<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 March 31, 1997
[ ] 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, including area code: 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 requirements for the past 90 days.
Yes X No
---- ----
Number of shares of common stock outstanding as of May 1, 1997: 99,319,186
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STONE CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
(IN MILLIONS) 1997* 1996
------------------------------
ASSETS
Current assets:
Cash and cash equivalents. . . . . . . . . . . . $ 94.4 $ 112.6
Accounts and notes receivable (less allowances
of $21.4 and $24.3). . . . . . . . . . . . . . 568.9 572.8
Inventories. . . . . . . . . . . . . . . . . . . 779.3 741.6
Other. . . . . . . . . . . . . . . . . . . . . . 127.3 134.2
--------- ------------
Total current assets . . . . . . . . . 1,569.9 1,561.2
--------- ------------
Property, plant and equipment. . . . . . . . . . 4,906.6 4,939.1
Accumulated depreciation and amortization. . . . (2,349.0) (2,305.4)
--------- ------------
Property, plant and equipment--net . . 2,557.6 2,633.7
Timberlands. . . . . . . . . . . . . . . . . . . 32.8 34.6
Goodwill . . . . . . . . . . . . . . . . . . . . 476.0 485.4
Investment in non-consolidated affiliates. . . . 1,169.0 1,198.2
Other. . . . . . . . . . . . . . . . . . . . . . 428.4 440.7
--------- ------------
Total assets . . . . . . . . . . . . . . . . . . $ 6,233.7 $ 6,353.8
--------- ------------
--------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . $ 270.0 $ 363.8
Current maturities of senior long-term debt. . . 179.5 186.7
Notes payable and current maturities of
non-recourse debt of consolidated affiliates. . 30.0 21.9
Income taxes . . . . . . . . . . . . . . . . . . 23.3 15.1
Accrued and other current liabilities. . . . . . 306.7 301.7
--------- ------------
Total current liabilities. . . . . . . 809.5 889.2
--------- ------------
Senior long-term debt. . . . . . . . . . . . . . 3,457.0 3,269.6
Subordinated debt. . . . . . . . . . . . . . . . 422.4 422.3
Non-recourse debt of consolidated affiliates . . 246.8 259.2
Other long-term liabilities. . . . . . . . . . . 305.6 308.1
Deferred taxes . . . . . . . . . . . . . . . . . 337.6 410.2
Commitments and contingencies. . . . . . . . . .
STOCKHOLDERS' EQUITY:
Series E preferred stock. . . . . . . . . . . 115.0 115.0
Common stock (99.3 and 99.3 shares
outstanding) . . . . . . . . . . . . . . . . 955.4 954.8
Accumulated deficit . . . . . . . . . . . . . (192.9) (94.2)
Foreign currency translation adjustment . . . (221.5) (178.8)
Unamortized expense of restricted stock plan. (1.2) (1.6)
--------- ------------
Total stockholders' equity . . . . . . 654.8 795.2
--------- ------------
Total liabilities and stockholders' equity . . . $ 6,233.7 $ 6,353.8
--------- ------------
--------- ------------
*Unaudited; subject to year-end audit
The accompanying notes are an integral part of these statements.
1
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STONE CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
AND RETAINED EARNINGS (ACCUMULATED DEFICIT)
Three months ended
March 31,
------------------
(IN MILLIONS EXCEPT PER SHARE) 1997 1996
------- --------
Net sales. . . . . . . . . . . . . . . . . . . . . . . . . $1,180.8 $1,321.5
Cost of products sold. . . . . . . . . . . . . . . . . . . 988.2 972.2
Selling, general and administrative expenses . . . . . . . 146.7 153.7
Depreciation and amortization. . . . . . . . . . . . . . . 78.5 79.0
Equity (income) loss from affiliates . . . . . . . . . . . 12.6 (26.2)
Other (income) expense-net . . . . . . . . . . . . . . . . 1.7 (2.8)
-------- --------
Income (loss) before interest expense, income taxes,
and minority interest . . . . . . . . . . . . . . . . . . (46.9) 145.6
Interest expense . . . . . . . . . . . . . . . . . . . . . (107.4) (99.6)
-------- --------
Income (loss) before income taxes and minority interest. . (154.3) 46.0
(Provision) credit for income taxes. . . . . . . . . . . . 57.6 (14.6)
Minority interest. . . . . . . . . . . . . . . . . . . . . -- 1.0
-------- --------
Net income (loss). . . . . . . . . . . . . . . . . . . . . (96.7) 32.4
Preferred stock dividends. . . . . . . . . . . . . . . . . (2.0) (2.0)
-------- --------
Net income (loss) applicable to common shares. . . . . . . $ (98.7) $ 30.4
-------- --------
Retained earnings (accumulated deficit),
beginning of period . . . . . . . . . . . . . . . . . . . $ (94.2) $ 97.8
Net income (loss). . . . . . . . . . . . . . . . . . . . . (96.7) 32.4
Cash dividends on common and preferred stock . . . . . . . (2.0) (16.9)
-------- --------
Retained earnings (accumulated deficit), end of period . . $ (192.9) $ 113.3
-------- --------
-------- --------
PER SHARE OF COMMON STOCK:
Net income (loss):
Primary . . . . . . . . . . . . . . . . . . . . . . . . $ (.99) $ .31
-------- --------
Fully diluted. . . . . . . . . . . . . . . . . . . . . . $ * $ .30
-------- --------
Cash dividends . . . . . . . . . . . . . . . . . . . . . . $ -- $ .15
-------- --------
Common shares and common share equivalents outstanding
(weighted average, in millions):
Primary. . . . . . . . . . . . . . . . . . . . . . . . . 99.3 99.2
-------- --------
Fully Diluted. . . . . . . . . . . . . . . . . . . . . . * 104.4
-------- --------
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
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STONE CONTAINER CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended
March 31,
------------------
(IN MILLIONS EXCEPT PER SHARE) 1997 1996
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss). . . . . . . . . . . . . . . . . . . . $(96.7) $ 32.4
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization. . . . . . . . . . . . . 78.5 79.0
Deferred taxes . . . . . . . . . . . . . . . . . . . . (62.4) 3.7
Foreign currency transaction losses. . . . . . . . . . 4.5 .2
Equity (income) loss from affiliates . . . . . . . . . 12.6 (26.2)
Other--net. . . . . . . . . . . . . . . . . . . . . . . 20.4 15.3
Changes in current assets and liabilities:
(Increase) decrease in accounts and notes
receivable--net. . . . . . . . . . . . . . . . . . . (1.8) 58.1
Increase in inventories. . . . . . . . . . . . . . . . (41.7) (49.8)
Increase in other current assets . . . . . . . . . . . (.1) (4.8)
Decrease in accounts payable and other current
liabilities . . . . . . . . . . . . . . . . . . . . . (72.6) (23.0)
------ -------
Net cash (used in) provided by operating activities. . . (159.3) 84.9
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings . . . . . . . . . . . . . . . . . . . . . . . 191.4 184.7
Non-recourse borrowings of consolidated affiliates . . . -- 1.2
Payments made on debt. . . . . . . . . . . . . . . . . . (10.5) (63.2)
Payments by consolidated affiliates on non-recourse debt (3.2) (5.1)
Cash dividends . . . . . . . . . . . . . . . . . . . . . (2.0) (16.9)
------ -------
Net cash provided by financing activities. . . . . . . . 175.7 100.7
------ -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures . . . . . . . . . . . . . . . . . . (26.3) (41.8)
Proceeds from sales of assets. . . . . . . . . . . . . . 2.6 2.6
Purchase of securities of a non-consolidated affiliate . -- (39.6)
Payments made for businesses acquired. . . . . . . . . . (4.3) (5.7)
Other--net . . . . . . . . . . . . . . . . . . . . . . . (5.3) (.8)
------ -------
Net cash used in investing activities. . . . . . . . . . (33.3) (85.3)
------ -------
Effect of exchange rate changes on cash. . . . . . . . . (1.3) (1.2)
------ -------
Net (decrease) increase in cash and cash equivalents . . (18.2) 99.1
Cash and cash equivalents, beginning of period . . . . . 112.6 40.3
------ -------
Cash and cash equivalents, end of period . . . . . . . . $ 94.4 $ 139.4
------ -------
------ -------
See Note 6 regarding supplemental cash flow information.
Unaudited; subject to year-end audit
The accompanying notes are an integral part of these statements.
3
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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 normal recurring adjustments necessary to fairly
present the Company's financial position as of March 31, 1997 and the results
of operations and cash flows for the three month periods ended March 31, 1997
and 1996.
NOTE 2: RECLASSIFICATIONS
Certain prior year amounts have been restated to conform with the current year
presentation in the Statements of Cash Flows.
NOTE 3: SUBSEQUENT EVENTS
In April 1997, the Company's 90 percent owned subsidiary Stone Venepal
(Celgar) Pulp, Inc. ("SVCPI") acquired the remaining 50 percent interest
(the "Additional Celgar Interest") in the Celgar pulp mill (the "Celgar
Mill") in Castlegar, British Columbia from CITIC B.C., Inc. ("CITIC"), an
indirect subsidiary of China International Trust Investment Corporation of
Beijing, People's Republic of China, in exchange for the assumption of the
portion of the Celgar Mill's indebtedness owed by CITIC. Such indebtedness is
non-recourse to the Company. The Company now owns a 90 percent interest in
the Celgar Mill. The Company is in discussion with a third party to sell
approximately 50 percent of the Company's interest in the Celgar Mill.
NOTE 4: MERGER OF SIGNIFICANT SUBSIDIARY
On February 14, 1997, Stone-Consolidated Corporation, a 46.6 percent owned non-
consolidated affiliate of the Company, and Abitibi-Price Inc., announced a
merger agreement between the two companies. The transaction, which is subject
to shareholder and regulatory approval, is expected to close in the second
quarter of 1997. Following the amalgamation, the Company would own
approximately 25 percent of the common stock of the resulting entity which would
be a significant manufacturer and marketer of publication papers with combined
annual revenues of approximately $4.7 billion (CDN). As of May 1, 1997, the
Company's interest in Stone-Consolidated Corporation had a market value of
approximately US $820 million, based on the per share price as reported by the
Toronto Stock Exchange and the prevailing exchange rate at such time.
4
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NOTE 5: INVENTORIES
Inventories are summarized as follows:
March 31, December 31,
(IN MILLIONS) 1997 1996
--------- -----------
Raw materials and supplies . . . . . . $247.8 $ 255.3
Paperstock . . . . . . . . . . . . . . 422.8 378.1
Work in process. . . . . . . . . . . . 20.6 19.5
Finished products. . . . . . . . . . . 103.8 105.1
--------- -----------
795.0 758.0
Excess of current cost over LIFO
inventory value. . . . . . . . . . . (15.7) (16.4)
--------- -----------
Total inventories. . . . . . . . . . . $779.3 $ 741.6
--------- -----------
--------- -----------
NOTE 6: ADDITIONAL CASH FLOW STATEMENT INFORMATION
The Company's cash payments for interest and income taxes were as follows:
Three months ended
March 31,
-----------------------
(IN MILLIONS) 1997 1996
---------- ---------
Cash paid during the periods for:
Interest (net of capitalization) . . $ 98.4 $ 92.7
Income taxes (net of refunds). . . . $ (5.1) $ 2.8
---------- ---------
---------- ---------
NOTE 7: LIQUIDITY MATTERS
The Company's liquidity and financial flexibility has been adversely affected by
the net losses incurred and insufficient operating cash flows generated in 1996
and in the first quarter of 1997. Currently, industry conditions have resulted
in continued pressure on product prices and the Company will report a net loss
in the second quarter of 1997. In addition, the Company expects operating cash
flows to remain weak in the second quarter of 1997 resulting in increased
pressure on liquidity. At May 1, 1997, the Company had borrowing availability
of approximately $187 million under its revolving credit facilities.
The Company is highly leveraged, and while highly leveraged, will incur
substantial ongoing interest expense (in excess of $400 million annually
based upon current outstanding indebtedness). As of March 31, 1997, the
Company has debt amortizations of $182 million due in 1997, including $150
million of 10-3/4% Senior Subordinated Notes due June 15, 1997 (the "10-3/4%
Senior Subordinated Notes"). The Company is currently in the process of
refinancing the 10-3/4% Senior Subordinated Notes. Beginning in 1998 and
continuing thereafter, the Company will be required to make significantly
increased principal repayments on its existing indebtedness. As of March 31,
1997, the Company has debt amortizations of approximately $431 million in
1998, $599 million in 1999 and $483 million in 2000. In the event that
operating cash flows and borrowing availability under its revolving credit
facilities or from other financing sources do not provide sufficient
liquidity for the Company to meet its
5
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obligations, including its debt service requirements, the Company will
either seek to refinance significant portions of its indebtedness or sell or
otherwise monetize certain of its assets. The Company's financial flexibility
and ability to incur additional indebtedness and, in certain cases, refinance
outstanding indebtedness is limited or restricted under the provisions of the
Company's bank credit agreement (the "Credit Agreement"), various senior note
indentures (the "Senior Note Indentures") and certain of its other financial
obligations. Without additional financing or an improvement in operating
results, the Company may be required to pursue other alternatives to improve
liquidity, including cost reductions, sales or monetizations of assets, deferral
of certain discretionary capital expenditures and/or obtaining additional
sources of funds, if available. No assurance can be given that such measures,
if required, would generate the liquidity required by the Company to operate its
business and service its debt obligations.
See also Management's Discussion and Analysis-"Financial Condition and
Liquidity."
6
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STONE CONTAINER CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Provided below is certain financial data for the three months ended March 31,
1997 and 1996:
Three months ended March 31,
----------------------------
1997 1996
-------- --------
Net sales. . . . . . . . . . . . . . . $1,180.8 $1,321.5
Depreciation and amortization. . . . . 78.5 79.0
Interest expense . . . . . . . . . . . 107.4 99.6
Equity income (loss) from affiliates . (12.6) 26.2
Income (loss) before income taxes
and minority interest. . . . . . . . (154.3) 46.0
Net income (loss). . . . . . . . . . . (96.7) 32.4
The Company incurred a net loss of $96.7 million for the 1997 first quarter or
$.99 per share of common stock, as compared with net income for the 1996 first
quarter of $32.4 million, or $.31 per share of common stock on a primary basis
and $.30 per share of common stock on a fully diluted basis.
Net sales for the three months ended March 31, 1997 decreased $140.7
million from the prior year period. Net sales for 1996 included $59.3 million
of retail bag sales now reported as part of S&G Packaging Company, L.L.C.
("S&G"), a non-consolidated affiliate of the Company. Excluding the effect of
S&G, sales for the 1997 period decreased approximately $81.4 million or 6.4
percent from the comparable prior year period. The decrease in sales, as well
as the decrease in net income from the first quarter of 1996, mainly resulted
from lower average selling prices which more than offset sales volume increases
for certain of the Company's products. Additionally, a decrease in equity
income from affiliates primarily resulting from a first quarter 1997 net loss
incurred by Stone Consolidated Corporation, contributed to the decrease in net
income.
Shipments of corrugated containers, including the Company's proportionate
share of the shipments by its foreign affiliates, were 13.2 billion square feet
for the first quarter of 1997, compared with 13.1 billion square feet for the
comparable prior year period. Shipments of paper bags and sacks, including the
Company's proportionate share of the shipments of S&G, were 118 thousand tons
for the three months ended March 31, 1997, compared with 143 thousand tons
shipped during the comparable 1996 period.
Production of containerboard and kraft paper, including 50 percent of the
production at Florida Coast, was 1.38 million tons for the three months ended
March 31, 1997, compared with 1.14 million tons for the prior year period.
7
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FINANCIAL CONDITION AND LIQUIDITY
The Company's working capital ratio was 1.9 to 1 at March 31, 1997 and 1.8
to 1 at December 31, 1996. The Company's long-term debt to total
capitalization ratio was 80.6 percent at March 31, 1997 and 76.6 percent at
December 31, 1996. Capitalization, for purposes of this ratio, includes
long-term debt (which includes debt of 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.
The Company's bank Credit Agreement contains covenants that include,
among other things, the maintenance of certain financial tests and ratios.
The Company has begun discussions to seek covenant relief from its bank group
prior to June 30, 1997. Although no assurance can be given, the Company
believes such relief will be granted.
The Company's various Senior Note Indentures (under which approximately
$2.0 billion of debt is outstanding) state that if the Company does not
maintain a minimum Subordinated Capital Base (as defined) of $1 billion for
two successive quarters, the Company would be required to semi-annually offer
to purchase 10 percent of such outstanding indebtedness at par until the
minimum Subordinated Capital Base is again attained. In the event that
borrowings under the Company's Credit Agreement exceed amounts outstanding
under the Senior Note Indentures, and would not permit the offer to
repurchase, then the Company would be required to increase the rates on the
Notes by 50 basis points per quarter up to a maximum of 200 basis points
until the minimum Subordinated Capital Base is attained. The Company's
Subordinated Capital Base was $900 million at March 31, 1997, however, the
Company is in the process of implementing a subordinated financing which is
intended to cause the Subordinated Capital Base to be above $1 billion at
June 30, 1997. There can be no assurance that the Company will consummate
such financing or that the Company can achieve or maintain the minimum
Subordinated Capital Base in the future, as losses serve to decrease the
Subordinated Capital Base. The Company also has a minimum Net Worth (as
defined) covenant contained in its various Senior Subordinated Indentures
(under which approximately $469 million of debt was outstanding) which states
that if the Company does not maintain a minimum of $500 million of Net Worth
for two successive quarters, the Company will have to increase the interest
on such indebtedness issued under such indentures by 50 basis points per
quarter up to a maximum amount of 200 basis points.
At May 1, 1997, the Company had borrowing availability of approximately
$187 million (net of letters of credit which reduce the amount available to
be borrowed) under its revolving credit facilities. The weighted average
interest rates on outstanding term loan and revolver borrowings under the
Credit Agreement for the quarter ended March 31, 1997 were 8.7 percent and
8.4 percent, respectively. The weighted average rates do not include the
effect of the amortization of deferred debt issuance costs.
8
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OPERATING ACTIVITIES:
Net cash used in operating activities was $159.3 million for the three months
ended March 31, 1997, compared with $84.9 million of cash provided by
operating activities for the comparable period of 1996. The use of cash
during the 1997 first quarter primarily resulted from the first quarter net
loss in conjunction with an increase in cash outflows associated with working
capital changes. The negative cash flow effects associated with working
capital changes mainly resulted from an increase in paperstock inventory
levels and a decrease in accounts payable due to the timing of payments.
FINANCING ACTIVITIES:
During the 1997 first quarter the Company increased its borrowings by $193
million under its revolving credit facility primarily to fund operating cash
needs, capital expenditures and debt service obligations.
On February 17, 1997, the Company paid a cash dividend of $0.4375 per
share on its Series E Cumulative Convertible Exchangeable Preferred Stock
("Series E Cumulative Preferred Stock"). The Company's Credit Agreement,
Senior Note Indentures and Senior Subordinated Indenture dated March 15, 1992
(the "Senior Subordinated Indenture") contain provisions restricting payments
of dividends on the Company's capital stock. Due to these restrictive
provisions, the Company will not be permitted to declare or pay future
dividends on the Series E Cumulative Preferred Stock until the Company
generates income or issues capital stock to replenish the dividend pool under
various of its debt instruments and total stockholders' equity equals or
exceeds $750 million. At March 31, 1997, the dividend pool under the Senior
Subordinated Indenture (which contains the most restrictive provisions) had a
deficit of approximately $30 million. In the event the Company has six
quarterly dividends which remain unpaid on the Series E Cumulative Preferred
Stock, the holders of the Series E Cumulative Preferred Stock would have the
right to elect two members to the Company's Board of Directors until the
accumulated dividends on such Series E Cumulative Preferred Stock have been
declared and paid or set apart for payment.
On January 27, 1997, the Company announced that it did not declare a
cash dividend on its Common Stock. Cash dividends on Common Stock cannot be
declared and paid until the Company fully satisfies all accumulated preferred
stock dividends in arrears and there is an available dividend pool under the
Senior Subordinated Indenture and under the Credit Agreement.
On January 27, 1997, the Company filed a $1 billion shelf registration
statement with the Securities and Exchange Commission providing for the
issuance of equity and/or debt securities. The registration statement was
declared effective February 5, 1997.
INVESTING ACTIVITIES:
Capital expenditures for the three months ended March 31, 1997 totalled
approximately $26.3 million.
9
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OUTLOOK:
The Company's liquidity and financial flexibility has been adversely affected
by the net losses incurred and insufficient operating cash flows generated in
1996 and in the first quarter of 1997. Currently, industry conditions have
resulted in continued pressure on product prices and the Company will report
a net loss in the second quarter of 1997. In addition, the Company expects
operating cash flows to remain weak in the second quarter of 1997 resulting
in increased pressure on liquidity. At May 1, 1997, the Company had
borrowing availability of approximately $187 million under its revolving
credit facilities.
The Company is highly leveraged, and while highly leveraged, will incur
substantial ongoing interest expense (in excess of $400 million annually
based upon current outstanding indebtedness). As of March 31, 1997, the
Company has debt amortizations of $182 million due in 1997, including $150
million of 10-3/4% Senior Subordinated Notes due June 15, 1997 (the "10-3/4%
Senior Subordinated Notes"). The Company is currently in the process of
refinancing the 10-3/4% Senior Subordinated Notes and anticipates certain
additional financings of approximately $550 million including approximately
$50 million from inventory reductions associated with mill downtime.
Beginning in 1998 and continuing thereafter, the Company will be required to
make significantly increased principal repayments on its existing
indebtedness. As of March 31, 1997, the Company has debt amortizations of
approximately $431 million in 1998, $599 million in 1999 and $483 million in
2000. In the event that operating cash flows and borrowing availability under
its revolving credit facilities or from other financing sources do not
provide sufficient liquidity for the Company to meet its obligations,
including its debt service requirements, the Company will either seek to
refinance significant portions of its indebtedness or sell or otherwise
monetize certain of its assets. The Company's financial flexibility and
ability to incur additional indebtedness and, in certain cases, refinance
outstanding indebtedness is limited or restricted under the provisions of the
Credit Agreement, various Senior Note Indentures and certain of its other
financial obligations. Without additional financing or an improvement in
operating results, the Company may be required to pursue other alternatives
to improve liquidity, including cost reductions, sales or monetization of
assets, deferral of certain discretionary capital expenditures and/or
obtaining additional sources of funds, if available. No assurance can be
given that such measures, if required, would generate the liquidity required
by the Company to operate its business and service its debt obligations.
10
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Computation of Primary and Fully Diluted Net Income (Loss) Per Common
Share
27 Financial Data Schedule for the three months ended March 31, 1997.
(b) Reports on Form 8-K
1. A Report on Form 8-K dated April 28, 1997 was filed under
Item 5 - Other Events and Item 7 - Exhibits.
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: May 13, 1997
11
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<TABLE>
<CAPTION>
EXHIBIT 11
STONE CONTAINER CORPORATION
COMPUTATION OF PRIMARY AND FULLY DILUTED
NET INCOME (LOSS) PER SHARE
(IN MILLIONS, EXCEPT PER SHARE)
Three Months Ended
March 31,
------------------
1997 1996
-------- --------
<S> <C> <C>
PRIMARY EARNINGS PER SHARE
Shares of Common Stock:
Weighted average number of common shares outstanding. . . . . . . . . . . . . . . . . . . . 99.3 99.2
-------- --------
Primary Weighted Average Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . . . . 99.3 99.2
-------- --------
-------- --------
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(96.7) $ 32.4
Less:
Series E Cumulative Convertible Exchangeable Preferred Stock dividend . . . . . . . . . . . (2.0) (2.0)
-------- --------
Net income (loss) used in computing primary net income (loss) per common share. . . . . . . . $(98.7) $ 30.4
-------- --------
-------- --------
PRIMARY EARNINGS PER SHARE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (.99) $ .31
-------- --------
-------- --------
FULLY DILUTED EARNINGS PER SHARE
Shares of Common Stock:
Weighted average number of common shares outstanding. . . . . . . . . . . . . . . . . . . . 99.3 99.2
Addition from assumed conversion of 8.875% convertible senior subordinated
notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.1 5.2
Addition from assumed conversion of 6.75% convertible subordinated debentures . . . . . . . 1.3 1.3
Addition from assumed conversion of Series E Cumulative Convertible
Exchangeable Preferred Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.4 3.4
-------- --------
Fully Diluted Weighted Average Shares Outstanding . . . . . . . . . . . . . . . . . . . . . . 109.1 109.1
-------- --------
-------- --------
Net Income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $(96.7) $ 32.4
Less:
Series E Cumulative Convertible Exchangeable Preferred Stock dividend . . . . . . . . . . . (2.0) (2.0)
Add back:
Interest on 8.875% convertible senior subordinated notes. . . . . . . . . . . . . . . . . . .8 .8
Interest on 6.75% convertible subordinated debentures . . . . . . . . . . . . . . . . . . . .5 .5
Series E Cumulative Convertible Exchangeable Preferred Stock dividend . . . . . . . . . . . 2.0 2.0
-------- --------
Net income (loss) used in computing fully diluted net income per common share . . . . . . . . $(95.4) $ 33.7
-------- --------
-------- --------
FULLY DILUTED EARNINGS PER SHARE (A)(B) . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (.87) $ .31
-------- --------
-------- --------
</TABLE>
(A) Fully diluted earnings per share for the three months ended March 31, 1997
is not presented in the consolidated financial statements due to
anti-dilutive nature.
(B) Fully diluted earnings per share for the three months ended March 31, 1996
in the consolidated financial statements excludes the assumed conversion
of the 6.75% convertible subordinated debentures and the Series E Cumulative
Convertible Exchangeable Preferred Stock due to their anti-dilutive nature.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from Stone Container
Corporation and Subsidiaries' March 31, 1997 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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 94
<SECURITIES> 0
<RECEIVABLES> 590
<ALLOWANCES> 21
<INVENTORY> 779
<CURRENT-ASSETS> 1570
<PP&E> 4907
<DEPRECIATION> 2349
<TOTAL-ASSETS> 6234
<CURRENT-LIABILITIES> 810
<BONDS> 4126
0
115
<COMMON> 955
<OTHER-SE> (416)
<TOTAL-LIABILITY-AND-EQUITY> 6234
<SALES> 1181
<TOTAL-REVENUES> 1181
<CGS> 988
<TOTAL-COSTS> 1214
<OTHER-EXPENSES> 14
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 107
<INCOME-PRETAX> (154)
<INCOME-TAX> (57)
<INCOME-CONTINUING> (97)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (97)
<EPS-PRIMARY> (.99)
<EPS-DILUTED> (.99)
</TABLE>
