UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For Quarter Ended September 30, 1995
Commission File Number 0-23876
JEFFERSON SMURFIT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 43-1531401
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
8182 Maryland, St. Louis, Missouri 63105
(Address of principal executive offices) (Zip Code)
(314) 746-1100
Registrant's telephone number, including area code
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of October 25, 1995, the registrant had outstanding
110,989,156 shares of common stock, $.01 par value per share.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
JEFFERSON SMURFIT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales $1,050.9 $ 858.4 $3,120.2 $2,352.0
Costs and expenses
Cost of goods sold 805.7 722.8 2,459.2 2,006.9
Selling and administrative expenses 59.7 55.1 184.9 162.2
Income from operations 185.5 80.5 476.1 182.9
Other income (expense)
Interest expense (60.0) (70.3) (180.5) (204.4)
Other, net .6 1.7 2.3 4.8
Income (loss) before income
taxes and extraordinary item 126.1 11.9 297.9 (16.7)
Provision for (benefit from)
income taxes 48.7 6.1 114.9 (2.3)
Income (loss) before extraordinary
item 77.4 5.8 183.0 (14.4)
Extraordinary item
Loss from early extinguishment of
debt, net of income tax benefits (3.0) (3.6) (51.6)
Net income (loss) $ 74.4 $ 5.8 $ 179.4 $ (66.0)
Per share of common stock:
Income (loss) before extraordinary
item $ .70 $ .05 $ 1.65 $ (.15)
Extraordinary item (.03) (.03) (.53)
Net income (loss) $ .67 $ .05 $ 1.62 $ (.68)
Weighted average shares of
common stock outstanding 110.989 110.988 110.989 97.117
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JEFFERSON SMURFIT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
September 30, December 31,
1995 1994
ASSETS (unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 15.2 $ 61.8
Receivables, less allowances of
$9.5 in 1995 and $8.6 in 1994 384.9 316.3
Inventories
Work-in-process and finished goods 105.7 86.9
Materials and supplies 168.8 136.8
274.5 223.7
Deferred income taxes 36.5 38.1
Prepaid expenses and other current assets 7.4 6.6
Total current assets 718.5 646.5
Net property, plant and equipment 1,452.6 1,427.1
Timberland, less timber depletion 255.0 259.0
Goodwill, less accumulated amortization of
$40.6 in 1995 and $35.0 in 1994 254.2 257.1
Other assets 174.3 169.3
$2,854.6 $2,759.0
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Current maturities of long-term debt $ 59.0 $ 50.2
Accounts payable 325.0 348.8
Accrued compensation and payroll taxes 111.9 114.3
Interest payable 61.5 48.3
Other accrued liabilities 97.1 74.4
Total current liabilities 654.5 636.0
Long-term debt, less current maturities 2,244.2 2,391.7
Other long-term liabilities 219.9 237.5
Deferred income taxes 285.7 207.7
Minority interest 1.2 16.4
Stockholders' deficit
Common stock, par value $.01 per share;
250,000,000 shares authorized; 110,989,156
and 110,988,462 issued and outstanding
in 1995 and 1994, respectively 1.1 1.1
Additional paid-in capital 1,168.3 1,168.3
Retained earnings (deficit) (1,720.3) (1,899.7)
Total stockholders' deficit (550.9) (730.3)
$2,854.6 $2,759.0
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
JEFFERSON SMURFIT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Nine months ended
September 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 179.4 $ (66.0)
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Extraordinary loss from early
extinguishment of debt 6.1 83.2
Depreciation, depletion and amortization 104.2 98.7
Amortization of deferred debt issuance costs 10.7 7.3
Deferred income taxes 79.7 (36.8)
Non-cash interest 15.4
Non-cash employee benefit expense (5.6) (7.4)
Change in current assets and liabilities,
net of effects from acquisitions
Receivables (68.6) (83.8)
Inventories (53.3) 17.8
Prepaid expenses and other current assets (1.1) 2.9
Accounts payable and accrued liabilities (24.1) 32.3
Interest payable 17.5 44.9
Income taxes payable 10.0 .7
Other, net (2.5) (6.9)
Net cash provided by operating activities 252.4 102.3
Cash flows from investing activities
Property additions (103.9) (92.4)
Timberland additions (14.2) (11.4)
Investments and acquisitions (33.0)
Proceeds from property and timberland disposals 8.0 1.6
Net cash used for investing activities (143.1) (102.2)
Cash flows from financing activities
Issuance of common stock, net of related expenses 370.6
Proceeds from long-term borrowings 227.2 967.8
Repayment of long-term debt (379.2) (1,224.6)
Deferred debt issuance costs (3.9) (76.9)
Net cash provided by (used for) financing activities (155.9) 36.9
Increase (decrease) in cash and cash equivalents (46.6) 37.0
Cash and cash equivalents
Beginning of period 61.8 44.2
End of period $ 15.2 $ 81.2
See notes to consolidated financial statements.
</TABLE>
<PAGE>
JEFFERSON SMURFIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in millions, except share data)
(Unaudited)
1. -- Basis of Presentation
The accompanying consolidated financial statements of Jefferson
Smurfit Corporation ("JSC" or the "Company") have been prepared in
accordance with the instructions to Form 10-Q and reflect all
adjustments which management believes necessary (which include only
normal recurring accruals) to present fairly the financial position
and results of operations. These statements, however, do not
include all information and footnotes necessary for a complete
presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles.
Interim results may not necessarily be indicative of results which
may be expected for any other interim period or for the year as a
whole. For further information refer to the consolidated financial
statements and footnotes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, filed on
March 7, 1995 with the Securities and Exchange Commission (the "JSC
1994 10-K").
JSC is the parent of JSCE, Inc. JSC has no operations other than
its investment in JSCE, Inc. On December 31, 1994 Jefferson
Smurfit Corporation (U.S.), a wholly-owned subsidiary of JSC,
merged into its wholly-owned subsidiary, Container Corporation of
America ("CCA"), with CCA surviving and changing its name to
Jefferson Smurfit Corporation (U.S.) ("JSC (U.S.)"). In addition,
on December 31, 1994, JSC contributed 100% of the common stock of
JSC (U.S.) to JSCE, Inc. JSCE, Inc. has no operations other than
its investment in JSC (U.S.).
2. -- Long-Term Debt
On February 23, 1995, JSC (U.S.) entered into a $315.0 million
accounts receivable securitization program (the "1995
Securitization"). The 1995 Securitization provides for the sale of
certain of JSC (U.S.)'s trade receivables to a wholly-owned,
bankruptcy remote, limited purpose subsidiary, Jefferson Smurfit
Finance Corporation ("JS Finance"), which finances its purchases of
eligible JSC (U.S.) receivables through the issuance of commercial
paper or the proceeds of borrowings under a revolving liquidity
facility and a term loan. JS Finance borrowed $15.0 million under
the term loan, and may issue up to $300.0 million trade
receivables-backed commercial paper or borrow up to $300.0 million
under a revolving liquidity facility. At September 30, 1995, $84.6
million was available for additional borrowing under the 1995
Securitization subject to JSC (U.S.)'s level of eligible accounts
receivable. The 1995 Securitization matures in December 1999.
Interest rates on borrowings under the 1995 Securitization are at
a variable rate. Proceeds of the 1995 Securitization were used to
extinguish JSC (U.S.)'s borrowings under the pre-existing accounts
receivable securitization program and for general corporate
purposes.
3. -- Intercompany Sales Elimination
Net sales and cost of good sold for the nine months ended September
30, 1995 have been reduced by $35.1 million as a result of the
correction of intercompany sales for the first and second quarters
of 1995. There was no effect on income from operations as a result
of the correction.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
<TABLE>
<CAPTION>
(In millions) Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Net sales
Paperboard/Packaging Products $ 948.6 $791.1 $2,847.1 $2,160.8
Newsprint 102.3 67.3 273.1 191.2
Total $1,050.9 $858.4 $3,120.2 $2,352.0
Operating profit
Paperboard/Packaging Products $ 173.3 $ 86.6 $ 456.2 $ 199.9
Newsprint 12.8 (4.4) 22.2 (12.2)
Total $ 186.1 $ 82.2 $ 478.4 $ 187.7
</TABLE>
The Company had record net sales for the nine months ended
September 30, 1995, up 32.7% compared to the same period last year.
Sales increased in each of the Company's operating segments,
primarily as a result of improved pricing. The Company's operating
segments continued to perform well in the third quarter of this
year, with operating profits significantly improved compared to the
third quarter of the prior year. The chart below shows the
components of the sales increases for each of the Company's
segments.
<TABLE>
<CAPTION>
(In millions) Change in net sales analysis
Three months Nine months
1995 compared to 1994 1995 compared to 1994
<S> <C> <C>
Sales price and product mix
Paperboard/Packaging Products $194.7 $688.2
Newsprint 35.7 84.1
230.4 772.3
Sales volume
Paperboard/Packaging Products (39.8) (8.3)
Newsprint (.6) (2.1)
(40.4) (10.4)
Acquisitions and new facilities
Paperboard/Packaging Products 2.5 6.3
Total $192.5 $768.2
</TABLE>
The Company was able to implement price increases during the first
nine months of 1995 on all its major products. The sales price and
product mix improvements in the Paperboard/Packaging Products
segment were due primarily to price increases on containerboard,
corrugated shipping containers and reclaimed fiber. The decrease
in sales volume for the Paperboard/Packaging Products segment was
due primarily to softening of demand for corrugated shipping
containers. Changes in the number of units sold and produced for
the Company's major products are shown in the Production/Shipments
Summary below.
Cost of goods sold as a percent of net sales for the nine months
ended September 30, 1995 declined compared to the same period in
1994 in each of the Company's segments, primarily as a result of
the higher sales prices. The percentages for the nine months ended
September 30, 1995 and 1994 were 77.9% and 83.8%, respectively, for
the Paperboard/Packaging Products segment and 88.0% and 102.0%,
respectively, for the Newsprint segment. The cost of recycled
fiber, a key raw material used by the Company's paper mills, was
sharply higher in the nine months ended September 30, 1995 compared
<PAGE>
to the same period in 1994, due to unprecedented demand. While
prices of reclaimed fiber peaked in the second quarter of 1995, and
have since declined, it is too early to determine whether such
lower prices will be sustained for a significant period of time.
Selling and administrative expenses for the nine months ended
September 30, 1995 rose 14.0% compared to the same period in 1994
due primarily to higher provisions for personnel costs, incentive
plans and inflationary increases in other costs. Selling and
administrative expenses as a percent of net sales for the nine
months ended September 30, 1995 were 5.9% as compared to 6.9% for
the same period last year.
Interest expense for the nine months ended September 30, 1995 was
lower compared to the same period in 1994 due to lower average debt
levels outstanding and lower effective interest rates primarily as
a result of the 1994 Recapitalization discussed below.
Production/Shipments Summary
<TABLE>
<CAPTION>
(In thousands of tons, Three months ended Nine months ended
except as noted) September 30, September 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Production:
Containerboard 505 505 1,458 1,456
Recycled boxboard and
solid bleached sulfate 197 199 588 570
Newsprint 157 156 464 463
Corrugated shipping containers
sold (billion square feet) 7.3 8.0 22.2 23.2
Folding cartons sold 119 127 352 362
Fiber reclaimed and brokered 1,070 1,081 3,265 3,038
</TABLE>
Liquidity and Capital Resources
On February 23, 1995, JSC (U.S.) entered into the 1995
Securitization consisting of a $300.0 million trade receivables-
backed commercial paper program and a $15.0 million term loan,
which matures in December 1999. Proceeds of the 1995
Securitization were used to extinguish JSC (U.S.)'s borrowings
under its pre-existing accounts receivable securitization program
and for general corporate purposes. Interest rates on borrowings
under the 1995 Securitization are at a variable rate.
In conjunction with the Company's 1994 Recapitalization as defined
in the JSC 1994 10-K, the Company entered into a new bank credit
facility (the "1994 Credit Agreement") consisting of a $450.0
million revolving credit facility, a $900.0 million Tranche A Term
Loan and a $300.0 million Tranche B Term Loan. The 1994 Credit
Agreement contains various business and financial covenants
including, among other things, (i) limitations on dividends,
redemptions and repurchases of capital stock, (ii) limitations on
the incurrence of indebtedness, liens, leases and sale-leaseback
transactions, (iii) limitations on capital expenditures, (iv)
maintenance of minimum levels of consolidated earnings before
depreciation, interest, taxes and amortization and (v) maintenance
of minimum interest coverage ratios. Such restrictions, together
with the highly leveraged position of the Company, could restrict
corporate activities, including the Company's ability to respond to
market conditions, to provide for unanticipated capital
expenditures or to take advantage of business opportunities.
<PAGE>
The 1994 Credit Agreement imposes an annual limit on future capital
expenditures of $150.0 million. The capital spending limit is
subject to increase in any year by an amount equal to the Company's
portion of excess cash flow and an amount up to $75.0 million if
the prior year's spending was less than the maximum amount allowed.
For 1995 the Company's portion of excess cash flow and carryover
from 1994 is $65.4 million. Management does not believe the annual
limitation for capital expenditures impairs its plans for
maintenance, expansion and continued modernization of its
facilities.
During the nine months ended September 30, 1995, the Company made
net long-term debt repayments of $152.0 million, including $63.7
million of mandatory and $120.3 million of optional payments in
respect of the Tranche A and Tranche B Term Loans under the 1994
Credit Agreement.
In the third quarter of 1995, JSC (U.S.) permanently ceased
operations of its East Mill in Monroe, Michigan which produced
approximately 50,000 tons per year of recycled cylinderboard and
sold a corrugated container plant in New Brunswick, New Jersey.
The cost of closure and disposal of these facilities was previously
reserved for as part of the Company's Restructuring Program as
defined in the JSC 1994 10-K. The cash expenditures anticipated
under the Restructuring Program for the remainder of 1995 and 1996
will be funded through operations, as originally planned.
Operating activities have historically been the major source of
cash for the Company's capital expenditures and debt payments. Net
cash provided by operating activities for the nine months ended
September 30, 1995 was $252.4 million compared to $102.3 million
for the same period in 1994. The increase was primarily
attributable to the improved level of earnings which were partially
offset by increases in accounts receivable and inventories in the
current year. The increase in accounts receivable was due
primarily to the significant increase in sales compared to last
year and inventories were higher due to the higher cost of raw
materials and increases in inventory quantities.
In July 1995, Jefferson Smurfit Corporation marked its entry into
Asia through the formation of a joint venture among the Company,
Morgan Stanley & Co. Incorporated and a third party to purchase a
52% controlling interest in a linerboard mill near Shanghai, China.
The Company owns a 42.5% equity interest in the joint venture. The
mill, Zhejiang CIMIC Nanyang Paper Products Co., Ltd., produces
approximately 50,000 tons of paperboard annually and operates
several waste paper recycling facilities.
In July 1995, the Company purchased the 20% minority interest of
Smurfit Newsprint Corporation which was owned by The Times Mirror
Company ("Times Mirror"). The Company already owned 80% of the
newsprint company, which was originally acquired in 1986 from Times
Mirror. The acquisition of the minority interest is expected to
make a positive contribution to earnings this year. Smurfit
Newsprint Corporation's operations include two mills located near
Portland, Oregon producing approximately 615,000 tons of newsprint
annually and two facilities which produce Cladwood, a composite
wood panel made of sawmill shavings and other wood residuals used
by the housing industry. The Company is expected to continue to be
a major supplier of newsprint to Times Mirror as the transaction
had no effect on the existing long-term newsprint supply contract.
<PAGE>
At September 30, 1995, the Company had $271.3 million of unused
borrowing capacity under the 1994 Credit Agreement and $84.6
million of unused borrowing capacity under the 1995 Securitization
subject to JSC (U.S.)'s level of eligible accounts receivable. The
Company believes that cash provided by operating activities and
available financing sources will be sufficient for the next several
years to pay interest on the Company's obligations, amortize its
term loans and fund anticipated capital expenditures.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
During and subsequent to the quarter ended September 30,
1995, the following developments occurred with respect to
Legal Proceedings previously reported in the JSC 1994 10-
K:
With respect to the case of Otis B. Ingram, executor of the
Estate of Naomi M. Ingram, et. al. v. Jefferson Smurfit
Corporation (U.S.) f/k/a Container Corporation of America,
pending in United States District Court, Middle District of
Georgia and described in detail in the JSC 1994 10-K, the
jury trial commenced in mid-October 1995 and the case was
subsequently settled.
In July 1995, the Company, pursuant to a consent decree
previously entered into with the United States, settled the
cause of action commenced by the government in October 1993
against the Company for alleged failures to properly
respond to document and information requests by the
Environmental Protection Agency with respect to the Miami
County, Ohio Comprehensive Environmental Response,
Compensation and Liability Act Site. Pursuant to the
consent decree the Company paid $1.2 million to the
government.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
On August 31, 1995, JSC (U.S.) sold its corrugated
container plant located in New Brunswick, New Jersey. On
September 21, 1995, JSC (U.S.) permanently ceased
operations at its East Mill in Monroe, Michigan which
produced approximately 50,000 tons per year of recycled
cylinderboard. The cost of disposal and closure of these
facilities was previously reserved for as part of the
Company's Restructuring Program implemented in the third
quarter of 1993.
Item 6. Exhibits and Reports on Form 8-K
a) The following exhibits are included in this Form 10-Q.
11.1 Calculation of Per Share Earnings
27.1 Financial Data Schedule
b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during
the three months ended September 30, 1995.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
JEFFERSON SMURFIT CORPORATION
(Registrant)
Date November 9, 1995 /s/ John R. Funke
John R. Funke
Vice President
and Chief Financial Officer
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000919226
<NAME> JEFFERSON SMURFIT CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 15200
<SECURITIES> 0
<RECEIVABLES> 394400
<ALLOWANCES> 9500
<INVENTORY> 274500
<CURRENT-ASSETS> 718500
<PP&E> 2182300
<DEPRECIATION> 729700
<TOTAL-ASSETS> 2854600
<CURRENT-LIABILITIES> 654500
<BONDS> 2244200
<COMMON> 1100
0
0
<OTHER-SE> (550900)
<TOTAL-LIABILITY-AND-EQUITY> 2854600
<SALES> 3120200
<TOTAL-REVENUES> 3120200
<CGS> 2459200
<TOTAL-COSTS> 2459200
<OTHER-EXPENSES> 184900
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 180500
<INCOME-PRETAX> 297900
<INCOME-TAX> 114900
<INCOME-CONTINUING> 183000
<DISCONTINUED> 0
<EXTRAORDINARY> (3600)
<CHANGES> 0
<NET-INCOME> 179400
<EPS-PRIMARY> 1.62
<EPS-DILUTED> 1.62
</TABLE>
<TABLE>
EXHIBIT 11.1
JEFFERSON SMURFIT CORPORATION
CALCULATION OF PER SHARE EARNINGS
(In millions, except per share data)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1995 1994<F1> 1995 1994<F1>
<S> <C> <C> <C> <C>
Primary earnings per share <F2>:
Weighted average shares outstanding 110.989 110.988 110.989 97.117
Income (loss) applicable to common shares
before extraordinary item $ 77.4 $ 5.8 $183.0 $(14.4)
Extraordinary item (3.0) (3.6) (51.6)
Net income (loss) applicable to common
shares $ 74.4 $ 5.8 $179.4 $(66.0)
Per share amounts
Income (loss) before extraordinary item $ .70 $ .05 $ 1.65 $ (.15)
Extraordinary item (.03) (.03) (.53)
Net income (loss) applicable to common
shares $ .67 $ .05 $ 1.62 $ (.68)
Fully diluted earnings per share <F2>:
Weighted average shares outstanding 110.989 110.988 110.989 97.117
Income (loss) applicable to common shares
before extraordinary item $ 77.4 $ 5.8 $183.0 $(14.4)
Extraordinary item (3.0) (3.6) (51.6)
Net income (loss) applicable to common
shares $ 74.4 $ 5.8 $179.4 $(66.0)
Per share amounts
Income (loss) before extraordinary item $ .70 $ .05 $ 1.65 $ (.15)
Extraordinary item (.03) (.03) (.53)
Net income (loss) applicable to common
shares $ .67 $ .05 $ 1.62 $ (.68)
<FN>
<F1> Gives effect to the reclassification on May 4, 1994 pursuant to
which the Company's five classes of common stock were converted into
one class on a basis of ten shares of common stock for each
outstanding share of each of the old classes.
<F2> The computations do not include common stock equivalents associated
with stock options since the dilutive effect on earnings per share
is not material.
</FN>
</TABLE>
