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, 1997
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
(I.R.S. Employer number of registrant's
Identification No.) 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 1998-2007 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.
At October 31, 1997, the latest practicable date, the number of
shares of common stock outstanding and aggregate market value
of voting common stock held by nonaffiliates were 101,930,023
and $3,322,281,687, respectively.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders for
the fiscal year ended October 31, 1997 (the "1997 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 24, 1998
("Westvaco's 1998 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 and also operates a folding carton plant. It also
operates a folding carton plant in the Czech Republic. It
exports products from the United States, Brazil and the Czech
Republic 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 1997 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 25% of Westvaco's total sales in 1997 (1996-23%,1995-21%).
Substantially all products are sold through the
company's own sales force. Westvaco maintains 30 sales offices
located throughout the United States and 28 in foreign
countries.
Forest resources
The principal raw material used in the manufacture of paper,
paperboard and pulp is wood. Westvaco owns 1,461,000 acres of
forest land in the United States and southern Brazil (more than
1,000 miles from the Amazon rainforests). Westvaco's
Cooperative Forest Management Program, established in the
1950s, provides an additional source of wood fiber from the
1,408,000 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 1997, Westvaco furnished 39% (1996-39%,1995-37%) of its
wood requirements from company-owned land, and an additional 8%
(1996-7%, 1995-8%) 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 29 pulpwood concentration and processing yards that
are strategically located to store and ship wood to the mills
as needed. Westvaco supplied 95% of the wood for its Brazilian
mill from company plantations.
Westvaco forests include plantations, natural stands, and fiber
farms. 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 and fiber farm programs are
expanding and involve 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, North
Charleston, SC, and Covington, VA, and a forest science laboratory
at Summerville, SC. Forest research conducted there, and at
satellite centers at Wickliffe, KY, Rupert, WV, and Tres Barras,
State of Santa Catarina, Brazil, is focused on biotechnology,
genetics, tree nutrition, regeneration, stand management,
environmental protection and forest measurements. The goal is
increased timber and fiber production on a sustainable basis. 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 1997, the company incurred $42.9 million (1996-$38.3 million,
1995-$31.4 million) of research and development costs.
Substantially all of the research projects are company sponsored.
Approximately 240 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 $145
million and $112 million in 1998 and 1999, respectively. Capital
expenditures for pollution control facilities may increase over time
as a result of additional regulation of industry by the U. S.
Environmental Protection Agency (EPA). In 1995, the company
authorized removal of elemental chlorine from all of its pulp
bleaching processes. This important initiative, completed during
1997 at a cost of approximately $100 million, represents a major
step already taken by Westvaco in addressing new EPA regulations for
the U.S. pulp and paper industry regarding air and water quality.
These regulations, which have long been anticipated, were just
announced in November 1997; they have not as yet been published as
we prepare this report. It is expected that implementation of these
new regulations will be required over the next several years. In
the next few months, as the regulations become final and available
for review, the company expects to reduce substantially the upper
end of the range of its previously estimated compliance costs, which
have been in the range of $175 to $400 million, including
expenditures already incurred. Downward revisions to its previously
estimated additional operating costs, which were in the range of $25
to $50 million pretax annually, are also anticipated.
Employees
At October 31, 1997, Westvaco employed approximately 13,370 persons,
of whom 6,330 domestic employees are represented by various labor
unions under collective bargaining agreements. Approximately 2,100
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, a 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 37% of unbleached segment operating profit in 1997.
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"), operates a consumer packaging plant in that country.
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
16% of Westvaco's 1997 sales (1996-15%, 1995-14%). The sales of our
foreign operating subsidiaries, including exports, were 9% of
Westvaco's total sales (1996-8%, 1995-7%). For information
concerning the income of Westvaco's foreign subsidiaries for the
three years ended October 31, 1997 and the assets for the two years
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, 1997 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
Covington, Virginia Corrugating medium
North Charleston, South Carolina Saturating kraft, containerboard and
folding carton stock
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
Manaus, Amazonia, Brazil Corrugated boxes
Pacajus, Ceara, Brazil Corrugated boxes
Valinhos, Sao Paulo, Brazil Corrugated boxes
Cameron, South Carolina Building products
Summerville, South Carolina Building products
Chemicals
Location Product
Covington, Virginia Activated carbon products and services
DeRidder, Louisiana Printing ink resins and tall oil
derivatives
North Charleston, South Carolina Lignin-based surfactants and tall oil
derivatives
Wickliffe, Kentucky Activated carbon products and services
Other
Location Product
Summerville, South Carolina Land development
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 3,198,000 tons for
the paper and paperboard mills and 821,000 tons for the
converting plants. The 1997 production from these facilities was
3,058,000 and 592,000 tons, respectively. The mills supplied 69%
of the paper and paperboard needs of the converting plants. The
annual productive capacity for the chemical plants is 452,000
tons. In 1997, 430,000 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.
Forest resources
Westvaco owns 1,461,000 acres of forest land. There are
1,096,000 acres in the South and Middle Atlantic United States,
248,000 acres in the Central United States and 117,000 acres in
southern 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, 1997, 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, 1997.
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.* 49 Chairman, 1996
President and
Chief Executive Officer 1992
Rudolph G. Johnstone, Jr.* 61 Executive Vice President 1995
Philip H. Emery, Jr. 63 Senior Vice President 1995
Frederick C. Haas 61 Senior Vice President 1982
Jack A. Hammond 59 Senior Vice President 1992
James E. Stoveken, Jr. 58 Senior Vice President 1996
Brantley D. Thomas, Jr. 64 Senior Vice President 1987
Samuel L. Torrence 57 Senior Vice President 1996
R. Scott Wallinger 58 Senior Vice President 1987
Wendell L. Willkie, II 46 Senior Vice President and
General Counsel 1996
William S. Beaver 46 Vice President 1996
and Treasurer 1987
John W. Hetherington 59 Vice President, 1987
Assistant General Counsel
and Secretary 1978
Ned W. Massee 47 Vice President 1991
John E. Banu 50 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:
Rudolph G. Johnstone, Jr., Senior Vice President, 1990-1995; Philip
H. Emery, Jr., Vice President, 1987-1995; 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; John
E. Banu, Assistant Comptroller, 1980-1995.
Information required by Item 405 of Regulation S-K will be
included in Westvaco's 1998 Proxy Statement, pursuant to
Regulation 14A, to be filed with the Securities and Exchange
Commission by January 29, 1998, 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 for 1997 and 1996 is
included on page 2 of the 1997 Westvaco Annual Report under the
caption "Quarterly price ranges of stock", and is incorporated
herein by reference.
(b) Approximate number of common shareholders
At October 31, 1997, the number of record holders of Westvaco
common stock was approximately 7,840. In addition, there were
12,400 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 102 years. Information concerning quarterly dividends
per share for 1997 and 1996 is included on page 2 of the 1997
Westvaco Annual Report under the caption "Quarterly dividends
per share," and is incorporated herein by reference. There were
no restrictions on dividends at October 31, 1997.
Item 6. Selected financial data
Information required by this item is included on pages 34-35 of the
1997 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
1997 Westvaco Annual Report under the captions "Liquidity and
capital resources," "Analysis of operations," "Forward-looking statements,"
"Fiscal year 1996" and "Fiscal year 1995," and is incorporated herein by
reference.
Item 7A. Quantitative and qualitative disclosures about market risk
Not applicable.
Item 8. Financial statements and supplementary data
Information required by this item is included on pages 18-33 of the
1997 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 1998 Proxy Statement, pursuant to
Regulation 14A, to be filed with the Securities and Exchange
Commission by January 29, 1998, 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
1998 Proxy Statement, pursuant to Regulation 14A, to be filed with
the Securities and Exchange Commission by January 29, 1998, 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
1998 Proxy Statement, pursuant to Regulation 14A, to be filed with
the Securities and Exchange Commission by January 29, 1998, and is
incorporated herein by reference.
Item 13. Certain relationships and related transactions
Information required by this item will be contained in Westvaco's
1998 Proxy Statement, pursuant to Regulation 14A, to be filed with
the Securities and Exchange Commission by January 29, 1998, 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 1997
Westvaco Annual Report:
Page
Consolidated statement of income for fiscal years
ended October 31, 1997, 1996 and 1995 18
Consolidated balance sheet at October 31, 1997 and 1996 19
Consolidated statement of cash flows for fiscal years
ended October 31, 1997, 1996 and 1995 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 the 1997 Westvaco Annual Report and
incorporated herein by reference.
3. Exhibits
3.i Restated Certificate of Incorporation.
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
September 19, 1997.
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 September 23, 1997 between
Westvaco Corporation and The Bank of New York previously
filed as Exhibit 1 to the company's Form 8-A dated October
31, 1997, 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, previously filed as Exhibit
10(e) to the company's Annual Report on Form 10-K for the
fiscal year ended October 31, 1996, incorporated herein by
reference.
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 Deferred Compensation Plan for Outside
Directors dated December 1986, previously filed as Exhibit 10(j)
to the company's Annual Report on Form 10-K for the fiscal year
ended October 31, 1996, incorporated herein by reference.
10.j Form of Indemnification Contract between the company and each of
its officers and directors as listed in the Westvaco Corporation
1997 Annual Report to Shareholders, incorporated herein by
reference.
13 Pages 2 and 14 through 35 of the Westvaco Corporation 1997
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 schedule.
(b) Reports on Form 8-K
A report on Form 8-K was filed on August 27, 1997, and is incorporated herein
by reference. The contents of the report are summarized below:
Item 5. Other Events - describing that the Board of
Directors had authorized the periodic
repurchase of the company's common stock to
satisfy issuances under employee stock option plans.
A report on Form 8-K was filed on October 31,1997, and is incorporated herein
by reference. The contents of the report are summarized below:
Item 5. Other Events - On September 23, 1997, the
Board of Directors declared a dividend of
one preferred share purchase right for each
outstanding share of common stock, par
value $5.00 per share, of the Company.
Item 6. Exhibits
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)
November 25, 1997 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 November 25, 1997
Rudolph G. Johnstone, Jr. Executive Vice President
and Director November 25, 1997
James E. Stoveken, Jr. Senior Vice President November 25, 1997
(Principal Financial Officer)
John E. Banu Comptroller November 25, 1997
(Principal Accounting Officer)
Samuel W. Bodman III Director November 25, 1997
W. L. Lyons Brown, Jr. Director November 25, 1997
Dr. Thomas W. Cole, Jr. Director November 25, 1997
David L. Hopkins, Jr. Director November 25, 1997
Douglas S. Luke Director November 25, 1997
John A. Luke Director November 25, 1997
William R. Miller Director November 25, 1997
Katherine G. Peden Director November 25, 1997
Richard A. Zimmerman Director November 25, 1997
Amended
Restated
Certificate
of
Incorporation
OF
Westvaco Corporation
(Composite)
299 PARK AVENUE, NEW YORK, NEW YORK 10171
APRIL, 1997
AMENDED
RESTATED CERTIFICATE OF INCORPORATION
of
WESTVACO CORPORATION
(Composite)
The following sets forth the provisions of the Restated Certificate of
Incorporation of Westvaco Corporation adopted by the Board of Directors of the
Corporation on April 22, 1986 and filed with the Secretary of State of
Delaware on May 23, 1986, as last amended in Article FOURTH by the
shareholders on February 25, 1997, which amendment was filed with the
Secretary of State of Delaware on March 10, 1997.
FIRST: The name of this Corporation is Westvaco Corporation.
SECOND: The address of its registered office in the state of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington,
County of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares of all classes of capital stock which the
Corporation shall have authority to issue is 310,044,170 of which 44,170
shares shall be Cumulative Preferred Stock of the par value of $100 per share,
10,000,000 shares shall be Preferred Stock without par value, and 300,000,000
shares shall be Common Stock of the par value of $5 per share. No holder of
any stock of the Corporation of any class, now or hereafter authorized, shall
have any preemptive right to subscribe to any or all additional issues of
stock of the Corporation of any or all classes.
A. Provisions Relating to Cumulative Preferred Stock
1. The Cumulative Preferred Stock may be issued from time to time in one or
more series, each such series to have such designation, preferences and
relative optional or other special rights and qualifications, limitations or
restrictions thereof as are stated and expressed herein or in any resolution
or resolutions providing for the issue of such series adopted by the Board of
Directors as hereinafter provided.
2. Authority is hereby expressly granted to the Board of Directors of the
Corporation, subject to the provisions of this Article Fourth, to authorize
the issue of one or more series of Cumulative Preferred Stock and with respect
to each series to fix by resolution or resolutions providing for the issue of
such series:
a. The number of shares to constitute such series (which number may be
increased or decreased by action of the Board of Directors of the Corporation
as provided by law) and the distinctive designation thereof;
b. The dividend rate on the shares of such series, not exceeding seven per
centum per annum, and the date or dates from which dividends shall accumulate,
and also the quarterly dividend dates;
c. The premium, if any (not exceeding $15 per share), over and above the par
value thereof and any accrued dividends thereon, payable upon the redemption
of shares otherwise than by or through a retirement or sinking fund;
d. Whether or not the shares of such series shall be subject to the operation
of a retirement or sinking fund and if so the terms and provisions relative to
the operation thereof, including the premium, if any (not exceeding $15 per
share), over and above the par value thereof and any accrued dividends
thereon, payable upon redemption by or through such a fund;
e. Whether or not the shares of such series shall be made convertible into or
exchangeable for the shares of any other class or classes, or of any other
series of the same class of stock, of the Corporation, and if made so
convertible or exchangeable the conversion price or prices or the rate or
rates of exchange at which such conversion or exchange may be made and the
method (if any) of adjusting the same; and
f. The amount of premium, if any (not exceeding S15 per share), over and above
the par value thereof and any accrued dividends thereon, which shares of any
such series shall be entitled to receive upon the voluntary liquidation,
dissolution or winding-up of the Corporation.
All shares of any one series of Cumulative Preferred Stock shall be identical
with each other in all respects, except that shares of any one series issued
at different times may differ as to the date from which dividends thereon
shall accumulate; and all series shall rank equally and be identical in all
respects, except as permitted by the foregoing provisions of this Section A.
3. The holders of shares of Cumulative Preferred Stock of each series shall be
entitled to receive, when and as declared by the Board of Directors, dividends
at the respective rates per annum fixed for the shares of the respective
series payable quarterly on such dates as shall be fixed by the Board of
Directors, which dividends shall be cumulative as to each share from the
quarterly dividend date next preceding the date of issue thereof, or from the
date of issue, if that be a quarterly dividend date, and shall be payable
quarterly on the quarterly dividend dates to the shareholders of record on
such day preceding the respective quarterly dividend date as the Board of
Directors shall determine, provided that the amount of the first dividend
payable with respect to shares of any particular series may be fixed by the
Board of Directors at less than the amount of a full quarterly dividend and
shall be cumulative only as to the amount so fixed.
If for any quarterly dividend period or periods dividends shall not have been
paid or declared and set apart for payment upon all outstanding shares of
Cumulative Preferred Stock at the rates determined for the respective series,
the deficiency shall be fully paid or declared and set apart for payment
before any dividends shall be declared or paid upon or set apart for payment
on the Common Stock or on any other class of stock at any time ranking junior
to the Cumulative Preferred Stock with respect to the payment of dividends;
provided, however, that dividends in full shall not be declared and set apart
for payment or paid on the Cumulative Preferred Stock of any series for any
quarterly dividend period unless dividends in full have been or are
contemporaneously declared and set apart for payment or paid on the
outstanding Cumulative Preferred Stock of all series for all the quarterly
dividend periods terminating on the same or an earlier date. When dividends
are not paid in full the shares of all series of the Cumulative Preferred
Stock shall share ratably in the payment of dividends, including accumu-
lations, if any, in accordance with the sums which would be payable on such
shares if all dividends were declared and paid in full. Accumulations of
dividends shall not bear interest.
In no event, so long as any Cumulative Preferred Stock shall remain
outstanding, shall any dividend whatsoever (other than dividends payable in
stock ranking junior to the Cumulative Preferred Stock with respect to
priority both in payment of dividends and upon dissolution, liquidation or
winding-up of the Corporation) be declared or paid upon, nor shall any
distribution be made upon, any class of stock of the Corporation ranking
junior to the Cumulative Preferred Stock with respect either to the payment of
dividends or upon dissolution, liquidation or winding-up of the Corporation,
nor shall any shares of any such class be purchased by the Corporation or by
any Subsidiary, nor shall any shares of any such class be redeemed by the
Corporation, nor shall any moneys be paid or made available for any such
purchase or redemption of any shares of any such class of stock, if
[i] Dividends on all outstanding shares of Cumulative Preferred Stock for all
past quarterly dividend periods shall not have been paid; or
[ii] The Corporation shall have failed to set apart for, or apply to, the
retirement of Cumulative Preferred Stock all amounts then or theretofore
required to be set apart, or applied, by the retirement or sinking fund
provisions, if any, with respect to shares of any series of the Cumulative
Preferred Stock; or
[iii] The aggregate amount of payments for all dividends, distributions,
purchases and redemptions as to any class of stock ranking junior to the
Cumulative Preferred Stock with respect to priority either in payment or
dividends or upon dissolution, liquidation or winding-up of the Corporation
(including the payment to be then made but excluding dividends in stock
ranking junior to the Cumulative Preferred Stock in both such respects) made
subsequent to the close of the fiscal year next preceding the first issuance
of any shares of Cumulative Preferred Stock shall exceed the sum of (A) the
Consolidated Net Income of the Corporation and its Subsidiaries (but after
deduction of all dividends and distributions upon the Cumulative Preferred
Stock) from and after the close of the aforesaid fiscal year,
(B) $2,000,000, and (C) the aggregate net consideration received by the
Corporation from the issue or sale subsequent to the close of the aforesaid
fiscal year of shares of stock of the Corporation ranking junior to the
Cumulative Preferred Stock with respect to priority both in payments of
dividends and upon dissolution, liquidation or winding-up of the Corporation
(which net consideration, to the extent it may consist of tangible property
rather than cash, shall be taken at the fair value of such property as
determined by the Board of Directors); or
[iv] Immediately after making such payment, distribution, purchase or
redemption, the Consolidated Net Tangible Assets of the Corporation and its
Domestic Subsidiaries shall be less than 200% of the sum of (A) the
Consolidated Funded Indebtedness of the Corporation and its Domestic
Subsidiaries, and (B) the par value of all the then outstanding shares of
Cumulative Preferred Stock; unless such action has been approved by the
affirmative vote of the holders of 66 2/3% of all the shares of Cumulative
Preferred Stock then outstanding as a class given at a meeting of which notice
shall have been given to the holders of Cumulative Preferred Stock.
4. Upon the dissolution, liquidation or winding-up of the Corporation the
holders of shares of Cumulative Preferred Stock of each and every series shall
be entitled to receive, out of the assets of the Corporation (whether capital
or surplus), the following amounts before any payment shall be made on any
class of stock ranking junior to the Cumulative Preferred Stock upon
dissolution, liquidation or winding-up:
[i] In case of any involuntary dissolution or liquidation or winding-up of the
Corporation the holder of each share of Cumulative Preferred Stock of each
series shall be entitled to receive cash in an amount equal to the par value
thereof together with a sum equivalent to all dividends (whether or not earned
or declared) on such stock accrued and unpaid thereon to the date of the final
distribution to the holders of Cumulative Preferred Stock at the rates fixed
for the shares of the different series respectively; or
[ii] In case of any voluntary dissolution or liquidation or winding-up of the
Corporation the holder of each share of Cumulative Preferred Stock of each
series shall be entitled to receive cash in an amount equal to the par value
thereof, plus such premium, if any, as shall have been fixed by the Board
of Directors for shares of the respective series, together with a sum
equivalent to all dividends (whether or not earned or declared) on such
stock accrued and unpaid thereon to the date of the final distribution to
the holders of Cumulative Preferred Stock at the rates fixed for the shares
of the different series respectively.
The sale, conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially all of the property
and assets of the Corporation shall be deemed a voluntary dissolution,
liquidation or winding-up of the Corporation for the purposes of this
paragraph 4, but the merger or consolidation of the Corporation into or with
any other corporation, or the merger of any other corporation into it, shall
not be deemed to be a dissolution, liquidation or winding-up, voluntary or
involuntary, for the purposes of this paragraph 4.
If the assets distributable upon such dissolution, liquidation or winding-up,
whether voluntary or involuntary, shall be insufficient to permit the payment
to holders of the Cumulative Preferred Stock of the full amounts aforesaid,
then said assets shall be distributed among the holders of the Cumulative
Preferred Stock pro rata to the amounts the respective holders of such shares
of stock would be entitled upon payment of the full amounts aforesaid. After
payment to holders of Cumulative Preferred Stock of the full preferential
amounts aforesaid, the holders of Cumulative Preferred Stock as such shall
have no right or claim to any of the remaining assets of the Corporation.
5. The Corporation shall have the right to redeem the Cumulative Preferred
Stock of any series at any time, either in whole or in such portions as from
time to time the Board of Directors may determine, at the par value thereof,
plus an amount equal to accrued and unpaid dividends thereon to the date fixed
for redemption (hereinafter referred to as the "Redemption Date"), and in
addition thereto the amount of the premium, if any, payable upon such
redemption as shall be fixed for the shares of such series by the Board of
Directors (the total sum so payable upon any redemption being hereinafter
referred to as the "Redemption Price"). At its election the Corporation, on
or prior to the Redemption Date, may deposit the aggregate of the
Redemption Price of the shares so to be redeemed with such responsible bank or
trust company in the Borough of Manhattan, City and State of New York
(hereinafter referred to as the "Depositary"), as may be designated by the
Board of Directors, in trust for payment on and after the Redemption Date to
the holders of the Cumulative Preferred Stock then to be redeemed. If less
than the whole amount of the outstanding Cumulative Preferred Stock of any
particular series shall be redeemed at any time the shares thereof to be
redeemed shall be selected by lot, or in such other manner as the Board of
Directors in its discretion may determine. Notice of any such redemption shall
be mailed to each holder of record of the shares of Cumulative Preferred Stock
so to be redeemed, at his address registered with the Corporation, not more
than sixty [60] nor less than thirty [30] days prior to the Redemption Date,
and if less than all the shares owned by such shareholder are then to be
redeemed the notice shall specify the number of shares thereof which are to be
redeemed. Notice of redemption having been so given, the shares therein
designated for redemption shall not be entitled to any dividends which may be
declared after the Redemption Date specified in such notice, unless default be
made in the payment or deposit of the Redemption Price, and on such Redemption
Date, or any date prior thereto on which the deposit herein provided for shall
have been made, all rights of the respective holders of the said shares, as
shareholders of the Corporation by reason of the ownership of such shares,
shall cease, except the right to receive the Redemption Price of such shares
upon presentation and surrender of their respective certificates representing
the said shares (and except also the right to receive from the Depositary on
any quarterly dividend date which may intervene between the deposit of moneys
and the Redemption Date the amount of such quarterly dividend); and such
shares shall not after such Redemption Date or date of deposit be deemed to be
outstanding. In case less than all the shares represented by such certificates
are redeemed a new certificate shall be issued representing the unredeemed
shares.
In case the holder of shares of Cumulative Preferred Stock which shall have
been called for redemption shall not, within five [5] years after the
Redemption Date, claim the amount deposited with respect to the redemption
thereof, and the Depositary shall, upon demand, pay over to the Corporation
such unclaimed amount, then the Depositary shall be relieved of all
responsibility in respect thereof to such holder and such holder shall look
only to the Corporation for the payment thereof. Any interest accrued on any
funds so deposited shall belong to the Corporation.
The provisions of this paragraph 5 shall apply to redemptions made for the
purpose of complying with the requirements of the retirement or sinking fund
provisions with respect to shares of any series of the Cumulative Preferred
Stock, provided, however, that the premium, if any, payable upon redemption
for retirement fund or sinking fund purposes shall be as fixed for the shares
of the particular series by the Board of Directors.
In order to facilitate the redemption of any shares of Cumulative Preferred
Stock, the Board of Directors is authorized to cause the transfer books of the
Corporation to be closed as to the shares of the particular series to be
redeemed.
6. Any shares of Cumulative Preferred Stock which shall at any time have been
redeemed, or which shall at any time have been surrendered for cancellation
pursuant to the retirement or sinking fund provisions with respect to any
series of the Cumulative Preferred Stock, shall be permanently retired and
cancelled and shall under no circumstances be reissued, and the Corporation
shall from time to time take appropriate corporate action to reduce the
authorized number of shares of Cumulative Preferred Stock of the appropriate
series accordingly.
7. Regardless of any other provision hereof, if at any time the Corporation
shall fail to pay dividends in full upon all the then outstanding shares of
the Cumulative Preferred Stock, thereafter and until dividends in full shall
have been paid or declared and set apart for payment the Corporation shall not
redeem for any purpose any Cumulative Preferred Stock, except as a whole, and
neither the Corporation nor any Subsidiary shall purchase any Cumulative
Preferred Stock except in accordance with a purchase offer made to all holders
of the Cumulative Preferred Stock upon the same terms for shares of any one
series; provided, that the Corporation may apply to the anticipation of the
annual requirements not yet due of the retirement or sinking fund provisions
with respect to any series of Cumulative Preferred Stock, shares of the
appropriate series of Cumulative Preferred Stock acquired by it prior to
such failure and then held by it as treasury stock.
8. Except as herein or by law expressly provided, the holders of shares of
Cumulative Preferred Stock shall have no right to vote for the election of
Directors or for any other purpose, or on any other subject, or to be
represented at, or to receive notice of, any meeting of shareholders.
Whenever,
a. Dividends on any Cumulative Preferred Stock shall be in arrears and unpaid
in an aggregate amount equal to or exceeding the amount of the dividends due
thereon for one year; or
b. The Corporation shall have failed to set apart for the retirement of
Cumulative Preferred Stock any amount then required by the retirement or
sinking fund provisions with respect to shares of any series of Cumulative
Preferred Stock to be set apart; or
c. After setting any such amount apart the Corporation shall be in default in
applying the same in the manner provided in such provisions; thereafter the
holders of shares of Cumulative Preferred Stock shall have the right to
receive notice of all meeting of shareholders for the election of Directors
and at every such meeting the holders of Cumulative Preferred Stock shall have
the right to vote for the election of Directors, each share of Cumulative
Preferred Stock having such number of votes (but in any case not less than one
vote) as shall be equal to the quotient derived from dividing the aggregate
number of shares of Cumulative Preferred Stock at such time outstanding into
the total aggregate number of votes for the election of Directors to which the
outstanding shares of all other classes of stock ranking Junior to the
Cumulative Preferred Stock with respect to priority, either in payment of
dividends or upon dissolution, liquidation or winding-up of the Corporation,
may be collectively entitled; and such voting rights shall continue in the
Cumulative Preferred Stock until all accumulated dividends (if any) on the
Cumulative Preferred Stock shall have been paid or declared and a sum set
apart for the payment thereof, and until all amounts which the Corporation
shall have failed to set apart for or to apply to the retirement of any
Cumulative Preferred Stock as then required by the provisions for a
retirement or sinking fund with respect to shares of any series of
Cumulative Preferred Stock shall have been set apart in full, or, as
the case may be, shall have been applied in the manner provided, at which time
the Cumulative Preferred Stock shall be again excluded from the right to vote
and to be represented at and to receive notice of such meetings. The term of
office of all persons who may be Directors of the Corporation at the time when
the right to vote for Directors shall accrue to the Cumulative Preferred Stock
as herein provided shall terminate pursuant to this paragraph 8 upon the
election of new Directors at a meeting of shareholders which may be held at
any time after the accrual of such voting rights upon like notice as that
required for the annual meeting of shareholders and which meeting shall be
called by the Secretary of the Corporation upon request of, or may be called
by the holders of record of, at least 10% of all the shares of Cumulative
Preferred Stock then outstanding. The new Directors so elected shall serve
until the next annual meeting of shareholders (unless a special meeting of
shareholders shall be called and held as hereinafter provided) and until their
successors shall be chosen and qualified. When all the accumulated dividends
on the Cumulative Preferred Stock shall have been paid or declared and a sum
set apart for the payment thereof and when all amounts which the Corporation
shall have failed to set apart for or to apply to the retirement of any
Cumulative Preferred Stock shall have been set apart in full, or, as the case
may be, shall have been applied in the manner provided, a special meeting of
shareholders shall be called by the Secretary of the Corporation upon like
notice as that required for the annual meeting of shareholders upon request
of, or may be called by the holders or record of, at least 10% of the shares
of Common Stock of the Corporation then outstanding to elect new Directors,
and upon the election and qualification of such new Directors the term of
office of the Directors then in office shall terminate. The Directors elected
at the special meeting of shareholders called by or at the request of holders
of Common Stock shall serve until the next annual meeting of shareholders
(unless a special meeting of shareholders shall be called and held as herein
before provided) and until their successors shall be chosen and qualified.
9. So long as any of the Cumulative Preferred Stock remains outstanding, unless
approved by the affirmative vote of the holders of 66 2/3% of all the shares
of Cumulative Preferred Stock then outstanding as a class given at a meeting
of which notice shall have been given to the holders of Cumulative Preferred
Stock;
a. There shall not be authorized or created any class of stock ranking prior to
or on a parity with the Cumulative Preferred Stock in payment of dividends or
upon the dissolution, liquidation or winding-up of the Corporation, nor shall
the authorized number of shares of Cumulative Preferred Stock be increased;
b. None of the express terms and provisions of Section A of this Article Fourth
nor of the resolutions of the Board of Directors providing for the issue of
any series of Cumulative Preferred Stock shall at any time be changed,
altered, amended or repealed in any way or manner so as to affect the
Cumulative Preferred Stock adversely, provided that if any such change,
alteration, amendment or repeal shall adversely affect only one series of
Cumulative Preferred Stock then outstanding the same shall not be made, unless
in addition to the foregoing vote the same also shall have been approved by
the affirmative vote of the holders of 66 2/3% of all the shares of the
particular series then outstanding so affected as a class given at such
meeting;
c. There shall not be authorized a reorganization involving any
recapitalization or reclassification of shares of the Corporation, or a
liquidation, dissolution or winding-up of the Corporation, or a consolidation
or merger of the Corporation, or a disposal by sale, exchange, lease or in any
other manner of all or substantially all of the property and assets of the
Corporation.
10. So long as any of the Cumulative Preferred Stock remains outstanding, the
Corporation will not issue any additional shares of Cumulative Preferred
Stock, create, incur, issue or assume any indebtedness for borrowed money or
advances of funds, or assume or guarantee any such indebtedness or permit any
Subsidiary to create, incur, issue, assume or guarantee any such indebtedness
or to issue any preferred stock (other than any such indebtedness or preferred
stock issued by a Subsidiary to the Corporation or to a Wholly-Owned
Subsidiary), unless either
[i] Immediately upon such issuance, creation, incurrence, assumption or
guarantee the Consolidated Net Tangible Assets of the Corporation and its
Domestic Subsidiaries shall be at least 200% of the sum of (A) the
Consolidated Funded Indebtedness of the Corporation and its Domestic
Subsidiaries, and (B) the par value of all the then outstanding shares of
Cumulative Preferred Stock, or
[ii] Such action has been approved by the affirmative vote of the holders of
66 2/3% of all the shares of Cumulative Preferred Stock then outstanding as
a class given at a meeting of which notice shall have been given to the
holders of Cumulative Preferred Stock.
No holder of Cumulative Preferred Stock shall as such holder have any
preemptive or preferential right of subscription to any stock of any class of
the Corporation, or to any obligation convertible into stock of the
Corporation issued or sold, or to any right of subscription to, or to any
warrant or option for the purchase of, any such stock or obligation.
12. For the purposes of Section A of Article Fourth hereof:
a. The term "Consolidated Balance Sheet of the Corporation and its Domestic
Subsidiaries" shall mean a consolidated balance sheet of the Corporation and
its Domestic Subsidiaries prepared in accordance with generally accepted
principles of accounting practice; except that at the option of the
Corporation there need not be consolidated any Subsidiary which, in the
judgment of the senior accounting officer of the Corporation is not required
to be consolidated in accordance with generally accepted principles of
accounting practice.
b. The term "Consolidated Funded Indebtedness of the Corporation and its
Domestic Subsidiaries" shall be determined from a Consolidated Balance Sheet
of the Corporation and its Domestic Subsidiaries and shall mean the Funded
Indebtedness of the Corporation and its Domestic Subsidiaries on a
consolidated basis.
c. The term "Consolidated Net Income of the Corporation and its Subsidiaries"
shall mean the balance remaining after deducting from the consolidated
earnings and other income and profits of the Corporation and its Subsidiaries
all expenses and charges of every proper character, after provision for net
profits applicable to shares of stock of Subsidiaries held by others than
the Corporation, and after making appropriate provision for inter-company
items, all as determined from time to time in accordance with generally
accepted principles of accounting practice, provided that there shall not be
included in any such determination any profits or losses of any Subsidiary
which, in the judgment of the senior accounting officer of the Corporation,
would not be required in accordance with generally accepted principles of
accounting practice to be consolidated in a consolidated balance sheet of the
Corporation and its Subsidiaries prepared as of the date of such determination.
d. The term "Consolidated Net Tangible Assets of the Corporation and its
Domestic Subsidiaries" shall be determined from a Consolidated Balance Sheet
of the Corporation and its Domestic Subsidiaries and shall mean total assets,
less the following:
[1] Current liabilities, including liabilities for indebtedness maturing more
than 12 months from the date of original creation thereof but maturing within
12 months from the date of determination;
[2] Reserves for depreciation and other asset valuation reserves;
[3] Intangible assets such as goodwill, trademarks, brands, trade names,
patents and unamortized debt discount and expense; and
[4] Appropriate adjustments on account of minority interests of other persons
holding stock in any Domestic Subsidiary of the Corporation.
e. The term "Domestic Subsidiary", when used with respect to the Corporation,
shall mean any Subsidiary of the Corporation the principal part of the assets
of which is located within and which has a principal place of business within
the United States of America.
f. The term "Funded Indebtedness" shall mean any indebtedness for money
borrowed and any indebtedness not assumed by the Corporation or any of its
Domestic Subsidiaries which is secured by mortgages or liens on any property
hereafter acquired by the Corporation or any of its Domestic Subsidiaries
existing at the time of such acquisition, maturing by its terms more than 12
months from the date of the creation thereof or extendible or renewable at
the option of the obligor to a date more than 12 months from the date of the
original creation thereof, less (a) any indebtedness which on the date of
determination of Funded Indebtedness shall be due and payable within 12
months from such date and (b) any indebtedness, not deducted under the
foregoing clause (a), whether or not so assumed, for the payment, redemption
or satisfaction of which money (or evidence of indebtedness, if permitted
under the instrument creating such indebtedness) in the necessary amount
shall have been deposited in trust with the trustee or proper depositary
either at or before the maturity or redemption thereof.
g. The word "outstanding" used in reference to Cumulative Preferred Stock shall
mean issued shares of Cumulative Preferred Stock, excluding shares held by the
Corporation or a Subsidiary.
h. The term "Subsidiary" shall mean [i] any corporation of which the
Corporation directly or indirectly owns or controls such number of shares of
outstanding stock as at the time shall have by the terms thereof ordinary
voting power to elect a majority of the Board of Directors of such
corporation, irrespective of whether or not at the time stock of any other
class or classes of such corporation shall have or might have voting power by
reason of the happening of any contingency, or [ii] any corporation of which
such number of shares of outstanding stock of the character described in the
foregoing clause [i] shall at the time be owned or controlled directly or
indirectly by the Corporation and any Subsidiary as defined in the foregoing
clause [i] or by one or more such Subsidiaries.
[i]The term "Wholly-Owned Subsidiary" shall mean [i] any corporation of which
the Corporation directly or indirectly owns or controls at the time all of the
outstanding stock except directors' qualifying shares having by the terms
thereof ordinary voting power to elect the Board of Directors of such
corporation, irrespective of whether or not at the time stock of any other
class or classes of such corporation shall have voting power by reason of the
happening of any contingency, or [ii] any corporation of which all of the
outstanding stock of the character described in the foregoing clause [i] shall
at the time be owned or controlled directly or indirectly by the Corporation
and any Wholly-Owned Subsidiary as defined in the foregoing clause [i]
or by one or more such Wholly-Owned Subsidiaries.
B. Provisions Relating to the Preferred Stock, Without Par Value
The Preferred Stock, without par value, may be issued from time to time in one
or more series. Each such series shall consist of the number of shares and,
subject to the preferential rights and powers of the holders of the Cumulative
Preferred Stock, shall have such designation, voting powers, preferences and
relative, participating, optional or other special rights, and qualifications,
limitations, or restrictions thereof, as shall be stated and expressed in the
resolution or resolutions providing for the issue of such series adopted by
the Board of Directors of the Corporation. Authority is granted to the Board
of Directors of the Corporation, subject to the provisions of this Article
FOURTH, to authorize the issue of shares of Preferred Stock, without par
value, in one or more series and, with respect to each such series, to fix, by
such resolution or resolutions, the number of shares of which it shall consist
and its designation, voting powers, preferences and relative, participating,
optional or other special rights and any qualifications, limitations or
restrictions thereof. All shares of any one such series thereof issued at
different times may differ as to the dates of issue and the dates from which
dividends thereon shall accumulate.
C. Provisions Relating to Common Stock
The Common Stock now outstanding and hereafter authorized and issued shall be
subject to the preferred rights of the holders of the Cumulative Preferred
Stock to the extent herein provided.
All or any of the shares of Common Stock may be issued from time to time by
the Corporation, acting through the Board of Directors, without action by the
stockholders, for such consideration, not less than par, as may be fixed from
time to time by said Board, and any and all shares so issued, the full
consideration for which (as so fixed by said Board) shall have been paid or
delivered, shall be conclusively deemed to be fully paid and non-assessable.
D. Other Provisions
The number of shares with which this Corporation will commence business is six
hundred fifty-two thousand nine hundred and sixty-four [652,964] being common
shares without nominal or par value.
FIFTH: The existence of this Corporation is to be perpetual.
SIXTH: The affairs of the Corporation are to be conducted by the officers and
persons fixed by the Bylaws; and such persons are to be chosen at the times
and places fixed by the Bylaws.
SEVENTH: The Corporation may become seized and possessed of either real or
personal estate, or both, to an unlimited extent, but a limit to the value of
the property so held may be fixed by the Bylaws.
EIGHTH: The amount of indebtedness or liability which the Corporation may at
any time incur shall be unlimited, unless a limit thereto be fixed by the
Bylaws.
NINTH: The private property of the stockholders shall not be subject to the
payment of corporate debts to any extent whatever.
TENTH:
A. The directors shall have power to make and to alter the Bylaws; to fix the
amount to be reserved as working capital, and to authorize, and cause to be
executed, mortgages, and liens, without limit as to amount, upon the property
and franchises of the Corporation.
B. Any Bylaws made by the directors under the powers conferred hereby may be
altered, amended, or repealed, and any provision inconsistent therewith may be
adopted, by the directors or by the stockholders. Notwithstanding the
foregoing and anything contained in this Certificate of Incorporation to the
contrary, however, Section 3 of Article I and Sections 1, 3, 4, and 5 of
Article II of the Bylaws, all as in effect with the effectiveness of this
Article, shall not be altered, amended, or repealed, and no provision
inconsistent therewith shall be adopted, without the affirmative vote of at
least 75% of the combined voting power of the then-outstanding shares of all
classes and series of stock of the Corporation entitled to vote generally in
the election of directors ("Voting Stock"), voting together as a single class.
Notwithstanding anything contained in this Certificate of Incorporation to the
contrary, the affirmative vote of at least 75% of the Voting Stock, voting
together as a single class, shall be required to alter, amend, or repeal, or
adopt any provision inconsistent with, this Section B of Article TENTH.
C. The Bylaws shall determine whether and to what extent the accounts and
books of the Corporation, or any of them, shall be open to the inspection of
the stockholders; and no stockholder shall have any right of inspecting any
account, or book, or document of the Corporation, except as conferred by law
or the Bylaws, or by resolution of the stockholders.
D. The stockholders or directors shall have power to hold their meetings, and
keep the books, outside of the State of Delaware, at such places as may be
from time to time designated.
ELEVENTH:
A. As used in this Article ELEVENTH:
1. "Affiliate" and "Associate" shall be determined pursuant to Rule 12b-2 (or
any successor rule) of the General Rules and Regulations under the Securities
Exchange Act of 1934 (the "Exchange Act");
2. "Beneficial Ownership" shall be determined pursuant to Rule 13d-3 (or any
successor rule) of the General Rules and Regulations under the Exchange Act
and shall include:
[i] Shares of stock which a Person has the right to acquire, hold or vote
whether pursuant to any agreement, arrangement or understanding, or upon
exercise of conversion rights, warrants, options or otherwise; and
[ii] Shares of stock which are beneficially owned, directly or indirectly
(including shares deemed owned through application of the foregoing clause
[i]), by any Person (a) with which it or its Affiliate or Associate has any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of shares of stock of the Corporation or (b) which is its
Affiliate or Associate;
3. "Business Combination" shall include:
[i] Any merger, consolidation or share exchange of the Corporation or any of
its subsidiaries with or into (a) any Related Person, or (b) any other
corporation (whether or not itself a Related Person) which is, or after such
merger, consolidation or share exchange would be, an affiliate of a Related
Person; in each case irrespective of which corporation or company is the
surviving entity;
[ii] The sale, lease, exchange, mortgage, pledge, transfer or other
disposition to or with any Related Person (in one transaction
or a series of transactions) of any assets of the Corporation or any
subsidiary thereof or any assets of any Related Person having an aggregate
fair market value of $1,000,000 or more;
[iii] The issuance or transfer by the Corporation or any subsidiary thereof
(in one transaction or a series of transactions) of any securities of the
Corporation or any subsidiary thereof to any Related Person (other than an
issuance or transfer of securities which is effected on a pro rata basis to
all shareholders of the Corporation) in exchange for cash, securities or other
property (or a combination thereof) having an aggregate fair market value of
$1,000,000 or more;
[iv] The acquisition by the Corporation or any of its subsidiaries of any
securities of a Related Person;
[v] The adoption of any plan or proposal for the liquidation or dissolution of
the Corporation proposed by or on behalf of any Related Person;
[vi] Any reclassification or recapitalization of securities of the Corporation
if the effect, directly or indirectly, of such transaction is to increase the
relative voting power of any Related Person; or
[vii] Any agreement, contract or other arrangement providing for or resulting
in any of the transactions described in this definition of Business
Combination.
4. "Continuing Director" shall mean a member of the Board of Directors of the
Corporation who is not affiliated with any Related Person and was a member of
the Board of Directors prior to the time that the Related Person acquired the
last shares of stock of the Corporation entitling such Related Person to
exercise, in the aggregate, in excess of ten percent [10%] of the voting power
of any class or series of capital stock of the Corporation, or a Person
designated as a Continuing Director by a majority of Continuing Directors;
5. "Person" shall include any individual, corporation, partnership, person or
other entity; and
6. "Related Person" shall mean any Person, together with any Affiliate or
Associate of such Person, which has Beneficial Ownership, directly or
indirectly, of shares of stock of the Corporation entitling such Person to
exercise ten percent [10%] or more of the voting power of the outstanding
shares of any class or series of capital stock of the Corporation, together
with the successors and assigns of any such Person in any transaction or
series of transactions not involving a public offering of the Corporation's
stock within the meaning of the Securities Act of 1933, except the Corporation
or employee benefit plans of the Corporation and the trustees of such plans in
such capacity.
B. Unless the conditions set forth in subparagraphs [1] or [2] of this
paragraph B are satisfied, the affirmative vote of not less than seventy-five
percent [75%] of the voting power of all the then outstanding shares of
capital stock of the Corporation entitled to vote in elections of directors,
considered for the purposes of this Article ELEVENTH as one class, shall be
required for the adoption or authorization of a Business Combination involving
any Related erson. Such affirmative vote shall be required notwithstanding the
act that no vote, or a lesser percentage, may be required by law or n any
agreement with any national securities exchange or otherwise, but such 75%
affirmative vote shall not be applicable if:
1. A Business Combination with a Related Person is approved by a majority of
the Continuing Directors; such approval shall be made by a majority of the
Continuing Directors even if such majority does not constitute a quorum of the
members of the Board of Directors then in office and shall be in addition to
any other approval of the Corporation's Board of Directors required by
applicable law; or
2. All of the following conditions are satisfied:
[i] The cash and fair market value of the property, securities or other
consideration (including, without limitation, stock of the Corporation
retained by its existing public stockholders in the event of a Business
Combination in which the Corporation is the surviving corporation) to be
received per share by the holders of each class or series of stock of the
Corporation in a Business Combination with a Related Person is not less than
the highest per share price (including brokerage commissions and soliciting
dealer's fees) paid by such Related Person in acquiring any shares of such
class or series, respectively; and
[ii] The consideration to be received by holders of a particular class of
securities shall be in cash or in the same form as the Related Person has
previously paid for shares of such class of stock. If the Related Person has
paid for shares of any class of stock with varying forms of consideration, the
form of consideration for such class of stock shall be either cash or the form
used to acquire the largest number of shares of such class of stock previously
acquired by it; and
[iii] After a Person has become a Related Person and prior to the consummation
of a Business Combination, except as approved by a majority of the Continuing
Directors (a) there shall have been no failure to declare and pay at the
regular date therefor any full quarterly dividends (whether or not cumulative)
on any outstanding preferred stock and (b) there shall have been [1] no
reduction in the annual rate of dividends paid on shares of common stock of
the Corporation (except as necessary to reflect any subdivision of such
shares), and [2] an increase in the annual rate of dividends as necessary to
reflect any reclassification (including any reverse stock split),
recapitalization, reorganization or any similar transaction which has the
effect of reducing the number of outstanding shares of common stock of the
Corporation; and
[iv] After a Person has become a Related Person and prior to the consummation
of a Business Combination, except as approved by a majority of the Continuing
Directors, there shall have been no amendment to any trust or other agreement
with respect to any employee savings, stock, pension or other benefit plan the
effect of which is to change in any manner the provisions governing the voting
of any capital stock in such plan; and
[v] The Related Person shall not have received the benefit, directly or
indirectly (except proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance or tax credits provided by
the Corporation, whether in anticipation of or in connection with such
Business Combination or otherwise; and
[vi] A proxy or information statement complying with the requirements of the
Exchange Act shall be mailed to public stockholders of the Corporation
(whether or not such proxy or information statement is required to be mailed
pursuant to the Exchange Act). The proxy statement shall contain at the front
thereon, in a prominent place, any recommendations as to the advisability (or
inadvisability) of the Business Combination which the Continuing Directors, or
any of them, may choose to state and, if deemed useful by a majority of the
Continuing Directors, an opinion of a reputable investment banking firm as to
the fairness (or not) of the terms of such Business Combination, from the
point of view of the remaining public stockholders of the Corporation (such
investment banking firm to be selected by a majority of the Continuing
Directors and to be paid a reasonable fee for their services by the
Corporation upon receipt of such opinion).
C. The provisions of this Article ELEVENTH shall also apply to a Business
Combination with any Person which at any time has been a Related Person,
notwithstanding the fact that such Person is no longer a Related Person, if,
at the time the definitive agreement or other arrangements relating to a
Business Combination with such Person was entered into, it was a Related
Person or if, as of the record date for the determination of stockholders
entitled to notice of and to vote on the Business Combination, such Person is
an Affiliate of the Corporation.
D. A majority of the Continuing Directors shall have the power and duty,
consistent with their fiduciary obligations, to determine for the purposes of
this Article ELEVENTH, on the basis of information known to them,
[1] Whether any Person is a Related Person;
[2] Whether any Person is an Affiliate or Associate of another;
[3] Whether any Person has an agreement, arrangement, or understanding with
another; or
[4] The fair market value of property, securities or other consideration
(other than cash) to be received by holders of shares of stock of the
Corporation. The good faith determination of a majority of the Continuing
Directors of such matters shall be binding and conclusive for purposes of
this Article ELEVENTH.
E. No amendment to the Certificate of Incorporation of the Corporation shall
amend, alter, change or repeal any of the provisions of this Article ELEVENTH,
unless the amendment effecting such amendment, alteration, change or repeal
shall receive the affirmative vote of not less than seventy-five percent [75%]
of the shares of stock of the Corporation entitled to vote in elections of
directors, considered for the purposes of this Article ELEVENTH as one class;
provided that this paragraph E shall not apply to, and such seventy-five
percent [75%] vote shall not be required for, any amendment, alteration,
change or repeal recommended to the stockholders by a majority of the
Continuing Directors.
F. Nothing contained in this Article ELEVENTH shall be construed to relieve
the Board of Directors or any Related Person from any fiduciary obligation
imposed by law.
TWELFTH:
A. Any action by stockholders of the Corporation shall be taken at a meeting
of stockholders and no corporate action may be taken by written consent of
stockholders entitled to vote upon such action.
B. No amendment to the Certificate of Incorporation of the Corporation shall
amend, alter, change or repeal any of the provisions of this Article TWELFTH,
unless the amendment effecting such amendment, alteration, change or repeal
shall receive the affirmative vote of not less than seventy-five percent [75%]
of the shares of stock of the Corporation entitled to vote in elections of
directors, considered for the purposes of this Article TWELFTH as one class.
THIRTEENTH:
A. The number of directors of the Corporation shall be determined from time to
time only by resolution adopted by the Board of Directors pursuant to the
Bylaws. The directors shall be classified with respect to the time for which
they severally hold office, into three classes, as nearly equal in number as
possible, as shall be provided in the manner specified in the Bylaws of the
Corporation, with each director in each class to hold office until his or her
successor is elected and qualified. At each annual meeting of stockholders
beginning with the annual meeting of stockholders to be held in 1987, the
successors of the class of directors whose term expires at that meeting shall
be elected to hold office for a term expiring at the annual meeting of
stockholders to be held in the third year following the year of their
election, with each director in each such class to hold office until his
or her successor is elected and qualified.
B. Advance notice of stockholder nominations for the election of directors
shall be given in the manner provided by the Bylaws of the Corporation.
C. Any vacancies on the Board of Directors resulting from death, resignation,
disqualification, removal, an increase in the number of directors, or other
causes shall be filled only by the affirmative vote of a majority of the
remaining directors then in office, even though less than a quorum of the
Board of Directors. Any director elected in accordance with the preceding
sentence shall hold office for the remainder of the full term of the class of
directors in which the vacancy occurred and until such director's successor
shall have been elected and qualified. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.
D. Any director may be removed from office, with cause, but only by the
affirmative vote of at least 75% of the combined voting power of the then
outstanding a shares of all classes and series of stock of the company
entitled to vote generally in the election of directors ("Voting Stock"),
voting together as a single class.
E. Notwithstanding anything contained in this Certificate of Incorporation to
the contrary, the affirmative vote of at least 75% of the combined voting
power of the Voting Stock, voting together as a single class, shall be
required to alter, amend, or repeal, or adopt any provision inconsistent with,
this Article THIRTEENTH.
FOURTEENTH:
A. No director of the Corporation shall be personally liable to the
Corporation or its stockholders for monetary damages for any breach of
fiduciary duty by such director as a director. Notwithstanding the foregoing,
a director shall be liable to the extent provided by applicable law (i) for
breach of the director's duty of loyalty to the Corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) pursuant to
Section 174 of the Delaware General Corporation Law or any
amendment or successor provision thereto, or (iv) for any transaction from
which the director derived an improper personal benefit.
B. The Corporation shall indemnify in the same manner and to the fullest
extent permitted by the General Corporation Law of the State of Delaware, as
it may be in effect from time to time, all persons that such law grants the
Corporation the power to indemnify.
C. No amendment to or repeal of any provision of this Article FOURTEENTH shall
apply to or have any effect on the liability or alleged liability of any
director of the Corporation for or with respect to any acts or omissions of
such director occurring prior to such amendment.
CONFORMED COPY
$500,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of
September 19, 1997
among
Westvaco Corporation
The Banks Listed Herein
Morgan Guaranty Trust Company of New York,
as Administrative Agent,
Documentation Agent and Co-Agent,
and
The Bank of New York,
as Syndication Agent and Co-Agent
AMENDED AND RESTATED CREDIT AGREEMENT
AMENDED AND RESTATED CREDIT AGREEMENT dated as of
September 19, 1997 (this "Amendment and Restatement")
among WESTVACO CORPORATION, the BANKS listed on the
signature pages hereof, MORGAN GUARANTY TRUST COMPANY
OF NEW YORK, as Administrative Agent, Documentation
Agent and Co-Agent, and THE BANK OF NEW YORK, as
Syndication Agent and Co-Agent.
W I T N E S S E T H :
WHEREAS, certain of the parties hereto have
heretofore entered into a Credit Agreement dated as of
June 21, 1993 (as heretofore amended, the "Agreement");
and
WHEREAS, the parties hereto desire to amend the
Agreement as set forth herein and to restate the
Agreement in its entirety to read as set forth in the
Agreement with the amendments specified below;
NOW, THEREFORE, the parties hereto agree as
follows:
Section 1. Definitions; References. Unless
otherwise specifically defined herein, each capitalized
term used herein which is defined in the Agreement
shall have the meaning assigned to such term in the
Agreement. Each reference to "hereof", "hereunder",
"herein" and "hereby" and each other similar reference
and each reference to "this Agreement" and each other
similar reference contained in the Agreement shall from
and after the date hereof refer to the Agreement as
amended and restated hereby and each reference to the
"Notes" shall include the Notes delivered pursuant to
Section 9 hereof.
Section 2. Extension of Facility.
(a) The date "December 31, 1997" appearing in the
definition of Termination Date is changed to "December
31, 2000".
(b) The date "December 31, 1999" appearing in the
definition of Maturity Date is changed to "December 31,
2002".
(c) The dates "June 30, 1998" and "June 30, 1999"
appearing in the definition of Commitment Reduction
Date are changed to "June 30, 2001" and "June 30, 2002",
respectively.
Section 3. Amended Pricing.
(a) The definition of "CD Margin" in Section
2.07(b) is amended to read in its entirety as follows:
"CD Margin" means 0.275% per annum.
(b) The definition of "Euro-Dollar Margin" in
Section 2.07(c) is amended to read in its entirety as
follows:
"Euro-Dollar Margin" means 0.15% per annum.
(c) The reference to "1/10th of 1%" appearing in
Section 2.08(a) is changed to "0.08%".
Section 4. Amendment of Section 2.07 of the
Agreement. Section 2.07 is amended by deleting the
reference to "Section 327.3(e)" appearing in the definition
of Assessment Rate and substituting in lieu thereof "Section
327.4(a)".
Section 5. Updated Representations.
(a) Each reference to "1991", "1992" or "1993" in
Section 4.04 is changed to "1995", "1996" or "1997",
respectively.
(b) The definition of "Borrower's 1992 Form 10-K"
is amended by changing each reference to "1992" to "1996".
Section 6. Changes to Commitments. With effect
from and including the date this Amendment and
Restatement becomes effective in accordance with
Section 10, (i) the aggregate amount of the Commitments
shall be increased to $500,000,000; (ii) each of the
Bank Brussels Lambert, New York Branch and PNC Bank,
National Association (the "New Banks") shall become a
Bank party to the Agreement and (iii) the Commitment
of each Bank shall be the amount set forth opposite the
name of such Bank on the signature pages hereof.
Shawmut Bank Connecticut, N.A. (the "Departing Bank")
shall upon such effectiveness cease to be a Bank party
to the Agreement, and all accrued fees and other
amounts payable under the Agreement for the account of
the Departing Bank shall be due and payable on such
date; provided that the provisions of Sections 8.03 and
9.03 of the Agreement shall continue to inure to the
benefit of the Departing Bank.
Section 7. Agents. With the effect from and
including the date this Amendment and Restatement
becomes effective in accordance with Section 10 hereof,
Morgan Guaranty Trust Company of New York shall be
Administrative Agent, Documentation Agent and Co-Agent
under the Agreement and The Bank of New York shall be
Syndication Agent and Co-Agent thereunder. In
furtherance thereof:
(a) The following new defined terms are added to
Section 1.01 of the Agreement in their appropriate
alphabetical position:
"Administrative Agent" means Morgan Guaranty
Trust Company of New York in its capacity as
Administrative Agent hereunder, and its successors
in such capacity.
"Co-Agents" means Morgan Guaranty Trust
Company of New York and The Bank of New York, each
in its capacity as Co-Agent hereunder.
"Documentation Agent" means Morgan Guaranty
Trust Company of New York in its capacity as
Documentation Agent hereunder, and its successors
in such capacity.
"Syndication Agent" means The Bank of New
York in its capacity as Syndication Agent
hereunder, and its successors in such capacity.
(b) The following definition in Section 1.01 of
the Agreement is amended to read in its entirety as
follows:
"Agent" means the Administrative Agent, the
Documentation Agent or the Syndication Agent, as
the context may require.
(c) Each reference to the "Agent" in Articles I
through VI and VIII of the Agreement is changed to the
"Administrative Agent".
(d) Section 3.01 of the Agreement is deleted.
(e) Article VII of the Agreement is amended to
read in its entirety as follows:
ARTICLE VII
THE AGENTS
SECTION 7.01. Appointment and Authorization.
Each Bank irrevocably appoints and authorizes each
Agent to take such action as agent on its behalf
and to exercise such powers under this Agreement
and the Notes as are delegated to such Agent by
the terms hereof or thereof, together with all
such powers as are reasonably incidental thereto.
SECTION 7.02. Agents and Affiliates. Morgan
Guaranty Trust Company of New York and The Bank of
New York shall have the same rights and powers
under this Agreement as any other Bank and may
exercise or refrain from exercising the same as
though it were not an Agent, and Morgan Guaranty
Trust Company of New York and The Bank of New York
and their respective affiliates may accept
deposits from, lend money to, and generally engage
in any kind of business with the Borrower or any
Subsidiary or affiliate of the Borrower as if it
were not an Agent hereunder.
SECTION 7.03. Action by Agents. The
obligations of the Agents hereunder are only those
expressly set forth herein. Without limiting the
generality of the foregoing, no Agent shall be
required to take any action with respect to any
Default, except in the case of the Administrative
Agent as expressly provided in Article VI.
SECTION 7.04. Consultation with Experts.
Each Agent may consult with legal counsel (who may
be counsel for the Borrower), independent public
accountants and other experts selected by it and
shall not be liable for any action taken or
omitted to be taken by it in good faith in
accordance with the advice of such counsel,
accountants or experts.
SECTION 7.05. Liability of Agents. Neither
any Agent nor any of their respective affiliates
nor any of the respective directors, officers,
agents or employees of the foregoing shall be
liable for any action taken or not taken by it in
connection herewith (i) with the consent or at the
request of the Required Banks or (ii) in the
absence of its own gross negligence or willful
misconduct. Neither any Agent nor any of their
respective affiliates nor any of the respective
directors, officers, agents or employees of the
foregoing shall be responsible for or have any
duty to ascertain, inquire into or verify (i) any
statement, warranty or representation made in
connection with this Agreement or any borrowing
hereunder; (ii) the performance or observance of
any of the covenants or agreements of the
Borrower; (iii) the satisfaction of any condition
specified in Article III, except in the case of
the Administrative Agent receipt of notice
required to be given to such Agent; or (iv) the
validity, effectiveness or genuineness of this
Agreement, any Notes or any other instrument or
writing furnished in connection herewith. No
Agent shall incur any liability by acting in
reliance upon any notice, consent, certificate,
statement, or other writing (which may be a bank
wire, telex, facsimile or similar writing)
believed by it to be genuine or to be signed by
the proper party or parties. Without limiting the
generality of the foregoing, the use of the term
"agent" in this Agreement with reference to the
Agents is not intended to connote any fiduciary or
other implied (or express) obligations arising
under agency doctrine of any applicable law.
Instead, such term is used merely as a matter of
market custom and is intended to create or reflect
only an administrative relationship between
independent contracting parties.
SECTION 7.06. Indemnification. Each Bank
shall, ratably in accordance with its Commitment,
indemnify each Agent (to the extent not reimbursed
by the Borrower) against any cost, expense
(including counsel fees and disbursements), claim,
demand, action, loss or liability (except such as
result from such Agent's gross negligence or
willful misconduct) that such Agent may suffer or
incur in connection with this Agreement or any
action taken or omitted by such Agent hereunder.
SECTION 7.07. Credit Decision. Each Bank
acknowledges that it has, independently and
without reliance upon any Agent or any other Bank,
and based on such documents and information as it
has deemed appropriate, made its own credit
analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it
will, independently and without reliance upon any
Agent or any other Bank, and based on such
documents and information as it shall deem
appropriate at the time, continue to make its own
credit decisions in taking or not taking any
action under this Agreement.
SECTION 7.08. Successor Agent. Any Agent
may resign at any time by giving written notice
thereof to the Banks and the Borrower. Upon any
such resignation, the Borrower shall have the
right to appoint a successor Agent, subject to the
approval of the Required Banks. If no successor
Agent shall have been so appointed by the Borrower
and approved by the Required Banks, and shall have
accepted such appointment, within 30 days after
the retiring Agent gives notice of resignation,
then the retiring Agent may, on behalf of the
Banks, appoint a successor Agent, which shall be a
commercial bank organized or licensed under the
laws of the United States of America or of any
State thereof and having a combined capital and
surplus of at least $50,000,000. Upon the
acceptance of its appointment as Agent hereunder
by a successor Agent, such successor Agent shall
thereupon succeed to and become vested with all
the rights and duties of the retiring Agent, and
the retiring Agent shall be discharged from its
duties and obligations hereunder. After any
retiring Agent's resignation hereunder as Agent,
the provisions of this Article shall inure to its
benefit as to any actions taken or omitted to be
taken by it while it was Agent.
SECTION 7.09. Syndication Agent and Co-Agents.
Nothing in this Agreement shall impose
upon the Syndication Agent, in such capacity, or
the Co-Agents, in such capacity, any duties or
obligations whatsoever.
(f) Section 9.01 of the Agreement is amended by
changing each reference to "the Agent" therein to "the
Administrative Agent".
(g) Section 9.02 is amended by changing the
reference to "the Agent or any Bank" to "any Agent or
Bank".
(h) Section 9.03(a) is amended (i) by changing
each of the first two references to "the Agent" to "the
Agents" and (ii) by changing the reference to "the
Agent or any Bank" to "any Agent or Bank".
(i) Section 9.03(b) is amended by changing the
reference to "the Agent" to "any Agent".
(j) Section 9.05 is amended (i) by changing the
first reference to "the Agent" to "any Agent" and (ii)
by changing the second reference to "the Agent" to "such
Agent".
(k) Section 9.06 is amended by changing each
reference therein to "the Agent" to "the Administrative
Agent".
(l) Section 9.07 is amended by changing the
reference to "the Agent" to "each Agent".
(m) Each reference to the Credit Agreement in the
Exhibits to the Agreement is amended to conform to the
cover page of this Amendment and Restatement.
Section 8. Representations and Warranties. The
Borrower represents and warrants that as of the date
hereof and after giving effect hereto:
(a) no Default has occurred and is continuing; and
(b) each representation and warranty of the
Borrower set forth in the Agreement after giving effect
to this Amendment and Restatement is true and correct
as though made on and as of such date.
Section 9. Governing Law. This Amendment and
Restatement shall be governed by and construed in
accordance with the laws of the State of New York.
Section 10. Counterparts; Effectiveness. This
Amendment and Restatement may be signed in any number
of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Amendment
and Restatement shall become effective on the date that
each of the following conditions shall have been
satisfied:
(i) receipt by the Documentation Agent of
duly executed counterparts hereof signed by each
of the parties hereto (or, in the case of any
party as to which an executed counterpart shall
not have been received, the Agent shall have
received telegraphic, telex or other written
confirmation from such party of execution of a
counterpart hereof by such party);
(ii) receipt by the Documentation Agent of a
duly executed Note for each New Bank;
(iii) receipt by the Documentation Agent of an
opinion of the General Counsel of the Borrower
substantially in the form of Exhibit A hereto; and
(iv) receipt by the Documentation Agent of all
documents it may reasonably request relating to
the existence of the Borrower, the corporate
authority for and the validity of the Agreement as
amended and restated hereby and any other matters
relevant hereto, all in form and substance
satisfactory to the Documentation Agent;
provided that this Amendment and Restatement shall not
become effective or binding on any party hereto unless
all of the foregoing conditions are satisfied not later
than September 19, 1997. The Documentation Agent shall
promptly notify the Borrower and the Banks of the
effectiveness of this Amendment and Restatement, and
such notice shall be conclusive and binding on all
parties hereto.
IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed by their
respective authorized officers as of the day and year
first above written.
WESTVACO CORPORATION
By James E. Stoveken, Jr.
Title: Senior Vice President
Commitments
$ 75,000,000 MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By Robert L. Barrett
Title: Vice President
$ 75,000,000 THE BANK OF NEW YORK
By William G.C. Dakin
Title: Vice President
$ 65,000,000 THE CHASE MANHATTAN BANK
By Helene Santo
Title: Vice President
$ 50,000,000 CITIBANK, N.A.
By Theodore J. Beck
Title: Attorney-in-Fact
$ 50,000,000 WACHOVIA BANK, N.A.
(successor by merger to Wachovia Bank
of Georgia, N.A.)
By William C. Christie
Title: Senior Vice President
$ 50,000,000 NATIONSBANK, N.A.
By Joseph L. Corah
Title: Vice President
$ 25,000,000 BANKBOSTON, N.A.
By Lisa Gelfand Abrams
Title: Vice President
$ 25,000,000 THE NORTHERN TRUST COMPANY
By Joseph G. Yacullo
Title: Vice President
$ 20,000,000 BANK BRUSSELS LAMBERT
NEW YORK BRANCH
By John Kippax
Title: Vice President & Manager
By Dominick H.J. Vangaever
Title: Senior Vice President - Credit
$ 20,000,000 CRESTAR BANK
By Keith A. Hubbard
Title: Senior Vice President
$ 20,000,000 NATIONAL CITY BANK
By Joseph D. Robeson
Title: Vice President
$ 20,000,000 PNC BANK, NATIONAL ASSOCIATION
By Donald V. Davis
Title: Vice President
$ 5,000,000 per pro BROWN BROTHER HARRIMAN & CO.
By W. Carter Sullivan, III
Title: Senior Manager
$ -0- FLEET NATIONAL BANK, formerly known as
Fleet National Bank of Connecticut, successor by
merger to Shawmut Bank Connecticut, N.A.
By Dorothy E. Bambach
Title: Senior Vice President
$500,000,000
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK, as
Administrative Agent,
Documentation Agent and Co-Agent
By Robert L. Barrett
Title: Vice President
60 Wall Street
New York, New York 10260-0060
Attention: Credit Administration
Telex number: 177615 MGT UT
THE BANK OF NEW YORK, as
Syndication Agent and Co-Agent
By William G.C. Dakin
Title: Vice President
Address: One Wall Street,
New York, NY 10286
EXHIBIT A
OPINION OF
COUNSEL FOR THE BORROWER
[Effective Date]
To the Banks and the Agents
Referred to Below
c/o Morgan Guaranty Trust Company
of New York, as Documentation Agent
60 Wall Street
New York, New York 10260-0060
Dear Sirs:
I am General Counsel of Westvaco Corporation (the
"Borrower"), and I have acted in that capacity in
connection with the Credit Agreement dated as of June
21, 1993, as amended by Amendment No. 1 dated as of
August 22, 1994 and as amended and restated by the
Amended and Restated Credit Agreement dated as of
September __, 1997 (as so amended and restated, the
"Credit Agreement"), among the Borrower, the banks
listed on the signature pages thereof and Morgan
Guaranty Trust Company of New York, as Administrative
Agent, Documentation Agent and Co-Agent, and The Bank
of New York, as Syndication Agent and Co-Agent. Terms
defined in the Credit Agreement are used herein as
therein defined.
I have examined originals or copies, certified or
otherwise identified to my satisfaction, of such
documents, corporate records, certificates of public
officials and other instruments and have conducted such
other investigations of fact and law as I have deemed
necessary or advisable for purposes of this opinion.
Upon the basis of the foregoing, I am of the
opinion that:
1. The Borrower is a corporation validly existing
and in good standing under the laws of Delaware, and
has all corporate powers and all material governmental
licenses, authorizations, consents and approvals
required to carry on its business as now conducted.
2. The execution, delivery and performance by the
Borrower of the Credit Agreement and the Notes are
within the Borrower's corporate powers, have been
authorized by all necessary corporate action, require
no action by or in respect of, or (except for
informational filings under section 13 or 15(d) of the
Exchange Act) filing with, any governmental body,
agency or official and do not contravene, or constitute
a default under, any provision of applicable law or
regulation or of the certificate of incorporation or
by-laws of the Borrower or of any agreement, judgment,
injunction, order, decree or other instrument binding
upon the Borrower or result in the creation or
imposition of any Lien on any asset of the Borrower or
any of its Subsidiaries.
3. The Credit Agreement constitutes a valid and
binding agreement of the Borrower and the Notes
constitute valid and binding obligations of the
Borrower.
4. There is no action, suit or proceeding pending
against, or to the best of my knowledge threatened
against, the Borrower or any of its Subsidiaries before
any court or arbitrator or any governmental body,
agency or official, in which there is a reasonable
possibility of an adverse decision which could
materially adversely affect the business or
consolidated financial position of the Borrower and its
Consolidated Subsidiaries, considered as a whole, or
which in any manner draws into question the validity of
the Credit Agreement or the Notes.
5. Each of the Borrower's Domestic Subsidiaries
is a corporation validly existing and in good standing
under the laws of its jurisdiction of incorporation,
and has all corporate powers and all material
governmental licenses, authorizations, consents and
approvals required to carry on its business as now
conducted.
Very truly yours,
Highlights of the year
1997 1996
Sales $2,982,288,000 $3,045,450,000
Net income $ 162,700,000 $ 212,156,000
Net income per common share $1.60 $2.09
Common stock dividends $ 89,778,000 $ 89,539,000
Dividends per common share $.88 $.88
Capital expenditures $ 613,896,000 $ 510,902,000
Sales by quarter Earnings by quarter
In millions In millions Per share
Quarter 1997 1996 Quarter 1997 1996 1997 1996
First $ 736 $ 749 First $ 35.5 $ 62.4 $ .35 $ .61
Second 725 760 Second 38.0 50.6 .37 .50
Third 738 758 Third 37.5 43.6 .37 .43
Fourth 783 778 Fourth 51.7 55.6 .51 .55
Total $2,982 $3,045 Total $162.7 $212.2 $1.60 $2.09
Quarterly dividends per share Quarterly price ranges of stock*
1997 1996
Quarter 1997 1996 Quarter High Low High Low
First $.22 $.22 First $30 1/2 $27 1/8 $29 1/4 $24 1/2
Second .22 .22 Second 29 7/8 25 32 28
Third .22 .22 Third 33 3/4 27 7/8 33 1/8 27 3/8
Fourth .22 .22 Fourth 37 1/2 31 3/16 30 1/4 27 1/2
Total $.88 $.88
* 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, 1997, the ratio of current assets to current
liabilities was 2.0, compared to 1.7 and 1.8 in 1996 and 1995,
respectively. The twelve-month average collection period for trade
receivables was 32 days in 1997, 1996 and 1995. Cash and marketable
securities increased $60 million, reflecting increased financing
activities offset by increased capital expenditures and lower cash
from operations. Cash flows from operations were $391 million for
1997, compared to $522 million in 1996 and $523 million in 1995. The
decline was principally due to lower net income and changes in
working capital items, primarily higher receivables and inventories
and lower accounts payable and accrued expenses. Receivables
increased 8.5% in 1997 due to stronger sales in the latter part of
the fourth quarter and increased export shipments.
New investment in plant and timberlands was $614 million for 1997,
compared to $511 million in 1996 and $309 million in 1995. Cash
payments for these investments totaled $621 million in 1997, $522
million in 1996 and $290 million in 1995. The increase in capital
expenditures is related to projects including paper machine
improvements, the construction of the Chemical Division's new carbon
plant in Wickliffe, KY, improvements to the chemical recovery and
wood handling systems at the bleached board mill in Covington, VA,
and the removal of elemental chlorine from all of our pulp bleaching
processes. At October 31, 1997, the amounts committed to complete
all authorized capital projects were $484 million. Capital
expenditures for 1998 and for each of the next several years are
expected to be approximately $600 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 1997 included the
issuance of $150 million of 7.65% thirty-year sinking fund
debentures in March 1997 and $150 million of 7 1/2% thirty-year
sinking fund debentures in June 1997. The funds are to be used for
capital spending and general purposes. The company issued $80
million of 7.67% thirty-year revenue bonds in January to finance the
construction of the carbon plant in Wickliffe, KY. At October 31,
1997, the company had no outstanding commercial paper but may utilize
commercial paper as it has in the past. During the fourth quarter,
the company amended its revolving credit agreement to increase it to
$500 million. There were no borrowings during the year under this
arrangement. The ratio of debt to total capital employed was 34% at
October 31, 1997, compared to 29% in 1996 and 30% in 1995. In 1997,
the Board of Directors authorized the periodic repurchase of the
company's common stock to satisfy issuances under its stock option
plans. During 1997, 500,000 shares were purchased at a cost of $17
million and 239,542 shares were issued out of treasury to satisfy
stock option exercises.
Environmental matters: The company operates in an industry
subject to extensive environmental regulations. Capital expenditures
for pollution control facilities may increase over time as a result
of additional regulation of industry by the U.S. Environmental
Protection Agency (EPA).
In 1995, the company authorized removal of elemental chlorine from
all of its pulp bleaching processes. This important initiative,
completed during 1997 at a cost of approximately $100 million,
represents a major step already taken by Westvaco in addressing new
EPA regulations for the U.S. pulp and paper industry regarding air
and water quality. These regulations, which have long been
anticipated, were just announced in November 1997; they have not as
yet been published as we prepare this report. It is expected that
implementation of these new regulations will be required over the
next several years. In the next few months, as the regulations
become final and available for review, the company expects to reduce
substantially the upper end of the range of its previously estimated
compliance costs, which have been in the range of $175 to $400
million, including expenditures already incurred. Downward revisions
to its previously estimated additional operating costs, which were in
the range of $25 to $50 million pretax annually, are also
anticipated.
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: In 1998, the company will adopt the
provisions of American Institute of Certified Public Accountants
Statement of Position 96-1, Environmental Remediation Liabilities,
and believes that the adoption will not have a material effect on the
company's financial position or results of operations. The company
is required to adopt a new accounting standard in fiscal year 1998:
Statement of Financial Accounting Standards (SFAS) 128, Earnings per
Share. Also, the company is required to adopt two new accounting
standards in fiscal year 1999: SFAS 130, Reporting Comprehensive
Income, and SFAS 131, Disclosures about Segments of an Enterprise and
Related Information. For further discussion, see the summary of
significant accounting policies in the notes to the financial
statements.
Analysis of operations
Overall, the results for the fiscal year ended October 31, 1997
reflect the very competitive market conditions felt throughout our
industry. Sales of $2.98 billion for the fiscal year were down 2.1%
from 1996, the result of a 4.4% decrease in price and product mix,
partially offset by an increase in the volume of shipments of 2.3%.
Market conditions gradually improved during our fourth quarter,
extending a trend that began earlier in the fiscal year. Net income
in 1997 was $162.7 million, or $1.60 per share, a decline of 23.3%
from $212.2 million, or $2.09 per share, earned in 1996. While
pricing remains a significant challenge, orders for linerboard and
coated printing papers have increased, and orders for our bleached
board have shown improvements from third quarter levels. Export
sales from the United States represented 16% of the company's
consolidated sales for 1997, and increased 10% from last year despite
slower economic growth in some markets. Sales outside of the United
States, including sales of our foreign operating subsidiaries,
accounted for approximately 25% of consolidated sales. Gross profit
margin for the year was 19%, compared with 21% in 1996. 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 for paper machine improvements. The
decrease in cost of products sold for the year was attributable to
decreases in some direct materials and conversion costs.
Depreciation and amortization expense for the year increased 12% from
the prior year.
Bleached segment: Bleached segment sales decreased 1.7% from the
prior year to $2.02 billion, due to a decrease in price and product
mix, partially offset by volume increases. Operating profit for the
year decreased 17% from 1996 due to lower printing paper prices and
the impact of taking downtime for paper machine improvements. During
the 1997 fiscal year, approximately 26% 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. The current
legal and regulatory pressures on that industry could have an adverse
effect on future bleached segment sales and profitability. We would
expect to offset any unit volume declines in U.S. tobacco sales by
continuing growth in our sales to the liquid, dry and frozen food,
personal care, foreign tobacco and other consumer product markets of
the world.
Unbleached segment: Unbleached segment sales for the year
decreased 8% to $638 million, due to decreases in price and product
mix of 8.9%, partially offset by an increase in volume. Although the
demand for linerboard, saturating kraft paper and folding carton
board has strengthened, the unbleached segment pricing was adversely
affected by the very competitive conditions in those markets. In
Brazil, similar conditions impacted the Brazilian corrugated box
markets. Operating profit for the unbleached segment for the year
was $102.4 million which decreased from $134.7 million for the prior
year period due mainly to pricing pressures and some temporary
machine downtime taken in the fourth quarter. Rigesa, Ltda., our
Brazilian subsidiary, accounted for 37% of unbleached segment
operating profit in 1997. The potential for slower economic growth
in Brazil, as the government there enacts what we believe are prudent
measures to promote economic stability, may influence business
conditions in that country. The company cannot predict the future
strength of the Brazilian market. Due to the decline in the rate of
inflation in Brazil in recent years, effective November 1, 1997, the
Brazilian Real will become the functional currency for the company's
Brazilian operations and adjustments resulting from financial
statement translations will be included in the shareholders' equity
section of the balance sheet.
Chemicals segment: Chemicals segment sales for the year increased
8.6% from 1996 to $326.3 million, due to favorable changes in price
and product mix of 6.3% and volume of 2.3% and included the addition
of the new carbon plant which began operations in the third quarter
of 1997. Operating profit for the chemicals segment increased 15.1%.
Other items: The effective tax rate was 34.0% for 1997 compared
to 36.9% for the 1996 period. The decline was principally due to
foreign earnings taxed at lower rates. Westvaco, like most companies
today, is dependent upon computer technology to effectively carry out
its operations. The company is currently in the process of
evaluating its computer software and databases to ensure that any
modifications required to be "Year 2000" compliant are made in a
timely manner. The company does not expect the financial impact of
such modifications to be material to the company's financial position
or results of operations in any period.
Forward-looking statements
Certain statements in this document and elsewhere by management of
the company that are neither reported financial results nor other
historical information are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements are not guarantees of future
performance and are subject to known and unknown risks, uncertainties
and other factors which may cause or contribute to actual results of
company operations, or the performance or achievements of the
company, or industry results, to differ materially from those
expressed in or implied by the forward-looking statements. In
addition to any such risks, uncertainties and other factors discussed
elsewhere herein, risks, uncertainties and other factors that could
cause or contribute to actual results differing materially from those
expressed in or implied by the forward-looking statements include,
but are not limited to, competitive pricing for the company's
products; changes in raw materials, energy and other costs;
fluctuations in demand and changes in production capacities; changes
to economic growth in the U.S. and international economies,
especially in the Far East and Brazil; governmental policies and
regulations affecting the environment; and currency movements.
Fiscal year 1996
Sales and earnings for the fiscal year ended 1996 reflected 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 reflected
market softness which developed in the fall of 1995 when our markets
were affected by relatively high customer inventories and capacity
additions in certain sectors of our industry. While pricing remained
under pressure, orders for coated printing papers increased, and our
bleached board markets, which remained reasonably stable throughout
the year, improved as well. Export sales from the United States
represented approximately 15% of the company's consolidated sales for
1996 and equaled the prior 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 was 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 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 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 1996, 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 to $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.
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%.
Interest expense decreased by 10.1% for the year due to the
repayment of certain sinking fund debentures in the 1995 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 to 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 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. 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.
Fourth quarter results
Sales were $783 million for the fourth quarter of 1997, compared to
sales of $778 million for the fourth quarter of 1996. In the fourth
quarter of 1997, the company recorded net income of $51.7 million,
or $.51 per share, compared to net income of $55.6 million, or $.55
per share, for the prior year period.
Dividend reinvestment plan
At year end, 15,430 shareholders, including members of the company's
savings and investment plans for salaried and hourly employees,
representing 13,790,223 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 20,240. This number includes
12,400 members of the company's salaried and hourly savings and
investment plans. The plans, established in 1968 and 1995,
respectively, hold 12,441,123 shares of Westvaco common stock for
the accounts of participants. This represents 12% of the
101,930,023 shares of common stock outstanding at year end.
Payroll and benefit costs
The total cost of payroll and benefits was $680 million, compared
with $664 million in 1996. This includes $49.2 million in Social
Security taxes in 1997 and $47.9 million in 1996. Payroll and
benefit costs were 23% of sales in 1997 and 22% of sales in 1996.
Sales per employee have increased 39% in the last five years. In
1992, they stood at $160,855, rising to $223,058 in 1997.
Financial statements
Consolidated statement of income
In thousands, except per share
Year ended October 31
1997 1996 1995
Sales $2,982,288 $3,045,450 $3,272,447
Other income [expense] 28,743 29,065 30,297
3,011,031 3,074,515 3,302,744
Cost of products sold [excludes depreciation
shown separately below] 2,161,194 2,173,719 2,266,807
Selling, research and administrative expenses 240,814 234,366 235,100
Depreciation and amortization 269,151 240,411 230,306
Interest expense 93,272 90,063 100,205
2,764,431 2,738,559 2,832,418
Income before taxes 246,600 335,956 470,326
Income taxes 83,900 123,800 186,900
Income before extraordinary charge 162,700 212,156 283,426
Extraordinary charge - extinguishment
of debt, net of taxes - - [2,590]
Net income $ 162,700 $ 212,156 $ 280,836
Per share of common stock:
Income before extraordinary charge $ 1.60 $ 2.09 $ 2.80
Extraordinary charge - - [.02]
Net income $ 1.60 $ 2.09 $ 2.78
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
1997 1996
Assets
Cash and marketable securities $ 175,354 $ 115,368
Receivables 300,827 277,135
Inventories 270,519 263,292
Prepaid expenses and other current assets 58,508 60,300
Current assets 805,208 716,095
Plant and timberlands:
Machinery 4,739,179 4,249,814
Buildings 626,559 558,865
Other property, including plant land 226,082 204,098
5,591,820 5,012,777
Less: accumulated depreciation 2,447,575 2,245,338
3,144,245 2,767,439
Timberlands-net 269,216 248,299
Construction in progress 270,897 337,995
3,684,358 3,353,733
Other assets 409,221 367,670
$4,898,787 $4,437,498
Liabilities and shareholders' equity
Accounts payable and accrued expenses $ 356,691 $ 372,445
Notes payable and current maturities of
long-term obligations 26,121 27,883
Income taxes 22,765 18,609
Current liabilities 405,577 418,937
Long-term obligations 1,512,621 1,153,447
Deferred income taxes 702,021 655,377
Shareholders' equity:
Common stock, $5 par, at stated value
Shares authorized: 300,000,000
[1996-200,000,000]
Shares issued: 103,170,667
[1996-102,761,119] 761,522 750,457
Retained income 1,549,356 1,479,025
Common stock in treasury, at cost
Shares held: 1,240,644 [1996-870,075] [32,310] [19,745]
2,278,568 2,209,737
$4,898,787 $4,437,498
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
1997 1996 1995
Cash flows from operating activities:
Net income $162,700 $212,156 $280,836
Adjustments to reconcile net income
to net cash provided by operating activities:
Provision for depreciation and amortization 269,151 240,411 230,306
Provision for deferred income taxes 46,798 49,243 74,057
Gains on sales of plant and timberlands [10,537] [6,546] [7,792]
Pension credit and other employee benefits [39,296] [43,716] [13,851]
Foreign currency translation [gains] losses 1,690 477 [2,561]
Net changes in assets and liabilities [43,380] 61,924 [44,033]
Other, net 3,557 7,869 5,682
Net cash provided by operating activities 390,683 521,818 522,644
Cash flows from investing activities:
Additions to plant and timberlands [621,172][521,598][290,053]
Proceeds from sales of plant and timberlands 22,292 67,793 11,754
Other, net 5,912 [4,377] [909]
Net cash used in investing activities [592,968][458,182][279,208]
Cash flows from financing activities:
Proceeds from issuance of common stock 10,901 5,585 13,237
Proceeds from issuance of debt 649,186 46,357 96,214
Dividends paid [89,778] [89,539] [77,929]
Treasury stock purchases [17,374] - -
Repayment of notes payable and long-term
obligations [290,018] [62,125][201,172]
Net cash provided by [used in]
financing activities 262,917 [99,722][169,650]
Effect of exchange rate changes on cash [646] [369] 3,034
Increase [decrease] in cash and
marketable securities 59,986 [36,455] 76,820
Cash and marketable securities:
At beginning of period 115,368 151,823 75,003
At end of period $175,354 $115,368 $151,823
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: Effective November 1, 1996, the
company adopted 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, related goodwill
and certain identifiable intangible assets to be held and used or
to be disposed of. The adoption did not have a material effect on
the company's consolidated financial position or results of
operations. Also effective November 1, 1996, the company adopted
SFAS 123, Accounting for Stock-Based Compensation. For further
discussion, see note L beginning on page 27.
The American Institute of Certified Public Accountants issued
Statement of Position 96-1, Environmental Remediation Liabilities
(the SOP), in October 1996. The SOP provides guidance concerning
the recognition, measurement and disclosure of environmental
remediation liabilities and is effective for fiscal years beginning
after December 15, 1996. The company will adopt the provisions of
the SOP in fiscal 1998 and believes that adoption will not have a
material effect on its financial position or results of operations.
In February 1997, the Financial Accounting Standards Board issued
SFAS 128, Earnings per Share, which requires dual presentation of
basic and diluted earnings per share on the face of the income
statement. For the fiscal years ended 1997 and 1996, the basic and
diluted earnings per share calculated pursuant to SFAS 128 are not
materially different from primary earnings per share calculated
under Accounting Principles Board (APB) Opinion 15. This standard
will be effective for the 1998 fiscal year. Also issued in 1997,
SFAS 130, Reporting Comprehensive Income, establishes standards for
the reporting and displaying of comprehensive income and SFAS 131,
Disclosures about Segments of an Enterprise and Related
Information, establishes standards for the way public companies
report information about operating segments in both interim and
annual financial statements and related disclosures. The company
has not determined what, if any, impact SFAS 131 will have on the
operating segments reported nor the related disclosures. These
standards will be effective for the company's 1999 fiscal 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.
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. 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.
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.
A. Other income (expense)
Components of other income (expense) are as follows:
In thousands 1997 1996 1995
Gains on sales of plant, equipment
and timberlands $10,537 $ 6,546 $ 7,792
Interest income 15,089 22,172 14,738
Foreign currency translation gains [losses] [1,690] [477] 2,561
Other, net 4,807 824 5,206
$28,743 $29,065 $30,297
B. Research and development
Expenditures of $42,944,000 (1996-$38,262,000, 1995-$31,397,000)
were expensed as incurred.
C. Income taxes
Income before provision for income taxes consisted of:
In thousands 1997 1996 1995
Domestic $177,323 $257,582 $365,156
Foreign 69,277 78,374 105,170
$246,600 $335,956 $470,326
The provision for income taxes is composed of:
In thousands 1997 1996 1995
Current:
Federal $ 23,982 $ 47,136 $ 58,151
State 3,503 12,610 8,700
Foreign 9,617 14,811 45,992
37,102 74,557 112,843
Deferred:
Federal 35,949 39,668 56,315
State 9,375 8,977 16,846
Foreign 1,474 598 896
46,798 49,243 74,057
$ 83,900 $123,800 $186,900
The net deferred income tax liability at October 31, 1997 and 1996
includes the following components:
In thousands 1997 1996
Current deferred tax assets:
Employee benefits $ 16,423 $ 20,632
Other, net 25,596 21,484
42,019 42,116
Noncurrent deferred tax assets:
Alternative minimum tax carryforward 133,034 125,488
Noncurrent deferred tax liabilities:
Depreciation 600,491 565,754
Pension and other employee benefits 116,977 100,867
State and local taxes 90,877 84,796
Other, net 26,710 29,448
835,055 780,865
Total net deferred tax liability $660,002 $613,261
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:
1997 1996 1995
Statutory federal income tax rate 35.0% 35.0% 35.0%
State and local taxes 3.4 4.2 3.5
Foreign income at other than U.S. rates [4.0] [2.5] 2.7
Other, net [.4] .2 [1.5]
Effective tax rate 34.0% 36.9% 39.7%
At October 31, 1997, for tax purposes, the company had available
$133 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 $252 million of the October 31, 1997
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 $82,647,000 (1996-$53,233,000) are valued
at cost, which approximates market value. Receivables include
$6,989,000 from sources other than trade (1996-$7,534,000) and
have been reduced by allowances for discounts and doubtful
accounts of $11,341,000 (1996-$14,822,000). Inventories at
October 31 are composed of:
In thousands 1997 1996
Raw materials $ 62,025 $ 61,094
Production materials, stores and supplies 81,618 78,850
Finished and in process goods 126,876 123,348
$270,519 $263,292
If inventories had been valued at current cost, they would have been
$390,950,000 in 1997 (1996-$385,463,000).
E. Accounts payable and accrued expenses
Accounts payable and accrued expenses at October 31 consist of:
In thousands 1997 1996
Accounts payable:
Trade $130,425 $146,496
Other 29,108 21,243
Accrued expenses:
Taxes, other than income 18,590 19,451
Interest 33,588 25,775
Payroll and employee benefit costs 82,976 92,533
Other 62,004 66,947
$356,691 $372,445
F. Interest capitalization
In 1997, $119,234,000 of interest cost was incurred (1996-$105,312,000,
1995-$107,501,000) of which $25,962,000 was capitalized (1996-$15,249,000,
1995-$7,296,000).
G. Cash flows
Changes in assets and liabilities are as follows:
In thousands 1997 1996 1995
[Increase] decrease in:
Receivables $[23,674] $ 36,679 $[41,974]
Inventories [7,577] 11,155 [37,911]
Prepaid expenses
and other current assets 1,633 [943] [2,287]
Increase [decrease] in:
Accounts payable and
accrued expenses [9,957] 45,764 6,153
Income taxes payable [3,805] [30,731] 31,986
$[43,380] $ 61,924 $[44,033]
Reconciliation of capital expenditures on a cash basis:
In thousands 1997 1996 1995
New investment in plant and timberlands $613,896 $510,902 $309,020
Less: debt assumed [21] [62] [159]
net change in related current liabilities 7,297 10,758 [18,808]
Cash additions to plant and timberlands $621,172 $521,598 $290,053
Cash payments for interest excluding amounts capitalized were
$84,503,000 in 1997 (1996-$87,060,000, 1995-$103,313,000). Cash
payments for income taxes were $39,331,000 in 1997 (1996-$105,220,000,
1995-$78,563,000).
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
1998 $ 21,515
1999 16,660
2000 11,678
2001 9,325
2002 7,635
Later years 43,697
Minimum lease payments $110,510
Rental expense under operating leases was $38,031,000 in 1997
(1996-$36,629,000, 1995-$33,973,000).
At October 31, 1997, commitments required to complete currently
authorized capital projects are $484 million.
I. Notes payable and long-term obligations
At October 31, 1997, 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 1/2%, due 2008-2027 150,000
7.65%, due 2008-2027 150,000
7.75%, due 2004-2023 150,000
8 1/8%, due 1998-2007 $ 2,350 24,150
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 3,300 5,900
5.85-6.65%, due 2004-2018 26,620
5 7/8-5.9%, due 1998-2003 965 10,470
5 7/8-6.2%, due 1998-2007 450 12,580
6 3/8%, due 2026 5,740
7 1/8-7 1/2%, due 1998-2001 300 4,000
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:
7-7.67%, due 1999-2027 95,300
Economic Development Bonds:
8 3/4%, due 2000-2010 4,300
Notes payable and other 18,756 82,861
$26,121 $1,512,621
Outstanding noncurrent obligations maturing in the four years after
1998 are (in millions): 1999-$18.6; 2000-$31.3; 2001-$31.8; 2002-$127.8.
An amended revolving credit agreement for $500 million became
effective in September 1997, replacing the previous facility dated
June 21, 1993. 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. There were
no borrowings under this facility during 1997 or 1996.
The company issued $80 million of 7.67% thirty-year revenue bonds
in January 1997. Also, the company issued $150 million of 7.65%
thirty-year sinking fund debentures in March 1997 and $150 million
of 7 1/2% thirty-year sinking fund debentures in June 1997. 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, 1997, the book value of financial instruments
included in notes payable and long-term obligations was
$1,478,706,000 (1996-$1,128,333,000), and the fair value was
estimated to be $1,577,559,000 (1996-$1,192,986,000). 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 $58,186,000 in 1997
(1996-$62,965,000, 1995-$58,282,000).
Results of operations for Rigesa, Ltda., our Brazilian operating
subsidiary, were as follows:
In thousands 1997 1996 1995
Sales $220,502 $237,303 $247,424
Net income $ 40,858 $ 48,613 $ 52,792
Dividends received from foreign subsidiaries amounted to
$13,389,000 in 1997 (1996-$6,434,000, 1995-$25,349,000). Assets of
these subsidiaries, principally Rigesa, included in the
consolidated balance sheet are $373,205,000 (1996-$342,798,000).
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 income to the common stock account.
In February 1997, the company's shareholders approved an
amendment to the corporation's Restated Certificate of
Incorporation which resulted in an increase in the number of
authorized shares of common stock from 200 million to 300 million.
Changes in shareholders' equity for 1995, 1996 and 1997 are summarized below:
Retained
Common stock Treasury stock income
Dollars in thousands Shares Amount Shares Amount Amount
Balance at October 31, 1994 67,597,227 $551,265 430,409 $13,232 $1,323,982
Net income - - - - 280,836
Cash dividends - - - - [77,929]
Issuances 640,911 19,447 - - -
Repurchases of common stock - - 96,540 3,818 -
Three-for-two stock split 34,096,106 170,481 256,084 - [170,481]
Balance at October 31, 1995 102,334,244 741,193 783,033 17,050 1,356,408
Net income - - - - 212,156
Cash dividends - - - - [89,539]
Issuances 426,875 9,264 - - -
Repurchases of common stock - - 87,042 2,695 -
Balance at October 31, 1996 102,761,119 750,457 870,075 19,745 1,479,025
Net income - - - - 162,700
Cash dividends - - - - [89,778]
Issuances 409,548 11,065 - - -
Repurchases of common stock - - 610,111 20,880 -
Issuance of treasury stock - - [239,542] [8,315] [2,591]
Balance at October 31, 1997 103,170,667 $761,522 1,240,644 $32,310 $1,549,356
In 1997, the company repurchased 500,000 shares of company stock
under a new repurchase program authorized during the year by the
Board of Directors. The program was initiated to satisfy
issuances under the company's stock option plans. There were no
purchases in 1995, 1996 or 1997 under the stock repurchase
program authorized in 1987 by the Board of Directors.
At October 31, 1997, 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.
On September 23, 1997, the Board of Directors approved a Rights
Agreement to replace the Rights Agreement which expires on
December 8, 1997. In the event a person or group were to
acquire a 15% or greater position in Westvaco, each right would
entitle its holder (other than the acquiror) to buy that number
of shares of common stock of Westvaco which at the time of the
15% acquisition had a market value of two times the exercise
price of the rights. If, after the rights have been triggered,
an acquiring company were to merge or otherwise combine with
Westvaco, or Westvaco were to sell 50% or more of its assets or
earning power, each right would entitle its holder (other than
the acquiror) to buy that number of shares of common stock of
the acquiring company which at the time of such transaction
would have a market value of two times the exercise price of the
rights. The rights have no effect on earnings per share until
they become exercisable.
L. Stock option plans
At October 31, 1997, the company had four stock option plans.
The 1983 and 1988 Stock Option and Stock Appreciation Rights
Plans and the 1995 Salaried Employee Stock Incentive Plan
provide for the granting of up to 4,725,000, 4,500,000 and
4,837,500, respectively, of stock options and stock appreciation
rights to key employees. The 1995 Non-Employee Director Stock
Incentive Plan provides for the granting of up to 112,500 stock
options and stock appreciation rights to outside directors. For
the employee plans, stock options may be granted with or without
stock 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. Under
each employee plan, stock options may be granted with or without
limited stock appreciation rights, which are exercisable upon
the occurrence of certain events related to changes in corporate
control. In 1997, nearly all outstanding stock appreciation
rights, which had previously been granted to employees and
nonemployee directors, were cancelled or surrendered. Subject
to limited exception, no new grants are anticipated.
The company applies APB Opinion 25, Accounting for Stock Issued
to Employees, in accounting for its plans and, accordingly, no
compensation cost has been recognized. If compensation cost for
the company's stock options had been determined based on the
fair value method of SFAS 123, the company's net income and
earnings per share would have been reduced to the pro forma
amounts as follows:
In thousands, except per share
Net income 1997 1996
As reported $162,700 $212,156
Pro forma 159,089 209,104
Earnings per share
As reported $1.60 $2.09
Pro forma 1.56 2.06
In determining the fair value of options for pro forma purposes,
the company used the Black-Scholes option pricing model and
assumed the following for options granted in 1997 and 1996,
respectively: risk-free interest rate of 6.14% and 5.57%;
dividend yield of 3.21% and 3.51%; an expected option life of
six years for each year; and an expected volatility of 20% for
each year. The weighted average fair values of the options
granted during 1997 and 1996 were $6.16 and $5.10 per share,
respectively. The following table summarizes activity in the
plans for 1997, 1996 and 1995.
Weighted
Average
Exercise
Options Price
Outstanding at October 31, 1994 5,036,134 $20.64
Granted 937,650 26.50
Exercised [1,745,494] 19.08
Cancelled [17,322] 19.06
Outstanding at October 31, 1995 4,210,968 22.59
Granted 984,392 25.06
Exercised [756,911] 19.86
Cancelled [225] 23.08
Outstanding at October 31, 1996 4,438,224 23.61
Granted 964,015 27.44
Exercised [1,022,792] 21.92
Cancelled [3,235] 24.55
Outstanding at October 31, 1997 4,376,212 24.84
As of October 31, 1997, the options outstanding under the plans
had exercise prices between $18.29 and $27.44 and a weighted
average remaining life of 6.7 years. Outstanding options
exercisable at October 31, 1997 were 3,425,697 (1996-3,468,832,
1995-3,675,245) with a weighted-average exercise price of $24.12
(1996-$23.20, 1995-$22.03).
There were 2,468,055 shares available for grant as of October
31, 1997 (1996-3,428,835, 1995-4,413,002). At October 31, 1997,
2,959,343 outstanding options had related limited stock
appreciation rights.
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 1997 net pension credit relating to employee pension and
retirement benefits was $42,058,000 (1996-$37,834,000, 1995-$33,926,000).
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 1997, 1996 and 1995 are as follows:
In thousands 1997 1996 1995
Service cost-benefits earned during the period $ 23,369 $ 22,168 $ 21,895
Interest cost on projected benefit obligation 65,947 61,890 58,562
Actual return on plan assets [674,619] [216,244] [261,720]
Net amortization and deferrals 543,245 94,352 147,337
Net pension credit $[42,058] $[37,834] $[33,926]
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 1997 1996
Actuarial present value of benefit obligations:
Accumulated benefit obligation,
including vested benefits of $[836,073]
(1996-$[724,180]) $ [870,071] $ [752,438]
Projected benefit obligation $[1,003,647] $ [869,820]
Plan assets at fair value:
Mainly listed stocks, including $83 million
of company stock, and money market and
fixed income investments 2,088,419 1,453,658
Plan assets in excess of projected
benefit obligation 1,084,772 583,838
Unrecognized net gain from past experience
different from that assumed [744,469] [276,826]
Unrecognized prior service cost 54,954 51,768
Unrecognized net transition asset [29,846] [36,786]
Net prepaid pension cost included in
consolidated balance sheet $ 365,411 $ 321,994
The discount rate and rate of increase in future compensation
levels used in determining the actuarial present value of the
projected benefit obligation were 7.25% and 5.5% in 1997 and
7.75% and 5.5%, respectively, in 1996 and 1995. The expected
long-term rate of return on plan assets used in determining net
pension cost was 9.75% for 1997, 1996 and 1995. The net prepaid
pension cost, from the previous table, is included in other
assets except for an obligation of $19.7 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, 1997, 1996 and 1995 are as
follows:
In thousands 1997 1996 1995
Service cost-benefits earned
during the period $1,300 $1,200 $1,300
Interest cost 1,500 1,600 1,800
Net amortization [900] [400] [300]
Net periodic postretirement benefits cost $1,900 $2,400 $2,800
The accumulated postretirement benefit obligation as of July 31, the
valuation date, was as follows:
In thousands 1997 1996
Retirees $15,800 $11,000
Fully eligible active employees 3,900 4,200
Other active participants 2,000 6,200
21,700 21,400
Unrecognized prior service cost 300 -
Unrecognized net gain 7,100 8,000
Accrued postretirement benefits cost included
in consolidated balance sheet $29,100 $29,400
The discount rate used in determining the accumulated benefit
obligation was 7.25% for 1997 and 7.75% for 1996. The annual
rate of increase in health care costs was assumed at 8% for 1996,
7% for 1997 and decreasing ratably to a 5% annual rate in 1999
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, 1997 accumulated postretirement benefit
obligation by $400,000 and the net postretirement benefits cost
for 1997 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 specialty chemicals. Westvaco is a leading manufacturer of
paper for high-quality graphic reproduction, it converts paper
and paperboard into a variety of endproducts, manufactures
specialty 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, has in the past been subbject to
inflation and currency fluctuations. 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 43% of consolidated sales for 1997 (1996-42%,
1995-41%). Folding carton sales accounted for 11% of
consolidated sales in 1997 (1996-11%, 1995-8%). Sales of
envelopes accounted for 10% of consolidated sales in 1997
(1996-11%, 1995-10%).
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 kraft paper and board accounted for 13% of consolidated sales
for 1997 (1996-14%, 1995-10%). Sales of corrugated shipping
containers accounted for 6% of consolidated sales for 1997
(1996-8%, 1995-16%), reflecting the sale of the domestic corrugated
box business in fiscal 1996.
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 both 1997 and 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 $487,698,000
in 1997 (1996-$444,663,000, 1995-$448,361,000). Total export
sales, including exports from foreign subsidiaries, were
$495,865,000 in 1997 (1996-$453,586,000, 1995-$454,237,000).
Financial information by business segment follows:
In millions 1997 1996 1995
Sales
Bleached
Sales to unaffiliated companies $2,020.8 $2,054.9 $2,090.0
Intersegment sales 2.4 3.9 5.1
Total 2,023.2 2,058.8 2,095.1
Unbleached
Sales to unaffiliated companies 638.1 692.9 894.9
Intersegment sales 0.2 1.1 7.6
Total 638.3 694.0 902.5
Chemicals
Sales to unaffiliated companies 306.9 281.8 269.3
Intersegment sales 19.4 18.6 18.2
Total 326.3 300.4 287.5
Corporate items
Sales to unaffiliated companies 16.5 15.9 18.2
Eliminations [22.0] [23.6] [30.9]
Total [5.5] [7.7] [12.7]
Consolidated sales $2,982.3 $3,045.5 $3,272.4
Operating profit
Bleached $ 261.9 $ 315.5 $ 394.6
Unbleached 102.4 134.7 221.2
Chemicals 63.2 54.9 43.9
Corporate items [180.9] [169.1] [189.4]
Consolidated income before taxes $ 246.6 $ 336.0 $ 470.3
Depreciation and amortization
Bleached $ 185.3 $ 170.1 $ 157.2
Unbleached 59.4 50.2 55.1
Chemicals 17.1 13.7 12.5
Corporate items 7.4 6.4 5.5
Consolidated depreciation and
amortization $ 269.2 $ 240.4 $ 230.3
Capital expenditures
Bleached $ 413.7 $ 314.3 $ 164.0
Unbleached 98.5 123.2 110.0
Chemicals 97.6 57.4 25.4
Corporate items 4.1 16.0 9.6
Consolidated capital expenditures $ 613.9 $ 510.9 $ 309.0
Identifiable assets
Bleached $3,200.9 $2,936.0 $2,785.5
Unbleached 1,121.7 1,056.8 1,083.1
Chemicals 327.5 246.6 193.2
Corporate items 248.7 198.1 190.9
Consolidated assets $4,898.8 $4,437.5 $4,252.7
P. Selected quarterly information [unaudited]
In thousands, except per share data
Quarter 1997 1996 1995*
Sales
First $ 736,355 $ 748,728 $ 741,675
Second 724,593 760,284 804,622
Third 738,227 757,715 854,567
Fourth 783,113 778,723 871,583
Year $2,982,288 $3,045,450 $3,272,447
Gross profit
First $ 131,145 $ 170,463 $ 151,139
Second 134,929 155,370 192,831
Third 137,467 149,498 214,490
Fourth 157,545 163,705 222,904
Year $ 561,086 $ 639,036 $ 781,364
Net income
First $ 35,510 $ 62,387 $ 49,317
Second 37,940 50,554 65,030
Third 37,538 43,619 77,563
Fourth 51,712 55,596 88,926
Year $ 162,700 $ 212,156 $ 280,836
Net income per common share
First $ .35 $ .61 $ .49
Second .37 .50 .64
Third .37 .43 .77
Fourth .51 .55 .88
Year $1.60 $2.09 $2.78
* 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.
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 regularly 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 the company's legal compliance program
as well as significant 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
November 18, 1997
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,
1997 and 1996, and the results of their operations and their
cash flows for each of the three years in the period ended
October 31, 1997, in conformity with generally accepted
accounting principles. These financial statements are the
responsibility of the company's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of
these statements in accordance with generally accepted
auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
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, 1997
An eleven-year comparison
Year ended October 31 1997 1996 1995
Earnings [in thousands]
Sales $2,982,288 $3,045,450 $3,272,447
Net income before extraordinary charge
and cumulative effect of
accounting changes 162,700 212,156 283,426
Extraordinary charge - extinguishment
of debt, net of taxes - - [2,590]
Cumulative effect of accounting
changes, net of taxes - - -
Net income 162,700 212,156 280,836
Depreciation and amortization 269,151 240,411 230,306
Common stock
Number of common shareholders 20,240 20,760 20,490
Weighted average number of shares
outstanding [in thousands] 101,978 101,737 101,190
Cash dividends [in thousands] $89,778 $89,539 $77,929
Per share:
Net income before
extraordinary charge and
cumulative effect of accounting $1.60 $2.09 $2.80
Extraordinary charge -
extinguishment of debt - - [.02]
Cumulative effect of accounting
changes - - -
Net income 1.60 2.09 2.78
Dividends .88 .88 .77
Book value 22.35 21.69 20.49
Financial position [in thousands]
Working capital $399,631 $297,158 $358,315
Current ratio 2.0 1.7 1.8
Plant and timberlands, net $3,684,358 $3,353,733 $3,140,090
Total assets 4,898,787 4,437,498 4,252,732
Long-term obligations 1,512,621 1,153,447 1,147,020
Shareholders' equity 2,278,568 2,209,737 2,080,551
Debt to total capital 34% 29% 30%
Operations [in thousands,
except for number of employees]
Primary production of paper, paperboard
and market pulp [in tons] 3,058 3,001 3,105
New investment in plant and
timberlands $613,896 $510,902 $309,020
Acres of timberlands owned 1,461 1,452 1,453
Employees 13,370 13,430 14,300
Westvaco Corporation
and consolidated subsidiary companies
An eleven-year comparison
Year ended October 31 1994 1993 1992
Earnings [in thousands]
Sales $2,607,474 $2,344,560 $2,335,617
Net income before extraordinary charge
and cumulative effect of
accounting changes 103,606 56,512 135,912
Extraordinary charge - extinguishment
of debt, net of taxes - [7,351] -
Cumulative effect of accounting
changes, net of taxes - 55,180 -
Net income 103,606 104,341 135,912
Depreciation and amortization 219,282 194,994 183,052
Common stock
Number of common shareholders 13,890 14,570 14,970
Weighted average number of shares
outstanding [in thousands] 100,581 99,954 99,179
Cash dividends [in thousands] $73,754 $73,301 $72,756
Per share:
Net income before
extraordinary charge and
cumulative effect of accounting $1.03 $0.56 $1.37
Extraordinary charge -
extinguishment of debt - [.07] -
Cumulative effect of accounting
changes - 0.55 -
Net income 1.03 1.04 1.37
Dividends .73 1/3 .73 1/3 .73 1/3
Book value 18.48 18.18 17.84
Financial position [in thousands]
Working capital $268,987 $243,959 $318,883
Current ratio 1.7 1.7 1.9
Plant and timberlands, net $3,063,351 $3,077,505 $2,838,143
Total assets 3,982,993 3,927,837 3,703,914
Long-term obligations 1,234,300 1,258,312 1,055,473
Shareholders' equity 1,862,015 1,823,988 1,777,080
Debt to total capital 34% 35% 31%
Operations [in thousands,
except for number of employees]
Primary production of paper, paperboard
and market pulp [in tons] 2,848 2,626 2,595
New investment in plant and
timberlands $207,257 $442,168 $352,233
Acres of timberlands owned 1,453 1,462 1,468
Employees 14,170 14,440 14,520
Westvaco Corporation
and consolidated subsidiary companies
An eleven-year comparison
Year ended October 31 1991 1990 1989
Earnings [in thousands]
Sales $2,301,204 $2,410,751 $2,284,059
Net income before extraordinary charge
and cumulative effect of
accounting changes 137,398 188,236 223,090
Extraordinary charge - extinguishment
of debt, net of taxes - - -
Cumulative effect of accounting
changes, net of taxes - - -
Net income 137,398 188,236 223,090
Depreciation and amortization 179,354 168,948 155,684
Common stock
Number of common shareholders 15,020 15,630 15,530
Weighted average number of shares
outstanding [in thousands] 98,353 97,531 97,111
Cash dividends [in thousands] $69,676 $65,808 $60,834
Per share:
Net income before
extraordinary charge and
cumulative effect of accounting $1.40 $1.93 $2.30
Extraordinary charge -
extinguishment of debt - - -
Cumulative effect of accounting
changes - - -
Net income 1.40 1.93 2.30
Dividends .70 5/6 .67 1/2 .62 2/3
Book value 17.21 16.53 15.27
Financial position [in thousands]
Working capital $309,726 $370,062 $328,204
Current ratio 2.0 2.2 2.1
Plant and timberlands, net $2,674,623 $2,539,149 $2,239,975
Total assets 3,461,818 3,331,966 2,960,945
Long-term obligations 969,731 961,294 767,951
Shareholders' equity 1,699,463 1,618,667 1,488,433
Debt to total capital 31% 32% 29%
Operations [in thousands,
except for number of employees]
Primary production of paper, paperboard
and market pulp [in tons] 2,587 2,512 2,499
New investment in plant and
timberlands $321,870 $472,064 $536,932
Acres of timberlands owned 1,483 1,487 1,467
Employees 14,440 15,040 14,960
Westvaco Corporation
and consolidated subsidiary companies
An eleven-year comparison
Year ended October 31 1988 1987
Earnings [in thousands]
Sales $2,133,889 $1,903,606
Net income before extraordinary charge
and cumulative effect of
accounting changes 200,434 146,191
Extraordinary charge - extinguishment
of debt, net of taxes - -
Cumulative effect of accounting
changes, net of taxes - -
Net income 200,434 146,191
Depreciation and amortization 139,845 129,723
Common stock
Number of common shareholders 15,730 15,330
Weighted average number of shares
outstanding [in thousands] 97,015 97,467
Cash dividends [in thousands] $53,668 $45,494
Per share:
Net income before
extraordinary charge and
cumulative effect of accounting $2.07 $1.50
Extraordinary charge -
extinguishment of debt - -
Cumulative effect of accounting
changes - -
Net income 2.07 1.50
Dividends .55 1/3 .46 2/3
Book value 13.59 12.10
Financial position [in thousands]
Working capital $317,627 $311,768
Current ratio 2.2 2.3
Plant and timberlands, net $1,871,328 $1,625,582
Total assets 2,512,825 2,213,990
Long-term obligations 576,577 489,630
Shareholders' equity 1,318,267 1,178,356
Debt to total capital 26% 25%
Operations [in thousands,
except for number of employees]
Primary production of paper, paperboard
and market pulp [in tons] 2,488 2,386
New investment in plant and
timberlands $392,954 $279,590
Acres of timberlands owned 1,462 1,458
Employees 14,750 14,670
Westvaco Corporation
and consolidated subsidiary companies
Exhibit No. 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 No. 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, 1997 appearing
on page 33 of the Westvaco Corporation 1997 Annual Report to Shareholders
which is incorporated by reference in this Annual Report on Form 10-K.
Price Waterhouse LLP
New York, NY
November 25, 1997
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