UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
For Quarter Ended March 31, 1996
Commission File Number 0-23876
JEFFERSON SMURFIT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 43-1531401
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) No.)
8182 Maryland, St. Louis, Missouri 63105
(Address of principal executive offices) (Zip Code)
(314) 746-1100
Registrant's telephone number, including area code
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of March 31, 1996, the registrant had outstanding
110,989,156 shares of common stock, $.01 par value per share.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
JEFFERSON SMURFIT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
<TABLE>
Three months ended
March 31,
1996 1995
<S> <C> <C>
Net sales $ 916 $ 986
Costs and expenses
Cost of goods sold 711 799
Selling and administrative expenses 67 61
Income from operations 138 126
Other income (expense)
Interest expense (51) (63)
Other, net 2
Income before income taxes 87 65
Provision for income taxes 34 26
Net income $ 53 $ 39
Net income per share of common stock $ .48 $ .35
Weighted average shares outstanding 111 111
</TABLE>
See note to consolidated financial statements.
<PAGE>
JEFFERSON SMURFIT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
<TABLE>
March 31, December 31,
1996 1995
ASSETS (unaudited)
<S> <C> <C>
Current assets
Cash and cash equivalents $ 15 $ 27
Receivables, less allowances of
$9 in 1996 and 1995 327 339
Inventories
Work-in-process and finished goods 87 85
Materials and supplies 132 139
219 224
Deferred income taxes 42 45
Prepaid expenses and other current assets 9 9
Total current assets 612 644
Net property, plant and equipment 1,453 1,456
Timberland, less timber depletion 263 258
Goodwill, less accumulated amortization of
$44 in 1996 and $42 in 1995 251 253
Other assets 166 172
$ 2,745 $ 2,783
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Current maturities of long-term debt $ 6 $ 81
Accounts payable 293 290
Accrued compensation and payroll taxes 96 101
Interest payable 52 37
Other accrued liabilities 118 88
Total current liabilities 565 597
Long-term debt, less current maturities 2,044 2,111
Other long-term liabilities 229 234
Deferred income taxes 341 328
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
issued and outstanding in 1996 and 1995 1 1
Additional paid-in capital 1,168 1,168
Retained earnings (deficit) (1,603) (1,656)
Total stockholders' deficit (434) (487)
$ 2,745 $ 2,783
</TABLE>
See note to consolidated financial statements.
<PAGE>
JEFFERSON SMURFIT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
<TABLE>
Three months ended
March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities
Net income $ 53 $ 39
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation, depletion and amortization 33 34
Amortization of deferred debt issuance costs 4 3
Deferred income taxes 15 28
Non-cash employee benefit (income) expense 3 (2)
Change in current assets and liabilities,
net of effects from acquisitions
Receivables 12 (64)
Inventories 5 (34)
Prepaid expenses and other current assets (2)
Accounts payable and accrued liabilities 7 23
Interest payable 16 23
Income taxes payable 16 (4)
Other, net (2)
Net cash provided by operating activities 164 42
Cash flows from investing activities
Property additions (25) (33)
Timberland additions (9) (6)
Acquisitions (4)
Proceeds from property and timberland disposals 1 2
Net cash used for investing activities (33) (41)
Cash flows from financing activities
Proceeds from long-term borrowings 213
Repayment of long-term debt (143) (258)
Deferred debt issuance costs (3)
Net cash used for financing activities (143) (48)
Decrease in cash and cash equivalents (12) (47)
Cash and cash equivalents
Beginning of period 27 62
End of period $ 15 $ 15
</TABLE>
See note to consolidated financial statements.
<PAGE>
JEFFERSON SMURFIT CORPORATION
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular amounts in millions, except share data)
(Unaudited)
1. -- Basis of Presentation
The accompanying consolidated financial statements of Jefferson
Smurfit Corporation ("JSC" or the "Company") have been prepared in
accordance with the instructions to Form 10-Q and reflect all
adjustments which management believes necessary (which include only
normal recurring accruals) to present fairly the financial position
and results of operations. These statements, however, do not
include all information and footnotes necessary for a complete
presentation of financial position, results of operations and cash
flows in conformity with generally accepted accounting principles.
Interim results may not necessarily be indicative of results which
may be expected for any other interim period or for the year as a
whole. For further information refer to the consolidated financial
statements and footnotes included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1995, filed on March 8,
1996 with the Securities and Exchange Commission.
JSC owns 100% of the equity interest in JSCE, Inc. JSC has no
operations other than its investment in JSCE, Inc. JSCE, Inc. owns
100% of the equity interest in Jefferson Smurfit Corporation (U.S.)
("JSC (U.S.)"). JSC (U.S.) has extensive operations throughout the
United States. JSCE, Inc. has no operations other than its
investment in JSC (U.S.).
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
<TABLE>
Three months ended March 31,
(In millions) 1996 1995
Income Income
Net from Net from
sales operations sales operations
<S> <C> <C> <C> <C>
Paperboard/Packaging Products $ 821 $ 112 $ 906 $ 123
Newsprint 95 26 80 3
Total net sales $ 916 $ 138 $ 986 $ 126
</TABLE>
For the three months ended March 31, 1996, net sales of the Company
were $916 million, a decrease of 7.1% compared to the same period
last year. Income from operations was $138 million, an improvement
of 9.5% compared to last year. Net income was $53 million, an
increase of 35.9% compared to last year. Increases (decreases) in
sales for each of the Company's segments are discussed below.
<TABLE>
(In millions)
Paperboard/
Packaging
Increase(decrease due to: Products Newsprint Total
<S> <C> <C> <C>
Sales price and product mix $ (57) $ 27 $ (30)
Sales volume (17) (12) (29)
Acquisitions and new facilities 1 1
Closed or sold facilities (12) (12)
Total net sales increase(decrease) $ (85) $ 15 $ (70)
</TABLE>
Paperboard/Packaging Products Segment Sales
Net sales of the Paperboard/Packaging Products segment for the
first quarter of 1996 were $821 million, a decrease of 9.4%
compared to last year. The decrease was due primarily to lower
prices for containerboard and reclamation products.
Net sales of containerboard and corrugated shipping containers in
the first quarter of 1996 decreased 6.7% compared to 1995 due
primarily to sales price and volume. Demand for containerboard
products, which slowed in the fourth quarter of 1995 in response to
the soft overall economy, stayed relatively weak during the first
quarter. Shipments of corrugated shipping containers for the first
quarter were down 4.2% compared to last year. Linerboard prices
declined steadily, from approximately $490/ton at December 31, 1995
to approximately $430/ton at March 31, 1996.
Net sales of reclamation and timber products in the first quarter
of 1996 decreased 46.9% compared to 1995, due primarily to sales
price. The price of reclaimed fiber decreased significantly
compared to last year due to lower demand as a result of extensive
mill downtime taken this year, primarily in the containerboard
industry.
Net sales of the Company's other major products in the
paperboard/packaging products segment in the first quarter of 1996
increased 2.1% compared to last year.
<PAGE>
Newsprint Segment Sales
Net sales of the Newsprint segment for the first quarter of 1996
were $95 million, an increase of 19% compared to last year. The
increase was due to higher prices for newsprint products.
Costs and Expenses
Cost of goods sold for the three months ended March 31, 1996, as a
percent of net sales declined from 81.6% in 1995 to 78.4% in 1996
for the paperboard/packaging products segment due primarily to
lower fiber cost, and declined from 92.4% in 1995 to 69.2% in 1996
for the newsprint segment due primarily to higher sales prices.
Selling and administrative expenses for both segments as a percent
of net sales in the first quarter increased from 6.2% in 1995 to
7.3% in 1996. The increase in selling and administrative expense
as a percent of net sales was due primarily to overall lower sales
prices, higher personnel costs and inflationary increases in other
costs.
Interest expense for the first quarter of 1996 declined $12 million
compared to 1995 due primarily to lower average debt levels
outstanding and lower effective interest rates.
The Company adopted Financial Accounting Standards 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, the
effect of which was immaterial.
Statistical Data
<TABLE>
(In thousands of tons, Three months ended
except as noted) March 31,
1996 1995
<S> <C> <C>
Mill production:
Containerboard 473 477
Recycled boxboard and
solid bleached sulfate 196 196
Newsprint 152 156
Corrugated shipping containers
sold (billion square feet) 7.2 7.5
Folding cartons sold 121 118
Fiber reclaimed and brokered 1,079 1,072
Liquidity and Capital Resources
The Company's bank credit facility (the "1994 Credit Agreement")
includes a $450 million revolving credit facility, a Tranche A Term
Loan and a Tranche B Term Loan (the "Term Loans"). 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, 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.
Operating activities have historically been the major source of
cash for the Company's capital expenditures and debt payments.
Net cash provided by operating activities for the three months
ended March 31, 1996 was $164 million compared to $42 million
for the same period in 1995.
<PAGE>
The ratio of current assets to current liabilities was 1.1 at March
31, 1996, unchanged from December 31, 1995. The most significant
change in working capital was the reduction in current maturities
of long-term debt, which was lower due primarily to prepayments
made on the Term Loans. During the three months ended March 31,
1996, the Company made net long-term debt repayments of $143
million, of which $109 million represented mandatory and optional
payments under the 1994 Credit Agreement.
The Company is finalizing negotiations to borrow an additional $80
million under the Tranche B Term Loan and $120 million under a
newly created Tranche C Term Loan, each of which will be issued
under the 1994 Credit Agreement. The $200 million in new proceeds
of these term loans will be used to reduce future scheduled
installment payments of the Tranche A Term Loan. The Company
expects its annual interest cost to increase by approximately $4
million as a result of the new borrowings. This refinancing is
expected to be closed in the second quarter of 1996 and will
provide additional financial flexibility to the Company.
At March 31, 1996, the Company had $344 million in unused borrowing
capacity under the 1994 Credit Agreement. In addition, the Company
had borrowing capacity of $114 million under its accounts
receivable securitization program, subject to the Company's level
of eligible accounts receivable. The Company believes that cash
provided by operating activities and available financing sources
will be sufficient for the next several years to pay interest on
the Company's obligations, amortize its term loans and fund capital
expenditures.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a) The following exhibits are included in this Form 10-Q.
11.1 Calculation of Per Share Earnings
27.1 Financial Data Schedule
b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during
the three months ended March 31, 1996.
<PAGE>
Signatures
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
JEFFERSON SMURFIT CORPORATION
(Registrant)
Date April 30, 1996 /s/ John R. Funke
John R. Funke
Vice President and
Chief Financial Officer
(Principal Accounting Officer)
<PAGE>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000919226
<NAME> JEFFERSON SMURFIT CORPORATION
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 15
<SECURITIES> 0
<RECEIVABLES> 336
<ALLOWANCES> 9
<INVENTORY> 219
<CURRENT-ASSETS> 612
<PP&E> 2230
<DEPRECIATION> 777
<TOTAL-ASSETS> 2745
<CURRENT-LIABILITIES> 565
<BONDS> 2044
1
0
<COMMON> 0
<OTHER-SE> (434)
<TOTAL-LIABILITY-AND-EQUITY> 2745
<SALES> 916
<TOTAL-REVENUES> 916
<CGS> 711
<TOTAL-COSTS> 711
<OTHER-EXPENSES> 67
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 51
<INCOME-PRETAX> 87
<INCOME-TAX> 34
<INCOME-CONTINUING> 53
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 53
<EPS-PRIMARY> .48
<EPS-DILUTED> .48
</TABLE>
EXHIBIT 11.1
JEFFERSON SMURFIT CORPORATION
CALCULATION OF PER SHARE EARNINGS
(In millions, except per share data)
<TABLE>
Three months ended
March 31,
1996 1995
<S> <C> <C>
Primary earnings per share <fn1>
Weighted average shares outstanding 111 111
Net income applicable to common shares $ 53 $ 39
Per share amounts
Net income applicable to common shares $ .48 $ .35
Fully diluted earnings per share <fn1>
Weighted average shares outstanding 111 111
Net income applicable to common shares $ 53 $ 39
Per share amounts
Net income applicable to common shares $ .48 $ .35
<FN>
<fn1>The computations do not include common stock equivalents associated
with stock options since the dilutive effect on earnings per share
is not material.
</FN>
</TABLE>
