legal Fees and Expenses
Westvaco shall promptly reimburse each Member, upon
request to the Treasurer of Westvaco, for the amount
of all legal fees and expenses which the Director may
incur in seeking to enforce any right or benefit
provided or agreed to be provided to the Director by
Westvaco, including the rights under this Agreement.
(f) Interpretation
This Plan is not subject to the provisions of the
Employee Retirement Security Act of 1974 and is not
qualified under Section 401(a) of the Internal
Revenue Code of 1986. It shall be construed and
enforced according to the laws of the State of New
York.
EXHIBIT 10.j
WESTVACO CORPORATION
DIRECTORS DEFERRED COMPENSATION PLAN
FOR OUTSIDE DIRECTORS
DEFINITIONS
1. The following terms shall have the following
meanings:
(a) "Westvaco" shall mean Westvaco Corporation, a Delaware
corporation, and its successors and assigns.
(b) "Director" shall mean any person who serves on the
Westvaco Board of Directors after December 31, 1985, who
does not, while acting as a Director, receive
compensation from Westvaco or a Westvaco affiliate for
services as a full-time employee or officer.
(c) "Fees" shall mean any fees payable to a Director by reason
of his being a director of Westvaco or for attending any
meeting of the Westvaco Board of Directors or a committee
thereof.
(d) "Current Compensation" is defined as the percentage of
Fees that the Director elects to receive during each
respective calendar year.
(e) "Deferred Compensation" is defined as the percentage of
Fees payable during a calendar year that the Director
elects to defer.
(f) "Notice of Election" shall mean the Notices of Election
referred to in Paragraph 2.
(g) "Payment Dates" shall mean the dates referred to in
Paragraph 3 which are set forth in a Director's Notice of
Election.
DEFERRAL OF FEES
2. For each full and partial calendar year beginning in
1986 and terminating in the year of the termination
of the Director's term of office, the Director shall
execute and deliver to the Secretary of Westvaco a
Notice of Election which sets forth the percentages
of Fees receivable during such full or partial
calendar year that the Director wishes to have
payable respectively as Current Compensation and as
Deferred Compensation. The Notice of Election
applicable to that portion of the Director's term of
office in calendar year 1986 must be executed and
delivered to Westvaco prior to January 1, 1986. Each
Notice applicable to a full or partial calendar year
occurring after 1986 must be executed and delivered
to the Secretary of Westvaco prior to the January 1
of the calendar year to which such Notice is
applicable. If a Notice of Election applicable to a
calendar year is not executed and delivered to the
Secretary of Westvaco by a Director prior to January
1 of that year, that Director will have all Fees for
that year paid as Current Compensation.
PAYMENT OF DEFERRED COMPENSATION
3. The amount of Deferred Compensation owed to a
Director shall be held in the general assets of
Westvaco until the Payment Dates. On the Payment
Dates the amount of Deferred Compensation owed to the
Director, together with interest on such amounts, at
the prevailing prime rates charged by leading
commercial banks in New York City, as such prime
rates may fluctuate from time to time, compounded on
each July 1 and January 1, shall be paid to the
Director in cash in a lump sum, or in the number of
installments and at the times set forth in the
respective Notices of Election. However, upon the
death of the Director, all unpaid Deferred
Compensation shall be paid to the estate of the
Director.
DISABILITY
4. In the event of the disability of a Director, a
majority of disinterested members of the Westvaco
Board of Directors may authorize Westvaco to make
payments of Deferred Compensation, and interest
thereon, to the Director in amounts deemed to be in
the Director's best interests. Such majority shall
determine the fact of disability in its sole
discretion.
MISCELLANEOUS
5. (a) Administration
The Plan shall be administered by Westvaco.
Elections and designations shall be in writing on
forms prescribed by Westvaco.
(b) Financing and Payment
Payments shall be made from the general funds of
Westvaco; Westvaco may elect to insure or guarantee
payments of benefits, but shall have not obligation
to do so.
(c) Assignments and Alienability
Persons entitled to payments from the Plan may not
assign the rights to such payments and such payments
shall not be subject to any liens or other rights of
creditors against any such persons.
(d) Amendments and Liability
Westvaco may amend or terminate the Plan, but it may
not amend the Plan to deprive any Member or other
payee of (i) rights accrued under the Plan up to the
effective date of the amendment; or (ii) the right to
payments payable after the effective date of any such
amendment which accrued before such date. Members
and other payees shall have contractual rights to
enforce their rights under the Plan against Westvaco,
and such rights are irrevocable.
(e) Legal Fees and Expenses
Westvaco shall promptly reimburse each member, upon
request to the Treasurer of Westvaco, for the amount
of all legal fees and expenses which the Director may
incur in seeking to enforce any right or benefit
provided or agreed to be provided to the Director by
Westvaco, including the rights under this Agreement.
(f) Relationship to Retirement Plan
Pensions payable to a Director from the Westvaco
Corporation Retirement Plan for Outside Directors
shall not reduce the amount of Deferred Compensation
payable pursuant to this Plan.
(g) Interpretation
This Plan is not subject to the provisions of the
Employee Retirement Security Act of 1974 and is not
qualified under Section 401(a) of the Internal
Revenue Code of 1954. It shall be construed and
enforced according to the laws of the State of New
York.
EXHIBIT 10.k
(Name)
INDEMNIFICATION CONTRACT
The ability to attract and retain the services of highly
qualified people as directors and officers is essential to
the continued success of Westvaco. To encourage you to
serve in your capacity as an officer or director, the
corporation seeks to assure you of the most complete
indemnification permitted by law for any expense or
liability which you may incur because of your service for
Westvaco.
In furtherance of this assurance the bylaws of the
corporation require indemnification of directors and
officers to the fullest extent permitted by Delaware law, a
similar provision has been adopted in its certificate of
incorporation and the corporation also maintains directors
and officers liability insurance. The bylaw provision,
however, and perhaps the charter provision, could be changed
as a result of a change in the composition of the Board of
Directors or in the event of a change in corporate control,
and the availability and coverage of such directors and
officers liability insurance has become from time to time
uncertain.
Delaware law provides that the indemnification provided by
that law is not exclusive of other rights to indemnification
which directors and officers may receive and many leading
companies have taken additional protective measures to
insure that their directors and officers are indemnified to
the fullest extent permitted by law. Since we believe that
retaining your service to Westvaco requires the greatest
protection possible consistent with good corporate
practices, our Board has determined it to be fair and in the
best interests of the corporation to authorize a contract
with you with respect to indemnification. Accordingly, as a
material inducement to your continued service to the
corporation as a director or officer, it is agreed as
follows:
1. The corporation shall indemnify you if, by reason of, or
arising in whole or in part out of, the fact that you
are or have been a director or officer of the
corporation, or at the request of the corporation,
express or implied, are or were serving as a director,
officer, employee, agent or fiduciary of any other
company, association, partnership, joint venture, trust,
employee benefit plan or other entity, any of the
following shall occur:
(a) you are made or threatened to be made a party
to any threatened, pending or completed
action, suit or proceeding, whether civil,
criminal or administrative, and including any
action by or in the right of the corporation,
unless you are a party plaintiff suing on your
own behalf;
(b) you are made subject to any inquiry or
investigation, including special litigation
committee investigations; or
(c) you are caused to attend as a witness in any
matter, whether voluntarily or involuntarily.
Such indemnification shall cover and be against
judgments, fines, amounts paid in settlement and
reasonable expenses, including attorneys' fees, incurred
as a result of such action, proceeding or matter, or any
appeal therein, to the fullest extent permitted by law,
and shall be paid as soon as practicable but, in any
case, no later than thirty (30) days after demand.
2. Expenses incurred by you or on your behalf in connection
with any such action or proceeding shall be paid by the
corporation in advance of the final disposition of such
action or proceeding, as soon as practicable, but, in
any case, no later than thirty (30) days after demand.
3. The indemnification provided by this contract shall not
be exclusive of any right to which you may be entitled
by law or pursuant to the corporation's bylaws,
certificate of incorporation, any policy of insurance,
any other contract or otherwise. These rights to
indemnification shall be cumulative, and no failure or
delay in exercising any such right shall operate as a
waiver of it nor shall any single or partial exercise of
it preclude its other or further exercise or the
exercise of any other right.
4. While your rights are independent of, and not affected
by, any bylaw, charter provision or policies of
insurance maintained by the corporation, indemnification
payments pursuant to this contract shall be reduced by
amounts actually received by you with respect to the
same item by virtue of such insurance.
5. In the event that you institute any legal action to
obtain or enforce, or are required to defend the
validity or enforceability of, any right to benefit
provided by this contract, the corporation will
regardless of the outcome of such action, pay for all
actual legal fees and expenses incurred by you, as soon
as practicable, but, in any case, no later than thirty
(30) days after demand.
6. In any matter covered by this contract, a presumption
shall exist that you are entitled to indemnification,
and the burden of proof shall be upon the party seeking
to deny indemnification to you.
7. For so long as you serve as a director or officer, this
contract may not be terminated or amended by the
corporation without your written consent, may not be
delegated as to duty nor assigned by the corporation and
shall be binding on any successor to the corporation,
whether by consolidation, merger, acquisition of all or
substantially all of the corporation's assets or
otherwise. In any case, in so far as legally
permissible, neither your ceasing to act as a director
or officer, nor the termination of this contract, nor a
subsequent change in the law, shall affect any rights
you may have under this contract with respect to your
service while such contract was in effect.
8. In all matters covered by this contract, your estate,
heirs and distributees, and any of them, shall stand in
your stead and be entitled to indemnification in the
same manner and to the same extent as you would be where
they or any of them may be liable on account of your
activities contemplated by this contract.
9. This contract shall be governed by the law of the State
of Delaware.
Please indicate your acceptance of and agreement with the
provisions of this contract of indemnification by executing
and returning the enclosed counterpart. The first copy is
for your records.
Sincerely,
WESTVACO CORPORATION
By
Accepted and Agreed to this
day of , 1996.
Highlights of the Year EXHIBIT 13
1996 1995
Sales $3,045,450,000 $3,272,447,000
Net income before
extraordinary charge $ 212,156,000 $ 283,426,000
Extraordinary charge-
extinguishment of debt,
net of taxes - $ [2,590,000]
Net income $ 212,156,000 $ 280,836,000
Net income per common share
before extraordinary charge $ 2.09 $ 2.80
Extraordinary charge -
extinguishment of debt,
net of taxes - $ [.02]
Net income per common share $ 2.09 $ 2.78
Common stock dividends $ 89,539,000 $ 77,929,000
Dividends per common share $ .88 $ .77
Capital expenditures $ 510,902,000 $ 309,020,000
Sales by quarter Earnings by quarter
In millions In millions Per share
Quarter 1996 1995 Quarter 1996 1995 1996 1995
First $ 749 $ 742 First $ 62.4 $ 49.3 $ .61 $ .49
Second 760 804 Second 50.6 65.0 .50 .64
Third 758 855 Third 43.6 77.6(1) .43 .77(1)
Fourth 778 871 Fourth 55.6 88.9 .55 .88
Total $3,045 $3,272 Total $212.2 $280.8 $2.09 $2.78
Quarterly dividends per share Quarterly price ranges of stock*
Quarter 1996 1995 1996 1995
First $.22 $.18 1/3 Quarter High Low High Low
Second .22 .18 1/3 First $29 1/4 $24 1/2 $26 1/2 $21 1/6
Third .22 .18 1/3 Second 32 28 29 1/12 24 1/3
Fourth .22 .22 Third 33 1/8 27 3/8 31 2/3 27 3/4
Total $.88 $.77 Fourth 30 1/4 27 1/2 31 2/3 26 3/4
(1) Includes an extraordinary charge of $2.6 million, or $.02
per share, from the extinguishment of high interest rate debt.
* This table reflects the range of market prices of Westvaco
common stock as quoted in the New York Stock Exchange-Composite
Transactions. The New York Stock Exchange is the principal
market in which the securities are traded.
Westvaco Corporation
and consolidated subsidiary companies
Management's discussion and analysis of financial condition and
results of operations
Liquidity and capital resources
At October 31, 1996, the ratio of current assets to current
liabilities was 1.7, compared to 1.8 and 1.7 in 1995 and 1994,
respectively. The twelve-month average collection period for
trade receivables was 32 days in 1996, 1995 and 1994. Cash
flows from operations were $522 million for 1996, compared to
$523 million in 1995 and $326 million in 1994. Receivables
decreased 11% reflecting the decreased sales in 1996.
New investment in plant and timberlands of $511 million for
1996, compared to $309 million in 1995 and $207 million in 1994.
Cash payments for these investments totaled $522 million in
1996, $290 million in 1995 and $215 million in 1994. The
increase in capital expenditures is related to projects
including the purchase of a consumer products printing and
packaging plant in Valinhos, Brazil, paper machine improvements,
the construction of the Chemical Division's new carbon plant in
Wickliffe, KY, and the removal of elemental chlorine from all of
our pulp bleaching processes. Construction of the carbon plant
is being financed by the issuance of revenue bonds. The
increase in proceeds from the sale of plant and timberlands is
mainly due to the sale of the domestic corrugated box business
in November 1995. At October 31, 1996, the amounts committed to
complete all authorized capital projects were $735 million.
Capital expenditures for 1997 and for each of the next several
years are expected to range from $600 to $700 million primarily
in support of the company's strategy of product and service
differentiation. The company may from time to time use debt to
supplement its internal cash flows to support future levels of
capital investments, as it has in the past.
Cash flows from financing activities for 1996 reflected the
issuance and repayment of $20 million of commercial paper and
the scheduled repayment of debentures and notes. At October 31,
1996, the company had no outstanding commercial paper but may
continue to utilize commercial paper as it has in the past. The
company maintains a $400 million revolving credit agreement and
has access to an additional $75 million of unsecured bank credit
lines. There were no borrowings during the year under any of
these arrangements. The ratio of debt to total capital employed
was 29% at October 31, 1996, compared to 30% in 1995 and 34% in
1994.
Environmental matters: The company operates in an industry
subject to extensive environmental regulations. Future
capital expenditures for pollution control facilities are
expected to increase substantially as a result of proposed
EPA air and water quality regulations for the U. S. paper
industry. In 1995, the company authorized the final step in
a long-term program initiated in 1989 which will result in
the removal of elemental chlorine from all of our pulp
bleaching processes. To accomplish this, Westvaco
authorized an expenditure of $140 million in the spring of
1995, and we expect the program to be complete in 1997.
This is an initial step in addressing the anticipated
regulations. Total required expenditures related to EPA's
proposals could fall in the range of $175 to $400 million.
Additional operating costs, including depreciation, for
these new facilities could fall in the range of $25 to $50
million pretax annually. Currently, the company does not
expect final rules until sometime in 1997 with
implementation required over several years thereafter. It
will be difficult to develop more precise estimates until
the proposed rules become final.
The company is currently named as a potentially
responsible party with respect to the cleanup of a number of
hazardous waste sites under the Comprehensive Environmental
Response, Compensation, and Liability Act (CERCLA) and
similar state laws. While joint and several liability is
authorized under CERCLA, as a practical matter, remediation
costs will be allocated among the waste generators and
others involved. The company has accrued approximately $5
million for estimated potential cleanup costs based upon its
close monitoring of ongoing activities and its past
experience with these matters.
Accounting changes: The company is required to adopt
two new accounting standards in fiscal year 1997:
Statement of Financial Accounting Standards (SFAS) 121,
Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to Be Disposed Of, and SFAS 123,
Accounting for Stock-Based Compensation. For further
discussion see the summary of significant accounting
policies in the notes to the financial statements.
Analysis of operations
Sales and earnings for the fiscal year ended 1996
reflect the very competitive market conditions that
began late in 1995 causing prices and shipments of key
paper and paperboard grades to decline from 1995's
record-setting levels. Sales of $3 billion for the
fiscal year were down 6.9% from the record levels set
during 1995, the result of a 4.4% decrease in the
volume of shipments and a 2.5% decrease in price and
product mix. Net income in 1996 was $212 million, or
$2.09 per share, a decline of 24% from $281 million, or
$2.78 per share, earned in 1995. The decline in sales
reflects market softness which developed last fall when
our markets were affected by relatively high customer
inventories and capacity additions in certain sectors
of our industry. While pricing remains under pressure,
orders for coated printing papers have increased, and
our bleached board markets, which have remained
reasonably stable throughout the year, are improving as
well. Export sales from the United States represented
approximately 15% of the company's consolidated sales
for 1996 and equaled last year's level despite slower
economic growth in some markets. Sales outside of the
United States, including sales of our foreign operating
subsidiaries, accounted for approximately 23% of
consolidated sales. Gross profit margin for the year
was 21%, compared with 24% in 1995. The reduction in
the gross profit margin is primarily the result of the
market pressure on prices felt throughout our industry
and some temporary machine downtime. The decrease in
cost of products sold for the year was attributable to
volume declines, partially offset by some direct
materials and labor cost increases. Depreciation and
amortization expense for the year increased 4.4% from
the prior year.
Bleached segment: Bleached segment sales decreased
1.7% from the prior year, principally due to a decrease
in price and product mix. Operating profit for the
year decreased 20% from 1995 due to lower printing
paper prices and the temporary downtime taken for
planned manufacturing improvements during the third
quarter at our Covington, VA, mill. During the 1996
fiscal year, approximately 23% of bleached segment
sales were made to the tobacco industry for packaging
tobacco products. A majority of this paper and board
was exported or used to produce products for export.
Excluding that portion, approximately 9% of bleached
segment sales consisted of packaging materials made for
the domestic tobacco industry for sale in the United
States.
Unbleached segment: Unbleached segment sales for the
year decreased 23.1% due to decreases in volume of
15.3% as a result of the sale of the domestic
corrugated box business in November 1995 and decreases
in price and product mix of 7.8%. During the year, the
unbleached segment pricing was adversely affected by
the very competitive conditions in U. S. containerboard
markets. In Brazil, similar conditions, as well as
concerns about reduced economic growth rates, impacted
the Brazilian corrugated box markets. Operating
profit for the unbleached segment for the year was
$134.7 million compared with $221.2 million for the
prior year period. This decrease was due to lower
prices as well as downtime for machine upgrades at our
Tres Barras, Brazil, mill. Rigesa accounted for nearly
half of unbleached segment operating profit in 1996.
The company cannot predict the future strength of the
Brazilian market.
Chemicals segment: Chemicals segment sales for the
year increased 4.5% from 1995 due to favorable changes
in price and product mix of 5%, partially offset by
decreases in volume of .5%. Operating profit for the
chemicals segment increased 25.1%.
Other items: Interest expense decreased by 10.1% for
the year due to the repayment of certain sinking fund
debentures in the prior fiscal year. The effective tax
rate was 36.9% for 1996 compared to 39.7% for the 1995
period. The decline was due to foreign earnings being
taxed at lower rates.
Fiscal year 1995
Record sales for the fiscal year ended October 31, 1995
reflected the very strong business conditions during
most of the year. Sales of $3.3 billion for the fiscal
year were up 25.5% from 1994, primarily due to a 19.2%
increase in price and product mix and a 6.3% increase
in the volume of shipments. Export sales increased 30%
from 1994 and accounted for nearly 14% of the company's
1995 consolidated sales. Total sales outside of the
United States, including Rigesa, accounted for more
than 21% of consolidated sales. Gross profit margin
for 1995 was 24%, compared with 18% in 1994. Cost of
products sold increased 18% in 1995, due to volume
increases and increases in the costs for direct
materials.
Bleached segment sales were up 24.6% from 1994,
reflecting a 15.6% increase in price and product mix
and a 9% increase in volume. Bleached segment sales
increases during 1995 reflected the improved pricing
and demand in both domestic and export markets.
Operating profit for the bleached segment increased to
$394.6 million from $242.1 million as a result of the
strong market conditions. During the 1995 fiscal year,
approximately 23% of bleached segment sales were made
to the tobacco industry for packaging tobacco products.
A majority of this paper and board was exported or used
to produce products for export. Excluding that
portion, approximately 8.5% of bleached segment sales
consisted of packaging materials made for the domestic
tobacco industry for sale in the United States.
Sales for the unbleached segment increased 32.4% in
1995 as a result of a 31.5% increase in price and
product mix and a .9% increase in volume. Operating
profit for the unbleached segment increased to $221.2
million from $51.8 million in 1994, as a result of
improvements in all major business units of the
segment, including Rigesa. Rigesa accounted for
approximately 27% and 40% of unbleached segment sales
and operating profit, respectively. During the second
half of our 1994 fiscal year, the Brazilian government
adopted a new economic plan that has significantly
reduced inflation. The impact on 1995 sales and
earnings has been positive, but the company cannot
predict the continued success of the plan. The company
sold its domestic corrugated box business during the
first quarter of fiscal 1996; the sale did not have a
material impact on the company's operating results.
Sales for the chemicals segment increased 15% from
1994, reflecting a price and product mix improvement of
11.5% and a volume increase of 3.5%. Operating profit
decreased to $43.9 million, compared to $48.4 million
in 1994. The 1995 operating results for the chemicals
segment reflected the impact of our active new product
efforts which temporarily affected earnings.
Other income (expense) increased $24.6 million in
1995 due principally to foreign currency translation
gains as compared to losses in 1994 and higher interest
income, partially offset by the lower level of gains on
property transactions in 1995. The 16.6% increase in
selling, research and administrative expenses included
increases in costs related to stock appreciation rights
and payroll and benefit costs. Interest expense
decreased 8.1% for the year, reflecting the early
extinguishment and scheduled repayment of sinking fund
debt and a decrease in the interest paid on commercial
paper.
Record net income for fiscal 1995 of $280.8 million,
or $2.78 per share, surpassed 1994 net income of $103.6
million, or $1.03 per share, by a considerable margin.
Earnings for 1995 included an extraordinary charge of
$2.6 million, or $.02 per share, from the
extinguishment of high interest rate debt. Earnings
for 1994 included a net gain of $.06 per share from the
sale of property and the sale of an operating lease.
The effective tax rate increased to 39.7% for the
1995 fiscal year compared to 36% in 1994, due mainly to
increased foreign source income taxed at higher rates.
Fiscal year 1994
Results for the fiscal year ended October 31, 1994
reflected the accelerating demand for our products
through the year. Sales of $2.6 billion for the fiscal
year set a record and were up 11.2% from 1993,
primarily due to an 11.9% increase in the volume of
shipments. Export sales increased almost 24% from
1993. In 1994, exports accounted for nearly 14% of the
company's consolidated sales, up from 12% in 1993.
Gross profit margin for 1994 was 18%, compared with 19%
in 1993. Cost of products sold increased 12.4% in
1994, due mainly to the increase in the volume of
shipments. Depreciation and amortization expense for
the fiscal year increased 12.5%, following the
commencement of operations of the company's new
bleached board machine in late 1993.
Bleached segment sales were up 11.3% from 1993,
reflecting a 13.7% increase in volume, partially offset
by a 2.4% decline due to changes in price and product
mix. Bleached segment unit volume increases during
1994 were primarily due to increases in bleached board
shipments following the completion of our bleached
board expansion project. Operating profit for the
bleached segment increased to $242.1 million from
$220.1 million, due mainly to the inclusion of a
portion of the special charge in 1993. During the 1994
fiscal year, approximately 24% of bleached segment
sales were made to the tobacco industry for packaging
tobacco products. A majority of this paper and board
was exported or used to produce products for export.
Excluding that portion, approximately 10% of bleached
segment sales consisted of packaging materials made for
the domestic tobacco industry for sale in the United
States.
Sales for the unbleached segment increased 11.3% in
1994 as a result of a 10.3% increase in volume and a 1%
increase in price and product mix. Shipments from our
U. S. operations and from Rigesa were strong during the
year. Operating profit for the unbleached segment
increased to $51.8 million from $1.6 million in 1993,
due mainly to the increase in the volume of unbleached
paper shipments and Rigesa's results which showed
significant improvement. The Brazilian government's
economic plan to control inflation had a positive
impact on Rigesa's sales and earnings in 1994.
Sales for the chemicals segment increased 10.1% from
1993, reflecting a price and product mix improvement of
6.3% and a volume increase of 3.8%. Operating margins
for the segment remained strong, with operating profit
at $48.4 million, compared to $42.6 million in 1993.
Other income (expense) increased $20.5 million in
1994 due to gains on property transactions and
decreased foreign currency translation losses related
to Rigesa. Interest expense increased 31.9% for the
year, reflecting a decrease in interest capitalized in
connection with our bleached board expansion project,
which was completed in late 1993.
Net income for fiscal 1994 of $103.6 million, or
$1.03 per share, decreased from 1993 net income of
$104.3 million, or $1.04 per share. Earnings for 1994
included a combined pretax gain of $10.1 million, or
$.06 per share, from property transactions which was
included in other income. Earnings for 1993 were
favorably impacted by $55.2 million, or $.55 per share,
for the cumulative effect of the adoption of three new
accounting standards. Earnings for 1993 were adversely
impacted by $.46 per share, due to a special pretax
charge of $43.4 million, or $.26 per share, in
connection with a restructuring program designed to
improve productivity and permanently reduce costs; a
provision of $12.9 million, or $.13 per share, for the
impact of an increase in the federal income tax rate;
and an extraordinary charge of $7.4 million, or $.07
per share, from the extinguishment of debt. Although
the savings from these initiatives reached planned
levels during 1994, the effect on net income of the
savings, primarily related to the planned reduction in
salaried employees, was more than offset by the
intensely competitive conditions existing during the
first three quarters of 1994 and by increased interest
expense and depreciation. The effective tax rate
decreased to 36% for the 1994 fiscal year from 39% in
1993, reflecting the adjustment of the deferred tax
reserves in 1993 primarily due to the effect of the
increase in the federal income tax rate.
Fourth quarter results
Sales were $778 million for the fourth quarter of 1996,
compared to sales of $871 million for the fourth quarter
of 1995. In the fourth quarter of 1996, the company
recorded net income of $55.6 million, or $.55 per share,
compared to net income of $88.9 million, or $.88 per
share, for the prior year period.
Dividend reinvestment plan
At year end, 15,380 shareholders, including members of the
company's savings and investment plans for salaried and
hourly employees, representing 14,547,042 shares of
Westvaco common stock, were participants in the company's
Dividend Reinvestment Plan.
Number of shareholders
At year end, the number of individuals and institutions
owning Westvaco common shares was about 20,760. This
number includes 12,260 members of the company's salaried
and hourly savings and investment plans. The plans,
established in 1968 and 1995, respectively, hold
13,286,302 shares of Westvaco common stock for the
accounts of participants. This represents 13% of the
101,891,044 shares of common stock outstanding at year
end.
Payroll and benefit costs
The total cost of payroll and benefits was $664 million,
compared with $694 million in 1995. This includes $47.9
million in Social Security taxes in 1996 and $47.7 million
in 1995. Payroll and benefit costs were 22% of sales in
1996 and 21% of sales in 1995. Sales per employee have
increased 42% in the last five years. In 1991, they stood
at $159,363, rising to $226,765 in 1996.
Financial statements
Consolidated statement of income
In thousands, except per share
Year ended October 31
1996 1995 1994
Sales $3,045,450 $3,272,447 $2,607,474
Other income [expense] 29,065 30,297 5,686
3,074,515 3,302,744 2,613,160
Cost of products sold [excludes
depreciation shown separately
below] 2,173,719 2,266,807 1,921,363
Selling, research and
administrative expenses 234,366 235,100 201,540
Depreciation and amortization 240,411 230,306 219,282
Interest expense 90,063 100,205 109,069
2,738,559 2,832,418 2,451,254
Income before taxes 335,956 470,326 161,906
Income taxes 123,800 186,900 58,300
Income before extraordinary charge 212,156 283,426 103,606
Extraordinary charge - extinguishment
of debt, net of taxes - [2,590] -
Net income $ 212,156 $ 280,836 $ 103,606
Per share of common stock:
Income before extraordinary charge $ 2.09 $ 2.80 $ 1.03
Extraordinary charge - [.02] -
Net income $ 2.09 $ 2.78 $ 1.03
The accompanying notes are an integral part of these financial
statements.
Westvaco Corporation
and consolidated subsidiary companies
Consolidated balance sheet
In thousands
At October 31
1996 1995
Assets
Cash and marketable securities $ 115,368 $ 151,823
Receivables 277,135 311,366
Inventories 263,292 274,144
Prepaid expenses and other current assets 60,300 49,683
Current assets 716,095 787,016
Plant and timberlands:
Machinery 4,249,814 4,082,419
Buildings 558,865 565,081
Other property, including plant land 204,098 193,506
5,012,777 4,841,006
Less: accumulated depreciation 2,245,338 2,152,901
2,767,439 2,688,105
Timberlands-net 248,299 241,324
Construction in progress 337,995 210,661
3,353,733 3,140,090
Other assets 367,670 325,626
$4,437,498 $4,252,732
Liabilities and shareholders' equity
Accounts payable and accrued expenses $ 372,445 $ 338,237
Notes payable and current maturities
of long-term obligations 27,883 41,191
Income taxes 18,609 49,273
Current liabilities 418,937 428,701
Long-term obligations 1,153,447 1,147,020
Deferred income taxes 655,377 596,460
Shareholders' equity:
Common stock, $5 par, at stated value
Shares authorized: 200,000,000
Shares issued: 102,761,119
[1995-102,334,244] 750,457 741,193
Retained income 1,479,025 1,356,408
Common stock in treasury, at cost
Shares held: 870,075 [1995-783,033] [19,745] [17,050]
2,209,737 2,080,551
$4,437,498 $4,252,732
The accompanying notes are an integral part of these financial
statements.
Westvaco Corporation
and consolidated subsidiary companies
Consolidated statement of cash flows
In thousands
Year ended October 31
1996 1995 1994
Cash flows from operating
activities:
Net income $ 212,156 $ 280,836 $ 103,606
Adjustments to reconcile net
income to net cash provided
by operating activities:
Provision for depreciation
and amortization 240,411 230,306 219,282
Provision for deferred
income taxes 49,243 74,057 47,699
Gains on sales of plant and
timberlands [6,546] [7,792] [10,025]
Pension credit and other
employee benefits [43,716] [13,851] [40,736]
Foreign currency translation
[gains] losses 477 [2,561] 11,738
Net changes in assets and
liabilities 61,924 [44,033] [7,151]
Other, net 7,869 5,682 2,003
Net cash provided by operating
activities 521,818 522,644 326,416
Cash flows from investing activities:
Additions to plant and
timberlands [521,598] [290,053] [214,751]
Proceeds from sales of plant
and timberlands 67,793 11,754 13,894
Other, net [4,377] [909] [2,983]
Net cash used in investing
activities [458,182] [279,208] [203,840]
Cash flows from financing activities:
Proceeds from issuance of common
stock 5,585 13,237 7,160
Proceeds from issuance of debt 46,357 96,214 402,457
Dividends paid [89,539] [77,929] [73,754]
Repayment of notes payable and
long-term obligations [62,125] [201,172] [429,796]
Net cash used in financing
activities [99,722] [169,650] [93,933]
Effect of exchange rate changes
on cash [369] 3,034 [10,199]
[Decrease] increase in cash and
marketable securities [36,455] 76,820 18,444
Cash and marketable securities:
At beginning of period 151,823 75,003 56,559
At end of period $ 115,368 $ 151,823 $ 75,003
The accompanying notes are an integral part of these financial
statements.
Westvaco Corporation
and consolidated subsidiary companies
Summary of significant accounting policies
Basis of consolidation and preparation of financial
statements: The consolidated financial statements include
the accounts of all subsidiaries more than 50% owned. 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. Actual results could differ
from these estimates.
Accounting standards changes: In 1995, the Financial
Accounting Standards Board (FASB) issued Statement of
Financial Accounting Standards (SFAS) 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, which establishes accounting
standards for the impairment of long-lived assets, certain
identifiable assets and goodwill related to those assets to
be held and used, as well as for long-lived assets and
certain identifiable intangibles to be disposed of. The
company is required to adopt the new standard in its fiscal
year 1997. Based on the company's evaluation of this
standard, the company does not expect the adoption will
have a material effect on the company's consolidated
financial position or results of operations. Also in 1995,
the FASB issued SFAS 123, Accounting for Stock-Based
Compensation. This standard is effective for the company's
1997 fiscal year. As permitted by the standard, the company
plans to continue its current accounting method, but it
will make the additional required disclosure in its 1997
financial statements.
Translation of foreign currencies: The functional currency
for the company's Brazilian operations is the U.S. dollar,
due to the high inflation rate which has existed in that
country. Foreign currency asset and liability accounts are
remeasured into U.S. dollars at fiscal year-end rates
except for inventories, properties and accumulated
depreciation, which are translated at historical rates;
revenues and expenses (other than those relating to assets
translated at historical rates) are translated at average
rates prevailing during the year. Translation gains and
losses are included in other income (expense).
Marketable securities: For financial statement purposes,
highly liquid securities purchased three months or less
from maturity are considered to be cash equivalents.
Inventories: Inventories are valued at the lower of cost
or market. Cost is determined using the last-in, first-out
(LIFO) method for raw materials, finished goods and certain
production materials, where allowed for U.S. federal income
tax purposes. Cost of all other inventories is determined
by the first-in, first-out (FIFO) or average cost method.
Plant and timberlands: Owned assets are recorded at cost.
Also included in the cost of these assets is interest on
funds borrowed during the construction period. When assets
are sold, retired or disposed of, their cost and related
accumulated depreciation are removed from the accounts, and
any resulting gain or loss is reflected in other income
(expense). Costs of renewals and betterments of properties
are capitalized; costs of maintenance and repairs are charged
to income. Costs of reforestation of timberlands are
capitalized.
Depreciation and amortization: The cost of plant and
equipment is depreciated, generally by the straight-line
method, over the estimated useful lives of the respective
assets, which range from 20 to 40 years for buildings and 5
to 30 years for machinery and equipment. For certain major
projects, the units-of-production method is used until a
commercial level of production is reasonably sustained. The
cost of standing timber is amortized as timber is cut, at
rates determined annually based on the relationship of
unamortized timber costs to the estimated volume of
recoverable timber.
Revenue recognition: The company recognizes revenues at
the point of passage of title, which is at the time of
shipment.
Income taxes: Deferred income taxes are recorded for
temporary differences between financial statement carrying
amounts and the tax basis of assets and liabilities.
Deferred tax assets and liabilities reflect the enacted tax
rates in effect for the years the differences are expected
to reverse.
Preoperating costs: Preoperating costs relating to major
facilities are deferred and all others are charged to
income as incurred. Deferred preoperating costs are
amortized over a sixty-month period following commencement
of commercial operations of the facility. No preoperating
costs were deferred in 1996, 1995 or 1994.
Income per share: Net income per common share is based on
the weighted average number of common shares and common
share equivalents outstanding during the year.
Environmental matters: Environmental expenditures that
increase useful lives are capitalized, while other
environmental expenditures are expensed. Liabilities are
recorded when remedial efforts are probable and the costs
can be reasonably estimated.
A. Other income (expense)
Components of other income (expense) are as follows:
In thousands 1996 1995 1994
Gains on sales of plant, equipment
and timberlands $ 6,546 $ 7,792 $10,025
Interest income 22,172 14,738 7,832
Foreign currency translation gains
[losses] [477] 2,561 [11,738]
Other, net 824 5,206 [433]
$29,065 $30,297 $ 5,686
B. Research and development
Expenditures of $38,262,000 (1995-$31,397,000, 1994-$30,642,000) were
expensed as incurred.
C. Income taxes
Income before provision for income taxes consisted of:
In thousands 1996 1995 1994
Domestic $257,582 $365,156 $133,616
Foreign 78,374 105,170 28,290
$335,956 $470,326 $161,906
The provision for income taxes is composed of:
In thousands 1996 1995 1994
Current:
Federal $ 47,136 $ 58,151 $ 6,632
State 12,610 8,700 728
Foreign 14,811 45,992 3,241
74,557 112,843 10,601
Deferred:
Federal 39,668 56,315 34,771
State 8,977 16,846 9,880
Foreign 598 896 3,048
49,243 74,057 47,699
$123,800 $186,900 $58,300
The net deferred income tax liability at October 31, 1996 and
1995 includes the following components:
In thousands 1996 1995
Current deferred tax assets:
Employee benefits $ 20,632 $ 11,339
Other, net 21,484 21,103
42,116 32,442
Noncurrent deferred tax assets:
Alternative minimum tax carryforward 125,488 141,069
Noncurrent deferred tax liabilities:
Depreciation 565,754 548,437
Pension and other employee benefits 100,867 87,979
State and local taxes 84,796 81,393
Other, net 29,448 19,720
780,865 737,529
Total net deferred tax liability $613,261 $564,018
The differences (expressed as a percentage of pretax income)
between the U.S. statutory federal income tax rate and the
effective income tax rate as reflected in the accompanying
consolidated statement of income are:
1996 1995 1994
Statutory federal income tax rate 35.0% 35.0% 35.0%
State and local taxes 4.2 3.5 4.3
Foreign income at other than
U.S. rates [2.5] 2.7 [2.2]
Other items, net .2 [1.5] [1.1]
Effective tax rate 36.9% 39.7% 36.0%
At October 31, 1996, for tax purposes, the company had
available $125 million of alternative minimum tax credit
carryforwards, which do not expire under current laws.
Provision has not been made for income taxes which would
become payable upon remittance of $205 million of the October
31, 1996 undistributed earnings of certain foreign subsidiaries
representing that portion of such earnings which the company
considers to have been indefinitely reinvested in the
subsidiaries, principally in Brazil. Computation of the
potential deferred tax liability associated with these
undistributed earnings is not practicable.
D. Current assets
Marketable securities of $53,233,000 (1995-$90,080,000) are
valued at cost, which approximates market value. Receivables
include $7,534,000 from sources other than trade (1995-$9,055,000)
and have been reduced by allowances for discounts
and doubtful accounts of $14,822,000 (1995-$15,550,000).
Inventories at October 31 are composed of:
In thousands 1996 1995
Raw materials $ 61,094 $ 71,998
Production materials, stores and supplies 78,850 77,769
Finished and in process goods 123,348 124,377
$263,292 $274,144
If inventories had been valued at current cost, they would have
been $385,463,000 in 1996 (1995-$415,431,000).
E. Accounts payable and accrued expenses
Accounts payable and accrued expenses at October 31 consist of:
In thousands 1996 1995
Accounts payable:
Trade $146,496 $121,683
Other 21,243 9,890
Accrued expenses:
Taxes, other than income 19,451 19,535
Interest 25,775 26,263
Payroll and employee benefit costs 92,533 103,502
Other 66,947 57,364
$372,445 $338,237
F. Interest capitalization
In 1996, $105,312,000 of interest cost was incurred (1995-$107,501,000,
1994-$114,947,000) of which $15,249,000 was capitalized
(1995-$7,296,000, 1994-$5,878,000).
G. Cash flows
Changes in assets and liabilities are as follows:
In thousands 1996 1995 1994
[Increase] decrease in:
Receivables $ 36,679 $[41,974] $[41,602]
Inventories 11,155 [37,911] 35,968
Prepaid expenses
and other current assets [943] [2,287] 2,650
Increase [decrease] in:
Accounts payable and
accrued expenses 45,764 6,153 [5,951]
Income taxes payable [30,731] 31,986 1,784
$ 61,924 $[44,033] $ [7,151]
Reconciliation of capital expenditures on a cash basis:
In thousands 1996 1995 1994
New investment in plant and
timberlands $510,902 $309,020 $207,257
Less: debt assumed [62] [159] [10]
net change in related
current liabilities 10,758 [18,808] 7,504
Cash additions to plant and
timberlands $521,598 $290,053 $214,751
Cash payments for interest excluding amounts capitalized were
$87,060,000 in 1996 (1995-$103,313,000, 1994-$118,850,000).
Cash payments for income taxes were $105,220,000 in 1996
(1995-$78,563,000, 1994-$15,775,000).
H. Leasing activities and other commitments
The company leases a variety of assets for use in its
operations. Leases for administrative offices, converting
plants and storage facilities generally contain options which
allow the company to extend lease terms for periods up to 25
years, or to purchase the properties. Certain leases provide
for escalation of the lease payments as maintenance costs and
taxes increase.
The company has no significant capital lease liabilities.
Minimum rental payments under operating leases that have
noncancellable lease terms in excess of 12 months, are as
follows:
Operating
In thousands leases
1997 $22,205
1998 17,488
1999 13,460
2000 9,899
2001 8,232
Later years 47,083
Minimum lease payments $ 118,367
Rental expense under operating leases was $36,629,000 in 1996
(1995-$33,973,000, 1994-$30,657,000).
At October 31, 1996, commitments required to complete
currently authorized capital projects are $735 million.
I. Notes payable and long-term obligations
At October 31, 1996, notes payable and long-term obligations
include:
In thousands Current Noncurrent
Debentures:
9.65%, due 2002 $ 100,000
9 3/4%, due 2020 100,000
Sinking Fund Debentures:
7%, due 2004-2023 150,000
7.75%, due 2004-2023 150,000
8 1/8%, due 1997-2007 $ 2,350 26,500
8.30%, due 2003-2022 125,000
10 1/8%, due 2000-2019 100,000
10 1/4%, due 1999-2018 100,000
10.30%, due 2000-2019 100,000
Pollution Control Revenue Bonds:
5.2-6.2%, due 1998-2008 9,200
5.85-6.65%, due 2004-2018 26,620
5 7/8-5.9%, due 1997-2003 965 11,435
5 7/8-6.2%, due 1997-2007 400 13,030
6 3/8%, due 2026 5,740
7 1/8-7 1/2%, due 1997-2001 300 4,300
8 1/4%, due 2000-2010 4,100
9 1/8-9.6%, due 2006-2015 10,100
10 1/2%, due 2004 1,500
Industrial Revenue Bonds:
7%, due 1999-2009 15,300
Economic Development Bonds:
8 3/4%, due 2000-2010 4,300
Notes payable and other 23,868 96,322
$27,883 $1,153,447
Outstanding noncurrent obligations maturing in the four years
after 1997 are (in millions): 1998-$31.0; 1999-$18.5; 2000-$30.4; 2001-$31.3.
Westvaco is a party to a revolving credit agreement for $400
million. Borrowings under the agreement may be in unsecured
domestic or Eurodollar notes and may be at rates approximating
prime or the London Interbank Offered Rate, at the company's
option. There is a nominal commitment fee on the unused funds.
The company also has available $75 million of additional
unsecured domestic lines of credit at interest rates
approximating the prime rate. There were no borrowings under
any of these facilities during 1996 or 1995.
During the 1995 third quarter, the company retired, at a
premium, $63,750,000 of 12.3% debentures due in 2015. The
transaction resulted in an extraordinary charge of $2,590,000,
net of an income tax benefit of $1,690,000.
At October 31, 1996, the book value of financial instruments
included in notes payable and long-term obligations was
$1,128,333,000 (1995-$1,129,849,000), and the fair value was
estimated to be $1,192,986,000 (1995-$1,226,188,000). The
company has estimated the fair value of financial instruments
based upon quoted market prices for the same or similar issues
or on the current interest rates available to the company for
debt of similar terms and maturities.
J. Foreign subsidiaries
Income of foreign subsidiaries included in consolidated net
income amounted to
$62,965,000 in 1996 (1995-$58,282,000, 1994-$22,001,000).
Results of operations for Rigesa, Ltda., our Brazilian
operating subsidiary, were as follows:
In thousands 1996 1995 1994
Sales $237,303 $247,424 $151,941
Net income $ 48,613 $ 52,792 $ 15,900
Dividends received from foreign subsidiaries amounted to
$6,434,000 in 1996 (1995-$25,349,000, 1994-$8,275,000). Assets
of these subsidiaries, principally Rigesa, included in the
consolidated balance sheet are $342,798,000 (1995-$290,230,000).
K. Shareholders' equity
In 1995, the Board of Directors declared a three-for-two split
of the common stock in the form of a 50% stock dividend. As a
result, $170,481,000 ($5 for each share issued pursuant to the
stock split) was transferred from retained earnings to the
common stock account.
Changes in shareholders' equity for 1994, 1995 and 1996 are
summarized below:
Common stock
Dollars in thousands Shares Amount
Balance at October 31, 1993 67,385,798 $545,166
Net income - -
Cash dividends - -
Issuances 211,429 5,701
Repurchases of common stock - -
Sales of treasury stock to
benefit and dividend
reinvestment plans - 398
Balance at October 31, 1994 67,597,227 551,265
Net income - -
Cash dividends - -
Issuances 640,911 19,447
Repurchases of common stock - -
Three-for-two stock split 34,096,106 170,481
Balance at October 31, 1995 102,334,244 741,193
Net income - -
Cash dividends - -
Issuances 426,875 9,264
Repurchases of common stock - -
Balance at October 31, 1996 102,761,119 $750,457
Retained
Treasury stock income
Dollars in thousands Shares Amount Amount
Balance at October 31, 1993 499,887 $15,308 $1,294,130
Net income - - 103,606
Cash dividends - - [73,754]
Issuances - - -
Repurchases of common stock 9,025 329 -
Sales of treasury stock to
benefit and dividend
reinvestment plans [78,503] [2,405] -
Balance at October 31, 1994 430,409 13,232 1,323,982
Net income - - 280,836
Cash dividends - - [77,929]
Issuances - - -
Repurchases of common stock 96,540 3,818 -
Three-for-two stock split 256,084 - [170,481]
Balance at October 31, 1995 783,033 17,050 1,356,408
Net income - - 212,156
Cash dividends - - [89,539]
Issuances - - -
Repurchases of common stock 87,042 2,695 -
Balance at October 31, 1996 870,075 $19,745 $1,479,025
Treasury shares are sold at market prices to the company's
savings and investment and dividend reinvestment plans with the
excess of market value over cost credited to the common stock
account. There were no purchases in 1994, 1995 or 1996 under the
stock repurchase program authorized in 1987 by the Board of
Directors.
At October 31, 1996, there were 44,170 shares of nonvoting $100
par value cumulative preferred stock authorized and 10 million
shares of preferred stock without par value authorized and
available for issue.
Pursuant to its Shareholder Rights Plan, the company in 1987
declared a dividend distribution of one right for each
outstanding share of common stock. The rights expire in December
1997. Initially, the rights will not be exercisable,
certificates will not be sent to shareholders, and will
automatically trade with the common stock.
The plan provides that each right when exercisable entitles the
registered holder to purchase from the company a unit consisting
of one one-hundredth share of Series A Junior Participating
Preferred Stock at an exercise price of $150 per unit. The
rights will become exercisable and separate certificates
representing the rights will be distributed 15 business days (or
such later date as may be determined by the company's Board of
Directors) after a person or group either acquires 20% or more of
the company's outstanding common shares or announces an offer the
consummation of which would result in ownership by a person or
group of 30% or more of the company's outstanding common shares.
In general, if a person or group exceeds 20% ownership other
than pursuant to certain offers for all the company's shares, if
after someone acquires 20% or more of the outstanding shares the
company merges with any party and its shares are exchanged, or
50% or more of the company's earning power or assets are sold,
then the holder of each right other than in certain instances a
holder of 20% or more of the outstanding common shares may
purchase common shares, or the equivalent, worth twice the
exercise price of $150. In lieu of the right to purchase stock,
the Board of Directors in its sole discretion, following the
acquisition by a person or group of 20% or more of the
outstanding shares and before any person acquires 50% or more of
the outstanding shares, may cause each outstanding right, other
than those held by the 20% or more holder, to be exchanged
automatically for one share of common stock or a fraction of a
share of preferred stock which is the economic equivalent of one
share of common stock. The company generally may redeem each
right for $.05 until 15 days after someone acquires 20% or more
of the outstanding common shares. The plan may be amended by the
Board of Directors in most respects prior to the date the rights
become exercisable.
L. Stock option plans
The company has stock option plans that provide for the
granting of stock options and stock appreciation rights to key
employees and nonmanagement directors. Stock options may be
granted with or without appreciation rights and are granted at
market value. They are exercisable after a period of six months
to one year and expire not later than ten years from the date of
grant. The company also may grant, to employees, options with
limited stock appreciation rights, which are exercisable upon the
occurrence of certain events related to changes in corporate
control.
In 1995, the shareholders approved a new Salaried Employee
Stock Incentive Plan which provides for the granting of stock
options and stock appreciation rights for an additional 4,837,500
shares of common stock. In 1995, the shareholders also approved
a new Non-Employee Director Stock Incentive Plan for the granting
of stock options and stock appreciation rights up to 112,500
shares. These 1995 plans are substantially the same as the
existing plans.
The following table summarizes activity in the plans for 1995
and 1996. At October 31, 1996, 3,313,489 outstanding options
have related stock appreciation rights, including 3,062,197 with
limited stock appreciation rights. At October 31, 1996 and 1995,
respectively, 3,468,832 and 3,675,245 options were exercisable.
At October 31, 1994, all outstanding options were exercisable.
Options Price per share
Outstanding at October 31, 1994 5,036,134 $11.11-24.25
Granted 937,650 26.50
Exercised [1,745,494] 11.11-26.50
Cancelled [17,322] 18.33-26.50
Outstanding at October 31, 1995 4,210,968 13.04-26.50
Granted 984,392 25.06
Exercised [756,911] 13.04-26.50
Cancelled [225] 23.08
Outstanding at October 31, 1996 4,438,224 18.33-26.50
There were 3,428,835 shares available for grant as of
October 31, 1996 (1995-4,413,002, 1994-393,173).
M. Employee retirement, postretirement and postemployment
benefits
Pension and retirement plans
The company provides retirement benefits for substantially all
domestic employees under several noncontributory trusteed plans
and also provides benefits to employees whose retirement
benefits exceed maximum amounts permitted by current tax law
under an unfunded benefit plan. Benefits are based on a final
average pay formula for the salaried plans and a unit benefit
formula for the hourly paid plans. Prior service costs are
amortized on a straight-line basis over the average remaining
service period for active employees. Contributions are made to
the funded plans in accordance with ERISA requirements.
The 1996 net pension credit relating to employee pension and
retirement benefits was $37,834,000 (1995-$33,926,000, 1994-$42,089,000).
The net pension credits reflect cumulative favorable investment returns
on plan assets. The 1995 credit also reflects changes in certain economic
assumptions. The components of the net pension credit for 1996, 1995 and
1994 are as follows:
In thousands 1996 1995 1994
Service cost-benefits earned
during the period $ 22,168 $ 21,895 $ 22,693
Interest cost on projected
benefit obligation 61,890 58,562 53,459
Actual return on plan assets [216,244] [261,720] [69,598]
Net amortization and deferrals 94,352 147,337 [48,643]
Net pension credit $[37,834] $[33,926] $[42,089]
The following table sets forth the funded status of the plans
and amounts recognized in the consolidated balance sheet at
October 31, based on a valuation date of July 31:
In thousands 1996 1995
Actuarial present value of
benefit obligations:
Accumulated benefit obligation,
including vested benefits of
$[724,180](1995-$[668,196]) $ [752,438] $ [694,696]
Projected benefit obligation $ [869,820] $ [815,026]
Plan assets at fair value:
Mainly listed stocks, including
$71 million of company stock,
and money market and fixed
income investments 1,453,658 1,274,951
Plan assets in excess of projected
benefit obligation 583,838 459,925
Unrecognized net gain from past
experience different from that
assumed [276,826] [175,996]
Unrecognized prior service cost 51,768 39,873
Unrecognized net transition asset [36,786] [43,445]
Net prepaid pension cost included
in consolidated balance sheet $ 321,994 $ 280,357
The discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the
projected benefit obligation were 7.75% and 5.5%, respectively,
in 1996, 1995 and 1994. The expected long-term rate of return on
plan assets used in determining net pension cost was 9.75% for
1996 and 1995 and 10.5% for 1994. The net prepaid pension cost,
from the previous table, is included in other assets except for
an obligation of $17.7 million for an unfunded excess benefit
plan which is recorded as a long-term liability.
Postretirement benefits
The company provides life insurance for substantially all
retirees and medical benefits to certain retirees in the form
of cost subsidies until medicare eligibility is reached and to
certain other retirees, medical benefits up to a maximum
lifetime amount. None of these benefits is funded.
The components of net periodic postretirement benefits cost
for the fiscal years ended October 31, 1996, 1995 and 1994 are
as follows:
In thousands 1996 1995 1994
Service cost-benefits earned
during the period $1,200 $1,300 $1,600
Interest cost 1,600 1,800 1,900
Net amortization [400] [300] -
Net periodic postretirement benefits cost $2,400 $2,800 $3,500
The accumulated postretirement benefit obligation as of July
31, the valuation date, was as follows:
In thousands 1996 1995
Retirees $11,000 $13,800
Fully eligible active employees 4,200 4,600
Other active participants 6,200 5,000
21,400 23,400
Unrecognized net gain 8,000 5,900
Accrued postretirement benefits cost included
in consolidated balance sheet $29,400 $29,300
The discount rate used in determining the accumulated benefit
obligation was 7.75% for 1996 and 1995. The annual rate of
increase in health care costs was assumed at 11% for 1995, 8%
for 1996 and decreasing ratably to a 4.5% annual rate in 2000
and remaining at that level thereafter. The effect of a 1%
increase in the assumed health care cost trend rate would
increase the July 31, 1996 accumulated postretirement benefit
obligation by $300,000 and the net postretirement benefits
cost for 1996 by $100,000.
Postemployment benefits
The company provides limited postemployment benefits to
former or inactive employees including short-term disability,
workers' compensation and severance.
N. Legal and environmental matters
The company is involved in various legal proceedings and
environmental actions, generally arising in the normal
course of its business. Although the ultimate outcome of
such matters cannot be predicted with certainty, the company
and its general counsel believe that their ultimate
resolution will not have a material adverse effect on the
company's consolidated financial position or results of
operations.
O. Business segment information
The company's principal business segments are the
manufacture of bleached and unbleached paper, paperboard and
packaging products and speciality chemicals. Westvaco is a
leading manufacturer of paper for high-quality graphic
reproduction, it converts paper and paperboard into a
variety of endproducts, manufactures speciality chemicals,
produces lumber, sells timber from its timberlands and is
engaged in land development. The markets in which the
company sells its products are affected by several factors,
including industry capacities and the level of economic
growth in domestic and international markets. The principal
markets for Westvaco's products are in the United States.
The company owns 1.5 million acres of timberland in the
United States and Brazil. Westvaco's Cooperative Forest
Management Program provides an additional source of wood
fiber for its mills from the 1.4 million acres covered by
the program. In Brazil, the company is a major producer of
paperboard and corrugated packaging for the markets of that
country. Rigesa, a wholly owned Brazilian subsidiary, is
subject to Brazil's continuing inflation and currency
fluctuations, which have moderated significantly as a result
of various governmental actions in the last two years.
Westvaco also exports products from both the United States
and Brazil to other countries throughout the world.
Information about the company's operations and policies in
different lines of business are as follows:
Bleached paper, paperboard and packaging products: The
company manufactures bleached products at four domestic
mills and markets those products as pulp, printing grade
papers and board, envelopes, food containers, folding
cartons and cartons for liquid products. Company woodlands
provide significant volumes of wood fiber to these mills.
Sales of printing grade papers and board accounted for 42%
of consolidated sales for 1996 (1995-41%, 1994-40%). Sales
of envelopes accounted for 11% of consolidated sales in 1996
(1995-10%, 1994-11%). Folding carton sales accounted for
11% of consolidated sales in 1996 (1995-8%, 1994-9%).
Unbleached paper, paperboard and packaging products: The
company manufactures unbleached products at four mills,
including two in Brazil, and markets those products as kraft
paper and board and corrugated shipping containers. Company
woodlands provide significant volumes of wood fiber to these
mills. Sales of corrugated shipping containers accounted
for 8% of consolidated sales for 1996 (1995-16%, 1994-14%),
reflecting the sale of the domestic corrugated box business
in fiscal 1996. Sales of kraft paper and board accounted
for 14% of consolidated sales for 1996 (1995 and 1994-10%).
Chemicals: The company manufactures specialty chemical
products at four domestic locations. Major product groups
are: activated carbon products and services; printing ink
resins and lignin-based surfactants; tall oil fatty acid,
rosin and derivative products.
The company's land development activities have been
included in corporate items.
Segment sales include intersegment sales valued at market
prices.
Segment operating profit is revenue less allocable
operating expenses. General net corporate expense includes
nonoperating overhead, research and development
expenditures, interest expense and interest and other income
(expense).
Segment identifiable assets are those which are directly
used in segment operations. Corporate assets are
principally marketable securities, certain nontrade
receivables, prepaid items and other assets.
In 1996, sales to a single customer accounted for
approximately 11% of consolidated sales primarily from the
company's bleached segment.
Export sales from the United States amounted to
$444,663,000 in 1996 (1995-$448,361,000, 1994-$344,394,000).
Total export sales, including exports from our Brazilian
subsidiary, were $453,586,000 in 1996 (1995-$454,237,000,
1994-$353,974,000).
Financial information by business segment follows:
In millions 1996 1995 1994
Sales
Bleached
Sales to unaffiliated companies $2,054.9 $2,090.0 $1,677.8
Intersegment sales 3.9 5.1 3.6
Total 2,058.8 2,095.1 1,681.4
Unbleached
Sales to unaffiliated companies 692.9 894.9 676.0
Intersegment sales 1.1 7.6 5.5
Total 694.0 902.5 681.5
Chemicals
Sales to unaffiliated companies 281.8 269.3 236.2
Intersegment sales 18.6 18.2 13.7
Total 300.4 287.5 249.9
Corporate items
Sales to unaffiliated companies 15.9 18.2 17.5
Eliminations [23.6] [30.9] [22.8]
Total [7.7] [12.7] [5.3]
Consolidated sales $3,045.5 $3,272.4 $2,607.5
Operating profit
Bleached $ 315.5 $ 394.6 $ 242.1
Unbleached 134.7 221.2 51.8
Chemicals 54.9 43.9 48.4
Corporate items [169.1] [189.4 [180.4]
Consolidated income before taxes $ 336.0 $ 470.3 $ 161.9
Depreciation and amortization
Bleached $ 170.1 $ 157.2 $ 147.1
Unbleached 50.2 55.1 56.1
Chemicals 13.7 12.5 11.2
Corporate items 6.4 5.5 4.9
Consolidated depreciation and
amortization $ 240.4 $ 230.3 $ 219.3
Capital expenditures
Bleached $ 314.3 $ 164.0 $ 118.1
Unbleached 123.2 110.0 57.5
Chemicals 57.4 25.4 25.7
Corporate items 16.0 9.6 6.0
Consolidated capital expenditures $ 510.9 $ 309.0 $ 207.3
Identifiable assets
Bleached $2,936.0 $2,785.5 $2,709.8
Unbleached 1,056.8 1,083.1 953.1
Chemicals 246.6 193.2 166.8
Corporate items 198.1 190.9 153.3
Consolidated assets $4,437.5 $4,252.7 $3,983.0
P. Selected quarterly information [unaudited]
In thousands, except per share data
Quarter 1996 1995(a) 1994(b)
Sales
First $ 748,728 $ 741,675 $ 577,254
Second 760,284 804,622 626,436
Third 757,715 854,567 641,270
Fourth 778,723 871,583 762,514
Year $3,045,450 $3,272.447 $2,607,474
Gross profit
First $ 170,463 $ 151,139 $ 94,211
Second 155,370 192,831 106,947
Third 149,498 214,490 111,467
Fourth 163,705 222,904 160,028
Year $ 639,036 $ 781,364 $ 472,653
Net income before extraordinary charge
First $ 62,387 $ 49,317 $ 15,817
Second 50,554 65,030 16,284
Third 43,619 80,153 20,173
Fourth 55,596 88,926 51,332
Year $ 212,156 $ 283,426 $ 103,606
Net income
First $ 62,387 $ 49,317 $ 15,817
Second 50,554 65,030 16,284
Third 43,619 77,563 20,173
Fourth 55,596 88,926 51,332
Year $ 212,156 $ 280,836 $ 103,606
Net income per common share before extraordinary charge
First $ .61 $ .49 $ .16
Second .50 .64 .16
Third .43 .79 .20
Fourth .55 .88 .51
Year $2.09 $2.80 $1.03
Net income per common share
First $ .61 $ .49 $ .16
Second .50 .64 .16
Third .43 .77 .20
Fourth .55 .88 .51
Year $2.09 $2.78 $1.03
(a) Results for the 1995 third quarter include an extraordinary
charge of $2.6 million, or $.02 per share, from the
extinguishment of high interest rate debt.
(b) Results for the 1994 first quarter include a combined pretax
gain of $10.1 million, or $.06 per share, resulting from the sale
of property and the sale of an operating lease.
Responsibility for financial statements
Management is responsible for the information and
representations in the consolidated financial statements and
related notes which appear on pages 18 through 31 as well as
all other financial information contained in this report.
These financial statements were prepared in accordance with
generally accepted accounting principles and by necessity
include some amounts determined using informed estimates and
judgments.
Management is responsible for establishing and maintaining
a system of internal control. The company's accounting
systems include internal controls which management believes
provide reasonable assurance of the reliability of its
financial records and the proper safeguarding and use of its
assets. In establishing the basis for reasonable assurance,
management balances the cost of the internal controls with
the benefits they provide. Additionally, it has long been
the policy of the company to work to conduct its business
affairs in accordance with high ethical standards, as set
forth in the Westvaco Memorandum on Business Conduct.
The company's independent accountants, Price Waterhouse
LLP, were engaged to audit the consolidated financial
statements and were responsible for conducting their audit
in accordance with generally accepted auditing standards.
The appointment of Price Waterhouse LLP as the company's
independent accountants by the Board of Directors, on the
recommendation of the Audit Committee, has been ratified
each year by the shareholders. Their report immediately
follows this statement.
The Audit Committee of the Board of Directors, composed
solely of nonmanagement directors, meets several times each
year. The committee meets with the company's management,
the internal audit manager and the independent accountants,
to discuss accounting and financial reporting matters and
the nature, scope and results of audits. The Audit
Committee meets with the independent accountants both with
and without the presence of management. The committee also
meets with the company's general counsel to review
litigation issues. The independent accountants and the
internal audit manager have full and free access to the
Audit Committee.
John A. Luke, Jr.
Chairman, President and
Chief Executive Officer
James E. Stoveken, Jr.
Senior Vice President
Report of independent accountants
To the Board of Directors and
Shareholders of
Westvaco Corporation
In our opinion, the consolidated financial statements appearing
on pages 18 through 31 of this report present fairly, in all
material respects, the financial position of Westvaco
Corporation and its subsidiaries at October 31, 1996 and 1995,
and the results of their operations and their cash flows for
each of the three years in the period ended October 31, 1996,
in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the
company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we
plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the
financial statements, assessing the accounting principles used
and significant estimates made by management, and evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
1177 Avenue of the Americas, New York, New York
November 18, 1996
An eleven- year comparison
Year ended October 31 1996 1995 1994
Earnings (in thousands)
Sales $3,045,450 $3,272,447 $2,607,474
Net income before
extraordinary charge
and cumulative effect of
accounting changes 212,156 283,426 103,606
Extraordinary charge -
extinguishment of debt,
net of taxes - [2,590] -
Cumulative effect of
accounting changes,
net of taxes - - -
Net income 212,156 280,836 103,606
Depreciation and amortization 240,411 230,306 219,282
Common stock
Number of common shareholders 20,760 20,490 13,890
Weighted average number of shares
outstanding (in thousands) 101,737 101,190 100,581
Cash dividends (in thousands) $89,539 $77,929 $73,754
Per share:
Net income before extraordinary
charge and cumulative effect of
accounting changes $2.09 $2.80 $1.03
Extraordinary charge -
extinguishment of debt - [.02] -
Cumulative effect of accounting
changes - - -
Net income 2.09 2.78 1.03
Dividends .88 .77 .73 1/3
Book value 21.69 20.49 18.48
Financial position (in
thousands)
Working capital $ 297,158 $ 358,315 $ 268,987
Current ratio 1.7 1.8 1.7
Plant and timberlands, net $3,353,733 $3,140,090 $3,063,351
Total assets 4,437,498 4,252,732 3,982,993
Long-term obligations 1,153,447 1,147,020 1,234,300
Shareholders' equity 2,209,737 2,080,551 1,862,015
Debt to total capital 29% 30% 34%
Operations (in thousands,
except for number of
employees)
Primary production of paper,
paperboard and market pulp
(in tons) 3,001 3,105 2,848
New investment in plant and
timberlands $510,902 $309,020 $207,257
Acres of timberlands owned 1,452 1,453 1,453
Employees 13,430 14,300 14,170
Westvaco Corporation
and consolidated subsidiary companies
An eleven- year comparison
Year ended October 31 1993 1992 1991
Earnings (in thousands)
Sales $2,344,560 $2,335,617 $2,301,204
Net income before
extraordinary charge
and cumulative effect of
accounting changes 56,512 135,912 137,398
Extraordinary charge -
extinguishment of debt,
net of taxes [7,351] - -
Cumulative effect of
accounting changes,
net of taxes 55,180 - -
Net income 104,341 135,912 137,398
Depreciation and amortization 194,994 183,052 179,354
Common stock
Number of common shareholders 14,570 14,970 15,020
Weighted average number of shares
outstanding (in thousands) 99,954 99,179 98,353
Cash dividends (in thousands) $73,301 $72,756 $69,676
Per share:
Net income before extraordinary
charge and cumulative effect of
accounting changes $0.56 $1.37 $1.40
Extraordinary charge -
extinguishment of debt [.07] - -
Cumulative effect of accounting
changes 0.55 - -
Net income 1.04 1.37 1.40
Dividends .73 1/3 .73 1/3 .70 5/6
Book value 18.18 17.84 17.21
Financial position (in
thousands)
Working capital $ 243,959 $ 318,883 $ 309,726
Current ratio 1.7 1.9 2.0
Plant and timberlands, net $3,077,505 $2,838,143 $2,674,623
Total assets 3,927,837 3,703,914 3,461,818
Long-term obligations 1,258,312 1,055,473 969,731
Shareholders' equity 1,823,988 1,777,080 1,699,463
Debt to total capital 35% 31% 31%
Operations (in thousands,
except for number of
employees)
Primary production of paper,
paperboard and market pulp
(in tons) 2,626 2,595 2,587
New investment in plant and
timberlands $442,168 $352,233 $321,870
Acres of timberlands owned 1,462 1,468 1,483
Employees 14,440 14,520 14,440
Westvaco Corporation
and consolidated subsidiary companies
An eleven- year comparison
Year ended October 31 1990 1989 1988
Earnings (in thousands)
Sales $2,410,751 $2,284,059 $2,133,889
Net income before
extraordinary charge
and cumulative effect of
accounting changes 188,236 223,090 200,434
Extraordinary charge -
extinguishment of debt,
net of taxes - - -
Cumulative effect of
accounting changes,
net of taxes - - -
Net income 188,236 223,090 200,434
Depreciation and amortization 168,948 155,684 139,845
Common stock
Number of common shareholders 15,630 15,530 15,730
Weighted average number of shares
outstanding (in thousands) 97,531 97,111 97,015
Cash dividends (in thousands) $65,808 $60,834 $53,668
Per share:
Net income before extraordinary
charge and cumulative effect of
accounting changes $1.93 $2.30 $2.07
Extraordinary charge -
extinguishment of debt - - -
Cumulative effect of accounting
changes - - -
Net income 1.93 2.30 2.07
Dividends .67 1/2 .62 2/3 .55 1/3
Book value 16.53 15.27 13.59
Financial position (in
thousands)
Working capital $ 370,062 $ 328,204 $ 317,627
Current ratio 2.2 2.1 2.2
Plant and timberlands, net $2,539,149 $2,239,975 $1,871,328
Total assets 3,331,966 2,960,945 2,512,825
Long-term obligations 961,294 767,951 576,577
Shareholders' equity 1,618,667 1,488,433 1,318,267
Debt to total capital 32% 29% 26%
Operations (in thousands,
except for number of
employees)
Primary production of paper,
paperboard and market pulp
(in tons) 2,512 2,499 2,488
New investment in plant and
timberlands $472,064 $536,932 $392,954
Acres of timberlands owned 1,487 1,467 1,462
Employees 15,040 14,960 14,750
Westvaco Corporation
and consolidated subsidiary companies
An eleven- year comparison
Year ended October 31 1987 1986
Earnings (in thousands)
Sales $1,903,606 $1,811,937
Net income before
extraordinary charge
and cumulative effect of
accounting changes 146,191 108,096
Extraordinary charge -
extinguishment of debt,
net of taxes - -
Cumulative effect of
accounting changes,
net of taxes - -
Net income 146,191 108,096
Depreciation and amortization 129,723 121,603
Common stock
Number of common shareholders 15,330 15,290
Weighted average number of shares
outstanding (in thousands) 97,467 97,374
Cash dividends (in thousands) $45,494 $39,390
Per share:
Net income before extraordinary
charge and cumulative effect of
accounting changes $1.50 $1.11
Extraordinary charge -
extinguishment of debt - -
Cumulative effect of accounting
changes - -
Net income 1.50 1.11
Dividends .46 2/3 .40 4/9
Book value 12.10 11.11
Financial position (in
thousands)
Working capital $ 311,768 $ 352,267
Current ratio 2.3 2.8
Plant and timberlands, net $1,625,582 $1,492,743
Total assets 2,213,990 2,060,066
Long-term obligations 489,630 526,395
Shareholders' equity 1,178,356 1,082,791
Debt to total capital 25% 28%
Operations (in thousands,
except for number of
employees)
Primary production of paper,
paperboard and market pulp
(in tons) 2,386 2,351
New investment in plant and
timberlands $279,590 $250,363
Acres of timberlands owned 1,458 1,477
Employees 14,670 15,110
Westvaco Corporation
and consolidated subsidiary companies
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
Domestic Subsidiary Foreign Subsidiaries
Westvaco Development Corporation Rigesa, Ltda.
Summerville, South Carolina Valinhos, Sao Paulo, Brazil
Westvaco Asia, K.K.
Tokyo, Japan
Westvaco Europe, S.A.
Brussels, Belgium
Westvaco Canada Ltd.
Toronto, Canada
Westvaco Foreign Sales Corporation
Brussels, Belgium
Westvaco Hong Kong, Ltd.
Hong Kong
Westvaco Korea, Ltd.
Seoul, South Korea
Westvaco de Mexico S.A. de C.V.
Mexico City, Mexico
Westvaco Pacific Pty. Limited
Sydney, Australia
Westvaco Singapore Pte., Ltd.
Singapore
Westvaco Specialty Products, S.A.
Brussels, Belgium
Westvaco Svitavy, spol. s r.o.
Svitavy, Czech Republic
Westvaco Taiwan, Ltd.
Taipei, Taiwan
Westvaco Worldwide Distribution, S.A.
Neuchatel, Switzerland
EXHIBIT 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Registration Statements on Form S-8 (Nos. 33-53967, 2-71723, 2-94699,
33-26823, 33-57879, 33-57881 and 33-59765) and in the Prospectus
constituting part of the Registration Statement on Form S-3
(No. 33-60645) of Westvaco Corporation of our report dated
November 18, 1996 appearing on page 33 of the Westvaco Corporation
1996 Annual Report to Shareholders which is incorporated by reference
in this Annual Report on Form 10-K.
Price Waterhouse LLP
New York, NY
December 17, 1996
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
EXHIBIT 27
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-END> OCT-31-1996
<CASH> 62135
<SECURITIES> 53233
<RECEIVABLES> 284423
<ALLOWANCES> 14822
<INVENTORY> 263292
<CURRENT-ASSETS> 716095
<PP&E> 5599071
<DEPRECIATION> 2245338
<TOTAL-ASSETS> 4437498
<CURRENT-LIABILITIES> 418937
<BONDS> 1153447
0
0
<COMMON> 730712
<OTHER-SE> 1479025
<TOTAL-LIABILITY-AND-EQUITY> 4437498
<SALES> 3045450
<TOTAL-REVENUES> 3045760
<CGS> 2173719
<TOTAL-COSTS> 2173719
<OTHER-EXPENSES> 474777
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 90063
<INCOME-PRETAX> 335956
<INCOME-TAX> 123800
<INCOME-CONTINUING> 212156
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 212156
<EPS-PRIMARY> 2.09
<EPS-DILUTED> 2.09
</TABLE>
