Securities and Exchange Commission
Washington, D.C. 20549
Form 10-K
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the fiscal year ended December 31, 1995
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ____________ to ____________
Commission file number 0-23876
Jefferson Smurfit Corporation
(Exact name of registrant as specified in its charter)
Delaware 43-1531401
(State of incorporation or organization) (I.R.S. Employer
Identification)
Jefferson Smurfit Centre
8182 Maryland Avenue
St. Louis, Missouri 63105
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number: (314) 746-1100
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $.01 par value
Title of Class
Indicate by check mark whether registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of the registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of January 31, 1996: $228,593,750
The number of shares outstanding of the registrant's common stock as of
January 31, 1996: 110,989,156
DOCUMENTS INCORPORATED BY REFERENCE:
Part of Form 10-K
into Which
Document is
Document Incorporated
Sections of the Registrant's Proxy Statement III
for the Annual Meeting of Stockholders
to be held on May 9, 1996
<PAGE>
JEFFERSON SMURFIT CORPORATION
Annual Report on Form 10-K
December 31, 1995
TABLE OF CONTENTS
PART I
Page
Item 1. Business. . . . . . . . . . . . . . . . . . . . . . . .1
Item 2. Properties. . . . . . . . . . . . . . . . . . . . . . .7
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . .7
Item 4. Submission of Matters to a Vote of Security Holders . 11
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters . . . . . . . . . . . . . 11
Item 6. Selected Financial Data . . . . . . . . . . . . . . . 12
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 14
Item 8. Financial Statements and Supplementary Data . . . . . 22
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure. . . . . . . . 46
PART III
Item 10. Directors and Executive Officers of the Registrant. . 46
Item 11. Executive Compensation. . . . . . . . . . . . . . . . 50
Item 12. Security Ownership of Certain Beneficial Owners and
Management. . . . . . . . . . . . . . . . . . . . . . 50
Item 13. Certain Relationships and Related Transactions. . . . 50
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports
on Form 8-K . . . . . . . . . . . . . . . . . . . . . 51
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
Jefferson Smurfit Corporation, hereinafter referred to as the
"Company" or "JSC", owns 100% of the equity interest in JSCE, Inc.,
hereinafter referred to as "JSCE". The Company has no operations
other than its investment in JSCE. JSCE owns a 100% equity
interest in Jefferson Smurfit Corporation (U.S.) ("JSC (U.S.)").
JSC (U.S.) has extensive operations throughout the United States.
JSCE has no operations other than its investment in JSC (U.S.).
The Company operates in two business segments, Paperboard/Packaging
Products and Newsprint. The Company believes it is one of the
nation's largest producers of paperboard and packaging products and
is the largest producer of recycled paperboard and recycled
packaging products and the largest processor of wastepaper. In
addition, the Company believes it is one of the nation's largest
producers of recycled newsprint.
The Company's Paperboard/Packaging Products segment includes a
system of paperboard mills that, in 1995, produced 1,905,000 tons
of virgin and recycled containerboard, 773,000 tons of coated and
uncoated recycled boxboard and solid bleached sulfate ("SBS") and
192,000 tons of recycled cylinderboard, which were sold to the
Company's own converting operations and to third parties. The
Company's converting operations consist of 51 corrugated container
plants, 18 folding carton plants, and 22 industrial packaging
plants located across the country, with three plants located
outside the U.S. In 1995, the Company's container plants converted
1,925,000 tons of containerboard, an amount equal to approximately
101.1% of the amount it produced, its folding carton plants
converted 529,000 tons of SBS, recycled boxboard and coated natural
kraft, an amount equal to approximately 68.3% of the amount it
produced, and its industrial packaging plants converted 148,000
tons of recycled cylinderboard, an amount equal to approximately
77.2% of the amount it produced. The paperboard/packaging products
operations also include 14 consumer packaging plants. The
Company's Paperboard/Packaging Products segment contributed 90.5%
of the Company's net sales in 1995.
The Company's paperboard operations are supported by its
reclamation division, which processed or brokered 4.3 million tons
of wastepaper in 1995, and by its timber division which manages
approximately one million acres of owned or leased timberland
located in close proximity to its virgin fiber mills.
The Company's Newsprint segment includes two newsprint mills in
Oregon, which produced 620,000 tons of recycled newsprint in 1995,
and two facilities that produce Cladwood, a construction material
produced from newsprint and wood by-products. The Company's
newsprint mills are also supported by the Company's reclamation
division.
Except for the historical information contained in this Annual
Report on Form 10-K, certain matters discussed herein, including
(without limitation) in particular under Part I, Item 3, "Legal
Proceedings" and under Part II, Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," are
forward looking statements. The matters referred to in such
statements could be affected by the risks and uncertainties
involved in the Company's business, including (without limitation)
the effect of economic and market conditions, the level and
volatility of interest rates and currency values, wastepaper
prices, costs related to environmental matters, and the impact of
current or pending legislation and regulation.
<PAGE>
PRODUCTS
PAPERBOARD/PACKAGING PRODUCTS SEGMENT
CONTAINERBOARD AND CORRUGATED SHIPPING CONTAINERS
The Company's containerboard operations are highly integrated.
Tons of containerboard produced and converted for the last three
years were:
<TABLE>
1993 1994 1995
(Tons in thousands)
<S> <C> <C> <C>
Containerboard
Production 1,840 1,932 1,905
Consumption 1,942 2,018 1,925
</TABLE>
The Company's mills produce a full line of containerboard,
including unbleached kraft linerboard, mottled white linerboard and
recycled medium. Unbleached kraft linerboard is produced at the
Company's mills located in Fernandina Beach and Jacksonville,
Florida and mottled white linerboard is produced at its Brewton,
Alabama mill. Recycled medium is produced at the Company's mills
located in Alton, Illinois, Carthage, Indiana, Circleville, Ohio
and Los Angeles, California. In 1995, the Company produced
1,057,000, 316,000 and 532,000 tons of unbleached kraft linerboard,
mottled white linerboard and recycled medium, respectively. The
Company's sales of containerboard in 1995 were $1,054 million
(including $559 million of intracompany sales). Sales of
containerboard to the Company's container plants are at market
prices.
Corrugated shipping containers, manufactured from containerboard in
converting plants, are used to ship such diverse products as home
appliances, electric motors, small machinery, grocery products,
produce, books, tobacco and furniture, and for many other
applications, including point of purchase displays. The Company
stresses the value added aspects of its corrugated containers, such
as labeling and multi-color graphics, to differentiate its products
and respond to customer requirements. The Company's 51 container
plants serve local customers and large national accounts and are
located nationwide, generally in or near large metropolitan areas.
The Company's total sales of corrugated shipping containers in 1995
were $1,570 million (including $109 million of intracompany sales).
Total corrugated shipping container sales volumes for 1993, 1994
and 1995 were 29,394, 30,822 and 29,382 million square feet,
respectively.
RECYCLED BOXBOARD, SBS AND FOLDING CARTONS
The Company's recycled boxboard, SBS and folding carton operations
are also integrated. Tons of recycled boxboard and SBS produced
and converted for the last three years were:
<TABLE>
1993 1994 1995
(Tons in thousands)
<S> <C> <C> <C>
Recycled Boxboard and SBS
Production 744 767 773
Consumption 542 543 529
</TABLE>
<PAGE>
The Company's mill produce recycled coated and uncoated boxboard
and SBS. Coated recycled boxboard is produced at the Company's
mills located in Middletown, Ohio, Philadelphia, Pennsylvania,
Santa Clara, California and Wabash, Indiana. The Company produces
uncoated recycled boxboard at its Los Angeles, California mill and
SBS at its Brewton, Alabama mill. The table above excludes
production of approximately 85,000 tons in 1993 from the Lockland,
Ohio boxboard mill that was closed in January 1994. In 1995, the
Company produced 595,000 and 178,000 tons of recycled boxboard and
SBS, respectively. The Company's total sales of recycled boxboard
and SBS in 1995 were $461 million (including $231 million of
intracompany sales).
The Company's folding carton plants offer a broad range of
converting capabilities, including web and sheet litho, rotogravure
and flexo printing and a full line of structural and design
graphics services. The Company's 18 facilities convert recycled
boxboard and SBS into folding cartons. Folding cartons are used
primarily to protect customers' products while providing point of
purchase advertising. The Company makes folding cartons for a wide
variety of applications, including food and fast foods, detergents,
paper products, beverages, health and beauty aids and other
consumer products. Customers range from small local accounts to
large national and multinational accounts. The Company's folding
carton plants are located nationwide, generally in or near large
metropolitan areas. The Company's sales of folding cartons in 1995
were $686 million (none of which were intracompany sales). Folding
carton sales volumes for 1993, 1994 and 1995 were 475,000, 486,000
and 469,000 tons, respectively.
The Company has focused its capital expenditures in these
operations and its marketing activities to support a strategy of
enhancing product quality as it relates to packaging graphics,
increasing flexibility while reducing customer lead time and
assisting customers in innovative package designs.
The Company provides marketing consultation and research activities
through its Design and Market Research (DMR) center. It provides
customers with graphic and product design tailored to the specific
technical requirements of lithographic, rotogravure and
flexographic printing, as well as photography for packaging, sales
promotion concepts, and point of purchase displays.
RECYCLED CYLINDERBOARD AND INDUSTRIAL PACKAGING
The Company's recycled cylinderboard and industrial packaging
operations are also integrated. Tons of recycled cylinderboard
produced and converted for the last three years were:
<TABLE>
1993 1994 1995
(Tons in thousands)
<S> <C> <C> <C>
Recycled Cylinderboard
Production 157 166 164
Consumption 123 128 148
</TABLE>
The Company's recycled cylinderboard mills are located in Tacoma,
Washington, Monroe, Michigan, Lafayette, Indiana, and Cedartown,
Georgia. The table above excludes production of approximately
49,000, 43,000 and 28,000 tons in 1993, 1994 and 1995 from a
cylinderboard mill located in Monroe, Michigan that was closed
in September 1995. In 1995, total sales of recycled cylinderboard
were $80 million (including $34 million of intracompany sales).
<PAGE>
The Company's 22 industrial packaging plants convert recycled
cylinderboard, including a portion of the recycled cylinderboard
produced by the Company, into papertubes and cores. Papertubes and
cores are used primarily for paper, film and foil, yarn carriers
and other textile products and furniture components. The Company
also produces solid fiber partitions for the pharmaceutical,
electronics, glass, cosmetics and plastics industries. In
addition, the Company produces a patented self-locking partition
especially suited for automated packaging and product protection.
Also, the Company manufactures corrugated pallets that are made
entirely from corrugated components and are lightweight yet
extremely strong and are fully recyclable. The Company's
industrial packaging sales in 1995 were $114 million (including $5
million in intracompany sales).
CONSUMER PACKAGING
The Company manufactures a wide variety of products at its 14
consumer products facilities. These products include flexible
packaging, paper and metallized paper labels and labels that are
heat transferred to plastic containers for a wide range of
industrial and consumer product applications. The contract
packaging plants provide a wide variety of custom contract
packaging services including cartoning, bagging, liquid- or powder-
filling and high-speed overwrapping. Fragranced advertising
products and related specialty items are produced by the scented
products facility. The Company produces high-quality rotogravure
cylinders and has a full-service organization experienced in the
production of color separations and lithographic film for the
commercial printing, advertising and packaging industries. Total
sales of consumer packaging products and services in 1995 were $191
million (including $15 million of intracompany sales).
RECLAMATION OPERATIONS; FIBER RESOURCES AND TIMBER PRODUCTS
The raw materials essential to the Company's business are reclaimed
fiber and virgin wood fiber. The Brewton, Circleville,
Jacksonville and Fernandina mills use primarily wood fibers, while
the other paperboard mills use reclaimed fiber exclusively. The
newsprint mills use approximately 47% wood fiber and 53% reclaimed
fiber.
The use of recycled products in the Company's operations begins
with its reclamation division which operates 27 facilities that
collect, sort, grade and bale wastepaper, as well as collect
aluminum and glass. The reclamation division also operates a
nationwide brokerage system whereby it purchases and resells
wastepaper (including wastepaper for use in its recycled fiber
mills) on a regional and national contract basis. Such contracts
provide bulk purchasing, resulting in lower prices and cleaner
wastepaper. The reclamation division provides valuable fiber
resources to both the paperboard and newsprint segments of the
Company as well as to other producers. Many of the reclamation
facilities are located in close proximity to the Company's recycled
paperboard and newsprint mills, assuring availability of supply,
when needed, with minimal shipping costs. Total sales of recycled
materials in 1995 were $736 million (including $292 million of
intracompany sales).
<PAGE>
In 1995, the Company processed 4.3 million tons of wastepaper. The
amount of wastepaper collected and the proportions sold internally
and externally by the Company's reclamation division for the last
three years were:
<TABLE>
1993 1994 1995
(Tons in thousands)
<S> <C> <C> <C>
Wastepaper collected by Reclamation Division 3,907 4,134 4,293
Percent sold internally 48.8% 45.5% 43.1%
Percent sold to third parties 51.2% 54.5% 56.9%
</TABLE>
While there has been unprecedented demand for reclaimed fiber
during 1994 and 1995, the Company does not, however, anticipate any
significant problems satisfying its need for this material in the
foreseeable future. During 1995, the wastepaper which was
reclaimed by the Company's reclamation plants and brokerage
operations satisfied all of the Company's mill requirements for
reclaimed fiber.
The Company's timber division manages approximately one million
acres of owned and leased timberland. In 1995, approximately 59%
of the timber harvested by the Company was used in its
Jacksonville, Fernandina and Brewton Mills. The Company harvested
893,000 cords of timber which would satisfy approximately 35% of
the Company's requirements for wood fibers. The Company's wood
fiber requirements not satisfied internally are purchased on the
open market or under long-term contracts. In the past, the Company
has not experienced difficulty obtaining an adequate supply of wood
through its own operations or open market purchases. The Company
is not aware of any circumstances that would adversely affect its
ability to satisfy its wood requirements in the foreseeable future.
In recent years, a shortage of wood fiber in the spotted owl
regions in the Northwest has resulted in increases in the cost of
virgin wood fiber. In 1995, the Company's total sales of timber
products were $260 million (including $201 million of intracompany
sales).
NEWSPRINT SEGMENT
NEWSPRINT MILLS
The Company's newsprint mills are located in Newberg and Oregon
City, Oregon. During 1993, 1994 and 1995, the Company produced
615,000, 615,000 and 620,000 tons of newsprint, respectively. In
1995, total sales of newsprint were $361 million (none of which
were intracompany sales).
For the past three years, an average of approximately 55% of the
Company's newsprint production has been sold to The Times Mirror
Company ("Times Mirror") pursuant to a long-term newsprint
agreement (the "Newsprint Agreement") entered into in connection
with the Company's acquisition of Smurfit Newsprint Corporation
("SNC") stock in February 1986. Under the terms of the Newsprint
Agreement, the Company supplies newsprint to Times Mirror generally
at prevailing West Coast market prices. Sales of newsprint to
Times Mirror in 1995 amounted to $189 million.
CLADWOOD
Cladwood is a wood composite panel used by the housing industry,
manufactured from sawmill shavings and other wood residuals and
overlaid with recycled newsprint. The Company has two Cladwood
plants located in Oregon. Total sales for Cladwood in 1995 were
$26 million (none of which were intracompany sales).
<PAGE>
MARKETING
The marketing strategy for the Company's mills is to maximize sales
of products to manufacturers located within an economical shipping
area. The strategy in the converting plants focuses on both
specialty products tailored to fit customers' needs and high volume
sales of commodity products. The Company also seeks to broaden the
customer base for each of its segments rather than to concentrate
on only a few accounts for each plant. These objectives have led
to decentralization of marketing efforts, such that each plant has
its own sales force, and many have product design engineers, who
are in close contact with customers to respond to their specific
needs. National sales offices are also maintained for customers
who purchase through a centralized purchasing office. National
account business may be allocated to more than one plant because of
production capacity and equipment requirements.
COMPETITION
The paperboard and packaging products markets as well as the
newsprint markets are highly competitive and are comprised of many
participants. Although no single company is dominant, the Company
does face significant competitors in each of its businesses. The
Company's competitors include large vertically integrated companies
as well as numerous smaller companies. The industries in which the
Company competes are particularly sensitive to price fluctuations
as well as other competitive factors including design, quality and
service, with varying emphasis on these factors depending on
product line.
BACKLOG
Demand for the Company's major product lines is relatively constant
throughout the year and seasonal fluctuations in marketing,
production, shipments and inventories are not significant. The
Company does not have a significant backlog of orders, as most
orders are placed for delivery within 30 days.
RESEARCH AND DEVELOPMENT
The Company's research and development center uses state-of-the-art
technology to assist all levels of the manufacturing and sales
process from raw materials supply through finished packaging
performance. Research programs have provided improvements in
coatings and barriers, stiffeners, inks and printing. The
technical staff conducts basic, applied and diagnostic research,
develops processes and products and provides a wide range of other
technical services.
The Company actively pursues applications for patents on new
inventions and designs and attempts to protect its patents against
infringement. Nevertheless, the Company believes that its success
and growth are dependent on the quality of its products and its
relationships with its customers, rather than on the extent of its
patent protection. The Company holds or is licensed to use certain
patents, but does not consider that the successful continuation of
any important phase of its business is dependent upon such patents.
<PAGE>
EMPLOYEES
The Company had approximately 16,200 employees at December 31,
1995, of which approximately 10,900 employees (67%), are
represented by collective bargaining units. The expiration date of
union contracts for the Company's major facilities are as follows:
the Oregon City mill, expiring March 1997; the Brewton mill,
expiring October 1997; the Fernandina mill, expiring June 1998; a
group of 11 properties, including 4 paper mills and 7 corrugated
container plants, expiring June 1998; the Jacksonville mill,
expiring June 1999; the Alton mill, expiring June 2000 and the
Newberg mill, expiring March 2002. The Company believes that its
employee relations are generally good and is currently in the
process of bargaining with unions representing production employees
at a number of its other operations.
ITEM 2. PROPERTIES
The Company's properties at December 31, 1995 are summarized in the
table below. Approximately 58% of the Company's investment in
property, plant and equipment is represented by its paperboard and
newsprint mills.
<TABLE>
Number
of State
Facilities Locations
<S> <C> <C>
Paperboard mills:
Containerboard mills 7 6
Boxboard mills 4 4
Cylinderboard mills 4 4
Newsprint mills 2 1
Reclamation plants 27 12
Converting facilities:
Corrugated container plants 51 21
Folding carton plants 18 10
Industrial packaging plants 22 14
Consumer packaging plants 14 8
Cladwood plants 2 1
Wood product plants 1 1
Total 152 28
</TABLE>
In addition to its manufacturing facilities, the Company owns and
leases approximately 758,000 acres and 226,000 acres of timberland,
respectively, and also operates wood harvesting facilities.
ITEM 3. LEGAL PROCEEDINGS
Litigation
In June 1993, the Company filed suit against Otis B. Ingram, as
executor of the estate of Naomi M. Ingram, and Ingram-LeGrand
Lumber Company in the United States District Court, Middle District
of Georgia, seeking declaratory and injunctive relief and damages
in excess of $3 million arising out of the defendants' alleged
breach and anticipatory repudiation of certain timber purchase
agreements and timber management agreements between the Company and
such parties dated November 22, 1967 pertaining to approximately
30,000 acres of property in Georgia (the "Agreements"). The
defendants filed an answer and counterclaim seeking damages in
excess of $14 million based on allegations that the Company
breached the Agreements and failed to pay for timber allegedly
stolen or otherwise removed from the property by the Company or
third parties. A jury trial commenced in October 1995 and the case
was subsequently settled before completion of the trial.
<PAGE>
The Company is a defendant in a number of other lawsuits which have
arisen in the normal course of business. While any litigation has
an element of uncertainty, the management of the Company believes
that the outcome of such suits will not have a material adverse
effect on its financial condition or results of operations.
Environmental Matters
Federal, state and local environmental requirements, particularly
relating to air and water quality, are a significant factor in the
Company's business. The Company employs processes in the
manufacture of pulp, paperboard and other products, resulting in
various discharges and emissions that are subject to numerous
federal, state and local environmental control statutes,
regulations and ordinances. The Company operates and expects to
operate under permits and similar authorizations from various
governmental authorities that regulate such discharges and
emissions.
Occasional violations of permit terms have occurred from time to
time at the Company's facilities, resulting in administrative
actions, legal proceedings or consent decrees and similar
arrangements. Pending proceedings include the following:
Sweet Home, Oregon
On May 11, 1995, the United States Environmental Protection Agency
("EPA") executed a search warrant at the Sweet Home, Oregon
manufacturing facility of SNC, at which Cladwood, a wood composite
panel manufactured from sawmill shavings, is produced. According
to the search warrant, the U.S. Attorney's office for the District
of Oregon and the EPA are investigating whether this facility
violated the Clean Water Act or other federal laws in connection
with its waste water discharges. The Company has been advised
that the government has presented, or intends to present, evidence
to a grand jury in connection with the investigation. SNC and
certain of its employees could be charged, and SNC could be
assessed significant fines and penalties if an indictment and
conviction follows as a result of the grand jury proceeding.
Duval County, Florida
In March 1992, the Company entered into an administrative consent
order with the Florida Department of Environmental Regulation to
carry out any necessary assessment and remediation of Company-
owned property in Duval County, Florida that was formerly the site
of a sawmill that dipped lumber into a chemical solution.
Assessment data with respect to this site indicates soil and
groundwater contamination that will likely require nonroutine
remediation. Management believes that the probable costs of this
site, taken alone or with potential costs at other Company-owned
properties where some contamination has been found, will not have
a material adverse effect on its financial condition or results
of operations.
<PAGE>
Jacksonville, Florida
In October 1994, the Company voluntarily reported possible
noncompliance with certain provisions of its
construction/operation permit at its D-Graphics labels plant
located in Jacksonville, Florida to state and local environmental
authorities, and subsequently entered into a settlement agreement
with such authorities to resolve all civil and administrative
issues regarding this matter. The Company has recently been
advised by the United States Department of Justice that it will
not pursue any criminal action against the Company in connection
with this matter.
The Company also faces potential liability as a result of releases,
or threatened releases, of hazardous substances into the
environment from various sites owned and operated by third parties
at which Company-generated wastes have allegedly been deposited.
Generators of hazardous substances sent to off-site disposal
locations at which environmental problems exist, as well as the
owners of those sites and certain other classes of persons
(generally referred to as "potentially responsible parties" or
"PRPs"), are, in most instances, subject to joint and several
liability for response costs for the investigation and remediation
of such sites under the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") and analogous state laws,
regardless of fault or the legality of original disposal. The
Company has received notice that it is or may be a PRP at a number
of federal and/or state sites where remedial action may be
required, and as a result may have joint and several liability for
cleanup costs at such sites. However, liability of CERCLA sites is
typically shared with the other PRPs and costs are commonly
allocated according to relative amounts of waste deposited.
Because the Company's relative percentage of waste deposited at a
majority of these sites is quite small, management of the Company
believes that its probable liability under CERCLA, taken on a case
by case basis or in the aggregate, will not have a material adverse
effect on its financial condition or operations. Pending CERCLA
proceedings include the following:
Miami County, Ohio Site
In 1995, pursuant to a consent decree previously entered into with
the United States, the Company paid $3.1 million in satisfaction
of its alleged and/or potential liability for past and future
response costs under CERCLA in connection with a site in Miami
County, Ohio and, pursuant to a second consent decree with the
United States, paid $1.2 million in settlement of a cause of
action previously commenced by the government against the Company
for alleged failures to properly respond to document and
information requests by the EPA with respect to such site. A
criminal inquiry was commenced in 1993 relating to the Company's
responses to the EPA's document and information requests, and it
is uncertain whether any criminal action will be forthcoming.
Monterey Park, California Site
The Company has paid approximately $768,000 pursuant to two
partial consent decrees entered into in 1990 and 1991 with respect
to cleanup obligations at the Operating Industries site in
Monterey Park, California. It is anticipated that there will be
further remedial measures beyond those covered by these partial
settlements.
Baltimore, Maryland Site
The Company entered into a consent decree and settlement agreement
in full settlement of its obligations in connection with a
superfund site in Baltimore, Maryland. The Company paid
approximately $171,000 in 1995 as part of this settlement, and may
be required to pay an additional amount up to approximately
$80,000 for future cleanup costs.
<PAGE>
In addition to other Federal and State laws regarding hazardous
substance contamination at sites owned or operated by the Company,
the New Jersey Industrial Site Recovery Act ("ISRA") requires that
a "Negative Declaration" or a "Cleanup Plan" be filed and approved
by the New Jersey Department of Environmental Protection and Energy
("DEPE") as a precondition to the "transfer" of an "industrial
establishment". The ISRA regulations provide that a transferor may
close a transaction prior to the DEPE's approval of a negative
declaration if the transferor enters into an administrative consent
order with the DEPE. The Company is currently a signatory to
administrative consent orders with respect to two formerly leased
or owned industrial establishments and to a facility that was sold
in 1995 and received a negative declaration with respect thereto.
Management believes that any requirements that may be imposed by
the DEPE with respect to these sites will not have a materially
adverse effect on the financial condition or results of operations
of the Company.
The Company's paperboard and newsprint mills are large consumers of
energy, using either natural gas or coal. Approximately 68% of the
Company's total paperboard tonnage is produced by mills which have
coal-fired boilers. The cost of energy is dependent, in part, on
environmental regulations concerning sulfur dioxide and particulate
emissions.
Because various pollution control standards are subject to change,
it is not possible at this time to predict the amount of capital
expenditures that will ultimately be required to comply with future
standards. In particular, the EPA has proposed a comprehensive
rule governing the pulp, paper and paperboard industry, which could
require substantial expenditures to achieve compliance on the part
of the Company. For the past three years, the Company has spent an
average of approximately $10 million annually on capital
expenditures for environmental purposes. Further sums may be
required in the future, although, in the opinion of management,
such expenditures will not have a material effect on its financial
condition or results of operations. The anticipated spending for
such capital projects for fiscal 1996 is approximately $30 million.
Since the Company's competitors are, or will be, subject to
comparable pollution control standards, including the proposed rule
discussed above, if implemented, management is of the opinion that compliance
with future pollution standards will not adversely affect the Company's
competitive position.
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders of the
registrant during the fourth quarter of 1995.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
MARKET INFORMATION
At December 31, 1995 the Company's common stock was held by
approximately 12,000 stockholders, including stockholders of record
and shares owned beneficially through nominee or street name
accounts with brokers. The Company's common stock trades on The
Nasdaq Stock Market under the symbol "JJSC". The high and low
trading prices of the stock for 1995 were:
<TABLE>
High Low
<S> <C> <C>
First quarter $20.38 $14.38
Second quarter $16.50 $11.88
Third quarter $16.75 $13.00
Fourth quarter $15.63 $ 9.00
</TABLE>
DIVIDENDS
The Company has not paid cash dividends on its common stock and
does not intend to pay dividends on its common stock in the
foreseeable future. The ability of the Company to pay dividends in
the future is restricted by certain provisions contained in the
1994 Credit Agreement and the indentures relating to JSC (U.S.)'s
outstanding indebtedness.
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
(In millions, except per share and statistical data)
<TABLE>
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Summary of Operations
Net sales $4,093 $3,233 $2,947 $2,998 $2,940
Cost of goods sold 3,222 2,719 2,567 2,495 2,407
Gross profit 871 514 380 503 533
Selling and administrative expenses 241 223 239 231 225
Restructuring charge 96
Environmental and other charges 54
Income (loss) from operations 630 291 (9) 272 308
Interest expense (234) (269) (254) (300) (335)
Other, net <fn1> 7 6 5 4 (40)
Income (loss) before income taxes,
extraordinary item and cumulative
effect of accounting changes 403 28 (258) (24) (67)
Provision for (benefit from)
income taxes 156 16 (83) 10 10
Income (loss) before
extraordinary item and cumulative
effect of accounting changes 247 12 (175) (34) (77)
Extraordinary item
Loss from early extinguishment
of debt, net of income tax benefit (4) (55) (38) (50)
Cumulative effect of accounting
changes (16)
Net income (loss) $ 243 $ (43) $ (229) $ (84) $ (77)
Per share of common stock <fn2>
Income (loss) before extraordinary
item and cumulative effect of
accounting changes $ 2.23 $ .12 $(2.75) $(1.16) $(2.52)
Net income (loss) 2.19 (.43) (3.60) (2.19) (2.52)
Weighted average shares outstanding 111 101 64 48 40
Other Financial Data
Net cash provided by operating
activities $ 411 $ 149 $ 78 $ 146 $ 133
Depreciation, depletion and
amortization 139 131 131 135 130
Capital investments and acquisitions 188 166 117 104 129
Working capital 47 11 40 106 77
Property, plant, equipment and
timberland, net 1,714 1,686 1,636 1,497 1,526
Total assets 2,783 2,759 2,597 2,436 2,460
Long-term debt, less current
maturities 2,111 2,392 2,619 2,503 2,650
Deferred income tax liability 328 208 232 160 158
Stockholders' deficit (487) (730) (1,058) (829) (977)
Statistical Data (tons in thousands)
Containerboard production (tons) 1,905 1,932 1,840 1,918 1,830
Boxboard and SBS production (tons) 774 767 744 745 726
Newsprint production (tons) 620 615 615 615 614
Corrugated shipments (billion sq. ft.) 29.4 30.8 29.4 28.1 26.4
Folding carton shipments (tons) 469 486 475 487 482
Fiber reclaimed and brokered (tons) 4,293 4,134 3,907 3,846 3,666
Timberland owned or leased
(thousand acres) 984 985 984 978 978
Number of employees 16,200 16,600 17,300 17,800 18,100
<FN>
<fn1> Other, net in 1991 includes after-tax charges of $29 million and $7
million for the write-off of the Company's equity investments in Temboard
and Company Limited Partnership, Inc. and PCL Industries Limited,
respectively.
fn2> Gives effect to the ten-for-one stock conversion pursuant to a
reclassification (the "Reclassification") in 1994, whereby 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.
</FN>
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
General
Market conditions and demand for containerboard, corrugated
shipping containers and newsprint, three of the Company's most
important products, are generally subject to cyclical changes in
the economy and changes in industry capacity, both of which can
significantly impact selling prices and the Company's
profitability.
Containerboard markets, which were depressed in the early 1990's,
began to recover in late 1993 and the strong growth in the U.S.
economy in the second half of 1994 and the first half of 1995
propelled containerboard prices through a series of rapid
increases. Linerboard prices in 1993 were at a low of $280/ton
prior to the recovery and, by April of 1995, had reached a record
high of $535/ton. Market conditions were strong until the third
quarter of 1995, when the economy began to weaken, causing excess
inventories in the industry. Many paper companies, including the
Company, took downtime at paper mills during the fourth quarter of
1995 in response to the slowdown in the economy. Linerboard prices
softened by the end of 1995 to $490/ton, but were still high
compared to historical levels.
Newsprint markets were also depressed in the early 1990's. Demand
for newsprint began to improve in the second half of 1994 and
prices steadily increased during the second half of 1994 and 1995.
Increases in demand for recycled paperboard products and recycled
newsprint during 1994 and 1995 created unprecedented demand for
reclaimed fiber, causing shortages of this material and prices
escalated at a dramatic rate. While the effect of the reclaimed
fiber price increases is favorable to the Company's reclamation
products division, it is unfavorable to the Company overall because
reclaimed fiber is a key raw material for certain of its paper
mills. The demand for and price of reclaimed fiber dropped
dramatically in the fourth quarter of 1995 as a result of the
significant downtime taken by containerboard mills throughout the
country. Although reclaimed fiber prices are currently low in
comparison to the record highs reached earlier in 1995, the Company
believes it is likely that the cost of reclaimed fiber will
increase again in 1996. The Company does not, however, anticipate
any significant problems satisfying its need for this material in
the foreseeable future.
Results of Operations
<TABLE>
Segment data
(In millions) 1995 1994 1993
Income Income
Income (loss) (loss)
Net from Net from Net from
sales operations sales operations sales operations
<S> <C> <C> <C> <C> <C> <C>
Paperboard/
Packaging
Products $3,706 $604 $2,974 $308 $2,699 $ 13
Newsprint 387 26 259 (17) 248 (22)
Total $4,093 $630 $3,233 $291 $2,947 $ (9)
</TABLE>
1995 Compared to 1994
Price recovery coupled with productivity gains and cost reduction
programs implemented in recent years provided record sales and earnings
for the Company in 1995. Net sales were $4.1 billion, an increase of
26.6% over 1994 and income from operations was $630 million, more than
double the 1994 amount. Increases (decreases) in sales for each of the
Company's segments are discussed below.
<TABLE>
(In millions) 1995 Compared to 1994
Paperboard/
Packaging
Products Newsprint Total
<S> <C> <C> <C>
Increase (decrease) due to:
Sales prices and product mix $749 $130 $879
Sales volume (22) (2) (24)
Acquisitions and new facilities 9 9
Sold or closed facilities (4) (4)
Total net sales increase $732 $128 $860
</TABLE>
Paperboard/Packaging Products Segment Sales
Net sales of the Paperboard/Packaging Products segment increased 24.6%
compared to 1994, to $3.71 billion, primarily as a result of sales
prices and product mix.
Net sales of containerboard and corrugated shipping containers increased
25.9% compared to 1994, to $1.96 billion. Corrugated shipping container
prices increased 28.0% on average compared to 1994. In view of the
reduced demand in the second half of 1995, several of the Company's
containerboard mills took downtime in order to reduce inventories. As
a result of this downtime, shipments of containerboard in 1995 were down
2.0% compared to 1994. Shipments of corrugated shipping containers were
down 4.2% compared to 1994.
Net sales of recycled boxboard, SBS and folding cartons increased 9.6%
compared to 1994, to $916 million. Recycled boxboard prices were
increased during the first half of 1995 to cover higher reclaimed fiber
cost, but declined later in the year in response to lower reclaimed
fiber cost. On average, prices of recycled boxboard and SBS rose 19.4%
and 18.9%, respectively, compared to 1994. Folding carton prices
increased 9.4% on average compared to 1994. Shipments of recycled
boxboard and SBS decreased 2.1% and shipments of folding cartons
decreased by 2.8% compared to 1994.
Net sales for the reclamation and timber products operations increased
74.7% compared to 1994, to $503 million, due primarily to escalating
prices of reclaimed fiber. Reclaimed fiber prices were higher by 62.0%
on average compared to 1994 and shipments increased 4.1% compared to
1994.
Net sales of recycled cylinderboard and industrial packaging increased
18.3% compared to 1994, to $155 million, due primarily to higher prices.
Net sales of consumer packaging increased 6.0% compared to 1994, to $176
million.
<PAGE>
Newsprint Segment Sales
Net sales of the Newsprint segment increased 49.4% compared to 1994, to
$387 million, primarily as a result of sales prices and product mix.
Costs and Expenses
Cost of goods sold as a percent of net sales declined from 82.5% in 1994
to 77.6% in 1995 in the Paperboard/Packaging Products segment and
declined from 102.2% in 1994 to 89.5% in 1995 in the Newsprint segment.
Selling and administrative expenses as a percent of net sales declined
for both segments from 6.9% in 1994 to 5.9% in 1995. The sales price
increases implemented during 1995 were the primary reason for the
improvements in each of cost of goods sold and selling and
administrative expenses as a percent of net sales.
In 1993, the Company recorded a pretax charge of $96 million for a
restructuring program (the "Restructuring Program") to improve its long-
term competitive position. The Restructuring Program provided for plant
closures, asset write-downs, reductions in workforce, relocation of
employees and consolidation of certain plant operations, expected to be
completed over an approximate three year period. Major activities
relating to the Restructuring Program in 1995 included the sale of a
corrugated shipping container plant in August and the shutdown in
September of the East mill in Monroe, Michigan, which produced
approximately 50,000 tons per year of recycled cylinderboard. Since
1993, the Company has written down the assets of closed facilities and
other nonproductive assets totalling $35 million and made cash
expenditures of $33 million relating to the Restructuring Program.
Proceeds of $5 million from sale of fixed assets and asset transfers to
other plants of $2 million were used to offset additional expenses and
anticipated expenses related to shutdowns. The remaining balance of the
restructuring liability, the majority of which is for anticipated cash
expenditures in 1996, will continue to be funded through operations.
Based on expenditures to date and those anticipated by the original
plan, no significant adjustment to the reserve balance is expected at
this time.
The Company decreased its weighted average discount rate in measuring
its pension obligations from 8.5% to 7.25% and its rate of increase in
compensation levels from 5.0% to 4.0% at December 31, 1995. The net
effect of changing these assumptions was the primary reason for the
increase in projected benefit obligations. In addition, the Company
changed its expected long-term rate of return on assets from 10.0% to
9.5% at December 31, 1995. The net effect of these changes is expected
to increase pension cost in 1996 by approximately $14 million.
In the fourth quarter of 1995, the Company recorded a pretax charge
totalling $25 million related to product quality matters and failure to
follow proper manufacturing and internal procedures in an immaterial
non-core product line. The Company is continuing to further evaluate
this issue and expects to conclude its review during the second fiscal
quarter. Based upon the information currently available to management,
the Company believes the reserve is adequate but intends to reevaluate
the adequacy of the reserve at the conclusion of its review.
Interest expense for 1995 declined $35 million compared to 1994 due
primarily to lower average debt levels outstanding and lower effective
interest rates. The lower average interest rate in 1995 resulted
primarily from the retirement in December 1994 of the Company's high
yield subordinated debt in conjunction with the Company's 1994
Recapitalization as defined in the JSC 1994 Annual Report on Form 10-K
(the "1994 Recapitalization").
<PAGE>
The Company will adopt Statement of Financial Accounting Standards
("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to be Disposed Of", in the first quarter of
1996. Based on current circumstances, the Company does not believe the
effect of such adoption will be material.
The provision for income taxes in 1995 was $156 million compared to $16
million in 1994. The Company's effective tax rate of 38.7% in 1995 was
substantially lower than the 1994 effective tax rate of 57.1%, primarily
due to the effect of permanent differences from applying purchase
accounting. The Company has net operating loss carryforwards for
federal income tax purposes of approximately $98 million (expiring in
the year 2009), none of which are available for utilization against
alternative minimum taxes. Federal income tax returns for 1989 through
1991 are currently under examination. While the ultimate results of
such examination cannot be predicted with certainty, the Company's
management believes that the examination will not have a material
adverse effect on its consolidated financial condition or results of
operations.
1994 Compared to 1993
Results for 1994 reflected increased demand for the Company's products.
Net sales of $3.2 billion for 1994 were up 9.7% compared to 1993.
Increases (decreases) in sales for each of the Company's segments are
discussed below.
<TABLE>
(In millions) 1994 Compared to 1993
Paperboard/
Packaging
Products Newsprint Total
<S> <C> <C> <C>
Increase (decrease) due to:
Sales prices and product mix $185 $ 11 $196
Sales volume 199 199
Acquisitions and new facilities 5 5
Closed facilities (114) (114)
Total net sales increase $275 $ 11 $286
</TABLE>
Paperboard/Packaging Products Segment Sales
Net sales in the Paperboard/Packaging Products segment for 1994
increased 10.2% compared to 1993, to $2.97 billion. The increase was
due to higher sales prices and increased sales volume. Sales growth for
this segment was mitigated by the shutdown of several operating
facilities in late 1993 and early 1994, including a coated recycled
boxboard mill, five converting plants and two reclamation products
facilities in connection with the Company's Restructuring Program.
Net sales of containerboard and corrugated shipping containers increased
12.5% compared to 1993, to $1.55 billion. Containerboard prices
increased from approximately $300/ton at the end of 1993 to $435/ton in
October 1994. Corrugated shipping container prices increased 4.7% on
average compared to 1993. Shipments of containerboard and corrugated
shipping containers were higher in 1994 compared to 1993 by 3.9% and
4.7%, respectively.
<PAGE>
Net sales of recycled boxboard, SBS and folding cartons decreased 2.6%
compared to 1993, to $836 million. On average, recycled boxboard prices
were comparable to 1993, but SBS prices, although rising in the second
half of 1994, were 4.8% lower on average compared to 1993. Folding
carton prices were lower on average by 2.2% in 1994 compared to 1993.
Shipments of folding cartons increased by 1.8% compared to 1993, but
shipments of recycled boxboard decreased 10.0%, due primarily to the
recycled boxboard mill shutdown referred to above. Shipments of SBS
increased 6.8% compared to 1993.
Net sales for the reclamation and timber products operations increased
74.5% compared to 1993, to $288 million, due primarily to higher prices
for reclaimed fiber. Reclaimed fiber prices in 1994 were higher by
62.9% on average compared to 1993 and shipments increased 5.8% compared
to 1993.
Net sales of recycled cylinderboard and industrial packaging increased
.8% compared to 1993, to $131 million and net sales of consumer
packaging increased .6% compared to 1993, to $166 million.
Newsprint Segment Sales
Net sales in the Newsprint segment for 1994 increased $11 million, up
4.4% compared to 1993, to $259 million. The increase was due primarily
to higher sales prices in the second half of 1994.
Costs and Expenses
Costs and expenses in both segments in 1994 were favorably impacted by
cost reduction initiatives and by the Restructuring Program. Cost of
goods sold as a percent of net sales in the Paperboard/Packaging
Products segment declined from 85.6% in 1993 to 82.5% in 1994, primarily
as a result of higher sales prices and improved capacity utilization.
Cost of goods sold as a percent of net sales in the Newsprint segment
improved modestly from 102.8% in 1993 to 102.2% in 1994, primarily as a
result of higher sales prices. Selling and administrative expenses as
a percent of net sales declined from 8.1% in 1993 to 6.9% in 1994 as a
result of higher sales prices.
The Company increased its weighted average discount rate in measuring
its pension obligations from 7.6% to 8.5% and its rate of increase in
compensation levels from 4.0% to 5.0% at December 31, 1994. The net
effect of changing these assumptions was the primary reason for the
decrease in projected benefit obligations and the changes decreased
pension cost in 1995 by approximately $5 million.
Average debt levels outstanding decreased in 1994 as a result of the
1994 Recapitalization, however, interest expense of $269 million for
1994 increased 5.9% compared to 1993 due to the impact of higher
effective interest rates in 1994.
The tax provision for 1994 was $16 million compared to a tax benefit for
1993 of $83 million. The Company's effective tax rate for 1994 was
higher than the U.S. Federal statutory tax rate due to several factors,
the most significant of which was the effect of permanent differences
between book and tax accounting.
<PAGE>
The Company recorded an extraordinary loss from the early extinguishment
of debt (net of income tax benefits) amounting to $55 million ($.55 per
share) in 1994 and $38 million ($.59 per share) in 1993. The Company
adopted SFAS No. 112 "Employers' Accounting for Postemployment Benefits"
in 1994, the effect of which was not material.
Liquidity and Capital Resources
Net cash provided by operating activities was significantly higher in
1995 compared to 1994 due primarily to the higher earnings level. Net
cash provided by operating activities of $411 million and excess cash at
the end of 1994 was used primarily to fund capital investments and
acquisitions of $188 million and to reduce debt by $264 million.
The ratio of current assets to current liabilities was 1.1 at December
31, 1995 compared to 1.0 at December 31, 1994. Accounts receivable were
higher at December 31, 1995, primarily as a result of significantly
higher product pricing. Accounts payable were lower at December 31,
1995, primarily as a result of lower fiber cost at the end of 1995
compared to 1994.
In February 1995, JSC (U.S.) entered into a $315 million accounts
receivable securitization program (the "1995 Securitization") consisting
of a $300 million trade receivables-backed commercial paper program and
a $15 million term loan, which matures in December 1999. Proceeds of
the 1995 Securitization were used to extinguish JSC (U.S.)'s borrowings
under its previous accounts receivable securitization program and for
general corporate purposes. Interest rates on borrowings under the 1995
Securitization are at a variable rate (5.78% at December 31, 1995).
In conjunction with the Company's 1994 Recapitalization, the Company
entered into a new bank credit facility (the "1994 Credit Agreement")
consisting of a $450 million revolving credit facility, a $900 million
Tranche A Term Loan and a $300 million Tranche B Term Loan. In October
1995, the 1994 Credit Agreement was amended to reduce the interest rates
payable on the revolving credit facility and the Tranche A Term Loan.
Net debt reduction for 1995 included $64 million of mandatory and $192
million of optional payments in respect of the Tranche A and Tranche B
Term Loans. The Company recorded an extraordinary loss from the early
extinguishment of debt (net of income tax benefits) amounting to $4
million ($.04 per share) in 1995. In January 1996, the 1994 Credit
Agreement was amended to give greater flexibility to the Company in
applying optional prepayments toward installments due within the next
twelve months.
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.
The 1994 Credit Agreement imposes an annual limit on future capital
expenditures of $150 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 million if the prior year's
spending was less than the maximum amount allowed. The Company has a
carryover of approximately $66 million for 1996. Because the Company
has invested heavily in its core businesses in prior years, management
believes the annual limitation for capital expenditures does not impair
its plans for maintenance, expansion and continued modernization of its
facilities.
<PAGE>
Capital investments and acquisitions in 1995 include $154 million of
property and timberland additions and $34 million of investments in
affiliates and acquisitions. The investments in affiliates primarily
include (i) the purchase of the 20% minority interest of Smurfit
Newsprint Corporation previously owned by Times Mirror, the primary
assets of which are two mills located near Portland, Oregon producing
approximately 620,000 tons of newsprint annually, and (ii) a joint
venture, the primary asset of which is a linerboard mill near Shanghai,
China.
The Company expects internally generated cash flows and existing
financing resources will be sufficient for the next several years to
meet its needs to pay interest, amortize term loans and fund capital
expenditures. Scheduled payments due in 1996 and 1997 under the 1994
Credit Agreement are $62 million and $133 million, with increasing
amounts thereafter. Capital expenditures for 1996 are estimated to be
comparable to 1995. The Company expects to use any excess cash provided
by operations to make further debt reductions. At December 31, 1995,
the Company had $301 million of unused borrowing capacity under its 1994
Credit Agreement and $95 million of unused borrowing capacity under the
1995 Securitization subject to JSC (U.S.)'s level of eligible accounts
receivable.
The Company's earnings are significantly affected by the amount of
interest on its indebtedness. The Company enters into interest rate
swap, cap and option agreements to manage interest rate exposure on its
indebtedness. Management's objective is to protect the Company from
interest rate volatility and reduce or cap interest expense within
acceptable levels of risk. Periodic amounts to be paid or received
under interest rate swap and cap agreements are accrued and recognized
as adjustments to interest expense. Premiums paid on cap agreements are
included in interest payable and amortized to interest expense over the
life of the agreements. The Company amends existing agreements or enters
into agreements with offsetting effects when necessary to change its net
position. In 1995, interest rate swap agreements with a notional
value of $925 million expired and a cap agreement with a notional
amount of $100 million was terminated. Also in 1995, the Company
entered into an interest rate swap agreement with a notional
amount of $100 million. The table below shows interest rate swap agreements
outstanding at December 31, 1995, the related maturities for the years
thereafter and the contracted pay and receive rates for such agreements.
<TABLE>
Interest rate
swaps at Interest rate
December 31, swap maturities
(In millions) 1995 1996 1997
<S> <C> <C> <C>
Pay fixed interest rate swaps $ 483 $(150) $(333)
Pay rate 6.519% 6.519% 6.645%
Receive rate 5.797%
</TABLE>
<PAGE>
The Company has a cap agreement with a notional amount of $100
million, which matures in 1996, on variable rate debt which limits
the Company's interest payments to a range of 5.5-7.0% on the
notional amount.
Environmental Matters
In 1993, the Company recorded a provision of $54 million, of which
$39 million relates to environmental matters, representing asbestos
and PCB removal, solid waste cleanup at existing and former
operating sites, and expenses for response costs at various sites
where the Company has received notice that it is a potentially
responsible party ("PRP"). The Company made payments of $9 million
and $4 million related to PRP sites and other environmental cleanup
in 1995 and 1994, respectively. The Company, as well as other
companies in the industry, faces potential environmental liability
related to various sites at which wastes have allegedly been
deposited. The Company has received notice that it is or may be a
PRP at a number of federal and state sites (the "Sites") where
remedial action may be required. Because the laws that govern the
cleanup of waste disposal sites have been construed to authorize
joint and several liability, government agencies or other parties
could seek to recover all response costs for any Site from any one
of the PRPs for such Site, including the Company, despite the
involvement of other PRPs. Although the Company is unable to
estimate the aggregate response costs in connection with the
remediation of all Sites, if the Company were held jointly and
severally liable for all response costs at some or all of the
Sites, it would have a material adverse effect on the financial
condition and results of operations of the Company. However, joint
and several liability generally has not in the past been imposed on
PRPs, and, based on such past practice, the Company's past
experience and the financial conditions of other PRPs with respect
to the Sites, the Company does not expect to be held jointly and
severally liable for all response costs at any Site. Liability at
waste disposal sites is typically shared with other PRPs and costs
generally are allocated according to relative volumes of waste
deposited. At most Sites, the waste attributed to the Company is
a very small portion of the total waste deposited at the Site
(generally significantly less than 1%). There are approximately
ten Sites where final settlement has not been reached and where the
Company's potential liability is expected to exceed de minimis
levels. Accordingly, the Company believes that its estimated total
probable liability for response costs at the Sites was adequately
reserved at December 31, 1995. Further, the estimate takes into
consideration the number of other PRPs at each site, the identity,
and financial position of such parties, in light of the joint and
several nature of the liability, but does not take into account
possible insurance coverage or other similar reimbursement.
Effects of Inflation
With the exception of recycled fiber, the moderate level of
inflation during the past few years has not had a material impact
on the Company's financial position or operating results. The
Company uses the last-in, first-out method of accounting for
approximately 80% of its inventories. Under this method, the cost
of products sold reported in the financial statements approximates
current cost and thus reduces the distortion in reported income due
to increasing costs.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Page No.
The following consolidated financial statements of Jefferson
Smurfit Corporation are included in this report:
Consolidated balance sheets - December 31, 1995 and 1994. . . . . .25
For the years ended December 31, 1995, 1994 and 1993:
Consolidated statements of operations. . . . . . .. . . . . . .26
Consolidated statements of stockholders' deficit . . . . . . .27
Consolidated statements of cash flows . . . . . . . . . . . . .28
Notes to consolidated financial statements . . . . . . . . . . . . .29
The following consolidated financial statement schedule of
Jefferson Smurfit Corporation is included in Item 14(a):
II: Valuation and Qualifying Accounts . . . . . . . . . . . . .54
All other schedules specified under Regulation S-X for Jefferson
Smurfit Corporation have been omitted because they are either not
applicable, not required or because the information required is
included in the financial statements or notes thereto.
<PAGE>
MANAGEMENT'S RESPONSIBILITY FOR FINANCIAL STATEMENTS
The management of the Company is responsible for the information
contained in the consolidated financial statements and in other
parts of this report. The consolidated financial statements have
been prepared by the Company in accordance with generally accepted
accounting principles appropriate in the circumstances, and
necessarily include certain amounts based on management's best
estimate and judgment.
The Company maintains a system of internal accounting control,
which it believes is sufficient to provide reasonable assurance
that in all material respects transactions are properly authorized
and recorded, financial reporting responsibilities are met and
accountability for assets is maintained. In establishing and
maintaining any system of internal control, judgment is required to
assess and balance the relative costs and expected benefits.
Management believes that through the careful selection of
employees, the division of responsibilities and the application of
formal policies and procedures, the Company has an effective and
responsive system of internal accounting controls. The system is
monitored by the Company's staff of internal auditors, who evaluate
and report to management on the effectiveness of the system.
The Audit Committee of the Board of Directors is composed of three
directors who meet with the independent auditors, internal auditors
and management to discuss specific accounting, reporting and
internal control matters. Both the independent auditors and
internal auditors have full and free access to the Audit Committee.
James E. Terrill
President, Chief Executive Officer
John R. Funke
Vice President and Chief Financial Officer
(Principal Accounting Officer)
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Jefferson Smurfit Corporation
We have audited the accompanying consolidated balance sheets of
Jefferson Smurfit Corporation as of December 31, 1995 and 1994, and
the related consolidated statements of operations, stockholders'
deficit and cash flows for each of the three years in the period
ended December 31, 1995. Our audits also included the financial
statement schedule listed in the Index at Item 14(a). These
financial statements and schedule are the responsibility of the
Company's management. Our responsibility is to express an opinion
on these financial statements and schedule 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 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, the financial statements referred to above present
fairly, in all material respects, the consolidated financial
position of Jefferson Smurfit Corporation at December 31, 1995 and
1994, and the consolidated results of its operations and its cash
flows for each of the three years in the period ended December 31,
1995 in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule,
when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Note 5 and Note 6 to the financial statements, in
1993, the Company changed its method of accounting for income taxes
and postretirement benefits.
Ernst & Young LLP
St. Louis, Missouri
January 24, 1996
<PAGE>
<TABLE>
JEFFERSON SMURFIT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
December 31, 1995 1994
ASSETS
<S> <C> <C>
Current assets
Cash and cash equivalents $ 27 $ 62
Receivables, less allowances
of $9 in 1995 and 1994 339 316
Inventories
Work-in-process and finished goods 85 87
Materials and supplies 139 137
224 224
Deferred income taxes 45 38
Prepaid expenses and other current assets 9 7
Total current assets 644 647
Net property, plant and equipment 1,456 1,427
Timberland, less timber depletion 258 259
Goodwill, less accumulated amortization of
$42 in 1995 and $35 in 1994 253 257
Other assets 172 169
$ 2,783 $ 2,759
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Current maturities of long-term debt $ 81 $ 50
Accounts payable 290 349
Accrued compensation and payroll taxes 101 114
Interest payable 37 48
Other accrued liabilities 88 75
Total current liabilities 597 636
Long-term debt, less current maturities 2,111 2,392
Other long-term liabilities 234 253
Deferred income taxes 328 208
Stockholders' deficit
Preferred stock, par value $.01 per share; 50,000,000
shares authorized; none issued and outstanding
Common stock, par value $.01 per share; 250,000,000
shares authorized; 110,989,156 and 110,988,462 shares
issued and outstanding in 1995 and 1994, respectively 1 1
Additional paid-in capital 1,168 1,168
Retained earnings (deficit) (1,656) (1,899)
Total stockholders' deficit (487) (730)
$ 2,783 $ 2,759
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
JEFFERSON SMURFIT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
Year Ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Net sales $ 4,093 $ 3,233 $ 2,947
Costs and expenses
Cost of goods sold 3,222 2,719 2,567
Selling and administrative expenses 241 223 239
Restructuring charge 96
Environmental and other charges 54
Income (loss) from operations 630 291 (9)
Other income (expense)
Interest expense (234) (269) (254)
Other, net 7 6 5
Income (loss) before income taxes,
extraordinary item and cumulative
effect of accounting changes 403 28 (258)
Provision for (benefit from) income taxes 156 16 (83)
Income (loss) before extraordinary item and
cumulative effect of accounting changes 247 12 (175)
Extraordinary item
Loss from early extinguishment of debt,
net of income tax benefit of $2 in 1995,
$34 in 1994, and $22 in 1993 (4) (55) (38)
Cumulative effect of accounting changes
Postretirement benefits, net of income tax
benefit of $22 (37)
Income taxes 21
Net income (loss) $ 243 $ (43) $ (229)
Per share of common stock
Income (loss) before extraordinary item and
cumulative effect of accounting changes $ 2.23 $ .12 $ (2.75)
Extraordinary item (.04) (.55) (.59)
Cumulative effect of accounting changes (.26)
Net income (loss) $ 2.19 $ (.43) $ (3.60)
Weighted average shares outstanding 111 101 64
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
JEFFERSON SMURFIT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
(In millions, except share data)
Cumulative
Exchangeable
Preferred Stock Common Stock
Par Number Par Number Additional Retained
Value, of Value, of Paid-In Earnings
$1,000 Shares $.01 Shares Capital (Deficit)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1993 $ 167 167,000 $ 6,350,000 $ 632 $(1,627)
Net loss (229)
Conversion of cumulative
exchangeable preferred
stock (167) (167,000) 1,670,000 167
Balance at December 31, 1993 8,020,000 799 (1,856)
Net loss (43)
Reclassification of common
stock 1 72,180,000 (1)
Issuance of common stock,
net of related expenses 30,788,462 370
Balance at December 31, 1994 1 110,988,462 1,168 (1,899)
Net income 243
Issuance of common stock
under stock option plan 694
Balance at December 31, 1995 $ $ 1 110,989,156 $1,168 $(1,656)
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
JEFFERSON SMURFIT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
Year Ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities
Net income (loss) $ 243 $ (43) $(229)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities
Extraordinary loss from early
extinguishment of debt 7 89 60
Cumulative effect of accounting changes
Postretirement benefits 59
Income taxes (21)
Restructuring charge 96
Environmental and other charges 54
Depreciation, depletion and amortization 139 131 131
Amortization of deferred debt issuance costs 14 10 8
Deferred income taxes 113 (21) (157)
Non-cash interest 19 18
Non-cash employee benefit expense (7) (9) (13)
Change in current assets and liabilities,
net of effects from acquisitions
Receivables (22) (73) 1
Inventories (4) 10 14
Prepaid expenses and other current assets (1) (1) 5
Accounts payable and accrued liabilities (61) 42 26
Interest payable (7) (7) 5
Income taxes (1) 1 16
Other, net (2) 1 5
Net cash provided by operating activities 411 149 78
Cash flows from investing activities
Property additions (130) (144) (97)
Timberland additions (24) (19) (20)
Investments in affiliates and acquisitions (34) (3)
Proceeds from property and timberland
disposals and sale of businesses 10 4 24
Net cash used for investing activities (178) (162) (93)
Cash flows from financing activities
Issuance of common stock, net of related expenses 370
Borrowings under bank credit facilities 1,372
Borrowings under senior notes 400 500
Net borrowings under accounts
receivable securitization programs 35 6
Other increases in long-term debt 20 4 12
Payments of long-term debt and related premiums (284) (2,073) (479)
Deferred debt issuance costs (4) (77) (25)
Net cash provided by (used for) financing activities (268) 31 14
Increase (decrease) in cash and cash equivalents (35) 18 (1)
Cash and cash equivalents
Beginning of year 62 44 45
End of year $ 27 $ 62 $ 44
</TABLE>
See notes to consolidated financial statements.
<PAGE>
JEFFERSON SMURFIT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in millions, except share data)
1. -- Basis of Presentation
Jefferson Smurfit Corporation (formerly SIBV/MS Holdings, Inc.)
hereafter referred to as the "Company" owns 100% of the equity interest
in JSCE, Inc. The Company has no operations other than its investment
in JSCE, Inc. On December 31, 1994 Jefferson Smurfit Corporation
(U.S.), a wholly-owned subsidiary of the Company, 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.)"). JSCE, Inc. owns 100% of the equity interest in
JSC (U.S.). JSCE, Inc. has no operations other than its investment in
JSC (U.S.). Prior to May 4, 1994, 50% of the voting stock of the
Company was owned by Smurfit Packaging Corporation ("SPC") and Smurfit
Holdings B.V. ("SHBV"), indirect wholly-owned subsidiaries of Jefferson
Smurfit Group plc ("JS Group"), a public corporation organized under the
laws of the Republic of Ireland. The remaining 50% was owned by The
Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II") and certain
other investors.
In 1994, the Company completed a recapitalization plan (the
"Recapitalization") to repay and refinance a substantial portion of its
indebtedness. In connection with the Recapitalization, (i) the Company
issued and sold 19,250,000 shares of common stock pursuant to a
registered public offering at an initial public offering price of $13.00
per share, (ii) JS Group, through its wholly-owned subsidiary Smurfit
International B.V. ("SIBV"), purchased an additional 11,538,462 shares
of common stock for $150 million, and (iii) JSC (U.S.) issued and sold
$300 million aggregate principal amount of unsecured 11.25% Series A
Senior Notes due 2004 and $100 million aggregate principal amount of
unsecured 10.75% Series B Senior Notes due 2002 (the "1994 Senior
Notes") pursuant to a registered public offering.
Immediately prior to the consummation of the 1994 initial public
offerings, the Company effected a reclassification (the
"Reclassification") whereby the Company's previous 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. The
effect of the Reclassification was to transfer $1 million from the
additional paid-in capital account to the common stock account.
The deficit in stockholders' equity is primarily due to the Company's
1989 purchase of JSC (U.S.)'s common equity owned by JS Group and the
acquisition by JSC (U.S.) of its common equity owned by MSLEF I, which
were accounted for as purchases of treasury stock.
2. -- Significant Accounting Policies
Nature of Operations: The Company's major operations are in paper
products, newsprint production, recycling, and consumer packaging.
Paper product operations procure virgin or recycled fiber and produce
paperboard for conversion into corrugated containers at the Company's
own facilities and third party converting operations. Paper product
operations customers represent a diverse range of industries including
paperboard and paperboard packaging, wholesale trade, retailing and
agri-business. The Company's newsprint operations produce newsprint
<PAGE>
from virgin or recycled fiber primarily for the newspaper industry.
Recycling collects wastepaper which is then resold to paper product
operations of the Company and third parties for conversion into
boxboard, corrugated containers, and other paper products. Consumer
packaging produces labels and flexible packaging for use in industrial,
medical, and consumer product applications. Customers and operations
are principally located in the United States. Credit is extended to
customers based on an evaluation of their financial condition.
Principles of Consolidation: The consolidated financial statements
include the accounts of the Company and its majority-owned subsidiaries.
Significant intercompany accounts and transactions are eliminated in
consolidation.
Cash Equivalents: The Company considers all highly liquid investments
with an original maturity of three months or less to be cash
equivalents. At December 31, 1995, cash and cash equivalents of $27
million are pledged as collateral for obligations associated with the
accounts receivable securitization program (See Note 4).
Revenue Recognition: Revenue is recognized at the time products are
shipped.
Inventories: Inventories are valued at the lower of cost or market,
principally under the last-in, first-out ("LIFO") method except for $54
million in 1995 and $55 million in 1994 which are valued at the lower of
average cost or market. First-in, first-out costs (which approximate
replacement costs) exceed the LIFO value by $84 million and $58 million
at December 31, 1995 and 1994, respectively.
Property, Plant and Equipment: Property, plant and equipment are
carried at cost. Provisions for depreciation and amortization are made
using straight-line rates over the estimated useful lives of the related
assets and the terms of the applicable leases for leasehold
improvements.
Timberland: The portion of the costs of timberland attributed to
standing timber is charged against income as timber is cut, at rates
determined annually, based on the relationship of unamortized timber
costs to the estimated volume of recoverable timber. The costs of
seedlings and reforestation of timberland are capitalized.
Deferred Debt Issuance Costs: Deferred debt issuance costs are
amortized over the terms of the respective debt obligations using the
interest method.
Goodwill: The excess of cost over the fair value assigned to the net
assets acquired is recorded as goodwill and is being amortized using the
straight-line method over 40 years.
<PAGE>
2. -- Significant Accounting Policies (cont)
Use of Estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
Interest Rate Swap and Cap Agreements: The Company enters into interest
rate swap and cap agreements to reduce the impact of interest rate
fluctuations. Swap agreements involve the exchange of fixed and
floating rate interest payments without the exchange of the underlying
principal amount. Cap agreements provide that the Company will receive
a certain amount when short-term interest rates exceed a threshold rate.
Periodic amounts to be paid or received under interest rate swap and cap
agreements are accrued and recognized as adjustments to interest
expense. Premiums paid on cap agreements are included in interest
payable and amortized to interest expense over the life of the
agreements. Gains and losses realized upon settlement of these
agreements are deferred and amortized to interest expense over a period
relevant to the agreement if the underlying hedged instrument remains
outstanding, or immediately if the underlying hedged instrument is
settled.
Earnings (Loss) Per Common Share: The computations of earnings (loss)
per common share are based on the weighted average number of common
shares outstanding during the periods presented. Outstanding stock
options are common equivalent shares but are not included since the
dilutive effect is not material.
Fully diluted earnings per share amounts are not applicable because the
effect of the conversion of the stock options is not dilutive in 1995
and 1994 and antidilutive in 1993.
Had the Recapitalization occurred on January 1, 1994, the income before
extraordinary item would have been $42 million or $.38 per common share,
and the net loss would have been $15 million or $.13 per common share,
for 1994.
Earnings per share amounts and weighted average shares outstanding have
been restated to reflect the results of the Reclassification.
Employee Stock Options: The Company accounts for its stock-based
compensation awards under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25"). Under APB 25,
because the exercise price of the Company's employee stock options equal
the market price of the underlying stock on the date of grant, no
compensation expense is recognized.
<PAGE>
2. -- Significant Accounting Policies (cont)
Recently Issued Accounting Standards: In March 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of", which requires
impairment losses to be recorded on long-lived assets used in operations
when indicators of impairment are present and the undiscounted cash
flows estimated to be generated by those assets are less than the
assets' carrying amount. SFAS No. 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The Company will
adopt SFAS No. 121 in the first quarter of 1996 and, based on current
circumstances, does not believe the effect of adoption will be material.
Reclassifications: Certain reclassifications of prior year
presentations have been made to conform to the 1995 presentation.
3. -- Property, Plant and Equipment
<TABLE>
Property, plant and equipment at December 31 consists of:
1995 1994
<S> <C> <C>
Land $ 60 $ 60
Buildings and leasehold improvements 268 254
Machinery, fixtures and equipment 1,815 1,696
2,143 2,010
Less accumulated depreciation and amortization 753 657
1,390 1,353
Construction in progress 66 74
Net property, plant and equipment $1,456 $1,427
</TABLE>
4. -- Long-Term Debt
<TABLE>
Long-term debt at December 31 consists of:
1995 1994
<S> <C> <C>
Tranche A term loan $ 708 $ 900
Tranche B term loan 236 300
Revolving loans 55 43
Accounts receivable securitization program loans 217 217
1994 series A senior notes 300 300
1994 series B senior notes 100 100
1993 senior notes 500 500
Other 76 82
2,192 2,442
Less current portion 81 50
$2,111 $2,392
</TABLE>
Aggregate annual maturities of long-term debt at December 31, 1995, for
the next five years are $81 million in 1996, $142 million in 1997, $146
million in 1998, $154 million in 1999, and $397 million in 2000.
<PAGE>
4. -- Long-Term Debt (cont)
1994 Credit Agreement
In connection with the Recapitalization, JSC (U.S.) entered into a bank
credit facility (the "1994 Credit Agreement") which consists of a $450
million revolving credit facility (the "Revolving Credit Facility") of
which up to $150 million may consist of letters of credit, a $900
million Tranche A Term Loan and a $300 million Tranche B Term Loan.
The Revolving Credit Facility matures in 2001. The Tranche A Term Loan
matures in various installments through 2001. The Tranche B Term Loan
matures in various installments through 2002.
Outstanding loans under the Tranche A Term Loan and the Revolving Credit
Facility bear interest at rates selected at the option of JSC (U.S.)
equal to the alternate base rate ("ABR") plus .75% per annum or the
adjusted LIBOR Rate plus 1.75% per annum (7.82% at December 31, 1995).
Interest on outstanding loans under the Tranche B Term Loan is payable
at a rate per annum selected at the option of JSC (U.S.), equal to the
prime rate plus 2% per annum or the adjusted LIBOR Rate plus 3% per
annum (8.91% at December 31, 1995). ABR is defined as the highest of
Chemical Bank's prime lending rate, 1/2 of 1% in excess of the Federal
Funds Rate or 1% in excess of the base certificate of deposit rate. The
Tranche A and Tranche B Term Loans and the Revolving Credit Facility may
be prepaid at any time, in whole or in part, at the option of JSC
(U.S.).
A commitment fee of .375% per annum is assessed on the unused portion of
the Revolving Credit Facility. At December 31, 1995, the unused portion
of this facility, after giving consideration to outstanding letters of
credit, was $301 million.
The obligations under the 1994 Credit Agreement are unconditionally
guaranteed by the Company, JSCE, Inc. and its subsidiaries and are
secured by a security interest in substantially all of the assets of JSC
(U.S.) and its material subsidiaries, with the exception of cash, cash
equivalents and trade receivables. The 1994 Credit Agreement is also
secured by a pledge of all the capital stock of each material subsidiary
of the Company and by certain intercompany notes.
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. The 1994 Credit Agreement also
requires prepayments if JSC (U.S.) has excess cash flows, as defined, or
receives proceeds from: certain asset sales, insurance, issuance of
equity securities, or incurrence of certain indebtedness.
<PAGE>
4. -- Long-Term Debt (cont)
Accounts Receivable Securitization Program Loans
During 1995, JSC (U.S.) entered into a $315 million accounts receivable
securitization program (the "1995 Securitization"). The proceeds of the
1995 Securitization were used to extinguish JSC (U.S.)'s borrowings of
$230 million under the 1991 Securitization Program. The 1995
Securitization provides for the sale of certain of the Company'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
million under the term loan, and may issue up to $300 million trade
receivables-backed commercial paper or borrow up to $300 million under
a revolving liquidity facility.
Under the 1995 Securitization, JS Finance has granted a security
interest in all its assets, principally cash and cash equivalents of $27
million and trade accounts receivable of $217 million at December 31,
1995. Interest rates on borrowings under the 1995 Securitization are at
a variable rate (5.78% at December 31, 1995). At December 31, 1995, $95
million was available for additional borrowing, subject to JSC (U.S.)'s
level of eligible accounts receivable. Borrowings under the
Securitization Program, which expires December 1999, have been
classified as long-term debt because of the Company's intent to
refinance this debt on a long-term basis and the availability of such
financing under the terms of the program.
1994 Senior Notes
In connection with the Recapitalization, JSC (U.S.) issued and sold $300
million aggregate principal amount of unsecured 11.25% Series A Senior
Notes due 2004 and $100 million aggregate principal amount of unsecured
10.75% Series B Senior Notes due 2002. The Series A Senior Notes are
redeemable in whole or in part at the option of JSC (U.S.), at any time
on or after May 1, 1999 with premiums of 5.625% and 2.813% of the
principal amount if redeemed during the 12-month periods commencing May
1, 1999 and 2000, respectively. In addition, up to $100 million
aggregate principal amount of Series A Senior Notes are redeemable at
110% of the principal amount prior to May 1, 1997 in connection with
certain stock issuances. The Series B Senior Notes are not redeemable
prior to maturity.
The 1994 Senior Notes, which are unconditionally guaranteed on a senior
basis by JSCE, Inc., rank pari passu with the 1994 Credit Agreement and
the 1993 Senior Notes. The 1994 Senior Notes agreement contains
business and financial covenants which are less restrictive than those
contained in the 1994 Credit Agreement.
Holders of the 1994 Senior Notes have the right, subject to certain
limitations, to require JSC (U.S.) to repurchase their securities at
101% of the principal amount plus accrued and unpaid interest, upon the
occurrence of a change of control or in certain events from proceeds of
major asset sales, as defined.
<PAGE>
4. -- Long-Term Debt (cont)
1993 Senior Notes
In April 1993, JSC (U.S.) issued $500 million of unsecured 9.75% Senior
Notes (the "1993 Senior Notes") due 2003 which are not redeemable prior
to maturity. The 1993 Senior Notes, which are unconditionally
guaranteed on a senior basis by JSCE, Inc., rank pari passu with the
1994 Credit Agreement and the 1994 Senior Notes. The 1993 Senior Notes
agreement contains business and financial covenants which are
substantially less restrictive than those contained in the 1994 Credit
Agreement and substantially similar to those contained in the 1994
Senior Notes agreement.
Holders of the 1993 Senior Notes have the right, subject to certain
limitations, to require JSC (U.S.) to repurchase their securities at
101% of the principal amount plus accrued and unpaid interest, upon the
occurrence of a change in control or in certain events, from proceeds of
major asset sales, as defined.
Other Debt
Other long-term debt at December 31, 1995, is payable in varying
installments through the year 2029. Interest rates on these obligations
averaged approximately 8.81% at December 31, 1995.
Interest Rate Swap and Cap Agreements
The Company utilizes interest rate swap and cap agreements to manage its
interest rate exposure on long-term debt. At December 31, 1995, the
Company has interest rate swap agreements with a notional amount of $483
million which effectively fix (for remaining periods up to 2 years) the
interest rate on variable rate borrowings. The Company is currently
paying a weighted average fixed interest rate of 6.52% and receiving a
weighted average variable interest rate of 5.80%, calculated on the
notional amount. In addition, the Company has a cap agreement with a
notional amount of $100 million (through 1996) on variable rate debt
which limits the Company's interest payments to a range of 5.5-7.0% on
the notional amount.
The Company is exposed to credit loss in the event of non-performance by
the other parties to the interest rate swap agreements. However, the
Company does not anticipate non-performance by the counterparties.
Other
Interest costs capitalized on construction projects in 1995, 1994, and
1993 totalled $4 million, $4 million, and $3 million, respectively.
Interest payments on all debt instruments for 1995, 1994, and 1993 were
$228 million, $247 million, and $226 million, respectively.
<PAGE>
5. -- Income Taxes
At December 31, 1995, the Company has net operating loss carryforwards
for federal income tax purposes of approximately $98 million (expiring
in the year 2009), none of which are available for utilization against
alternative minimum taxes.
<TABLE>
Significant components of the Company's deferred tax assets and
liabilities at December 31 are as follows:
1995 1994
<S> <C> <C>
Deferred tax liabilities:
Depreciation and depletion $372 $365
Prepaid pension costs 34 31
Other 118 107
Total deferred tax liabilities 524 503
Deferred tax assets:
Employee benefit plans 127 120
Restructuring and other charges 11 32
Net operating loss and tax credit carryforwards 71 163
Other 43 43
Total deferred tax assets 252 358
Valuation allowance for deferred tax assets (11) (25)
Net deferred tax assets 241 333
Net deferred tax liabilities $283 $170
</TABLE>
<TABLE>
Provision for (benefit from) income taxes before extraordinary item and
cumulative effect of accounting changes were as follows:
Year Ended December 31,
1995 1994 1993
<S> <C> <C>
Current
Federal $ 38 $ 1 $ 28
State and local 4 2 2
42 3 30
Deferred
Federal (12) 39 (54)
State and local 2 4 6
Net operating loss carryforwards 124 (30) (71)
114 13 (119)
Adjustment of deferred tax assets and
liabilities for enacted tax rate change 6
$ 156 $ 16 $ (83)
</TABLE>
The Company increased its deferred tax assets and liabilities in 1993 as
a result of legislation enacted during 1993 increasing the corporate
federal statutory tax rate from 34% to 35% effective January 1, 1993.
<PAGE>
5. -- Income Taxes (cont)
The federal income tax returns for 1989 through 1991 are currently under
examination. While the ultimate results of such examination cannot be
predicted with certainty, the Company's management believes that the
examination will not have a material adverse effect on its consolidated
financial condition or results of operations.
A reconciliation of the difference between the statutory federal income
tax rate and the effective income tax rate as a percentage of income
(loss) before income taxes, extraordinary item, and cumulative effect of
accounting changes is as follows:
<TABLE>
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
U.S. Federal statutory rate 35.0% 35.0% (35.0%)
Adjustment of deferred tax assets
and liabilities for enacted
tax rate change 2.2
State and local taxes, net
of federal tax benefit 3.9 (4.8) (2.0)
Permanent differences from applying
purchase accounting 3.2 23.7 3.5
Effect of valuation allowances on
deferred tax assets, net of
federal benefit (3.4) 1.1 1.2
Other, net 2.1 (2.1)
38.7% 57.1% (32.2%)
</TABLE>
The Company made income tax payments of $41 million, $3 million, and $33
million, in 1995, 1994, and 1993, respectively.
Effective January 1, 1993, the Company changed its method of accounting
for income taxes from the deferred method to the liability method
required by SFAS No. 109, "Accounting for Income Taxes".
The cumulative effect of adopting SFAS No. 109 as of January 1, 1993 was
to increase net income by $21 million. For 1993, application of SFAS
No. 109 increased the pretax loss by $14 million because of increased
depreciation expense as a result of the requirement to report assets
acquired in prior business combinations at pretax amounts.
<PAGE>
6. -- Employee Benefit Plans
Pension Plans
The Company sponsors noncontributory defined benefit pension plans
covering substantially all employees not covered by multi-employer
plans. Plans that cover salaried and management employees provide
pension benefits that are based on the employee's five highest
consecutive calendar years' compensation during the last ten years of
service. Plans covering non-salaried employees generally provide
benefits of
stated amounts for each year of service. These plans provide reduced
benefits for early retirement. The Company's funding policy is to make
minimum annual contributions
required by applicable regulations. The Company also participates in
several multi-employer pension plans, which provide defined benefits to
certain union employees.
Assumptions used in the accounting for the defined benefit plans were:
<TABLE>
1995 1994 1993
<S> <C> <C> <C>
Weighted average discount rate 7.25% 8.5% 7.6%
Rate of increase in compensation levels 4.0% 5.0% 4.0%
Expected long-term rate of return on assets 9.5% 10.0% 10.0%
</TABLE>
The components of net pension income for the defined benefit plans and
the total contributions charged to pension expense for the multi-
employer plans follow:
<TABLE>
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Defined benefit plans:
Service cost - benefits earned during the period $ 13 $ 14 $ 13
Interest cost on projected benefit obligations 59 54 54
Actual return on plan assets (155) (8) (91)
Net amortization and deferral 75 (71) 9
Multi-employer plans 2 2 2
Net pension income $ (6) $ (9) $(13)
</TABLE>
The following table sets forth the funded status and amounts recognized
in the consolidated balance sheets at December 31 for the Company's and
its subsidiaries' defined benefit pension plans:
<TABLE>
1995 1994
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligations $781 $632
Accumulated benefit obligations $820 $670
Projected benefit obligations $857 $700
Plan assets at fair value 845 740
Plan assets (less than) in excess of
projected benefit obligations (12) 40
Unrecognized net loss 119 63
Unrecognized net asset at December 31,
being recognized over 14 to 15 years (21) (25)
Net pension asset $ 86 $ 78
</TABLE>
<PAGE>
6. -- Employee Benefit Plans (cont)
Approximately 41% of plan assets at December 31, 1995 are invested in
cash equivalents or debt securities and 59% are invested in equity
securities, including common stock of JS Group having a market value of
$78 million.
Savings Plans
The Company sponsors voluntary savings plans covering substantially all
salaried and certain hourly employees. The Company match, which is paid
in Company stock, is 50% of each participant's contributions up to an
annual maximum. The Company's expense for the savings plans totalled $6
million, $5 million, and $5 million in 1995, 1994, and 1993,
respectively.
Postretirement Health Care and Life Insurance Benefits
The Company provides certain health care and life insurance benefits for
all salaried and certain hourly employees. The Company has various
plans under which the cost may be borne either by the Company, the
employee or partially by each party. The Company
does not currently fund these plans. These benefits are discretionary
and are not a
commitment to long-term benefit payments. The plans were amended
effective January 1, 1993 to allow employees who retire on or after
January 1, 1994 to become eligible for these benefits only if they
retire after age 60 while working for the Company.
Effective January 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions", which
requires companies to accrue the expected cost of retiree benefit
payments, other than pensions, during employees' active service period.
The Company elected to immediately recognize the accumulated liability,
measured as of January 1, 1993. The cumulative effect of this change in
accounting principle resulted in a charge of $37 million (net of income
tax benefits of $22 million). The Company had previously recorded an
obligation of $36 million in connection with prior business
combinations.
The following table sets forth the accumulated postretirement benefit
obligation ("APBO") with respect to these benefits as of December 31:
<TABLE>
1995 1994
<S> <C> <C>
Retirees $ 56 $ 52
Active employees 38 34
Total accumulated postretirement benefit obligation 94 86
Unrecognized net gain 6 13
Accrued postretirement benefit cost $100 $ 99
</TABLE>
Net periodic postretirement benefit cost included the following components:
<TABLE>
1995 1994
<S> <C> <C>
Service cost - benefits earned during the period $ 1 $ 2
Interest cost on accumulated postretirement
benefit obligation 7 7
Net amortization (1) (1)
Net periodic postretirement benefit cost $ 7 $ 8
</TABLE>
<PAGE>
6. -- Employee Benefit Plans (cont)
A weighted-average discount rate of 7.25% and 8.5% was used in
determining the APBO at December 31, 1995 and 1994, respectively. The
weighted-average annual assumed rate of increase in the per capita cost
of covered benefits ("health care cost trend rate") was 9.5%, with an
annual decline of 1% until the rate reaches 4.25% in the year 2001. The
effect of a 1% increase in the assumed health care cost trend rate would
increase the APBO as of December 31, 1995 by $2 million and have no
effect on the annual net periodic postretirement benefit cost for 1995.
1992 Stock Option Plan
Under the 1992 Stock Option Plan (the "Plan"), selected employees of the
Company and its affiliates and subsidiaries are granted non-qualified
stock options to acquire shares of common stock of the Company. The
stock options are exercisable at a price equal to the fair market value,
as defined, of the Company's common stock on the date
of grant. The options vest pursuant to the schedule set forth for each
option and expire upon the earlier of twelve years from the date of
grant or termination of employment, death or disability. At December
31, 1995, 8,049,306 shares of common
stock were reserved for issuance under the Plan, including 2,417,838
shares available for the granting of options. The stock options become
exercisable upon the earlier of the occurrence of certain trigger dates,
as defined, or eleven years from the date of grant. At December 31,
1995, 486,103 options were exercisable, and no options were exercisable
at December 31, 1994.
Additional information relating to the Plan restated to reflect the
results of the Reclassification is as follows:
<TABLE>
Shares Under Option
Option Price Range
<S> <C> <C>
Outstanding at December 31, 1992 5,026,450 $10.00
Granted
Exercised
Cancelled 84,300 10.00
Outstanding at December 31, 1993 4,942,150 $10.00
Granted 640,250 12.50
Exercised
Cancelled 51,145 10.00 - 12.50
Outstanding at December 31, 1994 5,531,255 $10.00 - 12.50
Granted 141,750 14.31 - 17.63
Exercised 694 10.00
Cancelled 40,843 10.00 - 17.63
Outstanding at December 31, 1995 5,631,468 $10.00 - 17.63
</TABLE>
<PAGE>
7. -- Related Party Transactions
Transactions with JS Group
Transactions with JS Group, its subsidiaries and affiliated companies
were as follows:
<TABLE>
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Product sales $ 44 $36 $18
Product and raw material purchases 108 71 49
Management services income 4 4 6
Charges from JS Group for services provided 1 1
Charges from JS Group for letter of credit,
commitment fees and related expenses 3 3
Charges to JS Group for costs pertaining to
the Fernandina No. 2 paperboard machine 57 54 62
Receivables at December 31 3 4 2
Payables at December 31 13 11 12
</TABLE>
Product sales to and purchases from JS Group, its subsidiaries, and
affiliates are consummated on terms generally similar to those
prevailing with unrelated parties.
The Company provides certain subsidiaries and affiliates of JS Group
with general management and elective management services under separate
Management Services Agreements. In consideration for general management
services, the Company is paid a fee up to 2% of the subsidiaries' or
affiliates' gross sales. In consideration for elective services, the
Company is reimbursed for its direct cost of providing such services.
An affiliate of JS Group owns the No. 2 paperboard machine that is
located in the Company's Fernandina Beach, Florida paperboard mill (the
"Fernandina Mill"). Pursuant to an operating agreement between the
Company and the affiliate, the Company operates and manages the No. 2
paperboard machine and is compensated for its direct production and
manufacturing costs and indirect manufacturing, selling and
administrative costs incurred by the Company for the entire Fernandina
Mill. The compensation is determined by applying various formulas and
agreed upon amounts to the subject costs. The amounts reimbursed to the
Company are reflected as reductions of cost of goods sold and selling
and administrative expenses in the accompanying consolidated statements
of operations.
Transactions with Times Mirror
In July 1995, under the terms of a shareholder agreement, JSC (U.S.)
acquired the remaining 20% minority interest of Smurfit Newsprint
Corporation ("SNC") from The Times Mirror Company ("Times Mirror"). SNC
supplies newsprint to Times Mirror at amounts which approximate
prevailing market prices under the terms of a long-term agreement. The
obligations of the Company and Times Mirror to supply and purchase
newsprint are wholly or partially terminable upon the occurrence of
certain defined events. Sales to Times Mirror for 1995, 1994, and 1993
were $189 million, $113 million, and $115 million, respectively.
Transactions with Morgan Stanley & Co.
In connection with the Recapitalization, Morgan Stanley & Co., in its
capacity as underwriter of public equity and debt securities, received
fees from the Company of $16 million in 1994.
<PAGE>
8. -- Leases
The Company leases certain facilities and equipment for production,
selling and administrative purposes under operating leases. Future
minimum lease payments at December 31, 1995, required under operating
leases that have initial or remaining noncancelable lease terms in
excess of one year are $29 million in 1996, $22 million in 1997, $15
million in 1998, $11 million in 1999, $9 million in 2000 and $20 million
thereafter.
Net rental expense was $48 million, $46 million, and $45 million, for
1995, 1994, and 1993, respectively.
9. -- Fair Value of Financial Instruments
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
December 31,
1995 1994
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
Assets
Cash and cash equivalents $ 27 $ 27 $ 62 $ 62
Unrealized gain on interest
rate swap agreements 4
Liabilities
Long-term debt, including
current maturities 2,192 2,184 2,442 2,402
Unrealized loss on interest
rate swap agreements 5 8
Realized loss on interest
rate swap agreements
marked to market 4 4
</TABLE>
The carrying amount of cash equivalents approximates fair value because
of the short maturity of those instruments. The fair value of the
Company's long-term debt is estimated based on the quoted market prices
for the same or similar issues or on the current rates offered to the
Company for debt of the same remaining maturities. The fair value of
the interest rate swap agreements is the estimated amount the Company
would pay or receive, net of accrued interest expense, to terminate the
agreements at December 31, 1995 and 1994, taking into account current
interest rates and the current creditworthiness of the swap
counterparties.
10. -- Restructuring Charge
During 1993, the Company recorded a pretax charge of $96 million to
recognize the effects of a restructuring program designed to improve the
Company's long-term competitive position. Since 1993, the Company has
written down the assets of closed facilities and other nonproductive
assets totalling $35 million, and made cash expenditures of $33 million
relating to direct expenses associated with plant closures, reductions
in workforce, realignment and consolidation of various manufacturing
operations. The remaining balance of the restructuring liability at
December 31, 1995 was $28 million, the majority of which is expected to
be paid in 1996. The restructuring program is proceeding as originally
planned, and no significant adjustment to the reserve is anticipated at
this time.
<PAGE>
11. -- Contingencies
The Company's past and present operations include activities which are
subject to federal, state and local environmental requirements,
particularly relating to air and water quality. The Company faces
potential environmental liability as a result of violations of permit
terms and similar authorizations that have occurred from time to time at
its facilities. The Company faces potential liability for response
costs at various sites with respect to which the Company has received
notice that it may be a potentially responsible party ("PRP") as well as
contamination of certain Company-owned properties, under the
Comprehensive Environmental Response, Compensation and Liability Act
("CERCLA") concerning hazardous substance contamination. In estimating
its reserves for environmental remediation and future costs, the
Company's estimated liability reflects only the Company's expected
share. In determining the liability, the estimate takes into
consideration the number of other PRP's at each site, the identity and
financial condition of such parties and experience regarding similar
matters. No amounts have been recorded for potential recoveries from
insurance carriers.
During 1993, the Company recorded a pretax charge of $54 million of
which $39 million represents asbestos and PCB removal, solid waste
cleanup at existing and former operating sites and expenses for response
costs at various sites where the Company has received notice that it is
a potentially responsible party. The Company made payments of $9
million and $4 million related to PRP sites and other environmental
cleanup in 1995 and 1994, respectively.
The Company is a defendant in a number of lawsuits and claims arising
out of the conduct of its business, including those related to
environmental matters. While the ultimate results of such suits or
other proceedings against the Company cannot be predicted with
certainty, the management of the Company believes that the resolution of
these matters will not have a material adverse effect on its
consolidated financial condition or results of operation.
In the fourth quarter of 1995, the Company recorded a pretax charge
totalling $25 million related to product quality matters and failure to
follow proper manufacturing and internal procedures in an immaterial
non-core product line. The Company is continuing to further evaluate
this issue and expects to conclude its review during the second fiscal
quarter. Based upon the information currently available to management,
the Company believes the reserve is adequate but intends to reevaluate
the adequacy of the reserve at the conclusion of its review.
<PAGE>
12. -- Business Segment Information
The Company's principal lines of business are paperboard/packaging
products and newsprint. The paperboard/packaging products segment
includes the manufacture and distribution of containerboard, boxboard
and cylinderboard, corrugated containers, folding cartons, fiber
partitions, spiral cores and tubes, labels and flexible packaging. The
newsprint segment includes the manufacture and distribution of
newsprint. A summary by business segment of net sales, income (loss)
from operations, identifiable assets, capital expenditures and
depreciation, depletion and amortization follows:
<TABLE>
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Net sales
Paperboard/packaging products $3,706 $2,974 $2,699
Newsprint 387 259 248
$4,093 $3,233 $2,947
Income (loss) from operations
Paperboard/packaging products $ 604 $ 308 $ 13
Newsprint 26 (17) (22)
Total income (loss) from operations 630 291 (9)
Interest expense (234) (269) (254)
Other, net 7 6 5
Income (loss) before income taxes,
extraordinary item and cumulative
effect of accounting changes $ 403 $ 28 $ (258)
Identifiable assets
Paperboard/packaging products $2,294 $2,256 $2,153
Newsprint 248 231 225
Corporate assets 241 272 219
$2,783 $2,759 $2,597
Capital expenditures
Paperboard/packaging products $ 137 $ 146 $ 107
Newsprint 17 17 10
$ 154 $ 163 $ 117
Depreciation, depletion and amortization
Paperboard/packaging products $ 122 $ 115 $ 115
Newsprint 17 16 16
$ 139 $ 131 $ 131
</TABLE>
Sales and transfers between segments are not material. Export sales are
less than 10% of total sales. Corporate assets consist principally of
cash and cash equivalents, deferred income taxes, deferred debt issuance
costs and other assets which are not specific to a segment.
<PAGE>
13. -- Quarterly Results (Unaudited)
The following is a summary of the unaudited quarterly results of
operations:
<TABLE>
First Second Third Fourth
Quarter Quarter Quarter Quarter
<C> <C> <C> <C> <C>
1995
Net sales $986 $1,083 $1,051 $973
Gross profit 187 228 245 211
Income from operations 126 165 185 154
Income before extraordinary item 39 66 77 65
Loss from early extinguishment
of debt (3) (1)
Net income 39 66 74 64
Income per share before
extraordinary item .35 .60 .70 .58
Net income per share .35 .60 .67 .57
1994
Net sales $728 $766 $858 $881
Gross profit 98 111 136 169
Income from operations 47 56 80 108
Income (loss) before
extraordinary item (12) (9) 6 27
Loss from early extinguishment
of debt (51) (4)
Net income (loss) (12) (60) 6 23
Income (loss) per share before
extraordinary item (.15) (.08) .05 .24
Net income (loss) per share (.15) (.60) .05 .21
</TABLE>
<PAGE>
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
Directors
The following table sets forth the names and ages of the directors
of the Company.
Name Age
Michael W.J. Smurfit 59
Howard E. Kilroy 60
James E. Terrill 62
James R. Thompson 59
Donald P. Brennan 55
Alan E. Goldberg 41
David R. Ramsay 32
G. Thompson Hutton 40
The Board of Directors currently consists of eight directors. The
directors are classified into three groups: three directors having
terms expiring in 1996 (Messrs. Kilroy, Goldberg and Thompson), two
directors having terms expiring in 1997 (Messrs. Smurfit and
Brennan) and three directors having terms expiring in 1998 (Messrs.
Terrill, Ramsay and Hutton).
Executive Officers
The following table sets forth the names, ages and positions of the
executive officers of the Company.
<TABLE>
Name Age Position
<S> <C> <C>
Michael W.J. Smurfit 59 Chairman of the Board and Director
James E. Terrill 62 President, Chief Executive Officer and Director
Richard W. Graham 61 Senior Vice President
James P. Davis 40 Vice President and General Manager - Consumer
Packaging Division
Raymond G. Duffy 54 Vice President - Planning
John R. Funke 54 Vice President and Chief Financial Officer
Richard J. Golden 53 Vice President - Purchasing
Michael F. Harrington 55 Vice President - Personnel and Human Resources
Charles A. Hinrichs 42 Vice President and Treasurer
F. Scott Macfarlane 50 Vice President and General Manager - Folding
Carton and Boxboard Mill Division
Edward F. McCallum 61 Vice President and General Manager - Container
Division
Lyle L. Meyer 59 Vice President
Patrick J. Moore 41 Vice President and General Manager - Industrial
Packaging Division
David C. Stevens 61 Vice President and General Manager -
Reclamation Division
Truman L. Sturdevant 61 Vice President and General Manager of SNC
Michael E. Tierney 47 Vice President, General Counsel and Secretary
Richard K. Volland 57 Vice President - Physical Distribution
William N. Wandmacher 53 Vice President and General Manager -
Containerboard Mill Division
Gary L. West 53 Vice President - Sales and Marketing
</TABLE>
<PAGE>
Biographies
Donald P. Brennan has been a Director of the Company since 1989.
Mr. Brennan is an Advisory Director of Morgan Stanley & Co. Inc.
("MS&Co."). He was Managing Director of MS&Co. from 1984 to
February 1996, responsible for MS&Co.'s Merchant Banking Division.
He is Chairman and President of Morgan Stanley Leveraged Equity
Fund II, Inc. ("MSLEF II, Inc.") and Morgan Stanley Capital
Partners III, Inc. ("MSCP III, Inc."). Mr. Brennan serves as
Director of Fort Howard Corporation, PSF Finance Holdings, Inc. and
SITA Telecommunications Holdings N.V.
James P. Davis was appointed Vice President and General Manager -
Consumer Packaging Division in November 1995. He served as
Division Director of Operations from August 1995 to November 1995.
Prior to that time, he held various management positions in the
Container Division since joining the Company in 1977.
Raymond G. Duffy has been Vice President - Planning since July 1983
and served as Director of Corporate Planning from 1980 to 1983.
John R. Funke has been Vice President and Chief Financial Officer
since April 1989 and was Corporate Controller and Secretary from
1982 to April 1989.
Alan E. Goldberg has been a Director of the Company since 1989.
Mr. Goldberg joined MS&Co. in 1979 and has been a member of
MS&Co.'s Merchant Banking Division since its formation in 1985 and
a Managing Director of MS&Co. since 1988. Mr. Goldberg is a
Director and a Vice Chairman of MSCP III, Inc. and MSLEF II, Inc.
Mr. Goldberg also serves as Director of Amerin Guaranty
Corporation, CIMIC Holdings Limited, Centre Cat Limited, Hamilton
Services Limited and Risk Management Solutions, Inc.
Richard J. Golden has been Vice President - Purchasing since
January 1985 and was Director of Corporate Purchasing from October
1981 to January 1985. In January 1994, he was assigned
responsibility for world-wide purchasing for Jefferson Smurfit
Group plc ("JS Group"), a public company organized under the laws
of the Republic of Ireland.
Richard W. Graham was appointed Senior Vice President in February
1994. He served as Vice President and General Manager - Folding
Carton and Boxboard Mill Division from February 1991 to January
1994. Mr. Graham was Vice President and General Manager - Folding
Carton Division from October 1986 to February 1991.
Michael F. Harrington was appointed Vice President - Personnel and
Human Resources in January 1992. Prior to joining the Company, he
was Corporate Director of Labor Relations/Safety and Health with
Boise Cascade Corporation for more than 5 years.
Charles A. Hinrichs was appointed Vice President and Treasurer in
April 1995. Prior to joining the Company, he was employed by The
Boatmen's National Bank of St. Louis for 13 years where most
recently he was Senior Vice President and Chief Credit Officer.
<PAGE>
G. Thompson Hutton was elected to the Board of Directors in
December 1994. Mr. Hutton has been President and Chief Executive
Officer of Risk Management Solutions, Inc., an information services
company based in Menlo Park, California, since 1991. Prior to that
he was a management consultant with McKinsey & Company, Inc. from
1986 to 1991. He also serves as a Trustee of Colorado Outward
Bound School.
Howard E. Kilroy has been a Director of the Company since 1989.
Mr. Kilroy was Chief Operations Director of JS Group from 1978
until March 1995 and President of JS Group from October 1986 until
March 1995. He was a member of the Supervisory Board of Smurfit
International B.V. ("SIBV") from January 1978 to January 1992. He
was Senior Vice President of the Company for over 5 years. He
retired from his executive positions with JS Group and the Company
at the end of March 1995, but remains a Director of JS Group and
the Company. In addition, he is Governor (Chairman) of Bank of
Ireland and a Director of CRH plc.
F. Scott Macfarlane was appointed Vice President and General
Manager - Folding Carton and Boxboard Mill Division in November
1995. He served as Vice President and General Manager of the
Folding Carton Division from December 1993 to November 1995. Since
joining the Company in 1971, he has held increasingly responsible
positions within the Folding Carton Division.
Edward F. McCallum has been Vice President and General Manager -
Container Division since October 1992. He served as Vice President
and General Manager of the Industrial Packaging Division from
January 1991 to October 1992. Prior to that time, he served in
various positions in the Container Division since joining the
Company in 1971.
Lyle L. Meyer has been Vice President since April 1989. He served
as President of Smurfit Pension and Insurance Services Company
("SPISCO") from 1982 until 1992, when SPISCO was merged into the
Company.
Patrick J. Moore has been Vice President and General Manager -
Industrial Packaging Division since December 1994. He served as
Vice President and Treasurer from February 1993 to December 1994
and was Treasurer from October 1990 to February 1993. Prior to
joining the Company in 1987 as Assistant Treasurer, Mr. Moore was
with Continental Bank in Chicago where he served in various
corporate lending, international banking and administrative
capacities.
David R. Ramsay has been a Director of the Company since 1989. Mr.
Ramsay joined MS&Co. in 1989 and is a Vice President of MS&Co.'s
Merchant Banking Division. Mr. Ramsay also serves as a Director
of ARM Financial Group Inc., Integrity Life Insurance Company,
National Integrity Life Insurance Company, Consolidated Hydro,
Inc., Hamilton Services Limited, Risk Management Solutions, Inc.
and PSF Finance Holdings, Inc.
<PAGE>
Michael W.J. Smurfit has been Chairman and Chief Executive Officer
of JS Group since 1977. Dr. Smurfit has been Chairman of the Board
of the Company since 1989. He was Chief Executive Officer of the
Company prior to July 1990.
David C. Stevens has been Vice President and General Manager -
Reclamation Division since January 1993. He joined the Company in
1987 as General Sales Manager and was named Vice President later
that year. He held various management positions with International
Paper and was President of Mead Container Division prior to joining
the Company.
Truman L. Sturdevant has been Vice President and General Manager of
SNC since August 1990. Mr. Sturdevant joined the Company in 1984
as Vice President and General Manager of the Oregon City newsprint
mill.
James E. Terrill was named a Director and President and Chief
Executive Officer in February 1994. He served as Executive Vice
President - Operations from August 1990 to February 1994. He also
served as Executive Vice President of SNC from February 1993 to
February 1994 and was President of SNC from February 1986 to
February 1993.
James R. Thompson was elected to the Board of Directors in July
1994. He is Chairman of Winston & Strawn, a law firm that
regularly represents the Company on numerous matters. He served as
Governor of the State of Illinois from 1977 to 1991. Mr. Thompson
also serves as a Director of FMC Corporation, the Chicago Board of
Trade, International Advisory Council of the Bank of Montreal,
Prime Retail, Inc., Pechiney International, Wackenhut Corrections
Corporation, Hollinger International, Inc. and Union Pacific
Resources, Inc.
Michael E. Tierney has been Vice President, General Counsel and
Secretary since January 1993. He served previously as Senior
Counsel and Assistant Secretary since joining the Company in 1987.
Richard K. Volland has been Vice President - Physical Distribution
since 1978.
William N. Wandmacher has been Vice President and General Manager -
Containerboard Mill Division since January 1993. He served as
Division Vice President - Medium Mills from October 1986 to January
1993. Since joining the Company in 1966, he has held increasingly
responsible positions in production, plant management and planning,
both domestic and foreign.
Gary L. West has been Vice President - Sales and Marketing since
December 1994. He was Vice President and General Manager -
Industrial Packaging Division from October 1992 to December 1994.
He served as Vice President - Converting and Marketing for the
Industrial Packaging Division from January 1991 to October 1992.
Prior to that time, he held various management positions in the
Container and Consumer Packaging divisions since joining the
Company in 1980.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The information required in response to this item is set forth
under the captions "Executive Compensation", "Report of the
Compensation Committee on Executive Compensation" and "Appointment
Committee Interlocks and Insider Participation" in JSC's proxy
statement in connection with the Annual Meeting of Stockholders to
be held on May 9, 1996, which will be filed with the Securities and
Exchange Commission on or before April 30, 1996 (the "Proxy
Statement"), and is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information required in response to this item is set forth
under the caption "Principal Stockholders" in JSC's Proxy Statement
and is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required in response to this item is set forth
under the caption "Certain Transactions" in JSC's Proxy Statement
and is incorporated herein by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K.
(a) (1) and (2) The list of Financial Statements and Financial
Statement Schedules required by this item are included in Item
8 on page 22.
(3) Exhibits.
3.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-8 (File No. 33-57085)).
3.2 By-laws of the Company (incorporated by reference to Exhibit
4.2 to the Company's Registration Statement on Form S-8 (File
No. 33-57085)).
4.1 Certificate for the Company's Common Stock (incorporated by
reference to Exhibit 4.3 to the Company's Registration
Statement on Form S-8 (File No. 33-57085)).
10.1 Second Amended and Restated Organization Agreement, as of
August 26, 1992, among JSC (U.S.), Container Corporation of
America ("CCA"), MSLEF II, Inc., SIBV, the Company and The
Morgan Stanley Leveraged Equity Fund II, L.P). ("MSLEF II")
(incorporated by reference to Exhibit 10.1(d) to JSC (U.S.)'s
quarterly report on Form 10-Q for the quarter ended September
30, 1992).
10.2 Stockholders Agreement among the Company, SIBV, MSLEF II and
certain related entities (incorporated by reference to
Exhibit 10.2 to the Company's quarterly report on Form 10-Q
for the quarter ended March 31, 1994).
10.3 Registration Rights Agreement among the Company, MSLEF II and
SIBV (incorporated by reference to Exhibit 10.3 to the
Company's quarterly report on Form 10-Q for the quarter ended
March 31, 1994).
10.4 Subscription Agreement among the Company, JSC (U.S.), CCA and
SIBV (incorporated by reference to Exhibit 10.4 to the
Company's quarterly report on Form 10-Q for the quarter ended
March 31, 1994).
10.5(a) Restated Newsprint Agreement, dated January 1, 1990, by and
between SNC and The Times Mirror Company (incorporated by
reference to Exhibit 10.39 to JSC (U.S.)'s Annual Report on
Form 10-K for the fiscal year ended December 31, 1990).
Portions of this exhibit have been excluded pursuant to Rule
24b-2 of the Securities Exchange Act of 1934, as amended.
10.5(b) Amendment No. 1 to the Restated Newsprint Agreement
(incorporated by reference to Exhibit 10.6(b) to the
Company's Registration Statement on Form S-1 (File No. 33-
75520)).
10.6 Operating Agreement, dated as of April 30, 1992, by and
between CCA and Smurfit Paperboard, Inc. (incorporated by
reference to Exhibit 10.42 to JSC (U.S.)'s quarterly report
on Form 10-Q for the quarter ended March 31, 1992).
10.7 Deferred Compensation Agreement, dated January 1, 1979,
between JSC (U.S.) and James B. Malloy, as amended and
effective November 10, 1983 (incorporated by reference to
Exhibit 10(m) to JSC (U.S.)'s Registration Statement on Form
S-1 (File No. 2-86554)).
<PAGE>
10.8(a) JSC (U.S.) Deferred Compensation Capital Enhancement Plan
(incorporated by reference to Exhibit 10(r) to JSC (U.S.)'s
quarterly report on Form 10-Q for the quarter ended September
30, 1985).
10.8(b) Amendment No. 1 to the Deferred Compensation Capital
Enhancement Plan (incorporated by reference to Exhibit 10.37
to JSC (U.S.)/CCA's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989).
10.9(a) JSC (U.S.) Deferred Director's Fee Plan (incorporated by
reference to Exhibit 10.33 to JSC (U.S.)/CCA's Annual Report
on Form 10-K for the fiscal year ended December 31, 1989).
10.9(b) Amendment No. 1 to JSC (U.S.) Deferred Director's Fee Plan
(incorporated by reference to Exhibit 10.34 to JSC
(U.S.)/CCA's Annual Report on Form 10-K for the fiscal year
ended December 31, 1989).
10.10 Jefferson Smurfit Corporation (U.S.) Management Incentive
Plan.
10.11 Jefferson Smurfit Corporation (U.S.) 1994 Long-Term Incentive
Plan (incorporated by reference to Exhibit 10.13 to the
Company's Registration Statement on Form S-1 (File No. 33-
75520)).
10.12 Rights Agreement, dated as of April 30, 1992, among CCA,
Smurfit Paperboard, Inc. and Bankers Trust Company, as
collateral trustee (incorporated by reference to Exhibit
10.43 to JSC (U.S.)'s quarterly report on Form 10-Q for the
quarter ended March 31, 1992).
10.13(a) 1992 SIBV/MS Holdings, Inc. Stock Option Plan
(incorporated by reference to Exhibit 10.48 to JSC
(U.S.)'s quarterly report on Form 10-Q for the quarter
ended September 30, 1992).
10.13(b) Amendment No. 1 to 1992 SIBV/MS Holdings, Inc. Stock
Option Plan (incorporated by reference to Exhibit
10.16(b) to the Company's Registration Statement on Form
S-1 (File No. 33-75520)).
10.14 Credit Agreement, among JSCE, JSC (U.S.) and the banks
parties thereto (incorporated by reference to Exhibit 10.1 to
the Company's quarterly report on Form 10-Q for the quarter
ended March 31, 1994).
10.14(a) Consent and Amendment No. 1 dated as of February 23, 1995
to the Credit Agreement among JSCE, JSC (U.S.) and the
banks parties thereto.
10.14(b) Waiver and Amendment No. 2 dated as of June 9, 1995 to
the Credit Agreement among JSCE, JSC (U.S.) and the banks
parties thereto.
10.14(c) Waiver and Amendment No. 3 dated as of July 14, 1995 to
the Credit Agreement among JSCE, JSC (U.S.) and the banks
parties thereto.
10.14(d) Amendment No. 4 dated as of October 16, 1995 to the
Credit Agreement among JSCE, JSC (U.S.) and the banks
parties thereto.
10.14(e) Amendment No. 5 dated as of January 31, 1996 to the
Credit Agreement among JSCE, JSC (U.S.) and the banks
parties thereto.
11.1 Calculation of Historical Per Share Earnings.
18.1 Letter regarding change in accounting for pension plans
(incorporated by reference to Exhibit 18.1 to JSC (U.S.)'s
quarterly report on Form 10-Q for the quarter ended September
30, 1993).
21.1 Subsidiaries of the Company.
23.1 Consent of Independent Auditors.
24.1 Powers of Attorney.
27.1 Financial Data Schedule.
(b) Report on Form 8-K.
The Company did not file any reports on Form 8-K during the three
months ended December 31, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
DATE March 8, 1996 JEFFERSON SMURFIT CORPORATION
(Registrant)
BY /s/ John R. Funke
John R. Funke
Vice-President and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant in the capacities and on the date indicated.
SIGNATURE TITLE DATE
* Chairman of the Board
Michael W. J. Smurfit and Director
* President, Chief Executive Officer
James E. Terrill and Director (Principal Executive
Officer)
/s/ John R. Funke Vice-President and Chief March 8, 1996
John R. Funke Financial Officer (Principal
Accounting Officer)
* Director
Howard E. Kilroy
* Director
Donald P. Brennan
* Director
Alan E. Goldberg
* Director
David R. Ramsay
* Director
James R. Thompson
* Director
G. Thompson Hutton
* By /s/ John R. Funke , pursuant to Powers of Attorney
John R. Funke filed as part of the Form 10-K.
As Attorney in Fact
<PAGE>
<TABLE>
JEFFERSON SMURFIT CORPORATION
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In Millions)
Column A Column B Column C Column D Column E
Balance at
Beginning of Charged
Period, as Charged to to Other Deductions Balance
Previously Costs and Accounts Describe at End
Description Reported Expenses Describe <fn1> of Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1995
Allowance for doubtful accounts $ 9 $ 1 $ $ 1 $ 9
Year ended December 31, 1994
Allowance for doubtful accounts $ 9 $ 1 $ $ 1 $ 9
Year ended December 31, 1993
Allowance for doubtful accounts $ 8 $ 4 $ $ 3 $ 9
<FN>
<fn1> Uncollectible amounts written off, net of recoveries.
</FN>
</TABLE>
EXHIBIT 21.1
SUBSIDIARIES OF THE COMPANY
State or
Jurisdiction of
Incorporation or
Organization % Owned
(1) JSCE, Inc. Delaware 100%
(2) Jefferson Smurfit Corporatin (U.S.) Delaware 100%
(3) Smurfit Newsprint Corporation Delaware 100%
(4) Packaging Unlimited, Inc. Delaware 100%
(5) JSC International Sales, Inc. Barbados 100%
(6) CCA de Baja California, S.A. de C.V. Mexico D.F. 100%
(7) Jefferson Smurfit Finance Corporation Delaware 100%
(8) Groveton Paper Board, Inc. New Hampshire 62.94%
(9) Michigan Can & Tube, Inc. Michigan 100%
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000919226
<NAME> JEFFERSON SMURFIT CORPORATION
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 27000
<SECURITIES> 0
<RECEIVABLES> 348000
<ALLOWANCES> 9000
<INVENTORY> 224000
<CURRENT-ASSETS> 644000
<PP&E> 2209000
<DEPRECIATION> 753000
<TOTAL-ASSETS> 2783000
<CURRENT-LIABILITIES> 597000
<BONDS> 2111000
<COMMON> 1000
0
0
<OTHER-SE> (487000)
<TOTAL-LIABILITY-AND-EQUITY> 2783000
<SALES> 4093000
<TOTAL-REVENUES> 4093000
<CGS> 3222000
<TOTAL-COSTS> 3222000
<OTHER-EXPENSES> 241000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 234000
<INCOME-PRETAX> 403000
<INCOME-TAX> 156000
<INCOME-CONTINUING> 247000
<DISCONTINUED> 0
<EXTRAORDINARY> (4000)
<CHANGES> 0
<NET-INCOME> 243000
<EPS-PRIMARY> 2.19
<EPS-DILUTED> 2.19
</TABLE>
EXHIBIT 11.1
<TABLE>
JEFFERSON SMURFIT CORPORATION
CALCULATION OF PER SHARE EARNINGS
(In millions except per share data)
Year Ended December 31,
1995<fn1> 1994<fn1><fn2> 1993<fn2><fn3>
<S> <C> <C> <C>
Primary earnings per share
Weighted average shares outstanding 111 101 64
Income (loss) applicable to common shares
before extraordinary item and cumulative
effect of accounting changes $ 247 $ 12 $ (175)
Extraordinary item (4) (55) (38)
Cumulative effect of accounting changes (16)
Net income (loss) applicable to common shares $ 243 $ (43) $ (229)
Per share amounts
Net income (loss) before extraordinary item
and cumulative effect of accounting changes $ 2.23 $ .12 $(2.75)
Extraordinary item (.04) (.55) (.59)
Cumulative effect of accounting changes (.26)
Net income (loss) applicable to common shares $ 2.19 $(.43) $(3.60)
Fully diluted earnings per share
Weighted average shares outstanding 111 101 64
Income (loss) applicable to common shares
before extraordinary item and cumulative
effect of accounting changes $ 247 $ 12 $ (175)
Extraordinary item (4) (55) (38)
Cumulative effect of accounting changes (16)
Net income (loss) applicable to common shares $ 243 $ (43) $ (229)
Per share amounts
Net income (loss) before extraordinary item
and cumulative effect of accounting changes $ 2.23 $ .12 $(2.75)
Extraordinary item (.04) (.55) (.59)
Cumulative effect of accounting changes (.26)
Net income (loss) applicable to common shares $ 2.19 $(.43) $(3.60)
<FN>
<fn1> The computation does not include common stock equivalents associated with stock
options since the dilutive effect on earnings per share is not material.
<fn2> Gives effect to the ten-for-one stock conversion pursuant to the
Reclassification in 1994.
<fn3> The computations do not include common stock equivalents associated with stock
options and the conversion of the cumulative exchangeable preferred stock, both
of which would have been antidilutive.
</FN>
</TABLE>
Exhibit 10.10
JEFFERSON SMURFIT CORPORATION (U.S.)
MANAGEMENT INCENTIVE PLAN
1. Purposes.
The purposes of the Jefferson Smurfit Corporation Management
Incentive Plan (the "Plan") are to attract and retain highly
qualified employees by providing appropriate performance-based
incentive awards and to align employee and stockholder interests by
creating a direct link between employee compensation and the
success of the Company. Additional purposes of the Plan are to
satisfy the requirements of Rule 16b-3 promulgated under Section 16
of the Securities Exchange Act of 1934, as from time to time
amended ("Rule 16b-3"), and to serve as a qualified performance-
based compensation program under Section 162(m) of the Internal
Revenue Code of 1986, as amended (the "Code"), in order to maximize
the Company's tax deduction for compensation paid under the Plan to
Covered Employees. The Plan shall be effective when adopted by the
Board of Directors (the "Board") of Jefferson Smurfit Corporation
("Holdings"), subject to the approval of Holdings' shareholders.
2. Definitions.
The following terms, as used herein, shall have the following
meanings:
(a) "Annual Base Salary" shall mean the annual rate of base
salary of a Participant as in effect as of the first day of the
Plan Year, without regard to any optional or mandatory deferral of
base salary pursuant to a salary deferral arrangement.
(b) "Award" shall mean any annual incentive bonus award
granted pursuant to the Plan, the payment of which shall be
contingent upon the attainment of Performance Goals with respect to
a Plan Year.
(c) "Award Date" shall mean the date on which the price per
Share is set for purposes of determining the number of Shares to be
distributed with respect to the portion of any Award paid in Stock.
(d) "Cause" shall mean a plea of guilty or nolo contendere by
the Participant, or conviction of the Participant, for a felony; or
the determination by the Committee in its sold discretion that the
Participant has committed a common law fraud against the Company.
(e) "Change in Control" shall mean the occurrence of an event
described in Section 5(e) hereof.
(f) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
<PAGE>
(g) "Committee" shall mean the "Management Incentive Plan
Committee, " which shall be the Compensation Committee of the
Board.
(h) "Company" shall mean Jefferson Smurfit Corporation (U.S.),
a Delaware corporation, and its subsidiaries and affiliates.
(i) "Covered Employee" shall have the meaning set forth in
Section 162(m) of the Code (or any successor provision).
(j) "Disability" shall mean the total and permanent incapacity
of a Participant to perform the usual duties of his employment with
the Company. Such incapacity shall be deemed to exist when so
declared by, and in the sole discretion of, the Committee,
supported by the written opinion of at lease one physician
acceptable to the Committee, after the expiration of at least 120
days from the date of the inception of the incapacity.
(k) "Participant" shall mean an employee of the Company or a
subsidiary or affiliate thereof who is eligible to participate
herein pursuant to Section 3 of the Plan and for whom a target
Award is established with respect to the relevant Plan Year.
(l) "Performance Goals" shall mean the criteria and objectives
that must be met during the Plan Year as a condition of the
Participant's receipt of payment with respect to an Award, as
described in Section 4 hereof.
(m) "Plan" shall mean the Jefferson Smurfit Corporation (U.S.)
Management Incentive Plan.
(n) "Plan Year" shall mean each fiscal year of the Company,
commencing with the Company's fiscal year beginning on January 1,
1995.
(o) "Shares" shall mean shares of the common stock of
Holdings, par value $0.01.
3. Eligibility.
Certain key employees of the Company, as determined by the
Committee, shall be eligible to participate in the Plan.
4. Performance Goals.
The Committee shall establish Performance Goals expressed in
terms of the achievement of any of one or more of the following
performance measures: earnings, earnings per share, earnings from
operations, specified operational objectives, return on equity,
return on assets or the extent of increase or decrease of any one
or more of the foregoing over a specified period. Performance
Goals shall include a threshold level of performance below which no
Award payment shall be made and levels of performance at which
specified percentages of the target Award shall be paid, and may
also (but need not) include a maximum level of performance above
which no additional Award shall be paid. The performance measure
or measures and the Performance Goals established by the Committee
with respect thereto may (but need not) be different with respect
to each Plan Year, and different goals may (but need not) be
applicable to different divisions or other operational segments.
<PAGE>
5. Awards.
(a) In General. For each Plan Year, the Committee shall
specify the Performance Goals applicable to each Participant for
such Plan Year and the amount of, or the formula for determining,
the target Award for each Participant with respect to such Plan
Year. A Participant's target Award for each Plan Year shall be
expressed as a percentage of the Participant's Annual Base Salary.
Except as set forth in paragraph (e) of this Section 5, payment of
an Award for a particular Plan Year shall be made only if and to
the extent the Performance Goals with respect to such Plan Year are
attained and only if the Participant is employed by the Company on
the Award Date. The actual amount of the Award payable under the
Plan shall be determined as a percentage of the Participant's
target Award, which percentage shall vary depending upon the extent
to which the Performance Goals have been attained. The Committee
may (but need not) establish a maximum amount or percentage of
specified profits to be allocated in the aggregate to Awards in any
Plan Year.
(b) Special Limitation on Certain Awards. Notwithstanding
anything to the contrary contained in this Section 5, the Award for
each Covered Employee under the Plan in any Plan Year may not
exceed $3,500,000. In addition, the Committee may (but need not)
establish a maximum percentage of Annual Base Salary to be paid to
any Participant in any Plan Year and may (but need not) provide
that excess amounts shall be carried over to subsequent years.
(c) Time of Payment. Unless otherwise determined by the
Committee, or except as provided herein, all payments in respect of
Awards granted under this Section 5 shall be made within a
reasonable period after the end of the Plan Year, but in no event
later than March 15. In the case of Participants who are Covered
Employees, such payments shall be made only after achievement of
the Performance Goals has been certified by the Committee.
(d) Form of Payment. Subject to the provisions of paragraph
(e) of this Section 5, payment of a Participant's Award for any
Plan Year shall be made in Shares or in cash, at the discretion of
the Company.
(e) Termination of Employment. In the event that, prior to
the last day of the Plan Year, the employment of a Participant is
terminated (1) by the Company without Cause, or (2) by Death,
Disability or Retirement, such Participant's Award shall be
prorated on the basis of the months and fractional parts thereof
during which such Participant shall have been employed by the
Company during such Plan Year and, in such case, the form of
payment shall be entirely in cash unless the Participant requests
Shares. Except as otherwise determined by the Committee, in the
event that, prior to the date on which the payment of Awards is
made, a Participant (1) quits or resigns or (2) is terminated by
the Company for Cause, such Participant shall forfeit all claims to
unpaid amounts earned or otherwise due under the Plan, including
any carry-over amounts, (even if such termination occurs subsequent
to the last day of a Plan Year).
<PAGE>
6. Shares.
The aggregate number of Shares that may be issued under the
Plan shall be 5,000,000. Such number of Shares may be set aside
out of the authorized but unissued Shares not reserved for any
other purpose or out of Shares held in or acquired for the treasury
of Holdings. If the Shares, as presently constituted, shall be
changed into or exchanged for a different number or kind of share
or other securities of Holdings or of another corporation (whether
by merger, reverse split, combination of shares, or otherwise) or
if the number of Shares shall be increased through the payment of
a share dividend, there shall be substituted for or added to each
Share theretofore appropriated the number and kind of shares or
other securities into which each outstanding Share shall be so
changed, or for which each Share shall be exchanged, or to which
each Share shall be entitled, as the case may be.
7. Administration.
The Plan shall be administered by the Committee. The
Committee shall have the authority in its sole discretion, subject
to and not inconsistent with the express provisions of the Plan, to
administer the Plan and to exercise all the powers and authorities
either specifically granted to it under the Plan or necessary or
advisable in the administration of the Plan, including without
limitation, the authority to grant Awards; to determine the persons
to whom and the time or times at which Awards shall be granted; to
determine the terms, conditions, restrictions and performance
criteria relating to any Award; to make adjustments in the
Performance Goals in response to changes in applicable laws,
regulations, or accounting principles, except as otherwise provided
herein; to adjust compensation payable upon attainment of
Performance Goals; to construe and interpret the Plan and any
Award; to prescribe, amend and rescind rules and regulations
relating to the Plan; and to make all other determinations deemed
necessary or advisable for the administration of the Plan.
The Committee shall at all times consist of two or more
persons each of whom is "disinterested" within the meaning of Rule
16b-3 and an "outside director" within the meaning of Section
162(m) of the Code. All determinations of the Committee shall be
made by a majority of its members either present in person or
participating by conference telephone at a meeting or by unanimous
written consent. The Committee may delegate to one or more of its
members or to one or more agents such administrative duties as it
may deem advisable, including the authority for handling day-to-day
operations of the Plan, and the Committee or any person to whom it
has delegated duties as aforesaid may employ one or more persons to
render advice with respect to any responsibility the Committee or
such person may have under the Plan. All decisions, determinations
and interpretations of the Committee shall be final and binding on
all persons, including the Company, the Participant (or any person
claiming any rights under the Plan from or through any Participant)
and any stockholder.
No member of the Board or the Committee shall be liable for
any action taken or determination made in good faith with respect
to the Plan or any Award granted hereunder.
8. General Provisions.
(a) Compliance with Legal Requirements. The Plan and the
granting of Awards, and the other obligations of the Company under
the Plan shall be subject to all applicable federal and state laws,
rules and regulations, and to such approvals by any regulatory or
governmental agency as may be required.
<PAGE>
(b) Restrictions. Each Award payable in Shares under the Plan
shall be subject to the requirement that, if at any time the
Committee shall determine that (a) the registration, qualification
or exemption from registration of the Shares subject or related
thereto under any state of federal law, or (b) the consent or
approval of any government regulatory body, or (c) an agreement by
the recipient of an Award with respect to the disposition of Shares
is necessary or desirable as a condition of, or in connection with,
the payment of such Award, payment of such Award shall not be made
in Shares unless such registration, qualification, exemption,
consent, approval or agreement shall have been effected or obtained
free of any conditions not acceptable to the Committee, or, at the
discretion of the Committee, shall be made in such modified form as
the Committee shall determine.
(c) No Right To Continued Employment. Nothing in the plan or
in any Award granted shall confer upon any Participant the right to
continue in the employ of the Company or to be entitled to any
remuneration or benefits not set forth in the Plan or to interfere
with or limit in any way the right of the Company to terminate such
Participant's employment.
(d) Withholding Taxes. The Company shall deduct from all cash
payments and distributions under the Plan any taxes required to be
withheld by federal, state or local governments, and, if such cash
payments and distributions are insufficient for this purpose, shall
require the Participant to pay to the Company any additional
amounts required to be withheld.
(e) Amendment and Termination of the Plan. The Board may at
any time and from time to time alter, amend, suspend, or terminate
the Plan in whole or in part; provided, however, that no amendment
which requires stockholder approval in order for the Plan to
continue to comply with Rule 16b-3 or Code Section 162(m) shall be
effective unless the same shall be approved by the requisite vote
of the stockholders of the Company. Additionally, the Committee
may make such amendments as it deems necessary to comply with other
applicable laws, rules and regulations. Notwithstanding the
foregoing, no amendment shall affect adversely any of the rights of
any Participant, without such Participant's consent, under any
Award theretofore granted under the Plan.
(f) Participant Rights. No Participant shall have any claim
to be granted any Award under the Plan, and there is no obligation
for uniformity of treatment for Participants.
(g) Unfunded Status of Awards. The Plan is intended to
constitute an "unfunded" plan for incentive compensation. With
respect to any payments which at any time are not made to a
Participant pursuant to an Award, nothing contained in the Plan or
any Award shall give any such Participant any rights that are
greater than those of a general unsecured creditor of the Company.
(h) Governing Law. The Plan and the rights of all persons
claiming hereunder shall be construed and determined in accordance
with the laws of the State of Delaware without giving effect to the
choice of law principles thereof, except to the extent that such
law is preempted by federal law.
(i) Effective Date. The Plan shall take effect upon its
adoption by the Board, but the Plan (and any grants of Awards made
prior to the stockholder approval) shall be subject to the
requisite approval of the stockholders of Holdings. In the absence
of such approval, such Awards shall be null and void.
<PAGE>
(j) Interpretation. The Plan is designed and intended to
comply with Rule 16b-3 and Section 162(m) of the Code, to the
extent applicable, and all provisions hereof shall be construed in
a manner to so comply.
EXHIBIT 10.14(a)
CONSENT AND AMENDMENT No. 1 dated
as of February 23, 1995 (this
"Amendment"), to the Credit Agreement
dated as of May 11, 1994, among
Jefferson Smurfit Corporation, a
Delaware corporation ("JSC"); Jefferson
Smurfit Corporation (U.S.), a Delaware
corporation ("JSCUS"); Container
Corporation of America, a Delaware
corporation ("CCA"); the lenders named
therein (the "Lenders"); Chemical Bank,
a New York banking corporation, and
Bankers Trust Company, a New York
banking corporation, as senior managing
agents (in such capacity, the "Senior
Managing Agents") for the Lenders; the
fronting banks named therein (the
"Fronting Banks"); and Chemical Bank, as
swingline lender (in such capacity, the
"Swingline Lender"), administrative
agent (in such capacity, the
"Administrative Agent") and collateral
agent (in such capacity, the "Collateral
Agent").
A. JSC, JSCUS, CCA, the Lenders, the Senior
Managing Agents, the Swingline Lender, the Fronting Banks,
the Administrative Agent and the Collateral Agent are
parties to a Credit Agreement dated as of May 11, 1994 (the
"Credit Agreement"), pursuant to which the Lenders, the
Swingline Lender and the Fronting Banks have agreed,
pursuant to the terms and subject to the conditions set
forth therein, to extend credit to JSCUS and CCA.
B. As of December 31, 1994, (i) pursuant to
Section 7.12(c) of the Credit Agreement, JSCE, Inc., a
Delaware corporation ("JSCE"), assumed all the obligations
of JSCUS under the Loan Documents; (ii) pursuant to
Section 7.05 of the Credit Agreement, JSCUS was merged with
and into CCA, with CCA surviving such merger; and (iii) CCA
changed its name to Jefferson Smurfit Corporation (U.S.)
(referred to in this Amendment as the "Borrower").
C. Pursuant to the Credit Agreement, JSFin is
permitted to incur Indebtedness (the "Receivable Program
Indebtedness") pursuant to the Receivables Program Documents
(as defined in the Credit Agreement). The Borrower has
informed the Senior Managing Agents that JSFin desires to
refinance the Receivables Program Indebtedness and to enter
into the documentation listed on Schedule I hereto and other
non-material documentation entered into pursuant to such
documentation to provide for the purchase by JSFin of
Program Receivables and the financing thereof, all on the
terms described in Annex I hereto (collectively, the "New
Receivables Transaction"), and has requested that the
Required Lenders consent to the New Receivables Transaction.
D. The Borrower has also requested that certain
provisions of the Credit Agreement be amended as set forth
herein.
E. The Required Lenders are willing to consent to
the New Receivable Transaction and to amend the Credit
Agreement, pursuant to the terms and subject to the
conditions set forth herein.
F. Capitalized terms used and not otherwise
defined herein shall have the meanings assigned to them in
the Credit Agreement as amended hereby.
Accordingly, in consideration of the mutual
agreements herein contained and other good and valuable
consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Consent. The Required Lenders hereby
consent to the consummation by JSFin of the New Receivables
Transaction on terms substantially as set forth on Annex I
hereto.
SECTION 2. Amendment to Article I of the Credit
Agreement. (a) The definition of the term "Asset Sale" set
forth in Article I of the Credit Agreement is hereby amended
by inserting after the words "ordinary course of business"
within the parenthetical contained in clause (c) thereof the
words "and any Program Receivables".
(b) The definition of the term "Excess Cash Flow"
set forth in Article I of the Credit Agreement is hereby
amended by deleting the words "from the Issuer" in
clauses (a)(vi) and (b)(ix) thereof.
SECTION 3. Amendment to Section 6.04 of the
Credit Agreement. Section 6.04 of the Credit Agreement is
hereby amended as follows:
(a) by deleting from the first line thereof the
words "In the case of JSC, JSCUS, CCA and SNC, furnish"
and substituting therefor the word "Furnish";
(b) by inserting before the words "within
90 days" in the first line of paragraph (a) thereof,
the words "in the case of JSC and, until such time as
SNC shall be a wholly owned Subsidiary of JSC, SNC,";
(c) (i) by inserting before the words "within
45 days" in the first line of paragraph (b) thereof,
the words "in the case of JSC and, until such time as
SNC shall be a wholly owned Subsidiary of JSC, SNC,"
(ii) by deleting the words "of JSCUS and CCA" in the
sixth line thereof and substituting therefor the words
"of such Person"; and (iii) by deleting the words
"JSCUS, CCA or SNC, as relevant," in each of the ninth
and tenth lines thereof and substituting therefor the
words "of such Person";
(d) by inserting before the words "within
30 days" in the first line of paragraph (c) thereof,
the words "in the case of JSC and, until such time as
SNC shall be a wholly owned Subsidiary of JSC, SNC,";
and
(e) by inserting after the words "financial
statements" in the first line of paragraph (d) thereof,
the words "of any Person".
SECTION 4. Amendment to Section 7.12 of the
Credit Agreement. Section 7.12(b) of the Credit Agreement
is hereby amended and restated in its entirety to read as
follows:
(b) Subject to paragraphs (c) and (d) below, have
or create any Subsidiary not identified on
Schedule 4.08; provided, however, that the Borrower may
create one or more new Subsidiaries organized under the
laws of the United States or any political subdivision
thereof if (i) each such Subsidiary is a wholly owned
Subsidiary and is designated by the Borrower as a
Material Subsidiary and (ii) the Borrower and each such
Subsidiary complies with the applicable provisions of
Section 6.10.
SECTION 5. Substitution of Schedules.
Schedule 1.01(f) of the Credit Agreement is hereby deleted
in its entirety and Schedule I hereto is hereby substituted
therefor for all purposes under the Loan Documents.
SECTION 6. Representations and Warranties. To
induce the other parties hereto to enter into this
Amendment, each of JSC, JSCE and the Borrower represents and
warrants to each of the Lenders, the Administrative Agent,
the Senior Managing Agents, the Fronting Banks, the
Swingline Lender and the Collateral Agent that, after giving
effect to this Amendment, (a) the representations and
warranties set forth in Article IV of the Credit Agreement
are true and correct in all material respects on and as of
the date hereof with the same effect as though made on and
as of the date hereof, except to the extent such
representations and warranties expressly relate to an
earlier date and (b) no Default or Event of Default has
occurred and is continuing.
SECTION 7. Conditions to Effectiveness. This
Amendment shall become effective on the date that the
Administrative Agent shall have received counterparts of
this Amendment which, when taken together, bear the
signatures of JSC, JSCE, the Borrower and the Required
Lenders.
SECTION 8. Effect of Amendment. Except as
expressly set forth herein, this Amendment shall not by
implication or otherwise limit, impair, constitute a waiver
of, or otherwise affect the rights and remedies of the
Lenders, the Swingline Lender, the Fronting Banks, the
Collateral Agent, the Senior Managing Agents or the
Administrative Agent under the Credit Agreement or any other
Loan Document, and shall not alter, modify, amend or in any
way affect any of the terms, conditions, obligations,
covenants or agreements contained in the Credit Agreement or
any other Loan Document, all of which are ratified and
affirmed in all respects and shall continue in full force
and effect. Nothing herein shall be deemed to entitle any
Loan Party to a consent to, or a waiver, amendment,
modification or other change of, any of the terms,
conditions, obligations, covenants or agreements contained
in the Credit Agreement or any other Loan Document in
similar or different circumstances. This Amendment shall
apply and be effective only with respect to the provisions
of the Credit Agreement specifically referred to herein.
SECTION 9. Counterparts. This Amendment may be
executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when
so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and
the same contract. Delivery of an executed counterpart of a
signature page of this Amendment by facsimile transmission
shall be as effective as delivery of a manually executed
counterpart hereof.
SECTION 10. Applicable Law. THIS AMENDMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
SECTION 11. Headings. The headings of this
Amendment are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed by their duly authorized
officers, all as of the date and year first above written.
JEFFERSON SMURFIT CORPORATION,
by
Name:
Title:
JSCE, INC.,
by
Name:
Title:
JEFFERSON SMURFIT CORPORATION
(U.S.),
by
Name:
Title:
CHEMICAL BANK, individually
and as Administrative Agent,
Senior Managing Agent,
Swingline Lender and
Collateral Agent,
by
Name:
Title:
BANKERS TRUST COMPANY,
individually and as Senior
Managing Agent,
by
Name:
Title:
<PAGE>
NAME OF INSTITUTION:
by
Name:
Title:
EXHIBIT 10.14(b)
WAIVER AND AMENDMENT No. 2 dated as of
June 9, 1995 (this "Amendment"), to the
Credit Agreement dated as of May 11, 1994, as
amended by Consent and Amendment No. 1
thereto dated as of February 23, 1995 (as so
amended, the "Credit Agreement") among
Jefferson Smurfit Corporation, a Delaware
corporation ("JSC"); Jefferson Smurfit
Corporation (U.S.), a Delaware corporation
("JSCUS"); Container Corporation of America,
a Delaware corporation ("CCA"); the lenders
named therein (the "Lenders"); Chemical Bank,
a New York banking corporation, and Bankers
Trust Company, a New York banking
corporation, as senior managing agents (in
such capacity, the "Senior Managing Agents")
for the Lenders; the fronting banks named
therein (the "Fronting Banks"); and Chemical
Bank, as swingline lender (in such capacity,
the "Swingline Lender"), administrative agent
(in such capacity, the "Administrative
Agent") and collateral agent (in such
capacity, the "Collateral Agent").
A. Pursuant to the Credit Agreement the Lenders,
the Swingline Lender and the Fronting Banks have extended,
and have agreed to extend, pursuant to the terms and subject
to the conditions set forth therein, credit to the Borrower
(as defined below).
B. As of December 31, 1994, (i) pursuant to
Section 7.12(c) of the Credit Agreement, JSCE, Inc., a
Delaware corporation ("JSCE"), assumed all the obligations
of JSCUS under the Loan Documents; (ii) pursuant to
Section 7.05 of the Credit Agreement, JSCUS was merged with
and into CCA, with CCA surviving such merger; and (iii) CCA
changed its name to Jefferson Smurfit Corporation (U.S.)
(referred to in this Amendment as the "Borrower").
C. Pursuant to Section 7.17(e) of the Credit
Agreement, JSC, the Borrower and their respective
Subsidiaries are prohibited from selling, leasing,
assigning, transferring or otherwise disposing of any asset
or assets (other than to a Material Subsidiary) unless at
least 80% of the consideration received in connection
therewith is in the form of cash or cash equivalents and
readily marketable securities and certain conditions are met
with respect to any non-cash consideration received in
connection therewith. The Borrower has informed the Senior
Managing Agents that pursuant to an agreement dated March 6,
1995, an executed copy of which has been delivered to the
Administrative Agent (the "Purchase Agreement"), between the
Borrower and Integrated Packing Corporation (the
"Purchaser"), it intends to sell on or about August 30, 1995
its New Brunswick, New Jersey container plant to the
Purchaser (such sale, upon the terms and conditions
described below and in the Purchase Agreement, referred to
in this Amendment as the "Sale"). The purchase price for
the Sale is $4,700,000 (subject to adjustment as provided in
the Purchase Agreement), consisting of $400,000 in cash
payable at the closing of the Sale and the remainder to be
paid in the form of a secured promissory note (the "Note")
with a term of ten years and with interest payable at the
rate of 10% per annum for each of the first five years and
the prime rate plus 3% per annum for the last five years.
The Note will be secured by a first priority mortgage on the
land and building and a first priority security interest in
the equipment acquired by the Purchaser in connection with
the Sale, in each case in favor of the Borrower, which Note
and security interest will be pledged and assigned,
respectively, by the Borrower to the Collateral Agent for
the benefit of the Secured Parties. The Borrower has
requested that the Required Lenders consent to the Sale on
the terms described in this paragraph.
D. The Borrower has also requested that Section
7.06 of the Credit Agreement be amended as set forth herein
to allow for purchases of shares of Common Stock or options
on such Common Stock for the purpose of distributing such
Common Stock to its employees under its management incentive
program.
E. The Borrower has also requested that the
definition of the term "Investment" be amended to provide
that purchases of up to $15,000,000 in any fiscal year of
the Borrower of shares of Jefferson Smurfit Group plc solely
for the purpose of distributing such shares pursuant to its
management incentive program shall not constitute
Investments.
F. The Required Lenders are willing to consent to
the Sale and to so amend the Credit Agreement, pursuant to
the terms and subject to the conditions set forth herein.
G. Capitalized terms used but not defined herein
shall have the meanings assigned to them in the Credit
Agreement.
Accordingly, in consideration of the mutual
agreements herein contained and other good and valuable
consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Waiver. The Required Lenders hereby
waive compliance with Subsection 7.17(e) of the Credit
Agreement to the extent, and only to the extent, required to
permit the Borrower to consummate the Sale (a) substantially
on the terms set forth in the Purchase Agreement and (b) on
the terms set forth in paragraph C of the introductory
statement to this Amendment.
SECTION 2. Amendment to Article I of the Credit
Agreement. The definition of the term "Investment" set
forth in Article I of the Credit Agreement is hereby amended
by adding as a proviso at the end thereof the following:
"provided, however, that the term "Investment" shall
not include the purchase in the open market of shares
of JSG in an aggregate amount which, together with the
aggregate purchase price of all MIP Shares and all MIP
Options (each as defined in Section 7.06(d)) purchased
pursuant to Section 7.06(d) in any fiscal year, does
not exceed $15,000,000 in such fiscal year of the
Borrower, purchased exclusively for subsequent
distribution as additional compensation to employees of
the Borrower pursuant to its management incentive
program"
SECTION 3. Amendment to Section 7.06 of the
Credit Agreement. Section 7.06 of the Credit Agreement is
hereby amended by adding a new paragraph (d) which shall
read in its entirety as follows:
"(d) Notwithstanding the provisions of Section
7.06(a), during each fiscal year commencing on or after
January 1, 1995, the Borrower may purchase in the open
market shares of Common Stock ("MIP Shares") or options
to purchase shares of Common Stock ("MIP Options"),
provided, that (i) the sum of (x) the aggregate
purchase price of all MIP Shares (whether purchased
directly in the open market or upon the exercise of MIP
Options) and (y) the aggregate purchase price of all
MIP Options, together with the aggregate purchase price
of all shares of JSG purchased and excluded from the
term "Investments", in each case in such fiscal year
shall not exceed $15,000,000, (ii) MIP Shares,
including those purchased upon the exercise of MIP
Options, shall be purchased exclusively for subsequent
distribution as additional compensation to employees of
the Borrower pursuant to its management incentive
program, (iii) the Borrower shall not knowingly
purchase any MIP Shares from any Affiliate (acting as
principal in such transaction) of the Borrower and (iv)
at the time of any such purchase and immediately after
giving effect thereto, no Default or Event of Default
shall have occurred and be continuing."
SECTION 4. Representations and Warranties. To
induce the other parties hereto to enter into this
Amendment, each of JSC, JSCE and the Borrower represents and
warrants to each of the Lenders, the Administrative Agent,
the Senior Managing Agents, the Fronting Banks, the
Swingline Lender and the Collateral Agent that, after giving
effect to this Amendment, (a) the representations and
warranties set forth in Article IV of the Credit Agreement
are true and correct in all material respects on and as of
the date hereof with the same effect as though made on and
as of the date hereof, except to the extent such
representations and warranties expressly relate to an
earlier date and (b) no Default or Event of Default has
occurred and is continuing.
SECTION 5. Conditions to Effectiveness. This
Amendment shall become effective on the date that the
Administrative Agent shall have received counterparts of
this Amendment which, when taken together, bear the
signatures of JSC, JSCE, the Borrower and the Required
Lenders.
SECTION 6. Effect of Amendment. Except as
expressly set forth herein, this Amendment shall not by
implication or otherwise limit, impair, constitute a waiver
of, or otherwise affect the rights and remedies of the
Lenders, the Swingline Lender, the Fronting Banks, the
Collateral Agent, the Senior Managing Agents or the
Administrative Agent under the Credit Agreement or any other
Loan Document, and shall not alter, modify, amend or in any
way affect any of the terms, conditions, obligations,
covenants or agreements contained in the Credit Agreement or
any other Loan Document, all of which are ratified and
affirmed in all respects and shall continue in full force
and effect. Nothing herein shall be deemed to entitle any
Loan Party to a consent to, or a waiver, amendment,
modification or other change of, any of the terms,
conditions, obligations, covenants or agreements contained
in the Credit Agreement or any other Loan Document in
similar or different circumstances. This Amendment shall
apply and be effective only to the extent and with respect
to, the provisions of the Credit Agreement specifically
referred to herein. After the date hereof, any reference to
the Credit Agreement shall mean the Credit Agreement, as
amended hereby.
SECTION 7. Counterparts. This Amendment may be
executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when
so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and
the same contract. Delivery of an executed counterpart of a
signature page of this Amendment by facsimile transmission
shall be as effective as delivery of a manually executed
counterpart hereof.
SECTION 8. Applicable Law. THIS AMENDMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
SECTION 9. Headings. The headings of this
Amendment are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed by their duly authorized
officers, all as of the date and year first above written.
JEFFERSON SMURFIT CORPORATION,
by
Name:
Title:
JSCE, INC.,
by
Name:
Title:
JEFFERSON SMURFIT CORPORATION
(U.S.),
by
Name:
Title:
CHEMICAL BANK, individually
and as Administrative Agent,
Senior Managing Agent,
Swingline Lender and
Collateral Agent,
by
Name:
Title:
BANKERS TRUST COMPANY,
individually and as Senior
Managing Agent,
by
Name:
Title:
<PAGE>
NAME OF INSTITUTION:
by
Name:
Title:
EXHIBIT 10.14(c)
WAIVER AND AMENDMENT No. 3 dated as
of July 14, 1995 (this "Amendment"), to
the Credit Agreement dated as of May 11,
1994, as amended by Consent and
Amendment No. 1 thereto dated as of
February 23, 1995, and Waiver and
Amendment No. 2 thereto dated as of
June 9, 1995 (as the same may be further
amended, restated, supplemented, waived
or otherwise modified from time to time,
the "Credit Agreement"), among
Jefferson Smurfit Corporation, a
Delaware corporation ("JSC"); Jefferson
Smurfit Corporation (U.S.), a Delaware
corporation ("Old JSCUS"); Container
Corporation of America, a Delaware
corporation ("CCA"); the lenders named
therein (the "Lenders"); Chemical Bank,
a New York banking corporation, and
Bankers Trust Company, a New York
banking corporation ("BTCo"), as senior
managing agents (in such capacity, the
"Senior Managing Agents") for the
Lenders; the fronting banks named
therein (the "Fronting Banks"); and
Chemical Bank, as swingline lender (in
such capacity, the "Swingline Lender"),
administrative agent (in such capacity,
the "Administrative Agent") and
collateral agent (in such capacity, the
"Collateral Agent").
A. Pursuant to the terms and subject to the
conditions contained in the Credit Agreement, the Lenders,
the Swingline Lender and the Fronting Banks have extended,
and have agreed to extend, credit to the Borrower (as
defined below).
B. As of December 31, 1994, (i) pursuant to
Section 7.12(c) of the Credit Agreement, JSCE, Inc. assumed
all the obligations of Old JSCUS under the Loan Documents;
(ii) pursuant to Section 7.05 of the Credit Agreement, Old
JSCUS was merged with and into CCA, with CCA surviving such
merger; and (iii) CCA changed its name to Jefferson Smurfit
Corporation (U.S.) (referred to in this Amendment as "JSCUS"
or the "Borrower").
C. On July 14, 1995, JSCUS acquired all the
issued and outstanding capital stock of Smurfit Newsprint
Corporation, a Delaware corporation ("SNC"), not then owned
by it for $20,000,000 in cash, subject to adjustment to
reflect the net book value of SNC at December 31, 1995 (the
"SNC Stock Purchase"). As a result of the SNC Stock
Purchase, pursuant to Section 6.10(d) of the Credit
Agreement, (i) the Borrower is required to cause SNC to
guarantee the Obligations, and to secure such guarantee, and
(ii) all the capital stock of SNC is to be pledged to the
Collateral Agent to secure the Obligations, in each case
pursuant to one or more instruments or agreements
satisfactory in form and substance to the Collateral Agent.
D. The Borrower has requested that certain
provisions of the Credit Agreement be amended or waived so
that (i) certain accounts receivable of SNC sold or
contributed to JSCUS for sale or contribution to JSFin
pursuant to the Receivables Program Documents (the "SNC
Program Receivables") may be treated under the Loan
Documents as Program Receivables and, accordingly, not
pledged to the Collateral Agent to secure the Obligations,
(ii) the lien on the SNC Program Receivables in favor of the
Collateral Agent for the ratable benefit of the Secured
Parties may be released, (iii) SNC shall not be required to
grant to the Collateral Agent a lien on, and security
interest in, its real property, fixtures and equipment and
(iv) the SNC Stock Purchase shall not reduce the Borrower's
Investment basket under Section 7.04(h) of the Credit
Agreement.
E. The Required Lenders are willing to grant such
waivers and so to amend the Credit Agreement (the Credit
Agreement, as waived and amended hereby, is hereinafter
referred to as the "Amended Credit Agreement"), all on the
terms and subject to the conditions set forth herein.
F. Capitalized terms used but not defined herein
shall have the meanings assigned to them in the Credit
Agreement.
Accordingly, in consideration of the mutual
agreements herein contained and other good and valuable
consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Amendment to Section 1.01 of the
Credit Agreement. The definition of the term "Program
Receivables" in Section 1.01 of the Credit Agreement is
hereby amended by deleting from the fifth line thereof the
word "CCA" and substituting therefor the word "SNC".
SECTION 2. Amendment to Section 7.04 of the
Credit Agreement. Section 7.04 of the Credit Agreement is
hereby amended by:
(a) deleting the two parentheticals in
paragraph (a) thereof;
(b) deleting paragraph (c) thereof in its entirety
and substituting therefor the words "[Intentionally
Omitted]";
(c) deleting the parenthetical in paragraph (d)
thereof;
(d) deleting the word "and" at the end of
paragraph (g) thereof;
(e) deleting the parenthetical in clause (i) of
paragraph (h) thereof;
(f) deleting the period at the end of
paragraph (h) thereof and substituting therefor the
words "; and"; and
(g) adding as a new paragraph (i) thereto the
following:
"(i) the purchase of all the capital stock of
SNC not then owned by JSCUS for an aggregate
purchase price (including pursuant to purchase
price adjustments and fees and expenses payable in
connection with such purchase) not to exceed
$25,000,000; provided that, in connection
therewith, (i) JSCUS shall pledge to the
Collateral Agent all the capital stock of SNC and
(ii) JSCUS shall, and shall cause SNC to, comply
with the applicable provisions of
Section 6.10(d)."
SECTION 3. Amendment to Section 7.06(c) of the
Credit Agreement. Section 7.06(c) of the Credit Agreement
is hereby deleted in its entirety and the words
"Intentionally Omitted" substituted therefor.
SECTION 4. Amendment to Section 10.17 of the
Credit Agreement. Section 10.17 of the Credit Agreement is
hereby amended by deleting from the second and last lines
thereof the word "CCA" and substituting therefor the word
"SNC".
SECTION 5. Waiver of Section 6.10(d) of the
Amended Credit Agreement. The Required Lenders hereby waive
compliance by the Borrower with the provisions of
Section 6.10(d) of the Credit Agreement to the extent, but
only to the extent, necessary to allow SNC not to pledge to
the Collateral Agent (i) the SNC Program Receivables in
accordance with the Amended and Restated SNC Security
Agreement (as defined herein) and (ii) its real property,
fixtures and equipment (in each case whether now owned or
hereafter acquired).
SECTION 6. Authorization of Amended and Restated
SNC Security Agreement and Amended and Restated SNC
Guarantee Agreement. The Required Lenders hereby
(a) authorize the Collateral Agent to enter into (i) the
Amended and Restated SNC Security Agreement substantially in
the form attached as Exhibit A hereto (the "Amended and
Restated SNC Security Agreement") and (ii) the Amended and
Restated SNC Guarantee Agreement substantially in the form
attached as Exhibit B hereto (the "Amended and Restated SNC
Guarantee Agreement") and (b) agree that such agreements,
after giving effect to the waiver provided for in Section 5
above, satisfy the requirements of Section 6.10(d) of the
Amended and Restated Credit Agreement, Section 7.14 of the
Security Agreement and Section 20 of the Guarantee
Agreement, as applicable.
SECTION 7. Representations and Warranties. To
induce the other parties hereto to enter into this
Amendment, each of JSC, JSCE and the Borrower represents and
warrants to each of the Lenders, the Administrative Agent,
the Senior Managing Agents, the Fronting Banks, the
Swingline Lender and the Collateral Agent that, after giving
effect to this Amendment, (a) the representations and
warranties set forth in Article IV of the Credit Agreement
are true and correct in all material respects on and as of
the date hereof with the same effect as though made on and
as of the date hereof, except to the extent such
representations and warranties expressly relate to an
earlier date, (b) no Default or Event of Default has
occurred and is continuing and (c) JSCUS owns, beneficially
and of record, 100% of the issued and outstanding capital
stock of SNC.
SECTION 8. Conditions to Effectiveness. This
Amendment shall become effective as of the date first above
written when (a) the Administrative Agent shall have
received counterparts of this Amendment that, when taken
together, bear the signatures of JSC, JSCE, the Borrower,
the Guarantors and the Required Lenders, (b) the Amended and
Restated SNC Security Agreement and the Amended and Restated
SNC Guarantee Agreement shall have been duly executed by the
parties thereto and delivered to the Collateral Agent, and
shall be in full force and effect, (c) certificates
representing all the shares of common stock of SNC,
accompanied by stock powers duly endorsed in blank, shall be
in the actual possession of the Collateral Agent and the
Collateral Agent shall have received a supplement to
Schedule I to the Pledge Agreement, showing such shares
thereon, and (d) the fully executed Uniform Commercial Code
Financing statements referred to in Section 3.02 of the
Amended and Restated SNC Security Agreement shall have been
delivered to the Collateral Agent for filing with the
appropriate filing offices.
SECTION 9. Effect of Amendment. Except as
expressly set forth herein, this Amendment shall not by
implication or otherwise limit, impair, constitute a waiver
of, or otherwise affect the rights and remedies of the
Lenders, the Fronting Banks, the Swingline Lender, the
Collateral Agent, the Administrative Agent, the Senior
Managing Agents, JSC, JSCE, the Borrower or the Guarantors
under the Credit Agreement or any other Loan Document, and
shall not alter, modify, amend or in any way affect any of
the terms, conditions, obligations, covenants or agreements
contained in the Credit Agreement or any other Loan
Document, all of which are ratified and affirmed in all
respects and shall continue in full force and effect.
Nothing herein shall be deemed to entitle JSC, JSCE, the
Borrower or the Guarantors to a consent to, or a waiver,
amendment, modification or other change of, any of the
terms, conditions, obligations, covenants or agreements
contained in the Credit Agreement or any other Loan Document
in similar or different circumstances.
SECTION 10. Consent of Guarantors. The
Guarantors hereby acknowledge and consent to the terms and
conditions of this Amendment.
SECTION 11. Counterparts. This Amendment may be
executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when
so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and
the same instrument. Delivery of any executed counterpart
of a signature page of this Amendment by facsimile transmis-
sion shall be as effective as delivery of a manually
executed counterpart hereof.
SECTION 12. APPLICABLE LAW. THIS AMENDMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
SECTION 13. Headings. The headings of this
Amendment are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed by their duly authorized
officers, all as of the date and year first above written.
JEFFERSON SMURFIT CORPORATION,
by
Name:
Title:
JSCE, INC.,
by
Name:
Title:
JEFFERSON SMURFIT CORPORATION
(U.S.),
by
Name:
Title:
CHEMICAL BANK, individually
and as Administrative Agent,
Collateral Agent, Senior
Managing Agent and Swingline
Lender,
by
Name:
Title:
BANKERS TRUST COMPANY,
individually and as Fronting
Bank and Senior Managing
Agent,
by
Name:
Title:
NAME OF INSTITUTION:
by
________________________
Name:
Title:
<PAGE>
Acknowledged and consented to
as of the day and year first
above written:
THE GUARANTORS LISTED ON
SCHEDULE I HERETO,
by
Name:
Title:
EXHIBIT 10.14(d)
AMENDMENT No. 4 dated as of
October 16, 1995 (this "Amendment"), to
the Credit Agreement dated as of May 11,
1994, as amended by Consent and
Amendment No. 1 thereto dated as of
February 23, 1995, Waiver and Amendment
No. 2 thereto dated as of June 9, 1995,
and Waiver and Amendment No. 3 thereto
dated as of July 14, 1995 (as the same
may be further amended, restated,
supplemented, waived or otherwise
modified from time to time, the "Credit
Agreement"), among Jefferson Smurfit
Corporation, a Delaware corporation
("JSC"); Jefferson Smurfit Corporation
(U.S.), a Delaware corporation ("Old
JSCUS"); Container Corporation of
America, a Delaware corporation ("CCA");
the lenders named therein (the
"Lenders"); Chemical Bank, a New York
banking corporation, and Bankers Trust
Company, a New York banking corporation
("BTCo"), as senior managing agents (in
such capacity, the "Senior Managing
Agents") for the Lenders; the fronting
banks named therein (the "Fronting
Banks"); and Chemical Bank, as swingline
lender (in such capacity, the "Swingline
Lender"), administrative agent (in such
capacity, the "Administrative Agent")
and collateral agent (in such capacity,
the "Collateral Agent").
A. Pursuant to the terms and subject to the
conditions contained in the Credit Agreement, the Lenders,
the Swingline Lender and the Fronting Banks have extended,
and have agreed to extend, credit to the Borrower (as
defined below).
B. As of December 31, 1994, (i) pursuant to
Section 7.12(c) of the Credit Agreement, JSCE, Inc. assumed
all the obligations of Old JSCUS under the Loan Documents;
(ii) pursuant to Section 7.05 of the Credit Agreement, Old
JSCUS was merged with and into CCA, with CCA surviving such
merger; and (iii) CCA changed its name to Jefferson Smurfit
Corporation (U.S.) (referred to in this Amendment as the
"Borrower").
C. The Borrower has requested that the Credit
Agreement be amended so that (a) the interest rate spreads
from time to time applicable to the Revolving Loans and the
Tranche A Term Loans pursuant to Section 2.06(c) of the
Credit Agreement shall be determined by reference only to
JSC's consolidated leverage ratio (rather than by reference
to both JSC's consolidated leverage ratio and its
consolidated interest coverage ratio), (b) the level of the
Commitment Fees that accrue from time to time on the
Revolving Commitments pursuant to Section 2.05(a) of the
Credit Agreement shall also be determined by reference to
JSC's consolidated leverage ratio and (c) the requirements
of Section 7.17(e) of the Credit Agreement as to the type of
consideration received in connection with any sale of assets
would not apply to any sale of assets with a fair market
value of less than or equal to $5,000,000.
D. Each Lender holding Tranche A Term Loans and
each Lender with a Revolving Credit Commitment (such Lenders
also representing the Required Lenders) is willing to so
amend the Credit Agreement on the terms and subject to the
conditions set forth herein.
E. Capitalized terms used but not defined herein
shall have the meanings assigned to them in the Credit
Agreement.
Accordingly, in consideration of the mutual
agreements herein contained and other good and valuable
consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Amendment to Section 1.01 of the
Credit Agreement. Section 1.01 of the Credit Agreement is
hereby amended by inserting after the definition of the term
"Commitment Fee" therein the following:
"'Commitment Fee Percentage' shall mean 0.50% per
annum, subject to adjustment in accordance with Section
2.06(c)."
SECTION 2. Amendment to Section 2.05(a) of the
Credit Agreement. Section 2.05(a) of the Credit Agreement
is hereby amended (a) by deleting from the fourth line
thereof the words "as determined below" and substituting
therefor the words "equal to the Commitment Fee Percentage"
and (b) by deleting the third and fourth sentences thereof.
SECTION 3. Amendment to Section 2.06(c) of the
Credit Agreement. Section 2.06(c) of the Credit Agreement
is hereby amended and restated in its entirety to read as
follows:
"(c) So long as no Event of Default shall have
occurred and be continuing, on each occasion that, as
of the last day of any fiscal quarter ending on or
after September 30, 1995, the ratio of (i) the
Indebtedness of JSC and its consolidated Subsidiaries
on such date to (ii) Consolidated EBITDA for the period
of four consecutive fiscal quarters ending on such date
(such ratio being referred to herein as the
"Consolidated Leverage Ratio") shall fall within one of
the Categories set forth on the table below, the
Commitment Fee Percentage, the ABR Spread and the LIBOR
Spread in respect of Tranche A Term Loans and Revolving
Loans shall be automatically changed, if necessary, to
reflect the percentages indicated for such Category on
the table below, with any such change to be effective
(x) in the case of the Commitment Fee Percentage, with
respect to the unused amounts of the Commitments on and
after the date of delivery to the Administrative Agent
of the certificate described in Section 6.04(d)
relating to such fiscal quarter, (y) in the case of the
ABR Spread, with respect to all ABR Loans outstanding
on and after the date of delivery to the Administrative
Agent of such certificate and (z) in the case of the
LIBOR Spread, with respect to all Loans made on and
after the date of delivery to the Administrative Agent
of such certificate.
Committment
Category 1 ABR Spread LIBOR Spread Fee Percentage
When none of the Categories
below is applicable 1.50% 2.50% 0.50%
Category 2
4.25 to 1 or lower 1.25% 2.25% 0.50%
Category 3
4.00 to 1 or lower 1.00% 2.00% 0.50%
Category 4
3.50 to 1 or lower 0.75% 1.75% 0.375%
Category 5
3.00 to 1 or lower 0.50% 1.50% 0.375%
Category 6
2.50 to 1 or lower 0.25% 1.25% 0.375%
Category 7
2.25 to 1 or lower 0.00% 1.00% 0.25%
The applicable Category in the table above at any time
will be the Category with the lowest percentages for
which the Consolidated Leverage Ratio is satisfied at
such time. In the event that any condition that gives
rise to any change in a Category pursuant to the first
sentence of this Section 2.06(c) is no longer satisfied
as of the end of any subsequent fiscal quarter, on and
after the date of delivery to the Administrative Agent
of the certificate described in Section 6.04(d) relat-
ing to such subsequent fiscal quarter, the Commitment
Fee Percentage, the ABR Spread and the LIBOR Spread
shall be automatically changed to reflect the Category
indicated by such certificate, with any such change to
be effective (x) in the case of the Commitment Fee
Percentage, with respect to the unused amounts of the
Commitments on and after the date of delivery to the
Administrative Agent of the certificate described in
Section 6.04(d) relating to such fiscal quarter, (y) in
the case of the ABR Spread, with respect to all ABR
Loans outstanding on and after the date of delivery to
the Administrative Agent of such certificate and (z) in
the case of the LIBOR Spread, with respect to all Loans
made on and after the date of delivery to the
Administrative Agent of such certificate. Notwith-
standing the foregoing, at any time during which JSC
has failed to deliver the certificate described in
Section 6.04(d) with respect to a fiscal quarter in
accordance with the provisions thereof, or at any time
that an Event of Default shall have occurred and shall
be continuing, the Commitment Fee Percentage shall be
reset, if necessary, to be 1/2 of 1%, the ABR Spread
shall be reset, if necessary, to be 1-1/2% and the
LIBOR Spread shall be reset, if necessary, to be 2-1/2%
until such time as JSC shall deliver such certificate
in accordance with the provisions of Section 6.04(d) or
such Event of Default shall be cured or waived."
SECTION 4. Amendment to Section 7.17(e) of the
Credit Agreement. Section 7.17(e) of the Credit Agreement
is hereby amended by inserting immediately after the words
"(other than to a Material Subsidiary)" in the second and
third lines thereof the words ", in a single transaction or
a series of related transactions, having a fair market value
in excess of $5,000,000".
SECTION 5. Representations and Warranties. To
induce the other parties hereto to enter into this
Amendment, each of JSC, JSCE and the Borrower represents and
warrants to each of the Lenders, the Administrative Agent,
the Senior Managing Agents, the Fronting Banks, the
Swingline Lender and the Collateral Agent that, after giving
effect to this Amendment, (a) the representations and
warranties set forth in Article IV of the Credit Agreement
are true and correct in all material respects on and as of
the date hereof with the same effect as though made on and
as of the date hereof, except to the extent such
representations and warranties expressly relate to an
earlier date, and (b) no Default or Event of Default has
occurred and is continuing.
SECTION 6. Conditions to Effectiveness; Agreement
as to Fees and Spreads. (a) This Amendment shall become
effective on the date that the Administrative Agent shall
have received counterparts of this Amendment that, when
taken together, bear the signatures of JSC, JSCE, the
Borrower, the Guarantors and the Required Lenders. It shall
be an additional condition precedent to the effectiveness of
the amendments contained in Sections 1, 2 and 3 hereof that
the Administrative Agent shall have acknowledged receipt of
(the date of such acknowledgement being the "Pricing
Effective Date") (i) counterparts of this Amendment that,
when taken together, bear the signatures of each Lender
holding a Tranche A Term Loan and each Lender with a
Revolving Credit Commitment and (ii) either (A) the
certificate described in Section 6.04(d) of the Credit
Agreement relating to the fiscal quarter ending September
30, 1995 (together with the related unaudited financial
statements, the "Financial Statement Certificate") or (B) a
certificate of a Financial Officer of JSC (x) certifying
that no Default or Event of Default has occurred and is
continuing and (y) setting forth the computation of the
Consolidated Leverage Ratio for the fiscal quarter ending
September 30, 1995, in reasonable detail satisfactory to the
Administrative Agent (the "Ratio Calculation Certificate").
(b) Each party hereto hereby agrees that (i)
notwithstanding anything to the contrary contained in
Section 2.06(c)(z) of the Credit Agreement as amended
hereby, any change in the LIBOR Spread with respect to any
Eurodollar Revolving Loans and Eurodollar Term Loans
consisting of Tranche A Term Loans resulting from the
Administrative Agent's receipt of the Financial Statement
Certificate or the Ratio Calculation Certificate for the
fiscal quarter ending September 30, 1995, shall become
effective as of the Pricing Effective Date with respect to
all such Loans, including those outstanding on the Pricing
Effective Date, and (ii) any change in the ABR Spread or the
level of the Commitment Fee resulting from the
Administrative Agent's receipt of either such certificate
shall become effective as of the Pricing Effective Date.
(c) Each party hereto hereby agrees that, with
respect to the fiscal quarter ending September 30, 1995, if
JSC delivers to the Administrative Agent a Ratio Calculation
Certificate, such certificate shall be used to calculate any
applicable change in the Commitment Fee Percentage, the ABR
Spread or the LIBOR Spread (with respect to any Eurodollar
Revolving Loans and Eurodollar Term Loans consisting of
Tranche A Term Loans) as provided in Section 2.06(c) of the
Credit Agreement as amended hereby; provided, however, that
if the Financial Statement Certificate, when delivered in
accordance with Section 6.04(d) of the Credit Agreement,
indicates that the Consolidated Leverage Ratio for the
fiscal quarter ending September 30, 1995 was in a lower
Category (i.e. a Category with higher spreads and fees) than
the Category indicated by the Ratio Calculation Certificate,
then (i) the Commitment Fee Percentage, the ABR Spread and
the LIBOR Spread (with respect to any Eurodollar Revolving
Loans and Eurodollar Term Loans consisting of Tranche A Term
Loans) shall be changed to reflect the Category indicated by
the Financial Statement Certificate effective the date of
delivery of the Financial Statement Certificate to the
Administrative Agent, and (ii) the Borrower shall pay to the
Administrative Agent for the benefit of the applicable
Lenders, on such date of delivery, the amount of such
additional interest and Commitment Fees (which amounts shall
be determined by the Administrative Agent and shall be
conclusive in the absence of manifest error) as would have
accrued on the Loans and the Commitments for the period from
the Pricing Effective Date to but excluding such date of
delivery of the Financial Statement Certificate, assuming
that the Commitment Fee Percentage, the ABR Spread and the
LIBOR Spread for such period had been in the Category
indicated by such Financial Statement Certificate.
SECTION 7. Effect of Amendment. Except as
expressly set forth herein, this Amendment shall not by
implication or otherwise limit, impair, constitute a waiver
of, or otherwise affect the rights and remedies of the
Lenders, the Fronting Banks, the Swingline Lender, the
Collateral Agent, the Administrative Agent, the Senior
Managing Agents, JSC, JSCE, the Borrower or the Guarantors
under the Credit Agreement or any other Loan Document, and
shall not alter, modify, amend or in any way affect any of
the terms, conditions, obligations, covenants or agreements
contained in the Credit Agreement or any other Loan
Document, all of which are ratified and affirmed in all
respects and shall continue in full force and effect.
Nothing herein shall be deemed to entitle JSC, JSCE, the
Borrower or the Guarantors to a consent to, or a waiver,
amendment, modification or other change of, any of the
terms, conditions, obligations, covenants or agreements
contained in the Credit Agreement or any other Loan Document
in similar or different circumstances.
SECTION 8. Consent of Guarantors. The Guarantors
hereby acknowledge and consent to the terms and conditions
of this Amendment.
SECTION 9. Counterparts. This Amendment may be
executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when
so executed and delivered shall be deemed an original, but
all such counterparts together shall constitute but one and
the same instrument. Delivery of any executed counterpart
of a signature page of this Amendment by facsimile transmis-
sion shall be as effective as delivery of a manually
executed counterpart hereof.
SECTION 10. APPLICABLE LAW. THIS AMENDMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
SECTION 11. Headings. The headings of this
Amendment are for purposes of reference only and shall not
limit or otherwise affect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed by their duly authorized
officers, all as of the date and year first above written.
JEFFERSON SMURFIT CORPORATION,
by
Name:
Title:
JSCE, INC.,
by
Name:
Title:
JEFFERSON SMURFIT CORPORATION
(U.S.),
by
Name:
Title:
CHEMICAL BANK, individually
and as Administrative Agent,
Collateral Agent, Senior
Managing Agent and Swingline
Lender,
by
Name:
Title:
BANKERS TRUST COMPANY,
individually and as Fronting
Bank and Senior Managing
Agent,
by
Name:
Title:
<PAGE>
NAME OF INSTITUTION:
by
________________________
Name:
Title:
<PAGE>
Acknowledged and consented to
as of the day and year first
above written:
SMURFIT NEWSPRINT CORPORATION,
by
Name:
Title:
EXHIBIT 10.14(e)
AMENDMENT No. 5 dated as of January 31,
1996 (this "Amendment"), to the Credit
Agreement dated as of May 11, 1994, as
amended by Consent and Amendment No. 1
thereto dated as of February 23, 1995, Waiver
and Amendment No. 2 thereto dated as of June
9, 1995, Waiver and Amendment No. 3 thereto
dated as of July 14, 1995, and Amendment No.
4 thereto dated as of October 16, 1995 (as so
amended, the "Credit Agreement"), among
Jefferson Smurfit Corporation, a Delaware
corporation ("JSC"); Jefferson Smurfit
Corporation (U.S.), a Delaware corporation
("Old JSCUS"); Container Corporation of
America, a Delaware corporation ("CCA"); the
lenders named therein (the "Lenders");
Chemical Bank, a New York banking
corporation, and Bankers Trust Company, a New
York banking corporation, as senior managing
agents (in such capacity, the "Senior
Managing Agents") for the Lenders; the
fronting banks named therein (the "Fronting
Banks"); and Chemical Bank as swingline
lender (in such capacity, the "Swingline
Lender"), as administrative agent (in such
capacity, the "Administrative Agent") and
collateral agent (in such capacity, the
"Collateral Agent").
A. Pursuant to the terms and subject to the
conditions contained in the Credit Agreement, the Lenders,
the Swingline Lender and the Fronting Banks have extended,
and have agreed to extend, credit to the Borrower (as
defined Below).
B. As of December 31, 1994, (i) pursuant to
Section 7.12(c) of the Credit Agreement, JSCE, Inc. ("JSCE")
assumed all the obligations of Old JSCUS under the Loan
Documents; (ii) pursuant to Section 7.05 of the Credit
Agreement, Old JSCUS was merged into CCA, with CCA surviving
such merger; and (iii) CCA changed its name to Jefferson
Smurfit Corporation (U.S)(referred to in this amendment as
the "Borrower").
C. The Borrower has requested that the Credit
Agreement be amended (i) to provide that optional
prepayments of Term Loans made pursuant to Section 2.12(b)
or (c) of the Credit Agreement first will be applied against
the scheduled installments of principal required to be made
within 12 months of the date of such prepayment and (ii) to
permit additional optional prepayments, redemptions or
repurchases of Indebtedness for borrowed money under Section
7.09(a) of the Credit Agreement in an aggregate amount not
to exceed $25,000,000 in any year.
E. The requisite Lenders are willing so to amend
the Credit Agreement.
F. Capitalized terms used but not otherwise
defined herein shall have the meanings assigned to them in
the Credit Agreement.
Accordingly, in consideration of the mutual
agreements contained herein and other good and valuable
consideration, the sufficiency and receipt of which are
hereby acknowledged, the parties hereto agree as follows:
SECTION 1. Amendment to Section 2.12(b) of the
Credit Agreement. Section 2.12(b) of the Credit Agreement
is hereby amended by deleting from the ninth and tenth lines
thereof the words "six months" where they appear in such
lines and substituting therefor the words "twelve months".
SECTION 2. Amendment to Section 2.12(c) of the
Credit Agreement. Section 2.12(c) of the Credit Agreement
is hereby amended (a) by deleting from the fifth and sixth
lines thereof the words "six months" where they appear in
such lines and substituting therefor the words "twelve
months".
SECTION 3. Amendment to Section 7.09(a) of the
Credit Agreement. Section 7.09(a) of the Credit Agreement
is hereby amended (a) by deleting from the seventh line
thereof the words "or (v)" and substituting therefor the
words ", (v)" and (b) by inserting at the end thereof the
words "or (vi) optionally prepaying, repurchasing or
redeeming any Indebtedness for borrowed money of the
Borrower or any of its Subsidiaries in an aggregate amount
not to exceed $25,000,000 in any year".
SECTION 4. Representations and Warranties. To
induce the other parties hereto to enter into this
Amendment, each of JSC, JSCE, and the Borrower represents
and warrants to each of the Lenders, the Administrative
Agent, the Senior Managing Agents, the Fronting Banks, the
Swingline Lender and the Collateral Agent that, after giving
effect to this Amendment, (a) the representations and
warranties set forth in Article IV of the Credit Agreement
are true and correct in all material respects on and as of
the date hereof, except to the extent such representations
and warranties expressly relate to an earlier date and (b)
no Default or Event of Default has occurred and is
continuing.
SECTION 5. Conditions to Effectiveness. This
Amendment shall become effective on the date on which the
Administrative Agent shall have received counterparts of
this Amendment that, when taken together, bear the
signatures of JSC, JSCE, the Borrower, the Guarantors, the
Required Lenders, Lenders holding more than 50% of the
outstanding Tranche A Term Loans and Lenders holding more
than 50% of the outstanding Tranche B Term Loans.
SECTION 6. Effect of Amendment. Except as
expressly set forth herein, this Amendment shall not by
implication or otherwise limit, impair, constitute a waiver
of, or otherwise affect the rights and remedies of the
Lenders, the Fronting Banks, the Swingline Lender, the
Collateral Agent, the Administrative Agent, the Senior
Managing Agents, JSC, JSCE, the Borrower or the Guarantors
under the Credit Agreement or any other Loan Document, and
shall not alter, modify, amend or in any way affect any of
the terms, conditions, obligations, covenants or agreements
contained in the Credit Agreement or any other Loan
Document, all of which are ratified and affirmed in all
respects and shall continue in full force and effect.
Nothing herein shall be deemed to entitle JSC, JSCE, the
Borrower or the Guarantors to a consent to, or a waiver,
amendment, modification or other change of, any of the
terms, conditions, obligations, covenants or agreements
contained in the Credit Agreement or any other Loan Document
in similar or different circumstances.
SECTION 7. Counterparts. This Amendment may be
executed in any number of counterparts and by different
parties hereto in separate counterparts, each of which when
so executed and delivered shall be deemed an original, but
all such counterparts constitute but one and the same
instrument. Delivery of any executed counterpart of a
signature page of this Amendment by facsimile transmission
shall be effective as delivery of a manually executed
counterpart hereof.
SECTION 8. APPLICABLE LAW. THIS AMENDMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS
OF THE STATE OF NEW YORK.
SECTION 9. Headings. The headings of this
Amendment are for purposes of reference only and shall not
limit or otherwise effect the meaning hereof.
IN WITNESS WHEREOF, the parties hereto have caused
this Amendment to be duly executed by their duly authorized
officers, all as of the date and year first above written.
JEFFERSON SMURFIT CORPORATION,
by
Name:
Title:
JSCE, INC.,
by
Name:
Title:
JEFFERSON SMURFIT CORPORATION
(U.S.),
by
Name:
Title:
CHEMICAL BANK, individually
and as Administrative Agent,
Collateral Agent, Senior
Managing Agent and Swingline
Lender,
by
Name:
Title:
BANKERS TRUST COMPANY,
individually and as Fronting Bank
and Senior Managing Agent,
by
Name:
Title:
NAME OF INSTITUTION:
by
________________________
Name:
Title:
Acknowledged and consented to
as of the day and year first
above written:
SMURFIT NEWSPRINT CORPORATION,
by
Name:
Title:
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-82578) pertaining to the Jefferson
Smurfit Corporation Savings Plan, the Jefferson Smurfit Corporation
Hourly Savings Plan and the Smurfit Packaging Corporation Savings
Plan and in the Registration Statement (Form S-8 No. 33-57085)
pertaining to the Jefferson Smurfit Corporation 1992 Stock Option
Plan of our report dated January 24, 1996, with respect to the
consolidated financial statements and schedule of Jefferson Smurfit
Corporation included in the Annual Report (Form 10-K) for the year
ended December 31, 1995.
Ernst & Young
St. Louis, Missouri
March 7, 1996
EXHIBIT 24.1
POWER OF ATTORNEY
Each person whose signature appears below constitutes and
appoints Michael W.J. Smurfit, James E. Terrill, and John R. Funke,
and each of them, his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him and in
his name, place and stead, in any and all capacities, to sign
Annual Reports on Form 10-K and all required interim reports and to
file the same, with all exhibits thereto, and other documents in
connection therewith, regarding Jefferson Smurfit Corporation, a
Delaware corporation, and JSCE, Inc., a Delaware corporation with
the Securities and Exchange Commission and any other regulatory
authority, granting unto said attorney-in-fact and agents, full
power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-
fact and agents, or their substitutes, may lawfully do or cause to
be done by virtue hereof.
Signature Title
/s/ Michael W.J. Smurfit Chairman of the Board
Michael W.J. Smurfit and Director
/s/ James E. Terrill President, Chief Executive
James E. Terrill Officer and Director
(Principal Executive Officer)
/s/ John R. Funke Vice President and Chief Financial
John R. Funke Officer
(Principal Accounting Officer) and
(Principal Financial Officer)
/s/ Howard E. Kilroy Director
Howard E. Kilroy
/s/ Donald P. Brennan Director
Donald P. Brennan
/s/ Alan E. Goldberg Director
Alan E. Goldberg
/s/ David R. Ramsay Director
David R. Ramsay
/s/ G. Thompson Hutton Director
G. Thompson Hutton
/s/ James R. Thompson Director
James R. Thompson
Date: February 8, 1996
