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
For the Quarterly period ended September 30, 1995
[ ] 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 1-3439
STONE CONTAINER CORPORATION
_______________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 36-2041256
(State or other jurisdiction of incorporation (I.R.S. employer
or organization) identification no.)
150 North Michigan Avenue, Chicago, Illinois 60601
(Address of principal executive offices) (Zip Code)
Registrant's telephone number: 312-346-6600
Indicate by check mark (X) 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 requirement for the past 90
days.
Yes X No
Number of common shares outstanding as of November 7, 1995: 99,133,771
<PAGE>
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<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STONE CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
(in millions) 1995* 1994
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents....................... $ 102.2 $ 108.6
Accounts and notes receivable (less allowances
of $27.2 and $20.2)............................ 997.1 824.5
Inventories..................................... 827.4 673.1
Other........................................... 191.1 210.7
________________________________________________ ____________________________
Total current assets.................. 2,117.8 1,816.9
________________________________________________ ____________________________
Property, plant and equipment................... 5,867.5 5,465.5
Accumulated depreciation and amortization....... (2,376.8) (2,106.5)
________________________________________________ ____________________________
Property, plant and equipment--net.... 3,490.7 3,359.0
Timberlands..................................... 77.6 75.1
Goodwill........................................ 888.5 860.2
Other........................................... 869.4 893.7
________________________________________________ ____________________________
Total assets.................................... $ 7,444.0 $ 7,004.9
============================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable................................ $ 430.5 $ 328.0
Current maturities of senior and subordinated
long-term debt................................. 24.1 276.1
Notes payable and current maturities of
non-recourse debt of consolidated affiliates... 30.5 36.5
Income taxes.................................... 28.5 35.2
Accrued and other current liabilities........... 359.1 355.7
________________________________________________ ____________________________
Total current liabilities............. 872.7 1,031.5
________________________________________________ ____________________________
Senior long-term debt........................... 2,883.7 2,488.5
Subordinated debt............................... 827.5 1,159.6
Non-recourse debt of consolidated affiliates.... 667.8 783.8
Other long-term liabilities..................... 297.1 290.2
Deferred taxes.................................. 575.9 381.4
Minority interest............................... 256.9 221.8
Commitments and contingencies...................
Stockholders' equity:
Series E preferred stock..................... 115.0 115.0
Common stock (98.7 and 90.4 shares
outstanding)................................ 1,025.6 849.1
Retained earnings (accumulated deficit)...... 54.9 (96.3)
Foreign currency translation adjustment...... (130.7) (215.2)
Unamortized expense of restricted stock plan. (2.4) (4.5)
________________________________________________ ____________________________
Total stockholders' equity............ 1,062.4 648.1
________________________________________________ ____________________________
Total liabilities and stockholders' equity...... $ 7,444.0 $ 7,004.9
============================
<FN>
*Unaudited; subject to year-end audit
The accompanying notes are an integral part of these statements.
</TABLE>
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<TABLE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS (ACCUMULATED DEFICIT)
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
(in millions except per share) 1995 1994 1995 1994
________________________________ _________ _________ _________ _________
<S> <C> <C> <C> <C>
Net sales....................... $1,924.0 $1,482.2 $5,706.8 $4,127.3
Cost of products sold........... 1,330.4 1,183.4 4,002.0 3,367.4
Selling, general and
administrative expenses........ 151.7 147.7 455.9 418.1
Depreciation and amortization... 97.1 89.7 285.7 267.5
Equity (income) loss from
affiliates..................... (2.5) .4 (6.2) 6.1
Other operating (income)
expense-net.................... -- 1.0 -- (32.4)
Other (income) expense-net...... (11.5) (21.3) (30.0) (13.2)
________________________________ _________ _________ _________ _________
Income before interest expense,
income taxes, minority
interest, extraordinary charges
and cumulative effect of an
accounting change.............. 358.8 81.3 999.4 113.8
Interest expense................ (114.5) (113.9) (354.0) (338.1)
________________________________ _________ _________ _________ _________
Income (loss) before income
taxes, minority interest,
extraordinary charges and
cumulative effect of an
accounting change.............. 244.3 (32.6) 645.4 (224.3)
(Provision) credit for income
taxes.......................... (102.6) 5.4 (263.1) 65.4
Minority interest............... (12.7) (1.7) (25.5) .3
________________________________ _________ _________ _________ _________
Income (loss) before
extraordinary charges and
cumulative effect of an
accounting change.............. 129.0 (28.9) 356.8 (158.6)
Extraordinary charges from early
extinguishments of debt (net of
income tax benefit)............ (177.9) (44.8) (181.0) (61.6)
Cumulative effect of change in
accounting for postemployment
benefits (net of income tax
benefit)....................... -- -- -- (14.2)
________________________________ _________ _________ _________ _________
Net income (loss)............... (48.9) (73.7) 175.8 (234.4)
Preferred stock dividends....... (2.0) (2.0) (6.0) (6.0)
________________________________ _________ _________ _________ _________
Net income (loss) applicable to
common shares.................. $ (50.9) $ (75.7) $ 169.8 $ (240.4)
________________________________ _________ _________ _________ _________
Retained earnings (accumulated
deficit), beginning of period.. $ 128.4 $ (72.8) $ (96.3) $ 101.6
Net income (loss)............... (48.9) (73.7) 175.8 (234.4)
Cash dividends on preferred
stock.......................... (24.6) -- (24.6) (8.0)
Unrealized gain on marketable
equity security (net of income
taxes)......................... -- 10.3 -- 4.6
________________________________ _________ _________ _________ _________
Retained earnings (accumulated
deficit), end of period........ $ 54.9 $ (136.2) $ 54.9 $ (136.2)
________________________________ ========= ========= ========= =========
Per share of common stock -
Primary:
Income (loss) before
extraordinary charges and
cumulative effect of an
accounting change.............. $ 1.32 $ (.34) $ 3.79 $ (1.89)
Extraordinary charges from early
extinguishments of debt (net of
income tax benefit)............ (1.85) (.50) (1.95) (.70)
Cumulative effect of change in
accounting for postemployment
benefits (net of income tax
benefit)....................... -- -- -- (.16)
________________________________ _________ _________ _________ _________
Net income (loss)............... $ (.53) $ (.84) $ 1.84 $ (2.75)
========= ========= ========= =========
Per share of common stock -
Fully Diluted:
Income (loss) before
extraordinary charges and
cumulative effect of an
accounting change.............. $ 1.12 $ * $ 3.08 $ *
Extraordinary charges from early
extinguishments of debt (net of
income tax benefit)............ (1.57) * (1.55) *
Cumulative effect of change in
accounting for postemployment
benefits (net of income tax
benefit)....................... -- * -- *
________________________________ _________ _________ _________ _________
Net income (loss)............... $ (.45) $ * $ 1.53 $ *
========= ========= ========= =========
Cash dividends.................. $ .15 $ -- $ .15 $ --
========= ========= ========= =========
<PAGE>
Common shares and common share
equivalents outstanding
(weighted average, in millions):
Primary...................... 95.9 90.4 92.5 87.5
========= ========= ========= =========
Fully Diluted................ 113.1 * 116.6 *
========= ========= ========= =========
<FN>
Unaudited; subject to year-end audit
The accompanying notes are an integral part of these statements.
* Fully diluted earnings per share are not applicable because the amounts are
anti-dilutive.
</TABLE>
<PAGE>
<TABLE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
(in millions except per share) 1995 1994 1995 1994
_________________________________________ ________________ ________________
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................ $(48.9) $(73.7) $175.8 $(234.4)
Adjustments to reconcile net income
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization.......... 97.1 89.7 285.7 267.5
Deferred taxes......................... 74.4 (10.9) 183.0 (75.1)
Foreign currency transaction (gains)
losses................................ (5.6) (12.2) (9.9) 3.7
Extraordinary charges from early
extinguishments of debt............... 177.9 44.8 181.0 61.6
Cumulative effect of an accounting
change................................ -- -- -- 14.2
Other--net............................. 25.4 8.5 56.6 (49.3)
Changes in current assets and
liabilities--net of adjustments for an
acquisition and dispositions:
(Increase) decrease in accounts and
notes receivable--net................. 16.0 (68.6) (162.8) (150.0)
(Increase) decrease in inventories..... (73.6) (26.5) (145.1) 30.3
(Increase) decrease in other current
assets................................ 31.0 7.2 8.0 (29.6)
Increase in accounts payable and other
current liabilities................... 35.4 35.5 82.5 56.6
_________________________________________ ________________ ________________
Net cash provided by (used in) operating
activities.............................. 329.1 (6.2) 654.8 (104.5)
_________________________________________ ________________ ________________
Cash flows from financing activities:
Debt repayments.......................... (329.3) (4.0) (703.9) (921.6)
Payments by consolidated affiliates on
non-recourse debt....................... (5.7) (16.9) (144.4) (47.7)
Borrowings............................... 200.7 74.1 502.8 825.5
Non-recourse borrowings of consolidated
affiliates.............................. 2.4 -- 4.1 --
Proceeds from issuance of common
stock-net............................... .8 -- 1.6 276.3
Payment on letter of credit.............. -- -- -- (20.6)
Cash dividends........................... (24.6) -- (24.6) (8.0)
_________________________________________ ________________ ________________
Net cash (used in) provided by financing
activities.............................. (155.7) 53.2 (364.4) 103.9
_________________________________________ ________________ ________________
Cash flows from investing activities:
Capital expenditures..................... (97.7) (67.0) (279.7) (133.2)
Proceeds from sales of assets............ 6.8 -- 15.8 18.9
Payments made for businesses acquired.... (13.2) (2.5) (24.7) (2.6)
Other--net............................... (13.0) 10.8 (16.7) 6.4
_________________________________________ ________________ ________________
Net cash used in investing activities.... (117.1) (58.7) (305.3) (110.5)
_________________________________________ ________________ ________________
Effect of exchange rate changes on cash.. -- 1.2 8.5 3.3
_________________________________________ ________________ ________________
Net increase (decrease) in cash and cash
equivalents............................. 56.3 (10.5) (6.4) (107.8)
Cash and cash equivalents, beginning of
period.................................. 45.9 150.1 108.6 247.4
_________________________________________ ________________ ________________
Cash and cash equivalents, end of period. $102.2 $139.6 $102.2 $139.6
================ ================
<FN>
See Note 12 regarding non-cash investing and financing activities and
supplemental cash flow information.
Unaudited; subject to year-end audit
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: Basis of Presentation
Pursuant to the rules and regulations of the Securities and
Exchange Commission for Form 10-Q, the financial statements,
footnote disclosures and other information normally included in
the financial statements prepared in accordance with generally
accepted accounting principles have been condensed. These
financial statements, footnote disclosures and other information
should be read in conjunction with the financial statements and
the notes thereto included in Stone Container Corporation's (the
"Company's") latest Annual Report on Form 10-K. In the opinion
of the Company, the accompanying unaudited consolidated financial
statements contain all adjustments necessary to fairly present
the Company's financial position as of September 30, 1995 and the
results of operations and cash flows for the three and nine month
periods ended September 30, 1995 and 1994. All adjustments
reflected in the accompanying unaudited consolidated financial
statements are of a normal recurring nature.
NOTE 2: Reclassifications
Certain prior year amounts have been restated to conform with the
current year presentation in the Consolidated Statements of Cash
Flows.
NOTE 3: Subsequent Events
On November 1, 1995, Stone-Consolidated Corporation ("Stone-
Consolidated"), a 74.6 percent owned Canadian subsidiary of the
Company, amalgamated its operations (the "Amalgamation") with
Rainy River Forest Products Inc. ("Rainy River"), a Toronto-based
Canadian pulp and paper company. The amalgamated entity
("Amalco") will continue under the name of Stone-Consolidated
Corporation. As a result of the Amalgamation, the Company's
equity ownership in Stone-Consolidated Corporation was reduced
from 74.6 percent to 46.7 percent. From the effective date of
the Amalgamation, the Company will begin reporting Stone-
Consolidated Corporation as a non-consolidated affiliate in
accordance with the equity method of accounting.
Pursuant to the Amalgamation, (i) each share of common stock
of Stone-Consolidated was converted into one share of Amalco
common stock, (ii) each share of Rainy River common stock was
converted, at the option of the holder, subject to certain
limitations, into either (a) 1.04 shares of Amalco common stock
or (b) one share of Amalco redeemable preferred stock, (iii) each
convertible debenture of Stone-Consolidated was exchanged for or
converted into 62.11 shares of Amalco common stock, and (iv) each
convertible debenture of Rainy River was exchanged for or
converted into 60.465 shares of Amalco common stock. In
addition, Amalco paid $160 per $1,000 principal amount for each
of Stone-Consolidated's and Rainy River's convertible debentures
plus accrued interest.
Immediately after the Amalgamation, approximately 104
million shares of Amalco common stock were issued and outstanding
and approximately 4.7 million shares of Amalco redeemable
preferred stock were issued and outstanding.
The Amalgamation will result in the Company recording a
charge to common stock to adjust its investment in Stone-
Consolidated to its share of Amalco's common stockholder's
equity. Since the Amalgamation occurred on November 1, 1995, the
charge to common stock cannot be estimated at this time.
On November 2, 1995, the Company announced it has entered
into a joint venture agreement with Four M Corporation (Box USA)
to purchase a paperboard mill located in Port St. Joe, Florida,
from St. Joe Paper Company for $185 million plus applicable
working capital. Under the joint venture agreement, the Company
would make a 50 percent equity investment in the joint venture.
It is anticipated that the purchase by the joint venture would
close late in the first quarter of 1996. The completion of the
transaction is contingent upon a number of conditions, including
the termination of the Hart-Scott-Rodino waiting period and the
placement of non-recourse financing. Upon completion of the
transaction, the joint venture would be highly leveraged. The
mill has the capacity to produce approximately 500,000 short tons
per year, split almost evenly between mottled white and kraft
linerboard.
On November 6, 1995, the Company announced that a wholly-
owned subsidiary plans to privately place $200 million of senior
unsecured notes due in 2003 that will be unconditionally
guaranteed by the Company. The net proceeds from the issuance of
the notes will be used to retire existing indebtedness of the
Company. The placement of the notes is expected to close in
November 1995.
NOTE 4: Debt Repurchases
During the 1995 third quarter, in separate, independently
negotiated transactions, the Company purchased and retired
approximately $182 million principal amount of its 8-7/8 percent
Convertible Senior Subordinated Notes (the "Convertible Senior
Subordinated Notes"). The Convertible Senior Subordinated Notes
are convertible into 86.58 shares of the Company's common stock
per $1,000 face amount at $11.55 per share. The Convertible
Senior Subordinated Notes purchased and retired were convertible
into approximately 15.8 million common shares. The aggregate
value paid by the Company for such Convertible Senior
Subordinated Notes purchased and retired was approximately $357
million comprised of approximately $182 million cash (which was
equal to the face value of the Convertible Senior Subordinated
Notes purchased) and the issuance of approximately 8.2 million
shares of common stock valued at approximately $175 million.
Although the Company issued approximately 8.2 million shares of
common stock, total common shares on a fully diluted basis was
reduced by approximately 7.6 million common shares. Additionally,
the Company made open market purchases of other debt securities
during the quarter and the year. These transactions, in total,
resulted in the Company reporting extraordinary charges from the
early extinguishments of debt for the third quarter and first
nine months of 1995 of approximately $178 million and $181
million, respectively (including the write-off of deferred debt
issuance costs, net of income tax benefit). Furthermore, common
stock increased by approximately $175 million as a result of the
issuance of common shares as part of the transaction regarding
the Convertible Senior Subordinated Notes. Total stockholders'
equity in the Company's Consolidated Balance Sheet did not
substantially change as a result of the purchases of the
Convertible Senior Subordinated Notes. The purchases of the
Convertible Senior Subordinated Notes did not substantially
affect the calculation of the available dividend pool under the
covenants of the Company's various debt instruments concerning
dividend restrictions. Funding for the cash portion of the
purchases of the Convertible Senior Subordinated Notes and the
other open market purchases was financed primarily from bank
borrowings. See also Note 8 -- "Liquidity Matters".
The following tables provide actual earnings per share
information for the three and nine month periods ended September
30, 1995 and pro forma earnings per share information for the
three and nine month periods ended September 30, 1995 as if the
purchases of the Convertible Senior Subordinated Notes and the
open market cash purchases of the 6-3/4 percent Convertible
Subordinated Debentures had both occurred as of the beginning of
each period:
Three months ended September 30, 1995
Actual Pro Forma
________________ ________________
Fully Fully
Primary Diluted Primary Diluted
_______ _______ _______ _______
Per share of common stock:
Income before
extraordinary losses...... $ 1.32 $ 1.12 $ 1.28 $ 1.14
======= ======= ======= =======
Average common shares
(in millions)............. 95.9 113.1 99.1 109.9
======= ======= ======= =======
<PAGE>
Nine months ended September 30, 1995
Actual Pro Forma
________________ ________________
Fully Fully
Primary Diluted Primary Diluted
_______ _______ _______ _______
Per share of common stock:
Income before
extraordinary losses...... $ 3.79 $ 3.08 $ 3.54 $ 3.20
======= ======= ======= =======
Average common shares
(in millions)............. 92.5 116.6 99.0 109.8
======= ======= ======= =======
Supplemental primary earnings per share before extraordinary
losses for the three and nine months ended September 30, 1995
were $1.29 and $3.58 per share of common stock and supplemental
primary net income (loss) per share for the three and nine months
ended September 30, 1995 were $(.51) and $1.75 per share of
common stock, assuming that the securities pursuant to the
purchases of the Convertible Senior Subordinated Notes existed as
of the beginning of each period.
NOTE 5: Refinancings
In August 1995, the Company and its bank group amended and
restated its bank credit agreement (the "Credit Agreement") to
provide for an additional $200 million senior secured term loan
facility. Permitted uses for the borrowings under this
additional term loan were to partially fund the purchases of the
Convertible Senior Subordinated Notes, to partially fund the
redemption of the Company's $90 million principal amount of its
12-1/8 percent Subordinated Debentures and to partially fund open
market purchases of debt. The $200 million additional term loan
requires semi-annual amortizations of 1/2 of 1 percent of the
principal amount beginning April 1, 1996 through October 1, 2002
with the remaining balance equally maturing on April 1 and
October 1, 2003. Interest rate options available under the
additional term loan are either prime rate plus 2-3/8 percent or
LIBOR plus 3-3/8 percent.
In March 1995, the Company, through its wholly-owned
subsidiary Stone Receivables Corporation, completed the
refinancing of the obligations relating to its accounts
receivable securitization program with a new $310 million
accounts receivable securitization program consisting of $260
million of floating-rate notes due in 2000 (the "Notes") together
with a five-year $50 million revolving credit facility
(collectively, the "March 1995 Refinancing"). The March 1995
Refinancing permits the Company to sell certain of its accounts
receivable to Stone Receivables Corporation which purchases such
receivables under the program. The initial accounts receivable
under the program were purchased with the net proceeds received
from the issuance of the Notes. The purchased accounts
receivable are solely the assets of Stone Receivables
Corporation, which is a wholly-owned subsidiary of the Company,
with its own borrowings. In the event of a liquidation of Stone
Receivables Corporation, such borrowings would be satisfied from
the assets of Stone Receivables Corporation prior to any
distribution to the Company. At September 30, 1995, the
Company's Consolidated Balance Sheet included approximately $321
million of accounts receivable under the program and $266 million
of borrowings under the program.
NOTE 6: Insurance Matters
In the second quarter of 1994, a digester vessel ruptured at the
Company's pulp and paperboard mill in Panama City, Florida
causing extensive damage to certain of the facility's assets.
The Company is seeking recovery for both the losses to property
and the losses as a result of business interruption arising from
the Panama City occurrence. A partial recovery of approximately
$31 million has been received by the Company from certain
carriers, claims of approximately $11 million have been committed
to be paid and claims of approximately $41 million covering the
remaining portion of such losses are still pending. The
insurance carrier providing boiler and machinery coverage for the
Company has denied the Company's claim. The Company has
challenged the denial and has commenced a declaratory judgement
action against the boiler and machinery insurance carrier for a
determination that such insurance carrier is responsible for
coverage of the loss. In addition, during the second quarter of
1995, certain of the all-risk insurance carriers, which would
cover the losses not covered under the boiler and machinery
coverage, have also denied coverage. The Company has entered
into stand-still agreements with such carriers pending the
outcome of the suit against the boiler and machinery carrier.
Management believes the receivable recorded on its financial
statements is fully recoverable.
NOTE 7: Acquisition and Retirement of Non-recourse Debt
In March 1995, the Company acquired the remaining 1 percent of
the common stock of Seminole Kraft Corporation ("Seminole")
thereby making it a wholly-owned subsidiary of the Company.
During the second quarter of 1995, the Company (i) repaid
Seminole's bank debt and (ii) redeemed Seminole's
13-1/2 percent Subordinated Notes for approximately $123 million.
Effective April 30, 1995, the Company merged Seminole with and
into the Company.
<PAGE>
NOTE 8: Liquidity Matters
The Company's liquidity and financial flexibility improved during
the first nine months of 1995 as a result of its earnings, the
recently established $200 million additional bank term loan
facility under its Credit Agreement and through the completion of
the March 1995 Refinancing. The Company's Credit Agreement also
provides for, among other things, a $450 million revolving credit
facility. At November 8, 1995, the Company had borrowing
availability of approximately $259 million (net of letters of
credit which reduce the amount available to be borrowed) under
its $450 million revolving credit facility. In July 1995, the
Company received a waiver of its mandatory prepayments of excess
cash flow (as defined) for four quarters beginning with the 1995
second quarter payment. To date, such quarterly payments which
would have been scheduled to be paid on or before August 15, 1995
and November 15, 1995 would have totalled approximately $110
million.
The Company's primary capital requirements consist of debt
service and capital expenditures. The Company is highly
leveraged, and while highly leveraged, will incur substantial
ongoing interest expense. No significant debt maturities or
amortization obligations are due until June 1997. The Company's
total debt as of September 30, 1995 decreased from that reflected
in its December 31, 1994 Consolidated Balance Sheet by
approximately $311 million. Further, approximately $396 million
of non-recourse debt will be eliminated from the Company's
Consolidated Balance Sheet as of November 1, 1995 resulting from
the Company beginning to report Stone-Consolidated in accordance
with the equity method of accounting effective with the
Amalgamation described in Note 3 -- "Subsequent Events".
NOTE 9: Inventories
Inventories are summarized as follows:
September 30, December 31,
(in millions) 1995 1994
______________________________ _____________ ____________
Raw materials and supplies.... $ 356.7 $ 306.9
Paperstock.................... 353.3 263.4
Work in process............... 21.3 21.4
Finished products--converting
facilities.................. 132.0 116.1
______________________________ _____________ ____________
863.3 707.8
Excess of current cost over
LIFO inventory value........ (35.9) (34.7)
_____________ ____________
Total inventories............. $ 827.4 $ 673.1
============= ============
<PAGE>
At September 30, 1995 and December 31, 1994, the percentage
of total inventories costed by the LIFO, FIFO and average cost
methods were as follows:
September 30, December 31,
1995 1994
_____________ ____________
LIFO................... 38% 42%
FIFO................... 7% 7%
Average Cost........... 55% 51%
NOTE 10: Current Maturities of Long-Term Debt
Current maturities of long-term debt at September 30, 1995 and
December 31, 1994 consisted of the following components:
September 30, December 31,
(in millions) 1995 1994
_______________________________ _____________ ____________
Senior debt.................... $ 24.1 $ 276.1
Non-recourse debt of
consolidated affiliates...... 20.1 29.2
_______________________________ _____________ ____________
Total current maturities of
long-term debt............... $ 44.2 $ 305.3
============= ============
The current maturities at December 31, 1994 included $253.8
million of revolving credit facility borrowings outstanding under
the Company's previous accounts receivable securitization program
which were scheduled to mature in September 1995. As discussed
in Note 5 -- "Refinancings", the Company refinanced such
obligations through the completion of the March 1995 Refinancing,
which provided for a new, five-year accounts receivable
securitization program.
<PAGE>
NOTE 11: Segment Information
Financial information by business segment is summarized as
follows:
Three months ended
September 30, 1995 September 30, 1994
__________________________ __________________________
Income before Income (loss)
income taxes, before income
minority taxes, minority
interest and interest and
Total extraordinary Total extraordinary
(in millions) sales charge sales charge
____________________ _________ _________ _________ _________
Paperboard and paper
packaging......... $1,351.8 $ 236.8 $1,099.7 $ 82.6
White paper and
other.............. 588.3 134.6 391.8 8.0
Intersegment........ (16.1) -- (9.3) --
_________ _________ _________ _________
1,924.0 371.4 1,482.2 90.6
Interest expense.... (114.5) (113.9)
Foreign currency
adjustments........ 5.6 12.2
General corporate
and miscellaneous
(net).............. (18.2) (21.5)
_________ _________ _________ _________
Total............... $1,924.0 $ 244.3 $1,482.2 $ (32.6)
========= ========= ========= =========
<PAGE>
Nine months ended
September 30, 1995 September 30, 1994
__________________________ __________________________
Income (loss)
before income
taxes, minority
interest,
Income before extraordinary
income taxes, charges and
minority cumulative
interest and effect of an
Total extraordinary Total accounting
(in millions) sales charges sales change
____________________ _________ _________ _________ _________
Paperboard and
paper packaging.... $4,104.7 $ 726.1 $3,046.2 $ 187.7
White paper and
other.............. 1,649.9 313.4 1,107.6 (11.8)
Intersegment........ (47.8) -- (26.5) --
_________ _________ _________ _________
5,706.8 1,039.5 4,127.3 175.9
Interest expense.... (354.0) (338.1)
Foreign currency
adjustments........ 9.9 (3.7)
General corporate
and miscellaneous
(net).............. (50.0) (58.4)
_________ _________ _________ _________
Total............... $5,706.8 $ 645.4 $4,127.3 $ (224.3)
========= ========= ========= =========
<PAGE>
Financial information by geographic region is summarized as follows:
Three months ended
September 30, 1995 September 30, 1994
__________________________ __________________________
Income before Income (loss)
income taxes, before income
minority taxes, minority
interest and interest and
Total extraordinary Total extraordinary
(in millions) sales charge sales charge
____________________ _________ _________ _________ _________
United States....... $1,329.1 $ 247.2 $1,082.9 $ 74.8
Canada.............. 407.0 113.8 253.7 12.0
Europe.............. 224.2 10.4 163.5 3.8
_________ _________ _________ _________
1,960.3 371.4 1,500.1 90.6
Interest expense.... (114.5) (113.9)
Foreign currency
adjustments........ 5.6 12.2
General corporate
and miscellaneous
(net).............. (18.2) (21.5)
Inter-area
eliminations....... (36.3) -- (17.9) --
_________ _________ _________ _________
Total............... $1,924.0 $ 244.3 $1,482.2 $ (32.6)
========= ========= ========= =========
<PAGE>
Nine months ended
September 30, 1995 September 30, 1994
__________________________ __________________________
Income (loss)
before income
taxes, minority
interest,
Income before extraordinary
income taxes, charges and
minority cumulative
interest and effect of an
Total extraordinary Total accounting
(in millions) sales charges sales change
____________________ _________ _________ _________ _________
United States....... $4,021.6 $ 733.9 $3,020.5 $ 175.2
Canada.............. 1,108.2 275.0 707.8 (5.3)
Europe.............. 657.2 30.6 445.8 6.0
_________ _________ _________ _________
5,787.0 1,039.5 4,174.1 175.9
Interest expense.... (354.0) (338.1)
Foreign currency
adjustments........ 9.9 (3.7)
General corporate
and miscellaneous
(net).............. (50.0) (58.4)
Inter-area
eliminations....... (80.2) -- (46.8) --
_________ _________ _________ _________
Total............... $5,706.8 $ 645.4 $4,127.3 $ (224.3)
========= ========= ========= =========
<PAGE>
NOTE 12: Additional Cash Flow Statement Information
The Company's non-cash investing and financing activities and
cash payments for interest and income taxes were as follows:
Three months ended Nine months ended
September 30, September 30,
(in millions) 1995 1994 1995 1994
______________________ _______ _______ _______ ________
Non-cash investing and
financing activities:
Issuance of common
stock as partial
consideration to
extinguish debt... $174.8 $ -- $174.8 $ --
Assumption of non-
recourse debt of an
affiliate........... 13.1 -- 13.1 --
Unrealized gain on an
investment in an
equity security (net
of income taxes).... -- 10.3 -- 4.6
Conversion of
investment in an
affiliate into a
note receivable..... -- 3.2 -- 3.2
Note receivable
received from sale
of assets........... -- -- -- 1.3
Cash paid (refunded)
during the periods for:
Interest (net of
capitalization)..... $109.4 $108.4 $342.7 $299.1
Income taxes (net of
refunds)............ 26.3 (12.7) 88.3 (9.3)
======= ======= ======= =======
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Three months ended September 30,
1995 1994
____________________ ____________________
Percent of Percent of
(dollars in millions) Amount net sales Amount net sales
__________________________________ _________ _________ _________ _________
Net sales......................... $1,924.0 100.0% $1,482.2 100.0%
Cost of products sold............. 1,330.4 69.1 1,183.4 79.8
Selling, general and
administrative expenses.......... 151.7 7.9 147.7 10.0
Depreciation and amortization..... 97.1 5.1 89.7 6.0
Equity (income) loss from
affiliates....................... (2.5) (.1) .4 --
Other operating (income)
expense-net...................... -- -- 1.0 .1
Other (income) expense-net........ (11.5) (.6) (21.3) (1.4)
_________ _________ _________ _________
Income before interest expense,
income taxes, minority interest,
extraordinary charges and
cumulative effect of an
accounting change................ 358.8 18.6 81.3 5.5
Interest expense.................. (114.5) (5.9) (113.9) (7.7)
_________ _________ _________ _________
Income (loss) before income taxes,
minority interest, extraordinary
charges and cumulative effect of
an accounting change............. 244.3 12.7 (32.6) (2.2)
(Provision) credit for income
taxes............................ (102.6) (5.3) 5.4 .4
Minority interest................. (12.7) (.7) (1.7) (.1)
_________ _________ _________ _________
Income (loss) before extraordinary
charges and cumulative effect of
an accounting change............. 129.0 6.7 (28.9) (1.9)
Extraordinary charges from early
extinguishments of debt (net of
income tax benefit).............. (177.9) (9.2) (44.8) (3.0)
Cumulative effect of change in
accounting for postemployment
benefits (net of income tax
benefit)......................... -- -- -- --
_________ _________ _________ _________
Net income (loss)................. $ (48.9) (2.5) $ (73.7) (4.9)
========= ========= ========= =========
<PAGE>
Results of Operations (continued)
Nine months ended September 30,
1995 1994
____________________ ____________________
Percent of Percent of
(dollars in millions) Amount net sales Amount net sales
__________________________________ _________ _________ _________ _________
Net sales......................... $5,706.8 100.0% $4,127.3 100.0%
Cost of products sold............. 4,002.0 70.1 3,367.4 81.6
Selling, general and
administrative expenses.......... 455.9 8.0 418.1 10.1
Depreciation and amortization..... 285.7 5.0 267.5 6.5
Equity (income) loss from
affiliates....................... (6.2) (.1) 6.1 .1
Other operating (income)
expense-net...................... -- -- (32.4) (.8)
Other (income) expense-net........ (30.0) (.5) (13.2) (.3)
_________ _________ _________ _________
Income before interest expense,
income taxes, minority interest,
extraordinary charges and
cumulative effect of an
accounting change................ 999.4 17.5 113.8 2.8
Interest expense.................. (354.0) (6.2) (338.1) (8.2)
_________ _________ _________ _________
Income (loss) before income taxes,
minority interest, extraordinary
charges and cumulative effect of
an accounting change............. 645.4 11.3 (224.3) (5.4)
(Provision) credit for income
taxes............................ (263.1) (4.6) 65.4 1.6
Minority interest................. (25.5) (.4) .3 --
_________ _________ _________ _________
Income (loss) before extraordinary
charges and cumulative effect of
an accounting change............. 356.8 6.3 (158.6) (3.8)
Extraordinary charges from early
extinguishments of debt (net of
income tax benefit).............. (181.0) (3.2) (61.6) (1.5)
Cumulative effect of change in
accounting for postemployment
benefits (net of income tax
benefit)......................... -- -- (14.2) (.4)
_________ _________ _________ _________
Net income (loss)................. $ 175.8 3.1 $ (234.4) (5.7)
========= ========= ========= =========
<PAGE>
For the three months ended September 30, 1995, income before
the extraordinary charge from the early extinguishment of debt
was $129 million, or $1.32 per share of common stock on a primary
basis and $1.12 per share of common stock on a fully diluted
basis. In the 1995 third quarter, the Company recorded an
extraordinary charge from the early extinguishment of debt of
$177.9 million, net of income tax benefit, or $1.85 per share on
a primary basis and $1.57 per share on a fully diluted basis,
resulting in a net loss for the 1995 third quarter of $48.9
million, or $.53 per share of common stock on a primary basis and
$.45 per share of common stock on a fully diluted basis. For the
three months ended September 30, 1994, the loss before the
extraordinary charge from the early extinguishment of debt was
$28.9 million, or $.34 per share of common stock. After the
extraordinary charge, the net loss for the 1994 third quarter was
$73.7 million, or $.84 per share of common stock.
For the nine months ended September 30, 1995, income before
the extraordinary charges from the early extinguishments of debt
was $356.8 million, or $3.79 per share of common stock on a
primary basis and $3.08 per share of common stock on a fully
diluted basis. The Company recorded extraordinary charges from
the early extinguishments of debt totalling $181.0 million, net
of income tax benefit, or $1.95 per share on a primary basis and
$1.55 per share on a fully diluted basis, resulting in net income
for the nine months ended September 30, 1995 of $175.8 million,
or $1.84 per share of common stock on a primary basis and $1.53
per share of common stock on a fully diluted basis. See
"Financial Condition and Liquidity - Financing Activities" for a
further discussion of the extraordinary charges from the early
extinguishments of debt. For the nine months ended September 30,
1994, the loss before the extraordinary charges and the
cumulative effect of an accounting change was $158.6 million, or
$1.89 per share of common stock. After the extraordinary charges
and the cumulative effect of an accounting change, the net loss
for the nine months ended September 30, 1994 was $234.4 million,
or $2.75 per share of common stock.
The improved results for the three and nine month periods
ended September 30, 1995 over the comparable prior year periods
primarily reflect improved product pricing for the Company's
products which was partially offset by a substantial increase in
recycled fiber costs.
Paperboard and paper packaging:
Net sales for the three and nine months ended September 30, 1995
for the paperboard and paper packaging segment increased 23
percent and 35 percent, respectively, over the comparable prior
year periods reflecting higher sales for corrugated containers,
paperboard and paper bags and sacks. These sales increases
primarily resulted from significantly higher average selling
prices.
<PAGE>
Shipments of corrugated containers, including the Company's
proportionate share of the shipments by its affiliates, were 13.1
billion square feet for the third quarter of 1995, compared with
14.3 billion square feet for the comparable prior year period.
For the first nine months of 1995, the Company shipped 40.2
billion square feet of corrugated containers, compared with 40.4
billion square feet shipped during the first nine months of 1994.
The reduction in shipments of corrugated containers is a result
of recent softening in industry demand during the third quarter
of 1995. Shipments of paper bags and sacks were 140 thousand
tons and 434 thousand tons for the three and nine month periods
ended September 30, 1995, respectively, compared with 164
thousand tons and 486 thousand tons shipped during the comparable
1994 periods.
Production of containerboard and kraft paper for the three
and nine month periods ended September 30, 1995, was 1.23 million
tons and 3.84 million tons, respectively, compared to 1.29
million tons and 3.88 million tons produced during the comparable
prior year periods.
Operating income for the paperboard and paper packaging
segment increased significantly for the three and nine month
periods ended September 30, 1995, as compared with the
corresponding 1994 periods. These increases are attributable to
improved operating margins primarily resulting from significantly
higher average selling prices for the Company's paperboard and
paper packaging products.
White paper and other:
Net sales for the third quarter and first nine months of 1995 for
the white paper and other segment increased 50 percent and 49
percent, respectively, over the comparable prior year periods.
These increases were due in part to the inclusion of
approximately $44 million for the 1995 third quarter and
approximately $121 million for the first nine months of 1995 of
market pulp sales for Stone Venepal (Celgar) Pulp, Inc. ("SVCPI")
which, effective December 31, 1994, became a consolidated
subsidiary when the Company increased its ownership in SVCPI's
common stock from 50 percent to 90 percent. SVCPI had previously
been accounted for in accordance with the equity method of
accounting. Excluding the effect of SVCPI, net sales for the
third quarter and first nine months of 1995 for this segment
increased 39 percent and 38 percent, respectively, over the
comparable prior year periods, reflecting significant sales
increases for market pulp, newsprint and groundwood paper. These
sales increases were mainly attributable to higher average
selling prices, although improved market pulp sales volume also
contributed to the increases over the comparable prior year
periods.
<PAGE>
Production of newsprint, market pulp and groundwood paper
for the three and nine month periods ended September 30, 1995,
including 100 percent of the production at Stone-Consolidated
Inc. ("Stone-Consolidated"), the Company's Canadian newsprint and
groundwood paper subsidiary (see Note 3 -- "Subsequent Events"),
and 45 percent of the production at the Company's affiliated
market pulp mill in British Columbia for 1995 and 25 percent for
1994, was 738 thousand tons and 2.19 million tons, respectively,
compared with 650 thousand tons and 1.92 million tons produced
during the comparable prior year periods. As a result of the
Company increasing its ownership in SVCPI's common stock
effective December 31, 1994, the Company indirectly acquired an
additional 20 percent of the affiliated market pulp mill in
British Columbia.
Operating income for the white paper and other segment for
the 1995 third quarter was $134.6 million compared to operating
income of $8.0 million for the 1994 third quarter. Operating
income for the first nine months of 1995 was $313.4 million
compared to an operating loss of $11.8 million for the comparable
period of 1994. The significant improvement in operating income
was mainly attributable to improved operating margins resulting
primarily from the significantly higher average selling prices
for market pulp, newsprint and groundwood paper.
Financial Condition and Liquidity
The Company's working capital ratio at September 30, 1995 was 2.4
to 1 compared to 1.8 to 1 at December 31, 1994. The Company's
long-term debt to total capitalization ratio was 69.8 percent at
September 30, 1995 as compared with 78.0 percent at December 31,
1994. Capitalization, for purposes of this ratio, includes long-
term debt (which includes debt of consolidated affiliates which
is non-recourse to the parent company), deferred income taxes,
minority interest and stockholders' equity.
The Company's primary capital requirements consist of debt
service and capital expenditures. The Company is highly
leveraged, and while highly leveraged, will incur substantial
ongoing interest expense. No significant debt maturities or
amortization obligations are due until June 1997. The Company's
total debt as of September 30, 1995 decreased from that reflected
in its December 31, 1994 Consolidated Balance Sheet by
approximately $311 million. Further, approximately $396 million
of non-recourse debt will be eliminated from the Company's
Consolidated Balance Sheet as of November 1, 1995 resulting from
the Company beginning to report Stone-Consolidated in accordance
with the equity method of accounting effective with the
Amalgamation described in Note 3 -- "Subsequent Events".
The Company's liquidity and financial flexibility improved
during the first nine months of 1995 as a result of its earnings,
the recent $200 million additional bank term loan facility under
its bank credit agreement (the "Credit Agreement") and through
the completion of the March 1995 Refinancing. See also
"Financial Condition and Liquidity - Financing Activities". The
Company's Credit Agreement consists of a $400 million senior
secured term loan facility maturing through April 1, 2000, a $200
million senior secured term loan facility maturing through
October 1, 2003 and a $450 million senior secured revolving
credit facility commitment maturing May 15, 1999, which includes
a $25 million swing-line sub-facility also maturing May 15, 1999.
At November 8, 1995, the Company had borrowing availability of
approximately $259 million (net of letters of credit which reduce
the amount available to be borrowed) under its $450 million
revolving credit facility. The term loans and the revolving
credit facility had weighted average interest rates for the nine
months ended September 30, 1995 of 9.22 percent and 9.36 percent,
respectively. The weighted average rates do not include the
effects of the amortization of deferred debt issuance costs.
Borrowings under the Credit Agreement are secured with a
significant portion of the assets of the Company. The Credit
Agreement contains covenants that include, among other things,
the maintenance of certain financial tests and ratios.
Additionally, the term loan portion of the Credit Agreement
provides for mandatory prepayments from sales of certain assets,
certain debt financings and a percentage of excess cash flow (as
defined). The Company's bank lenders, at the Company's optional
request, may at their option waive the receipt of certain
mandatory prepayments. In July 1995, the Company received a
waiver of its mandatory prepayments of excess cash flow (as
defined) for required payments under its initial term loan for
four quarters beginning with the 1995 second quarter payment. To
date, such quarterly payments which would have been scheduled to
be paid on or before August 15, 1995 and November 15, 1995 would
have totalled approximately $110 million. The amortizations for
each semi-annual period is 1/2 of 1 percent of the principal
amount of the outstanding term loans and all mandatory and
voluntary prepayments are allocated against the term loan
amortizations in inverse order of maturity. Mandatory
prepayments from sales of collateral, unless replacement
collateral is provided, will be applied ratably to the term loan
and revolving credit facility, permanently reducing the loan
commitments under the Credit Agreement. The Credit Agreement
also contains cross-default provisions to the indebtedness of $10
million or more of the Company and certain subsidiaries, as well
as cross-acceleration provisions to the non-recourse debt of $10
million or more of SVCPI. At September 30, 1995, SVCPI had
approximately $289 million in secured indebtedness owed to bank
lenders. The Credit Agreement allows, under certain specific
circumstances, for the Company to make further investments in
SVCPI.
Operating activities:
Net cash provided by operating activities was $654.8 million for
the nine months ended September 30, 1995, an improvement of
$759.3 million over the comparable period of 1994. The
improvement in operating cash flows primarily reflects the
Company's improved earnings and decrease in debt issuance costs
which more than offset the effects of an increase in accounts and
notes receivable and inventories.
Financing activities:
In August 1995, the Company and its bank group amended and
restated its Credit Agreement to provide for an additional $200
million senior secured term loan facility. Permitted uses for
the borrowings under this additional term loan were to partially
fund the purchases of the 8-7/8 percent Convertible Senior
Subordinated Notes (the "Convertible Senior Subordinated Notes"),
to partially fund the redemption of the Company's $90 million
principal amount of its 12-1/8 percent Subordinated Debentures
and to partially fund open market purchases of debt. The $200
million additional term loan requires semi-annual amortizations
of 1/2 of 1 percent of the principal amount beginning April 1,
1996 through October 1, 2002 with the remaining balance equally
maturing on April 1 and October 1, 2003. Interest rate options
available under the additional term loan are either prime rate
plus 2-3/8 percent or LIBOR plus 3-3/8 percent.
During the 1995 third quarter, in separate, independently
negotiated transactions, the Company purchased and retired
approximately $182 million principal amount of its Convertible
Senior Subordinated Notes. The Convertible Senior Subordinated
Notes are convertible into 86.58 shares of the Company's common
stock per $1,000 face amount at $11.55 per share. The
Convertible Senior Subordinated Notes purchased and retired were
convertible into approximately 15.8 million common shares. The
aggregate value paid by the Company for such Convertible Senior
Subordinated Notes purchased and retired was approximately $357
million comprised of approximately $182 million cash (which was
equal to the face value of the Convertible Senior Subordinated
Notes purchased) and the issuance of approximately 8.2 million
shares of common stock valued at approximately $175 million.
Although the Company issued approximately 8.2 million shares of
common stock, total common shares on a fully diluted basis was
reduced by approximately 7.6 million common shares.
Additionally, the Company made open market purchases of other
debt securities during the quarter and the year. These
transactions, in total, resulted in the Company reporting
extraordinary charges from the early extinguishments of debt for
the third quarter and first nine months of 1995 of approximately
$178 million and $181 million, respectively (including the write-
off of deferred debt issuance costs, net of income tax benefit).
Furthermore, common stock increased by approximately $175 million
as a result of the issuance of common shares as part of the
transaction, in total, regarding the Convertible Senior
Subordinated Notes. Total stockholders' equity in the Company's
Consolidated Balance Sheet did not substantially change as a
result of the purchases of the Convertible Senior Subordinated
Notes. The purchases of the Convertible Senior Subordinated
Notes did not substantially affect the calculation of the
available dividend pool under the covenants of the Company's
various debt instruments concerning dividend restrictions.
Funding for the cash portion of the purchases of the Convertible
Senior Subordinated Notes and the other open market purchases was
financed primarily from bank borrowings. See also "Financial
Condition and Liquidity".
During the second quarter of 1995, the Company (i) repaid
Seminole Kraft Corporation's ("Seminole") bank debt and (ii)
redeemed Seminole's 13-1/2 percent Subordinated Notes for
approximately $123 million. The Company had previously acquired
the remaining 1 percent of the common stock of Seminole, thereby
making it a wholly-owned subsidiary of the Company in March 1995.
Effective April 30, 1995, the Company merged Seminole with and
into the Company.
In March 1995, the Company, through its wholly-owned
subsidiary Stone Receivables Corporation, completed the
refinancing of the obligations relating to its accounts
receivable securitization program with a new $310 million
accounts receivable securitization program consisting of $260
million of floating-rate notes due in 2000 (the "Notes") together
with a five-year $50 million revolving credit facility
(collectively, the "March 1995 Refinancing"). The March 1995
Refinancing permits the Company to sell certain of its accounts
receivable to Stone Receivables Corporation, which purchases such
receivables under the program. The initial accounts receivable
under the program were purchased with the net proceeds received
from the issuance of the Notes. The purchased accounts
receivable are solely the assets of Stone Receivables
Corporation, a wholly-owned subsidiary of the Company, with its
own borrowings. In the event of a liquidation of Stone
Receivables Corporation, such borrowings would be satisfied from
the assets of Stone Receivables Corporation prior to any
distribution to the Company. At September 30, 1995, the
Company's Consolidated Balance Sheet included approximately $321
million of accounts receivable under the program and $266 million
of borrowings under the program.
On August 15, 1995, the Company paid a cash dividend of
$2.1875 per share on the Series E Cumulative Preferred Stock.
The cash dividend represented a payment of $1.75 cumulative
arrearage for four quarters plus a regular quarterly dividend of
$0.4375. The cumulative cash dividend satisfied all dividends in
arrears on the Series E Cumulative Preferred Stock. On October
2, 1995, the Company's Board of Directors declared a cash
dividend of $0.4375 per share on the Series E Cumulative
Preferred Stock payable November 15, 1995 to stockholders of
record on November 1, 1995. Also, on October 2, 1995, the
Company's Board of Directors declared a quarterly cash dividend
of $0.15 per share on the Company's common stock payable December
13, 1995 to shareholders of record on November 22, 1995. The
Company had previously paid a quarterly cash dividend of $0.15
per share on the Company's common stock on September 13, 1995.
<PAGE>
Investing activities:
Capital expenditures for the nine months ended September 30, 1995
totalled approximately $280 million.
Outlook:
As a result of favorable industry conditions, the Company
implemented price increases for containerboard and corrugated
containers during the first nine months of 1995. However, due to
an increased imbalance in the supply demand relationship for both
containerboard and corrugated containers during the third quarter
of 1995, industry containerboard inventories have risen. As a
result of this imbalance, containerboard prices have come under
pressure beginning in the 1995 fourth quarter.
During the third quarter of 1995, the Company removed
approximately 145 thousand tons of containerboard production from
certain of its mills for inventory balancing purposes. The
Company plans to take additional market-related downtime of
approximately 160 thousand tons of containerboard and
approximately 20 thousand tons of market pulp during the fourth
quarter of 1995.
During the first nine months of 1995, the Company
implemented price increases for market pulp and has begun to
implement a further market pulp price increase for softwood pulp
effective October 1, 1995.
Additionally, Stone-Consolidated implemented newsprint and
groundwood paper price increases during the first nine months of
1995 and has announced a further newsprint price increase
effective February 1, 1996.
There can be no assurance that announced price increases for
the products of the Company or Stone-Consolidated will be
achieved or that prices can be maintained at current levels.
Wood fiber and recycled fiber, the principal raw materials
used in the manufacture of the Company's products, are purchased
in highly competitive, price sensitive markets. These raw
materials have historically exhibited price and demand
cyclicality. In addition, increased demand for the Company's and
the industry's products has resulted in greater demand for raw
materials, which has translated into higher raw material prices,
including a significant increase in the costs of recycled fiber.
The Company purchases or cuts a variety of species of timber
from which the Company utilizes wood fiber. The supply and price
of wood fiber in particular is dependent upon a variety of
factors over which the Company has no control, including
environmental and conservation regulations and natural disasters,
such as forest fires and hurricanes, and weather. A decrease in
the supply of wood fiber has caused, and will likely continue to
cause, higher wood fiber costs in some of the regions in which
the Company procures wood.
The increase in demand for products manufactured, in whole
or in part, from recycled fiber had caused a tightness in supply
of recycled fiber and a resulting significant increase in the
cost of such fiber used in the manufacture of recycled
containerboard and other products. Costs for recycled fiber
decreased in the 1995 third quarter when compared to the 1995
first and second quarters, but were still higher when compared to
the third quarter of 1994. Increased benefits of lower recycled
fiber costs are anticipated for the 1995 fourth quarter.
While the Company has not experienced any significant
difficulty in obtaining wood fiber and recycled fiber for its
mills, there can be no assurances that this will continue to be
the case for any or all of its mills.
In April 1995, the Company announced modest incremental
containerboard capacity projects at seven of its twelve U.S.
mills. These projects, which will be phased in between December
1995 and October 1996, will add a total of 704 tons per day to
the Company's production capacity, or less than 3 percent of the
Company's total mill production capacity. The cost of these
projects is approximately $87,500 per daily ton.
In July 1995, the Company announced that it has indefinitely
delayed the planned conversion of the No. 1 paper machine from
newsprint to corrugating medium at its mill in Snowflake,
Arizona. The Company remains on schedule at this mill to
construct an OCC ("old corrugated container") processing plant.
In the second quarter of 1994, a digester vessel ruptured at
the Company's pulp and paperboard mill in Panama City, Florida
causing extensive damage to certain of the facility's assets.
The Company is seeking recovery for both the losses to property
and the losses as a result of business interruption arising from
the Panama City occurrence. A partial recovery of approximately
$31 million has been received by the Company from certain
carriers, claims of approximately $11 million have been committed
to be paid and claims of approximately $41 million covering the
remaining portion of such losses are still pending. The
insurance carrier providing boiler and machinery coverage for the
Company has denied the Company's claim. The Company has
challenged the denial and has commenced a declaratory judgement
action against the boiler and machinery insurance carrier for a
determination that such insurance carrier is responsible for
coverage of the loss. In addition, during the second quarter of
1995, certain of the all-risk insurance carriers, which would
cover the losses not covered under the boiler and machinery
coverage, have also denied coverage. The Company has entered
into stand-still agreements with such carriers pending the
outcome of the suit against the boiler and machinery carrier.
Management believes the receivable recorded on its financial
statements is fully recoverable.
<PAGE>
The Company is continuing to pursue its financial strategy
of enhancing its liquidity and financial flexibility by
evaluating alternatives related to its non-core assets, including
the U.S. wood products business. As an initial step in achieving
this objective, the Company ceased operations of three wood
products facilities in the Pacific Northwest and has begun and
will continue to divest the assets of those facilities as
appropriate opportunities arise. Accordingly, such net assets
held for sale are included in other current assets within the
September 30, 1995 Consolidated Balance Sheet.
On November 1, 1995, Stone-Consolidated amalgamated its
operations (the "Amalgamation") with Rainy River Forest Products
Inc. ("Rainy River"), a Toronto-based Canadian pulp and paper
company. The amalgamated entity ("Amalco") will continue under
the name of Stone-Consolidated Corporation. As a result of the
Amalgamation, the Company's equity ownership in Stone-
Consolidated Corporation was reduced from 74.6 percent to 46.7
percent. From the effective date of the Amalgamation, the
Company will begin reporting Stone-Consolidated Corporation as a
non-consolidated affiliate in accordance with the equity method
of accounting.
On November 2, 1995, the Company announced it has entered
into a joint venture agreement with Four M Corporation (Box USA)
to purchase a paperboard mill located in Port St. Joe, Florida,
from St. Joe Paper Company for $185 million plus applicable
working capital. Under the joint venture agreement, the Company
would make a 50 percent equity investment in the joint venture.
It is anticipated that the purchase by the joint venture would
close late in the first quarter of 1996. The completion of the
transaction is contingent upon a number of conditions, including
the termination of the Hart-Scott-Rodino waiting period and the
placement of non-recourse financing. Upon completion of the
transaction, the joint venture would be highly leveraged. The
mill has the capacity to produce approximately 500,000 short tons
per year, split almost evenly between mottled white and kraft
linerboard.
On November 6, 1995, the Company announced that a wholly-
owned subsidiary plans to privately place $200 million of senior
unsecured notes due in 2003 that will be unconditionally
guaranteed by the Company. The net proceeds from the issuance of
the notes will be used to retire existing indebtedness of the
Company. The placement of notes is expected to close in November
1995.
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3 By-laws of the Company, as amended.
11 Computation of Primary and Fully Diluted Net Income
(Loss) Per Common Share.
27 Financial Data Schedule for the nine months ended
September 30, 1995.
(b) Reports on Form 8-K
1. A Current Report on Form 8-K dated September 8, 1995
was filed under Item 5 -- Other Events, stating that
the Company issued a press release on August 31, 1995
announcing the removal of 180,000 tons of production
from seven mills during the third quarter.
2. A Current Report on Form 8-K dated November 7, 1995
was filed under Item 5 -- Other Events, stating that
the Company issued a press release on October 23,
1995 announcing its financial results for the third
quarter of 1995 and for the nine months ended
September 30, 1995.
3. A Current Report on Form 8-K dated November 9, 1995
was filed reporting under Item 2 - Acquisition or
Disposition of Assets, stating that Stone-
Consolidated Corporation, a 74.6 percent owned
Canadian subsidiary of the Company, amalgamated its
operations with Rainy River Forest Products Inc., a
Toronto-based Canadian pulp and paper company. The
amalgamated entity ("Amalco") will continue under the
name Stone-Consolidated Corporation. As a result of
the Amalgamation, the Company's equity ownership in
Stone-Consolidated Corporation was reduced from 74.6
percent to approximately 46.7 percent. Stone-
Consolidated Corporation will begin to be reported by
the Company under the equity method of accounting
effective November 1, 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Company has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized.
STONE CONTAINER CORPORATION
By: Thomas P. Cutilletta
____________________________
Thomas P. Cutilletta
Senior Vice President and
Corporate Controller
(Principal Accounting
Officer)
Date: November 14, 1995
BY-LAWS
of
STONE CONTAINER CORPORATION
As Amended and In Effect
October 2, 1995
<PAGE>
BY-LAWS
of
Stone Container Corporation
ARTICLE I
Stockholders
Section 1.1 Annual Meeting. The annual meeting of
stockholders for the election of directors and the transaction of such
other business as may properly come before it shall be held on the
second Tuesday of May of each year, or such other date, and at such
time and place, within or without the State of Delaware, as shall be
determined by resolution of the Board of Directors. If the day fixed
for the annual meeting is a legal holiday, such meeting shall be held
on the next succeeding business day.
Except as otherwise provided by the laws of Delaware or the
Certificate of Incorporation of the Corporation, the only business
which properly shall be conducted at any annual meeting of stockholders
shall (a) have been specified in the written notice of the meeting (or
any supplement thereto) given as provided in Section 1.3, (b) be
brought before the meeting by or at the direction of the Board of
Directors or the officer of the Corporation presiding at the meeting or
(c) have been specified in a written notice (a "Stockholder Meeting
Notice") given to the Corporation, in accordance with all of the
following requirements, by or on behalf of any stockholder who is
entitled to vote at such meeting. Each Stockholder Meeting Notice must
be delivered personally to, or be mailed to and received by, the
Secretary of the Corporation at the principal executive offices of the
Corporation, in Chicago, Illinois, not less than sixty nor more than
ninety days prior to the annual meeting; provided, however, that in the
event that less than seventy days' notice or prior public disclosure of
the date of the annual meeting is given or made to stockholders, notice
by the stockholder to be timely must be received not later than the
close of business on the tenth day following the day on which such
notice of the date of the annual meeting was mailed or such public
disclosure was made, whichever first occurs. Each Stockholder Meeting
Notice shall set forth: (a) a description of each item of business
proposed to be brought before the meeting and the reasons for
conducting such business at the annual meeting; (b) the name and record
address of the stockholder proposing to bring such item of business
before the meeting; (c) the class and number of shares of capital stock
held of record, owned beneficially and represented by proxy by such
stockholder as of the record date for the meeting (if such date shall
then have been made publicly available) and as of the date of such
Stockholder Meeting Notice; and (d) such other information which would
be required to be included in a proxy statement filed with the
Securities and Exchange Commission if, with respect to any such item of
business, such stockholder were a participant in a solicitation subject
to Section 14 of the Securities Exchange Act of 1934, as amended. No
business shall be brought before any annual meeting of stockholders of
the Corporation otherwise than as provided in this Section 1.1;
provided, however, that nothing contained in this Section 1.1 shall be
deemed to preclude discussion by any stockholder of any business
properly brought before the annual meeting. The officer of the
Corporation presiding at the annual meeting of stockholders shall, if
the facts so warrant, determine that business was not properly brought
before the meeting in accordance with the provisions of this Section
1.1 and, if such officer should so determine, such officer shall so
declare to the meeting and any such business so determined to be not
properly brought before the meeting shall not be transacted.
Section 1.2 Special Meeting. Special meetings of
stockholders may only be called by the Board of Directors or the
Chairman of the Board. Special meetings of stockholders may be held at
such places, within or without the State of Delaware, as may be
specified in the call of any meeting.
Section 1.3 Notice of Meetings and Adjourned Meetings.
Written notice of every meeting of stockholders stating the place,
date, time and purposes thereof, shall, except when otherwise required
by the laws of the State of Delaware, be mailed at least ten but not
more than sixty days prior to the meeting to each stockholder of record
entitled to vote thereat. Any meeting at which a quorum of
stockholders is present, in person or by proxy, may adjourn from time
to time without notice other than announcement at such meeting until
its business is completed. At the adjourned meeting, the Corporation
may transact any business which might have been transacted at the
original meeting. If the adjournment is for more than thirty days, or
if after the adjournment a new record date is fixed for the adjourned
meeting, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
Section 1.4. Quorum. The holders of a majority of the
shares of capital stock of the Corporation issued and outstanding and
entitled to vote, present in person or by proxy, shall, except as
otherwise provided by law, constitute a quorum for the transaction of
business at all meetings of stockholders. If at any meeting a quorum
is not present, the chairman of the meeting or the holders of the
majority of the voting power of the shares of capital stock present or
represented may adjourn the meeting from time to time until a quorum is
present. At the adjourned meeting, the Corporation may transact any
business that might have been transacted at the original meeting. If
the adjournment is for more than thirty days, or if after the
adjournment a new record dated is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of
record entitled to vote at the meeting. The stockholders present or
represented at a duly called or held meeting at which a quorum is
present may continue to transact business until final adjournment
notwithstanding the withdrawal of enough stockholders to leave less
than a quorum.
Section 1.5 Voting. (a) Except as otherwise provided in
the Certificate of Incorporation of the Corporation or these By-Laws,
each holder of capital stock entitled to vote at a stockholders'
meeting shall, as to all matters in respect of which such capital stock
has voting rights, be entitled to one vote in person or by written
proxy for each share of capital stock owned of record by him, but no
proxy shall be voted or acted upon after three years from its date
unless the proxy provides for a longer period. No vote upon any matter
need be by ballot unless demanded by the holders of at least ten
percent of the voting power of the shares represented and entitled to
vote at the meeting. Except as provided in Section 1.5(b) of these By-
Laws with respect to the election of directors, all questions or
matters shall be decided by a majority of the votes cast, unless
otherwise required by the laws of the State of Delaware, the
Certificate of Incorporation or these By-Laws.
(b) In all elections for directors, each stockholder
entitled to vote thereat shall be entitled to as many votes as shall
equal the number of votes which (except for this Section 1.5(b)) such
stockholder would be entitled to cast for the election of directors
with respect to such stockholder's shares of stock multiplied by the
number of directors to be elected, and such stockholder may cast all of
such votes for a single director or may distribute them among the
number to be voted for or for any two or more of them as such
stockholder may see fit.
Section 1.6 Consent of Stockholders in Lieu of Meeting. (a)
Any action required to be taken or which may be taken at any annual or
special meeting of stockholders of the Corporation may be taken without
a meeting, without prior notice and without a vote, if a consent in
writing, setting forth the action so taken, shall be signed by the
holders of outstanding stock having not less than the minimum number of
votes that would be necessary to authorize or take such action at a
meeting at which all shares entitled to vote thereon were present and
voted.
(b) Within three business days after receipt of the
earliest dated consent delivered to the Corporation in the manner
provided in Section 228(c) of the Delaware General Corporation Law or
the determination by the Board of Directors of the Corporation that the
Corporation should seek corporate action by written consent, as the
case may be, the Secretary of the Corporation shall engage nationally
recognized independent inspectors of elections for the purpose of
performing a ministerial review of the validity of the consents and
revocations. The cost of retaining inspectors of election shall be
borne by the Corporation.
(c) Consents and revocations shall be delivered to the
inspectors upon receipt by the Corporation, any stockholder or
stockholders soliciting consents or soliciting revocations in
opposition to action by consent proposed by the Corporation
("Soliciting Stockholders"), proxy solicitors of the Corporation or
Soliciting Stockholders or other designated agents. As soon as
consents and revocations are received, the inspectors shall review the
consents and revocations and shall maintain a count of the number of
valid and unrevoked consents. The inspectors shall keep such count
confidential and shall not reveal the count to the Corporation, the
Soliciting Stockholders, representatives of the Corporation or the
Soliciting Stockholders or any other entity. As soon as practicable
after the earlier of (i) sixty days after the date of the earliest
dated consent delivered to the Corporation in the manner provided in
Section 228(c) of the Delaware General Corporation Law or (ii) a
written request therefor by the Corporation or Soliciting Stockholders,
whichever is soliciting consents, notice of which request shall be
given to the party opposing the solicitation of consents, if any, and
which shall state that the Corporation or Soliciting Stockholders, as
the case may be, have a good faith belief that the requisite number of
valid and unrevoked consents to authorize or take the action specified
in the consents has been received in accordance with these By-Laws, the
inspectors shall issue a preliminary report to the Corporation and the
Soliciting Stockholders stating: (i) the number of valid consents;
(ii) the number of valid revocations; (iii) the number of valid and
unrevoked consents; (iv) the number of invalid consents; (v) the number
of invalid revocations; (vi) whether, based on their preliminary count,
the requisite number of valid and unrevoked consents has been obtained
to authorize or take the action specified in the consents.
(d) Unless the Corporation and the Soliciting Stockholders
shall agree to a shorter or longer period, the Corporation and the
Soliciting Stockholders shall have 48 hours to review the consents and
revocations and to advise the inspectors and the opposing party in
writing as to whether they intend to challenge the preliminary report
of the inspectors. If no written notice of an intention to challenge
the preliminary report is received within 48 hours after the
inspectors' issuance of the preliminary report, the inspectors shall
issue to the Corporation and the Soliciting Stockholders their final
report containing the information from the inspectors' determination
with respect to whether the requisite number of valid and unrevoked
consents was obtained to authorize or take the action specified in the
consents. If the Corporation or the Soliciting Stockholders issue
written notice of an intention to challenge the inspectors' preliminary
report within 48 hours after the issuance of that report, a challenge
session shall be scheduled by the inspectors as promptly as
practicable. A transcript of the challenge session shall be recorded
by a certified court reporter. Following completion of the challenge
session, the inspectors shall as promptly as practicable issue their
final report to the Soliciting Stockholders and the Corporation, which
report shall contain the information included in the preliminary
report, plus all changes in the vote totals as a result of the
challenge or otherwise and a certification of whether the requisite
number of valid and unrevoked consents was obtained to authorize or
take the action specified in the consents. A copy of the final report
of the inspectors shall be included in the book in which the
proceedings of meetings of stockholders are recorded.
(e) The Corporation shall give prompt notice to the
stockholders of the results of any consent solicitation or the taking
of the corporate action without a meeting by less than unanimous
written consent.
Section 1.7 Fixing Date for Determination of Stockholders of
Record. (a) In order that the Corporation may determine the
stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or entitled to receive payment
of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or
exchange of capital stock or for the purpose of any other lawful action
other than stockholder action by written consent, the Board of
Directors may fix, in advance, a record date, which shall not be more
than sixty nor less than ten days before the date of such meeting, nor
more than sixty days prior to any such other action.
(b) If no record date is fixed:
(1) The record date for determining stockholders entitled to
notice of or to vote at a meeting of stockholders shall be at the close
of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next
preceding the day on which the meeting is held.
(2) The record date for determining stockholders for any
other purpose other than stockholder action by written consent shall be
at the close of business on the day on which the Board of Directors
adopts the resolution relating thereto.
(c) A determination of stockholders of record entitled to
notice of or to vote at a meeting of stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
(d) In order that the Corporation may determine the
stockholders entitled to consent to corporate action in writing without
a meeting, the Board of Directors may fix, in advance, a record date,
which shall not be more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Directors.
Any stockholder or record seeking to have the stockholders authorize or
take corporate action by written consent shall, by written notice to
the Secretary of the Corporation at its principal executive offices in
Chicago, Illinois, request the Board of Directors to fix a record date.
The Board of Directors shall promptly, but in all events within ten
days after the date on which such a request is received, adopt a
resolution fixing the record date. If no record date has been fixed by
the Board of Directors within ten days after the date on which such a
request is received, the record date for determining stockholders
entitled to consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is required by
applicable law, shall be the first date on which a signed written
consent setting forth the action taken or proposed to be taken is
delivered to the Corporation by delivery to its registered office in
the State of Delaware, its principal place of business, or an officer
or agent of the Corporation having custody of the book in which
proceedings of meetings of stockholders are recorded. Delivery made to
the Corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested. If no record date has been
fixed by the Board of Directors and prior action by the Board of
Directors is required by applicable law, the record date for
determining stockholders entitled to consent to corporate action in
writing without a meeting shall be at the close of business on the date
on which the Board of Directors adopts the resolution taking such prior
action.
<PAGE>
ARTICLE II
Directors
Section 2.1 Number, Election and Term of Office of
Directors. The Board of Directors of the Corporation shall consist of
fourteen directors, except that from time to time, such number shall be
deemed, for all purposes of these By-Laws and otherwise, increased or
decreased (each such increase or decrease to occur automatically
without any action required by the Corporation, the Board of Directors
or the stockholders) to the extent required by the terms of any issued
and outstanding series of preferred stock of the Corporation. Each
director shall hold office until his successor is elected and qualified
or until his earlier resignation or removal. No director need be a
stockholder.
Section 2.2 Resignation or Removal. Any director may resign
by giving written notice to the Board of Directors or the Chairman of
the Board, any such resignation shall take effect at the time of
receipt of notice thereof or at any later time specified therein, and,
unless expressly required, acceptance of such resignation shall not be
necessary to make it effective. Except as otherwise required by the
laws of the State of Delaware, the Certificate of Incorporation or in
any Preferred Stock Designation (as defined in Article Fourth of the
Certificate of Incorporation), any director may be removed, with or
without cause, by the affirmative vote or consent of the holders of a
majority of the voting power of shares of capital stock issued and
outstanding and entitled to vote.
Section 2.3 Vacancies. Except as otherwise required by the
Certificate of Incorporation or in any Preferred Stock Designation, any
vacancy occurring in the Board of Directors and any directorship to be
filled by reason of an increase in the number of directors may be
filled by a majority of the directors then in office, although less
than a quorum, or by the stockholders. A director elected to fill a
vacancy shall hold office until his successor is elected and qualified
or until his earlier resignation or removal. Except as otherwise
required by the Certificate of Incorporation, when one or more
directors shall resign from the Board of Directors, effective at a
future date, a majority of the directors then in office, including
those who have so resigned, shall have the power to fill such vacancy
or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall
hold office as provided in this Section 2.3 for the filling of other
vacancies.
Section 2.4 Place of Meetings. Meetings of the Board of
Directors may be held at such places, within or without the State of
Delaware, as the Board of Directors may from time to time determine or
as may be specified in the call of any meetings.
Section 2.5 Regular Meetings. A regular annual meeting of
the Board of Directors shall be held without call or notice immediately
after and at the same general place as the annual meeting of
stockholders, for the purpose of organizing the Board of Directors,
electing officers and transacting any other business that may properly
come before the meeting. Additional regular meetings of the Board of
Directors may be held without call or notice at such place and at such
time as shall be fixed by resolution of the Board of Directors.
Section 2.6 Special Meetings. Special meetings of the Board
of Directors may be called by the Chairman of the Board of Directors or
any two directors then in office. Notice of special meetings either
shall be mailed by the Secretary to each director at least two days
before the meeting or shall be given personally or telegraphed or
telecopied to each director by the Secretary at least twenty-four hours
before the meeting. Such notice shall set forth the date, time and
place of such meeting but need not, unless otherwise required by law,
state the purpose of the meeting.
Section 2.7 Quorum and Voting. A majority of the entire
Board of Directors shall constitute a quorum for the transaction of
business at any meeting of the Board of Directors. The act of the
majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors unless otherwise
provided by the laws of the State of Delaware, the Certificate of
Incorporation or these By-Laws. A majority of the directors present at
any meeting at which a quorum is present may adjourn the meeting to any
other date, time or place without further notice other than
announcement at the meeting. If at any meeting a quorum is not
present, a majority of the directors present may adjourn the meeting to
any other date, time or place without notice other than announcement at
the meeting until a quorum is present.
Section 2.8 Compensation. The directors shall be paid their
reasonable expenses, if any, of attendance at each meeting of the Board
of Directors and may be paid a fixed sum for attendance at each meeting
of the Board of Directors and an annual retainer or salary for services
as a director. No such payment shall preclude any director from
serving the Corporation in any other capacity and receiving
compensation therefor.
Section 2.9 Telephonic Meetings. Members of the Board of
Directors may participate in a meeting of the Board of Directors by
means of conference telephone or other similar communications equipment
by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 2.9
shall constitute presence in person at such meeting.
Section 2.10 Retirement. No person shall be nominated or
elected to the office of director of the Corporation if he or she has
attained, as of the date of the annual or special meeting of
stockholders at which he or she is to be elected, the age of 70.
Section 2.11 Honorary Directors. Mr. Marvin N. Stone and
Mr. Jerome H. Stone shall be honorary directors and, as such, shall be
entitled to notice of and to participate at meetings of directors, but
shall have no vote.
<PAGE>
Section 2.12 Executive Committee. The Board of Directors
may, in its discretion by resolution passed by a majority of the Board
of Directors, designate an Executive Committee consisting of such
number of directors as the Board of Directors shall determine. The
Executive Committee shall have and may exercise all of the authority of
the Board of Directors in the management of the Corporation with
respect to any matter which may require action prior to, or which in
the opinion of the Executive Committee may be inconvenient,
inappropriate or undesirable to be postponed until, the next meeting of
the Board of Directors; provided, the Executive Committee shall have no
authority to obligate the Corporation to any expenditure or liability
in excess of $1,500,000 in respect of any one project or series of
related projects unless in furtherance of resolutions or actions
previously adopted by the Board of Directors; and further provided, the
Executive Committee shall not have the power or authority of the Board
of Directors in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or consolidation, recommending to the
stockholders the sale, lease or exchange of all or substantially all of
the Corporation's property and assets, recommending to the stockholders
a dissolution of the Corporation or a revocation of a dissolution, or
amending these By-Laws. Any member of the Board of Directors may
request the Chairman of the Executive Committee to call a meeting of
the Executive Committee with respect to a specified subject.
Section 2.13 Other Committees. The Board of Directors may
from time to time, in its discretion, by resolution passed by a
majority of the Board of Directors, designate, and appoint, other
committees of one or more directors which shall have and may exercise
such lawfully delegable powers and duties conferred or authorized by
the resolutions of designation and appointment. The Board shall have
power at any time to change the members of any such committee, to fill
vacancies, and to discharge any such committee.
Section 2.14 Nominations. Except as otherwise provided in
the Certificate of Incorporation or any Preferred Stock Designation
relating to the rights of the holder of any one or more classes or
series of preferred stock issued by the Corporation, acting separately
by class or series, to elect, under specified circumstances, directors
at a meeting of stockholders, nominations for the election of directors
may be made by the Board of Directors or a committee appointed by the
Board of Directors or by any stockholder entitled to vote in the
election of directors generally. However, any stockholder entitled to
vote in the election of directors generally may nominate one or more
persons for election as directors at a meeting at which directors are
to be elected only if written notice of such stockholder's intent to
make such nomination or nominations has been delivered personally to,
or been mailed to and received by, the Secretary of the Corporation at
the principal executive offices of the Corporation in Chicago,
Illinois, not less than sixty days nor more than ninety days prior to
the meeting; provided, however, that, in the event that less than
seventy days' notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder to
be timely must be received not later than the close of business on the
tenth day following the day on which such notice of the date of the
meeting was mailed or such public disclosure was made, whichever first
occurs. Each such notice shall set forth: (i) the name and record
address of the stockholder who intends to make the nomination; (ii) the
name, age, principal occupation or employment, business address and
residence address of the person or persons to be nominated; (iii) the
class and number of shares of capital stock held of record, owned
beneficially and represented by proxy by such stockholder and by the
person or persons to be nominated as of the record date for the meeting
(if such date shall then have been made publicly available) and the
date of such notice; (iv) a representation that the stockholder intends
to appear in person or by proxy at the meeting to nominate the person
or persons specified in the notice; (v) a description of all
arrangements or understandings between such stockholder and each
nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by such
stockholder; (vi) such other information regarding each nominee
proposed by such stockholder as would be required to be included in a
proxy statement filed pursuant to the Securities Exchange Act of 1934,
as amended, and the proxy rules of the Securities and Exchange
Commission; and (vii) the consent of each nominee to serve as a
director of the Corporation if so elected. The Corporation may require
any proposed nominee to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility
of such proposed nominee to serve as a director of the Corporation.
The officer of the Corporation presiding at the meeting of stockholders
shall, if the facts so warrant, determine that a nomination was not
made in accordance with the provisions of this Section 2.14 and, if
such officer should so determine, such officer shall so declare to the
meeting and the defective nomination shall be disregarded. No person
shall be eligible for election as a director of the Corporation unless
nominated in accordance with the procedures set forth in these By-Laws.
<PAGE>
ARTICLE III
Officers
Section 3.1 Number and Designation. The officers of the
Corporation shall be a Chairman of the Board, a President, one or more
Vice Presidents (the number thereof to be determined by the Board of
Directors and one or more of whom may be designated as Executive Vice
Presidents or Senior Vice Presidents), a Secretary and a Treasurer, and
such Assistant Secretaries, Assistant Treasurers or other officers as
may be elected or appointed by the Board of Directors. Any two or more
offices may be held by the same person, except that no one person may
hold the offices of both Chairman of the Board and Secretary nor both
President and Secretary.
Section 3.2 Election and Term of Office. The officers of
the Corporation shall be elected annually by the Board of Directors at
the first meeting of the Board of Directors held after each annual
meeting of stockholders. If the election of officers shall not be held
at such meeting, such election shall be held as soon thereafter as
conveniently may be. Vacancies may be filled or new offices created
and filled at any meeting of the Board of Directors. Each officer
shall hold office until his or her successor shall have been duly
elected and shall have qualified or until his or her earlier
resignation or removal.
Section 3.3 Removal. Any officer or agent elected or
appointed by the Board of Directors may be removed by the Board of
Directors whenever in its judgment the best interests of the
Corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed.
Section 3.4 Vacancies. A vacancy in any office because of
death, resignation, removal, disqualification or otherwise, may be
filled by the Board of Directors for the unexpired portion of the term.
Section 3.5 Chairman of the Board. The Chairman of the
Board shall be the chief executive officer of the Corporation and shall
in general supervise and control all of the business and affairs of the
Corporation. The Chairman of the Board may sign, alone or with the
Secretary or any other proper officer of the Corporation thereunto
authorized by the Board of Directors, any deeds, mortgages, bonds,
contracts, or other instruments which the Board of Directors has
authorized to be executed, except in cases where the signing and
execution thereof shall be expressly delegated by the Board of
Directors or by these By-Laws to some other officer or agent of the
Corporation, or shall be required by law to be otherwise signed or
executed, and in general he shall perform all duties incident to the
office of Chairman of the Board and such other duties as from time to
time may be prescribed by the Board of Directors. When present, he
shall preside at all meetings of the stockholders and of the Board of
Directors.
<PAGE>
Section 3.6 President. The President shall be the principal
officer of the Corporation, second only to the Chairman of the Board.
In the absence of the Chairman of the Board or in the event of his or
her inability or refusal to act as Chairman of the Board, the President
shall perform the duties of the Chairman of the Board and, when so
acting, shall have all the powers of, and be subject to all the
restrictions upon, the Chairman of the Board. He or she may sign,
alone or with the Secretary or any other proper officer of the
Corporation thereunto authorized by the Board of Directors, any deeds,
mortgages, bonds, contracts, or other instruments which the Board of
Directors has authorized to be executed, except in cases where the
signing and execution thereof shall be expressly delegated by the Board
of Directors or by these By-Laws to some other officer or agent of the
Corporation, or shall be required by law to be otherwise signed or
executed, and in general he shall perform all duties incident to the
office of President and such other duties as from time to time may be
prescribed by the Board of Directors or the Chairman of the Board.
Section 3.7 The Vice Presidents. In the absence of the
President or in the event of his or her inability or refusal to act,
the Vice President (or in the event there be more than one Vice
President, the Vice Presidents in the order of their election) shall
perform the duties of the President, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the
President. Any Vice President shall perform such duties as from time
to time may be assigned to him or her by the Chairman of the Board, the
President or by the Board of Directors.
Section 3.8 The Treasurer. If required by the Board of
Directors, the Treasurer shall give a bond for the faithful discharge
of his duties in such sum and with such surety or sureties as the Board
of Directors shall determine. The Treasurer shall have charge and
custody of and be responsible for all funds and securities of the
Corporation, receive and give receipts for moneys due and payable to
the Corporation from any source whatsoever, and deposit all such moneys
in the name of the Corporation in such banks, trust companies or other
depositories as shall be selected in accordance with the provisions of
Article IV of these By-Laws. The Treasurer shall in general perform
all the duties incident to the office of Treasurer and such other
duties as from time to time may be assigned to him or her by the
Chairman of the Board, the President or by the Board of Directors.
Section 3.9 The Secretary. The Secretary shall: (a) keep
the minutes of the stockholders' and of the Board of Directors'
meetings in one or more books provided for that purpose; (b) see that
all notices are duly given in accordance with the provisions of these
By-Laws or as required by law; (c) be custodian of the corporate
records and of the seal of the Corporation; (d) keep a register of the
post office address of each stockholder which shall be furnished to the
Secretary by such stockholder; (e) have general charge of the stock
transfer books of the Corporation; and (f) in general perform all
duties incident to the office of Secretary and such other duties as
from time to time may be assigned to him or her by the President or the
Board of Directors.
<PAGE>
Section 3.10 Assistant Treasurers and Secretaries. The
Assistant Treasurers shall respectively, if required by the Board of
Directors, give bonds for the faithful discharge of their duties in
such sums and with such sureties as the Board of Directors shall
determine. The Assistant Treasurers and Assistant Secretaries, in
general, shall perform such duties as shall be assigned to them by the
Treasurer or the Secretary, respectively, or by the Chairman of the
Board, the President or the Board of Directors.
Section 3.11 Salaries. The salaries of the officers shall
be fixed from time to time by the Board of Directors and no officer
shall be prevented from receiving such salary by reason of the fact
that he is also a director of the Corporation.
ARTICLE IV
Contracts, Loans, Checks, and Deposits
Section 4.1 Contracts. The Board of Directors may authorize
any officer or officers, agent or agents, to enter into any contract or
execute and deliver any instrument in the name of and on behalf of the
Corporation, and such authority may be general or confined to specific
instances.
Section 4.2 Loans. No loans shall be contracted on behalf
of the Corporation and no evidences of indebtedness shall be issued in
the name of the Corporation unless authorized by a resolution of the
Board of Directors. Such authority may be general or confined to
specific instances.
Section 4.3 Checks, Drafts, Etc. All checks, drafts or
other orders for the payment of money issued in the name of the
Corporation shall be signed by such officers, employees or agents of
the Corporation as shall from time to time be designated by the
Chairman of the Board, the President, the Vice President-Finance or the
Treasurer.
Section 4.4 Deposits. All funds of the Corporation not
otherwise employed shall be deposited from time to time to the credit
of the Corporation in such banks, trust companies or other depositories
as shall be designated from time to time by the Chairman of the Board,
the President, a Vice President or the Treasurer; and such officers may
designate any type of depository arrangement (including but not limited
to depository arrangements resulting in net debits against the
Corporation) as from time to time offered or available.
<PAGE>
ARTICLE V
Certificates of Stock
The interest of each stockholder of the Corporation shall be
evidenced by certificates for shares of stock in such form as the Board
of Directors may from time to time prescribe. The shares of the stock
of the Corporation shall be transferred on the books of the Corporation
by the holder thereof in person or by his attorney, upon surrender for
cancellation of certificates for the same number of shares, with an
assignment and power of transfer endorsed thereon or attached thereto,
duly executed, with such proof of the authenticity of the signature as
the Corporation or its agents may reasonably require.
The certificates of stock shall be signed, countersigned and
registered in such manner as the Board of Directors may by resolution
prescribe, which resolution may permit all or any of the signatures on
such certificates to be in facsimile. In case any officer, transfer
agent or registrar who has signed or whose facsimile signature has been
placed upon a certificate has ceased to be such officer, transfer agent
or registrar before such certificate is issued, it may be issued by the
Corporation with the same effect as if he were such officer, transfer
agent or registrar at the date of issue.
ARTICLE VI
Fiscal Year
The fiscal year of the Corporation shall begin on the first
day of January in each year and end on the thirty-first day of December
in each year.
ARTICLE VII
Offices
The Corporation may have offices outside of the State of
Delaware at such places as shall be determined from time to time by the
directors.
<PAGE>
ARTICLE VIII
Indemnification
Section 8.1 General. Each person who was or is made a party
or is threatened to be made a party to or is involved in any action,
suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that
he or she or a person of whom he or she is the legal representative is
or was a director, officer or employee of the Corporation or is or was
serving at the request of the Corporation as a director, officer,
employee or agent of another corporation or of a partnership, joint
venture, trust or other enterprise, including service with respect to
employee benefit plans, whether the basis of such proceeding is alleged
action in an official capacity as a director, officer, employee or
agent or in any other capacity while serving as a director, officer,
employee or agent, shall be indemnified and held harmless by the
Corporation to the fullest extent authorized by the General Corporation
Law of the State of Delaware as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to
provide prior to such amendment), against all expense, liability and
loss (including attorneys' fees, judgments, fines, ERISA excise taxes
or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit or
his or her heirs, executors and administrators; provided, however, that
except as provided in Section 8.2 with respect to proceedings seeking
to enforce rights to indemnification, the Corporation shall indemnify
any such person seeking indemnification in connection with a proceeding
(or part thereof) initiated by such person only if such proceeding (or
part thereof) was authorized by the Board of Directors of the
Corporation. The right to indemnification conferred in this Article
VIII shall be a contract right and shall include the right to be paid
by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition; provided, however, that
if the General Corporation Law of the State of Delaware requires, the
payment of such expenses incurred by a director of officer in his or
her capacity as a director or officer (and not in any other capacity in
which service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee benefit
plan) in advance of the final disposition of a proceeding, shall be
made only upon delivery to the Corporation of an undertaking by or on
behalf of such director or officer, to repay all amounts so advanced if
it shall ultimately be determined that such director or officer is not
entitled to be indemnified under this Article VIII or otherwise.
<PAGE>
Section 8.2 Expenses. If a claim under Section 8.1 is not
paid in full by the Corporation within thirty days after a written
claim has been received by the Corporation, the claimant may at any
time thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in part, the
claimant shall be entitled to be paid also the expense of prosecuting
such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending
any proceeding in advance of its final disposition where the required
undertaking, if any is required, has been tendered to the Corporation)
that the claimant has not met the standards of conduct which make it
permissible under the General Corporation Law of the State of Delaware
for the Corporation to indemnify the claimant for the amount claimed,
but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of
Directors, independent legal counsel or stockholders) to have made a
determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances because
he or she has met the applicable standard of conduct set forth in the
General Corporation Law of the State of Delaware, nor an actual
determination by the Corporation (including its Board of Directors,
independent legal counsel or stockholders) that the claimant has not
met such applicable standard of conduct, shall be a defense to the
action or create a presumption that the claimant has not met the
applicable standard of conduct.
Section 8.3 Non-Exclusive. The right to indemnification and
the payment of expenses incurred in defending a proceeding in advance
of its final disposition conferred in this Article VIII shall not be
exclusive of any other right which any person may have or hereafter
acquire under any statute, provision of the Certificate of
Incorporation, By-Law, agreement, vote of stockholders or disinterested
directors or otherwise.
Section 8.4 Insurance. The Corporation may maintain
insurance, at its expense, to protect itself and any director, officer,
employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any
expense, liability or loss, whether or not the Corporation would have
the power to indemnify such person against such expense, liability or
loss under the General Corporation Law of the State of Delaware.
Section 8.5 Agents. The Corporation may, to the extent
authorized from time to time by the Board of Directors, grant rights to
indemnification, and rights to be paid by the Corporation the expenses
incurred in defending any proceeding in advance of its final
disposition, to any agent of the Corporation to the fullest extent of
the provisions of this Article VIII with respect to the indemnification
and advancement of expenses of directors, officers and employees of the
Corporation.
<PAGE>
ARTICLE IX
Amendments
Except to the extent otherwise provided in the Certificate of
Incorporation, any Preferred Stock Designation or these By-Laws, these
By-Laws shall be subject to alteration, amendment or repeal, and new
By-Laws may be adopted (i) by the affirmative vote of the holders of
not less than a majority of the voting power of all of the outstanding
shares of capital stock of the Corporation then entitled to vote
generally in the election of directors, voting together as a single
class, at any regular or special meeting of the stockholders, or (ii)
by the affirmative vote of not less than a majority of the members of
the Board of Directors at any meeting of the Board of Directors at
which there is a quorum present and voting; provided, that in the case
of clause (i), any alteration, amendment or repeal made with respect
to, or the adoption of a new By-Law inconsistent with, Section 1.5(b)
of Article I of these By-Laws, shall require the affirmative vote of
the holders of not less than eighty percent of the voting power of all
of the outstanding shares of capital stock of the Corporation then
entitled to vote generally in the election of directors.
<PAGE>
<TABLE>
EXHIBIT 11
STONE CONTAINER CORPORATION
COMPUTATION OF PRIMARY AND FULLY DILUTED
NET INCOME (LOSS) PER SHARE
(in millions, except per share)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
__________________ __________________
1995 1994 1995 1994
________ ________ ________ ________
<S> <C> <C> <C> <C>
Primary Earnings Per Share
Shares of Common Stock:
Weighted average number of
common shares outstanding....... 95.9 90.4 92.5 87.5
________ ________ ________ ________
Primary Weighted Average Shares
Outstanding....................... 95.9 90.4 92.5 87.5
======== ======== ======== ========
Net income (loss)................... $ (48.9) $ (73.7) $ 175.8 $(234.4)
Less:
Series E Cumulative Convertible
Exchangeable Preferred Stock
dividend........................ (2.0) (2.0) (6.0) (6.0)
________ ________ ________ ________
Net income (loss) used in computing
primary net income (loss) per
common share...................... $ (50.9) $ (75.7) $ 169.8 $(240.4)
======== ======== ======== ========
Primary Earnings Per Share.......... $ (.53) $ (.84) $ 1.84 $ (2.75)
======== ======== ======== ========
Fully Diluted Earnings Per Share
Shares of Common Stock:
Weighted average number of common
shares outstanding.............. 95.9 90.4 92.5 87.5
Dilutive effect of options and
warrants........................ -- .2 -- .2
Addition from assumed conversion
of 8.875% convertible senior
subordinated notes.............. 12.3 21.6 18.5 21.6
Addition from assumed conversion
of 6.75% convertible
subordinated debentures......... 1.5 3.4 2.2 3.4
Addition from assumed conversion
of Series E Cumulative
Convertible Exchangeable
Preferred Stock................. 3.4 3.4 3.4 3.4
________ ________ ________ ________
<PAGE>
Fully Diluted Weighted Average Shares
Outstanding........................ 113.1 119.0 116.6 116.1
======== ======== ======== ========
Net Income (Loss)................... $ (48.9) $ (73.7) $ 175.8 $(234.4)
Less:
Series E Cumulative Convertible
Exchangeable Preferred Stock
dividend........................ (2.0) (2.0) (6.0) (6.0)
Income adjustment associated with
assumed conversion of Stone-
Consolidated Corporation 8%
convertible subordinated
debentures...................... (5.1) -- (9.0) --
Add back:
Interest on 8.875% convertible
senior subordinated notes....... 1.9 3.4 8.7 10.2
Interest on 6.75% convertible
subordinated debentures......... .5 1.2 2.3 3.5
Income adjustment associated with
assumed conversion of Stone-
Consolidated Corporation 8%
convertible subordinated
debentures...................... -- 1.1 -- 6.6
Series E Cumulative Convertible
Exchangeable Preferred Stock
dividend........................ 2.0 2.0 6.0 6.0
________ ________ ________ ________
Net income (loss) used in computing
fully diluted net income (loss)
per common share.................. $ (51.6) $ (68.0) $ 177.8 $(214.1)
======== ======== ======== ========
Fully Diluted Earnings Per Share(A). $ (.45) $ (.57) $ 1.53 $ (1.84)
======== ======== ======== ========
<FN>
(A) Fully diluted earnings per share for the three and nine months ended
September 30, 1994 are not disclosed in the Consolidated Statements of
Operations and Retained Earnings (Accumulated Deficit) because the
amounts are anti-dilutive.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Stone
Container Corporation and Subsidiaries' September 30, 1995 Consolidated
Balance Sheet and Consolidated Statement of Operations & Retained Earnings
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 102
<SECURITIES> 0
<RECEIVABLES> 1024
<ALLOWANCES> 27
<INVENTORY> 827
<CURRENT-ASSETS> 2118
<PP&E> 5868
<DEPRECIATION> 2377
<TOTAL-ASSETS> 7444
<CURRENT-LIABILITIES> 873
<BONDS> 4379
<COMMON> 1026
0
115
<OTHER-SE> (78)
<TOTAL-LIABILITY-AND-EQUITY> 7444
<SALES> 5707
<TOTAL-REVENUES> 5707
<CGS> 4002
<TOTAL-COSTS> 4744
<OTHER-EXPENSES> (36)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 354
<INCOME-PRETAX> 645
<INCOME-TAX> 263
<INCOME-CONTINUING> 357
<DISCONTINUED> 0
<EXTRAORDINARY> (181)
<CHANGES> 0
<NET-INCOME> 176
<EPS-PRIMARY> 1.84
<EPS-DILUTED> 1.53
</TABLE>
