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, 1997
Commission File Number 0-23876
JEFFERSON SMURFIT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 43-1531401
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
8182 Maryland, St. Louis, Missouri 63105
(Address of principal executive offices) (Zip Code)
(314) 746-1100
Registrant's telephone number, including area code
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X No
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of March 31, 1997, the registrant had outstanding
110,989,156 shares of common stock, $.01 par value per share.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
JEFFERSON SMURFIT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share data)
(Unaudited)
Three months ended
March 31,
1997 1996
<S> <C> <C>
Net sales $ 778 $ 916
Costs and expenses
Cost of goods sold 675 711
Selling and administrative expenses 64 67
Income from operations 39 138
Interest expense, net (47) (51)
Income (loss) before income taxes (8) 87
Provision for (benefit from) income taxes (1) 34
Net income (loss) $ (7) $ 53
Net income (loss) per share of common stock $(.06) $ .48
Weighted average shares outstanding 111 111
</TABLE>
See note to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
JEFFERSON SMURFIT CORPORATION
CONSOLIDATED BALANCE SHEETS
(In millions, except share data)
March 31, December 31,
1997 1996
(unaudited)
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 15 $ 12
Receivables, less allowances of
$9 in 1997 and 1996 272 279
Refundable income taxes 9 1
Inventories
Work-in-process and finished goods 85 81
Materials and supplies 130 126
215 207
Deferred income taxes 44 46
Prepaid expenses and other current assets 8 7
Total current assets 563 552
Net property, plant and equipment 1,480 1,466
Timberland, less timber depletion 263 263
Goodwill, less accumulated amortization of
$52 in 1997 and $50 in 1996 245 246
Other assets 156 161
$ 2,707 $ 2,688
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Current maturities of long-term debt $ 9 $ 10
Accounts payable 295 290
Accrued compensation and payroll taxes 87 92
Interest payable 53 30
Other accrued liabilities 100 103
Total current liabilities 544 525
Long-term debt, less current maturities 1,945 1,934
Other long-term liabilities 234 241
Deferred income taxes 366 363
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 1997 and 1996 1 1
Additional paid-in capital 1,168 1,168
Retained earnings (deficit) (1,551) (1,544)
Total stockholders' deficit (382) (375)
$ 2,707 $ 2,688
</TABLE>
See note to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
JEFFERSON SMURFIT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
(Unaudited)
Three months ended
March 31,
1997 1996
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ (7) $ 53
Adjustments to reconcile net income (loss) to
net cash provided by operating activities
Extraordinary loss from early extinguishment of debt 1
Depreciation, depletion and amortization 35 33
Amortization of deferred debt issuance costs 3 4
Deferred income taxes 4 15
Non-cash employee benefit expense 2 3
Change in current assets and liabilities,
net of effects from acquisitions
Receivables 6 12
Inventories (7) 5
Prepaid expenses and other current assets (1) (1)
Accounts payable and accrued liabilities (8) 7
Interest payable 23 16
Income taxes payable (9) 16
Net cash provided by operating activities 41 164
Cash flows from investing activities
Property additions (32) (25)
Timberland additions (5) (9)
Construction funds held in escrow 2
Acquisition of businesses, net of cash acquired (9)
Proceeds from property and timberland disposals 1
Net cash used for investing activities (44) (33)
Cash flows from financing activities
Net repayments under Accounts Receivable
Securitization Program (3) (18)
Borrowings (repayments) of long-term debt 9 (125)
Net cash provided by (used for) financing activities 6 (143)
Increase (decrease) in cash and cash equivalents 3 (12)
Cash and cash equivalents
Beginning of period 12 27
End of period $ 15 $ 15
</TABLE>
See note to consolidated financial statements.
<PAGE>
JEFFERSON SMURFIT CORPORATION
NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
(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, 1996, filed on February
26, 1997 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>
<CAPTION>
Three months ended March 31,
(In millions) 1997 1996
Income Income
Net from Net from
sales operations sales operations
<S> <C> <C> <C> <C>
Paperboard/Packaging Products $ 711 $ 39 $ 821 $ 112
Newsprint 67 95 26
Total $ 778 $ 39 $ 916 $ 138
</TABLE>
Net sales for the Company for the three months ended March 31,
1997, were $778 million, a decrease of 15% compared to the same
period last year. The decrease in net sales was due primarily to
lower prices for containerboard, corrugated shipping containers and
newsprint products. Sales volumes were higher in the first quarter
of 1997 compared to last year. The changes in net sales for each
of the Company's segments are summarized in the chart below.
Income from operations for the Company was $39 million, a decrease
of 72% compared to the same period last year. The decrease in
income from operations was due primarily to the lower prices
mentioned above.
<TABLE>
<CAPTION>
(In millions)
Paperboard/
Packaging
Increase (decrease) in sales due to: Products Newsprint Total
<S> <C> <C> <C>
Sales price and product mix $(116) $(44) $(160)
Sales volume 8 16 24
Acquisitions and new facilities 4 4
Closed or sold facilities (6) (6)
Total net sales decrease $(110) $(28) $(138)
</TABLE>
Paperboard/Packaging Products Segment
For the three months ended March 31, 1997, net sales of the
Paperboard/Packaging Products segment decreased 13% compared to the
same period in 1996 to $711 million and income from operations
decreased 65% compared to the same period in 1996 to $39 million.
The decrease in net sales and income from operations of this
segment were primarily a result of the significant price reductions
for containerboard and corrugated shipping containers. Increases
in volume, particularly for reclamation products, partially offset
the decline in net sales. Income from operations for the
Paperboard/Packaging Products segment for the three months ended
March 31, 1997 decreased $73 million compared to the same period
last year. The major changes in net sales price and shipments
within the product groups of the Paperboard/Packaging Products
segment are discussed below.
Net sales of containerboard and corrugated shipping containers for
the first three months of 1997 declined $95 million to $347
million, a decrease of 21% compared to the same period of 1996. On
average, corrugated shipping container prices decreased 21% and
containerboard prices decreased 26%, resulting primarily from
excess capacity within the containerboard industry. Linerboard
prices declined to approximately $310 per ton in March 1997.
Shipments of corrugated shipping containers increased 4% and
shipments of containerboard declined 14% compared to last year.
Total shipments of containerboard, including integrated sales to
the Company's corrugating facilities, were comparable to last year.
<PAGE>
Net sales of the Company's other major products in the
Paperboard/Packaging Products segment for the three months ended
March 31, 1997, on a combined basis, declined 4%, as compared to
the same period last year.
Newsprint Segment
For the three months ended March 31, 1997, net sales of the
Newsprint segment decreased 29% compared to the same period in 1996
to $67 million and income from operations decreased 100% compared
to the same period in 1996 to breakeven. The decrease in net sales
and income from operations of this segment were primarily a result
of the significant price reductions for newsprint. An increase in
volume partially offset the decline in net sales. Income from
operations for the Newsprint segment for the three months ended
March 31, 1997 decreased $26 million compared to the same period
last year.
Costs and Expenses
Cost of goods sold as a percent of net sales for the three months
ended March 31 increased from 78% in 1996 to 87% in 1997 for the
reasons explained above. Selling and administrative expenses for
the three months ended March 31, 1997 declined by $3 million
compared to the same period of 1996. Selling and administrative
expenses as a percent of net sales for the three months ended March
31, increased from 7% in 1996 to 8% in 1997. The increase in the
percentage was due primarily to overall lower sales prices.
Interest expense for the three months ended March 31, 1997 declined
$4 million to $47 million due primarily to lower average debt
levels outstanding. The average effective interest rate for the
Company's outstanding debt was comparable for both the 1997 and
1996 periods.
The benefit from income taxes for the three months ended March 31,
1997 was $1 million. The effective tax rate for the period was
lower than the Federal statutory tax rate due to several factors,
the most significant of which was the effect of permanent
differences between book and tax accounting.
The Company will be required to adopt Statement of Financial
Accounting Standards No. 128, "Earnings Per Share", in the fourth
quarter of 1997. The effect of the adoption of the new rules is
expected to be immaterial to reported earnings per share for the
three months ended March 31, 1997.
<PAGE>
Statistical Data
<TABLE>
<CAPTION>
(In thousands of tons, Three months ended
except as noted) March 31,
1997 1996
<S> <C> <C>
Mill production:
Containerboard 479 473
Recycled boxboard and
solid bleached sulfate 203 196
Newsprint 156 152
Corrugated shipping containers
sold (billion square feet) 7.7 7.2
Folding cartons sold 111 121
Fiber reclaimed and brokered 1,183 1,079
</TABLE>
Liquidity and Capital Resources
Operating activities have historically been the major source of
cash to fund the Company's capital expenditures and debt payments.
Net cash provided by operating activities for the three months
ended March 31, 1997 of $41 million and net borrowings of $6
million were used primarily to fund capital investments and
acquisitions, totaling $46 million. During the quarter, the Company
acquired a corrugated shipping container plant in Florida and three
Chicago-area recycling plants. The Company also permanently shut
down a small unprofitable, uncoated recycled paperboard mill in
Monroe, MI.
The Company's credit agreement (the "Credit Agreement") contains
various business and financial covenants including, among other
things, maintenance of minimum levels of consolidated earnings
before depreciation, interest, taxes and amortization and
maintenance of minimum interest coverage ratios. The 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. 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. Continuation of the
current economic downturn in the Company's business segments,
further selling price decreases or the inability of the Company to
implement selling price increases could adversely affect the
Company's liquidity, requiring it to seek covenant relief under the
Credit Agreement. Although no assurance can be given, the Company
believes such relief, if sought, would be granted.
At March 31, 1997, the Company had $310 million of unused borrowing
capacity under its Credit Agreement and $136 million of unused
borrowing capacity under its $315 million accounts receivable
securitization program, subject to JSC(U.S.)'s level of eligible
accounts receivable. The Company believes that cash provided by
operating activities and available financing sources will be
sufficient for the next several years to pay interest on the
Company's obligations, amortize its term loans and fund 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
Form 8-K regarding a complaint filed against a subsidiary
of the Company was filed with the Securities and Exchange
Commission on January 21, 1997.
<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/ Patrick J. Moore
Patrick J. Moore
Vice President and
Chief Financial Officer
(Principal Accounting Officer)
EXHIBIT 11.1
<TABLE>
<CAPTION>
JEFFERSON SMURFIT CORPORATION
CALCULATION OF PER SHARE EARNINGS
(In millions, except per share data)
Three months ended
March 31,
1997 <fn1> 1996<fn2>
<S> <C> <C>
Primary earnings per share
Weighted average shares outstanding 111 111
Net income (loss) applicable to common shares $ (7) $ 53
Per share amounts
Net income (loss) applicable to common shares $(.06) $ .48
Fully diluted earnings per share
Weighted average shares outstanding 111 111
Net income (loss) applicable to common shares $ (7) $ 53
Per share amounts
Net income (loss) applicable to common shares $(.06) $ .48
<FN>
<fn1> The computations do not include common stock equivalents associated
with stock options which would have been antidilutive.
<fn2> 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>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000919226
<NAME> JEFFERSON SMURFIT CORPORATION
<MULTIPLIER> 1000000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 15
<SECURITIES> 0
<RECEIVABLES> 281
<ALLOWANCES> 9
<INVENTORY> 215
<CURRENT-ASSETS> 563
<PP&E> 2349
<DEPRECIATION> 869
<TOTAL-ASSETS> 2707
<CURRENT-LIABILITIES> 544
<BONDS> 1945
0
0
<COMMON> 1
<OTHER-SE> (382)
<TOTAL-LIABILITY-AND-EQUITY> 2707
<SALES> 778
<TOTAL-REVENUES> 778
<CGS> 675
<TOTAL-COSTS> 672
<OTHER-EXPENSES> 64
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 47
<INCOME-PRETAX> (8)
<INCOME-TAX> (1)
<INCOME-CONTINUING> (7)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7)
<EPS-PRIMARY> (.06)
<EPS-DILUTED> (.06)
</TABLE>
