STONE CONTAINER CORPORATION
DEFERRED INCOME SAVINGS PLAN
FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
STONE CONTAINER CORPORATION
DEFERRED INCOME SAVINGS PLAN
INDEX
Page
Report of Independent Accountants 1
Financial Statements:
Statement of Net Assets Available for
Benefits as of December 31, 1996 and 1995 2
Statement of Changes in Net Assets Available
for Benefits for the Years Ended
December 31, 1996 and 1995 3
Notes to Financial Statements 4
Note: Supplementary schedules have been omitted
because they are not applicable.
Report of Independent Accountants
June 23, 1997
To the Participants and
Administrator of the
Stone Container Corporation
Deferred Income Savings Plan
In our opinion, the accompanying statement of net assets available
for benefits and the related statement of changes in net assets
available for benefits present fairly, in all material respects, the
net assets available for benefits of the Stone Container Corporation
Deferred Income Savings Plan (the Plan) at December 31, 1996 and
1995, and the changes in net assets available for benefits for the
years then ended, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of
the Plan's management; our responsibility is to express an opinion
on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
<PAGE>
<TABLE>
STONE CONTAINER CORPORATION
DEFERRED INCOME SAVINGS PLAN
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
AS OF DECEMBER 31, 1996 AND 1995
<CAPTION>
1996 1995
<S> <C> <C>
Cash and cash equivalents $ - $ 2,868,559
Fixed investment contracts - 43,968,431
Pooled investment funds - 11,576,430
Mutual funds - 48,842,837
Common stock - 18,813,957
Investment in Stone Container
Corporation Defined Contribution
Master Trust 160,456,872 -
Total investments 160,456,872 126,070,214
Contributions receivable:
Employee - 4,540
Employer 1,151,094 534,554
Due from broker - 943,830
Accrued income 926,759 11,517
Total assets 162,534,725 127,564,655
Due to broker - 943,830
Total liabilities - 943,830
Net assets available for
benefits $162,534,725 $126,620,825
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
<TABLE>
STONE CONTAINER CORPORATION
DEFERRED INCOME SAVINGS PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
FOR THE YEARS ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>
1996 1995
<S> <C> <C>
Sources of assets:
Contributions:
Employee $ 14,300,054 $ 13,069,571
Employer 1,151,094 534,554
Net investment income in the Stone
Container Corporation Defined
Contribution Master Trust 16,927,852 -
Interest and dividend income - 6,771,903
Net appreciation in fair value of
investments - 3,157,992
Transfers of assets from other plan 14,939,684 -
Other 20,701 106,927
47,339,385 23,640,947
Application of assets:
Participant withdrawals 10,610,680 7,336,622
Common stock distributed
to participants 780,735 1,922,121
Other 34,070 100,419
11,425,485 9,359,162
Increase in net assets available
for benefits 35,913,900 14,281,785
Net assets available for benefits:
Beginning of period 126,620,825 112,339,040
End of period $162,534,725 $126,620,825
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
STONE CONTAINER CORPORATION
DEFERRED INCOME SAVINGS PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE 1 - DESCRIPTION OF THE PLAN:
The following description of the Stone Container Corporation Deferred Income
Savings Plan (the Plan) is provided for general informational purposes only.
Participants should refer to the Plan document for complete information.
General
The Plan was adopted by the Board of Directors of Stone Container
Corporation (Stone or the Company) to offer eligible employees of the Company
an opportunity to invest a portion of their income in the Plan on a
regular basis through salary reduction under the provisions of
section 401(k) of the Internal Revenue Code of 1986 (IRC). The Plan is
administered by a committee of three individuals appointed by the
Company and is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA). The Plan's year end is
December 31.
Eligibility
All salaried employees of the Company are eligible to participate in
the Plan on any January 1 or July 1 enrollment date by filing written
elections indicating their elective contributions (or by other procedure
established by the Plan administrator for this purpose).
Contributions
Employee salary reduction contributions are to be not less than one
percent or greater than ten percent of compensation up to the maximum
contribution as permitted by the IRC. Compensation is defined as the total
of wages, bonuses, commissions and overtime pay. Participants may change
their contribution percentages and fund investment alternatives at specified
dates during the year. Contributions may be suspended at any time by
notifying the Plan Administrator. Contributions and earnings on
participants' contributions are fully vested and nonforfeitable at all times.
The Company matches participant contributions in an amount equal to $.50 for
each $1 of contribution made by participants up to a maximum employer
contribution of $300 per participant, per year. Prior to January 1, 1996,
the Company matched participant contributions in an amount equal to $.25 for
each $1 of contribution made by participants up to a maximum employer
contribution of $150 per participant, per year. Employer contributions are
made annually subsequent to the Plan year end. Participants are also fully
vested, at all times, in the Company's matching contributions and earnings
thereon.
Distributions
The balance in a participant's account is distributable upon termination of
the participant's employment for any reason, including death, retirement,
permanent disability, resignation or dismissal. Participant balances in the
Company stock fund are distributable in shares of Stone common stock valued
as of the end of the accounting period during which the distribution is
requested. Participants who have not terminated employment are entitled to
distributions of their account balances upon attainment of age 59-1/2.
Participants must commence distribution of their account balances no later
than April 1 of the calendar year following the calendar year in which they
attain age 70-1/2. All distributions are made in the form of lump-sum
payments. Upon request, an annuity option is also available.
Prior to normal distribution of benefits, participants who demonstrate
financial hardship may request a withdrawal of all or a portion of their
employer and salary reduction contributions account as of December 31, 1988,
plus their aggregate salary reduction contributions, but not earnings
thereon, made on or after January 1, 1989. All hardship requests are
evaluated and subject to approval by the Plan Administrator. Such
withdrawals are subject to a $250 minimum and are not allowed more frequently
than once in a twelve-month period.
Investment alternatives
Participants have the option to invest their balances in a fixed income fund,
a balanced fund, an equity fund, an international equity fund, a small
company growth fund and a Company stock fund. Prior to 1989, certain
participants also had the option to invest in a money market fund.
Investment decisions for each fund are made by the Bankers Trust
Company (the Trustee) or the investment managers selected by the Plan
Administrator. Prior to April 1, 1995, Harris Trust and Savings
Bank acted as the Plan's trustee. Participants may elect to invest
their contributions and the matching Company contributions in the various
funds in increments of one percent. All contributions received are held and
invested in the short-term investment fund until it is administratively
possible for the Trustee to invest such contributions and earnings thereon
pursuant to the participants' investment elections. No contributions and
earnings thereon shall be held in the short-term investment fund longer than
the following accounting date.
Termination of the Plan
The Company anticipates and believes that the Plan will continue
without interruption, but reserves the right to discontinue the Plan
at any time. If the Plan is terminated, the assets of the Plan
shall be allocated among participants and beneficiaries in
accordance with the applicable provisions of ERISA and the IRC.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of accounting
The financial statements of the Plan are presented on the accrual
basis of accounting. Accordingly, investment income is recognized
when earned and expenses are recognized when incurred.
Effective January 1, 1996, the Plan participates in the Stone
Container Corporation Defined Contribution Master Trust (the Master
Trust). The financial statements of the Plan disclose only the
Plan's allocated share of the assets and the investment earnings and
losses of the Master Trust (Note 6). During 1996, the Master Trust
included four other defined contribution plans that are sponsored
by the Company.
Allocation of Master Trust assets and transactions
In order to preserve for participating plans an interest in the
combined assets of the Master Trust, the Trustee computes the
beneficial interest in the Master Trust for each defined
contribution plan by fund. The current month's Master Trust investment
transactions are allocated based on each plan's computed share in
the applicable Master Trust fund at the end of the prior month, adjusted for
the current month's contributions less payments to beneficiaries and
certain administrative expenses. These allocated amounts are then
added to or subtracted from the prior month's computed shares, as
adjusted, to determine computed shares at the end of the current
month. Master Trust investment transactions allocated to the Plan
include dividend and interest income and net appreciation (depreciation) in
the fair value of investments. These amounts, net of allocated
administrative expenses, represent the Plan's share of gain or loss on
investment in the Master Trust and are presented on the Statement of Changes
in Net Assets Available for Benefits.
Investment valuation
Mutual fund investments are valued at the last reported sales prices on the
last business day of the year. Fixed investment contracts and pooled
investment funds are valued at contract values plus accrued interest, which
approximates market values. The Company's common stock is valued at the
closing price on the last business day of the year. The sum of realized
gains and losses and the net change in unrealized appreciation or
depreciation in the fair value of investments is presented in the Statement
of Changes in Net Assets Available for Benefits as net appreciation or
depreciation in fair value of investments.
Administrative expenses
Investment manager expenses for the fixed income fund are paid by the Plan.
The investment manager expenses for the fixed income fund for the year ended
December 31, 1996 and 1995 were $22,738 and $12,208, respectively. The
majority of other administrative expenses are paid by the Company. Beginning
in 1996 when the Plan began participating in the Master Trust, certain
trustee fees are also paid by the Plan. Such fees for the year ended
December 31, 1996 were $3,671.
Payments to withdrawing participants
The Plan records payments to withdrawing participants at the time of
disbursement, in accordance with generally accepted accounting principles.
Under the rules for preparation of its Form 5500, the Plan reflects an
accrual for the amount to be paid to participants who have withdrawn from the
Plan prior to year end. Amounts payable to participants at December 31, 1996
and 1995 were $359,583 and $1,419,808, respectively.
The following is a reconciliation of net assets available for
benefits per the financial statements to the Form 5500:
December 31,
1996 1995
Net assets available for benefits
per the financial statements $162,534,725 $126,620,825
Amounts payable to withdrawing
participants (359,583) (1,419,808)
Net assets available for benefits per
the Form 5500 $162,175,142 $125,201,017
The following is a reconciliation of benefits paid to participants
per the financial statements to the Form 5500:
Year ended December 31,
1996 1995
Benefits paid to participants per the
financial statements $11,391,415 $9,258,743
Add: Amounts payable to withdrawing
participants at December 31, 1996
and 1995 359,583 1,419,808
Less: Amounts payable to withdrawing
participants at December 31, 1995
and 1994 (1,419,808) (2,244,219)
Benefits paid to participants per the
Form 5500 $10,331,190 $8,434,332
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the amounts reported in the financial
statements and related notes to the financial statements. Changes
in such estimates may affect amounts reported in future periods.
NOTE 4 - PLAN MERGER
Effective January 1, 1996, the Stone Container Corporation Frozen
Savings Plan (the Frozen Plan) merged into the Plan. At that time,
participants of the Frozen Plan became participants of the Plan and
the Frozen Plan was terminated. The net assets of the Frozen Plan
were transferred to the Plan's Trustee.
NOTE 5 - TAX STATUS OF THE PLAN:
The Internal Revenue Service has determined and informed the Company
by letter dated March 29, 1996 that the Plan is designed in
accordance with the applicable sections of the IRC. The Plan administrator
and the Plan's tax counsel believe that the Plan is designed and is currently
being operated in compliance with the applicable requirements of the IRC.
Therefore, no provision for income taxes has been included in the Plan's
financial statements.
NOTE 6 - PARTICIPATION IN THE MASTER TRUST
As described in Note 2, the Plan's investment assets are included
with the assets of several of the Company's defined contribution
plans in the Master Trust. The Trustee determines the Plan's
proportionate share of trust assets and related changes in trust
assets, as described in Note 2, and such amounts are reflected in
the Plan's Statements of Net Assets Available for Benefits and of
Changes in Net Assets Available for Benefits. At December 31, 1996,
the Plan's interest in the net assets of the Master Trust was
approximately 69 percent.
The following table presents the net assets held by the Master Trust
as of December 31, 1996.
1996
Investments, at fair value:
Cash and cash equivalents $ 7,510,768
Mutual funds 119,806,503
Common stock 20,087,230
Fixed income funds 62,938,266
Pooled investment funds 21,399,468
Total investments 231,742,235
Accrued income 2,520,445
Total assets 234,262,680
Due to broker 1,661,815
Total liabilities 1,661,815
Net assets held by Master Trust $232,600,865
The following table presents investment income for the Master Trust
for the year ended December 31, 1996.
1996
Net appreciation in fair value of investments $ 9,126,639
Dividends 7,149,986
Interest 9,751,826
Total investment income 26,028,451
Administrative expenses 38,748
Net investment income $25,989,703
The following table presents the change in the net appreciation in fair value
of investments (including gains and losses on investments sold during the
year and unrealized gains and losses on investments purchased and held during
the year) held by the Master Trust for the year ended December 31, 1996.
1996
Mutual funds $7,941,245
Common stock 1,185,394
Net appreciation
in fair value of investments $9,126,639
NOTE 7 - SIGNIFICANT INVESTMENTS:
Investments with fair values in excess of 5 percent of net assets available
for benefits at either December 31, 1996 or 1995 were:
1996 1995
Investment in Stone Container
Corporation Defined Contribution
Master Trust $160,456,872 $ -
Stone Container Corporation
Common Stock - 18,813,957
Participation in Neuberger &
Berman Guardian Fund - 12,854,892
Participation in American
Balanced Fund, Inc. - 13,462,912
Participation in American
Mutual Fund, Inc. - 11,023,750
Participation in Vanguard
U.S. Growth Fund - 11,501,281
Hawaiian Trust Co.
Pooled GIC Fund - 10,151,531
The following table presents changes in the net appreciation or
depreciation in fair value of investments (including gains and
losses on investments sold during the year and unrealized gains and
losses on investments purchased and held during the year) held by
the Plan for the year ended December 31, 1995.
1995
Common stock ($4,431,028)
Mutual funds 7,589,020
Net appreciation in fair
value of investments $3,157,992
NOTE 8 - CONFEDERATION LIFE
The Plan maintained insurance contracts with Confederation Life
Insurance Company (Confederation Life) during 1996. These contracts
were held as investments in the fixed income fund until the Plan
merged into the Master Trust at which time the contracts were
segregated from the fixed income fund and participants were
prohibited from making contributons, transfers or withdrawals to and
from these contracts. The investment contracts with Confederation
Life held as of December 31, 1996 were:
Original Original
Carrying Crediting Maturity
Value Rate Date
Confederation Life #62630 $1,201,371 7.68% 1/31/97
Confederation Life CIC #62618 1,199,497 7.45% 2/19/97
Confederation Life #62639 1,198,565 7.72% 9/26/96
Confederation Life #62640 1,199,649 7.76% 11/26/96
__________
$4,799,082
==========
In August 1994, following the placement of Confederation Life's
Candian operations under the regulatory control of the Canadian
government, Michigan insurance regulators filed an order of
rehabilitation against the United States branch of Confederation Life. In
response to the seizure of Confederation Life, the Plan ceased accruing
interest on the investments effective August 31, 1994.
In October 1996, the Confederation Life rehabilitation plan was approved by
the courts and in November 1996, the rehabilitation plan with finalized. In
accordance with the rehabilitation plan, the Plan elected to receive its
contract payments including accrued interest in installments commencing in
April 1997. As of May 30, 1997, the Plan has received contract payments
totaling $5,725,841 from Confederation Life and state guaranty associations,
and additional payments are expected to be minor. The excess of contract
payments received as compared to the carrying value of the Confederation Life
contracts at December 31, 1996 is due to the cessation of interest accrued by
the Plan. This excess has been recorded as income in the 1996 financial
statements.
NOTE 9 - INFORMATION BY FUND:
Net asset balances as of December 31, 1996 and 1995, and employee
contributions, employer contributions, net investment income,
transfers of assets from other plans, participant withdrawals and
common stock distributed to participants and transfers from (to)
associated funds for the year ended December 31, 1996 and 1995, by
fund are as follows:
As of As of
Net asset balance: 12/31/96 12/31/95
Fixed Income Fund $ 65,441,053 $ 55,299,963
Equity Fund 51,545,524 37,372,087
Company Stock Fund 19,960,119 18,663,904
Money Market Fund 213,398 270,228
Balanced Fund 21,732,009 15,014,643
International Equity Fund 1,300,643 -
Small Company Growth Fund 2,341,979 -
$162,534,725 $126,620,825
Year ended Year ended
Employee contributions: 12/31/96 12/31/95
Fixed Income Fund $ 4,818,728 $ 5,523,398
Equity Fund 4,978,209 3,468,127
Company Stock Fund 1,943,037 2,219,986
Money Market Fund - -
Balanced Fund 2,408,602 1,858,060
International Equity Fund 59,314 -
Small Company Growth Fund 92,164 -
$14,300,054 $13,069,571
Year ended Year ended
Employer contributions: 12/31/96 12/31/95
Fixed Income Fund $ 310,795 $220,491
Equity Fund 425,905 150,869
Company Stock Fund 138,131 81,632
Money Market Fund - -
Balanced Fund 207,197 81,562
International Equity Fund 34,533 -
Small Company Growth Fund 34,533 -
$1,151,094 $534,554
Year Ended Year Ended
Net investment income: 12/31/96 12/31/95
Fixed Income Fund $ 4,848,810 $3,643,235
Equity Fund 8,242,552 7,971,867
Company Stock Fund 1,402,942 (4,000,409)
Money Market Fund 12,441 22,293
Balanced Fund 2,326,077 2,292,909
International Equity Fund 65,121 -
Small Company Growth Fund 29,909 -
$16,927,852 $9,929,895
Year Ended Year Ended
Transfers of assets from other plan: 12/31/96 12/31/95
Fixed Income Fund $11,972,903 $ -
Equity Fund 2,186,452 -
Company Stock Fund - -
Money Market Fund - -
Balanced Fund 780,329 -
International Equity Fund - -
Small Company Growth Fund - -
$14,939,684 $
Participant withdrawals and common Year Ended Year Ended
stock distributed to participants: 12/31/96 12/31/95
Fixed Income Fund $ 7,051,101 $4,788,051
Equity Fund 2,456,567 1,982,122
Company Stock Fund 780,735 1,948,373
Money Market Fund 17,601 9,857
Balanced Fund 1,085,052 530,340
International Equity Fund - -
Small Company Growth Fund 359 -
$11,391,415 $9,258,743
Year Ended Year Ended
Transfers from (to) associated funds: 12/31/96 12/31/95
Fixed Income Fund ($4,743,217) ($5,363,542)
Equity Fund 845,125 4,941,178
Company Stock Fund (1,407,623) (2,965,335)
Money Market Fund (101,337) (14,518)
Balanced Fund 2,079,647 3,402,217
International Equity Fund 1,141,673 -
Small Company Growth Fund 2,185,732 -
$ - $ -
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustee and administrators of the plan have duly caused this annual report to
be signed on its behalf by the undersigned hereunto duly authorized.
STONE CONTAINER CORPORATION DEFERRED INCOME SAVINGS PLAN
By:THOMAS P. CUTILLETTA June 27, 1997
Thomas P. Cutilletta
Senior Vice President, Administration
and Corporate Controller
EXHIBIT 23
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the
Registration Statement on Form S-8 (No. 33-33784) of Stone Container
Corporation of our report dated June 23, 1997 appearing in the Annual
Report of the Stone Container Corporation Deferred Income Savings
Plan on Form 11-K for the year ended December 31, 1996.
PRICE WATERHOUSE LLP
Chicago, Illinois
June 27, 1997
