<PAGE>
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 June 30, 1996
[ ] 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 July 31, 1996: 99,164,102
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STONE CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
(in millions) 1996* 1995
- --------------------------------------------------------------------------------
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . . . . . . .$ 128.1 $ 40.3
Accounts and notes receivable (less allowances of
$23.1 and $22.1). . . . . . . . . . . . . . . . . . . . 626.5 743.0
Inventories. . . . . . . . . . . . . . . . . . . . . . . 753.1 733.3
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 164.4 166.3
------------------------
Total current assets . . . . . . . . . . . . .1,672.1 1,682.9
------------------------
Property, plant and equipment. . . . . . . . . . . . . .4,832.1 4,750.0
Accumulated depreciation and amortization. . . . . . . (2,240.4) (2,114.2)
-------------------------
Property, plant and equipment--net . . . . . .2,591.7 2,635.8
Timberlands. . . . . . . . . . . . . . . . . . . . . . . . 58.1 57.7
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . 533.4 545.5
Investment in non-consolidated affiliates. . . . . . . 1,129.7 1,096.2
Other. . . . . . . . . . . . . . . . . . . . . . . . . . 445.1 380.8
-----------------------
Total assets . . . . . . . . . . . . . . . . . . . . $ 6,430.1 $6,398.9
-------------------------
-------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . $ 319.5 $347.9
Current maturities of senior and subordinated long-term
debt. . . . . . . . . . . . . . . . . . . . . . . . . . 186.6 27.1
Notes payable and current maturities of non-recourse debt of
consolidated affiliates . . . . . . . . . . . . . . . . 45.5 29.3
Income taxes . . . . . . . . . . . . . . . . . . . . . . 4.0 .8
Accrued and other current liabilities. . . . . . . . . . 270.8 296.6
----------------------
Total current liabilities. . . . . . . . . . . 826.4 701.7
------------------------
Senior long-term debt. . . . . . . . . . . . . . . . . 2,955.3 2,807.3
Subordinated debt. . . . . . . . . . . . . . . . . . . . 653.5 809.2
Non-recourse debt of consolidated affiliates . . . . . . 252.9 268.6
Other long-term liabilities. . . . . . . . . . . . . . . 314.2 313.7
Deferred taxes . . . . . . . . . . . . . . . . . . . . . 464.5 493.1
Commitments and contingencies. . . . . . . . . . . . . .
STOCKHOLDERS' EQUITY:
Series E preferred stock. . . . . . . . . . . . . . . 115.0 115.0
Common stock (99.2 and 99.1 shares outstanding) . . . 952.9 953.1
Retained earnings . . . . . . . . . . . . . . . . . . 75.3 97.8
Foreign currency translation adjustment . . . . . . . (177.5) (156.9)
Unamortized expense of restricted stock plan. . . . . (2.4) (3.7)
-----------------------
Total stockholders' equity . . . . . . . . . 963.3 1,005.3
----------------------------
Total liabilities and stockholders' equity . . . . $ 6,430.1 $6,398.9
----------------------------
----------------------------
*Unaudited; subject to year-end audit
The accompanying notes are an integral part of these statements.
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS (ACCUMULATED DEFICIT)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------ ------------------------
(in millions except per share) 1996 1995 1996 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . . . . . . $1,282.3 $1,963.6 $2,603.8 $3,782.8
Cost of products sold. . . . . . . . . . . . . . 1,013.0 1,382.8 1,985.2 2,671.6
Selling, general and administrative expenses . . 156.0 149.2 309.7 304.2
Depreciation and amortization. . . . . . . . . . 79.0 92.7 158.0 188.6
Equity income from affiliates. . . . . . . . . . (20.6) (1.9) (46.8) (3.8)
Other (income) expense-net . . . . . . . . . . . (5.3) (10.2) (8.1) (18.5)
- -------------------------------------------------- -------- -------- -------- ---------
Income before interest expense, income taxes, minority
interest and extraordinary charges . . . . . . 60.2 351.0 205.8 640.7
Interest expense . . . . . . . . . . . . . . . . (101.5) (118.1) (201.1) (239.5)
- -------------------------------------------------- -------- -------- -------- ---------
Income (loss) before income taxes, minority interest and
extraordinary charges. . . . . . . . . . . . . (41.3) 232.9 4.7 401.2
(Provision) credit for income taxes. . . . . . . 19.3 (93.2) 4.7 (160.5)
Minority interest. . . . . . . . . . . . . . . . .9 (8.7) 1.9 (12.9)
- -------------------------------------------------- -------- -------- -------- ---------
Income (loss) before extraordinary charges . . . (21.1) 131.0 11.3 227.8
Extraordinary charges from early extinguishment of debt
(net of income tax benefit). . . . . . . . . . -- (3.1) -- (3.1)
- -------------------------------------------------- -------- -------- -------- ---------
Net income (loss). . . . . . . . . . . . . . . . (21.1) 127.9 11.3 224.7
Preferred stock dividends. . . . . . . . . . . . (2.0) (2.0) (4.0) (4.0)
- -------------------------------------------------- -------- -------- -------- ---------
Net income (loss) applicable to common shares. . $ (23.1) $ 125.9 $ 7.3 $ 220.7
- -------------------------------------------------- -------- -------- -------- ---------
- -------------------------------------------------- -------- -------- -------- ---------
Retained earnings (accumulated deficit),
beginning of period . . . . . . . . . . . . . . $ 113.3 $ .5 $ 97.8 $ (96.3)
Net income (loss) . . . . . . . . . . . . . . . (21.1) 127.9 11.3 224.7
Cash dividends on common and preferred stock . . (16.9) -- (33.8) --
- -------------------------------------------------- -------- -------- -------- ---------
Retained earnings, end of period . . . . . . . . $ 75.3 $ 128.4 $ 75.3 $ 128.4
- -------------------------------------------------- -------- -------- -------- ---------
- -------------------------------------------------- -------- -------- -------- ---------
PER SHARE OF COMMON STOCK - PRIMARY:
Income (loss) before extraordinary charges . . . $ (.23) $ 1.42 $ .07 $ 2.46
Extraordinary charges from early extinguishment of debt
(net of income tax benefit). . . . . . . . . . -- (.03) -- (.03)
- -------------------------------------------------- -------- -------- -------- ---------
Net income (loss). . . . . . . . . . . . . . . . $ (.23) $ 1.39 $ .07 $ 2.43
- -------------------------------------------------- -------- -------- -------- ---------
- -------------------------------------------------- -------- -------- -------- ---------
PER SHARE OF COMMON STOCK - FULLY DILUTED:
Income (loss) before extraordinary charges . . . $ * $ 1.12 $ * $ 1.97
Extraordinary charges from early extinguishment of debt
(net of income tax benefit). . . . . . . . . . * (.03) * (.03)
- -------------------------------------------------- -------- -------- -------- ---------
Net income (loss). . . . . . . . . . . . . . . . $ * $ 1.09 $ * $ 1.94
-------- -------- -------- ---------
-------- -------- -------- ---------
Cash dividends . . . . . . . . . . . . . . . . . $ .15 $ -- $ .30 $ --
-------- -------- -------- ---------
-------- -------- -------- ---------
Common shares and common share equivalents outstanding
(weighted average, in millions):
Primary. . . . . . . . . . . . . . . . . . . 99.2 90.8 99.4 90.8
-------- -------- -------- ---------
-------- -------- -------- ---------
Fully Diluted. . . . . . . . . . . . . . . . * 117.9 * 118.4
-------- -------- -------- ---------
-------- -------- -------- ---------
</TABLE>
Unaudited; subject to year-end audit
The accompanying notes are an integral part of these statements.
*Fully diluted amounts and average shares outstanding have not been presented
due to anti-dilutive nature.
2
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------ ------------------------
1996 1995 1996 1995
---------- --------- --------- ---------
(in millions except per share)
- -------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . . . . . . . . $ (21.1) $ 127.9 $ 11.3 $ 224.7
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization. . . . . . . . . 79.0 92.7 158.0 188.6
Deferred taxes . . . . . . . . . . . . . . . . (27.1) 65.2 (23.4) 108.6
Foreign currency transaction losses (gains). . .3 (4.3) .5 (4.3)
Equity income from affiliates. . . . . . . . . (20.6) (1.9) (46.8) (3.8)
Extraordinary charges from early extinguishment of debt -- 3.1 -- 3.1
Other--net . . . . . . . . . . . . . . . . . . 14.7 21.4 30.0 37.9
Changes in current assets and liabilities:
(Increase) decrease in accounts and notes receivable--net 57.4 (69.3) 115.5 (178.8)
(Increase) decrease in inventories . . . . . . 27.7 (32.2) (22.1) (71.5)
Increase in other current assets . . . . . . . (6.3) (1.6) (11.1) (23.0)
Increase (decrease) in accounts payable and other current
liabilities . . . . . . . . . . . . . . . . . (24.2) 21.5 (47.2) 47.1
- -------------------------------------------------- -------- -------- -------- ---------
Net cash provided by operating activities. . . . 79.8 222.5 164.7 328.6
- -------------------------------------------------- -------- -------- -------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments made on debt. . . . . . . . . . . . . . (11.8) (74.5) (75.0) (374.6)
Payments by consolidated affiliates on non-recourse debt (.8) (123.2) (5.9) (138.7)
Borrowings . . . . . . . . . . . . . . . . . . . 38.0 33.5 226.7 299.2
Non-recourse borrowings of consolidated affiliates .4 -- 1.6 1.7
Proceeds from issuance of common stock-net . . . -- .8 -- .8
Cash dividends . . . . . . . . . . . . . . . . . (16.9) -- (33.8) --
- -------------------------------------------------- -------- -------- -------- ---------
Net cash provided by (used in) financing activities 8.9 (163.4) 113.6 (211.6)
- -------------------------------------------------- -------- -------- -------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . (60.5) (113.5) (102.3) (182.0)
Proceeds from sales of assets. . . . . . . . . . 5.4 6.6 8.0 9.0
Purchase of securities of a non-consolidated affiliate -- -- (39.6) --
Payments made for businesses acquired. . . . . . (38.0) (8.4) (43.7) (11.5)
Other--net . . . . . . . . . . . . . . . . . . . (6.5) (9.5) (11.3) (3.7)
- -------------------------------------------------- -------- -------- -------- ---------
Net cash used in investing activities. . . . . . (99.6) (124.8) (188.9) (188.2)
- -------------------------------------------------- -------- -------- -------- ---------
Effect of exchange rate changes on cash. . . . . (.4) .5 (1.6) 8.5
- -------------------------------------------------- -------- -------- -------- ---------
Net increase (decrease) in cash and cash equivalents (11.3) (65.2) 87.8 (62.7)
Cash and cash equivalents, beginning of period . 139.4 111.1 40.3 108.6
- -------------------------------------------------- -------- -------- -------- ---------
Cash and cash equivalents, end of period . . . . $ 128.1 $ 45.9 $ 128.1 $ 45.9
-------- -------- -------- ---------
-------- -------- -------- ---------
</TABLE>
See Note 10 regarding supplemental cash flow information.
Unaudited; subject to year-end audit
The accompanying notes are an integral part of these statements.
3
<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
("SEC") 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 June 30, 1996 and the results of operations
and cash flows for the three and six month periods ended June 30, 1996 and 1995.
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 July 24, 1996 the Company, in a private placement, sold $125 million
principal amount of Rating Adjustable Senior Notes due 2016 ("Rating Adjustable
Senior Notes"). Interest, which is payable semi-annually commencing February 1,
1997, will be determined by reference to the credit ratings assigned to the
Rating Adjustable Senior Notes from time to time by Moody's Investors Service,
Inc. or Standard and Poor's Corporation. The initial interest rate, which is
guaranteed for 12 months, is 11-7/8 percent. Net proceeds from the sale of the
Rating Adjustable Senior Notes will be used for general corporate purposes,
which may include the repayment of debt.
On July 24, 1996, Stone Venepal (Celgar) Pulp, Inc. ("SVCPI"), an indirect
subsidiary of Stone Container, and CITIC B.C. Inc., an indirect subsidiary of
China International Trust and Investment Corporation, entered into an agreement
which among other items contemplates the creation of a new corporation that
would own the Celgar pulp mill in Castlegar, British Columbia. See also Note
11.
Additionally, on July 12, 1996, the Company and Gaylord Container
Corporation entered into a joint venture whereby the retail packaging businesses
of these two companies were combined to form S&G Packaging Company, L.L.C.
("S&G"). The Company will account for its interest in S&G in accordance with
the equity method of accounting. S&G produces paper grocery bags and sacks,
handle sacks and variety bags, with estimated annual sales in excess of $300
million and serves supermarkets, quick service restaurants, paper distributors
and non-food mass merchandisers throughout North America and the Caribbean.
4
<PAGE>
NOTE 4: JOINT VENTURE
On May 30, 1996, the Company consummated its previously announced joint
venture agreement with Four M Corporation (Box USA) for the purchase of a
paperboard mill located in Port St. Joe, Florida, from St. Joe Paper Company
for $185 million plus applicable working capital by Florida Coast Paper
Company, L.L.C. ("FCPC"). As part of the transaction, FCPC sold, through a
private placement, debt of approximately $165 million. Such debt is
non-recourse to the Company. The Company accounts for its investment in
accordance with the equity method of accounting.
NOTE 5: SUBSIDIARY ISSUANCE OF STOCK
On November 1, 1995, Stone-Consolidated Corporation ("Stone-Consolidated"), a
Canadian subsidiary of the Company, amalgamated its operations (the
"Amalgamation") with Rainy River Forest Products Inc., a Toronto-based Canadian
pulp and paper company. As a result of the issuance of common shares by Stone-
Consolidated associated with the Amalgamation, the Company's equity ownership in
Stone-Consolidated was reduced from 74.6 percent to 46.6 percent. Accordingly,
effective November 1, 1995 the Company began reporting Stone-Consolidated as a
non-consolidated affiliate under the equity method of accounting. Prior to such
date, the Company reported Stone-Consolidated as a consolidated subsidiary.
NOTE 6: REFINANCING
On March 22, 1996, the Company and its bank group amended and restated the
Company's bank credit agreement to, among other things, provide for an
additional senior secured term loan facility of $190 million with a final
maturity of October 1, 2003 and a supplemental revolving credit facility of $110
million maturing May 15, 1999 (the "Supplemental Revolver"). Additionally, the
Company received consents from a majority of its holders to waive mandatory
repayment of no less than 80 percent of each of its term loans from excess cash
flow (as defined) until September 1997. The credit agreement as amended no
longer has a cross-acceleration provision in the event of an acceleration of the
non-recourse debt of Stone Venepal (Celgar) Pulp, Inc. The funds provided by
the new term loan facility were used to repay indebtedness outstanding under the
Company's $450 million revolving credit facility under the bank credit agreement
without reducing the commitments thereunder, and provide liquidity in the form
of cash. The Company has not borrowed under the Supplemental Revolver. The
Company's bank credit agreement, as amended, now consists of three senior
secured term loan facilities aggregating $790 million which mature through
October 1, 2003, a $450 million senior secured revolving credit facility
commitment maturing May 15, 1999, which includes a $25 million swing-line sub-
facility, and the Supplemental Revolver (collectively the "Credit Agreement").
On June 20, 1996, the Company and its bank group further amended the
Company's bank Credit Agreement to permit the Company to contribute its retail
packaging assets into a joint venture with Gaylord Container Corporation. See
also Note 3.
5
<PAGE>
NOTE 7: PURCHASE OF SECURITIES OF A NON-CONSOLIDATED AFFILIATE
During the 1996 first quarter, the Company purchased approximately $40 million
of convertible debt securities of Financiere Carton Papier ("FCP"), a non-
consolidated affiliate of the Company. The securities are not convertible into
FCP common stock until March 1999. In the event that the Company would convert
the securities into common stock, the Company would own approximately 80 percent
of the outstanding shares of FCP.
NOTE 8: ADOPTION OF NEW ACCOUNTING STANDARDS
Effective January 1, 1996, the Company adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of" ("SFAS 121"), which requires that long-
lived assets be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The adoption of SFAS 121 did not have a material effect on the
Company's financial statements.
Also, effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS
123"), by electing to continue to apply the intrinsic value-based method of
accounting for stock-based compensation. The Company will provide the required
proforma disclosures pertaining to its stock-based compensation in its year end
1996 financial statement footnotes.
NOTE 9: INVENTORIES
Inventories are summarized as follows:
June 30, December 31,
(in millions) 1996 1995
----------- ----------- ------------
Raw materials and supplies . . . . . . . $268.6 $287.5
Paperstock . . . . . . . . . . . . . . . 379.7 358.8
Work in process. . . . . . . . . . . . . 23.0 23.1
Finished products. . . . . . . . . . . 140.0 123.1
---------------------------------------- ---------- ------------
. . . . . . . . . . . . . . . . . . . . 811.3 792.5
Excess of current cost over LIFO inventory
value . . . . . . . . . . . . . . . . . (58.2) (59.2)
---------- ------------
Total inventories. . . . . . . . . . . . $ 753.1 $ 733.3
--------- ------------
--------- ------------
6
<PAGE>
NOTE 10: ADDITIONAL CASH FLOW STATEMENT INFORMATION
The Company's cash payments for interest and income taxes were as follows:
Three months ended Six months ended
June 30, June 30,
--------------- ---------------
(in millions) 1996 1995 1996 1995
------------- ------ ------ ------ ------
CASH PAID DURING THE PERIODS FOR:
Interest (net of capitalization) $101.6 $116.2 $194.3 $233.3
Income taxes (net of refunds) 9.3 51.0 12.1 62.0
------ ------ ------ ------
------ ------ ------ ------
NOTE 11: COMMITMENTS AND CONTINGENCIES
On July 24, 1996, Stone Venepal (Celgar) Pulp, Inc. ("SVCPI"), an indirect
subsidiary of Stone Container, and CITIC B.C. Inc., an indirect subsidiary of
China International Trust and Investment Corporation, entered into an agreement
which among other items contemplates the creation of a new corporation that
would own the Celgar pulp mill in Castlegar, British Columbia. Other portions
of the agreement focus on the manner in which CITIC B.C. Inc. would cure its
defaults with lenders and SVCPI.
The agreement contemplates establishment of a new entity that would own 100
percent of the interest in the mill. The new entity would be owned 50 percent
by CITIC Canada, Inc., and 45 percent by Stone Container (Canada) Inc., with the
remaining 5 percent owned by a subsidiary of Venepal S.A.C.A., the Venezuelan
pulp and paper company.
As part of the agreement, CITIC B.C. Inc. has agreed to bring current all
interest, fees and expense payments due on its indebtedness, including
reimbursements to Stone for amounts previously advanced on behalf of CITIC B.C.
Inc.
Lenders to the mill are subject to a six-month moratorium with respect to
pursuing their rights, to provide time to work with SVCPI and CITIC B.C. Inc.
toward an acceptable restructuring of indebtedness at the mill, which is
non-recourse to the Company. No assurances can be given, however, that an
acceptable restructuring can be accomplished during such moratorium.
In addition to the advances made by the Company to SVCPI to cure CITIC B.C.
Inc.'s payment defaults and fund CITIC B.C. Inc.'s portion of operating
expenses, the Company has from time to time advanced amounts to SVCPI to fund
operating deficits and debt service requirements. The extent of any advances
that the Company may make in the future to SVCPI are likely to depend on the
terms of any restructuring achieved with the lenders and operating results at
the Celgar mill.
7
<PAGE>
STONE CONTAINER CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Effective November 1, 1995, the Company began reporting Stone-Consolidated
Corporation ("Stone-Consolidated") as a non-consolidated affiliate in accordance
with the equity method of accounting. Prior to such date the Company reported
Stone-Consolidated as a consolidated subsidiary. See also Note 5.
Provided below is certain financial data for the three and six months ended
June 30, 1996 and 1995. Also provided, for comparative purposes only, is
supplemental restated financial data for the three and six months ended June 30,
1995 assuming that the historical financial results of Stone-Consolidated were
reported by the Company in accordance with the equity method of accounting
effective January 1, 1995.
<TABLE>
<CAPTION>
Three months Six months
ended ended
Three months ended June 30, June 30, 1995 Six months ended June 30, June 30, 1995
1996 1995 (restated) 1996 1995 (restated)
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Net sales. . . . . . . . . . . . . . . $1,282.3 $1,963.6 $1,700.1 $2,603.8 $3,782.8 $3,291.1
Depreciation and amortization. . . . . 79.0 92.7 75.9 158.0 188.6 155.5
Interest expense . . . . . . . . . . . 101.5 118.1 109.7 201.1 239.5 222.1
Income (loss) before income
taxes, minority interest and
extraordinary charges . . . . . . . . (41.3) 232.9 206.4 4.7 401.2 360.8
Net income (loss). . . . . . . . . . . $ (21.1) $ 127.9 $ 127.9 $ 11.3 $ 224.7 $ 224.7
</TABLE>
The net loss for the 1996 second quarter was $21.1 million, or $.23 per
share of common stock while income before the extraordinary loss from the early
extinguishment of debt for the 1995 second quarter was $131 million, or $1.42
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 second quarter, the Company recorded an
extraordinary loss from the early extinguishment of debt of $3.1 million, net of
income tax benefit, or $.03 per share of common stock, resulting in net income
for the 1995 second quarter of $127.9 million, or $1.39 per share of common
stock on a primary basis and $1.09 per share of common stock on a fully diluted
basis.
For the six months ended June 30, 1996, the Company recorded net income of
$11.3 million, or $.07 per share of common stock. For the six months ended June
30, 1995, income before the extraordinary loss from the early extinguishment of
debt was $227.8 million, or $2.46 per share of common stock on a primary basis
and $1.97 per share of common stock on a fully diluted basis. The extraordinary
loss from the early extinguishment of debt recorded in the 1995 second quarter
resulted in net income for the six months ended June 30, 1995 of $224.7 million,
or $2.43 per share of common stock on a primary basis and $1.94 per share of
common stock on a fully diluted basis.
8
<PAGE>
Net sales for the three and six month periods ended June 30, 1996 decreased
$681.3 million and $1.18 billion, respectively, from the comparable prior year
periods. Net sales for the second quarter and first half of 1995 included
$263.5 million and $491.7 million, respectively, of sales of Stone-Consolidated.
Excluding the effect of Stone-Consolidated, sales for the second quarter and
first half of 1996 decreased approximately $417.8 million or 24.6 percent, and
$687.3 million or 20.9 percent, respectively, from the comparable prior year
periods.
The decreases in sales and net income for the second quarter and first half
of 1996 from the prior year periods primarily resulted from lower average
selling prices for the majority of the Company's products; additionally, market
related downtime at certain pulp and paper mills also contributed to the
decreases.
The results for the second quarter and first half of 1996 also reflect
reductions in interest expense due to lower average outstanding indebtedness and
decreases in average interest rates, and decreases in recycled fiber costs, as
compared with the prior year periods.
Shipments of corrugated containers, including the Company's proportionate
share of the shipments by its foreign affiliates, were 13.4 billion square feet
for both the second quarter of 1996 and the second quarter of 1995. For the
first six months of 1996, the Company shipped 26.5 billion square feet of
corrugated containers, compared with 27.1 billion square feet shipped during the
first half of 1995. Shipments of paper bags and sacks were 136 thousand tons
and 278 thousand tons for the three and six months ended June 30, 1996,
respectively, compared with 147 thousand tons and 294 thousand tons shipped
during the comparable 1995 periods.
Production of containerboard and kraft paper for the three and six months
ended June 30, 1996 were 1.16 million tons and 2.30 million tons, respectively,
compared to 1.28 million tons and 2.61 million tons produced during the
comparable 1995 periods.
FINANCIAL CONDITION AND LIQUIDITY
The Company's working capital ratio was 2.0 to 1 at June 30, 1996 and 2.4 to 1
at December 31, 1995. The Company's long-term debt to total capitalization
ratio was 73.0 percent at June 30, 1996 and 72.2 percent at December 31, 1995.
Capitalization, for purposes of this ratio, includes long-term debt (which
includes debt of certain consolidated affiliates which is non-recourse to the
Company), deferred income taxes, minority interest and stockholders' equity.
The Company's primary capital requirements consist of debt service and
capital expenditures, including capital investment for compliance with certain
environmental legislation requirements and ongoing maintenance expenditures and
improvements. 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 when the Company's $150 million
10-3/4 percent Senior Subordinated Notes mature.
9
<PAGE>
On March 22, 1996, the Company and its bank group amended the Company's
bank credit agreement. See also Note 6. At July 31, 1996, the Company had
borrowing availability of approximately $517 million (net of letters of
credit which reduce the amount available to be borrowed) under its revolving
credit facilities. In addition, the Company at July 31, 1996 had short term
investments of $111 million. The term loans and the $450 million revolving
credit facility had weighted average interest rates for the six months ended
June 30, 1996 of 8.8 percent and 8.7 percent, respectively. The weighted
average rates do not include the effect of the amortization of deferred debt
issuance costs.
OPERATING ACTIVITIES:
Net cash provided by operating activities was $164.7 million for the six months
ended June 30, 1996, compared with $328.6 million for the comparable period of
1995.
FINANCING ACTIVITIES:
In April 1996, the Company issued $33.3 million aggregate principal amount of
tax-exempt, industrial development revenue bonds. The proceeds from the
issuance have been and will be used to acquire, construct and install certain
solid waste disposal components of the Company's containerboard mill facilities
located in Snowflake, Arizona and Port Wentworth, Georgia.
On March 22, 1996, the Company borrowed $190 million under a senior secured
term loan facility provided under its Credit Agreement. See also Note 6. The
proceeds of the term loan were used to repay indebtedness outstanding under the
Company's $450 million revolving credit facility (without a corresponding
reduction in commitments) and provide additional liquidity in the form of cash.
On July 24, 1996 the Company, in a private placement, sold $125 million
principal amount of Rating Adjustable Senior Notes due 2016. See also Note 3.
In each of the first and second quarters of 1996, the Company paid
quarterly cash dividends of $.4375 per share on its Series E Cumulative
Preferred Stock and $.15 per share on its common stock. On July 22, 1996, the
Company's Board of Directors declared a quarterly cash dividend of $.4375 per
share on the Series E Cumulative Preferred Stock, payable August 15, 1996 and a
quarterly cash dividend of $.15 per share on the Company's common stock, payable
September 13, 1996.
INVESTING ACTIVITIES:
Capital expenditures for the six months ended June 30, 1996 totalled
approximately $102.3 million.
On July 24, 1996, Stone Venepal (Celgar) Pulp, Inc. ("SVCPI"), an indirect
subsidiary of Stone Container, and CITIC B.C. Inc., an indirect subsidiary of
China International Trust and Investment Corporation, entered into an agreement
which among other items contemplates the creation of a new corporation that
would own the Celgar pulp mill in Castlegar, British Columbia. See also Note
11.
10
<PAGE>
On July 12, 1996, the Company and Gaylord Container Corporation entered
into a joint venture whereby the retail packaging businesses of these two
companies were combined to form S&G Packaging Company, L.L.C. See also Note 3.
On May 30, 1996, the Company consummated its previously announced joint
venture agreement with Four M Corporation (Box USA) for the purchase of a
paperboard mill located in Port St. Joe, Florida, from St. Joe Paper Company for
$185 million plus applicable working capital. See also Note 4.
Additionally, during the 1996 first quarter the Company purchased
approximately $40 million of convertible debt securities of Financiere Carton
Papier ("FCP"), a non-consolidated affiliate of the Company, in order to provide
FCP with sufficient funds for debt service and general working capital purposes.
See also Note 7.
OUTLOOK:
The Company's net income decreased from $32.4 million in the first quarter of
1996 to a net loss of $21.1 million in the 1996 second quarter as pricing for
the Company's paperboard and paper packaging products continued to decline
primarily due to sluggish demand and relatively high industry inventory levels.
Beginning in late 1995, demand for containerboard and market pulp was
dramatically reduced and the Company, in an effort to prevent excessive
increases in inventory, took significant downtime at various of its mills in the
last half of 1995 and in the first half of 1996. The Company believes that
conditions in the industry are improving which could result in price increases
for certain of its products during the latter part of 1996. However, no
assurance can be given that price increases will be implemented or that pricing
for the Company's products will be maintained at current levels.
The Company will be required in the future to generate sufficient cash
flows to fully meet the Company's debt service requirements. The Company has
debt amortizations of approximately $256 million in 1997, $489 million in 1998,
$481 million in 1999 and $535 million in 2000. In the event that the Company is
unable to generate sufficient operating cash flows to fully meet such debt
service requirements, it is anticipated that the Company would refinance
portions of this indebtedness and/or use a substantial portion of its cash
resources and borrowing availabilities under its revolving credit facilities to
repay such indebtedness. No assurance can be given that such sources will be
available in sufficient amounts for such requirements.
11
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities
As previously reported in a Report on Form 8-K dated May 16, 1996, the
Company amended the Rights Agreement, dated as of July 25, 1988, as amended
July 23, 1990.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4(r) Amendment No. 1 to Guaranty, dated as of June 1, 1996, among
Continental Holdings, Inc., Continental Group, Inc. and the Company.
4(s) First Amendment of Credit Agreement, dated as of June 20, 1996,
among the Company and the Lenders named therein.
11 Computation of Primary and Fully Diluted Net Income (Loss) Per
Common Share.
27 Financial Data Schedule for the six months ended June 30, 1996.
(b) Reports on Form 8-K
1. A Report on Form 8-K dated May 16, 1996 was filed under Item 5 -
Other Events.
2. A Report on Form 8-K dated June 28, 1996 was filed under Item 5 -
Other Events.
3. A Report on Form 8-K dated July 19, 1996 was filed under Item 5 -
Other Events.
4. A Report on Form 8-K dated July 25, 1996 was filed under Item 5 -
Other Events.
12
<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: /s/ THOMAS P. CUTILLETTA
---------------------------------
Thomas P. Cutilletta
Senior Vice President,
Administration and
Corporate Controller (Principal
Accounting Officer)
Date: August 6, 1996
13
<PAGE>
EXHIBIT 4(R)
AMENDMENT NO. 1
TO GUARANTY DATED AS OF AUGUST 30, 1983
This Amendment No. 1 (this "Amendment") is dated and shall be
effective as of June 1, 1996 (the "Effective Date") between Continental
Holdings, Inc. ("Continental"), a Wyoming corporation and successor to The
Continental Group, Inc ("CGI"), and Stone Container Corporation ("Guarantor"), a
Delaware corporation and successor in interest to Stone Container Corporation,
an Illinois corporation ("Stone Illinois"). Capitalized terms used but not
defined herein shall have the meanings assigned thereto in the Guaranty dated as
of August 30, 1983 between Stone Illinois and CGI (the "Guaranty").
WHEREAS, Guarantor and Continental, are successors in interest to
Stone Illinois and CGI, respectively, under the Guaranty; and
WHEREAS, Guarantor and Continental desire to amend the Guaranty as set
forth herein.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Section 2.1(d) of the Guaranty shall be amended and restated to
read in its entirety as follows:
(d) DEFAULT ON OTHER INDEBTEDNESS - (i) the
Guarantor or any majority-owned subsidiary thereof (other than Stone
Venepal (Celgar) Pulp, Inc., a Canadian federal corporation ("SVCPI"),
and any successor to SVCPI) fails to pay at final maturity the
principal of any indebtedness for borrowed money in excess of
$5,000,000 principal amount for a period longer than any applicable
grace period or (ii) the default by the Guarantor or any majority-
owned subsidiary thereof (other than SVCPI and any successor to SVCPI)
in the performance of any term, covenant or condition in any agreement
or instrument evidencing indebtedness for money borrowed in excess of
$5,000,000 principal amount, which default shall result in such
<PAGE>
indebtedness being declared due and payable prior to the date on which
it otherwise would become due and payable, and such acceleration shall
not have been rescinded or annulled.
2. Except as amended by this Amendment, the Guaranty shall remain in
full force and effect.
IN WITNESS WHEREOF, each of Guarantor and Continental have caused this
Amendment to be executed by a duly authorized officer thereof as of the date
first above written.
STONE CONTAINER CORPORATION
By: /s/ Leslie T. Lederer
--------------------------------
Name: Leslie T. Lederer
Title: Vice President,
Secretary and Counsel
CONTINENTAL HOLDINGS, INC.
By: /s/ Kenneth D. Gaskins
--------------------------------
Name: Kenneth D. Gaskins
Title: Vice President and Secretary
-2-
<PAGE>
Exhibit 4(s)
FIRST AMENDMENT
OF
CREDIT AGREEMENT
THIS FIRST AMENDMENT OF CREDIT AGREEMENT, dated as of June 20, 1996 (this
"AMENDMENT"), is by and among Stone Container Corporation, a Delaware
corporation (the "BORROWER"), the undersigned financial institutions, including
Bankers Trust Company, in their capacities as lenders (collectively, the
"LENDERS," and each individually, a "LENDER"), Bankers Trust Company, as agent
(the "AGENT") for the Lenders, and the undersigned financial institutions in
their capacities as Co-Agents.
RECITALS:
A. The Borrower, Bank of America National Trust & Savings Association,
The Bank of New York, The Bank of Nova Scotia, Caisse Nationale de Credit
Agricole, Chemical Bank, The Chase Manhattan Bank, N.A., Dresdner Bank AG-
Chicago and Grand Cayman Branches, The First National Bank of Chicago, The Long-
Term Credit Bank of Japan, Ltd., NationsBank, N.A. (Carolinas), The Sumitomo
Bank, Ltd., Chicago Branch and Toronto Dominion (Texas), Inc., as co-agents
(collectively, the "CO-AGENTS," and each individually, a "CO-AGENT"), the Agent
and the Lenders are parties to that certain Amended and Restated Credit
Agreement dated as of March 22, 1996 (the "CREDIT AGREEMENT").
B. The Borrower is contemplating entering into a joint venture structured
as a limited liability company (the "RETAIL BAG JOINT VENTURE"), into which the
Borrower will transfer substantially all of its retail bag division assets
(except for real estate owned by the Borrower) and assign its liabilities and
assign (or sublease) real estate leases and equipment leases related thereto, in
exchange for an initial 65% equity ownership in the Retail Bag Joint Venture,
and Gaylord Container Corporation will transfer substantially all of its grocery
bag division assets plus a to be determined value of roll stock inventory, and
assign its liabilities and assign (or sublease ) real estate leases and
equipment leases related thereto, in exchange for an initial 35% equity
ownership in the Retail Bag Joint Venture.
C. As a result of the Borrower initially having, among other factors,
equal board representation in the Retail Bag Joint Venture, the Retail Bag Joint
Venture will not be consolidated with the Borrower under generally accepted
accounting principles for reporting purposes but instead will be accounted for
utilizing the equity method.
D. The Borrower desires to have the Credit Agreement amended to, among
other things, permit the creation of the Retail Bag Joint Venture and the
transfer of the Borrower's retail bag division assets and liabilities thereto,
and to clarify the treatment of the Retail Bag Joint Venture under the Credit
Agreement as a non-subsidiary of the Borrower.
<PAGE>
E. The Borrower, the Co-Agents, the Agent and the Lenders desire to amend
the Credit Agreement on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the premises and of the mutual covenants
herein contained, the parties hereto agree as follows:
SECTION 1. DEFINED TERMS. Unless otherwise defined herein, all
capitalized terms used herein shall have the meanings given them in the Credit
Agreement.
SECTION 2. AMENDMENTS TO THE CREDIT AGREEMENT. The Credit Agreement
is, as of the Effective Date (as defined below), hereby amended as follows:
(a) SECTION 5.2.2(x) of the Credit Agreement is amended by deleting
"150%" appearing in clause (B) of such Section and replacing it with
"200%".
(b) SECTION 5.2.7 of the Credit Agreement is amended by (i) deleting
the word "and" appearing at the end of clause (o) thereof, (ii) deleting
the period appearing at the end of clause (p) thereof and inserting "; and"
in place thereof and (iii) inserting after clause (p) thereof the following
new clause (q):
"(q) the Borrower may contribute all of its retail bag division assets
(except for real estate owned by the Borrower), including, without
limitation, inventory, equipment, customer lists, licenses and
intellectual property, but excluding trade accounts receivable which
have been sold by the Borrower to StoneSub, and assign its liabilities
and assign (or sublease) real estate leases and equipment leases,
which assets, liabilities and leases, immediately prior to such
contribution, are utilized by the Borrower in its retail bag division,
and which assets do not exceed $55 million in aggregate book value, to
a newly formed limited liability company (the "RETAIL BAG JOINT
VENTURE") in exchange for an initial 65% equity ownership interest in
the Retail Bag Joint Venture (it being understood that the initial
contribution of assets and liabilities may occur contemporaneously or
may occur over a period of time)."
(c) SECTION 5.2.10 of the Credit Agreement is amended by (i) deleting
the word "and" appearing at the end of clause (xiii) thereof and (ii)
inserting after clause (xiv) thereof the following new clause (xv):
"and (xv) StoneSub may prepay, or otherwise cause a reduction in,
Indebtedness for Money Borrowed owing to the Issuer utilizing funds
arising from the collection of Receivables;"
(d) SECTION 5.2.12 of the Credit Agreement is amended by adding a new
sentence at the end thereof as follows:
-2-
<PAGE>
"Notwithstanding the foregoing, the Borrower may contribute and
transfer its property and assets to the Retail Bag Joint Venture as
permitted by SECTION 5.2.7(q) in connection with the initial
capitalization (it being understood that the initial capitalization
and related transfers of property may occur contemporaneously or over
a period of time) of the Retail Bag Joint Venture."
(e) SECTION 9.13 of the Credit Agreement is amended by adding a new
clause (g) at the end thereof as follows:
"(g) If requested by the Borrower in connection with the incurrance by
the Borrower or any Subsidiary of any Financing Lease Obligations as
permitted under SECTION 5.2.2(i), any Indebtedness for Money Borrowed
in respect of the purchase price of property as permitted under
SECTION 5.2.2(k) or any lease payments as permitted under SECTION
5.2.15, the Agent is authorized to execute and deliver any agreement
or other instrument in favor of, or with, any lender extending any
such Indebtedness for Money Borrowed or lessor under any such lease (a
"THIRD PARTY LENDER") which expressly waives, relinquishes and/or
subordinates any Lien of the Agent for the benefit of the Lenders
under any Loan Documents in or upon the asset(s) being acquired or
leased by the Borrower or such Subsidiary from such Third Party Lender
until such time as such Indebtedness for Money Borrowed or lease is
paid in full, with such agreement or instrument in form and substance
reasonably satisfactory to the Agent, and the Lenders hereby authorize
the Agent to execute and deliver any such agreement or instrument."
(f) A new definition is added to the Definitional Appendix to the
Credit Agreement in appropriate alphabetical order as follows:
""RETAIL BAG JOINT VENTURE" is defined in SECTION 5.2.7(q)."
(g) The definition of "Person" appearing in the Definitional Appendix
to the Credit Agreement is amended by deleting such definition in its
entirety and replacing it with the following:
""PERSON" means an individual or a corporation, partnership,
trust, limited liability company, incorporated or unincorporated
association, joint venture, joint stock company, government (or an
agency or political subdivision thereof) or other entity of any kind."
(h) The definition of "Subsidiary" appearing in the Definitional
Appendix to the Credit Agreement is amended by deleting such definition in
its entirety and replacing it with the following:
-3-
<PAGE>
""SUBSIDIARY" of any Person shall mean and include (i) any
corporation more than 50% of whose stock of any class or classes
having by the terms thereof ordinary voting power to elect a majority
of the directors of such corporation (irrespective of whether or not
at the time stock of any class or classes of such corporation shall
have or might have voting power by reason of the happening of any
contingency) is at the time owned by such Person directly or
indirectly through Subsidiaries and (ii) any partnership, association,
joint venture, limited liability company or other entity in which such
Person directly or indirectly through Subsidiaries, has more than a
50% equity interest at the time; PROVIDED, HOWEVER, that the Retail
Bag Joint Venture shall not be deemed to be a subsidiary for any
purpose of this Agreement so long as the Borrower is only entitled to
elect 50% or less of the members of the board of directors (or the
governing body) of the Retail Bag Joint Venture and the assets,
liabilities and results of operations of which are not required to be
consolidated with the Borrower's assets, liabilities and results of
operations under generally accepted accounting principles. Unless
otherwise expressly provided, all references herein to a "Subsidiary"
shall mean a Subsidiary of the Borrower. Notwithstanding the
foregoing, SVCPI shall not be deemed to be a Subsidiary for any
purposes of this Agreement (including without limitation the
definition of "Wholly-Owned Subsidiary") regardless of the fact that
Stone-Canada and/or Affiliates of Stone-Canada may at any time own a
majority or all of the outstanding voting shares of SVCPI, PROVIDED,
HOWEVER that in the event Stone-Canada and/or Affiliates of Stone-
Canada become the owner of a majority of the outstanding voting shares
of SVCPI, then (i) SVCPI shall be deemed to be a Subsidiary for
purposes of SECTIONS 5.1.1(f), (g) and (h), 5.1.6 and 5.1.7 and
(ii) for purposes of the financial statements referred to in SECTIONS
5.1.1(b), (c), (d) and (e), SVCPI shall be accounted for utilizing the
equity method."
SECTION 3. CONDITIONS PRECEDENT TO EFFECTIVENESS OF AMENDMENT. This
Amendment shall become effective upon the date (the "EFFECTIVE DATE") the
Borrower, the Agent and the Required Lenders shall have executed and delivered
this Amendment.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The
Borrower represents and warrants to the Lenders, the Co-Agents and the Agent as
follows:
(a) The representations and warranties contained in the Credit
Agreement and the other Loan Documents are true and correct in all material
respects at and as of the date hereof as though made on and as of the date
hereof (except to the extent specifically made with regard to a particular
date).
(b) No Event of Default or Unmatured Event of Default has occurred
and is continuing.
-4-
<PAGE>
(c) The execution, delivery and performance of this Amendment has
been duly authorized by all necessary action on the part of, and duly
executed and delivered by, the Borrower and this Amendment is a legal,
valid and binding obligation of the Borrower enforceable against the
Borrower in accordance with its terms, except as the enforcement thereof
may be subject to the effect of any applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally and general principles of equity (regardless of whether such
enforcement is sought in a proceeding in equity or at law).
(d) The execution, delivery and performance of this Amendment do not
conflict with or result in a breach by the Borrower of any term of any
material contract, loan agreement, indenture or other agreement or
instrument to which the Borrower is a party or is subject.
SECTION 5. REFERENCES TO AND EFFECT ON THE CREDIT AGREEMENT.
(a) On and after the Effective Date each reference in the Credit Agreement
to "this Agreement," "hereunder," "hereof," "herein," or words of like import,
and each reference to the Credit Agreement in the Loan Documents and all other
documents (the "ANCILLARY DOCUMENTS") delivered in connection with the Credit
Agreement shall mean and be a reference to the Credit Agreement as amended
hereby.
(b) Except as specifically amended above, the Credit Agreement, the Loan
Documents and all other Ancillary Documents shall remain in full force and
effect and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Amendment shall not,
except as expressly provided herein, operate as a waiver of any right, power or
remedy of the Lenders, the Co-Agents or the Agent under the Credit Agreement,
the Loan Documents or the Ancillary Documents.
(d) The Borrower acknowledges and agrees that this Amendment constitutes a
"Loan Document" for purposes of the Credit Agreement, including, without
limitation, SECTION 7.1(d) of the Credit Agreement.
SECTION 6. EXECUTION IN COUNTERPARTS. This Amendment may be executed
in counterparts, each of which when so executed and delivered shall be deemed to
be an original and all of which taken together shall constitute but one and the
same instrument. This Amendment shall be binding upon the respective parties
hereto upon the execution and delivery of this Amendment by the Borrower, the
Agent and the Required Lenders regardless of whether it has been executed and
delivered by all of the Lenders. Delivery of an executed counterpart of a
signature page of this Amendment by facsimile transmission shall be effective as
delivery of a manually executed counterpart of this Amendment.
-5-
<PAGE>
SECTION 7. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND BE
CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
WITHOUT REGARD TO THE INTERNAL CONFLICTS OF LAWS PROVISIONS THEREOF.
SECTION 8. HEADINGS. Section headings in this Amendment are included
herein for convenience of reference only and shall not constitute a part of this
Amendment for any other purposes.
[Signature Pages Follow]
-6-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed by their respective officers thereunto duly authorized as of the
date above first written.
STONE CONTAINER CORPORATION BANKERS TRUST COMPANY, in its
individual capacity and as Agent
By: /s/ Leslie T. Lederer By: /s/ Mary Zadroga
------------------------------ ------------------------------
Name: Leslie T. Lederer Name: Mary Zadroga
Title: Vice President, Secretary and Title: Vice President
General Counsel
BANK OF AMERICA ILLINOIS BANK OF AMERICA NATIONAL
TRUST AND SAVINGS ASSOCIATION,
in its individual capacity
and as a Co-Agent
By:
------------------------------------ By: /s/ Patricia Delgrande
Name: ------------------------------
Title: Name: Patricia DelGrande
Title: Managing Director
BANK OF BOSTON THE BANK OF NEW YORK, in its
individual capacity and as a Co-
Agent
By: /s/ Gretchen Bergstresser By: /s/ John C. Lambert
------------------------------ ------------------------------
Name: Gretchen Bergstresser Name: John C. Lambert
Title: Vice President Title: Vice President
THE BANK OF NOVA SCOTIA, in its CAISSE NATIONALE DE CREDIT
individual capacity and as a Co-Agent AGRICOLE, in its individual
capacity and as a Co-Agent
By: /s/ F.C.H. Ashby By: /s/ Dean Balice
------------------------------ ------------------------------
Name: F.C.H. Ashby Name: Dean Balice
Title: Senior Manager Loan Operations Title: Senior Vice President
Branch Manager
-7-
<PAGE>
AERIES FINANCE LTD. CERES FINANCE LTD.
By: /s/ Andrew Ian Wignall By:
-------------------------- ------------------------------
Name: Andrew Ian Wignall Name:
Title: Director Title:
STRATA FUNDING LTD. THE CHASE MANHATTAN BANK,
N.A., in its individual capacity
and as a Co-Agent
By:
-------------------------- By: /s/ Helene Santo
Name: -------------------------------
Title: Name: Helene Santo
Title: Vice President
CHEMICAL BANK, in its individual CHL HIGH YIELD LOAN PORTFOLIO,
capacity and as a Co-Agent a Unit of Chemical Bank
By: /s/ Timothy J. Storms By: /s/ Joyce C. Delucca
-------------------------- --------------------------
Name: Timothy J. Storms Name: Joce C. Delucca
Title: Managing Director Title: Vice President
COMPAGNIE FINANCIERE DE CIC ET DRESDNER BANK AG (Chicago and
DE L'UNION EUROPEENNE Grand Cayman Branches), in its
individual capacity and as a Co-Agent
By: /s/ Sean Mounier By: /s/ Thomas J. Nadramia
-------------------------- --------------------------
Name: Sean Mounier Name: Thomas J. Nadramia
Title: First Vice President Title: Vice President
By: /s/ Brian O'Leary By: /s/ John W. Sweeney
-------------------------- --------------------------
Name: Brian O'Leary Name: John W. Sweeney
Title: Vice President Title: Assistant Vice President
-8-
<PAGE>
THE EQUITABLE LIFE ASSURANCE THE FIRST NATIONAL BANK OF
SOCIETY OF THE UNITED STATES CHICAGO,in its individual
capacity and as a Co-Agent
By: By: /s/ Karen F. Kizer
-------------------------- --------------------------
Name: Name: Karen F. Kizer
Title: Title: Senior Vice President
KEYPORT LIFE INSURANCE COMPANY LEHMAN COMMERCIAL PAPER INC.
By: Chacellor Senior Secured
Management, Inc. as
Portfolio Advisor
By: /s/ Christopher A. Bondy By: /s/ Michele Swanson
-------------------------- --------------------------
Name: Christopher A. Bondy Name: Michele Swanson
Title: Vice President Title:Authorized Signatory
THE LONG-TERM CREDIT BANK OF MERITA BANK LTD., formerly known
JAPAN, LTD. in its individual as Union Bank of Finland, Ltd.,
capacity and as a Co-Agent Grand Cayman Branch
By: /s/ Armund J. Schoen, Jr. By:
-------------------------- --------------------------
Name: Armund J. Schoen, Jr. Name:_________________________
Title: V. P. & Deputy General Title:________________________
Manager
MERRILL LYNCH PRIME RATE MERRILL LYNCH SENIOR FLOATING
PORTFOLIO RATE FUND, INC.
By: Merrill Lynch Asset
Management, LP, as
Investment Advisor
By: /s/ R. Douglas Henderson By: /s/ R. Douglas Henderson
-------------------------- --------------------------
Name: R. Douglas Henderson Name: R. Douglas Henderson
Title: Authorized Signatory Title: Authorized Signatory
-9-
<PAGE>
SENIOR HIGH INCOME PORTFOLIO, SENIOR HIGH INCOME PORTFOLIO II,
INC. INC.
By: /s/ R. Douglas Henderson By: /s/ R. Douglas Henderson
-------------------------- --------------------------
Name: R. Douglas Henderson Name: R. Douglas Henderson
Title: Authorized Signatory Title: Authorized Signatory
SENIOR STRATEGIC INCOME FUND, NATIONSBANK, N.A. (CAROLINAS),
INC. in its individual capacity and
By: /s/ R. Douglas Henderson as a Co-Agent
-------------------------- By: /s/ Michael Short
Name: R. Douglas Henderson --------------------------
Title: Authorized Signatory Name: Michael Short
Title: Vice President
PROSPECT STREET SENIOR PORTFOLIO,
PEARL STREET, L.P. L.P.
By: Prospect Street Senior Loan Corp.,
as Managing General Partner
By: By: /s/ Preston I. Carnes, Jr.
-------------------------- --------------------------
Name: Name: Preston I. Carnes, Jr.
Title: Title: Vice President
RESTRUCTURED OBLIGATIONS BACKED STICHTING RESTRUCTURED OBLIGATIONS
BY SENIOR ASSETS B.V. BACKED BY SENIOR ASSETS 2 (ROSA2)
By: Chancellor Senior Secured By: Chancellor Senior Secured Management,
Management, Inc., as Portfolio Inc., as Portfolio Advisor
Advisor
By: /s/ Christopher A. Bondy By:
-------------------------- ---------------------------
Name: Christopher A. Bondy Name:
Title: Vice President Title:
-10-
<PAGE>
SENIOR DEBT PORTFOLIO THE SUMITOMO BANK, LTD.,
CHICAGO BRANCH, in its individual
By: Boston Management and capacity and as a Co-Agent
Research, as Investment
Advisor
By: /s/ Jeffrey S. Garner By: /s/ Hiroyuki Iwami
-------------------------- --------------------------
Name: Jeffrey S. Garner Name: Hiroyuki Iwami
Title: Vice President Title: Joint General Manager
TORONTO DOMINION (TEXAS), INC., VAN KAMPEN MERRITT PRIME RATE
in its individual capacity and INCOME TRUST
as a Co-Agent
By: /s/ Jeffrey W. Maillet
By: /s/ Frederic Hawley --------------------------
-------------------------- Name: Jeffrey W. Maillet
Name: Frederic Hawley Title: Senior Vice President - Portfolio
Title: Vice President Manager
MEDICAL LIABILITY MUTUAL FIRST ALABAMA BANK
INSURANCE COMPANY
By: By: /s/ James E. Schmalz
-------------------------- --------------------------
Name: Name: James E. Schmalz
Title: Title: National Accounts Officer
INTERNATIONALE NEDERLANDEN THE YASUDA TRUST & BANKING CO.,
(U.S.) CAPITAL CORPORATION LTD. CHICAGO BRANCH
By: By:
-------------------------- --------------------------
Name: Name:
Title: Title:
-11-
<PAGE>
APPALOOSA MANAGEMENT L.P. INDOSUEZ CAPITAL FUNDING II, LIMITED
By: Indosuez Capital Luxembourg, as
Collateral Manager
By: By: /s/ T. Berthelot
-------------------------- --------------------------
Name: Name: T. Berthelot
Title: Title: Authorized Signatory
ING CAPITAL ADVISORS, INC. PROTECTIVE LIFE INSURANCE CO.
By: /s/ Michael D. Hatley By: /s/ Mark K. Okada CFA
-------------------------- --------------------------
Name: Michael D. Hatley Name: Mark F. Okada CFA
Title: Vice President & Title: Principal Protective
Portfolio Manager Asset Management Co.
CANADIAN IMPERIAL BANK OF
COMMERCE
By:
--------------------------
Name:
Title:
-12-
<PAGE>
EXHIBIT 11
STONE CONTAINER CORPORATION
COMPUTATION OF PRIMARY AND FULLY DILUTED
NET INCOME (LOSS) PER SHARE
(IN MILLIONS, EXCEPT PER SHARE)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER SHARE
Shares of Common Stock:
Weighted average number of common shares outstanding . . . . . . . . . 99.2 90.8 99.4 90.8
---------- ---------- ---------- ----------
Primary Weighted Average Shares Outstanding. . . . . . . . . . . . . . . 99.2 90.8 99.4 90.8
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (21.1) $ 127.9 $ 11.3 $ 224.7
Less:
Series E Cumulative Convertible Exchangeable Preferred Stock
dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.0) (2.0) (4.0) (4.0)
---------- ---------- ---------- ----------
Net income (loss) used in computing primary net income (loss)
per common share . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (23.1) $ 125.9 $ 7.3 $ 220.7
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
PRIMARY EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . . . . $ (.23) $ 1.39 $ .07 $ 2.43
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
FULLY DILUTED EARNINGS PER SHARE
Shares of Common Stock:
Weighted average number of common shares outstanding . . . . . . . . . 99.2 90.8 99.4 90.8
Dilutive effect of options and warrants. . . . . . . . . . . . . . . . .3 .1 -- .1
Addition from assumed conversion of 8.875% convertible senior
subordinated notes . . . . . . . . . . . . . . . . . . . . . . . . . 5.2 21.6 5.2 21.6
Addition from assumed conversion of 6.75% convertible
subordinated debentures. . . . . . . . . . . . . . . . . . . . . . . 1.3 2.0 1.3 2.5
Addition from assumed conversion of Series E Cumulative
Convertible Exchangeable Preferred Stock. . . . . . . . . . . . . . . 3.4 3.4 3.4 3.4
---------- ---------- ---------- ----------
Fully Diluted Weighted Average Shares Outstanding. . . . . . . . . . . . 109.4 117.9 109.3 118.4
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net Income (loss). . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (21.1) $ 127.9 $ 11.3 $ 224.7
Less:
Series E Cumulative Convertible Exchangeable Preferred Stock
dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.0) (2.0) (4.0) (4.0)
Income adjustment associated with assumed conversion of Stone-
Consolidated Corporation 8% convertible subordinated
debentures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -- (3.0) -- (3.9)
Add back:
Interest on 8.875% convertible senior subordinated notes . . . . . . . .8 3.4 1.6 6.8
Interest on 6.75% convertible subordinated debentures. . . . . . . . . .5 .7 .9 1.8
Series E Cumulative Convertible Exchangeable Preferred Stock
dividend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.0 2.0 4.0 4.0
---------- ---------- ---------- ----------
Net income (loss) used in computing fully diluted net income
(loss) per common share. . . . . . . . . . . . . . . . . . . . . . . . $ (19.8) $ 129.0 $ 13.8 $ 229.4
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
FULLY DILUTED EARNINGS PER SHARE(A). . . . . . . . . . . . . . . . . . . $ (.18) $ 1.09 $ .13 $ 1.94
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
(A) Fully diluted earnings per share for the three and six months ended
June 30, 1996 are not presented in the consolidated financial statements due
to anti-dilutive nature.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from Stone
Container Corporation and Subsidiaries' June 30, 1996 Consolidated Balance
Sheet and Consolidated Operations and Retained Earnings and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 128
<SECURITIES> 0
<RECEIVABLES> 650
<ALLOWANCES> 23
<INVENTORY> 753
<CURRENT-ASSETS> 1672
<PP&E> 4832
<DEPRECIATION> 2240
<TOTAL-ASSETS> 6430
<CURRENT-LIABILITIES> 271
<BONDS> 3862
0
115
<COMMON> 953
<OTHER-SE> (105)
<TOTAL-LIABILITY-AND-EQUITY> 6430
<SALES> 2604
<TOTAL-REVENUES> 2604
<CGS> 1985
<TOTAL-COSTS> 2453
<OTHER-EXPENSES> (55)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 201
<INCOME-PRETAX> 5
<INCOME-TAX> (5)
<INCOME-CONTINUING> 11
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 11
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
