<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A-2
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 1, 1994
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-3838
FEDERAL PAPER BOARD COMPANY, INC.
(Exact name of Registrant as specified in its charter)
NORTH CAROLINA 22-0904830
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
75 CHESTNUT RIDGE ROAD, MONTVALE, NEW JERSEY 07645
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (201) 391-1776
The undersigned Registrant hereby amends the following items, financial
statements, exhibits or other portions of its Report on Form 10-K for the
fiscal year ended January 1, 1994 as set forth in the pages attached hereto:
Part II
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Item 8. Financial Statements and Supplementary Data
Part IV.
Exhibits:
11 Statement of Computation of Earnings (Loss) Per Common Share
12 Computation of Ratio of Earnings to Fixed Charges
13 1993 Annual Report to Shareholders of the Company
23 Independent Auditors' Consent
Financial Statement Schedules
Consolidated Balance Sheet
Consolidated Statement of Income
Consolidated Statement of Cash Flows
Consolidated Statement of Shareholders' Equity
Notes to Financial Statements
Additional Financial Data
Independent Auditors' Report
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
FEDERAL PAPER BOARD COMPANY, INC.
Date: October 18, 1994 BY: /s/ QUENTIN J. KENNEDY
------------------------------
Quentin J. Kennedy
Director, Executive Vice President
and Secretary
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PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The information required by Item 5 is included on page 36 of the
Annual Report and is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information required by Item 6 is included on page 37 of the
Annual Report and is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
The information required by Item 7 is included on pages 18
through 21 of the Annual Report and is incorporated herein by
reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by Item 8 is included on pages 22
through 36 of the Annual Report and is incorporated herein by
reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The directors of the Company and their business experience are
set forth on pages 3 through 5 of the Company's Notice of Annual
Meeting and Proxy Statement, dated March 15, 1994 (the "Proxy
Statement") and are incorporated herein by reference. The
discussion of executive officers of the Company is included in
Part I under "Executive Officers of the Company."
ITEM 11. EXECUTIVE COMPENSATION.
A description of the compensation of the Company's executive
officers is set forth on pages 5 through 15 of the Proxy
Statement, and with the exception of the section headed
"Compensation Committee Report" on pages 12 and 13, is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
A description of the security ownership of certain beneficial
owners and management is set forth on pages 2 and 3 of the Proxy
Statement and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None, other than those described under Items 11 and 12.
10
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PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K.
EXHIBITS:
A list of the exhibits required to be filed as part of this
Report on Form 10-K is set forth in the "Exhibit Index", which
immediately precedes such exhibits, and is incorporated herein
by reference.
REPORTS ON FORM 8-K:
No reports on Form 8-K were filed for the sixteen weeks ended
January 1, 1994.
FINANCIAL STATEMENT SCHEDULES:
The consolidated balance sheets as of January 1, 1994 and January 2,
1993, and related consolidated statements of income, cash flows and
shareholders' equity for each of the three fiscal years in the period ended
January 1, 1994, as restated, and the related notes to financial statements,
together with the Independent Auditors' Report thereon of Deloitte & Touche
LLP, dated February 7, 1994 (October 17, 1994 as to Note 10), appearing on
pages 22 through 35 of the Annual Report, are incorporated herein by
reference. With the exception of the aforementioned information and the
information incorporated by reference in Items 1 and 5 through 8, the Annual
Report is not to be deemed filed as part of this report. The following
additional financial data should be read in conjunction with the financial
statements in the Annual Report. Schedules not included with this additional
financial data have been omitted because they are not applicable or the
required information is shown in the financial statements or notes thereto.
ADDITIONAL FINANCIAL DATA
FISCAL YEARS 1993, 1992, AND 1991
<TABLE>
<CAPTION>
Page
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<S> <C>
Independent Auditors' Report 12
Financial Statement Schedules:
II Amounts Receivable from Related Parties and Underwriters,
Promoters and Employees other than Related Parties 13-14
V Property, Plant and Equipment 15
VI Accumulated Depreciation and Amortization of Property, Plant
and Equipment 16
VIII Valuation and Qualifying Accounts 17
IX Short-Term Borrowings 18
X Supplementary Income Statement Information 19
</TABLE>
11
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INDEPENDENT AUDITORS' REPORT
- ----------------------------
To the Shareholders and Board of Directors of
Federal Paper Board Company, Inc.
We have audited the consolidated financial statements of Federal
Paper Board Company, Inc. and its subsidiary companies as of
January 1, 1994 and January 2, 1993 and for each of the three
fiscal years in the period ended January 1, 1994, and have
issued our report thereon dated February 7, 1994 (October 17,
1994 as to Note 10), which report includes explanatory paragraphs
as to (i) changes in the method of accounting for income taxes and
postretirement benefits other than pensions and (ii) the restatement
of the financial statements for the fiscal year ended January 1, 1994;
such financial statements and report are included in your 1993 Annual
Report to Shareholders and are incorporated herein by reference. Our
audits also included the financial statement schedules of Federal Paper
Board Company, Inc. and its subsidiary companies, listed in Item 14.
These financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion
based on our audits. In our opinion, such financial statement schedules,
when considered in relation to the basic financial statements taken as
a whole, present fairly in all material respects the information set
forth therein.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
February 7, 1994
(October 17, 1994 as to Note 10)
12
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EXHIBIT INDEX
Exhibit
No. Description
- ------- -----------
11 Statement of Computation of Earnings (Loss) Per Common Share
12 Computation of Ratio of Earnings to Fixed Charges
13 1993 Annual Report to Shareholders of the Company
23 Independent Auditors' Consent
<PAGE> 1
EXHIBIT 11
FEDERAL PAPER BOARD COMPANY, INC.
STATEMENT OF COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Fiscal Years
Restated
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Assuming No Dilution:
- --------------------
Income Before Cumulative Effect of Accounting Change $ 6,400 $ 82,600 $ 82,400
(Deduct) Dividends on Convertible Preferred Stock (6,610) (7,060) (8,129)
---------- ---------- ---------
Income (Loss) Before Cumulative Effect of Accounting Change
available to Common Shares (210) 75,540 74,271
Cumulative Effect of Accounting Change -- 9,000 --
---------- ---------- ---------
Net Income (Loss) Available to Common Shares $ (210) $ 84,540 $ 74,271
========== ========== =========
Actual Weighted Average Number of Common
Shares Outstanding 41,995 41,448 40,540
========== ========== =========
Income (Loss) Before Cumulative Effect of Accounting Change $ (.01) $ 1.82 $ 1.83
Cumulative Effect of Accounting Change -- .22 --
---------- ---------- ---------
Earnings (Loss) Per Common Share Assuming No Dilution $ (.01) $ 2.04 $ 1.83
========== ========== =========
Assuming Full Dilution:
- ----------------------
Income Before Cumulative Effect of Accounting Change $ 6,400 $ 82,600 $ 82,400
(Deduct) Dividends on Convertible Preferred Stock (6,610) -- --
---------- ---------- ---------
Income (Loss) Before Cumulative Effect of Accounting Change
Applicable to Common Shares, Common Equivalent
Shares and Dilutive Securities (210) 82,600 82,400
Cumulative Effect of Accounting Change -- 9,000 --
---------- ---------- ---------
Net Earnings (Loss) Applicable to Common Shares, Common
Equivalent Shares and Dilutive Securities $ (210) $ 91,600 $ 82,400
========== ========== =========
Shares:
Adjusted Weighted Average Number of Common
Shares Outstanding 41,995 40,900 40,525
Dilutive Common Equivalent Shares Issuable
Under Stock Option Plans (a) 381 459
Common Shares Issuable Upon Conversion of
$1.20 Convertible Preferred Stock (a) 324 354
Common Shares Issuable Assuming Conversion of
$2.875 Convertible Preferred Stock (a) 5,090 5,091
---------- ---------- ---------
Weighted Average Number of Common and Diluted
Common Equivalent Shares and Dilutive Securities 41,995 46,695 46,429
========== ========== =========
Income (Loss) Before Cumulative Effect of Accounting Change $ (.01) $ 1.77 $ 1.77
Cumulative Effect of Accounting Change -- .19 --
---------- ---------- ---------
Earnings (Loss) Per Common Share Assuming Full
Dilution, As Reported $ (.01) $ 1.96 $ 1.77
========== ========== =========
</TABLE>
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EXHIBIT 11
(Continued)
FEDERAL PAPER BOARD COMPANY, INC.
STATEMENT OF COMPUTATION OF EARNINGS (LOSS) PER COMMON SHARE
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
The calculation of primary earnings per share is presented below in
accordance with Securities Exchange Act of 1934 Release No. 9083 although not
required by footnote 3 paragraph 14 of APB Opinion No. 15 because it results
in dilution of less than 3%. Earnings loss applicable to common shares are the
same as in the calculation assuming no dilution.
<TABLE>
<S> <C> <C> <C>
PRIMARY EARNINGS PER SHARE:
- --------------------------
Shares:
Weighted Average Number of Common Shares Outstanding 41,995 41,448 40,540
Dilutive Common Equivalent Shares Issuable Under
Stock Option Plans (a) 381 388
------------ ----------- ------------
Weighted Average Number of Common and Dilutive
Common Equivalent Shares 41,995 41,829 40,928
============ =========== ============
Income (Loss) Before Cumulative Effect of Accounting Change $ (.01) $ 1.80 $ 1.81
Cumulative Effect of Accounting Change -- .22 --
Primary Earnings (Loss) Per Common Share Assuming ------------ ----------- -------------
No Dilution from Common Equivalent Shares $ (.01) $ 2.02 $ 1.81
============ =========== =============
</TABLE>
(a) Antidilutive Issue.
*Further information on the 1993 restatement is contained in Note 10 of the
Company's 1993 Annual Report to Shareholders, as amended.
<PAGE> 1
EXHIBIT 12
FEDERAL PAPER BOARD COMPANY, INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(IN THOUSANDS)
<TABLE>
<CAPTION>
Fiscal Years
Restated*
1993 1992 1991 1990 1989
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Income Before Taxes and
Cumulative Effect of Accounting Change
per Consolidated Statement of Income $ 26,300 $ 135,700 $ 144,200 $202,200 $336,780
Add:
Interest on Indebtedness 84,509 85,018 90,243 43,111 28,332
Amortization of Previously
Capitalized Interest 8,221 7,656 6,716 4,354 2,901
Portion of Rents Representative
of Interest Factor 7,433 8,316 9,451 9,835 10,059
-------- --------- --------- -------- --------
Income as Adjusted $126,463 $ 236,690 $ 250,610 $259,500 $378,072
======== ========= ========= ======== ========
Fixed Charges:
Interest on Indebtedness $ 84,509 $ 85,018 $ 90,243 $ 43,111 $28,332
Capitalized Interest 6,136 11,274 18,807 47,247 29,057
Portion of Rents Representative
of Interest Factor 7,433 8,316 9,451 9,835 10,059
-------- --------- --------- -------- -------
Fixed Charges $ 98,078 $ 104,608 $ 118,501 $100,193 $67,448
======== ========= ========= ======== =======
Ratio of Earnings to Fixed Charges 1.29 2.26 2.11 2.59 5.61
======== ========= ========= ======== =======
</TABLE>
Note: Interest on indebtedness includes amortization of debenture discount
and other debt related expenses.
*Further information on the 1993 restatement is contained in Note 10 of the
Company's 1993 Annual Report to Shareholders, as amended.
<PAGE> 1
Exhibit 13
REVIEW OF OPERATIONS
PAPER, PAPERBOARD AND PULP
[PHOTO -- SEE EDGAR APPPENDIX]
Operating results for the paper, paperboard and pulp group were lower than
those of last year. The principal cause of the reduction was lower selling
prices for market pulp which continued to deteriorate throughout most of the
year. Paperboard average selling prices were somewhat less than last year due
partially to the mix of business. In addition, the Company curtailed production
in these product lines for completion of various capital projects.
RIEGELWOOD OPERATION
The Riegelwood, NC pulp and paperboard mill produced 530,000 tons of market
pulp and 310,000 tons of bleached paperboard, in 1993, despite the loss of
production of approximately 19,000 tons of market pulp and 3,000 tons of
bleached paperboard in the third quarter resulting from downtime taken in
connection with the modernization of the mill.
A substantial portion of the modernization of the mill was completed during
the year. The total cost of the project is expected to be $190 million. It
includes the rebuild of the No. 18 paperboard machine and the installation of
new winders, rollwrapping equipment and refiners. The completion of the project
is scheduled for mid-1994 and will result in improved quality to better serve
our various customers.
[PULP CHART -- SEE EDGAR APPENDIX]
Federal Paper Board Company, Inc. 1993 Annual Report Page 6
<PAGE> 2
AUGUSTA OPERATION
Bleached paperboard production at the Augusta, GA mill in 1993 was 615,000
tons, an increase over last year's production and a record for the mill. In
addition, the mill produced 26,000 tons of market pulp, slightly below the
prior year.
All of the major modernizations and renovations were completed at the
Augusta mill in 1992. It is among one of the most efficient and highest quality
producers of bleached paperboard in the world.
SERVICE DISTRIBUTION CENTERS
[PHOTO -- SEE EDGAR APPENDIX]
The service distribution centers of the Company consist of five sheeting plants
and one extrusion plant, all located near our markets.
During the year, the Company acquired a sheeting plant in Wharfedale,
England. This operation enables the Company to export rolls of paperboard from
the United States for sheeting at the Wharfedale plant, and delivery to
customers both in the United Kingdom and on the Continent.
The distribution centers processed more than 257,000 tons of bleached
paperboard during the year, an increase over prior years. It is expected that
the tonnage processed through the distribution centers will continue to
increase and provide the Company with an important tool in servicing our
customers.
[PAPERBOARD CHART -- SEE EDGAR APPENDIX]
Federal Paper Board Company, Inc. 1993 Annual Report Page 7
<PAGE> 3
INVERURIE OPERATION
[PHOTO -- SEE EDGAR APPENDIX]
The Company's uncoated free-sheet paper mill in Inverurie, Scotland had record
production in 1993 producing more than 180,000 metric tons of paper compared to
136,000 metric tons last year.
Operating income for 1993 was adversely affected by continued low selling
prices. The market and selling prices began to improve toward year-end and have
further strengthened in the early months of 1994.
The capital expenditures made at the mill through 1993 have substantially
increased productivity and reduced production costs. As the European economies
improve, operating earnings will increase.
Construction of a new warehouse, in excess of 100,000 sq. ft., was started
during the year and will be completed in mid-1994, further reducing costs.
SPRAGUE OPERATION
The Company's recycled paperboard mill in Sprague, CT produced a record 179,000
tons during the year, an increase from the record high of 178,000 tons last
year. The Sprague mill continues to supply recycled paperboard to the Company's
folding carton plants, but the majority of its products are sold to the open
market. Operating income for the year was slightly ahead of last year,
reflecting improved efficiencies and reduced costs. An eight mile natural gas
[PAPER CHART -- SEE EDGAR APPENDIX]
Federal Paper Board Company, Inc. 1993 Annual Report Page 8
<PAGE> 4
pipeline was completed in 1993 giving the mill the option of using either
natural gas or oil in its boiler depending on which is more cost beneficial.
The mill uses about 185,000 tons of various grades of wastepaper per year,
which is its primary raw material.
WOOD PRODUCTS
LUMBER PLANTS
[PHOTO -- SEE EDGAR APPENDIX]
Lumber continued to be in short supply in 1993, resulting principally from the
curtailment of logging in the Pacific Northwest and reasonably strong housing
starts. Operating income for our lumber plants was substantially higher than
last year as lumber prices escalated rapidly during the year.
The Company's five lumber plants produced 588.7 million board feet of lumber
in 1993 slightly above last year's record production.
Lumber prices are expected to continue to escalate as the economy recovers.
With continued low mortgage rates, housing starts should increase, putting
further upward pressure on lumber selling prices. The Company's lumber plants
are modern, efficient, and low cost and are expected to continue to contribute
to the profitability of the Company.
WOODLANDS
The Company owns 568,000 acres of timberlands and leases another 125,000 acres
of timberlands, with purchase options. The acreage is located in North
Carolina, South Carolina and Georgia and is
[WOOD PRODUCTS CHART -- SEE EDGAR APPENDIX]
Federal Paper Board Company, Inc. 1993 Annual Report Page 9
<PAGE> 5
[PHOTO -- SEE EDGAR APPENDIX]
generally in close proximity to our pulp and paperboard mills at Riegelwood, NC
and Augusta, GA and our lumber plants.
The Woodlands operation, in addition to managing the Company's timberlands,
also procures all of the wood needs of the lumber plants and pulp and
paperboard mills. Approximately 20% of the Company's softwood needs come from
the Company's own timberlands, the balance and substantially all its hardwood
needs are purchased by the Woodlands group from outside sources.
CONVERTING OPERATIONS
CUP OPERATIONS
Operating results from our cup operations were below last year and reflect a
further reduction in selling prices of this product line.
A cost reduction program was implemented to reduce costs and consolidate
various operations of the business. The initial stages of the program include
the consolidation of functions to the corporate office, overall reduction in
personnel and the construction of a new distribution center adjacent to the
Shelbyville, IL plant. The cost reduction program, which will be completed by
the end of 1995, is on schedule and savings are beginning to be realized.
[CONVERTING OPERATIONS CHART -- SEE EDGAR APPENDIX]
Federal Paper Board Company, Inc. 1993 Annual Report Page 10
<PAGE> 6
1993 production was 9% above last year. Working with the Company's packaging
group, the cup operations now provide paperboard trays in addition to cups to a
number of customers. The cup plants use approximately 100,000 tons of bleached
paperboard annually from the Company's mills.
An improvement in earnings is expected in 1994 as the cost reduction plan
continues and the economy improves.
PACKAGING OPERATIONS
[PHOTO -- SEE EDGAR APPENDIX]
At our Packaging Operations, the Company manufactures printed folding cartons
for a variety of consumer products. Operating income in 1993 was below that of
1992, reflecting once again, the weak economic conditions which have prevailed
for the last several years. The Packaging group operates four plants, each
serving different market segments. The largest plant is in Wilmington, NC and
has four gravure presses; the other plants have offset and flexographic
printing equipment.
The plants consume more than 75,000 tons of paperboard each year, 80% of
which is produced at the Company's own mills.
Federal Paper Board Company, Inc. 1993 Annual Report Page 11
<PAGE> 7
Federal Paper Board Company, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
RESULTS OF OPERATIONS
OVERVIEW
Results for fiscal years 1993 and 1991 include 52 weeks while fiscal year 1992
includes 53 weeks. The effect of the inclusion of 53 weeks of the Company's
operations in fiscal year 1992 is not deemed material to the Company's financial
position and results of operations.
Results for the fiscal year 1993 were negatively impacted by weak economic
and market conditions which persisted throughout the year. Net sales were
$1,386.4 million in 1993, decreasing 5% from 1992 and 3% from 1991. Income
before cumulative effect of accounting change was $6.4 million, a 92% decline
from both 1992 and 1991. Net income for 1993 includes a charge of $18.9 million
for nonhedged financial instrument transactions. Net income for 1993 also
includes a non-cash charge of $9.5 million resulting from a change in the
Federal statutory tax rate from 34% to 35%. This charge includes the
cumulative effect of the recalculation of the deferred tax liability under
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes". Net income of $91.6 million for fiscal year 1992 includes a
non-cash gain of $9.0 million from the cumulative effect of accounting change
related to the adoption of SFAS No. 109.
PAPER, PAPERBOARD AND PULP
The paper, paperboard and pulp segment manufactures bleached and recycled
paperboard, hardwood and softwood market pulp and uncoated free-sheet paper.
The Company operates one recycled paperboard mill, two bleached paperboard and
pulp mills, one uncoated free-sheet paper mill, five sheeting and distribution
centers and one extrusion coating plant.
Net sales for this segment declined 12% compared to fiscal year 1992.
Paperboard sales declined approximately 6% compared to the prior year
reflecting a reduction in shipments along with a decline in average selling
prices. Paperboard accounted for 72% and 67% of the segment's sales for 1993
and 1992, respectively. Market pulp sales declined 38% from last year
reflecting a 30% decline in average selling prices and a reduction in
shipments. Shipments of this product to the export market declined 11% compared
to the prior year reflecting the continuation of poor economic conditions
throughout Europe. Market pulp accounted for 15% and 21% of the segment's sales
in 1993 and 1992, respectively. Improvement in demand, during 1993, caused a
3% increase in sales of uncoated free-sheet paper over the prior year. Paper
sales accounted for 13% and 12% of the segment's sales in 1993 and 1992,
respectively.
Operating profits for this segment declined 55% compared to 1992. The
decline in operating profits reflects reduced average selling prices for market
pulp and bleached paperboard, partially offset by increased selling prices of
recycled paperboard. Demand for these products remained strong throughout the
year with shipments of all products, except uncoated free-sheet paper,
declining only slightly from the prior year.
The Augusta paperboard and pulp mill operated efficiently during the year
attaining record production levels on two of its machines. In previous years,
the mill underwent a major capital expansion program to increase production
capacity and improve quality. Since the start-up in early 1992, the upgraded
machines have been operating efficiently and have been achieving higher
production levels.
The Riegelwood paperboard and pulp mill also operated efficiently during
1993 but was negatively impacted by lower average selling prices for market
pulp. Weak economic conditions along with high worldwide market pulp inventory
levels have caused a 30% decline, compared to 1992, in the average selling
price of market pulp. At year-end selling prices, this product is unprofitable
and cannot return to profitability until selling prices are restored to
adequate levels. Prices improved slightly at the end of the fourth quarter and
further improvement is anticipated in 1994. The Company anticipates market pulp
prices to return to profitable levels in the near future. The results for the
mill were also impacted by lower shipments and lower average selling prices for
bleached paperboard. This decline in average selling prices was generally
caused by a change in product mix.
The Sprague recycled paperboard mill had an excellent year setting an
overall production record producing 179,200 tons of recycled paperboard in
1993. Operating profits improved 19% over the prior year primarily due to
improved operating efficiencies and increased average selling prices. In 1993,
the mill completed a natural gas pipeline which enabled the substitution of
lower priced natural gas for oil and propane used during the manufacturing
process.
The Inverurie uncoated free-sheet paper mill showed an improvement in both
sales and operating profits over 1992. The mill set an overall production
record mainly due to the completion, in 1992, of a capital expansion program
which significantly increased production capacity. Demand for uncoated
free-sheet paper strengthened during the year with shipments 37% above the
prior year. Average selling prices declined compared to last year due to poor
economic conditions throughout Europe, a change in product mix and an increase
in industry capacity. In early 1994, a price increase was implemented for this
product and further price increases are anticipated as the economy improves.
Net sales for this segment were 6% higher in 1992 than in 1991. A decrease
in uncoated free-sheet paper sales partially offset increases in both
paperboard and market pulp sales. The primary factor contributing to the
increased sales was an increase in shipments of all products. The increase in
sales was partially offset by decreases in the average selling prices of
bleached paperboard, mainly caused by a change in product mix, and of uncoated
free-sheet paper, caused by weak economic conditions in Europe. Average selling
prices of market pulp improved slightly in 1992 compared to 1991.
Federal Paper Board Company, Inc. 1993 Annual Report Page 18
<PAGE> 8
Federal Paper Board Company, Inc.
Operating profits for this segment declined 4% in 1992 compared to 1991.
This decline was mainly attributable to lower average selling prices for all
product lines generally caused by weak economic conditions, extremely
competitive market conditions and changes in product mix. The Company's mills
all operated efficiently during 1992 with the Riegelwood and Inverurie mills
setting production records. During 1992, capital programs were successfully
completed at the Inverurie and Augusta mills while other programs were begun at
the Sprague and Riegelwood mills.
WOOD PRODUCTS
The wood products segment is involved in the manufacture of dimensional lumber
and land management activities. The Company operates five lumber plants and
owns or leases approximately 693,000 acres of timberlands.
Net sales for this segment increased 28% compared to fiscal year 1992.
Average selling prices of dimensional lumber reached record levels during the
year and ended 1993 approximately 31% above last year. Demand remained strong
during the year with shipments slightly below the 1992 level.
Operating profits more than doubled for this segment in fiscal year 1993
compared to 1992. Market conditions for lumber were favorable during the year
reflecting improved housing starts and a reduced supply of lumber. The
completion of various modernization programs at some of the lumber plants
improved operating efficiencies, positively impacting operating profits for the
year.
Net sales in 1992 increased 34% compared to fiscal year 1991 due to
increased shipments and average selling prices for lumber. Shipments of lumber
reached 582.2 million board feet compared to 513.5 million board feet in 1991.
Average selling prices increased 18% in 1992 compared to 1991.
Operating profits in 1992 were substantially higher than 1991. Strong demand
for lumber along with improved average selling prices had a favorable impact on
the profitability of this segment. In 1992, the Company completed various
modernization programs at the lumber plants which increased production
efficiencies and positively impacted earnings.
CONVERTING OPERATIONS
The converting operations segment manufactures paper and plastic cups and
specialty packaging products. The company operates six cup plants and four
folding carton plants.
Net sales for this segment declined slightly compared to the prior year. The
decrease reflects a 15% decline in sales of packaging products partially offset
by a 4% increase in sales of paper and plastic cups. Demand for paper and
plastic cups improved throughout the year with shipments 9% higher than the
prior year. The increase in shipments was partially offset by a decline in
average selling prices along with a change in product mix. Paper and plastic
cups accounted for 70% and 65% of this segment's sales in 1993 and 1992,
respectively.
Operating profits declined 49% for this segment in 1993 compared to 1992.
The primary factors contributing to these lower earnings were reduced volume
and a change in product mix from the Company's packaging operations. Results
for the cup operations were also below the prior year due to lower average
selling prices, along with a change in product mix partially offset by an
increase in volume. The current year's results for the cup operations include a
charge of $1.0 million associated with the restructuring of these operations.
As part of the restructuring, the Company has implemented various cost
reduction programs which, combined with recent capital expenditures, are
expected to enhance manufacturing and distribution efficiencies. These programs
are expected to have a positive impact on operating profits as general economic
conditions improve.
A decrease in net sales of 17% in 1992 compared to 1991 reflects lower sales
of all products in this segment. The majority of the decline was attributable
to a 14% decrease in the sale of paper and plastic cups. This business was
significantly impacted by the weak economy and industry overcapacity which had
a negative impact on average selling prices of paper and plastic cups. Net
sales of packaging products decreased in 1992 due to the divestiture of folding
carton plants in 1991.
Operating profits declined significantly in 1992 compared to 1991 mainly due
to the erosion of average selling prices of cups caused by the weak economy.
The Company's packaging operations performed well during 1992 benefiting from
reduced costs associated with the reorganization of the operations due to the
divestiture of four plants in 1991.
Federal Paper Board Company, Inc. 1993 Annual Report Page 19
<PAGE> 9
Federal Paper Board Company, Inc.
OTHER ITEMS
The Company entered into several nonhedged off-balance-sheet financial
instrument transactions in 1993, 1992 and 1991. The cost of transacting these
instruments along with gains or losses to mark these instruments to market was
a pre-tax loss in fiscal year 1993 of approximately $31.9 million and pre-tax
gains of approximately $5.3 million and $5.0 million for fiscal years 1992 and
1991, respectively. The Company recorded a gain in 1991 of approximately $4.7
million from the divestiture of folding carton plants. The items above are
included in Other - net in the Consolidated Statement of Income.
INCOME TAXES
The Federal statutory tax rate changed in 1993 from 34% to 35%. The 1993
provision for income taxes includes $9.2 million for the cumulative effect of
the recalculation of the deferred tax liability under SFAS No. 109, "Accounting
for Income Taxes", which bases future taxes on the current statutory rate. The
Company had adopted this Statement in 1992 and recorded a gain of $9.0 million
from the cumulative effect of an accounting change in the Consolidated
Statement of Income. The adoption of SFAS No. 109 resulted in higher
depreciation expense for the fiscal years 1993 and 1992. The Company's overall
effective tax rate was 75.7%, 39.1% and 42.9% in 1993, 1992 and 1991,
respectively. The higher effective tax rate for 1993 compared to 1992 and 1991
reflects the change in the Federal statutory rate.
OTHER ACCOUNTING MATTERS
The Company adopted, in fiscal year 1993, SFAS No. 106, "Employers' Accounting
for Postretirement Benefits Other than Pensions", electing to amortize the
transition obligation over twenty years. This Statement requires the Company to
accrue the estimated cost of retiree benefit payments during the years the
employee provides services. The Company previously expensed the cost of these
benefits as claims were incurred. The incremental pre-tax cost for 1993, as a
result of adopting SFAS No. 106, including amortization, service and interest
cost was approximately $2.8 million.
Certain postemployment benefits are provided to former or inactive
employees, their beneficiaries and covered dependents after employment but
before retirement. In November 1992, SFAS No. 112, "Employers' Accounting for
Postemployment Benefits", was issued and must be adopted for fiscal years
beginning after December 15, 1993. The impact of adopting this Statement in
fiscal year 1993 would not have been material to the Company's financial
position and results of operations.
CAPITAL RESOURCES AND LIQUIDITY
Despite lower net income in 1993, the Company's cash flows from operations
remained strong. Cash generated by operations in 1993 was $231.0 million
compared to $223.8 million in 1992 and $269.2 million in 1991. In 1991, the
Company entered into an agreement which allows for the sale of a fractional
interest in a defined pool of trade accounts receivable. During 1993, the
maximum allowable amount of receivables to be sold, initially $75 million, was
increased to $88 million. Proceeds from the sold receivables of $13 million and
$75 million in 1993 and 1991, respectively are reported as operating cash
flows.
Cash flows used for investing activities were primarily associated with
capital investment programs. Capital expenditures, including capitalized
interest, totaled $161.2 million in 1993, $149.1 million in 1992 and $227.4
million in 1991. The majority of the capital spending in 1993 related to a
modernization program at the Company's Riegelwood mill which will improve
quality and ensure the Company's leadership position in the lightweight
bleached bristol market. In 1993, the Company also began a capital spending
program to construct a new warehouse for its cup operations in order to improve
distribution efficiencies. A major portion of the spending in 1992 was related
to ongoing capital investment programs for the paper, paperboard and pulp
segment, including some spending on the Riegelwood mill program mentioned
above. Spending in 1991 was primarily associated with the completion of capital
expansion programs at the Company's Augusta and Inverurie mills which related
to increasing production capacity and improving quality. Capital expenditures
for 1994, including capitalized interest, are expected to be consistent with
the 1993 level.
Cash flows used for financing activities were associated with the payment of
dividends and the repayment of long-term debt. Cash paid for dividends was
$48.6 million, $48.4 million and $48.6 million in 1993, 1992 and 1991,
respectively. The Company's cash dividend was maintained at a quarterly rate of
$.25 per common share for the fourth straight year. During 1993, the Company
reduced total debt by $28.8 million. The ratio of total debt to total
capitalization was 54.2%, 53.5% and 54.8% in 1993, 1992 and 1991, respectively.
During 1993, the Company entered into two revolving credit agreements. The
first agreement provides for borrowings of up to $75 million and expires in
September 1994 and the second agreement provides for borrowings of up to $225
million and expires in September 1996. Both of these agreements may be extended
until 1998 upon mutual consent of all parties. These agreements replaced the
existing $200 million revolving credit and term loan agreement.
Federal Paper Board Company, Inc. 1993 Annual Report Page 20
<PAGE> 10
Federal Paper Board Company, Inc.
Debt repayments in 1994 for outstanding borrowings are projected to be $56.1
million. The Company believes cash flows from operations supplemented by the
revolving credit agreement and $75 million remaining under a previously filed
shelf registration statement will be sufficient to meet the repayment
requirements and fund capital spending programs.
During 1993, the Company entered into $50 million and terminated $175
million of interest rate swap agreements in order to effectively lower interest
costs. The Company's outstanding interest rate swap agreements effectively
converted $175 million and $300 million of fixed rate debt to variable rate
debt at January 1, 1994 and January 2, 1993, respectively. These agreements
have various expiration dates through 1997.
The Company had various nonhedged interest rate swap agreements outstanding
at January 1, 1994 of which two were complex in nature. One interest rate swap
agreement outstanding is based on a notional amount of $175 million in which
the Company receives LIBOR and pays LIBOR in arrears, a predetermined spread
plus a leveraged coupon based on various interest rate spreads. The estimated
fair value of this interest rate swap agreement at January 1, 1994 was a loss
of $20.6 million.
The second interest rate swap agreement outstanding is based on a notional
amount of $25 million in which the Company receives a fixed rate of 10% and
pays LIBOR, a predetermined spread plus a leveraged coupon based on various
interest rate spreads. The estimated fair value of this interest rate swap
agreement at January 1, 1994 was a loss of $3.8 million.
The Company manages certain portions of its exposure to foreign currency
fluctuations through a variety of nonhedged off-balance-sheet financial
instruments including foreign currency option and forward contracts. The
Company's market risk under these agreements is subject to currency rate
changes of the British pound sterling, the German mark and the Japanese yen
along with changes in U.S. and German interest rates. At January 1, 1994, the
Company had outstanding foreign currency call option contracts with a notional
amount of 5.0 million U.S. dollars and 20.0 million British pounds, foreign
currency put option contracts with a notional amount of 40.0 million U.S.
dollars, 8.5 million German marks and 10.0 million British pounds and forward
foreign exchange contracts with a notional amount of 5.0 million U.S. dollars.
Certain loan agreements the Company is party to contain various restrictive
covenants. At January 1, 1994, as restated, the Company was unable to comply
with the cash flow coverage test in the revolving credit agreements. The
Company has obtained waivers from the syndicate of banks related to this item
of default through June 18, 1994, at which time the Company was in compliance
with all restrictive covenants.
ENVIRONMENTAL MATTERS
The Company operates in an industry subject to extensive environmental
regulations. In order to meet the standards established by the various federal,
state and local environmental laws and regulations, the Company has made
substantial capital and operating expenditures. Environmental capital
expenditures totaled $17.2 million in 1993, $32.2 million in 1992 and $48.0
million in 1991. Capital expenditures for environmental purposes are estimated
to be approximately $25 million and $70 million for fiscal years 1994 and 1995,
respectively. However, spending on these environmental projects may be
undertaken in years beyond 1995. Additional amounts to be incurred for
environmental purposes in future years will depend on new laws and regulations,
other changes in legal requirements, changes in environmental control
technology and changes in the economic environment. In the latter part of
1993, the United States Environmental Protection Agency issued regulations
which could result in significant expenditures being incurred in our industry
in future years. The Company is not yet in a position to establish a meaningful
estimate of such costs or predict what potential financial impact changes to
other existing regulations would have on the Company. All companies in our
industry are subject to the same or similar environmental laws and regulations
and the Company does not believe that compliance with applicable laws and
regulations will materially effect its competitive position.
The Company is involved in environmental remediation activities at 11 sites
where it has been named a potentially responsible party under the Comprehensive
Environmental Response, Compensation and Liability Act and by certain state
agencies. The total costs to the Company to remediate these sites cannot be
predicted with certainty due to the amount of time necessary to complete the
cleanups, the extent to which contributions will be available from other
parties or the availability of insurance coverage. However, based upon its
experience with such matters, the Company does not believe that its expected
share of such known actual and potential cleanup costs will have a materially
adverse effect on its financial position and results of operations.
The Company has accruals for probable and estimable environmental costs of
$4.7 million and $3.8 million, at January 1, 1994 and January 2, 1993,
respectively.
EFFECTS OF INFLATION
The moderate level of inflation during the past few years has not had a
material impact on the Company's operating results. Prices and volumes for the
Company's products are more closely related to supply and demand factors in
specific markets and by exchange rate fluctuations than by inflationary
factors.
FUTURE OUTLOOK
The Company anticipates an improvement in the general economic and market
conditions affecting its business in 1994. Expected increases in demand for its
major products should allow for overall higher average selling prices in 1994.
In addition, ongoing Company-wide cost reduction programs, along with recent
capital expenditures, are expected to enhance manufacturing and distribution
efficiencies throughout the Company. Therefore, with improved demand and
pricing of its major product lines and overall lower costs, 1994 results should
be improved over 1993.
Federal Paper Board Company, Inc. 1993 Annual Report Page 21
<PAGE> 11
Federal Paper Board Company, Inc.
INDUSTRY SEGMENT INFORMATION
<TABLE>
<CAPTION>
Net Sales to
Unaffiliated Intersegment Total
In thousands Customers Sales Sales
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FOR FISCAL YEAR 1993
Paper, Paperboard and Pulp $ 843,775 $ 91,302 $ 935,077
Wood Products 214,913 19,217 234,130
Converting Operations 327,698 -- 327,698
- ------------------------------------------------------------------------------------------------------------------------
Total segment operations 1,386,386 110,519 1,496,905
Intersegment eliminations -- (110,519) (110,519)
General corporate items - net -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Consolidated total $ 1,386,386 $ -- $1,386,386
- ------------------------------------------------------------------------------------------------------------------------
FOR FISCAL YEAR 1992
Paper, Paperboard and Pulp $ 955,978 $ 93,039 $1,049,017
Wood Products 168,330 19,286 187,616
Converting Operations 336,511 -- 336,511
- ------------------------------------------------------------------------------------------------------------------------
Total segment operations 1,460,819 112,325 1,573,144
Intersegment eliminations -- (112,325) (112,325)
General corporate items - net -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Consolidated total $ 1,460,819 $ -- $1,460,819
- ------------------------------------------------------------------------------------------------------------------------
FOR FISCAL YEAR 1991
Paper, Paperboard and Pulp $ 905,022 $ 81,870 $ 986,892
Wood Products 126,063 20,287 146,350
Converting Operations 403,936 -- 403,936
- ------------------------------------------------------------------------------------------------------------------------
Total segment operations 1,435,021 102,157 1,537,178
Intersegment eliminations -- (102,157) (102,157)
General corporate items - net -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Consolidated total $ 1,435,021 $ -- $1,435,021
========================================================================================================================
</TABLE>
The Paper, Paperboard and Pulp segment consists of the Company's operations at
Riegelwood, NC; Augusta, GA; Sprague, CT; Inverurie, Scotland; Sturgis, MI;
Ontario, CA; Hazleton, PA; Prosperity, SC; and Wharfedale, England. Net sales
to unaffiliated customers were as follows:
<TABLE>
<CAPTION>
In thousands 1993 1992 1991
- ---------------------------------------------------------
<S> <C> <C> <C>
Paper $113,263 $109,601 $115,750
Paperboard 605,632 644,844 603,486
Pulp 124,880 201,533 185,786
=========================================================
</TABLE>
The Wood Products segment includes the results of the Company's lumber
plants and land management group. The Converting Operations segment includes
the results of the Company's cup operations and packaging operations.
Intersegment sales are comprised principally of the sale of paperboard at
market prices to the Converting Operations and the sale of wood chips and
pulpwood at cost from the lumber plants and woodlands to the Paperboard and
Pulp Operations. Identifiable assets by segment are principally those assets
which are used in the Company's operations in each industry.
Federal Paper Board Company, Inc. 1993 Annual Report Page 22
<PAGE> 12
Federal Paper Board Company, Inc.
<TABLE>
<CAPTION>
Restated
Income Before Taxes Restated Depreciation,
and Cumulative Effect Identifiable Amortization and Cost Capital
of Accounting Change Assets of Timber Harvested Expenditures
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$ 88,646 $1,845,876 $106,303 $130,901
71,633 309,228 12,997 14,760
7,829 312,509 20,898 15,054
- ------------------------------------------------------------------------------------------------------------------------
168,108 2,467,613 140,198 160,715
1,399 -- -- --
(143,207) 94,290 3,889 523
- ------------------------------------------------------------------------------------------------------------------------
$ 26,300 $2,561,903 $144,087 $161,238
- ------------------------------------------------------------------------------------------------------------------------
$ 198,361 $1,860,734 $106,817 $121,891
31,431 290,763 13,475 12,050
15,480 321,008 22,347 14,993
- ------------------------------------------------------------------------------------------------------------------------
245,272 2,472,505 142,639 148,934
(92) -- -- --
(109,480) 100,994 3,927 196
- ------------------------------------------------------------------------------------------------------------------------
$ 135,700 $2,573,499 $146,566 $149,130
- ------------------------------------------------------------------------------------------------------------------------
$ 207,680 $1,810,891 $ 86,055 $194,124
10,277 266,583 10,958 15,283
38,971 317,245 21,949 17,414
- ------------------------------------------------------------------------------------------------------------------------
256,928 2,394,719 118,962 226,821
(989) -- -- --
(111,739) 97,971 3,733 582
- ------------------------------------------------------------------------------------------------------------------------
$ 144,200 $2,492,690 $122,695 $227,403
========================================================================================================================
</TABLE>
Corporate assets include cash, prepaid items, non-trade receivables,
unamortized debenture expenses, investments and non-operating assets. General
corporate items - net include administrative expenses, interest expense and
other items.
Export sales from the Company's United States operations to unaffiliated
customers by major geographic area were as follows:
<TABLE>
<CAPTION>
In thousands 1993 1992 1991
- ---------------------------------------------------------
<S> <C> <C> <C>
North America $ 16,033 $ 14,727 $ 13,570
Europe 43,324 91,794 90,050
Asia 67,377 96,338 79,325
Other 5,278 6,980 5,691
- ---------------------------------------------------------
Total $ 132,012 $ 209,839 $ 188,636
=========================================================
</TABLE>
Further information on the 1993 restatement is contained in
Note 10 of the financial statments.
Federal Paper Board Company, Inc. 1993 Annual Report Page 23
<PAGE> 13
Federal Paper Board Company, Inc.
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
In thousands except per share amounts Restated
For Fiscal Year 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET SALES $1,386,386 $1,460,819 $1,435,021
- ------------------------------------------------------------------------------------------------------------------------
COSTS AND EXPENSES:
Cost of products sold 1,038,785 1,034,854 1,008,508
Depreciation, amortization and cost of timber harvested 144,087 146,566 122,695
Selling and administrative expenses 60,149 64,769 64,144
Interest expense 84,509 85,018 90,243
Other -- net 32,556 (6,088) 5,231
- ------------------------------------------------------------------------------------------------------------------------
TOTAL COSTS AND EXPENSES 1,360,086 1,325,119 1,290,821
- ------------------------------------------------------------------------------------------------------------------------
Income before taxes and cumulative effect of accounting change 26,300 135,700 144,200
Provision for income taxes 19,900 53,100 61,800
- ------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of accounting change 6,400 82,600 82,400
Cumulative effect of accounting change -- 9,000 --
- ------------------------------------------------------------------------------------------------------------------------
NET INCOME 6,400 91,600 82,400
Preferred dividend requirements 6,610 7,060 8,129
- ------------------------------------------------------------------------------------------------------------------------
Net income (loss) available to common shares $ (210) $ 84,540 $ 74,271
- ------------------------------------------------------------------------------------------------------------------------
Average common shares outstanding:
Assuming no dilution 41,995 41,448 40,540
Assuming full dilution 41,995 46,695 46,429
- ------------------------------------------------------------------------------------------------------------------------
EARNINGS (LOSS) PER COMMON SHARE
- ------------------------------------------------------------------------------------------------------------------------
Assuming no dilution:
Income (loss) before cumulative effect of accounting change $ (.01) $ 1.82 $ 1.83
Cumulative effect of accounting change -- .22 --
- ------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ (.01) $ 2.04 $ 1.83
- ------------------------------------------------------------------------------------------------------------------------
Assuming full dilution:
Income (loss) before cumulative effect of accounting change $ (.01) $ 1.77 $ 1.77
Cumulative effect of accounting change -- .19 --
- ------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) $ (.01) $ 1.96 $ 1.77
========================================================================================================================
</TABLE>
See accompanying notes to financial statements and Note 10 as to the 1993
restatement.
Federal Paper Board Company, Inc. 1993 Annual Report Page 24
<PAGE> 14
Federal Paper Board Company, Inc.
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
In thousands Restated
For Fiscal Year 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net income $ 6,400 $ 91,600 $ 82,400
Adjustments to reconcile net income to net cash provided
by operations:
Cumulative effect of accounting change -- (9,000) --
Depreciation, amortization and cost of timber harvested 144,087 146,566 122,695
Deferred income tax provision 13,076 26,857 35,056
Net loss (gain) on financial instrument transactions 31,854 (5,258) (4,989)
Net loss on disposal of property, plant and equipment and timber 401 4,778 10,787
Net gains on sales of facilities -- -- (4,668)
Other - net (11,543) (10,371) 3,293
Changes in current assets and liabilities, net of effects
from acquisitions:
Accounts and notes receivable 36,271 (4,762) 69,532
Inventories (21,651) (21,488) (26,472)
Other current assets 12,464 (794) 11,332
Accounts payable and other current liabilities 19,619 5,718 (29,788)
- ------------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATIONS 230,978 223,846 269,178
- ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (161,238) (149,130) (227,403)
Proceeds from disposal of property, plant and equipment 1,213 3,083 13,725
Net (payments) proceeds for financial instrument transactions (4,390) 5,258 4,989
Proceeds received on settlement of note receivable 10,000 -- --
Other (1,365) (9,071) (11,478)
- ------------------------------------------------------------------------------------------------------------------------
NET CASH USED FOR INVESTING ACTIVITIES (155,780) (149,860) (220,167)
- ------------------------------------------------------------------------------------------------------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Cash dividends paid (48,591) (48,414) (48,645)
Increase in long-term debt 1,909 209,966 200,623
Payments on long-term debt (34,348) (239,896) (224,447)
Issuance of equity capital 3,593 5,845 7,942
Change in short-term bank debt 2,230 (1,724) 15,032
- ------------------------------------------------------------------------------------------------------------------------
NET CASH USED FOR FINANCING ACTIVITIES (75,207) (74,223) (49,495)
- ------------------------------------------------------------------------------------------------------------------------
DECREASE IN CASH: (9) (237) (484)
Cash:
Beginning of year 280 517 1,001
End of year $ 271 $ 280 $ 517
- ------------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW DISCLOSURE:
Cash paid during the year for:
Interest (net of amount capitalized) $ 84,948 $ 78,864 $ 86,189
Income taxes 7,171 26,885 30,557
========================================================================================================================
</TABLE>
See accompanying notes to financial statements and Note 10 as to the 1993
restatement.
Federal Paper Board Company, Inc. 1993 Annual Report Page 25
<PAGE> 15
Federal Paper Board Company, Inc.
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
In thousands Restated
At Year End 1993 1992
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 271 $ 280
Accounts and notes receivable, less allowance for doubtful
accounts of $1,284 in 1993 and $1,672 in 1992 52,062 88,351
Inventories:
Raw materials 58,720 59,680
Work in process 15,469 9,404
Finished goods 99,329 87,680
Supplies 51,701 52,485
- ------------------------------------------------------------------------------------------------------------------------
Subtotal 225,219 209,249
LIFO reserve (2,819) (8,257)
- ------------------------------------------------------------------------------------------------------------------------
Total inventories 222,400 200,992
Deferred tax asset 15,142 11,010
Other current assets 17,250 15,254
- ------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 307,125 315,887
- ------------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, AT COST:
Land 16,227 14,990
Buildings, including leasehold improvements 238,859 227,437
Machinery and equipment 2,259,622 2,198,152
Construction in progress 151,715 92,105
- ------------------------------------------------------------------------------------------------------------------------
Subtotal 2,666,423 2,532,684
Accumulated depreciation and amortization (769,869) (654,334)
- ------------------------------------------------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT - NET 1,896,554 1,878,350
- ------------------------------------------------------------------------------------------------------------------------
TIMBER AND TIMBERLANDS 189,674 191,840
GOODWILL AND OTHER INTANGIBLES 118,418 123,200
OTHER ASSETS 50,132 64,222
- ------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $ 2,561,903 $ 2,573,499
========================================================================================================================
</TABLE>
See accompanying notes to financial statements and Note 10 as to the 1993
restatement.
Federal Paper Board Company, Inc. 1993 Annual Report Page 26
<PAGE> 16
Federal Paper Board Company, Inc.
<TABLE>
<CAPTION> Restated
1993 1992
- ------------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 90,356 $ 79,252
Current portion of long-term debt 56,148 31,140
Short-term bank debt 25,304 23,100
Dividends payable 10,554 10,506
Accrued compensation 24,867 26,933
Accrued interest 18,885 18,923
Other current liabilities 48,029 37,370
- ------------------------------------------------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 274,143 227,224
- ------------------------------------------------------------------------------------------------------------------------
LONG-TERM DEBT 973,825 1,029,874
OTHER LIABILITIES 78,872 53,586
DEFERRED TAX LIABILITY 342,757 322,400
SHAREHOLDERS' EQUITY:
Preferred stock - $1.20 cumulative convertible, $1 par value
(aggregate liquidation value at January 1, 1994 - $1,153);
authorized 1,900 shares; issued: 1993 - 58 shares;
1992 - 61 shares 58 61
Preferred stock - Class A
Second Series, $2.875 cumulative convertible, $1 par value
(aggregate liquidation value at January 1, 1994 - $113,721);
authorized 10,000 shares; issued: 1993 - 2,274 shares;
1992 - 2,274 shares 2,274 2,274
Common stock - $5 par value; authorized 240,000 shares;
issued: 1993 - 42,356 shares; 1992 - 42,269 shares 211,779 211,344
Other capital 249,800 257,379
Retained earnings 432,961 475,200
Treasury stock - at cost:
Common stock - 1993 - 209 shares; 1992 - 317 shares (4,566) (5,843)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 892,306 940,415
- ------------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,561,903 $2,573,499
========================================================================================================================
</TABLE>
Federal Paper Board Company, Inc. 1993 Annual Report Page 27
<PAGE> 17
Federal Paper Board Company, Inc.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Preferred Common Stock Other Retained Treasury Stock
In thousands Stocks Shares Amount Capital Earnings Shares Amount
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE DECEMBER 29, 1990 $2,871 40,529 $202,645 $284,356 $398,702 365 $(5,607)
Net income 82,400
Dividends declared:
Preferred stocks (8,129)
Common stock (40,645)
Amortization of compensation expense 135
Stock options exercised 524 2,620 6,267 31 (945)
Conversion of preferred stocks
(6,287 shares) (7) 30 151 (144)
Restricted common shares forfeited (12) (59) (154)
Cumulative foreign translation
adjustment (1,847)
Minimum pension liability adjustment (1,410)
- ------------------------------------------------------------------------------------------------------------------------
BALANCE DECEMBER 28, 1991 $2,864 41,071 $205,357 $287,203 $432,328 396 $(6,552)
Net income 91,600
Dividends declared:
Preferred stocks (7,060)
Common stock (41,668)
Stock options exercised 224 1,116 4,646 (79) 709
Conversion of preferred stocks
(529,089 shares) (529) 974 4,871 (4,968)
Cumulative foreign translation
adjustment (23,339)
Minimum pension liability adjustment (6,163)
- ------------------------------------------------------------------------------------------------------------------------
BALANCE JANUARY 2, 1993 $2,335 42,269 $211,344 $257,379 $475,200 317 $(5,843)
Net income 6,400
Dividends declared:
Preferred stocks (6,610)
Common stock (42,029)
Stock options exercised 72 362 1,954 (108) 1,277
Conversion of preferred stock
(2,908 shares) (3) 15 73 (70)
Cumulative foreign translation
adjustment (286)
Minimum pension liability adjustment (9,177)
- ------------------------------------------------------------------------------------------------------------------------
BALANCE JANUARY 1, 1994 (Restated) $2,332 42,356 $211,779 $249,800 $432,961 209 $(4,566)
========================================================================================================================
</TABLE>
See accompanying notes to financial statements and Note 10 as to the 1993
restatement.
Federal Paper Board Company, Inc. 1993 Annual Report Page 28
<PAGE> 18
Federal Paper Board Company, Inc.
NOTES TO FINANCIAL STATEMENTS (Restated)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include all subsidiary companies.
Significant intercompany transactions have been eliminated.
Fiscal Year
The Company's fiscal year is comprised of 52 or 53 weeks, ending on the
Saturday nearest December 31st. The fiscal year 1992 includes 53 weeks while
the other years presented include 52 weeks.
Inventories
Inventories are valued at the lower of cost or market. Inventory costs include
all direct manufacturing costs and applied overhead. Finished goods, work in
process and raw materials for the Bleached Paperboard, Pulp, Wood Products and
Converting Operations are determined on the last-in, first-out (LIFO) basis.
Inventories for the Recycled Paperboard and Paper facilities are determined on
the first-in, first-out (FIFO) basis. Supply inventories are determined on an
average cost basis.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost. Depreciation is computed on
the straight-line method based on the estimated useful lives of related assets
except for the Augusta, GA paperboard mill, where the units-of-production
method is used. Depreciable lives are 20 to 33 years for buildings and 3 to 30
years for machinery and equipment. Cost of timber harvested is computed at unit
cost rates calculated annually based on the estimated volume of recoverable
timber and the related costs.
In the first quarter of 1993 and the fourth quarter of 1992, the Company
changed the estimated useful lives used to calculate depreciation for certain
productive assets to properly reflect the expected use of these assets. The
change in estimated useful lives made in 1993 resulted in an increase of $4.1
million on income before taxes, $2.5 million on income after taxes and $.06 on
earnings per fully diluted common share. The change in estimated useful lives
made in 1992 resulted in an increase of $2.4 million on income before taxes,
$1.4 million on income after taxes and $.03 on earnings per fully diluted
common share.
Costs of the construction of certain long-term assets include capitalized
interest which is amortized over the estimated useful life of the related
asset. The Company capitalized interest costs of $6.1 million in 1993, $11.3
million in 1992 and $18.8 million in 1991.
Intangibles and Other Assets
The excess of the purchase price over the fair value of the net assets of
acquired companies is goodwill and is amortized over 40 years. Other identified
intangible assets are amortized, if applicable, on a straight-line basis over
their estimated useful lives which range from 3 to 40 years. Accumulated
amortization of goodwill and other intangibles amounted to $20.5 million, $16.2
million and $11.3 million in 1993, 1992 and 1991, respectively.
The Company incurs certain start-up costs during the process of bringing a
project into commercial production. Such start-up costs on major capital
projects are capitalized and amortized on a straight-line basis over five
years. Unamortized start-up costs, included in other assets, were $17.1
million, $22.5 million and $18.5 million in 1993, 1992 and 1991, respectively.
Management periodically evaluates the recoverability of long-term assets,
including goodwill, based upon current and anticipated net income and
undiscounted future cash flows.
Financial Instruments
The Company enters into hedged interest rate swap agreements which involve the
exchange of fixed and floating rate interest payments periodically over the
life of the agreement without the exchange of the underlying principal amounts.
The differential to be paid or received is accrued as interest rates change and
recognized over the life of the agreements as an adjustment to interest
expense.
The Company enters into nonhedged interest rate swap agreements along with
hedged and nonhedged foreign exchange instruments. Gains and losses
associated with nonhedged transactions are recorded currently in income. If
the contract hedges a firm commitment, gains and losses are deferred and
included as a component of the related commitment.
Income Taxes
Effective December 29, 1991, the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes", and has
reported the cumulative effect of this change in the method of accounting for
income taxes in the Consolidated Statement of Income for fiscal year 1992.
Under SFAS No. 109, deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. In adopting SFAS No. 109, the Company adjusted the
carrying amounts of previous acquisitions accounted for using the purchase
method of accounting.
Under APB Opinion 11, which was applied in 1991 and prior years, provisions
were made for deferred income taxes resulting from differences between the time
transactions were recorded for financial statement purposes and the time they
affected taxable income.
Earnings Per Common Share
Earnings per common share assuming no dilution is based on the weighted average
number of shares and common equivalent shares outstanding during the year.
Outstanding stock options are common equivalent shares but are not included in
the computation since the dilutive effect is not material.
Earnings per common share assuming full dilution is based on the weighted
average number of common shares outstanding during the year, including the
dilutive effects of stock options outstanding and the conversion of the
Company's preferred stocks.
Federal Paper Board Company, Inc. 1993 Annual Report Page 29
<PAGE> 19
Federal Paper Board Company, Inc.
Foreign Currency Translation
Adjustments resulting from the translation of foreign subsidiaries' financial
statements into U.S. dollars are included as cumulative foreign translation
adjustments in shareholders' equity. The net cumulative foreign currency
translation adjustments included in other capital were decreases of $18.6
million and $18.3 million at January 1, 1994 and January 2, 1993,
respectively.
Revenue Recognition
The Company generally recognizes revenues when goods are shipped.
Reclassifications
Certain amounts in prior year financial statements have been reclassified to
conform with the current year presentation.
NOTE 2 SUPPLEMENTAL BALANCE SHEET INFORMATION
Accounts and Notes Receivable
In 1991, the Company entered into an agreement which allows for the sale,
without recourse, of a fractional interest in a defined pool of trade accounts
receivable. The maximum allowable amount of receivables to be sold, initially
$75 million, was increased to $88 million in 1993. The amount available at any
measurement date varies based upon the level of eligible receivables. Under
this agreement, $88 million and $75 million were sold as of January 1, 1994 and
January 2, 1993, respectively. These sales are reflected as reductions of
accounts receivable in the accompanying Consolidated Balance Sheet and as
operating cash flows in the accompanying Consolidated Statement of Cash Flows.
The costs of this program, which were $2.8 million in 1993, $3.4 million in
1992 and $1.9 million in 1991, are based upon the Company's debt ratings and
the purchasers' level of investment and borrowing costs and are charged to
selling and administrative expenses in the accompanying Consolidated Statement
of Income.
During 1993, the Company settled a $20.5 million note receivable it had
received in 1991 when three folding carton plants were sold to a group of
former employees. In the settlement of this receivable, the Company received
cash and preferred stock. The preferred stock is included in Other Assets in
the accompanying Consolidated Balance Sheet.
Inventories
The Company used the LIFO method of valuing its inventories for approximately
69% of total inventories at January 1, 1994 and 67% of total inventories at
January 2, 1993.
A reduction of certain inventory quantities resulted in the liquidation of
certain LIFO inventory layers. As a result of these liquidations, net income
and earnings per common share assuming full dilution for the fiscal years 1993,
1992 and 1991 were higher by $1.7 million or $.04, $.4 million or $.01 and $2.3
million or $.05, respectively.
Financial Instruments
The estimated fair values of the Company's financial instruments at January 1,
1994 and January 2, 1993 were as follows:
<TABLE>
<CAPTION>
1993 1992
--------------------------------------------
Carrying Estimated Carrying Estimated
In thousands Amount Fair Value Amount Fair Value
- -----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Accounts and notes
receivable $ 52,062 $ 52,062 $ 88,351 $ 88,351
Notes receivable
non-current 2,418 2,418 22,913 26,289
Long-term debt 1,029,973 1,181,193 1,061,014 1,149,644
Interest rate swap
agreements-settlement
basis:
In a loss position -- 1,830 -- 8,800
Interest rate swaps --
marked to market:
In a gain position 260 260 -- --
In a loss position 25,706 25,706 -- --
=======================================================================
</TABLE>
The estimated fair value amounts have been determined by the Company, using
available market information and appropriate valuation methodologies as of
January 1, 1994 and January 2, 1993. Although management is not aware of any
factors that would significantly affect the estimated fair value amounts, such
amounts have not been comprehensively revalued for purposes of these financial
statements since that date, and current estimates of fair value may differ
significantly from amounts presented herein. The following are the methods used
for each class of financial instrument for which it is practicable to estimate
the value.
Accounts and notes receivable: The carrying amounts of these items are a
reasonable estimate of their fair value.
Notes receivable non-current: The estimated fair value of notes receivable
to the Company is based on market prices for the same or similar
instruments with similar maturities.
Long-term debt: The estimated fair value of the Company's long-term debt is
based on the quoted market prices for the same or similar issues or on the
current rates offered to the Company for debt with the same remaining
maturities.
Interest rate swap agreements: The estimated fair value of interest rate swap
agreements is obtained from dealer quotes.
The Company had various nonhedged interest rate swap agreements outstanding at
January 1, 1994 of which two were complex in nature. One interest rate swap
agreement outstanding is based on a notional amount of $175 million in which
the Company receives LIBOR and pays LIBOR in arrears, a predetermined spread
plus a leveraged coupon based on various interest rate spreads. The estimated
fair value of this interest rate swap agreement at January 1, 1994 was a loss
of $20.6 million.
The second interest rate swap agreement outstanding is based on a notional
amount of $25 million in which the Company receives a fixed rate of 10% and
pays LIBOR, a predetermined spread plus a leveraged coupon based on various
interest rate spreads. The estimated fair value of this interest rate swap
agreement at January 1, 1994 was a loss of $3.8 million.
The Company manages certain portions of its exposure to foreign
currency fluctuations through a variety of financial instruments with
off-balance-sheet market risk including foreign currency option and foreign
currency forward contracts. The risk of loss to the Company in the event of
non-performance by any party under these agreements is not significant. The
Company's market risk under these agreements is subject to currency rate
differentials. At January 1, 1994, the Company had outstanding foreign currency
call option contracts with a notional amount of 5.0 million U.S. dollars and
20.0 million British pounds, foreign currency put option contracts with a
notional amount of 40.0 million U.S. dollars, 8.5 million German marks, 10.0
million British pounds and forward foreign exchange contracts with a
notional amount of 5.0 million U.S. dollars. At January 2, 1993, the Company had
outstanding foreign currency call option contracts with a notional amount of
$185.0 million, foreign currency put option contracts with a notional amount
of $20.0 million and forward foreign exchange contracts with a notional amount
of $10.0 million. The estimated fair values of the nonhedged foreign currency
contracts outstanding at January 1, 1994 and January 2, 1993 were immaterial.
Federal Paper Board Company, Inc. 1993 Annual Report Page 30
<PAGE> 20
NOTE 3 LONG-TERM DEBT Federal Paper Board Company, Inc.
<TABLE>
<CAPTION>
In thousands 1993 1992
- -----------------------------------------------------------------------
<S> <C> <C>
Revolving credit agreements,
variable interest rates $ 50,000 $ 20,000
Notes:
9.39% - 10.5% Senior notes,
due 1993 - 2009 475,000 500,000
4.9% Bank note, due 1994 25,000 25,000
5.85% Bank note, due 1995 20,000 20,000
Other 45,000 75,000
8.125% - 10% Debentures,
due 2002-2012 375,000 375,000
Industrial revenue bonds,
due 1992-2012 29,870 32,799
Capitalized lease obligations 2,118 1,056
Other 7,985 12,159
- -----------------------------------------------------------------------
Total 1,029,973 1,061,014
Current portion (56,148) (31,140)
- -----------------------------------------------------------------------
Total long-term debt $ 973,825 $1,029,874
=======================================================================
</TABLE>
The aggregate maturities of long-term debt for the five years subsequent to
January 1, 1994 are as follows: 1994 - $56,148; 1995 - $71,954; 1996 - $95,538;
1997 - $32,912; 1998 - $27,591.
The Company has two revolving credit agreements with a syndicate of banks.
The first agreement provides for borrowings of up to $75 million and expires in
1994 and the second agreement provides for borrowings of up to $225 million and
expires in 1996. Both of these agreements may be extended, by mutual consent of
all parties, until 1998. The agreements require the payment of a facility fee
and the $225 million agreement requires the payment of a commitment fee based
on the unused portion of the line of credit. These agreements became effective
in the third quarter of 1993 and replaced the Company's $200 million revolving
credit and term loan agreement.
The agreements referenced above provide for borrowing at variable interest
rates based on the prime rate or, at the Company's option, on the London
Interbank Offered Rate (LIBOR) or the average secondary market offering rate
for certificates of deposit in New York City. The rate can be reduced or
increased depending on the Company's ratio of debt to total capitalization and
cash flow coverage. The weighted average interest rate for 1993 and 1992 was
3.9% and 4.9%, respectively. The weighted average interest rate for 1992
reflects the impact of interest rate swap agreements, which expired in March of
1992, on a portion of the outstanding loans. The Company classified $45 million
and $75 million of other notes as long-term debt at January 1, 1994 and January
2, 1993, respectively. The Company has the ability and intent under the
revolving credit agreements to renew these obligations through 1996.
During 1993, the Company executed and terminated various interest rate swap
agreements which reduced the interest costs on certain fixed rate debt. At
January 1, 1994, the Company had hedged interest rate swap agreements
outstanding with a notional principal amount of $175 million which converted
fixed rate debt with a weighted average interest rate of 8.66% to variable
rates, based on LIBOR plus a predetermined spread, with a weighted average
interest rate of 7.1%. These swap agreements terminate on various dates
through the year 1997. The Company is exposed to credit loss in the event of
nonperformance by the other party to the interest rate swap agreements.
However, the Company does not anticipate nonperformance by the counterparty.
The industrial revenue bonds had a weighted average interest rate of 4.8%
and 6.6% in 1993 and 1992, respectively.
Certain loan agreements contain various restrictive covenants, including a
restriction on the amount of net earnings available for dividends and the
purchases of Company stock. Unrestricted retained earnings under the most
restrictive provision amounted to $94.7 million at January 1, 1994. At
January 1, 1994, as restated, the Company was unable to comply with the cash
flow coverage test in the revolving credit agreements. The Company has
obtained waivers from the syndicate of banks related to this item of default
through June 18, 1994, at which time the Company was in compliance with all
restrictive covenants.
NOTE 4 LEASES & OTHER COMMITMENTS
Leases
The Company leases certain buildings and machinery and equipment under various
operating leases. Rental expense for operating leases was $19.1 million, $20.6
million and $23.0 million in 1993, 1992, and 1991, respectively. Minimum lease
payments for operating leases existing as of January 1, 1994 are as follows:
$15.4 million in 1994; $13.0 million in 1995; $10.3 million in 1996; $9.0
million in 1997; $7.5 million in 1998 and $15.4 million in years after 1998.
Environmental
Environmental expenditures that relate to current operations are expensed or
capitalized as appropriate. Expenditures that relate to an existing condition
caused by past operations, and which do not contribute to current or future
revenue generation, are expensed. These amounts are recorded when
environmental assessments and/or remedial efforts are probable, and the cost
can be reasonably estimated. The timing of these accruals generally coincides
with completion of a feasibility study or the Company's commitment to a formal
action plan. Amounts included in the accompanying Consolidated Balance Sheet
for estimated environmental costs, at January 1, 1994 and January 2, 1993, were
$4.7 million and $3.8 million, respectively, which in the opinion of management
are sufficient to cover probable and estimable environmental costs.
Federal Paper Board Company, Inc. 1993 Annual Report Page 31
<PAGE> 21
Federal Paper Board Company, Inc.
NOTE 5 INCOME TAXES
As discussed in Note 1, the Company adopted SFAS No. 109 as of December 29,
1991 and the cumulative effect of this change in accounting for income taxes is
reported separately in the Consolidated Statement of Income for the fiscal year
1992. As a result of applying SFAS No. 109, pre-tax income for the fiscal year
ended January 2, 1993 was reduced by $6.3 million representing the effect of
adjustments for prior purchase business combinations.
The components of income before income taxes and cumulative effect of
accounting change and the provision for income taxes included in the
Consolidated Statement of Income consist of the following:
<TABLE>
<CAPTION>
In thousands 1993 1992 1991
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
INCOME (LOSS) BEFORE TAXES
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE:
Domestic $ 28,128 $137,059 $134,800
Foreign (1,828) (1,359) 9,400
- -----------------------------------------------------------------------------
Income before taxes and
cumulative effect of
accounting change $26,300 $135,700 $144,200
=============================================================================
PROVISION FOR INCOME TAXES:
Current tax expense:
Federal $ 6,310 $ 26,119 $ 26,729
State 514 124 15
- -----------------------------------------------------------------------------
Total current provision $ 6,824 $ 26,243 $ 26,744
- -----------------------------------------------------------------------------
Deferred tax expense:
Federal $ 11,890 $ 14,881 $ 21,070
State 1,786 11,976 10,950
Foreign (600) -- 3,036
- -----------------------------------------------------------------------------
Total deferred provision $ 13,076 $ 26,857 $ 35,056
- -----------------------------------------------------------------------------
Total provision $ 19,900 $ 53,100 $ 61,800
=============================================================================
</TABLE>
The provision for income taxes differs from amounts computed by applying the
statutory Federal income tax rate of 35% for fiscal year 1993 and 34% for
fiscal years 1992 and 1991 to income before taxes and cumulative effect of
accounting change due to the following:
<TABLE>
<CAPTION>
In thousands 1993 1992 1991
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Federal income taxes at
statutory rate $ 9,205 $46,138 $49,028
State income taxes less Federal
income tax effect 1,517 7,986 7,237
Enacted statutory rate change 9,200 -- --
Excess of book over tax basis
of acquired assets -- -- 4,782
Amortization of intangibles 696 780 1,051
Adjustment of prior years accruals (934) (1,498) 795
Other - net 216 (306) (1,093)
- -----------------------------------------------------------------------------
Provision for income taxes $19,900 $53,100 $61,800
Effective tax rate 75.7% 39.1% 42.9%
=============================================================================
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities at January 1, 1994 and
January 2, 1993 were as follows:
<TABLE>
<CAPTION>
In thousands 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C>
Alternative minimum tax credit carryforwards $ 59,802 $ 56,484
Net operating loss carryforwards 32,842 11,141
Other 40,558 25,705
- -----------------------------------------------------------------------------
Total deferred tax assets $ 133,202 $ 93,330
- -----------------------------------------------------------------------------
Property, plant, and equipment $ (387,602) $ (344,340)
Capitalized interest (40,661) (39,471)
Other (32,554) (20,909)
- -----------------------------------------------------------------------------
Total deferred tax liabilities $ (460,817) $ (404,720)
=============================================================================
</TABLE>
The tax effects of timing differences that give rise to components of the
deferred tax provision for income taxes for the fiscal year ended December 28,
1991 were as follows:
<TABLE>
<CAPTION>
In thousands 1991
- ---------------------------------------------------------
<S> <C>
Depreciation $ 56,428
Alternative minimum tax (27,265)
Capitalized interest 3,085
Pension costs 2,891
Foreign loss carryforward 3,036
Other - net (3,119)
- ---------------------------------------------------------
Total deferred provision for taxes $ 35,056
=========================================================
</TABLE>
The Company has capital loss and net operating loss carryforwards for domestic
income tax purposes which are available to offset future taxable income through
1998 and 2008, respectively. At January 1, 1994, the capital loss and net
operating loss carryforwards were $2.8 million and $54.5 million, respectively.
The Company also has alternative minimum tax credit carryforwards of
approximately $59.8 million at January 1, 1994, which are available to reduce
future federal regular income taxes over an indefinite period.
In addition, the Company acquired a net operating loss carryforward and an
advance corporation tax for United Kingdom tax purposes, with no expirations,
as a result of an acquisition. Using the exchange rate at January 1, 1994, the
net operating loss carryforward was approximately $32.2 million and the advance
corporation tax was $1.1 million. The foreign deferred provision for fiscal
year 1991 reflects a charge for income taxes which will not result in a cash
payment because of the utilization of these credit carryforwards. This item
resulted in a reduction to property, plant and equipment and did not impact the
deferred income tax liability.
Deferred taxes are not provided on undistributed earnings of foreign
subsidiaries, which at January 1, 1994 were $9.9 million. These earnings have
been and will continue to be reinvested. It is not practicable to estimate the
tax liability that might arise if these earnings were remitted.
Federal Paper Board Company, Inc. 1993 Annual Report Page 32
<PAGE> 22
Federal Paper Board Company, Inc.
NOTE 6 EMPLOYEE BENEFIT PLANS
Pension Plans
The Company maintains non-contributory, defined benefit pension plans covering
substantially all employees. Benefits for salaried employees are based on
salary and years of service, while hourly plans are based on a fixed benefit
rate and years of service. The Company's funding policy is to contribute at
least the minimum amount required by applicable regulations. The assets of the
plans are principally invested in equity and debt securities.
The net periodic pension cost and actuarial assumptions of the Company's
plans were as follows:
<TABLE>
<CAPTION>
In thousands 1993 1992 1991
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost $ 5,690 $ 5,618 $ 5,761
Interest cost 16,915 16,566 15,760
Actual return on assets (27,904) (11,289) (20,491)
Net amortization and deferral 15,594 (70) 10,200
- -----------------------------------------------------------------------------
Net periodic pension cost $ 10,295 $10,825 $ 11,230
- -----------------------------------------------------------------------------
Discount rate 7.5% 8.75% 9.0%
Projected increase in future
compensation levels 5.0% 5.0% 6.0%
Expected long-term return
on plan assets 10.5% 10.5% 11.0%
==============================================================================
</TABLE>
The Company has recorded liabilities that are equal to the unfunded accumulated
benefit obligations of its plans in fiscal 1993 and 1992. This has resulted in
recognition of an intangible asset of $14.5 million and a net-of-tax reduction
to other capital of $24.1 million as of January 1, 1994. The intangible asset
and net-of-tax reduction to other capital as of January 2, 1993 was $15.0
million and $14.9 million, respectively. The following table sets forth the
funded status and the amounts reflected in the Company's Consolidated Balance
Sheet at January 1, 1994 and January 2, 1993:
<TABLE>
<CAPTION>
In thousands 1993 1992
- -----------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of:
Vested benefit obligation $ (182,617) $ (153,241)
Accumulated benefit obligation (231,011) (190,503)
Projected benefit obligation (241,918) (197,691)
Plan assets at fair value 190,171 149,782
- -----------------------------------------------------------------------------
Projected benefit obligation in
excess of plan assets (51,747) (47,909)
- -----------------------------------------------------------------------------
Unrecognized net loss 49,377 30,271
Unrecognized prior service costs 9,567 9,428
Unrecognized net initial obligation 4,962 5,650
Adjustment to meet minimum liability (54,214) (39,431)
- -----------------------------------------------------------------------------
Pension liabilities $ (42,055) $ (41,991)
=============================================================================
</TABLE>
All of the Company's retirement plans have accumulated benefits in excess of
plan assets.
Other Postretirement Plans
The Company provides certain health care and life insurance benefits to
eligible retired employees. The Company continues to fund benefit costs on a
pay-as-you-go basis, with retirees paying a portion of the costs. Salaried
participants generally become eligible for retiree health care benefits after
reaching age 55 with 15 years of service. Benefits, eligibility and
cost-sharing provisions for hourly employees vary by location. Most hourly
employees are not eligible for retiree health care benefits and others are
eligible for retiree health care benefits similar to those provided to salaried
employees. Generally, Company provided health care benefits terminate when
covered individuals become eligible for Medicare benefits or reach age 65,
whichever occurs first. Certain retired employees of businesses acquired by the
Company are covered under other health care plans that differ from current
plans in coverage, plan design and retiree contributions.
Effective January 3, 1993, the Company adopted SFAS No. 106 "Employers'
Accounting for Postretirement Benefits Other than Pensions". SFAS No. 106
requires the Company to accrue the estimated cost of retiree benefit payments
during the years the employee provides services. The Company previously
expensed the cost of these benefits as claims were incurred. SFAS No. 106
allows recognition of the cumulative effect of the liability in the year of the
adoption or the amortization of the obligation over a period of up to twenty
years. The Company has elected to amortize this obligation of $27.2 million
over a period of twenty years. As a result of applying SFAS No. 106, pre-tax
income for the fiscal year ended January 1, 1994 was reduced by approximately
$2.8 million.
The net periodic postretirement benefit cost of the Company's plans were as
follows:
<TABLE>
<CAPTION>
In thousands 1993
- --------------------------------------------------------
<S> <C>
Service cost of benefits earned $ 660
Interest cost on accumulated postretirement
benefit obligation 2,686
Amortization of transition obligation 1,358
- --------------------------------------------------------
Net periodic postretirement benefit cost $ 4,704
========================================================
</TABLE>
The following table sets forth the funded status and the amounts reflected in
the Company's Consolidated Balance Sheet at January 1, 1994:
<TABLE>
<CAPTION>
In thousands 1993
- --------------------------------------------------------
<S> <C>
Accumulated postretirement benefit obligation:
Retirees $ (19,185)
Fully eligible plan participants (1,064)
Other active plan participants (13,560)
- --------------------------------------------------------
Total accumulated postretirement
benefit obligation (33,809)
Unrecognized loss 966
Unrecognized transition obligation 24,392
- --------------------------------------------------------
Accrued postretirement benefit cost $ (8,451)
========================================================
</TABLE>
The discount rate used in determining the accumulated postretirement benefit
obligation was 7.5%. The assumed health care cost trend rate used in measuring
the accumulated postretirement benefit obligation was 13% in 1993, decreasing
gradually each successive year until it reaches 5% in 2004, after which it
remains constant.
Federal Paper Board Company, Inc. 1993 Annual Report Page 33
<PAGE> 23
Federal Paper Board Company, Inc.
If the health care cost trend rates were increased by 1%, the accumulated
postretirement benefit obligation as of January 1, 1994 would have increased by
11%. The effect of this change on the aggregate of the service and interest
cost components of net periodic postretirement benefit cost for 1993 would be
an increase of 12%.
Savings and Stock Ownership Plans
The Company has two savings and stock ownership plans in effect which cover all
domestic salaried and non-union hourly employees. These plans were established
to enhance the existing retirement plans for all eligible employees.
Participants may contribute up to 15% of their annual compensation on a
deferred or a non-deferred tax basis, or both. The Company match, which is paid
in Company stock and is based on employee contributions of up to 6% of their
annual compensation, was decreased from 50% to 25% during 1993. The Company
match is fully vested after an employee has completed three years of service
while employee contributions are fully vested when they are contributed.
Postemployment Plans
The Company provides certain postemployment benefits to former or inactive
employees, their beneficiaries and covered dependents after employment but
before retirement. In November 1992, SFAS No. 112, "Employers' Accounting for
Postemployment Benefits" was issued, which establishes new standards of
accounting for postemployment benefits and requires adoption for fiscal years
beginning after December 15, 1993. The impact of adopting this Statement, for
the fiscal year 1993, would not have been material to the Company's financial
position and results of operations.
NOTE 7 SHAREHOLDERS' EQUITY
The $1.20 cumulative convertible preferred stock has a liquidation value of $20
per share and is convertible at any time into 5.02 shares of common stock. The
shares are callable at $20.
The $2.875 cumulative convertible preferred stock has a liquidation value of
$50 per share and is convertible at any time into 1.8182 shares of common stock
subject to adjustment under certain conditions. This preferred stock is also
redeemable, in whole or in part, at the option of the Company at a price of
$51.15 per share which declines gradually each year to $50 per share on or
after March 15, 1997.
Shares of common stock were reserved for the following purposes at January
1, 1994:
<TABLE>
<CAPTION>
1993
- --------------------------------------------------------
<S> <C>
Conversion of $1.20 convertible stock 289,303
Conversion of $2.875 convertible stock 4,135,332
Exercise of outstanding stock options 2,712,575
Granting of additional stock options 68,125
- --------------------------------------------------------
Total common shares reserved 7,205,335
- --------------------------------------------------------
</TABLE>
The Company has stock option plans, which were approved by the shareholders,
which authorize the granting of options to officers and certain key employees
to purchase the Company's common stock at a price equal to the market price on
the date of grant. Options become exercisable in annual installments of 25% of
the amount granted per optionee one year after the date of grant and expire
five years after the date of grant. Employees may exchange Company stock as
payment when exercising their options, and such stock used as payment becomes
treasury stock. Also, the Company may issue stock from treasury when employees
exercise these options.
The Company's 1982 stock option plan expired in 1993 and the 1989 and 1992
stock option plans each authorized the granting of 1.5 million shares of common
stock. The combined activity of all plans is presented below:
<TABLE>
<CAPTION>
Shares Under Price Range
Option Per Share
- --------------------------------------------------------------------
<S> <C> <C>
Outstanding December 29,1990 2,279,522 $12.00-24.63
Granted 81,000 28.50
Exercised (535,118) 12.00-24.63
Expired or cancelled (44,200) 15.00-28.50
- --------------------------------------------------------------------
Outstanding December 28,1991 1,781,204 $15.00-28.50
Granted 1,010,800 25.50-30.25
Exercised (314,979) 15.00-24.63
Expired or cancelled (65,625) 15.00-30.25
- --------------------------------------------------------------------
Outstanding January 2, 1993 2,411,400 $15.00-30.25
Granted 2,007,900 20.88-25.50
Exercised (184,125) 15.00-20.63
Expired or cancelled (1,522,600) 15.00-30.25
Outstanding January 1, 1994 2,712,575 $15.00-30.25
Exercisable January 1, 1994 549,331 $15.00-30.25
====================================================================
</TABLE>
Note 8 Supplemental Income Statement Information
The components of Other - net included in the Consolidated Statement of Income
were (income) or expense as presented below:
<TABLE>
<CAPTION>
In thousands 1993 1992 1991
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
Net loss on disposal of property,
plant and equipment and timber $ 401 $ 4,778 $10,787
Interest income (1,141) (2,455) (2,233)
Financial instrument transactions 31,854 (5,258) (4,989)
Other 1,442 (3,153) 1,666
- -----------------------------------------------------------------------------------
Total $ 32,556 $(6,088) $ 5,231
===================================================================================
</TABLE>
NOTE 9 INDUSTRY SEGMENT INFORMATION
Information about the Company's operations in different industry segments for
fiscal years 1993, 1992, and 1991 is included on pages 22 and 23 of this Annual
Report.
NOTE 10 RESTATEMENT OF FINANCIAL STATEMENTS
The accompanying consolidated financial statements for fiscal year 1993
have been restated to account for certain interest rate swap agreements at
market value. The Company, in agreement with its outside auditors, previously
accounted for these interest rate swap agreements based on settlement
accounting but has determined that this was not an appropriate accounting
method. When the Company entered into these interest rate swap agreements the
intent was to change the interest rate characteristics of specific fixed rate
debt obligations of the Company. However, it has been determined because of
the risk and leverage factors inherent in these interest rate swap agreements,
the swap transactions did not effectively offset the rate characteristics of
the underlying debt obligations. As a result, these instruments are required
to be marked to market. The effects of the restatement on the Company's
financial results are as follows (in thousands, except per share amounts)
<TABLE>
<CAPTION>
Fiscal Year
1993
-----------
<S> <C>
Net income as previously reported $20,800
Adjustment (14,400)
------
Restated net income $ 6,400
======
Earnings (loss) per common share:
Assuming no dilution:
As reported $ .34
Adjustment (.35)
----
Restated net income (loss) $(.01)
====
Assuming full dilution:
As reported $ .34
Adjustment (.35)
----
Restated net income (loss) $(.01)
====
</TABLE>
NOTE 11 FINANCIAL RESULTS BY QUARTER (UNAUDITED)
Selected quarterly financial information for the fiscal years 1993 and 1992 is
included on page 36 of this Annual Report.
Federal Paper Board Company, Inc. 1993 Annual Report Page 34
<PAGE> 24
Federal Paper Board Company, Inc.
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
of Federal Paper Board Company, Inc.:
We have audited the accompanying consolidated balance sheets of Federal Paper
Board Company, Inc. and its subsidiary companies as of January 1, 1994 and
January 2, 1993, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three fiscal years in the
period ended January 1, 1994. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and the significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in
all material respects, the financial position of Federal Paper Board Company,
Inc. and its subsidiary companies at January 1, 1994 and January 2, 1993, and
the results of their operations and their cash flows for each of the three
fiscal years in the period ended January 1, 1994 in conformity with generally
accepted accounting principles.
As discussed in Notes 5 and 6 to the financial statements, the Company
changed its method of accounting for income taxes, effective December 29, 1991,
and its method of accounting for postretirement benefits other than pensions,
effective January 3, 1993.
As discussed in Note 10, the accompanying financial statements for the fiscal
year ended January 1, 1994 have been restated to record certain interest rate
swap agreements at market value.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
February 7, 1994
(October 17, 1994 as to Note 10)
REPORT OF MANAGEMENT
The management of Federal Paper Board Company, Inc. is responsible for the
integrity and fair presentation of the financial statements and other
information contained in this Annual Report. The statements were prepared in
accordance with generally accepted accounting principles and reflect
management's informed judgements and estimates.
The Company maintains a system of internal control designed to provide
reasonable assurance that assets are safeguarded, transactions are executed
and recorded in accordance with management's authorizations and financial
records are maintained to permit the preparation of reliable financial
statements. The system of internal control is reviewed by the Company's
internal audit staff to confirm that it is adequate and operating effectively.
As indicated in the independent auditors' report, Deloitte & Touche performs
an independent audit of the consolidated financial statements for the purpose
of forming an opinion as to whether the financial statements are presented
fairly, in all material respects, in conformity with generally accepted
accounting principles. The independent auditors are appointed annually by the
Board of Directors and their appointment is ratified by the shareholders.
The Audit Committe of the Board of Directors, composed of four outside
directors, meets periodically with management, internal auditors and
independent auditors to review matters relating to the adequacy of corporate
financial reporting, accounting systems and controls, and the internal and
independent audit functions.
/s/ QUENTIN J. KENNEDY
- ------------------------
Quentin J. Kennedy
Executive Vice President
and Secretary
/s/ ROGER L. SANDERS, II
- ------------------------
Roger L. Sanders, II
Controller
Federal Paper Board Company, Inc. 1993 Annual Report Page 35
<PAGE> 25
Federal Paper Board Company, Inc.
FINANCIAL RESULTS BY QUARTER (UNAUDITED)
<TABLE>
<CAPTION>
In thousands except per share amounts
Quarter (A) 1st 2nd 3rd 4th Year (B)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1993
Net Sales $319,844 $329,579 $324,025 $412,938 $1,386,386
Gross Profit 50,331 51,728 41,841 59,614 203,514
Net Income (Loss) (C) 9,100 (5,200) (7,200) 9,700 6,400
- ------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) Per Common Share:
Assuming No Dilution $.18 $(.16) $(.21) $.18 $(.01)
Assuming Full Dilution (D) .18 (.16) (.21) .18 (.01)
- ------------------------------------------------------------------------------------------------------------------------
Dividends Declared per Common Share $.25 $.25 $.25 $.25 $1.00
- ------------------------------------------------------------------------------------------------------------------------
Price Range of Common Stock (E)
High $27.63 $25.63 $23.50 $23.38 $27.63
Low 23.13 21.88 21.63 19.50 19.50
========================================================================================================================
1992
Net Sales $323,042 $345,316 $337,896 $454,565 $1,460,819
Gross Profit 59,093 73,047 70,777 76,482 279,399
Income before cumulative effect of
accounting change 16,346 25,303 26,082 14,869 82,600
Net Income 25,346 25,303 26,082 14,869 91,600
- ------------------------------------------------------------------------------------------------------------------------
Earnings Per Common Share:
Assuming No Dilution:
Income before cumulative effect of
accounting change $.36 $.57 $.59 $.31 $1.82
Net Income .58 .57 .59 .31 2.04
Assuming Full Dilution: (D)
Income before cumulative effect of
accounting change $.35 $.54 $.56 $.30 $1.77
Net Income .54 .54 .56 .30 1.96
- ------------------------------------------------------------------------------------------------------------------------
Dividends Declared per Common Share $.25 $.25 $.25 $.25 $1.00
- ------------------------------------------------------------------------------------------------------------------------
Price Range of Common Stock (E)
High $32.75 $33.38 $30.75 $29.63 $33.38
Low 28.50 28.75 27.13 24.25 24.25
========================================================================================================================
</TABLE>
(A) All quarters are comprised of 12 week periods except the fourth quarter,
which is comprised of 16 weeks in 1993 and 17 weeks in 1992. The second,
third and fourth quarters of 1993 have been restated to account for
certain interest rates swap agreements at market value.
(B) May not total due to individual quarterly calculations.
(C) The second quarter of 1993 includes an after-tax charge of $15.3
million, or $.37 per fully diluted common share, for financial instrument
transactions. The third quarter of 1993 includes a charge of $9.2
million for the cumulative effect of the recalculation of the deferred
tax liability reflecting the increase in the Federal statutory income tax
rate.
(D) Earnings per common share assuming full dilution is based on the weighted
average number of common shares outstanding during the year, including the
dilutive effects of stock options outstanding and the conversion of the
Company's preferred stocks.
(E) The Company's common stock is traded on the New York Stock Exchange. Data
for the Company's $1.20 convertible preferred stock and Class A
convertible preferred stocks, also traded on the New York Stock Exchange,
is not presented since they are preferred stock issues. At January 1,
1994 there were 5,577 holders of common stock and 998 holders of
convertible preferred stocks.
Federal Paper Board Company, Inc. 1993 Annual Report Page 36
<PAGE> 26
Federal Paper Board Company, Inc.
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
In millions except per share amounts Restated
For Fiscal Year (A) 1993 1992 1991 1990 1989
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATING RESULTS
Net Sales $1,386.4 $1,460.8 $1,435.0 $1,374.1 $1,319.0
Income before Taxes and Cumulative
Effect of Accounting Change 26.3 135.7 144.2 202.2 336.8
Income before Cumulative Effect
of Accounting Change 6.4 82.6 82.4 118.2 205.5
Cumulative Effect of Accounting Change -- 9.0 -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Net Income 6.4 91.6 82.4 118.2 205.5
- ------------------------------------------------------------------------------------------------------------------------
Earnings (Loss) per Common Share:
Assuming No Dilution:
Income (Loss) before Cumulative Effect
of Accounting Change (.01) 1.82 1.83 2.74 5.00
Cumulative Effect of Accounting Change -- .22 -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) (.01) 2.04 1.83 2.74 5.00
- ------------------------------------------------------------------------------------------------------------------------
Assuming Full Dilution:
Income (Loss) before Cumulative Effect
of Accounting Change (.01) 1.77 1.77 2.58 4.52
Cumulative Effect of Accounting Change -- .19 -- -- --
- ------------------------------------------------------------------------------------------------------------------------
Net Income (Loss) (.01) 1.96 1.77 2.58 4.52
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL RATIOS
Total Debt as a Percentage of Total Capitalization 54.2% 53.5% 54.8% 56.1% 46.9%
Return on Shareholders' Equity .7% 9.8% 9.1% 13.9% 28.3%
- ------------------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Property, Plant and Equipment - Net $1,896.6 $1,878.4 $1,828.8 $1,756.5 $1,287.3
Timber and Timberlands 189.7 191.8 188.0 183.2 178.0
Total Assets 2,561.9 2,573.5 2,492.7 2,447.8 1,882.5
Long-Term Debt 973.8 1,029.9 1,076.9 1,092.4 685.6
Deferred Tax Liability 342.8 322.4 237.5 208.0 171.5
Shareholders' Equity 892.3 940.4 921.2 882.9 812.0
- ------------------------------------------------------------------------------------------------------------------------
ADDITIONAL DATA
Capital Expenditures $ 161.2 $ 149.1 $ 227.4 $ 509.3 $ 399.7
Depreciation, Amortization and Cost of
Timber Harvested 144.1 146.6 122.7 88.4 73.0
Dividends Declared per Common Share 1.00 1.00 1.00 1.00 .95
Book Value per Share - Assuming No Dilution 18.45 19.68 19.17 18.46 16.69
Book Value per Share - Assuming Full Dilution 19.11 20.11 19.79 19.26 17.60
- ------------------------------------------------------------------------------------------------------------------------
Common Shares Outstanding at Year-End (in thousands) 42,147 41,952 40,675 40,164 40,158
========================================================================================================================
</TABLE>
(A) 1992 includes 53 weeks all other years presented include 52 weeks.
Total Debt as a Percentage of Total Capitalization - Total debt divided by the
sum of shareholders' equity and total debt.
Return on Shareholders' Equity - Net income divided by the average of
shareholders' equity at the beginning and the end of the year.
Book Value per Common Share - Assuming No Dilution - Shareholders' equity
available to common shares divided by outstanding shares of common stock.
Book Value per Common Share - Assuming Full Dilution - Shareholders' equity
divided by outstanding shares of common stock and common stock equivalents.
Further information on the 1993 restatement is contained in Note 10 of the
financial statements.
Federal Paper Board Company, Inc. 1993 Annual Report Page 37
<PAGE> 27
EDGAR APPENDIX EXHIBIT 13
(Continued)
FEDERAL PAPER BOARD COMPANY, INC.
Graphic and Image Material Index
1. The photo on page 6 on this Annual Report shows an employee
standing near the Carolina King pulp dryer at our Riegelwood, NC
mill.
2. The bar chart on page 6 of this Annual Report shows pulp
accounting for 9% of sales.
3. The photo on page 7 of this Annual Report shows an employee
standing near rolls of paperboard produced at the Augusta, GA
mill.
4. The bar chart on page 7 of this Annual Report shows paperboard
accounting for 44% of sales.
5. The photo on page 8 of this Annual Report shows an employee
standing near rolls of paperboard at the Augusta, GA mill.
6. The bar chart on page 8 of this Annual Report shows paper
accounting for 8% of sales.
7. The photo on page 9 of this Annual Report shows an employee
standing near dimensional lumber at the Armour, NC lumber plant.
8. The bar chart on page 9 of this Annual Report shows wood
products accounting for 15% of sales.
9. The photo on page 10 of this Annual Report shows printed
rolls of paperboard used by our Cup Operations.
10. The bar chart on page 10 of this Annual Report shows the
Converting Operations accounting for 24% of sales.
11. The photo on page 11 of this Annual Report shows an employee
standing near an eight color gravure press at the Wilmington, NC
folding carton plant.
<PAGE> 1
EXHIBIT 23
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
We consent to the incorporation by reference in Registration Statements of
Federal Paper Board Company, Inc. and its subsidiary companies on Form S-3
(Registration Nos. 33-48063, 33-39748 and Post-Effective Amendment No. 1 to
Registration Statement No. 33-39748) and Form S-8 (Registration Nos. 33-64258,
33-64256, 33-48654, 33-34440 and Post-Effective Amendment No. 7 to Registration
Statement No. 2-56623) of our reports dated February 7, 1994 (October 17, 1994
as to Note 10) which express an unqualified opinion and include explanatory
paragraphs relating to (i) changes in the method of accounting for income
taxes and postretirement benefits other than pensions and (ii) the
restatement of the 1993 financial statements for the fiscal year ended
January 1, 1994 ; appearing in and incorporated by reference in the Annual
Report on Form 10-K of Federal Paper Board Company, Inc. for the fiscal year
ended January 1, 1994.
/s/ DELOITTE & TOUCHE LLP
Parsippany, New Jersey
October 17, 1994
