-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KW8/FYSNxkFwRlveGwDDcuRnBQl0hobzxjllJwHjUDt6tPclPQNkU339/9Iqj7ZT RdcSuer6fAKOFXxCrQfieA== 0000950117-98-000677.txt : 19980401 0000950117-98-000677.hdr.sgml : 19980401 ACCESSION NUMBER: 0000950117-98-000677 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980331 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNION CAMP CORP CENTRAL INDEX KEY: 0000100783 STANDARD INDUSTRIAL CLASSIFICATION: PAPER MILLS [2621] IRS NUMBER: 135652423 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-04001 FILM NUMBER: 98580588 BUSINESS ADDRESS: STREET 1: 1600 VALLEY RD CITY: WAYNE STATE: NJ ZIP: 07470 BUSINESS PHONE: 9736282000 MAIL ADDRESS: STREET 1: 1600 VALLEY ROAD CITY: WAYNE STATE: NJ ZIP: 07470 FORMER COMPANY: FORMER CONFORMED NAME: UNION BAG CAMP PAPER CORP DATE OF NAME CHANGE: 19660921 10-K 1 UNION CAMP CORPORATION 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended Commission File DECEMBER 31, 1997 NUMBER 1-4001 UNION CAMP CORPORATION A Virginia Corporation 13-5652423 I.R.S. Employer Identification No. 1600 Valley Road Wayne, New Jersey 07470 Telephone (973) 628-2000 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange Title of Each Class on Which Registered Common Stock, $1 par value............................New York Stock Exchange; Pacific Stock Exchange Preferred Stock Purchase Rights......................New York Stock Exchange; Pacific Stock Exchange 8 5/8% Sinking Fund Debentures Due April 15, 2016... ...................New York Stock Exchange Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] On March 4, 1998, 69,244,048 shares of Registrant's Common Stock, $1 par value, were outstanding. On March 4, 1998, the closing price per share for the Common Stock as reported on the Composite Tape for issues listed on the New York Stock Exchange was $59.3125 and the aggregate market value of the Common Stock held by non-affiliates of the Registrant was $4,107,037,597. DOCUMENTS INCORPORATED BY REFERENCE Portions of Registrant's Annual Report to Stockholders for the fiscal year ended December 31, 1997 (the "Union Camp 1997 Annual Report") are incorporated by reference in Parts I, II and IV of this Form 10-K. Portions of Registrant's Proxy Statement, dated March 16, 1998 (the "Union Camp 1998 Proxy Statement"), are incorporated by reference in Part III of this Form 10-K. ================================================================================ COPIES OF THE EXHIBITS MAY BE OBTAINED BY STOCKHOLDERS UPON WRITTEN REQUEST DIRECTED TO THE SECRETARY, UNION CAMP CORPORATION, 1600 VALLEY ROAD, WAYNE, NEW JERSEY 07470, ACCOMPANIED BY A CHECK IN THE AMOUNT OF $10.00 PAYABLE TO UNION CAMP CORPORATION TO COVER PROCESSING AND MAILING COSTS. COSTS OF INDIVIDUAL EXHIBITS ARE AVAILABLE UPON REQUEST TO THE SECRETARY. PART 1 ITEM 1. BUSINESS GENERAL Union Camp Corporation is a Virginia corporation resulting from a merger in 1956 of Union Bag and Paper Corporation and Camp Manufacturing Company, Incorporated. Predecessor businesses were started in 1861 and 1887, respectively. As used in this Report, the terms "Union Camp" and the "Company" mean Union Camp Corporation and its subsidiaries unless the context otherwise requires. Union Camp's principal business segments are the manufacture and sale of paper and paperboard, packaging products and wood products and the production and sale of chemicals, including flavors and fragrances. Information about developments during 1997 relating to Union Camp's business appears in the following portions of the Union Camp 1997 Annual Report and is incorporated by reference in this Item 1: the text under the captions "The Year in Fine Paper" on page 16 (other than the caption describing the photograph on that page); "The Year in Packaging" on page 17 (other than the caption describing the photograph on that page); "The Year in Chemicals" on page 18 (other than the caption describing the photograph on that page); and "The Year in Forest Resources" on page 19 (other than the caption describing the photograph on that page). Information about the Company's research and development costs appears under the caption "Research and Development Costs" in Note 1 of Notes to Consolidated Financial Statements on page 32 of the Union Camp 1997 Annual Report and is incorporated by reference in this Item 1. Revenue, operating profits and other financial data for the principal business segments and for the foreign and domestic operations and the dollar amounts of export sales of Union Camp for the years ended December 31, 1997, 1996 and 1995 appear in Note 15 of Notes to Consolidated Financial Statements on pages 39 and 40 of the Union Camp 1997 Annual Report and are incorporated by reference in this Item 1. The international operations of Union Camp and its subsidiaries are subject to the risks of doing business abroad, including currency fluctuations, foreign government regulation and changes in political environments. During 1997, Union Camp's consolidated sales and operating profit were generated primarily by domestic operations. 1 PAPER AND PAPERBOARD Union Camp's Fine Paper Division produces bleached paper and paperboard and its Kraft Paper and Board Division produces kraft paper and paperboard. Those products are its largest contributors to profits. Union Camp's total production of bleached and kraft paper and paperboard in 1997 was approximately 3.7 million tons, of which about 59% was kraft and 41% was bleached. The Company operates four large paper mills at Savannah, Georgia, Prattville, Alabama, Franklin, Virginia and Eastover, South Carolina. They are fully integrated in that all pulp required to support paper manufacturing is produced at the mill sites. Combined operating capacity is estimated to be approximately 3.8 million tons in 1998. The Savannah, Georgia mill produces kraft linerboard and paper, including saturating kraft, a specialized paper which is used by others as a backing material for decorative and industrial laminates. Kraft paper is used primarily in the manufacture of multiwall bags and kraft linerboard is used primarily in the manufacture of corrugated shipping containers (see the next section entitled "Packaging Products"). There are six machines at the Savannah mill. The two paper machines at the Prattville, Alabama mill produce kraft linerboard. In 1997, the Company converted about 57% of its kraft linerboard and paper production into packaging products and sold essentially all of the rest to others for conversion into similar products. The Franklin, Virginia mill produces uncoated free sheet which is sold in roll and sheet form. These sales are to converters who use uncoated free sheet primarily to make envelopes and forms, to merchant distributors and major end users who use it in business communications, printing, direct response mail and reprographic use. The mill also produces coated and uncoated bleached board which are sold for a variety of end uses, such as publishing, greeting cards, book covers and advertising and promotional printing. There are four paper machines and two board machines at this mill. The Franklin mill includes a recycled (deinked) pulp facility. The deinked facility removes ink from office waste paper and produces recycled pulp for the manufacture of recycled content white paper and board. Recycled content paper is sold as Union Camp branded products such as Collage(TM) and Great White(TM). The Eastover, South Carolina mill produces uncoated free sheet which, like the Franklin product, is sold to others in roll and sheet form for the same end uses. The two-machine Eastover mill has an excess of pulp capacity which is used together with an on-site pulp dryer to produce bleached pulp for sale to others in domestic and international markets. A new business unit of the Fine Paper Division called the Great White Consumer Products(TM) unit sells branded business and computer paper products manufactured at 2 the Franklin and Eastover mills as well as specialty coated and colored paper products produced by others to office superstores, mass merchandisers and other retailers. In 1997, Union Camp sold about 31% of its fine paper and paperboard production in converted or sheet form. This includes approximately 1% converted by its own plants into folding cartons and bags. The four integrated mills use sulfate pulping chemistry, also referred to as the kraft process. Both hardwood and pine timber are used at all four mills. Approximately 34% of the Company's wood pulp production utilizes timber harvested from lands owned or controlled by the Company. Timber use at the Prattville, Savannah and Franklin mills is supplemented with recycled waste paper acquired from others and the Company's converting plants (see the next section entitled "Packaging Products"). PACKAGING PRODUCTS From its mill production of paper and paperboard, Union Camp makes bags and sacks and corrugated and solid fibre containers. Union Camp produces multiwall and consumer bags used to package cement, feed, fertilizer, clay, pet food, chemical and mineral products and specialty bags used in packaging pet food, charcoal, produce, sugar, flour, seed, coffee, cookies, microwaveable popcorn and other miscellaneous items. Union Camp also produces linear low density plastic products including film for consumer applications and for industrial applications, such as plastic shipping sacks to package salt, bark, soil, insulation, resins and chemicals. In March 1997 the Company acquired seventy-five percent of the capital stock of Puntapel, S.A., a manufacturer of multiwall bags used primarily to package cement, flour, feed and sugar. Puntapel's plant is located in San Luis, Argentina. Union Camp produces corrugated and solid fibre containers used to ship and store canned, bottled and packaged products for a wide variety of customers, including food processors and textile, furniture, chemical and automotive manufacturers. In October 1997, the Company acquired Phoenix Display and Packaging Corporation, a marketing, merchandising and point-of-purchase display company based in West Deptford, New Jersey. Phoenix Display and Packaging offers a broad range of services including structural and graphic design, printing, contract packaging and fulfillment. The Company's Folding Carton Division operates three plants which produce cartons with high quality gravure and lithographic printing, which are used principally by the cosmetics and toiletries industries for shelf packaging in retail stores. The International Packaging Division manufactures corrugated containers at wholly-owned, consolidated subsidiaries in Chile, Spain, the Republic of Ireland and Puerto Rico. Union Camp holds a 30% interest in Zucamor S.A., Argentina's leading independent 3 corrugated container company, which it purchased during 1994. The Company has a joint venture in Turkey with KAV Orman Sanayii A.S., a subsidiary of KOC Holding Company, one of the world's largest industrial companies, to operate a corrugated container plant serving agricultural and industrial markets in Turkey. In August 1997, a consolidated joint venture corrugated container plant in Guangzhou, Peoples Republic of China commenced operations. WOOD PRODUCTS Union Camp produces southern pine lumber, plywood and particleboard. Its wood products mills have the capacity to produce 527,000,000 board feet of lumber, 240,000,000 square feet (3/8" basis) of plywood and 117,000,000 square feet (3/4" basis) of particleboard annually. Union Camp's wood products mills produced at 96% of capacity in 1997. Its wood products are used in home construction and industrial markets such as furniture, cabinets and fixtures. The wood products mills also produce significant quantities of wood chips for use in Union Camp's papermaking operations. The Company is constructing a new facility adjacent to its existing veneer plant in Thorsby, Alabama which will produce laminated veneered lumber and wood I-joists for engineered wood product markets. The facility is scheduled to begin operation in the second half of 1998. CHEMICAL GROUP The Chemical Group consists of two operating units: Chemical Products Division and Bush Boake Allen Inc. The Chemical Products Division produces a variety of wood-based and non-wood-based chemicals. Wood-based chemicals, which are by-products of pulp mill operations, include tall oil and turpentine chemicals. Tall oil is a mixture of rosin and fatty acids which are by-products of the pulping process. Tall oil rosins are converted into rosin-based resins and fatty acids are converted into dimer acids and polyamide resins. These products are used in coatings, adhesives, printing inks, paper sizing and oil field chemicals. Non-wood-based chemicals, which are complementary to Union Camp's pulp-derived tall oil fatty acids, are produced by converting vegetable oils into a variety of esters and other derivatives. These are sold primarily for use in cosmetics, lubricants, plastics, surfactants and rubber. The Chemical Products Division has five processing facilities, three of which are in the United States and two of which are in England. In June 1994, Bush Boake Allen Inc. completed an initial public offering of 32% of its outstanding common stock. Union Camp owns the remaining 68% of the stock. 4 Bush Boake Allen Inc. is a producer of flavors (including essential oils, seasonings and spice extracts) and fragrances and aroma chemicals. The flavor products impart a desired taste and smell to a broad range of consumer products, including soft drinks, confections, dietary foods, snack foods, dairy products, pharmaceuticals and alcoholic beverages. The fragrance products are used in a wide variety of items, including fine fragrances, soaps, detergents, air fresheners, cosmetics and toiletries and related products. The flavor and fragrance compounds are sold primarily to major consumer product companies which use these products in conjunction with other natural and synthetic ingredients to make their products more appealing to consumers. The majority of the aroma chemicals produced by Bush Boake Allen are used by major multinational consumer product manufacturers and other fragrance and flavor compounders as fragrance raw materials. The remainder is sold to agrichemical and specialty chemical manufacturers or internally used by Bush Boake Allen in its production of fragrance compounds. Bush Boake Allen has developed a broad-based global presence with operations in 39 countries in North and South America, Europe, Asia, Australia, The Middle East and Africa. PAPER DISTRIBUTION The Alling & Cory Company, a distributor of business communications and printing papers, industrial packaging and business products with its headquarters in Rochester, New York, is a wholly owned subsidiary of the Company. Alling & Cory operates 17 distribution centers and 22 retail paper shops in Maryland, New Jersey, New York, Ohio, Pennsylvania, Virginia and West Virginia. Alling & Cory's wholly owned subsidiary, the Alcor Envelope Company, Inc. operates an envelope converting facility in Hamburg, New York. Alling & Cory employs approximately 1,300 people. LAND DEVELOPMENT AND HOUSING Union Camp's real estate subsidiary, The Branigar Organization, Inc., is engaged in the sale and development of land in Georgia, South Carolina and North Carolina for residential, recreational and commercial use and the sale and development of commercial properties at highway interchanges in Georgia and South Carolina. CAPITAL EXPENDITURES Information about Union Camp's 1997 and estimated 1998 capital expenditures appears on page 26 of the Union Camp 1997 Annual Report in the text under the caption "Capital Expenditures" and is incorporated by reference in this Item 1. 5 MARKETING Most of Union Camp's sales, other than its chemical sales, are made in the United States east of the Rocky Mountains through a variety of distribution methods. Paper and paperboard are sold both directly to converters and through merchants. Packaging materials are sold directly to the industrial and agricultural trades primarily by Union Camp sales representatives and, to a lesser extent, through distributors. Wood products are sold through building supply dealers and directly to industrial users. Union Camp chemicals are sold worldwide with most sales being made to customers in the United States and European Economic Community countries. Through various overseas subsidiaries and related companies of Bush Boake Allen, Union Camp sells in the worldwide markets for flavors and fragrances and related products. Chemical products generally are sold directly to industrial users and to a lesser extent through agents and distributors. During 1997, Union Camp's chemical exports from the United States were about 7.2% of the total chemical sales of Union Camp and its subsidiaries. In addition, approximately 54.6% of such total chemical sales originated from the production facilities of subsidiaries located outside the United States. In 1997, Union Camp sold in the export market approximately 20% of its production of paper and paperboard. COMPETITION All of Union Camp's products are sold in highly competitive markets in which there are many large and well-established companies, of which Union Camp is one. Competition in each of Union Camp's markets is based on price, quality of product, service and product innovation. TIMBER RESOURCES The basic raw material for Union Camp's business is timber, a renewable resource. Union Camp controls approximately 1,605,000 acres of timberlands in Georgia, Alabama, Virginia, Florida, North Carolina, and South Carolina, of which approximately 1,523,000 acres are owned by the Company and the balance is held under long-term leases. In 1997, Union Camp obtained approximately 39% of its total timber requirements from its own timberlands and purchased the balance from others. Union Camp operates its timberlands on a sustained yield basis. Union Camp began reforestation on its timberlands in the mid-1950's and now has approximately 972,000 acres in plantation growth. It planted about 44,000 acres under the plantation program in 1997 and expects to plant approximately 59,000 acres in 1998. These plantation programs result in 6 increased yield per acre. The current growing cycle for most of Union Camp's plantations averages between 20 and 25 years. Union Camp anticipates that for the foreseeable future there will be an adequate supply of timber for its operations from its own lands and other sources. ENVIRONMENTAL PROTECTION ACTIVITIES Union Camp is committed to complying with applicable environmental protection control laws. Wastewater treatment facilities and/or atmospheric emission control equipment at various Union Camp locations, which currently comply with applicable restrictions, may from time to time have to be upgraded to comply with new limitations. Such new limits may be imposed when federal and state permits are renewed or as regulations are promulgated implementing revisions to federal and state air and water pollution control laws. Union Camp invested approximately $31 million in environmental control facilities in 1997 and approximately $130 million over the past five years. Over the next two years, it is estimated that environmental control expenditures will average approximately 9% of projected capital spending. Environmental control expenditures divert capital and may increase operating and financing costs. To that extent, they have an adverse impact on earnings. During the next several years, the cost of compliance with environmental control laws will depend upon the application of existing and new regulations and on revisions to existing statutes. Union Camp believes such costs will not adversely affect its competitive position within the paper and chemical industries since most paper and chemical companies have similar air, water and solid waste disposal concerns. In August 1992, Union Camp entered into a Consent Order with Region V of the U.S. Environmental Protection Agency (the "EPA") to conduct an investigation to ascertain existing conditions at the Company's Dover, Ohio facility under the Resource Conservation and Recovery Act. The Company submitted a final risk assessment and site investigation report in late 1996 which was approved with modifications by the EPA. All outstanding issues regarding the need for further investigation and ascertaining risk to human health and the environment have been satisfactorily resolved. The Company has submitted a corrective measures study to the EPA with its recommendations for corrective action and is awaiting the EPA's determination of what corrective actions should be taken. On the basis of the information presently available to it, Union Camp believes that remedial action required as a result of the investigation will not result in a material adverse effect on its financial condition. EMPLOYEES Union Camp and its subsidiaries employ approximately 19,000 people, approximately 37% of whom are represented by a total of 61 unions under collective bargaining agreements. Contracts involving approximately 2,900 hourly employees were concluded during 1997. Contracts involving approximately 1,400 hourly employees are subject to renegotiation 7 and renewal in 1998. Union Camp believes that its relationship with its employees is favorable and it has not experienced a strike at any major facility since 1974. ITEM 2. PROPERTIES Union Camp's mills and plants, domestic and foreign, are at the locations listed below and primarily produce the items described in the heading for each group. Union Camp's corporate headquarters is in Wayne, New Jersey and its principal research facilities are located at its corporate technology center in Princeton, New Jersey. Except for a few facilities which in the aggregate are not material, Union Camp owns all of the following mills and plants, in some cases subject to financing leases or similar arrangements. PAPER AND PAPERBOARD INDUSTRY SEGMENT Paper and Paperboard The four paper mills located at the sites listed below are the Company's principal facilities. Item 1 of this Report provides information regarding their general character, including the products they produce, their productive capacity and the extent of utilization. Eastover, South Carolina Franklin, Virginia Prattville, Alabama Savannah, Georgia Paper Finishing The three converting plants listed below are part of the Company's Fine Paper Division. They convert large rolls of paper produced by the division into folio sheets for commercial printers and office size sheets for home and business use. A new converting plant called the Converting Innovation Center began operating in Franklin during 1997. This plant specializes in shorter cycle, smaller count retail oriented package design concepts. Franklin, Virginia (2) Sumter, South Carolina 8 PACKAGING PRODUCTS INDUSTRY SEGMENT Multiwall and Consumer Bags The plants listed below produce multiwall and consumer bags of various substrates for packaging products such as cement, seed, feed, pet food, sugar, cookies and popcorn. Hanford, California Hazleton, Pennsylvania Monticello, Arkansas St. Louis, Missouri San Luis, Argentina Seymour, Indiana Sibley, Iowa Spartanburg, South Carolina Tifton, Georgia Plastic Products The plants listed below produce polyethylene packaging and roll stock for packaging a variety of agricultural and industrial products and consumer items such as ice, salt, insulation, fertilizer and pet food. Griffin, Georgia Monticello, Arkansas Tomah, Wisconsin Corrugated Containers The plants listed below use a corrugator to manufacture corrugated sheets by gluing a fluted paperboard material called medium between two or more flat facings of linerboard. These corrugated sheets are then sold or made into boxes or corrugated containers in a separate operation at these plants. The Company has decided to exit the Central Florida corrugated container market and, therefore, is exploring opportunities to sell the Lakeland, Florida container plant and the Eaton Park, Florida finishing plant as an ongoing operation. Ashbourne, Republic of Ireland Atlanta, Georgia Auburn, Maine Bayamon, Puerto Rico Chicago, Illinois Decatur, Alabama Gandia, Spain Hanford, California Houston, Mississippi Kalamazoo, Michigan Lafayette, Louisiana Lakeland, Florida La Laguna, Tenerife, Spain Las Palmas de Gran Canaria, Spain Madrid, Spain Morristown, Tennessee 9 Newtown, Connecticut Rancagua, Chile Richmond, Virginia San Antonio, Texas Savannah, Georgia Spartanburg, South Carolina Washington, Pennsylvania Finishing The plants listed below use equipment that converts corrugated sheets into boxes or laminates a printed sheet of paper to one panel of a box or applies a wax coating to a finished box. Conway, Arkansas Eaton Park, Florida Edinburg, Texas Fort Worth, Texas Los Angeles, California Statesboro, Georgia West Deptford, New Jersey Graphics The plants listed below use a process that adheres medium to a single linerboard sheet to produce singleface and then glues a printed label to the singleface. These sheets are then made into boxes at these plants. Cleveland, Ohio Conway, Arkansas Stockton, California Solid Fibre Products The plant listed below manufactures solid fibre sheets by gluing two or more flat linerboard sheets together. These solid fibre sheets are then made into boxes or slip sheets in a separate operation. Slip sheets are used in material handling in lieu of wooden pallets. Lancaster, Pennsylvania Folding Cartons and Gravure Printing The plants listed below produce folding cartons with high quality gravure and lithographic printing which are used to package cosmetics, toiletries and fragrance products. Clifton, New Jersey Englewood, New Jersey Moonachie, New Jersey 10 WOOD PRODUCTS INDUSTRY SEGMENT Lumber The sawmills listed below produce wood chips, small timbers and/or dimension lumber. Chapman, Alabama Folkston, Georgia Franklin, Virginia Meldrim, Georgia Opelika, Alabama Seaboard, North Carolina Plywood The plants listed below produce veneer and/or plywood panels for sale primarily for industrial applications including furniture, truck trailers and sound equipment. Chapman, Alabama Thorsby, Alabama Particleboard The plants listed below use wood shavings and other wood residues to produce particleboard which is cut to size and sold primarily to the furniture industry. Franklin, Virginia CHEMICAL INDUSTRY SEGMENT The chemical industry segment has two operating units, Bush Boake Allen Inc. and the Chemical Products Division. The facilities listed below are part of Bush Boake Allen Inc. which produces aroma chemicals, flavors, fragrances, essential oils, spices and seasonings. The process used and products produced by each facility are shown below.
Location Products Process - --------- -------- ------- Carrollton, Texas Seasonings Compounding, i.e., mixing and blending Chicago, Illinois Flavors, Vanilla Extract Extraction and Compounding
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Location Products Process - --------- -------- ------- Guangzhou, China Flavors, Fragrances Compounding Jacksonville, Florida Terpene Derivatives Chemical Processing and Aroma Chemicals Johannesburg, Flavors, Fragrances and Compounding South Africa Seasonings Jurong, Singapore Flavors and Fragrances Compounding London, England Flavors and Fragrances Compounding Long Melford, England Spices, Essential Oils Extraction and Compounding and Seasonings Madras, India Flavors and Fragrances Compounding Manila, Philippines Flavors, Fragrances and Compounding Seasonings Melbourne, Australia Flavors, Fragrances Extraction and Compounding and Seasonings Norwood, New Jersey Fragrances and Compounding Essential Oils Sydney, Australia Flavors and Seasonings Compounding Widnes, England Aroma Chemicals Chemical Processing Witham, England Flavors Compounding
The chemical processing facilities listed below are part of the Chemical Products Division which produces a variety of wood-based and non-wood-based chemicals. Shown below are the principal products of each facility.
Location Products - --------- -------- Bedlington, England Ink, adhesive and coatings resins Chester-le-Street, England Tall oil derivatives, ink and adhesive resins Dover, Ohio Ink and adhesive resins, plasticizers and esters
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Location Products - --------- -------- Savannah, Georgia Tall oil derivatives, ink and adhesive resins Valdosta, Georgia Printing ink resins
In addition, in the chemical industry segment, Union Camp has small consolidated subsidiary manufacturing (compounding and mixing) facilities at the following locations: Kingston, Jamaica; Auckland, New Zealand; Atlacomulco, Mexico; Buenos Aires, Argentina; Istanbul, Turkey; Knislinge, Sweden; Bangkok, Thailand; LaSalle, Canada and Bogor, Indonesia. The aggregate 1997 revenue from these small facilities was approximately $33 million. Also see Item 1 for a discussion of Union Camp's timberland holdings used in Union Camp's Paper and Paperboard and Wood Products industry segments. Paper Distribution The Alling & Cory Company, a wholly owned subsidiary of the Company headquartered in Rochester, New York, distributes business communications and printing papers, industrial packaging and business products. The Alcor Envelope Company, Inc. a wholly owned subsidiary of Alling & Cory, manufactures envelopes in a plant in Hamburg, New York. The facilities listed below are distribution centers which handle the distribution of more than 20,000 products and retail paper stores which sell fine writing and printing papers, janitorial products, magnetic media supplies and other selected office supplies under the name "The Paper Shop". All of the properties listed are leased by Alling & Cory except for the distribution centers in Buffalo and Syracuse, New York and Harrisburg, Pennsylvania. Distribution Centers Albany, New York Allentown, Pennsylvania Baltimore, Maryland Bellaire, Ohio Buffalo, New York Cleveland, Ohio Erie, Pennsylvania Fairmont, West Virginia Hagerstown, Maryland Harrisburg, Pennsylvania Marlton, New Jersey Pittsburgh, Pennsylvania Rochester, New York Scranton, Pennsylvania Staunton, Virginia Syracuse, New York Toledo, Ohio 13 Retail Paper Shops Albany, New York Allentown, Pennsylvania Bridgeville, Pennsylvania Cheektowaga, New York Cleveland, Ohio Cranberry, Pennsylvania East Syracuse, New York Edison, New Jersey Havertown, Pennsylvania Malvern, Pennsylvania Maple Shade, New Jersey Middleburg Heights, Ohio Philadelphia, Pennsylvania (2) Pittsburgh, Pennsylvania Rochester, New York Scranton, Pennsylvania Trenton, New Jersey Utica, New York Westbury, New York Willow Grove, Pennsylvania Woodside, New York ITEM 3. LEGAL PROCEEDINGS In addition to the proceedings described below, the Company is a party to other legal proceedings incidental to its business which the Company does not believe are material to it. Union Camp has been designated a potentially responsible party at a number of hazardous waste sites pursuant to the Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA") and similar state laws. At the present time the Company is actively involved with proceedings at approximately 14 sites including the three sites described in the three paragraphs immediately below. Designated employees of the Company meet quarterly to review the status of such proceedings. When the facts known to the Company indicate that liability is probable and a reasonable estimate of the Company's share of remediation costs can be made, the Company records such estimated amount. Amounts reserved are adjusted as additional facts become known. In some cases, a determination of liability cannot be made. For example, it may not have been established that the Company is a potentially responsible party. In other cases, no estimate of remediation costs is possible. In many instances, the cost of remediation is speculative because remedial investigations and feasibility studies have not yet been contracted for, have not been completed or, alternatively, have been completed but an acceptable remedy has not been chosen. In other cases, it is uncertain whether the Company will seek, be offered or accept a settlement with payment of a premium over otherwise estimated liability in order to secure full release. Some settled cases also have "reopeners" for contamination discovered after full implementation of the remedy. Finally, insurance reimbursement is usually uncertain until matters are finally resolved. In May 1996, the EPA filed a civil suit against the Company and several other potentially responsible parties in the U.S. District Court for the District of Louisiana under CERCLA for recovery of past and future response costs incurred by the EPA at the Bayou Bonfouca Superfund Site at Slidell, Louisiana which operated as a wood treatment facility from 14 1882 to 1972. Subsequently, the State of Louisiana filed a similar suit against the Company seeking to recover the share of the response costs for which it is responsible under CERCLA. EPA records indicate there have been expenditures over a number of years of approximately $100 million for remediation at the site. The EPA estimates that future response costs will be approximately $30 million. In 1956, a subsidiary of Union Camp acquired the assets of American Creosoting Company which included the stock of a subsidiary which had owned and operated the Slidell facility since 1933. The subsidiary sold the Slidell facility in 1958. The subsidiary was sold in 1964. The EPA alleges that Union Camp has owner and/or operator status under CERCLA arising from its ownership of the subsidiary which owned the Slidell facility. Union Camp denies it ever owned and/or operated the Slidell facility. While it is not possible to estimate the likely outcome of these proceedings, Union Camp believes it has meritorious defenses based upon the facts and longstanding principles of corporate law and shareholders' liability. Union Camp is also party to an action in the U.S. District Court for the District of Connecticut in which private litigants are seeking contribution associated with past and future cost of remediating property used for creosoting operations from 1921 through 1964. Such remediation costs are currently estimated at approximately $3 million. A subsidiary of Union Camp conducted activities at the property from 1956 to 1964. Union Camp was dismissed on summary judgment from the lawsuit in June 1995, but on appeal the summary judgment order was vacated and the matter was remanded to the District Court to determine whether Union Camp could be held liable as an operator under federal and state superfund laws. The litigation has been stayed since the fall of 1996 for the review of the various potential remedies. Union Camp believes the facts do not support a claim that Union Camp was an operator of the site. In 1994, Union Camp was made a party to an action brought in state court in Forest County, Mississippi by the Hattiesburg Public School District seeking future remediation costs for property previously used in creosoting operations. In the second half of 1996 a suit was commenced in the U.S. District Court for the Southern District of Mississippi, Hattiesburg Division by car dealers who lease the property from Hattiesburg Public School District. These plaintiffs seek damages for diminution in the value of the property, lost profits and potential relocation expenses based upon the alleged pollution of the property. No remediation of the property has begun or been ordered. Like the matter described in the second preceding paragraph, this case and the case in the previous paragraph allege that Union Camp should be responsible for the activities of its subsidiary at the properties. Union Camp disputes these allegations because Union Camp did not own or operate the facilities. Although Union Camp believes it has a strong legal position with respect to the above described claims involving the creosoting activities of its former subsidiary, an estimate of the likely outcome of these proceedings cannot be made at this time. In the second quarter of 1995 the Company was named as one of approximately 60 defendants in a lawsuit filed in Jefferson County, Texas state court on behalf of approximately 2,400 plaintiffs who allege that they were exposed to asbestos while performing work at various plant sites in Alabama. Subsequent amendments have brought the number of plaintiffs to approximately 5,100. The defendants named include asbestos manufacturers, distributors of 15 asbestos-containing products, insurance companies, a manufacturer of safety equipment, parties who allegedly misrepresented the dangers of asbestos exposure, and the owners of the premises where the plaintiffs allege they were working when they were exposed to asbestos. Union Camp is included in the premises owner category of defendants and the amount of damages sought is unspecified. Approximately 160 of the plaintiffs allege exposure to asbestos while on Union Camp premises. In its Quarterly Report on Form 10-Q for the quarter ended June 30, 1991 the Company reported that a subsidiary of the Company was added as a defendant in approximately 7,000 asbestos-related cases which had been pending in Mississippi state court for several years. Subsequently, this subsidiary was named as a defendant in additional asbestos-related consolidated actions so that the total number of such cases was in excess of 10,000. The subsidiary was named in these cases because it allegedly was part of the chain of distribution of asbestos-containing products to facilities where the plaintiffs worked. The period of alleged exposure ranges from 1930 through the present. The subsidiary did not manufacture asbestos or asbestos-containing products. The number of defendants named in these suits ranges from approximately 40 to 170, and includes asbestos manufacturers, distributors of asbestos containing products, an insurance company and a manufacturer of safety equipment. In March 1993, the Company's subsidiary settled approximately 10,500 of these cases, with the settlement being funded by the Company's insurance carrier. The Company's subsidiary settled approximately 2,600 additional cases during 1997 which was funded by the Company's insurance carrier. This subsidiary is a defendant in approximately 8,000 remaining cases. Although the final outcome of any legal proceeding is subject to many variables and cannot be predicted with any degree of certainty, the Company presently believes the pending legal proceedings alleging liability on account of exposure to asbestos to which Union Camp or its subsidiary is a party will not have a material adverse effect on the financial position or results of operations of the Company and its subsidiaries taken as a whole. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS Not applicable. EXECUTIVE OFFICERS OF UNION CAMP The executive officers of Union Camp as of March 1, 1998 were as follows:
NAME AGE POSITION & OFFICES WITH UNION CAMP - ---- --- --------------------------------- W. Craig McClelland......63 Chairman of the Board and Chief Executive Officer; Director Jerry H. Ballengee.......60 President and Chief Operating Officer; Director
16 Charles H. Greiner, Jr...50 Executive Vice President A. William Hamill........50 Executive Vice President and Chief Financial Officer John T. Heald, Jr........52 Executive Vice President John C. Albert...........52 Senior Vice President Susan M. Arseven.........56 Senior Vice President and Chief Information Officer Jerome N. Carter.........49 Senior Vice President Willis J. Potts, Jr......51 Senior Vice President Dirk R. Soutendijk.......59 Vice President, General Counsel and Secretary Donald W. Barney.........57 Vice President and Treasurer John F. Haren............50 Controller
The Company's Articles of Incorporation provide that the Board of Directors shall be divided into three classes, as nearly equal in size as possible. Each year the directors of one class are elected to serve terms of three years. Executive officers are elected for one year and until their successors are elected. There are no family relationships among directors and executive officers. All of the executive officers listed above have held their present positions with Union Camp for the past five years, except as follows: Mr. McClelland became Chairman of the Board and Chief Executive Officer in July 1994. Previously, he had been President and Chief Operating Officer since December 1989. Mr. Ballengee became President and Chief Operating Officer in July 1994. Previously, he was an Executive Vice President since November 1988. Mr. Greiner became Executive Vice President in January 1998. Previously, he was Senior Vice President and General Manager, Fine Paper Division from December 1993 to December 1997. Prior to that he had been a Vice President and General Manager of the Fine Paper Division. 17 Mr. Hamill became Executive Vice President and Chief Financial Officer in June 1997. Mr. Hamill joined the Company in June 1996 as Senior Vice President, Finance. From March 1993 to June 1996, he was a partner in SCI Investors Inc., an investment firm in Richmond, Virginia, and a stockholder and director of Custom Papers Group Inc., a specialty paper producer which was privately held during this period. Prior to March 1993, he was Senior Vice President and Chief Financial Officer of Specialty Coatings International. Mr. Heald became Executive Vice President in January 1998. Previously, he was Senior Vice President, Converting Group from June 1993 to December 1997. Prior to that, he had been a Vice President and General Manager of the Container Division since November 1988. Mr. Albert became Senior Vice President, Forest Resources Group in December 1995. Prior to that, he had been Vice President and General Manager of the Forest Resources Group since January 1991. Ms. Arseven became Senior Vice President and Chief Information Officer in January 1998. She joined the Company in May 1995 as Vice President and Chief Information Officer. Previously, she was Director, Information Services Division of American Cyanamid Company. Mr. Carter became Senior Vice President in January 1997. Previously he had been a Vice President since December 1995. Prior to that, he had been Kraft Paper and Board Division Manager of Industrial Relations. Mr. Potts became Senior Vice President and General Manager, Kraft Paper and Board in December 1995. Prior to that, he had been a Vice President and General Manager, Kraft Paper and Board since June 1994. He was Vice President and General Operations Manager, Kraft Paper and Board from December 1992 to June 1994. Mr. Haren became Controller in November 1996. Previously, he was an Assistant Controller. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information in response to the disclosure requirements specified by this Item 5 appears under the captions and on the pages of the Union Camp 1997 Annual Report indicated below and is incorporated by reference in this Item 5. 18
REQUIRED ANNUAL REPORT ANNUAL REPORT INFORMATION CAPTION PAGE ----------- --------- ----- Principal markets for Financial Review - 27 Common Stock; high Quarterly Information and low sales prices Dividends per share Financial Review - 27 declared Quarterly Information Approximate number of Financial Review - 27 shareholders of record-Quarterly Information December 31, 1997
ITEM 6. SELECTED FINANCIAL DATA Information in response to the disclosure requirements specified by this Item 6 appears on pages 42 and 43 of the Union Camp 1997 Annual Report and is incorporated by reference in this Item 6. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information in response to the disclosure requirements specified by this Item 7 appears in the text under the caption "Financial Review" on pages 23 to 27 of the Union Camp 1997 Annual Report and is incorporated by reference in this Item 7. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not material. Item 8. Financial Statements and Supplementary Data Information in response to the disclosure requirements specified by this Item 8 appears under the caption "Quarterly Information" on page 27 and on pages 29 to 40 of the Union Camp 1997 Annual Report and is incorporated by reference in this Item 8. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. 19 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information in response to the disclosure requirements specified by this Item 10, with respect to (i) the directors of Union Camp appears under the caption "The Board of Directors" on pages 9 to 12 of the Union Camp 1998 Proxy Statement and (ii) the executive officers of Union Camp, appears under the caption "Executive Officers of Union Camp" in Part I of this Annual Report on Form 10-K. Such information is incorporated by reference in this Item 10. Disclosure pursuant to Item 405 of Regulation S-K appears under the caption "Section 16(a) Beneficial Ownership Reporting Compliance" on page 25 of Union Camp's 1998 Proxy Statement and is incorporated by reference in this Item 10. ITEM 11. EXECUTIVE COMPENSATION Information in response to the disclosure requirements specified by this Item 11 appears under the captions "Board Compensation" on pages 13 and 14 and "Executive Compensation", "Options", "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values", "Retirement Plans" and Severance Arrangements" on pages 15 to 18 of the Union Camp 1998 Proxy Statement. Such information is incorporated by reference in this Item 11. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information in response to the disclosure requirements specified by this Item 12 appears under the caption "Security Ownership of Management as of December 31, 1997" and "Security Ownership of Certain Beneficial Owners" on pages 24 and 25 of the Union Camp 1998 Proxy Statement and is incorporated by reference in this Item 12. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Not applicable. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (1)Index of financial statements The following financial statements are included at the indicated page in the Union Camp 1997 Annual Report and are incorporated by reference in this Annual Report on Form 10 - K: 20
Page ---- Consolidated Income for the years ended December 31, 1997, 1996 and 1995...................................29 Consolidated Balance Sheet - December 31, 1997 and 1996.........................................30 Consolidated Statement of Cash Flows for the years ended December 31, 1997, 1996 and 1995......................................................31 Notes to Consolidated Financial Statements.......................32-40 Report of Independent Accountants..................................28
(2) The following schedules, for the three years ended December 31, 1997, to the Financial Statements are included beginning at the indicated page in this Annual Report on Form 10-K:
Page ---- Report of Independent Accountants on Financial Statement Schedule....................................26 Schedule II-Valuation and Qualifying Accounts......................27
All schedules other than those indicated above are omitted because of the absence of the conditions under which they are required or because the required information is set forth in the financial statements and their notes. (3) All exhibits, including those incorporated by reference:
NO. DESCRIPTION 3.1 Articles of Incorporation of Union Camp, as amended February 26, 1996 (filed as Exhibit 3.1 to Union Camp's Annual Report on Form 10-K for the year ended December 31, 1995 and incorporated herein by reference). 3.2 By-Laws of Union Camp, as amended February 24, 1998. 4.1 Union Camp hereby agrees to furnish copies of instruments defining the rights of holders of long-term debt of Union Camp and its consolidated subsidiaries to the Commission upon its request.
21
NO. DESCRIPTION 4.2 Rights Agreement, dated as of January 25, 1996, as amended and restated as of June 25, 1996, between Union Camp Corporation and The Bank of New York as Rights Agent (filed as Exhibit 1 to the Company's Registration Statement on Form 8-A/A filed July 3, 1996 and incorporated herein by reference). 10.1 Union Camp's 1982 Stock Option Plan, as amended November 29, 1988 (filed as Exhibit 10 (b) to Union Camp's Annual Report on Form 10-K for the year ended December 31, 1988 and incorporated herein by reference).* 10.2 1989 Stock Option and Stock Award Plan, as amended October 29, 1996 (filed as Exhibit 10.2 to Union Camp's Annual Report on Form 10-K for the year ended December 31, 1996 and incorporated herein by reference).* 10.3 Executive Annual Incentive Plan (filed as Exhibit 10(c) to Union Camp's Annual Report on Form 10-K for the year ended December 31, 1988 and incorporated herein by reference).* 10.4 Restricted Stock Performance Plan (filed as Exhibit 10.1 to Union Camp's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 and incorporated herein by reference).* 10.5 Union Camp's Directors' Fees Deferral Plan (filed as Exhibit 10(d) to Union Camp's Annual Report on Form 10-K for the year ended December 31, 1982 and incorporated herein by reference).* 10.6 Union Camp's Retirement Plan for Outside Directors as amended November 25, 1997. 10.7 Form of Severance Agreement between Union Camp and certain executive officers of Union Camp (filed as Exhibit 10.7 to Union Camp's Annual Report on Form 10-K for the year ended December 31, 1996 and incorporated herein by reference).* 10.8 Union Camp's Stock Compensation Plan for Non-Employee Directors as amended February 24, 1998.* 10.9 Agreement between Union Camp and James M. Reed dated May 14, 1991 (filed as Exhibit 19(c) to Union Camp's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991 and incorporated herein by reference).* 10.10 Agreement between Union Camp and James M. Reed dated November 17, 1997.*
22 10.11 Union Camp Corporation Supplemental Retirement Income Plan for Executive Officers as amended and restated June 24, 1996 (filed as Exhibit 10 to Union Camp's Quarterly Report on Form 10-Q for the quarter ended June 30, 1996, and incorporated herein by reference).* 10.12 Description of post-retirement office arrangements between Union Camp Corporation and Raymond E. Cartledge (filed as Exhibit 10.2 to Union Camp's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994, and incorporated herein by reference).* 11 Statement re computation of per share earnings. 13 The portion of Union Camp's 1997 Annual Report to security holders which is incorporated by reference into this filing. 21 List of subsidiaries of Union Camp. 23 Consent of Independent Accountants. 27.1 Financial Data Schedule - Annual Period Ended December 31, 1997. 27.2 Financial Data Schedule - Restated for Annual Period Ended December 31, 1996. * Denotes a management contract or compensatory plan or arrangement required to be filed as exhibits pursuant to Item 14(c) of Form 10-K. (b) Reports on Form 8-K. No current Report on Form 8-K was filed by the Registrant during the quarter ended December 31, 1997.
SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the Township of Wayne, and State of New Jersey, on March 31, 1998. UNION CAMP CORPORATION By /S/ W. Craig McClelland ------------------------------------- (W. Craig McClelland) Chairman of the Board and Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities stated below on March 31, 1998.
Signature Title --------- ------ /S/ W. Craig McClelland Chairman of The Board and - -------------------------- (W. Craig McClelland) Chief Executive Officer and Director (Principal Executive Officer) /S/ Jerry H. Ballengee President and Chief Operating - -------------------------- (Jerry H. Ballengee) Officer and Director /S/ A. William Hamill Executive Vice President and - -------------------------- (A. William Hamill) Chief Financial Officer (Principal Financial Officer) /S/ John F. Haren Controller - -------------------------- (John F. Haren) (Principal Accounting Officer)
24
Signature Title --------- ------ /S/ George D. Busbee Director - -------------------------- (George D. Busbee) /S/ Raymond E. Cartledge Director - -------------------------- (Raymond E. Cartledge) /S/ Sir Colin Corness Director - -------------------------- (Sir Colin Corness) Director - -------------------------- (Robert D. Kennedy) /S/ Gary E. MacDougal Director - -------------------------- (Gary E. MacDougal) /S/ Ann D. McLaughlin Director - -------------------------- (Ann D. McLaughlin) /S/ George J. Sella, Jr. Director (George J. Sella, Jr.) /S/ Jeremiah J. Sheehan Director - -------------------------- (Jeremiah J. Sheehan) /S/ Ted D. Simmons Director - -------------------------- (Ted D. Simmons)
25 Price Waterhouse LLP 4 Headquarters Plaza North P.O. Box 1965 Morristown, NJ 07962-1965 Telephone (973) 540-8980 REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To The Board of Directors of Union Camp Corporation Our audits of the consolidated financial statements referred to in our report dated February 5, 1998 appearing in the 1997 Annual Report to Stockholders of Union Camp Corporation (which report and consolidated financial statements are incorporated by reference in this Annual Report on Form 10-K) also included an audit of the Financial Statement Schedule listed in Item 14(a)(2) of this Form 10-K. In our opinion, the Financial Statement Schedule presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. /S/ PRICE WATERHOUSE LLP PRICE WATERHOUSE LLP Morristown, New Jersey February 5, 1998 26 SCHEDULE II UNION CAMP CORPORATION AND CONSOLIDATED SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31,1997, 1996 AND 1995 (THOUSANDS OF DOLLARS)
- -------------------------------------------------------------------------------------------------------- Column A Column B Column C Column D Column E - -------------------------------------------------------------------------------------------------------- Additions ------------------------ Charged Balance at Charged to (Credited) Deductions Balance at Beginning Costs and to Other from End Description of Year Expenses(1) Accounts(2) Reserves(3) of Year - -------------------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, 1997: Reserves deducted from assets to which they apply: Reserve for doubtful accounts ......................$ 14,717 $ 2,902 (271) 2,264 15,084 Reserve for discounts and allowances .................... 2,553 148 -- -- 2,701 --------- -------- --------- -------- -------- Total ........................ 17,270 3,050 (271) 2,264 17,785 ========= ======== ========= ======== ======== YEAR ENDED DECEMBER 31, 1996: Reserves deducted from assets to which they apply: Reserve for doubtful accounts .....................$ 13,740 $ 5,634 (25) $ 4,632 $ 14,717 Reserve for discounts and allowances ................... 2,726 (173) -- -- 2,553 --------- -------- --------- -------- -------- Total ......................... 16,466 5,461 (25) 4,632 17,270 ========= ======== ========= ======== ======== YEAR ENDED DECEMBER 31,1995: Reserves deducted from assets to which they apply: Reserve for doubtful accounts 13,995 2,979 116 3,350 13,740 Reserve for discounts and allowances .................. 2,524 202 -- -- 2,726 --------- -------- --------- -------- -------- Total ....................... $ 16,519 3,181 116 3,350 16,466 ========= ======== ========= ======== ========
NOTES: (1) Discounts and allowances are charged to income as incurred and not to the reserve. The reserve is adjusted at the end of each period, by a charge or credit to income, for the estimated discounts and allowances applicable to the accounts receivable then outstanding. (2) Foreign currency translation adjustments. (3) Uncollectible accounts written off, net of recoveries. 27
EXHIBIT INDEX NO. DESCRIPTION 3.1 Articles of Incorporation of Union Camp, as amended February 26, 1996 (incorporated herein by reference). 3.2 Copy of By-Laws of Union Camp, as amended February 24, 1998. 4.2 Rights Agreement, dated as of January 25, 1996, as amended and restated as of June 25, 1996, between Union Camp Corporation and The Bank of New York as Rights Agent (filed as Exhibit 1 to the Company's Registration Statement on Form 8-A/A filed July 3, 1996 and incorporated herein by reference). 10.1 Union Camp's 1982 Stock Option Plan, as amended November 29, 1988 (incorporated herein by reference). 10.2 Union Camp's 1989 Stock Option Award Plan, as amended October 29, 1996 (incorporated herein by reference). 10.3 Union Camp's Executive Annual Incentive Plan (incorporated herein by reference). 10.4 Union Camp's Restricted Stock Performance Plan (incorporated herein by reference). 10.5 Union Camp's Directors' Fees Deferral Plan (incorporated herein by reference). 10.6 Union Camp's Retirement Plan for Outside Directors as amended November 25, 1997. 10.7 Form of Severance Agreement between Union Camp and certain executive officers of Union Camp (incorporated herein by reference). 10.8 Union Camp's Stock Compensation Plan for Non-Employee Directors as amended February 24, 1998. 10.9 Agreement between Union Camp and James M. Reed dated May 14, 1991 (incorporated herein by reference). 10.10 Agreement between Union Camp and James M. Reed dated November 17, 1997.
NO. DESCRIPTION 10.11 Union Camp Corporation Supplemental Retirement Income Plan for Executive Officers as amended and restated June 24, 1996 (incorporated herein by reference). 10.12 Description of post-retirement office arrangements between Union Camp Corporation and Raymond E. Cartledge (incorporated herein by reference). 11 Statement re computation of per share earnings. 13 The portion of Union Camp Corporation's 1997 Annual Report to security holders which is incorporated by reference into this filing. 21 List of subsidiaries of Union Camp. 23 Consent of Independent Accountants. 27.1 Financial Data Schedule - Annual Period Ended December 31, 1997. 27.2 Financial Data Schedule - Restated for Annual Period Ended December 31, 1996.
STATEMENT OF DIFFERENCES ------------------------ The trademark symbol shall be expressed as............................ 'tm' The registered trademark symbol shall be expressed as................. 'r' The service mark symbol shall be expressed as......................... 'sm' EX-3 2 EXHIBIT 3.2 EXHIBIT 3.2 - -------------------------------------------------------------------------------- BY-LAWS UNION CAMP CORPORATION (AS AMENDED FEBRUARY 24, 1998) - -------------------------------------------------------------------------------- BY-LAWS OF UNION CAMP CORPORATION (AS AMENDED FEBRUARY 24, 1998) ARTICLE I Stock SECTION 1. Form and Execution of Certificates. The certificates of shares of stock of the Corporation shall be in such form not inconsistent with the Articles of Incorporation as shall be approved by the Board of Directors. Certificates of stock shall be signed by the Chairman of the Board, the President or by a Vice President and the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary, except that where any such certificates shall be countersigned by a transfer agent or by a registrar, other than the Corporation, the signatures of any of the officers above specified may be facsimiles, engraved or printed. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer at the date of its issue. SECTION 2. Regulations. The Board of Directors may make such rules and regulations as it may deem expedient concerning the issue, transfer and registration of certificates of stock and concerning certificates of stock issued, transferred or registered in lieu or replacement of any lost, stolen, destroyed or mutilated certificates of stock. 1 SECTION 3. Transfer Agent and Registrar. The Board of Directors may appoint a transfer agent or transfer agents and a registrar or registrars of transfer for any or all classes of the capital stock of the Corporation, and may require stock certificates of any or all classes to bear the signature of either or both. SECTION 4. Closing of Transfer Books, Fixing of Record Date. The Board of Directors may fix in advance a date, not exceeding 70 days preceding the date of any meeting of stockholders, or the date for the payment of any dividend, or the date for the determination of stockholders for any other proper purpose, as a record date for the determination of the stockholders exclusively entitled to notice of and to vote at any such meeting, or any adjournment thereof, or entitled to receive payment of any such dividend, or for any other proper purpose. SECTION 5. Restrictions on Transfer. The Board of Directors may impose restrictions on transfer of securities of the Corporation pursuant to the Rights Agreement, dated as of January 25, 1996, by and between the Corporation and The Bank of New York, as and to the extent required by such Rights Agreement, as amended from time to time. SECTION 6. Control Share Acquisitions. Article 14.1 of the Virginia Stock Corporation Act shall not apply to acquisitions of the Corporation. 2 ARTICLE II Stockholders SECTION 1. Annual Meeting. The annual meeting of the stockholders for the election of directors and for the transaction of such other business as may properly come before the meeting shall be held at such time, and at such place, either within or without the State of Virginia, as may be designated in the notice thereof, on the last Tuesday in April of each year if not a legal holiday, but if a legal holiday, then on the next succeeding business day or on such other date as the Board of Directors may determine at any time in advance of such date. At the annual meeting of stockholders, only such business shall be conducted as shall have been properly brought before the meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of the Corporation who shall be entitled to vote at such meeting and who complies with the procedures set forth in this Section 1. In addition to any other applicable requirements, for business, including the nomination of one or more persons for election as Directors, to be properly brought before the annual meeting by a stockholder, such stockholder must have given timely advance written notice thereof to the Secretary of the Corporation. The Secretary shall deliver timely received notices to the Board of Directors or a committee designated by the Board for review. To be timely, a stockholder's notice must be received by the Secretary at the principal executive offices of the Corporation not less than sixty days in advance of the first anniversary date of the annual meeting of shareholders for the preceding year; provided, however, if and only if the annual 3 meeting is not scheduled to be held within a period which commences 30 days before such anniversary date and ends 30 days after such anniversary date, such notice shall be given not later than 60 days in advance of the meeting date unless the date of such meeting is not publicly disclosed by the Corporation (by press release or by a document filed by the Corporation with the Securities and Exchange Commission) at least 85 days prior thereto, in which case such notice shall be given not later than the close of business on the date that is 25 days following the first public disclosure by the Corporation of the date of the annual meeting. In calculating days, the day of such annual meeting shall not be included so that stockholders shall begin counting with the day immediately preceding the day of the annual meeting which, for purposes of such calculation, shall be one day in advance of the annual meeting. A stockholder's notice to the Secretary shall set forth as to each matter of business the stockholder proposes to bring before the annual meeting: (a) a description of the business intended to be brought before the annual meeting, including the text of any resolution to be presented, and the reasons for conducting such business at the annual meeting; (b) the name and address of the stockholder proposing such business; (c) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at the annual meeting and intends to appear in person or by proxy at the meeting to bring the business specified in the notice before the meeting; (d) the class and number of shares of stock of the Corporation owned (i) of record and (ii) beneficially by the stockholder; and (e) any material interest of the stockholder in the business to be brought before the meeting. A stockholder's notice of intent to make a nomination of one or more persons for election as Directors at the annual meeting of stockholders shall, in addition to the information required above, set forth as to each such person: (a) the name, age and business and residence addresses of 4 the person; (b) the principal occupation or employment of the person; (c) the class and number of shares of stock of the Corporation owned (i) of record and (ii) beneficially by the person; (d) a description of all arrangements or understandings between the stockholder and the person and any other person or persons (naming such other person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (e) such other information regarding the person as would be required to be included in a proxy statement filed pursuant to the proxy rules of the Securities and Exchange Commission, had the person been nominated by the Board of Directors; and (f) the written consent of the person to serve as a Director of the Corporation if so elected. The Corporation may require any stockholder proposing to nominate one or more persons for election as Directors to furnish such other information as may reasonably be required by the Corporation to determine the eligibility of each such person to serve as a Director of the Corporation. In the event a stockholder attempts to bring business before the annual meeting without complying with the provisions of this Section 1, the presiding officer of the meeting shall determine and declare to the meeting that the business was not properly brought before the meeting, and such business shall not be transacted. SECTION 2. Special Meeting. Special meetings of the stockholders for any purpose or purposes may be held at any time and at any place, within or without the State of Virginia, designated in the call thereof, whenever called by the Board of Directors, the Chairman of the Board, the President, or as otherwise provided by law. SECTION 3. Notice. Written notice of every annual or special meeting of the stockholders, stating the place, day and hour and purpose or purposes thereof, shall be given to each stockholder of record entitled to vote thereat, either personally or by mailing the notice to 5 him at his address as it appears on the stock transfer books of the Corporation. Where such notice of a stockholders' meeting includes as a purpose thereof action with respect to an amendment of the Articles of Incorporation or a reduction of stated capital or a plan of merger or consolidation, such notice shall be given in the manner hereinabove provided, but at least 25 and not more than 50 days before the date of any such meeting and any such notice shall be accompanied by a copy of the proposed amendment or plan of reduction or merger or consolidation. SECTION 4. Quorum. A quorum at any meeting of the stockholders shall consist of a majority of the stock of the Corporation entitled to vote, present in person or by proxy, unless otherwise required by law or the Articles of Incorporation. If at the time and place of the meeting there is present less than a quorum, a majority of the stock present in person or by proxy and entitled to vote, shall have power to adjourn the meeting from time to time without notice until a quorum is secured, and thereupon any business may be transacted which might have been transacted at the meeting as originally called. SECTION 5. Organization. All meetings of the stockholders shall be presided over by the Chairman of the Board, or in his absence, by the President, or in his absence, by the Chairman of the Executive Committee. In case none of such officers of the Corporation shall be present, a chairman shall be elected by the vote of a majority of the stock present in person or by proxy entitled to vote. The Secretary of the Corporation or an Assistant Secretary shall act as secretary of every such meeting when present, and in the absence of either, the presiding officer may appoint any other officer of the Corporation to act as Secretary. SECTION 6. Inspectors. At any annual or special meeting of stockholders, inspectors of election may be appointed by the presiding officer of the meeting for the purpose of opening 6 and closing the polls, receiving and taking charge of proxies, and receiving and counting the ballots or the votes of stockholders otherwise given and shall in writing certify to the returns. No candidate for election as director shall be appointed or act as inspector. ARTICLE III Directors SECTION 1. Number, Vacancy. The property, business and affairs of the Corporation shall be managed by a Board of 11 directors. Except as otherwise provided by law or in these By-laws or in the Articles of Incorporation, the directors shall be elected by the stockholders at each annual meeting of stockholders and shall serve until the next succeeding annual meeting and until their successors shall have been elected. In the event of any vacancy in the directors resulting from death, resignation, disqualification, an increase by thirty percent (30%) or less in the number of directors last elected by the stockholders, or other cause, the remaining directors, although less than a quorum, by an affirmative vote of a majority thereof, may fill such vacancy. SECTION 2. Regular Meeting. Regular meetings of the Board of Directors shall be held, either within or without the State of Virginia, as shall from time to time be determined by the Board of Directors. After there has been such determination and notice thereof has been given to each member of the Board of Directors, no further notice shall be required for any such regular meeting. The annual meeting of the Board of Directors may be held, without notice, on the same day as and after the annual meeting of the stockholders. SECTION 3. Special Meeting. Special meetings of the Board of Directors shall be held, either within or without the State of Virginia, upon the order of the Board, or the call of the Chairman of the Board, the President, or three directors. The Secretary, or other officer 7 performing his duties, shall give notice to each director of the time and place of each meeting, by mailing the same at least two days before the meeting or by telegraphing or telephoning the same prior to the meeting. SECTION 4. Quorum. A majority of the number of directors fixed by these By-laws shall constitute a quorum for the transaction of business except as otherwise provided by law or the Articles of Incorporation or these By-laws, but a majority of those present at the time and place of any meeting, although less than a quorum, may adjourn from time to time without notice, until a quorum is secured. SECTION 5. Compensation. The Board of Directors shall have the authority to fix the compensation of the directors and of members of the Executive Committee and of other committees of the Board. SECTION 6. Indemnification of Officers, Directors and Employees. (a) Each director and officer of the Corporation shall be indemnified by the Corporation against all costs and expenses reasonably incurred by or imposed upon him in connection with or resulting from any action, suit or proceeding to which he may be made a party by reason of his being or having been a director or officer of the Corporation (whether or not he continues to be a director or officer at the time of incurring such cost or expense), except in relation to matters as to which a recovery shall be had against him by reason of his having been finally adjudged in such action, suit or proceeding to have been derelict in the performance of his duty as such director or officer. The foregoing qualification shall not, however, prevent a settlement by the Corporation prior to final adjudication when such settlement appears to be in the interest of the Corporation. The right of indemnification herein provided shall not be 8 exclusive of other rights to which any director or officer may be entitled as a matter of law. (Adopted by the stockholders of the Corporation March 3, 1942.) (b) As used in the following subsections of this Section 6: "Applicant" means the person seeking indemnification pursuant to this Section. "Expenses" includes counsel fees. "Liability" means the obligation to pay a judgment, settlement, penalty, fine, including any excise tax assessed with respect to an employee benefit plan, or reasonable expenses incurred with respect to a proceeding. "Official capacity" means, (i) when used with respect to a director, the office of director in the Corporation; or (ii) when used with respect to an individual other than a director, the office in the Corporation held by the officer or the employment or agency relationship undertaken by the employee or agent on behalf of the Corporation. "Official capacity" does not include service for any other foreign or domestic corporation or any partnership, joint venture, trust, employee benefit plan, or other enterprise. "Party" includes an individual who was, is, or is threatened to be made a named defendant or respondent in a proceeding. "Proceeding" means any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative or investigative and whether formal or informal. (c) The Corporation shall indemnify any person who was or is a party to any proceeding by reason of the fact that he is or was a director, officer or employee of the 9 Corporation, or is or was serving at the request of the Corporation as a director, trustee, partner, officer or employee of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability incurred by him in connection with such proceeding if (i) he believed, in the case of conduct in his official capacity, that his conduct was in the best interests of the Corporation, and in all other cases that his conduct was at least not opposed to its best interests, and, in the case of any criminal proceeding, had no reasonable cause to believe his conduct was unlawful, (ii) in connection with a proceeding by or in the right of the Corporation, he was not adjudged liable to the Corporation, and (iii) in connection with any proceeding charging improper benefit to him, whether or not involving action in his official capacity, he was not adjudged liable on the basis that personal benefit was improperly received by him. A person is considered to be serving an employee benefit plan at the corporation's request if his duties to the corporation also impose duties on, or otherwise involve services by, him to the plan or to participants in or beneficiaries of the plan. A person's conduct with respect to an employee benefit plan for a purpose he believed to be in the interests of the participants and beneficiaries of the plan is conduct that satisfies the requirements of this subsection. (d) The termination of any proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not of itself create a presumption that the applicant did not meet the standard of conduct described in subsection (c) of this Section. (e) To the extent that the applicant has been successful on the merits or otherwise in defense of any proceeding referred to in subsection (c) of this Section, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses actually and reasonably incurred by him in connection therewith. 10 (f) Any indemnification under subsection (c) of this Section (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the applicant is proper in the circumstances because he has met the applicable standard of conduct set forth in subsection (c). The determination shall be made: (i) By the Board of Directors by a majority vote of a quorum consisting of directors not at the time parties to the proceeding; (ii) If a quorum cannot be obtained under paragraph (i) of this subsection, by majority vote of a committee duly designated by the Board of Directors (in which designation directors who are parties may participate), consisting solely of two or more directors not at the time parties to the proceeding; (iii) By special legal counsel: (A) Selected by the Board of Directors or its committee in the manner prescribed in paragraph (i) or (ii) of this subsection; or (B) If a quorum of the Board of Directors cannot be obtained under paragraph (i) of this subsection and a committee cannot be designated under paragraph (ii) of this subsection, selected by majority vote of the full Board of Directors, in which selection directors who are parties may participate; or (iv) By the shareholders, but shares owned by or voted under the control of directors who are at the time parties to the proceeding may not be voted on the determination. Authorization of indemnification and evaluation as to reasonableness of expenses shall be made in the same manner as the determination that indemnification is permissible, except that if the determination is made by special legal counsel, authorization of indemnification 11 and evaluation as to reasonableness of expenses shall be made by those entitled under paragraph (iii) of this subsection to select counsel. (g) (i) The Corporation may pay for or reimburse the reasonable expenses incurred by any applicant who is a party to a proceeding in advance of final disposition of the proceeding if: (A) The applicant furnishes the Corporation a written statement of his good faith belief that he has met the standard of conduct described in subsection (c); (B) The applicant furnishes the Corporation a written undertaking, executed personally or on his behalf, to repay the advance if it is ultimately determined that he did not meet the standard of conduct; and (C) A determination is made that the facts then known to those making the determination would not preclude indemnification under this Section. (ii) The undertaking required by subparagraph (B) of paragraph (i) of this subsection shall be an unlimited general obligation of the applicant but need not be secured and may be accepted without reference to financial ability to make repayment. (iii) Determinations and authorizations of payments under this subsection shall be made in the manner specified in subsection (f). (h) The Board of Directors is hereby empowered, by majority vote of a quorum of disinterested directors, to cause the Corporation to indemnify or contract in advance to indemnify any person not specified in subsection (c) of this Section who was or is a party to any proceeding, by reason of the fact that he is or was an agent of the Corporation, or is or was serving at the request of the Corporation as an agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, to the same extent as if such person 12 were specified as one to whom indemnification is granted in subsection (c). The provisions of subsections (d) through (g) of this Section shall be applicable to any indemnification provided hereafter pursuant to this subsection (h). (i) The Corporation may purchase and maintain insurance to indemnify it against the whole or any portion of the liability assumed by it in accordance with this Section and may also procure insurance, in such amounts as the Board of Directors may determine, on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise, against any liability asserted against or incurred by him in any such capacity or arising from his status as such, whether or not the Corporation would have power to indemnify him against such liability under the provisions of this Section. (j) The Board of Directors is hereby empowered to cause the Corporation to contract in advance to indemnify any person specified in subsection (c) of this Section provided that such contract does not permit indemnification if the proposed indemnitee failed to meet the standard of conduct set forth in subsection (c). (k) Every reference herein to directors, officers, employees or agents shall include former directors, officers, employees and agents and their respective heirs, executors and administrators. The indemnification hereby provided and provided hereafter pursuant to the power hereby conferred on the Board of Directors shall not be exclusive of any other rights to which any person may be entitled, including any right under policies of insurance that may be purchased and maintained by the Corporation or others, with respect to claims, issues or matters 13 in relation to which the Corporation would not have the power to indemnify such person under the provisions of this Section. (l) For the purposes of this Section, references to the "Corporation" include all constituent corporations absorbed in a consolidation or merger as well as the resulting or surviving corporation so that any person who is or was a director, officer or employee of such a constituent corporation or is or was serving at the request of such constituent corporation as a director, officer or employee of another corporation, partnership, joint venture, trust or other enterprise shall stand in the same position under the provisions of this Section with respect to the resulting or surviving corporation as he would if he had served the resulting or surviving corporation in the same capacity. (m) If any part of this Section 6 shall be found, in any claim, action, suit or proceeding, to be invalid or ineffective, the validity and the effect of the remaining parts shall not be affected. SECTION 7. Executive Committee. The Board of Directors may, by a resolution adopted by a majority of the number of directors fixed by these By-laws, appoint an Executive Committee to consist of two or more directors as determined by the Board. A majority of the members appointed shall constitute a quorum. Such Committee shall have the power of the Board of Directors in the management of the property, business and affairs of the Corporation, except the power to declare dividends, or to approve an amendment of the Articles of Incorporation or of these By-laws or to approve a plan of merger or consolidation. Such Committee shall keep regular minutes of its proceedings and shall report to the Board and be subject to its directions. The Board may fill vacancies therein in the same manner as original appointments to such Committee. Meetings of the Executive Committee shall be held, either 14 within or without the State of Virginia, upon the order of the Committee or the call of the Chairman of the Executive Committee, or two or more members of the Committee. The Secretary, or other officer performing his duties, shall give notice to each Executive Committee member of the time and place of each Executive Committee meeting, by mailing the same at least two days before the meeting or by telegraphing or telephoning the same prior to the meeting. SECTION 8. Other Committees. From time to time the Board of Directors by a resolution adopted by a majority of the directors present at a meeting at which a quorum is present may appoint any other committee or committees of directors for any purpose or purposes, to the extent lawful, which shall have such powers as shall be determined and specified by the Board of Directors in the resolution of appointment. Meetings of any such committees shall be held either within or without the State of Virginia, upon the order of such committee, or the call of the Chairman, such committee, or two or more members of such committee. The Secretary, or other officer performing his duties, shall give notice to each member of such committee of the time and place of each meeting of such committee, by mailing the same at least two days before the meeting or by telegraphing or telephoning the same prior to the meeting. SECTION 9. Action Without a Meeting. Unless otherwise restricted by law or the Articles of Incorporation, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if a written consent, setting forth the action so to be taken, shall be signed by all of the directors or all of the members of the committee, as the case may be. Action taken under this Section is effective when the last director signs the consent unless the consent specifies a different effective date, in 15 which event the action taken is effective as of the date specified therein provided the consent states the date of execution by each director. SECTION l0. Termination of Committee Membership. In the event any person shall cease to be a director of the Corporation, such person shall simultaneously therewith cease to be a member of any committee. ARTICLE IV Officers SECTION 1. Officers. The officers of the Corporation shall be the Chairman of the Board, the Vice Chairman of the Board, President, Chairman of the Executive Committee, one or more Senior Executive Vice Presidents, Executive Vice Presidents, Senior Vice Presidents, Vice Presidents, Secretary, Treasurer, General Counsel, Comptroller, Assistant Secretaries, Assistant Treasurers, and Assistant Comptrollers, and such other officers and agents as may be required by law, or as may be deemed useful. The Chairman of the Board, the Vice Chairman of the Board, the President and the Chairman of the Executive Committee shall each be a member of the Board of Directors. Any person may hold at the same time any two of the offices above named, except the offices of President and Secretary. SECTION 2. Election of Officers; Term of Office. All officers and agents shall be elected annually by the Board of Directors at each annual meeting of the Board. If the Board of Directors shall fail to fill any designated office at an annual meeting or if any vacancy shall occur, or if any office shall be newly created, such office may be filled at any meeting of the Board of Directors. 16 Each officer shall hold office until his successor is duly elected, or until his earlier death, resignation or removal, provided that the terms of office of all officers shall terminate at any annual meeting of the Board of Directors at which the President is elected. The Board of Directors shall have the power to remove any officer, with or without cause, at any time. 17 ARTICLE V Powers and Duties of Officers SECTION l. Chairman of the Board. The Chairman of the Board shall be the chief executive officer of the Corporation and shall have general supervision over the business of the Corporation. He shall preside at all meetings of the stockholders and the Board of Directors. SECTION 2. Chairman of the Executive Committee. The Chairman of the Executive Committee shall be the presiding officer of the Executive Committee and shall have such other powers and duties as may be assigned to him by the Board of Directors. SECTION 3. President. The President shall be the chief operating officer of the Corporation and shall have such other powers and duties as may from time to time be assigned to him by the Board of Directors or the Chairman of the Board. SECTION 4. Other officers. All officers other than those expressly referred to in this Article V shall have such powers and duties as usually pertain to their respective offices, in addition to the powers and duties conferred by law or by other sections of these By-laws, and such other duties and powers as may be assigned to them by the Board of Directors, the Chairman of the Board or the President. ARTICLE VI Fiscal Year SECTION 1. Fiscal Year. The fiscal year of the Corporation shall end on December 31 of each year. 18 ARTICLE VII Checks, Notes, Drafts, Contracts, Etc. SECTION 1. Checks, Notes, Drafts, Etc. All checks, notes, drafts or other orders for the payment of money of the Corporation shall be signed, endorsed or accepted in the name of the Corporation by such officer or person as may be designated from time to time either by the Board of Directors or by an officer authorized by the Board of Directors to make such designation. SECTION 2. Execution of Contracts, Deeds, Etc. The Board of Directors may authorize any officer or agent in the name and on behalf of the Corporation to enter into or execute and deliver any and all deeds, bonds, mortgages, contracts and other obligations or instruments, and such authority may be general or confined to specific instances. ARTICLE VIII Seal SECTION 1. Form. The Corporate Seal of the Corporation shall be the Seal impressed on the margin hereof. 19 ARTICLE IX Waiver of Notice SECTION 1. Waiver of Notice. Any stockholder, director or officer may waive any notice required to be given in accordance with law, these By-laws or the Articles of Incorporation by attendance in person or by a writing signed by the person or persons entitled to said notice or by his proxy, whether before or after the time or event referred to in said notice, which waiver shall be deemed equivalent to such notice. ARTICLE X Amendment to By-laws SECTION 1. By the Directors. Except as otherwise provided by law, the Board of Directors shall have the power to make, amend and repeal the By-laws of the Corporation. SECTION 2. By the Stockholders. By-laws made by the Board of Directors may be repealed or changed, and new By-laws made, by the stockholders and the stockholders may prescribe that any By-laws made by them shall not be altered, amended or repealed by the directors. Any such action shall be taken at any annual or special meeting of stockholders, provided that the notice of such meeting shall have included such action among the purposes of the meeting. 20 EX-10 3 EXHIBIT 10.6 EXHIBIT 10.6 UNION CAMP CORPORATION RETIREMENT PLAN FOR OUTSIDE DIRECTORS ARTICLE I PURPOSES The purposes of this Plan are to provide retirement income to certain members of the Board of Directors of Union Camp Corporation (the "Company") in recognition of their past services to the Company and to provide an incentive for such persons to continue to serve as members of the Board of Directors of the Company. ARTICLE II DEFINITIONS 2.1. "Board" shall mean the Board of Directors of Union Camp Corporation. 2.2. "Company" means Union Camp Corporation. 2.3. "Director" means a member of the Board. 2.4. "Effective Date" means April 26, 1988. 2.5. "Outside Director" means a Director who (a) is not an officer or employee of the Company or any of its subsidiaries or (b) has been designated by the Board as an honorary Director of the Company and immediately prior thereto was an Outside Director as defined in clause (a) of this Section 2.5. 2.6. "Participant" means an Outside Director who is both eligible for participation in the Plan and has not ceased to be a Participant. 2.7. "Plan" means the Union Camp Corporation Retirement Plan for Outside Directors as set forth herein and as amended from time to time. 2.8. "Plan Year" means the calendar year. 2.9. "Retainer" means the basic annual amount, (not including meeting fees) of cash compensation payable to an Outside Director for services rendered to the Company as of the date he ceases to be a member of the Board, excluding any amounts (basic annual amount or meeting fees) payable for services rendered as a member of any committee of the Board, plus the greater of (a) the average fair market value of the three most recent grants of Company common stock made to the Outside Director under the Stock Compensation Plan for Non-Employee Directors of the Company, the fair market value of each such grant being established as provided in said Stock Compensation Plan for Non-Employee Directors or (b) $5,000, as the value, for purposes of this Plan, of Company common stock awarded as compensation. 2.10. "Retirement Date" means any date on or after an Outside Director's 65th birthday on which he ceases to be an Outside Director for any reason other than death. 2.11. "Year of Service" means a period of 12 consecutive calendar months, whether before or after the Effective Date, commencing on the date an individual becomes an Outside Director and each anniversary thereof, during which such individual at all times serves as an Outside Director. ARTICLE III PARTICIPATION 3.1. Each Outside Director shall be a Participant in the Plan on the later of (a) the Effective Date and (b) the date he becomes an Outside Director. 3.2. An Outside Director who becomes a Participant will remain a Participant until he ceases to be an Outside Director. 3.3. To the extent provided by the Board, periods subsequent to the Effective Date during which an Outside Director is unable to carry out the duties of his position as a result of temporary injury, sickness, or leaves of absence specifically approved by the 2 Board, shall not cause an interruption of an individual's service as an Outside Director or of his Years of Service for purposes of this Plan. ARTICLE IV RETIREMENT BENEFIT 4.1. Each participant who on his Retirement Date (a) is an Outside Director and (b) has completed five Years of Service shall receive an annual retirement benefit in an amount equal to the sum of: (a) 50% of his Retainer on his Retirement Date, and (b) 10% of his Retainer on his Retirement Date multiplied by the number of his full Years of Service in excess of 5 but not in excess of 10. 4.2. The retirement benefit payable to a Participant under Section 4.1 shall be paid annually, commencing on or about the first day of the Plan Year following the Participant's Retirement Date and continuing on each subsequent anniversary thereof until the total number of such annual payments equals the number of the Participant's Years of Service, provided, however, if the Participant dies prior to all such annual payments being made, a death benefit shall be paid as provided in Article V hereof. ARTICLE V DEATH BENEFIT 5.1. If, after his Retirement Date, a Participant who is eligible to receive a retirement benefit under Article IV dies before having been paid the total number of annual payments he is eligible to receive thereunder, a lump sum death benefit shall be paid to his named beneficiary or, if no beneficiary is named, to his estate, as soon as practicable after his death. Such beneficiary shall be named on a form provided by and 3 filed with the Company for this purpose. The death benefit so payable shall be an amount equal to the present value of the unpaid annual retirement benefits which the Participant is eligible to receive under Article IV, such present value to be calculated by using the interest rate in effect on the first day of the year in which the Participant's death occurs as published by the Pension Benefit Guaranty Corporation for determining the value of lump sum payments on termination from IRS qualified pension plans. ARTICLE VI ABSENCE OF OTHER BENEFITS 6.1. Except for the retirement benefit payable under Article IV to a Participant who retires on his Retirement Date and, if applicable, the death benefit payable under Article V, no benefits are payable under this Plan to a Participant or any other person, including the spouse, beneficiaries or estate of any Participant, and the obligation of the Company to make payments under the Plan shall terminate upon the earlier of the payment of (a) the total number of annual payments the Participant is eligible to receive under Article IV or (b) the death benefit provided in Article V hereof. ARTICLE VII OBLIGATIONS OF COMPANY; SOURCE OF PAYMENTS 7.1. The sole obligation of the Company to any Participant in respect of any amounts which may become payable hereunder is a contractual obligation to make payments in accordance with the terms of the Plan. 7.2. The Plan is an unfunded plan and all amounts payable under the Plan shall be paid from the general assets of the Company. The Company shall be under no 4 obligation to segregate any of its assets in respect of the benefits provided hereunder or to fund or otherwise secure its obligation to pay such benefits. ARTICLE VIII ADMINISTRATION OF PLAN 8.1. The Plan shall be administered by the members of the Board who are not Outside Directors and such members of the Board shall have full and final authority to interpret the Plan; to prescribe, amend and rescind rules and regulations, if any, relating to the Plan; and to make all determinations necessary or advisable for the administration of the Plan. The reasonable determination of the members of the Board administering the Plan in all matters referred to herein shall be conclusive and binding for all purposes. 8.2. No member of the Board shall be liable for, and the Company shall indemnify and hold each member of the Board harmless with respect to, anything done or omitted to be done by such member or by any other member of the Board in connection with the Plan, except for the willful misconduct or gross negligence of such member. The Board shall have power to engage outside consultants, auditors or other professional help to assist in the fulfillment of its duties under the Plan. The expenses incurred in administering the Plan shall be paid by the Company. 5 ARTICLE IX AMENDMENT AND TERMINATION 9.1. The Plan may be amended or terminated as of any date specified in a resolution adopted by the Board, but no such amendment or termination shall reduce or otherwise adversely affect the payment of benefits to any Participant who has retired on a Retirement Date and commenced receiving payments hereunder prior to the date of such amendment or termination. ARTICLE X MISCELLANEOUS 10.1. Any payment under the Plan shall be made after deducting any taxes of any kind required to be withheld by the Company with respect to such payment under any federal, state or local law. 10.2. No Participant, his named beneficiary or his estate shall have any right to commute, sell, transfer, assign or otherwise alienate or encumber his or its right to receive any payments under the Plan and any attempt to do so shall be void. No amounts payable under the Plan shall be subject to levy, attachment, garnishment or other legal process of any kind in satisfaction of the contracts, torts or other liabilities of a Participant, his named beneficiary or his estate. 10.3. This Plan shall create no right in a Participant to continue as a member of the Board or to create any other rights in a Participant or obligations on the part of the Company, except as are set forth herein. 10.4 This Plan shall be governed by the laws of the State of New Jersey. 6 ARTICLE XI TERMINATION OF PLAN 11.1. There shall be no further accrual of benefits under this Plan after December 31, 1997. 11.2. The following Sections of this Article XI and Articles XII and XIII shall apply only to Outside Directors who are serving on the Board on December 31, 1997. 11.3. The term "Retirement Date" shall mean the date the Outside Director ceases to be a member of the Board for any reason including death. Section 2.10 shall not apply. 11.4. The term "Service" shall mean the number of years plus any fractional part of a year the Outside Director has served on the Board commencing on the date he became an Outside Director and ending on December 31, 1997. 11.5 The term "Retainer" shall mean $32,000. Section 2.9 shall not apply. 11.6. Article IV, Retirement Benefit, shall not apply. Instead, Article XII below shall apply. 11.7. Article V, Death Benefit, shall not apply. Instead, Article XIII below shall apply. ARTICLE XII ARTICLE XII RETIREMENT BENEFIT FOR OUTSIDE DIRECTORS SERVING ON THE BOARD ON DECEMBER 31, 1997 7 12.1. As of December 31, 1997 each Outside Director shall have accrued an annual retirement benefit under this Plan in an amount equal to 10% of his Retainer on December 31, 1997 multiplied by his years of Service but not in excess of 10 years of Service. 12.2. As of December 31, 1997 the present value of each Outside Director's accrued annual retirement benefit under the Plan shall be determined using (a) the discount rate then in effect under the Supplemental Retirement Plan for Executive Officers for determining lump sum payment amounts under that plan; (b) the Outside Director's age and Service on the Board as of December 31, 1997; and (c) an assumption of retirement from the Board at the greater of age 65 or the Outside Director's age on December 31, 1997. 12.3. As of December 31, 1997 each Outside Director shall have the option of allocating all or part of the present value of his accrued annual retirement benefit under the Plan between: (a) a deferred stock unit account payable in shares of the Company's Common Stock after the Outside Director's Retirement Date as set forth in and pursuant to the terms of the Outside Directors' Deferred Stock Unit Plan adopted by the Board on November 25, 1997; or (b) a deferred cash account credited at the rate of return achieved by the Custom Stable Value Fund (or its replacement) under the Company's employee savings plans. 12.4. Each Outside Director shall make an irrevocable payment election to be paid his deferred stock account and/or deferred cash account in a lump sum or five or ten annual installments following his Retirement Date.If the Outside Director elects a lump sum payment his account shall be paid as soon as administratively feasible following his Retirement Date. If the Outside Director elects five or ten substantially equal installments, the first installment be paid commence on or as soon as administratively feasible after January 1 of the year following the year in which the Retirement Date occurs. 8 ARTICLE XIII DEATH BENEFIT 13.1 If, an Outside Director serving on the Board on December 31, 1997, who has elected pursuant to Article XII to have his accrued retirement benefit allocated to a deferred cash account, dies, whether before or after his Retirement Date, a lump sum payment of his deferred cash account shall be made as soon as practicable to his designated beneficiary, or if no beneficiary is named, to his estate. Such beneficiary shall be named on a form provided by and filed with the Company for this purpose. 9 EX-10 4 EXHIBIT 10.8 EXHIBIT 10.8 STOCK COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS OF UNION CAMP CORPORATION 1. The purpose of the Stock Compensation Plan for Non-Employee Directors (the "Plan") of Union Camp Corporation (the "Corporation") is to provide competitive remuneration to the Corporation's non-employee directors so as to maintain the Corporation's ability to attract and retain highly qualified individuals to serve on the Board of Directors and to relate the compensation of non-employee directors more closely to the interests of the shareholders of the Corporation by increasing the amount of stock ownership of the Corporation held by non-employee directors. 2. This Plan shall become effective on April 24, 1990, provided the Plan is approved by shareholders on such date. If this Plan is not so approved, the Plan shall not become effective. 3. If the Plan becomes effective, each member of the Board of Directors who is not an employee of the Corporation immediately after each annual meeting of the stockholders of the Corporation, beginning with the 1990 Annual Meeting, shall receive whole shares of Common Stock of the Corporation having a fair market value of approximately $5,000. The number of shares of Common Stock each non-employee director shall be entitled to receive following each annual meeting thereafter shall be the number specified in an amendment to the Plan adopted as an Appendix thereto by the Board of Directors at any time prior to, and in the same calendar year as, such annual meeting; provided, however, if the Plan is not so amended, each non-employee director shall receive whole shares of Common Stock having a fair market value of approximately $5,000. If the Plan is so amended, each non-employee director shall receive an equal number of whole shares of Common Stock the fair market value of which shall not exceed $40,000 per calendar year. The total number of shares that may be awarded under this Plan is 150,000, provided that if during any fiscal year of the Corporation the shares of Common Stock issued and outstanding at the beginning of such fiscal year increase or decrease by more than 10% by reason of a stock dividend, stock split, reverse split, subdivision, merger, recapitalization, consolidation (whether or not the corporation is the surviving corporation), combination or exchange of shares, separation, reorganization, liquidation or like action, the total number of shares which may be granted under this Plan shall be correspondingly adjusted. The shares of stock awarded under this Plan shall be delivered to each non-employee director as soon as practicable following the applicable annual meeting. 4. The Plan shall be administered by the Chief Executive Officer of the Corporation (the "CEO") whose interpretation and decision as to any question arising under the Plan shall be conclusive. Recommendations as to annual awards under the Plan may be made by the CEO to the Board of Directors. In making any such recommendation, the CEO shall consider (a) the performance of the Corporation and (b) the remuneration paid to non-employee directors by other corporations of similar size. 5. All shares of Common Stock of the Corporation to be used for purposes of this Plan shall either be newly issued stock or stock purchased by the Corporation for the benefit of each non-employee Director or both. The fair market value of newly issued or purchased Common Stock shall be the mean of the high and low sales prices for the Common Stock as reported on the Composite Tape for New York Stock Exchange issues on the trading date preceding the applicable annual meeting of stockholders of the Corporation or if there is no sale of the shares on such Exchange on said date, the mean of the bid and asked prices on such Exchange at the close of the market on such date shall be deemed to be the fair market value of the shares. 6. This Plan shall be construed in accordance with the laws of the Commonwealth of Virginia. The Plan may be amended, suspended or terminated at any time by action of the Board of Directors of the Corporation, provided no amendment may (a) increase the maximum number of shares which may be awarded under this Plan, (b) increase the fair market value of awards to an annual amount greater than $40,000 for each non-employee director, (c) change the eligibility for awards to individuals other than non-employee directors, or (d) more than once every six months, change the number of shares of Common Stock each non-employee director shall be entitled to receive following each annual meeting. -2- AMENDMENT FEBRUARY 24, 1998 TO STOCK COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS OF UNION CAMP CORPORATION Appendix Number Seven Immediately after the 1998 Annual Meeting of the Stockholders of the Corporation each member of the Board of Directors of the Corporation who is not an employee of the Corporation shall receive under the Plan whole shares of Common Stock of the Corporation having a fair market value of approximately $9,000. EX-10 5 EXHIBIT 10.10 Union Camp Corporation 1600 Valley Road Exhibit 10.10 Wayne, NJ 07470 November 17, 1997 Mr. James M. Reed Union Camp Corporation 1600 Valley Road Wayne, NJ 07470 Dear Jim: Jim, this letter is an attempt to outline the understanding under which Union Camp may draw upon your services during 1998. It is my understanding you are scheduled to retire effective July 1, 1998 with the period between January 1 and June 30, 1998 being banked vacation. You are intending to leave on December 1, but remain on the payroll through the end of the year with an understanding that during 1998 you will work a number of days equal to the scheduled workdays in December. Specific projects have been identified for which you will commit time and service. John Albert has asked that you be available for no more than two days per quarter to act in a consulting role with the Forest Resources Group. With the month of December having twenty scheduled workdays, it would appear that John's request could be accomplished within the days allocated. However, if your work schedule is going to exceed the twenty day period, then additional discussions would be required. Any work performed beyond the twenty day limit would require Craig's approval and the establishment of an appropriate consulting agreement. Jim, if this outline accurately describes your understanding of future events, then please acknowledge by signing below and returning a copy to me. Sincerely, Jerry Carter Senior Vice President cc: W. C. McClelland /S/ James M. Reed 11/17/97 James M. Reed Date Union Camp Corporation 1600 Valley Road Wayne, NJ 07470 November 17, 1997 Mr. James M. Reed Union Camp Corporation 1600 Valley Road Wayne, NJ 07470 Dear Jim: Jim, this letter is an attempt to outline the understanding under which Union Camp may draw upon your services during 1998. It is my understanding you are scheduled to retire effective July 1, 1998 with the period between January 1 and June 30, 1998 being banked vacation. You are intending to leave on December 1, but remain on the payroll through the end of the year with an understanding that during 1998 you will work a number of days equal to the scheduled workdays in December. Specific projects have been identified for which you will commit time and service. John Albert has asked that you be available for no more than two days per quarter to act in a consulting role with the Forest Resources Group. With the month of December having twenty scheduled workdays, it would appear that John's request could be accomplished within the days allocated. However, if your work schedule is going to exceed the twenty day period, then additional discussions would be required. Any work performed beyond the twenty day limit would require Craig's approval and the establishment of an appropriate consulting agreement. Jim, if this outline accurately describes your understanding of future events, then please acknowledge by signing below and returning a copy to me. Sincerely, Jerry jnc/bak cc: W. C. McClelland /S/ James M. Reed 11/17/97 James M. Reed Date EX-11 6 EXHIBIT 11 EXHIBIT 11 COMPUTATION OF PER SHARE EARNINGS
1997 1996 1995 ---- ---- ---- Net Income ($000) $81,070 $85,308 $451,073 Weighted Average Common Shares Outstanding 69,439,150 69,220,157 69,940,397 Basic Earnings Per Share $1.17 $1.23 $6.45 Weighted Average Common Shares Outstanding Including Common Stock Equivalents - Diluted 69,930,442 69,605,536 70,569,537 Basis Diluted Earnings Per Share $1.16 $1.23 $6.39
EX-13 7 EXHIBIT 13 The Year in FINE PAPER The Fine Paper Division produces uncoated white paper, coated and uncoated white paperboard, and bleached market pulp at mills in Franklin, Virginia, and Eastover, South Carolina. About half the division's output, primarily printing and business papers, is sold to distributors who supply commercial printers, book publishers, offices, home users, and organizations with in-house printing capabilities. Our Great White Consumer Products'tm' unit provides business papers directly to consumers through retail outlets such as Office Depot, Staples, and Wal-Mart. The balance of our paper and board is sold directly to manufacturers who convert it into products such as envelopes, computer printout papers, business forms, greeting cards, and folding cartons. Operating Highlights We continue to concentrate our marketing efforts on the four segments that make up two-thirds of our business -- SOHO (small office/home office), the corporate information center, direct mail, and commercial printing. In 1997, sales across those four segments rose by 60,000 tons. In order to better serve the fast-growing SOHO market, we created a separate Great White Consumer Products'tm' unit that targets consumers through office supply superstores and catalogers. It's already delivering increased sales for the Great White'r' line. In keeping with our consumer-oriented strategy, we are adding line extensions to the Great White'r' brand. This fall, we agreed to market colored paper for computerprinters under the Crayola'r' name*. The partnership not only adds to our range of retail products, it also links Great White'r' products to a highly visible and reputable brand name. We continued to promote the Great White'r' brand through advertising in print and on TV. We also introduced a new line of kraft envelopes under the Tiger Shark'tm' brand name. Among manufacturing highlights, the division had record shipments in 1997, and the Franklin mill had record first-grade production driven by better operating efficiency. Our Franklin mill brought on line a gas-fired turbine generator and boiler that uses natural gas to generate steam and electricity. Cleaner than systems using coal and wood, it's also more energy efficient and less expensive to operate. At our Eastover mill, a new saltcake recovery plant is improving operations. The plant reclaims chemicals that otherwise would be lost from the liquor system and enables us to reduce expenses by about $2 million a year. *Crayola is a registered trademark of Binney & Smith. - --- 16 The Year in PACKAGING The Packaging Group integrates the company's Kraft Paper and Board Division (KP&B) and its packaging businesses. KP&B's mills in Savannah, Georgia, and Prattville, Alabama, supply much of the paper and paperboard to our packaging plants. The Container Division manufactures corrugated boxes, solid fiber containers and slip sheets, and display packaging. The Flexible Packaging Division produces industrial and consumer bags made of paper and/or plastic film. The International Packaging Division manufactures corrugated containers at many overseas locations. The Folding Carton Division manufactures packaging for the cosmetics, toiletries, pharmaceuticals, and food industries. Operating Highlights In Kraft Paper & Board, we set records last year for both production and shipments. The Container Division's Graphics Group broadened its packaging and merchandising capabilities when Union Camp acquired Phoenix Display and Packaging, a leader in temporary and permanent point-of-purchase (POP) displays. Phoenix gives us national POP production and sales capability. We also acquired Riley & Geehr, a manufacturer of specialty bulk packaging that provides our Performance Products Group with an improved market position in the Midwest. In our Container Division's Integrated Products Group, we restructured our sales organization to better serve the textile, food, appliance, and poultry industries. Also in Container, we introduced Microlite'tm', a cost-effective, lightweight corrugated packaging material aimed at the wholesale club market. And in China, our joint venture, Eastgate Packaging Ltd., brought on line a box plant in Guangzhou. A second plant is scheduled to open in central China in 1999. Our Flexible Packaging Division began operating its first plant outside the United States when we acquired a majority interest in Puntapel, a multiwall bag manufacturer in Argentina. Our Folding Carton Division formed its second international alliance, teaming up with Marinetti of Santiago, Chile, which serves cosmetics manufacturers on three continents. Folding Carton also opened a new Customer Response Center in Englewood, New Jersey, where we can digitally create and retouch packaging artwork, working in partnership with our customers. Across the division, we continued to set new standards for safety. Last year, our folding carton plant in Clifton, New Jersey, achieved Star Site status, the highest honor bestowed by the Occupational Safety and Health Administration in its Voluntary Protection Program. Our company now has five plants that have achieved this distinction, which fewer than one percent of the nation's manufacturing facilities have earned. -- 17 The Year in CHEMICALS The Chemical Group comprises the Chemical Products Division and Bush Boake Allen Inc. (BBA), which operates as a freestanding corporation. Chemical Products converts by-products from the papermaking process into tall oil fatty acids, rosin acid, dimer acid, rosin, and polyamide resins. These products are used in adhesives, inks, coatings, lubricants, soaps, and personal care products. BBA is one of the world's leading producers of aroma chemicals and compounders of flavors and fragrances. Operating Highlights: Chemical Products Division Our focus on high-growth, international markets paid off in 1997, as we achieved double-digit sales increases in Asia/Pacific, Latin America, Eastern Europe, and India. We expanded our network of sales, marketing, and customer technical support services, opening offices in Sao Paulo, Brazil, and Bombay, India. We completed a series of capital expansions to serve the international and U.S. markets for resins used in inks and adhesives, a high-demand product worldwide. The division also continued its successful investment in new product and process development. In fact, over 30 percent of our sales in 1997 came from products developed within the last five years. We have had particular success with hot-melt and water-based adhesive resins, as well as high-performance ink resins. Operating Highlights: Bush Boake Allen BBA expanded its Jacksonville, Florida, facility to increase the output of geraniols, which give perfumes their rose and geranium aroma. The company also automated much of its plant in Widnes, England, paving the way for better service and lower costs. Overseas, BBA purchased its first flavor and fragrance manufacturing site in Mexico, doubled the capacity of its Swedish seasonings plant, and expanded the production capacity of its Argentine fragrance factory. In Australia, BBA installed new spray dryers to meet growing demand for flavors in powdered form. And in India, BBA opened a new office and laboratory complex for flavors and fragrances to support its two manufacturing facilities in that country. - --- 18 The Year in FOREST RESOURCES The Forest Resources Group manages the company's woodlands, wood products, and land development activities. The Woodlands Division manages about 1.6 million acres in Alabama, Florida, Georgia, North Carolina, South Carolina, and Virginia, and supplies high-quality, competitively priced fiber to our paper mills and wood products plants. The Wood Products Division produces southern pine lumber, plywood, and particleboard panels for the industrial and home improvement markets. Wood Products operates nine facilities in Alabama, Georgia, North Carolina, and Virginia. The third division of the Forest Resources Group, The Branigar Organization, Inc., is a wholly owned subsidiary that develops high-value land for residential, recreational, and commercial use Operating Highlights Our emphasis on advanced land management techniques, along with intensive culture management, has helped make all of our land more productive. In fact, from 1987 to 1997, our standing pine inventory increased by 34 percent, while our land holdings actually decreased by 200,000 acres. Our intensive culture program continues to maximize fiber yield, producing an average yield of 12 tons per acre compared to an average yield in the South of three to four tons. The trees grow faster, with our harvest rotation for pulpwood having decreased substantially. We also made significant progress in our ongoing environmental education program for private landowners. By year's end, nearly all of our 1,200 foresters and contract wood suppliers had completed logger training on air, soil, water, and wildlife issues. It's part of our commitment to the industry's Sustainable Forestry Initiative'sm', a code of principles that guides the responsible stewardship of our woodlands. The Woodlands Division had record earnings in 1997, while the lumber segment of our Wood Products Division set records for profits and sales, and, for the first time, produced over one-half billion board feet of lumber. Our new laminated veneer lumber (LVL) facility is on track to start up in mid-1998. Growth for LVL products is exceeding our forecast, and we intend to be well positioned in this niche, value- added segment. The Branigar Organization has sold nearly all 4,250 units at the Landings on Skidaway Island, a world-class development near Savannah where the first unit was sold in 1972. Branigar also continues to serve as master developer for a broad range of commercial projects in the Southeast. Capitalizing on new technology, Branigar has generated more than $1 million in sales from Union Camp's Web site. --- 19 Financial Review Results of Operations 1997 Earnings Per Share (in dollars) 1st Quarter $0.14 2nd Quarter $0.15 3rd Quarter $0.40 4th Quarter $0.45 The adverse market conditions which had affected paper and packaging prices in 1996 continued through most of the first half of 1997. Improvements in the pricing environment became evident by mid-year and this trend progressed through year-end. The company achieved steady earnings improvement over the last three quarters of the year. Tight cost control coupled with improvements in volume and mix were critical factors in this upward trend of earnings. Consolidated net income was $81.1 million or $1.17 per share in 1997, down from $85.3 million or $1.23 per share in 1996 after a special charge of $28.9 million or $.42 per share after-tax relating to restructuring costs and asset write downs. This decline in earnings reflects the impact of significantly lower average selling prices for linerboard and uncoated free sheet, the company's principal paper products, but was substantially mitigated by improvements in manufacturing cost efficiencies and better volume and mix. Income from Operations (million of dollars) 1995 $841 1996* $253 1996 $257 *1996 includes $47 million special charge Operations in 1997 benefited from the profit enhancement plan announced at the end of 1996. This two year program has the objective of adding $100 million to pre-tax earnings through product mix enhancements, cost reductions, and business process improvements. At year-end 1997, progress on this program was well ahead of schedule. A portion of the cost reduction plan includes a targeted job elimination of 400 positions and, by year-end, 65% of this goal was achieved. Production cost efficiencies represent another element of the plan. Substantial operating cost savings were recognized within the company's production facilities throughout 1997. Paper product shipments in 1997 reached a record level, 3.7 million tons, 6% above prior year shipments, reflecting the improvement in customer demand and less mill downtime. Consolidated sales in 1997 were also a record $4.5 billion, 12% over 1996. Excluding the Alling & Cory Company, a paper distribution business acquired in August 1996, sales were up slightly. The increases in cost of products sold and selling, general and administrative expenses in 1997 reflect, in large part, the full year's effect of the Alling and Cory acquisition. In the fourth quarter of 1997, financial market concerns increased relative to the weakness of Asian economies. The company exported approximately 163,000 tons of linerboard into this region during 1997. Company shipments did not decrease appreciably in the fourth quarter. In addition, the company has not seen significant deterioration in sales activity in 1998. In 1996, consolidated net income was $85.3 million or $1.23 per share, after a special charge relating to restructuring costs and asset write downs. Before the special charge, 1996's net income was $114.2 million or $1.65 per share which was significantly lower than the all-time record reported in 1995 of $451.1 million or $6.45 per share. Operating results and other financial information for the company's principal business segments are presented on page 40. A discussion of the results of these segments follows. Paper and Paperboard Paper and Paperboard Operating Profit (millions of dollars) 1995 $750 1996 $176 1997 $145 The principal operations in this segment are two kraft paper and board mills, two bleached paper and board mills, and woodlands operations which support these mills as well as the company's wood products operation. Almost one-half of the company's 1997 sales were generated by this segment. Operating income was $145 million in 1997, compared to $176 million in 1996 and $750 million in 1995. The two year decline in operating income from 1995 reflected sharply lower demand in the linerboard and uncoated free sheet markets. Higher than normal inventory levels, particularly in uncoated free sheet, were a major factor in the decline. By mid 1997, selling prices in these markets began to increase and by year-end were well above end of year 1996 levels. Sales for the segment were $2.0 billion, level with 1996, and down from $2.6 billion in 1995. Kraft Paper & Board: The company is the fifth largest producer of linerboard within the United States. Operating income from the two kraft mills declined in 1997. Domestic and export linerboard prices averaged 14% and 4% below 1996. Pricing began to recover at the beginning of the third quarter. Year-end selling prices in the domestic markets were almost 30% above their mid-year low. Customer shipments increased 18% and 39%, in the domestic and export markets, respectively, year to year. Operating rates exceeded 100% for both mills during 1997; record production was achieved at the Savannah mill, for the first time exceeding one million tons. Also, --- 23 Financial Review cost containment initiatives were successful in achieving improvement in direct manufacturing costs per ton. Operating profit in 1996 declined significantly compared with 1995, primarily due to lower average selling prices. Domestic and export linerboard prices averaged 29% and 33% below 1995, respectively. Further contributing to the decrease in operating profit for 1996 was a 7% decline in linerboard shipments from 1995's level, and a slight increase in variable and fixed costs. Bleached Paper and Board: Despite record shipments of 1.4 million tons, operating profits in 1997 decreased slightly compared with 1996, primarily due to lower average prices in the uncoated free sheet market. Average selling prices of uncoated free sheet decreased by 4% compared to 1996. Offsetting the weakness in selling prices for the year was a 3% increase in total shipments over 1996, in addition to lower manufacturing costs. Operating rates at both bleached paper and board mills improved over the prior year. The Franklin mill set a new production record in 1997, exceeding the previous record by 6%. Operating profit decreased in 1996 compared with 1995, as the decline in selling prices, which began during the fourth quarter of 1995, continued throughout 1996. Average selling prices of uncoated business papers were approximately 25% less in 1996 compared with 1995. Total shipments increased by 8% over 1995, partially offsetting the effect of reduced selling prices. Packaging Chart Omitted: Packaging Operating Profit (millions of dollars) 1995 $51 1996 $45 1997 $36 The Packaging segment includes the corrugated container, flexible packaging and folding carton businesses. Packaging products are produced at 41 locations in the U.S. and 9 locations overseas. Although 1997 shipments for these products increased modestly over last year, prices in the corrugated container markets declined significantly throughout the year. Segment sales were $1.3 billion, down slightly from $1.4 billion in 1996 and $1.5 billion in 1995. Operating profit declined to $36 million in 1997, from $45 million in 1996 and $51 million in 1995, which was a record performance for the segment. The Container Division is the largest unit in this segment, operating 28 plants in the domestic market. Primary products include bulk and triplewall containers, graphics packaging and display items, and solid fiber containers. Despite a modest increase in shipments, operating profit declined in 1997. This reflects lower gross profit margins, despite improved production and stable converting expenses. Segment results in 1997 include a gain relating to the sale of the Denver, Colorado container plant as an ongoing business. Offsetting a substantial portion of the gain was the write down of certain non-performing assets. Revenues for the company's International Packaging group, which manufactures corrugated containers overseas, decreased by 12% in 1997, compared with a 5% increase in 1996. Despite improved volume, operating profit declined in 1997, primarily as a result of a 16% decline in selling prices, partially offset by reduced manufacturing costs. Local market conditions varied by country. The Flexible Packaging Division is the second largest operating unit in this segment, producing a broad variety of industrial and consumer bags, polyethylene film and other non-rigid packaging at 10 plants in the U.S. Operating profits declined in 1997, despite a 4% increase in sales over 1996. Although total shipments for 1997 increased 5% over 1996, lower average selling prices and higher fixed costs more than offset the increase. The company's Folding Carton Division operates three plants, which produce consumer products packaging with high quality graphics, principally for the cosmetics and pharmaceutical industries. Although sales volume was level year to year, operating profits decreased from 1996, primarily due to eroding margins and higher operating costs. Wood Products Chart Omitted: Wood Products Operating Profit (millions of dollars) 1995 $33 1996 $43 1997 $60 The Wood Products segment consists of lumber, plywood and particleboard operations. Segment revenue increased by 16% compared with 1996, and operating profit surged 39% to $60 million in 1997. This increase in profits is largely the result of an improvement in overall market conditions in the lumber business, with prices and volume increasing by 15% and 7%, respectively, during 1997. Lumber operations posted both record profits and production in 1997. Particleboard and plywood prices remained level with 1996, while volume increased 2% over 1996 levels. In 1996, operating profits increased by 33% compared with 1995, primarily attributable to a 4% increase in lumber prices and a 3% increase in volume. The favorable lumber operations, coupled with increased particleboard shipments, more than offset lower prices for plywood and particleboard. - --- 24 Chemical Chart Omitted: Chemical Operating Profit (millions of dollars) 1995 $75 1996 $67 1997 $74 Net sales for the Chemical segment were $759 million in 1997, an 8% increase over 1996 and 14% above 1995. Operating profit for this segment was $74 million, up from the $67 million reported in 1996 and down slightly from the $75 million in 1995. Bush Boake Allen, the largest operating unit in this segment, conducts operations on six continents and has locations in 39 countries worldwide. Union Camp is a majority owner of this global business with a 68% holding. BBA supplies flavors and fragrances for use in foods, beverages, cosmetics and toiletries. Sales were $491 million in 1997, up from $449 million in 1996, and $425 million in 1995. Operating profit was $53 million in 1997, a 13% increase over $47 million in 1996, and a 6% increase over $50 million in 1995. The growth in 1997 resulted from improved performance in both flavors and fragrances and chemicals operations. The company's Chemical Products Division, with facilities in the United States and United Kingdom, upgrades papermaking by-products and other raw materials into a wide range of specialized chemicals, primarily for use in inks, coatings and adhesives. Operating profit in 1997 increased by 3%, although the cost of crude tall oil, a primary raw material, increased by 6%. The division benefited from increased sales in its domestic and international markets and the continued implementation of efficiency enhancing programs. The division's performance for 1997 was largely driven by an expanded presence in international markets. Although results from the division's U.K. operations were somewhat hampered by a strengthening of the pound sterling, higher volumes and throughput enabled the operation to improve its results from 1996. Shipments increased by 14% during 1997. In 1996, operating profit declined by 18% from 1995. Interest Expense Net interest expense for 1997 was $117 million, compared to $112 million in 1996 and $114 million in 1995. The increase in interest expense for 1997 was the result of higher outstanding debt, in addition to slightly higher short-term interest rates, offset partially by an increase in capitalized interest. The decrease in interest expense in 1996 from the prior year was due to lower short-term interest rates which more than offset an increase in outstanding debt and a lower level of capitalized interest. Other (Income) Expense-Net In 1997, other income was $4 million, compared with $11 million in 1996 and $3 million in 1995. Other income for 1996 included $6.1 million related to other asset disposals. Financial Position, Liquidity and Capital Resources Chart Omitted: Capital Structure (millions of dollars) 1995 1996 1997 Shareholders' Equity $2,122 $2,094 $2,036 Deferred Income Taxes $ 710 $ 723 $ 745 Long-Term Debt $1,152 $1,252 $1,367 Chart Omitted: Cash Provided by Operations (millions of dollars) 1995 $759 1996 $503 1997 $381 The company's financial condition remains strong. Net working capital (the excess of current assets over current liabilities) was $409 million at year-end 1997, an increase of $55 million from the end of 1996. The increase was primarily attributable to higher trade receivables which resulted from higher sales and the impact of new businesses. The company's current ratio was 1.5 for both 1997 and 1996. The interest coverage ratio for 1997 was 2.0 compared to 2.2 for 1996. Stockholders' equity decreased by $58 million to $2.0 billion at year-end 1997 or $29.39 per share compared to $30.25 per share at the end of 1996. Internally generated cash flow has been and will remain a primary source of capital to fund the company's growth. Cash flow from operations was $381 million in 1997, $503 million in 1996 and $759 million in 1995. The decline in 1997 was attributable to increases in working capital items, primarily trade receivables. Cash used for investment activities was down $105 million in 1997, primarily the result of a lower level of capital spending. Cash used for financing activities in 1997 was $60 million compared to $55 million in the prior year. This reflects a net increase in total debt of $80 million offset by lower level of common stock repurchases. During the fourth quarter, the company issued $150 million of 6 1/2% 10-year notes, which was used to replace $57 million of expiring debt with higher interest rates and reduce the level of short-term borrowing. The ratio of long-term debt to total capital employed (the sum of long-term debt, deferred taxes and stockholders' equity) was 33.0% at December 31, 1997 compared with 30.8% at year-end 1996. Total debt to total capital for the current year increased to 36.8% compared with 35.3% at the end of 1996. --- 25 Financial Review Capital Expenditures Capital spending totaled $337 million in 1997 compared with $386 million in 1996 and $267 million in 1995. Included in capital expenditures for 1997 is paper mill spending of $152 million. This includes $34 million to complete the installation of a $70 million turbine generator and heat recovery steam generator at the Franklin, Virginia mill and $17 million of a $27 million turbine generator at the Savannah, Georgia mill. Chart Omitted: Capital Expenditures (millions of dollars) 1995 $267 1996 $386 1997 $337 Also included is $13 million in spending for a sheet finishing facility in Franklin, Virginia. Investment at domestic and international packaging plants was $42 million including a joint venture corrugated container plant in China. Chemical sector spending, including Bush Boake Allen, totaled $57 million. Spending at Wood Products facilities was $34 million which included $26 million of a $45 million laminated veneer lumber production facility at Thorsby, Alabama, which is scheduled for start up in mid 1998. Expenditures related to the company's timberlands totaled $36 million.
($ in millions) 1997 1996 1995 - ------------------------------------------------------------------ Plant and Equipment (excludes acquisitions): Expansion & Cost Reduction $145 $139 $137 Replacement & Other 146 148 88 Capitalized Interest 10 4 9 Timberlands (acquisition and regeneration) 36 95 33 - ----------------------------------------------------------------- Total $337 $386 $267 =================================================================
At year-end 1997, purchase commitments related to capital projects in-progress were approximately $59 million. Capital spending in 1998 is expected to be about $300 million. Acquisitions and Dispositions During 1997, Union Camp made three acquisitions. In October, the company acquired the outstanding shares of Phoenix Display and Packaging Corporation, a leading merchandising and point-of-purchase display company based in New Jersey. This acquisition builds on the company's national display business. In June, Alling and Cory, the company's paper distribution business, acquired the Antietam Paper Company. The acquisition strengthens Alling and Cory's position in Maryland and adds warehouse operations in Virginia. In March, the company acquired a 75% interest in Puntapel, S.A., a multiwall plant located in San Luis, Argentina. This acquisition positions the company into a high potential international packaging market. The cost of these acquisitions was $20 million in the aggregate. Also in October 1997, the company sold its Denver, Colorado container plant. Net sales for the Denver operation in 1997 were $19 million through the month of sale. In March, the Denton, Texas multiwall plant was closed and subsequently sold. In August 1997, the company contributed 25 thousand acres of timberlands valued at $30.7 million for a 50% equity investment in Forestmax LLC, which has as its primary assets timberland holdings. The company will recognize a gain of $27 million over a future period on the basis of timber cut. In January 1996, the company acquired the operating assets and assumed certain liabilities of O'Grady Containers, Inc., a graphics oriented, direct print, sheet plant in Fort Worth, Texas. Later in the first quarter, the company invested in a 50% interest in a corrugated container operation in Turkey. The total cost of these purchases was $34 million. In August 1996, the company acquired the outstanding shares of The Alling & Cory Company for $88.5 million, consisting of 1.7 million shares of company common stock and $5.4 million cash. Alling and Cory distributes communications and printing papers, industrial packaging and business products. The company sold two corrugated container plants in the second half of 1996. The divestiture of these two plants did not have a significant impact on the company's operations. Dividends and Stock Repurchases Cash dividends paid in 1997 were $125.1 million or $1.80 per share compared with $124.7 million or $1.80 per share in 1996 and $116.1 million or $1.66 per share in 1995. Stockholders' dividends are paid quarterly. The dividend rate was raised by 15% in two increments during 1995. In the second quarter of 1995, the Board of Directors authorized the repurchase of up to five million shares of the company's common stock. During 1997, 687,600 shares were repurchased. Share repurchases in 1996 and 1995 totaled 2,865,900. The total cost of these repurchases was $183 million. Environmental Matters The company invested approximately $31 million in pollution control facilities in 1997. Over the past five years, the company has invested approximately $130 million in such facilities, which is about 8% of total capital spending. In 1997, the company recorded expenses of $9 million for study, testing and remediation in compliance with environmental regulations. - --- 26 Regulations known as the Cluster Rule have been adopted by the U.S. Environmental Protection Agency. As applicable to Union Camp, these regulations establish various compliance completion dates which fall within the 2001-2006 time frame. Preliminary assessment by the company indicates the capital cost required to achieve compliance will be in the range of $125 to $150 million. Compliance involves various initiatives with different completion dates spread over a six year period. Some degree of flexibility exists with respect to the timing of required capital spending. However, the company expects a majority of this spending will be completed by 2001. The incremental operating cost is estimated to be immaterial. The company believes compliance with these rules will not adversely affect its competitive position since these regulations also apply in varying degrees to its domestic competitors. Accouting Matters The FASB recently issued Statement of Financial Accounting Standards (SFAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement establishes standards for the reporting of financial information relating to operating segments for both interim and annual periods. In addition, the FASB also issued SFAS No. 130, "Reporting Comprehensive Income." This statement establishes standards for the reporting and display of comprehensive income in the company's financial statements and footnotes. These statements, which will be adopted by the company in 1998, affect financial statement presentation and disclosure but will not have an impact on the company's consolidated financial position or results of operations. Year 2000 The company is currently in the process of evaluating its operations to ensure that its computer systems and process control equipment are "Year 2000" compliant. Management does not expect the financial impact of necessary actions to be material to the company's financial position or results of operations in any period. While the company believes all necessary work will be completed in a timely fashion, there can be no guarantee that all systems will be compliant by the year 2000 or that the systems of other companies on which the company relies will be converted within the same timeframe. Statements in this report that are not historical are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially. Such risks and uncertainties include the effect of general economic conditions, fluctuations in supply and demand for the company's products including exports and potential imports, paper industry production capacity, operating rates, competitive pricing pressures, and whether capital and restructuring projects are successfully completed. The company's goal of enhancing its earnings power during the next 12 months is subject to risks and uncertainties that planned product mix improvements are not implemented, and that cost reductions expected to result from investing in information technology, work flow redesign, shared service activities and other activities do not materialize. The company's assessment of the effects of complying with the U.S. Environmental Protection Agency's Cluster Rule is subject to risks and uncertainties regarding the amount the company will be required to expend vis-a-vis its competitors and the effect of timing differences in the rate such required expenditures are made. Quarterly Information
($ in thousands, except share and per share) - ----------------------------------------------------------------------------------------------------------------------------- Stock Price* Gross Net Basic Earnings Diluted Earnings Dividends ------------ Net Sales Profit Income(Loss) Per Share Per Share Per Share High Low - ----------------------------------------------------------------------------------------------------------------------------- 1997 Fourth Quarter $1,187,143 $283,841 $33,282 $ 0.48 $ 0.47 $0.45 $64 9/16 $49 3/4 Third Quarter 1,126,902 266,707 27,559 0.40 0.40 0.45 63 1/8 50 1/4 Second Quarter 1,105,591 251,809 10,611 0.15 0.15 0.45 54 7/8 45 1/8 First Quarter 1,057,125 232,034 9,618 0.14 0.14 0.45 52 1/4 46 7/8 - ----------------------------------------------------------------------------------------------------------------------------- 1996 Fourth Quarter $1,083,584 $157,014 $(5,687) $(0.09) $(0.09) $0.45 $50 5/8 $46 7/8 Third Quarter 1,017,310 222,814 14,353 0.21 0.21 0.45 51 1/2 46 1/4 Second Quarter 934,048 214,397 18,139 0.26 0.26 0.45 55 3/8 48 3/4 First Quarter 978,255 286,791 58,503 0.85 0.85 0.45 52 3/8 44 7/8 =============================================================================================================================
1996 has been restated to conform with the 1997 presentation. Fourth quarter 1996 includes a special charge relating to restructuring costs and asset write downs which reduces income from operations by $46.9 million pre-tax and after-tax net income by $28.9 million or $.42 per share. * The company's common stock is listed on the New York Stock Exchange and the Pacific Stock Exchange. The number of stockholders of record at December 31, 1997 was 7,760. --- 27 Report of Independent Accountants To the Stockholders and Board of Directors of Union Camp Corporation In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of income and of cash flows present fairly, in all material respects, the financial position of Union Camp Corporation and its subsidiaries at December 31, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Morristown, New Jersey February 5, 1998 - --- 28 Consolidated Income
($ in thousands, except per share) For The Years Ended December 31, 1997 1996 1995 - ------------------------------------------------------------------------------------------------------------ Net sales $ 4,476,761 $ 4,013,197 $ 4,211,709 Costs and other charges: Costs of products sold 3,399,559 2,965,149 2,680,938 Selling and administrative expenses 509,372 450,117 401,644 Depreciation, amortization and cost of company timber harvested 310,618 298,457 287,738 Special charge -- 46,935 -- - ------------------------------------------------------------------------------------------------------------ Income from operations 257,212 252,539 841,389 - ------------------------------------------------------------------------------------------------------------ Interest expense, net of capitalized interest 117,290 112,286 113,705 Other (income) expense--net (3,888) (10,792) (3,173) - ------------------------------------------------------------------------------------------------------------- Income before income taxes and minority interest 143,810 151,045 730,857 - ------------------------------------------------------------------------------------------------------------- Income taxes 51,804 55,250 268,895 - ------------------------------------------------------------------------------------------------------------- Minority interest, net of tax 10,936 10,487 10,889 - ------------------------------------------------------------------------------------------------------------ Net income $ 81,070 $ 85,308 $ 451,073 - ------------------------------------------------------------------------------------------------------------- Earnings per share: Basic $ 1.17 $ 1.23 $ 6.45 Diluted $ 1.16 $ 1.23 $ 6.39 =============================================================================================================
See the accompanying notes to consolidated financial statements. --- 29 Consolidated Balance Sheet
($ in thousands) December 31, 1997 1996 - ------------------------------------------------------------------------------------------------- Assets Current Assets Cash and cash equivalents $ 34,878 $ 44,917 Receivables-net 638,130 544,320 Inventories 495,313 496,433 Other 43,256 48,440 - ------------------------------------------------------------------------------------------------- 1,211,577 1,134,110 - ------------------------------------------------------------------------------------------------- Property Plant and equipment, at cost 6,800,477 6,562,465 Less: accumulated depreciation 3,404,918 3,161,450 - ------------------------------------------------------------------------------------------------- 3,395,559 3,401,015 364,226 351,334 - ------------------------------------------------------------------------------------------------- Timberlands, less cost of company timber harvested 3,759,785 3,752,349 - ------------------------------------------------------------------------------------------------- Other Assets 270,339 209,848 - ------------------------------------------------------------------------------------------------- Total Assets $ 5,241,701 $ 5,096,307 - ------------------------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Current Liabilities Current installments of long-term debt $ 40,439 $ 95,840 Notes payable 212,900 185,614 Accounts payable 298,641 264,064 Other accrued liabilities 212,973 201,319 Income and other taxes 38,065 33,032 - ------------------------------------------------------------------------------------------------- 803,018 779,869 - ------------------------------------------------------------------------------------------------- Long-Term Debt 1,367,450 1,252,475 - ------------------------------------------------------------------------------------------------- Deferred Income Taxes 744,677 723,431 - ------------------------------------------------------------------------------------------------- Other Liabilities and Minority Interest 290,838 246,938 - ------------------------------------------------------------------------------------------------- Stockholders' Equity Common stock-par value $1.00 per share 69,264 69,217 Capital in excess of par value 42,820 41,853 Other equity adjustments (20,989) (6,080) Retained earnings 1,944,623 1,988,604 - ------------------------------------------------------------------------------------------------- Shares outstanding, 1997--69,264,160; 1996--69,217,119 Stockholders' Equity--Net 2,035,718 2,093,594 - ------------------------------------------------------------------------------------------------- Total Liabilities and Stockholders' Equity $ 5,241,701 $ 5,096,307 =================================================================================================
See the accompanying notes to consolidated financial statements. - --- 30 Consolidated Statement of Cash Flows
($ in thousands) For The Years Ended December 31, 1997 1996 1995 - --------------------------------------------------------------------------------------------------------------- Cash (Used For) Provided By Operations: Net income $ 81,070 $ 85,308 $ 451,073 Adjustments to reconcile net income to cash provided by operations: Depreciation, amortization and cost of company timber harvested 310,618 298,457 287,738 Deferred income taxes 17,858 7,877 105,899 Special charge -- 46,935 -- Other 24,807 17,511 18,885 Changes in operational assets and liabilities: Receivables (89,489) 43,963 (23,000) Inventories 1,200 13,139 (55,325) Other assets 9,139 1,511 (3,637) Accounts payable, taxes and other liabilities 25,913 (11,556) (22,753) - --------------------------------------------------------------------------------------------------------------- Cash Provided By Operations 381,116 503,145 758,880 - --------------------------------------------------------------------------------------------------------------- Cash (Used For) Provided By Investment Activities: Capital expenditures: Plant and equipment (301,517) (291,345) (233,444) Timberlands (35,709) (95,098) (33,355) - ---------------------------------------------------------------------------------------------------------------- (337,226) (386,443) (266,799) Acquisitions (13,890) (49,452) (7,115) Sale of businesses-net -- 5,318 36,133 Sale of assets 9,518 22,009 9,822 Other 10,914 (27,093) (17,348) - --------------------------------------------------------------------------------------------------------------- Cash Used For Investment Activities (330,684) (435,661) (245,307) - --------------------------------------------------------------------------------------------------------------- Cash (Used For) Provided By Financing Activities: Issuance of long-term debt 160,000 150,000 22,625 Repayments of long-term debt (108,172) (48,954) (69,338) Change in short-term notes payable 28,211 52,156 (279,999) Proceeds from issuance of common stock 22,105 3,377 6,042 Common stock repurchases (36,864) (86,499) (59,614) Dividends paid (125,051) (124,718) (116,132) - --------------------------------------------------------------------------------------------------------------- Cash Used For Financing Activities (59,771) (54,638) (496,416) - --------------------------------------------------------------------------------------------------------------- Effect of exchange rate changes on cash (700) 1,739 (81) - --------------------------------------------------------------------------------------------------------------- Increase (decrease) in cash and cash equivalents (10,039) 14,585 17,076 Balance at beginning of year 44,917 30,332 13,256 - --------------------------------------------------------------------------------------------------------------- Balance at end of year $ 34,878 $ 44,917 $ 30,332 ===============================================================================================================
See the accompanying notes to consolidated financial statements. --- 31 Notes to Consolidated Financial Statements ($ in thousands, except per share) 1 Significant Accounting Policies Principles of Consolidation and Preparation of Financial Statements: The consolidated financial statements present the operating results and the financial position of the company and all of its subsidiaries. All significant intercompany transactions are eliminated. In accordance with generally accepted accounting principles, the preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of some assets and liabilities and, in some instances, the reported amounts of revenues and expenses during the reporting period. Cash and Cash Equivalents: Cash and cash equivalents include all highly liquid investment instruments with an original maturity of three months or less. Inventories: Inventories are stated at the lower of cost or market and include the cost of materials, labor and manufacturing overhead. Finished goods and raw materials of domestic operations are valued principally at last in, first out (LIFO) cost. Supplies and all inventories of foreign operations are valued at first in, first out (FIFO) or average cost. Property and Depreciation: Plant and equipment is recorded at cost, less accumulated depreciation. Upon sale or retirement, the asset cost and related depreciation are removed from the balance sheet and the resulting gain or loss is included in income. Depreciation is principally calculated on a straight-line basis with lives for buildings from 15 to 33 years and for machinery and equipment from 10 to 20 years. For major expansion projects, the company uses the units-of-production depreciation method until design level production is reasonably sustained. Accelerated depreciation methods are used for tax purposes. The cost of company timber harvested is charged to income as timber is cut. The charge to income is the product of the volume of timber cut multiplied by annually developed unit cost rates. Goodwill: The excess of the cost over the fair value of net assets of acquired businesses is recorded as goodwill and is amortized on a straight-line basis over appropriate periods not to exceed 40 years. The company reviews the goodwill recoverability period on a regular basis. Research and Development Costs: Research and development costs are expensed as incurred. These expenditures totaled $57.3 million in 1997, $55.9 million in 1996, and $55.4 million in 1995. Capitalized Interest: Interest is capitalized on major capital expenditures during the period of construction. Total interest costs incurred and amounts capitalized were:
1997 1996 1995 - -------------------------------------------------------------- Total interest $126,978 $116,748 $122,572 Interest capitalized (9,688) (4,462) (8,867) - -------------------------------------------------------------- Net interest expense $117,290 $112,286 $113,705 - -------------------------------------------------------------- - --------------------------------------------------------------
Stock-Based Compensation: In accordance with Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation," the company has elected to continue to account for its employee stock option plans in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and to disclose supplementally the pro forma effect of accounting for these plans as if the provisions of SFAS No. 123 had been adopted. (See also Note 10.) Accounting Standards: In June 1997, the Financial Accounting Standards Board (FASB) issued SFAS No. 130, "Reporting Comprehensive Income." This statement establishes standards for the reporting and display of comprehensive income and its components in the company's financial statements. Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of a Business and Related Information." This statement establishes revised standards for the reporting of financial information about a company's operating segments for both interim and annual reporting. These statements, which will be adopted by the company in 1998, affect financial statement presentation and disclosure but will not have an impact on the company's consolidated financial position or results of operations. Environmental Liabilities: Environmental expenditures that improve the condition of the property are generally capitalized, all other environmental expenditures are expensed as incurred. Liabilities are recorded when remedial efforts are probable and the costs can be reasonably estimated. The timing of these accruals generally coincides with the completion of a feasibility study or the company's commitment to a formal plan of action. Income Taxes: Deferred income taxes are recorded using enacted tax rates in effect for the year temporary differences are expected to reverse. Federal and state income taxes are not accrued on the cumulative undistributed earnings of foreign subsidiaries because the earnings have been reinvested in the businesses of those companies. As of December 31, 1997, the total of all such undistributed earnings amounted to $202.4 million. It is not practical to estimate the amount of tax that might be payable on the distribution of the foreign earnings. The company has, as - --- 32 required, provided for tax potentially payable on the distribution of its share of $85.7 million, the undistributed earnings of Bush Boake Allen Inc. (BBA) and subsidiaries earned subsequent to 1992. (See also Note 9.) Foreign Currency Translation: The assets and liabilities of the company's foreign subsidiaries and affiliates are translated into U.S. dollars at year-end exchange rates, while income and expense accounts are translated at average annual rates. The primary factor used to determine the functional currencies of the company's foreign subsidiaries is the local currency cash flows resulting from manufacturing, sales and financing activities. Gains and losses resulting from foreign currency translation are reflected in a separate component of Stockholders' Equity entitled Other Equity Adjustments. The effect of these cumulative adjustments was to reduce equity by $19.3 million at December 31, 1997 and $4.2 million at December 31, 1996. Derivatives: The company hedges foreign currency transactions by entering into forward foreign exchange contracts. Gains and losses associated with the forward contracts are matched with the offsetting gains and losses recorded for exchange rate fluctuations on the underlying assets and liabilities. Gains and losses on interest rate swap agreements are charged or credited to interest expense over the life of the agreement. (See also Note 8.) Revenue Recognition: The company recognizes revenue upon the passage of title, which is generally at the time of shipment. Earnings Per Share: In accordance with the provisions of SFAS No. 128, "Earnings Per Share," the company is presenting net income per share on a basic and diluted basis. Basic earnings per share is computed using the weighted average number of shares outstanding during the period. Diluted earnings per share is computed using the weighted average number of shares outstanding adjusted for dilutive common stock equivalents. The weighted average number of shares outstanding for basic earnings per share were 69,439,150 for 1997, 69,220,157 for 1996 and 69,940,397 for 1995. For diluted earnings per share, these amounts increased by 491,292, 385,379 and 629,140 in 1997, 1996 and 1995, respectively, due to potentially dilutive common stock equivalents issuable under the company's stock option plan. In 1997 and 1996, 949,700 and 28,000 potential common shares were excluded from the computation of diluted earnings per share because the effect would have been antidilutive. There were no antidilutive common stock equivalents in 1995. Reclassifications: Certain amounts have been reclassified for 1995 and 1996 to conform with the 1997 presentation. 2 Special Charge During the fourth quarter of 1996, the company recorded a $46.9 million pre-tax charge ($28.9 million after-tax) to operating income. Included in the charge was $21.0 million for employee severance costs, $18.4 million for asset write downs, and $7.5 million for other expenses. The asset write downs were taken to recognize equipment rendered obsolete as a result of replacement equipment and to reflect the fair value of certain investment properties. 3 Other (Income) Expense-Net The year 1996 included a $6.1 million gain related to other asset disposals. 4 Acquisitions In October 1997, the company acquired the outstanding shares of Phoenix Display and Packaging Corporation, a leading merchandising and point-of-purchase display company. In June, Alling and Cory, the company's paper distribution business, acquired the Antietam Paper Company. In March, the company acquired a 75% interest in Puntapel, S.A., a multiwall plant located in San Luis, Argentina. The cost of these acquisitions was $20 million in the aggregate. In August 1997, the company contributed 25 thousand acres of timberlands valued at $30.7 million for a 50% equity investment in Forestmax LLC, which has as its primary assets timberland holdings. The company will recognize a gain of $27 million over a future period on the basis of timber cut. In the first quarter of 1996, the company purchased the operating assets and assumed certain liabilities of O'Grady Containers, Inc. In addition, the company acquired a 50% interest in a corrugated container joint venture in Turkey. The total cost of these purchases was $34 million. On August 2, 1996, the company acquired The Alling & Cory Company (Alling and Cory), a paper distribution business, for a consideration totaling $88.5 million, consisting of 1.7 million shares of company common stock and $5.4 million cash. These acquisitions were accounted for under the purchase method and, accordingly, the net assets and results of operations have been included in the consolidated financial statements since the date of acquisition. The excess of purchase price over the estimated fair values of the net assets acquired has been treated as goodwill. The pro forma effect of these acquisitions is not material. --- 33 Notes to Consolidated Financial Statements ($ in thousands, except per share) 5 Supplemental Balance Sheet Information
December 31, 1997 1996 - ---------------------------------------------------------------- Receivables Trade $598,105 $514,799 Other 57,810 46,791 - ---------------------------------------------------------------- 655,915 561,590 Less estimated doubtful accounts, discounts and allowances 17,785 17,270 - ---------------------------------------------------------------- Net $638,130 $544,320 ================================================================ Inventories Finished goods $275,112 $270,123 Raw materials 109,352 110,569 Supplies 110,849 115,741 - ---------------------------------------------------------------- Total $495,313 $496,433 ================================================================
At December 31, 1997 and 1996, finished goods and raw materials totaling $240.1 million and $254.6 million, respectively, were valued at LIFO cost. The excess of current cost over LIFO value was $99.0 million and $101.7 million in 1997 and 1996, respectively.
December 31, 1997 1996 - ---------------------------------------------------------------- Other Current Assets Prepayments $ 24,212 $ 22,745 Short-term timber leases 19,044 19,045 Assets held for resale -- 6,650 - ---------------------------------------------------------------- Total $ 43,256 $ 48,440 ================================================================ Plant and Equipment, at cost Land $ 36,429 $ 37,151 Buildings and improvements 568,506 561,078 Machinery and equipment 5,974,738 5,777,737 Construction-in-progress 220,804 186,499 - ----------------------------------------------------------------- Total $6,800,477 $6,562,465 =================================================================
At December 31, 1997, property (principally machinery and equipment) having an original cost of approximately $388 million and a net book value of $152 million is pledged against lease obligations and notes payable to industrial development authorities (see also Note 6). These obligations and notes payable have outstanding long-term balances totaling approximately $334 million.
December 31, 1997 1996 - ----------------------------------------------------------------- Other Assets Goodwill $ 82,783 $ 72,646 Investments in affiliates 76,019 46,015 Other intangibles 44,383 30,096 Pension assets 42,593 28,738 Other 24,561 32,353 - ----------------------------------------------------------------- Total $270,339 $209,848 =================================================================
Short-Term Debt: Included in Notes Payable at December 31, 1997 and 1996 were $112.8 million and $114.0 million, respectively, of commercial paper borrowings. The weighted average interest rate on these borrowings for the years 1997 and 1996 were 5.76% and 5.60%, respectively. The company has short-term revolving credit facilities in numerous countries primarily outside the United States, which provide for aggregate availability of $157 million. At December 31, 1997 and 1996, approximately $92 million and $60 million, respectively, was outstanding and included in short-term borrowings. Related commitment fees are either nominal or zero.
December 31, 1997 1996 - --------------------------------------------------------------------- Other Accrued Liabilities Payrolls $ 72,276 $ 67,892 Interest 29,652 30,758 Special charge reserve 5,647 16,410 Other 105,398 86,259 - --------------------------------------------------------------------- Total $212,973 $201,319 ===================================================================== Other Liabilities and Minority Interest Postretirement and postemployment benefits $130,412 $128,838 Minority interest 102,429 86,507 Minimum pension liability 7,210 3,134 Other 50,787 28,459 - -------------------------------------------------------------------- Total $290,838 $246,938 ====================================================================
6 Long-Term Debt December 31, 1997 1996 - ----------------------------------------------------------------------- Sinking fund debentures: 8 5/8% due 1999-2016 $ 42,674 $ 47,474 10% due 2000-2019 100,000 100,000 9 1/4% due 2002-2021 117,780 117,780 Debentures: 9 1/2% due 2002 100,000 100,000 9 1/4% due 2011 124,800 124,800 8 1/2% due 2022 100,000 100,000 Notes: 7 3/8% due 1999 50,000 50,000 7% due 2006 150,000 150,000 6 1/2% due 2007 150,000 -- Medium-term notes due 1999-2001; 7.75% to 9.54%; weighted average rate 8.61% 53,000 84,000 Industrial Development Revenue Bonds due 2001-2013; 4.0% to 8.0%; weighted average rate 6.14% 36,944 41,575 Pollution Control Revenue Bonds due 1999-2027; 4.7% to 7.45%; weighted average rate 6.58% 297,500 289,005 Other notes due 1999-2004 5,024 5,560 Commercial paper 46,000 46,000 Less unamortized discount (6,272) (3,719) - ------------------------------------------------------------------------- Total $1,367,450 $1,252,475 ========================================================================= - --- 34 The current portion of long-term debt at December 31, 1997 amounted to $40.4 million. Amounts payable in the years 1999 through 2002 are $70.3 million, $31.1 million, $38.1 million and $140.9 million, respectively. At December 31, 1997, $46 million of commercial paper borrowings was classified as long-term debt, since the company has the ability and intent to renew these obligations through the year 2000. The effective interest rate on these borrowings was 5.76%. The company has revolving credit and term loan agreements which provide for unsecured borrowings up to $500 million in the United States through the year 2001. Any borrowings under these agreements would incur interest at the prevailing prime rate or other market rates. Nominal commitment fees are paid on the unused portion. No borrowings were made in 1997 under these agreements. 7 Stockholders' Equity
Capital in Other Common Excess of Retained Equity Stock Par Value Earnings Adjustments - ------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1994 $70,012 $ 87,897 $1,693,073 $(14,661) Net Income -- -- 451,073 -- Cash dividends ($1.66 per share) -- -- (116,132) -- Common stock repurchases (1,152) (58,462) -- -- Issuance of stock for options and award plans 218 8,909 -- (203) Foreign currency translation -- -- -- 1,120 - ------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1995 $69,078 $ 38,344 $2,028,014 $(13,744) Net Income -- -- 85,308 -- Cash dividends ($1.80 per share) -- -- (124,718) -- Common stock repurchases (1,714) (84,785) -- -- Issuance of stock for options and award plans 152 6,964 -- (1,326) Shares issued for business acquisitions 1,701 81,330 -- -- Foreign currency translation -- -- -- 8,990 - ------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1996 $69,217 $ 41,853 $1,988,604 $(6,080) Net Income -- -- 81,070 -- Cash dividends ($1.80 per share) -- -- (125,051) -- Common stock repurchases (688) (36,176) -- -- Issuance of stock for options and award plans 551 25,760 -- 273 Shares issued for business acquisitions 184 11,383 -- -- Foreign currency translation -- -- -- (15,182) - ------------------------------------------------------------------------------------------------------------------------ Balance, December 31, 1997 $69,264 $ 42,820 $1,944,623 $(20,989) ========================================================================================================================
The authorized capital stock of the company at December 31, 1997, 1996 and 1995 consisted of 125,000,000 shares of common stock, $1.00 par value, and 1,000,000 shares of authorized but unissued preferred stock, $1.00 par value. Common stock repurchased is included in the authorized but unissued shares of the company. Shareholder Rights Plan: The company has a Shareholders' Rights Plan pursuant to which preferred stock purchase rights are issued to the common stockholders at the rate of one right for each share of common stock. Each right entitles shareholders to purchase, under certain conditions (i) one one-thousandth of a share of the company's Series A Junior Participating Preferred Stock at an exercise price of $175 or (ii) common stock of the company having a market value of two times the exercise price. Alternatively, the Board of Directors may permit holders to surrender each right in exchange for one share of common stock. The rights will be exercisable only if a person or group acquires 15% or more of the outstanding common stock or announces a tender offer for 15% or more of the common stock. The rights expire February 26, 2006 and may be redeemed for $.001 per right by the Board of Directors prior to the time the rights become exercisable. In addition, if after any person acquires 15% or more of the company's common stock, the company is involved in a merger or other business combination transaction with another person after which its common stock does not remain outstanding, or the company sells 50% or more of its assets or earning power, each right will entitle its holder to purchase, at the then current exercise price, shares of the acquiring company's common stock having a market value equal to two times the purchase price. --- 35 Notes to Consolidated Financial Statements ($ in thousands, except per share) 8 Financial Instruments Fair Value of Financial Instruments: The carrying amounts of certain financial instruments: cash, short-term investments, trade receivables and payables approximate their fair values. The fair value of the company's long-term debt varies with market conditions and is estimated based on quoted market prices for similar financial instruments by obtaining quotes from brokers. At December 31, 1997, the book value of long-term debt was $1.4 billion and the fair value was approximately $1.5 billion. The book value of all other financial instruments approximates their fair value. Derivative Financial Instruments: Derivative instruments are used by the company only to hedge the risk associated with underlying business transactions such as existing floating rate debt and existing foreign currency commitments. Derivatives are not used for trading or speculative purposes. The book value of these derivatives approximates their fair value. At December 31, 1997, the company had outstanding foreign exchange contracts valued at $103.6 million. The purpose of $87.8 million of these contracts is to neutralize foreign currency transaction risk generated by the company's firm foreign currency business commitments resulting from the sale and purchase of products. The change in value of these contracts resulting from changes in the respective foreign currency rates versus the U.S. dollar is accrued monthly and credited or charged to foreign exchange gain or loss. These foreign currency commitment exposures are evaluated on an ongoing basis and the amount of the related foreign currency contracts are adjusted as required to offset the risk associated with the underlying transactions. Cash settlements are executed whenever the contracts are adjusted, which occurs at least monthly. The additional $15.8 million of foreign exchange contracts at December 31, 1997 represent hedges of specific firm commitments for certain capital expenditure and raw material purchase transactions denominated in foreign currencies. The company enters into these contracts, from time to time, to establish with certainty the U.S. dollar amount of the specific firm commitments. All foreign exchange contracts are limited to currencies with established forward markets and to counterparties, which have Moody's credit ratings of A1 or better. As a result, the company considers the credit risk of counterparty default to be minimal. At December 31, 1997, the company had an outstanding interest rate swap agreement, the purpose of which is to convert $32.5 million of floating rate commercial paper to fixed rate debt. The swap agreement is based on a declining principal balance schedule which terminates in April 2000. The differential between fixed and floating rate obligations is accrued as interest rates change and is charged or credited to interest expense over the life of the agreement. Cash settlements are payable semi-annually. The counterparty has a Moody's credit rating of Aa1. 9 Income Taxes The components of income before income taxes and minority interest are as follows:
1997 1996 1995 - ------------------------------------------------------------ Domestic $ 99,071 $ 97,187 $669,487 Foreign 44,739 53,858 61,370 - ------------------------------------------------------------ Total $143,810 $151,045 $730,857 ============================================================
The provision for income taxes is comprised of the following:
1997 1996 1995 - ------------------------------------------------------------ Current: Federal $19,493 $34,313 $124,937 State and local 3,132 3,831 21,880 Foreign 11,321 9,229 16,179 - ------------------------------------------------------------- $33,946 $47,373 $162,996 - ------------------------------------------------------------- Deferred: Federal $13,870 $ 2,094 $ 96,601 State 1,297 (206) 6,477 Foreign 2,691 5,989 2,821 - ------------------------------------------------------------- $17,858 $ 7,877 $105,899 - ------------------------------------------------------------- Total $51,804 $55,250 $268,895 =============================================================
The company follows the provisions of SFAS No. 109, "Accounting for Income Taxes," whereby deferred taxes represent estimated liabilities to be paid or assets to be received in the future and tax rate changes would immediately affect those liabilities or assets. The cumulative deferred tax liability at December 31, 1997 and 1996 was $744.7 million and $723.4 million, respectively. The significant components of these liabilities (assets) are as follows:
December 31, 1997 1996 - ------------------------------------------------------------- Deferred federal taxes: Accelerated depreciation $713,436 $704,912 Alternative minimum tax (45,540) (43,816) Postretirement benefits (44,294) (42,706) Other 26,553 16,601 - -------------------------------------------------------------- Total deferred federal taxes 650,155 634,991 Deferred state taxes 64,467 63,170 Deferred foreign taxes 30,055 25,270 - ------------------------------------------------------------- Total deferred taxes $744,677 $723,431 ============================================================= A detailed analysis of the effective tax rate is as follows: 1997 1996 1995 - ------------------------------------------------------------- Statutory federal tax rate 35.0% 35.0% 35.0% State taxes (net of federal tax impact) 2.4 1.5 2.8 Foreign income taxes (1.2) (2.3) (0.3) Other (0.2) 2.4 (0.7) - ------------------------------------------------------------- Effective rate 36.0% 36.6% 36.8% =============================================================
- --- 36 10 Employee Stock Option Plans Under the stock option plans adopted in 1982 and 1989 (as amended), a maximum of 2,175,000 shares and 5,678,000 shares, respectively, of the company's common stock were made available for the granting of options and stock appreciation rights to officers and other key employees of the company and its subsidiaries at prices not less than 100% of fair market value at the dates of grant. Such options generally become exercisable two years after the date of grant and expire ten years from that date. No further options may be granted under the 1982 plan. At the end of 1997, 230,250 options were available for future grants under the 1989 plan. Under the 1989 plan, 1,135,607 shares may be awarded as restricted stock to selected officers and other key employees of the company and its subsidiaries. Recipients of restricted stock are entitled to receive cash dividends and to vote their respective shares. Restrictions limit the sale or transfer of these shares during a specified period. Common shares issued as restricted stock under this plan were 4,533 shares in 1997, 38,890 shares in 1996 and 11,924 shares in 1995. The weighted average fair value on the date of grant was $48.56 for restricted stock granted in 1997, $49.50 for restricted stock granted in 1996, and $46.88 for restricted stock granted in 1995. Unearned compensation, equivalent to the market price of the restricted shares at date of grant, is included within Stockholders' Equity and is amortized to expense over the five-year restriction period. The following table summarizes activity in the company's stock option plans for 1997, 1996 and 1995. The options outstanding that had related stock appreciation rights attached were 1,067,101 at December 31, 1996, and 1,207,641 at December 31, 1995. In the third quarter of 1997, all outstanding stock appreciation rights previously granted in tandem with nonqualified stock options under the company's management incentive program were relinquished. This did not have a material impact on reported earnings. The related stock options were not affected and remain outstanding.
1997 1996 1995 ------------------------- ------------------------- ------------------------- Weighted Weighted Weighted Average Average Average Shares Exercise Price Shares Exercise Price Shares Exercise Price - ----------------------------------------------------------------------------------------------------------------------- Options outstanding at beginning of year 4,120,426 $44.86 3,582,626 $43.57 3,213,253 $41.67 Granted 949,700 58.84 722,000 49.38 664,400 49.45 Exercised (544,225) 41.08 (96,427) 38.97 (197,637) 36.03 Forfeited (96,065) 35.33 (76,598) 34.24 (78,840) 35.00 Expired -- -- (11,175) 47.90 (18,550) 42.98 - ----------------------------------------------------------------------------------------------------------------------- Options outstanding at end of year 4,429,836 $48.48 4,120,426 $44.86 3,582,626 $43.57 - ----------------------------------------------------------------------------------------------------------------------- Options exercisable at end of year 2,758,136 $44.75 2,741,526 $42.57 2,345,510 $41.55 =======================================================================================================================
For options outstanding as of the end of 1997, the range of exercise prices was $33.69 to $58.84 per share and the weighted average remaining life was 7.1 years. The weighted average fair values of the options granted during 1997, 1996 and 1995 were $12.60, $9.66 and $9.70 per share, respectively. Fair value was determined through use of the Black-Scholes options pricing formula. For options granted in 1997, the risk-free interest rate was 5.70%, the expected life was 7 years, the expected volatility was 19% and expected dividend yield was 3.4%, all calculated on a weighted average basis. For options granted in 1996 and 1995, the risk-free interest rate was 5.74% and 5.47%, respectively, the expected life was 6 years, the expected volatility was 18% and 19%, respectively, and the expected dividend yield was 3.4%, all calculated on a weighted average basis. Total compensation cost recognized in income for stock-based compensation awards was $3.3 million in 1997, $0.7 million in 1996 and $1.3 million in 1995. If the company had elected to adopt the provisions of SFAS No. 123, the pro forma net income and earnings per share would have been $76.7 million or $1.10 per share in 1997 and $83.1 million or $1.20 per share in 1996. The comparable pro forma impact on 1995 net income and earnings per share would be insignificant --- 37 Notes to Consolidated Financial Statements ($ in thousands, except per share) 11 Pension Plans The company and certain foreign subsidiaries have non-contributory defined benefit pension plans covering substantially all of their employees. Benefits are based on years of service and, for salaried employees, final average earnings. The company funds its plans annually based upon a consistently applied formula which amortizes the unfunded liability adjusted for actuarial gains or losses. Assets of the plans are primarily fixed income instruments and publicly traded stocks. The following table sets forth the status of all funded pension plans for 1997 and 1996:
December 31, 1997 December 31, 1996 -------------------------------------------------------------------------------- Domestic Plans Foreign Plans Domestic Plans Foreign Plans -------------------------------------------------------------------------------- Assets in Accumulated Assets in excess of benefits in excess of accumulated excess of accumulated benefits assets benefits - -------------------------------------------------------------------------------------------------------------------------- Actuarial present value of: Vested benefit obligation $ 542,226 $ 250,439 $ 138,797 $ 696,736 $ 122,859 ========================================================================================================================== Accumulated benefit obligation 580,968 264,943 140,249 742,222 123,995 ========================================================================================================================== Projected benefit obligation 685,835 264,943 168,467 821,853 150,340 Plan assets at fair value 695,527 259,474 181,667 859,805 160,213 - -------------------------------------------------------------------------------------------------------------------------- Plan assets greater (less) than projected benefit obligation 9,692 (5,469) 13,200 37,952 9,873 Unrecognized net (gain) loss (11,974) (26,783) 21,303 (61,864) 20,107 Unrecognized prior service cost (2,013) 20,313 (1,351) 10,944 46 Unrecognized transition (asset) obligation 147 4,543 (1,486) 6,257 (2,302) - -------------------------------------------------------------------------------------------------------------------------- Pension (liability) asset recorded on Balance Sheet $ (4,148) $ (7,396) $ 31,666 $ (6,711) $ 27,724 ==========================================================================================================================
The company has certain supplementary domestic pension plans that are not funded. At December 31, 1997 and 1996, the projected benefit obligation for these plans was $32.0 million and $23.0 million of which $25.7 million and $17.4 million represent the accumulated benefit obligation, and $24.2 million and $17.0 million represent the vested benefit obligation, respectively. The accrued pension liability for the unfunded plans recorded on the Balance Sheet at December 31, 1997 and 1996 was $23.8 million and $17.8 million, respectively. The minimum pension liability for these plans recorded on the Balance Sheet at December 31, 1997 and 1996 was $7.2 million and $3.1 million, respectively. The pension expense for all plans included the following components:
1997 1996 1995 - -------------------------------------------------------------------------------- Service cost-benefits earned during the period $ 28,165 $ 28,747 $ 20,643 Interest cost on projected benefit obligations 75,032 68,613 64,548 Actual return on assets (170,551) (137,070) (155,838) Net amortization and deferral 79,602 56,282 90,824 - -------------------------------------------------------------------------------- Total pension expense $ 12,248 $ 16,572 $ 20,177 ================================================================================
The discount rates used to determine the pension benefit obligation for the domestic plans at December 31, 1997 and 1996 were 7.0% and 7.5%, respectively. The discount rates used for the foreign plans were 7.0% and 8.0%, respectively, at December 31, 1997 and 1996. The compensation progression rate for domestic plans was 4.75% for 1997, 1996 and 1995. The expected long-term rate of return on domestic plan assets was 9.5% for each year. The compensation progression rates for the foreign plans were 6.0% for 1997 and 1996 and 7.0% for 1995. The expected long-term rate of return on foreign plan assets was 10.5% for 1997 and 11.5% for 1996 and 1995. In 1996, the company recorded a charge for special termination benefits of approximately $8.2 million, primarily attributable to the elimination of approximately 400 positions in connection with an employee severance program. - --- 38 12 Postretirement Benefits The company has a contributory postretirement health care plan covering primarily its U.S. salaried employees. Employees become eligible for these benefits when they meet minimum age and service requirements. The company funds its plan on a "pay-as-you-go" basis, in an amount equal to the retirees' medical claims paid. The components of the Accumulated Postretirement Benefit Obligation as of December 31, 1997 and 1996 are as follows:
1997 1996 - -------------------------------------------------------------- Retirees $ 84,786 $ 72,632 Fully eligible active plan participants 8,845 6,904 Other active plan participants 51,446 44,558 - --------------------------------------------------------------- 145,077 124,094 Unrecognized net gain (loss) (16,122) 511 Unrecognized prior service cost (2,402) (2,587) - --------------------------------------------------------------- Accrued postretirement benefit obligation $ 126,553 $ 122,018 ===============================================================
The components of the postretirement benefit expense for the years 1997, 1996 and 1995 are as follows:
1997 1996 1995 - ---------------------------------------------------------------------- Service cost-benefits earned during period $ 4,798 $ 5,311 $ 3,801 Interest cost on accumulated benefit obligation 9,458 8,819 7,954 Net amortization and deferral 185 185 (155) - ----------------------------------------------------------------------- Postretirement benefit expense $ 14,441 $ 14,315 $ 11,600 =======================================================================
The discount rates used to determine the accumulated postretirement benefit obligation at December 31, 1997 and 1996 were 7.0% and 7.5%, respectively. For measurement purposes, an 8% increase in the medical cost trend rate was assumed for 1997. This rate decreases incrementally to 5.0% by the year 2003 and will remain at that level thereafter. It is estimated that a 1% increase in the medical cost trend rate would increase the accumulated postretirement benefit obligation as of December 31, 1997 by $17.4 million and the postretirement benefit expense for 1997 by $2.1 million. 13 Supplemental Cash Flow Information Cash paid for income taxes was $29.7 million in 1997, $52.1 million in 1996 and $161.1 million in 1995. Cash paid for interest, net of amounts capitalized, was $118.4 million in 1997, $109.4 million in 1996 and $114.2 million in 1995. The following table summarizes non-cash investing and financing activities related to the company's acquisitions in 1997, 1996 and 1995.
1997 1996 1995 - ------------------------------------------------------------------ Fair value of assets acquired $ 42,085 $235,139 $ 8,345 Less: cash paid 13,890 49,452 7,115 Common stock issued 11,567 83,031 -- - ------------------------------------------------------------------ Liabilities incurred or assumed $ 16,628 $102,656 $ 1,230 ==================================================================
14 Commitments and Contingent Liabilities The company is involved in various legal proceedings and environmental actions. Although the outcome of these matters is subject to many variables and cannot be predicted with any degree of certainty, based upon the company's evaluation of the information presently available, management believes the ultimate resolution of any such legal proceedings and environmental actions will not have a material adverse effect on the company's consolidated financial position. However, it is remotely possible that such legal proceedings and environmental actions could have a material effect on quarterly or annual operating results when they are resolved in future reporting periods. The company has guaranteed loans of up to $20 million made by a financial institution to non-controlled entities. The guarantees have terms of 6 years or less and are either secured by the borrowers' assets and stock or contain contractual rights to obtain possession of stock in the borrower's business. 15 Segment Information Union Camp is a leading manufacturer of paper, packaging, chemicals and wood products serving both U.S. and international markets. The company derives approximately three fourths of its sales from paper and packaging products, such as linerboard, kraft paper, uncoated free sheet, corrugated containers, flexible packaging and folding cartons. The company's chemical business is involved in the manufacture of chemicals used in inks, coatings and adhesives, and through its Bush Boake Allen subsidiary, the manufacture of flavor, fragrance and aroma chemicals. Chemicals comprise about a sixth of Union Camp's sales. The company also manages a woodlands base of about 1.6 million acres, supplying raw materials for its linerboard, packaging and paper making business, as well as for the manufacture of wood products. Operating results and other financial data are presented for the principal business segments of the company for --- 39 Notes to Consolidated Financial Statements ($ in thousands, except per share) the years ended December 31, 1997, 1996 and 1995. Total revenue and operating profit by business segment include both sales to customers, as reported in the company's consolidated income statement, and intersegment sales, which are accounted for at prices charged to customers and eliminated in consolidation. The amount of the elimination of intersegment profit on any product that remains in inventory at the end of the period is determined by changes in quantities of inventory and changes in the margins of profit. Operating profit by business segment is total revenue less operating expenses. In computing operating profit by business segment, none of the following items has been added or deducted: other income, portions of administrative expenses, interest expense, income taxes and unusual items. Identifiable assets by business segment are those assets used in company operations in each segment. Corporate assets are principally cash, intangible assets, deferred charges and assets held for resale. Included within Corporate Items are the company's real estate operation, Branigar, and the company's paper distribution business, Alling and Cory. Since the date of acquisition, August 2, 1996, Alling and Cory had sales to customers of $279 million in 1996 and $694 million in 1997. Its impact on operating profit for 1997 and 1996 was insignificant. Capital expenditures are reported exclusive of acquisitions. Total revenue and operating profit from the company's foreign subsidiaries were $564 million and $51 million in 1997, $538 million and $48 million in 1996, and $504 million and $61 million in 1995. No geographic area outside the United States was material relative to consolidated revenues, operating profits or identifiable assets. Export sales from the United States were $384 million in 1997, $359 million in 1996 and $418 million in 1995.
Paper and Packaging Wood Corporate Paperboard Products Products Chemical Items Consolidated - ----------------------------------------------------------------------------------------------------------------------------------- 1997 Sales to Customers $1,336,685 $1,324,726 $ 326,373 $ 758,607 $ 730,370 $4,476,761 Intersegment Sales 660,367 10,866 114 347 (671,694)* -- - ----------------------------------------------------------------------------------------------------------------------------------- Total Revenue 1,997,052 1,335,592 326,487 758,954 58,676 4,476,761 Operating Profit 144,793 35,857 60,068 74,248 (57,754)** 257,212 Identifiable Assets 3,325,112 774,260 163,081 620,851 358,397 5,241,701 Depreciation, Amortization and Cost of Company Timber Harvested 228,268 40,320 8,891 26,392 6,747 310,618 Capital Expenditures 198,368 41,540 34,589 57,627 5,102 337,226 - ----------------------------------------------------------------------------------------------------------------------------------- 1996 Sales to Customers $1,313,226 $1,402,602 $ 281,467 $ 700,662 $ 315,240 $4,013,197 Intersegment Sales 659,096 9,930 72 -- (669,098)* -- - ----------------------------------------------------------------------------------------------------------------------------------- Total Revenue 1,972,322 1,412,532 281,539 700,662 (353,858) 4,013,197 Operating Profit 175,973 45,448 43,360 66,500 (78,742)** 252,539 Identifiable Assets 3,318,008 702,698 139,040 579,380 357,181 5,096,307 Depreciation, Amortization and Cost of Company Timber Harvested 225,262 38,056 7,209 22,065 5,865 298,457 Capital Expenditures 235,303 60,393 27,110 54,925 8,712 386,443 - ----------------------------------------------------------------------------------------------------------------------------------- 1995 Sales to Customers $1,714,009 $1,515,694 $ 283,594 $ 666,794 $ 31,618 $4,211,709 Intersegment Sales 852,589 11,317 71 150 (864,127)* -- - ----------------------------------------------------------------------------------------------------------------------------------- Total Revenue 2,566,598 1,527,011 283,665 666,944 (832,509) 4,211,709 Operating Profit 750,239 51,437 32,697 74,545 (67,529)** 841,389 Identifiable Assets 3,338,311 719,124 118,118 494,865 167,925 4,838,343 Depreciation, Amortization and Cost of Company Timber Harvested 215,247 35,503 12,012 20,497 4,479 287,738 Capital Expenditures 141,598 55,861 27,775 37,261 4,304 266,799 ====================================================================================================================================
* Elimination of Intersegment Sales. ** Includes intersegment eliminations and unallocated corporate, technology and engineering expenses of $60,482 in 1997, $64,801 in 1996, and $61,491 in 1995. 1996 includes a $46.9 million special charge relating to restructuring costs and asset write downs. If this amount had been allocated to segment operating profits in 1996, Paper and Paperboard operating profits would have been $152.9 million, Packaging operating profits would have been $37.2 million, Wood Products operating profits would have been $43.4 million, Chemical operating profits would have been $64.7 million, and Corporate Items operating loss would have been $45.6 million. - --- 40 Shipments
(Unaudited) 1997 1996 1995 1994 1993 - ------------------------------------------------------------------------------------------------------------------------------ Paper and Board Products--Tons - ------------------------------------------------------------------------------------------------------------------------------ Primary Mill Shipments Kraft Paper and Board 930,109 755,440 823,585 666,378 663,356 Bleached Paper and Board* 1,374,592 1,366,668 1,318,661 1,321,152 1,257,569 - ------------------------------------------------------------------------------------------------------------------------------ Total Mills 2,304,701 2,122,108 2,142,246 1,987,530 1,920,925 - ------------------------------------------------------------------------------------------------------------------------------ Converter Shipments Flexible Packaging 187,643 178,817 182,095 274,695 265,810 Containers 1,172,325 1,161,436 1,150,054 1,180,137 1,088,875 Other 9,807 11,054 10,826 10,242 15,645 - ------------------------------------------------------------------------------------------------------------------------------ Total Converted 1,369,775 1,351,307 1,342,975 1,465,074 1,370,330 - ------------------------------------------------------------------------------------------------------------------------------ Total Paper and Board Products 3,674,476 3,473,415 3,485,221 3,452,604 3,291,255 - ------------------------------------------------------------------------------------------------------------------------------ Wood Products - ------------------------------------------------------------------------------------------------------------------------------ Lumber-M Board Feet 523,429 488,938 476,711 462,978 463,216 Plywood-M Square Feet 203,287 201,653 232,191 226,678 227,235 Particleboard-M Square Feet 109,227 106,155 96,801 100,794 99,724 ==============================================================================================================================
* Years 1997-1993 include 113,727, 101,497, 116,564, 100,574, and 87,454 tons of market pulp, respectively. Paper and Paperboard-Mill Production and Capacity
(Unaudited) 1997 1998 (Thousands of tons) - ------------------------------------------------------------------------------------------------------ Location Production Capacity Principal Products Prattville, AL 984 985 Linerboard Savannah, GA 1,189 1,250 Linerboard; Kraft Paper; Saturating Kraft - ---------------------------------------------------- Kraft Paper and Board 2,173 2,235 - ------------------------------------------------------------------------------------------------------ Eastover, SC 727 750 Printing and Writing Papers; Market Pulp Franklin, VA 800 785 Printing and Writing Papers; Coated and Uncoated Board; Recycled Fiber - ------------------------------------------------------------------------------------------------------- Bleached Paper and Board 1,527 1,535 - ------------------------------------------------------------------------------------------------------- Total 3,700 3,770 =======================================================================================================
-- 41 Historical Data (1997-1987)
1997 1996 1995 1994 - --------------------------------------------------------------------------------------------------------------------------------- Operating Results Net Sales $ 4,476,761 $ 4,013,197 $ 4,211,709 $ 3,395,825 Costs and Other Charges 4,219,549 3,760,658* 3,370,320 3,111,539 - --------------------------------------------------------------------------------------------------------------------------------- Income From Operations 257,212 252,539 841,389 284,286 - --------------------------------------------------------------------------------------------------------------------------------- Interest Expense, net of capitalized interest 117,290 112,286 113,705 109,172 Other (Income) Expense-Net (3,888) (10,792) (3,173) (20,050)** - --------------------------------------------------------------------------------------------------------------------------------- Income Before Income Taxes, Minority Interest, Extraordinary Item, and Accounting Changes 143,810 151,045 730,857 195,164 Income Taxes 51,804 55,250 268,895 71,420 Minority Interest, net of tax (10,936) (10,487) (10,889) (6,518) Extraordinary Item, net of tax -- -- -- -- Effect of Accounting Changes, net of tax -- -- -- (3,716) - --------------------------------------------------------------------------------------------------------------------------------- Net Income 81,070 85,308 451,073 113,510 - --------------------------------------------------------------------------------------------------------------------------------- Per Common Share Net Income: Basic Earnings 1.17 1.23 6.45 1.62 Diluted Earnings 1.16 1.23 6.39 1.61 Dividends 1.80 1.80 1.66 1.56 Stockholders' Equity 29.39 30.25 30.71 26.23 - --------------------------------------------------------------------------------------------------------------------------------- Financial Position Current Assets 1,211,577 1,134,110 1,033,817 951,133 Current Liabilities 803,018 779,869 620,113 883,924 - --------------------------------------------------------------------------------------------------------------------------------- Working Capital 408,559 354,241 413,704 67,209 Total Assets 5,241,701 5,096,307 4,838,343 4,776,578 - --------------------------------------------------------------------------------------------------------------------------------- Long-Term Debt 1,367,450 1,252,475 1,151,536 1,252,249 Deferred Income Taxes 744,677 723,431 709,850 605,643 Stockholders' Equity 2,035,718 2,093,594 2,121,692 1,836,321 - --------------------------------------------------------------------------------------------------------------------------------- Percent of Long-Term Debt to Total Capital 33.0% 30.8% 28.9% 33.9% - --------------------------------------------------------------------------------------------------------------------------------- Additional Data Cash Provided by Operations 381,116 503,145 758,880 377,587 Capital Expenditures (excluding acquisitions) 337,226 386,443 266,799 324,939 Depreciation, Amortization and Cost of Company Timber Harvested 310,618 298,457 287,738 270,850 Tons Sold-Paper and Paperboard Products 3,674,476 3,473,415 3,485,221 3,452,604 Average Shares of Common Stock Outstanding 69,439,150 69,220,157 69,940,397 69,954,082 ================================================================================================================================
Years prior to 1997 have been restated to reflect the reclassification of certain items from other (income) expense to income from operations. * 1996 includes a $46.9 million special charge relating to restructuring costs and asset write downs. ** Includes $34.7 million pre-tax gain on sale of minority interest in Bush Boake Allen. - --- 42
($ in thousands) 1993 1992 1991 1990 1989 1988 1987 - ----------------------------------------------------------------------------------------------------------------------------------- $ 3,120,421 $ 3,064,358 $ 2,967,138 $ 2,839,704 $ 2,761,337 $ 2,660,918 $ 2,361,684 2,889,495 2,872,080 2,681,718 2,451,487 2,260,653 2,156,288 1,963,631 - ----------------------------------------------------------------------------------------------------------------------------------- 230,926 192,278 285,420 388,217 500,684 504,630 398,053 - ----------------------------------------------------------------------------------------------------------------------------------- 124,911 136,240 81,750 31,228 47,800 50,527 61,294 5,877 (9,372) (1,318) (9,029) (16,394) (13,906) (6,115) - ----------------------------------------------------------------------------------------------------------------------------------- 100,138 65,410 204,988 366,018 469,278 468,009 342,874 50,095 22,755 76,978 136,427 169,878 172,863 135,391 - ----------------------------------------------------------------------------------------------------------------------------------- -- (7,228) (3,220) -- -- -- -- -- 40,806 -- -- -- -- -- - ----------------------------------------------------------------------------------------------------------------------------------- 50,043 76,233 124,790 229,591 299,400 295,146 207,483 - ----------------------------------------------------------------------------------------------------------------------------------- 0.72 1.10 1.80 3.35 4.35 4.25 2.83 0.71 1.09 1.79 3.34 4.33 4.24 2.81 1.56 1.56 1.56 1.54 1.42 1.22 1.14 26.00 27.01 27.88 27.60 25.47 22.66 20.24 - ----------------------------------------------------------------------------------------------------------------------------------- 910,718 1,016,117 909,990 859,532 721,195 769,323 753,683 909,372 892,115 764,916 642,776 366,962 326,079 295,618 - ----------------------------------------------------------------------------------------------------------------------------------- 1,346 124,002 145,074 216,756 354,233 443,244 458,065 4,685,033 4,745,197 4,697,714 4,403,354 3,413,862 3,094,414 2,919,115 - ----------------------------------------------------------------------------------------------------------------------------------- 1,244,907 1,289,706 1,348,157 1,221,597 690,149 627,928 632,706 583,155 553,871 627,120 589,477 581,835 581,080 538,774 1,815,848 1,881,878 1,936,256 1,910,643 1,754,524 1,559,327 1,452,017 - ----------------------------------------------------------------------------------------------------------------------------------- 34.2% 34.6% 34.5% 32.8% 22.8% 22.7% 24.1% - ----------------------------------------------------------------------------------------------------------------------------------- 436,393 279,429 383,390 401,315 528,803 526,621 460,471 310,113 219,654 482,638 934,452 556,268 358,671 188,587 261,518 253,087 219,120 230,383 215,992 200,519 189,224 3,291,255 3,242,511 3,004,980 2,835,549 2,726,105 2,733,205 2,675,541 69,740,458 69,604,174 69,270,992 68,550,315 68,836,229 69,433,734 73,391,106 ===================================================================================================================================
--- 43 EX-21 8 EXHIBIT 21 EXHIBIT 21 SUBSIDIARIES OF UNION CAMP(1) Jurisdiction of Name of Subsidiary Incorporation - ------------------- ------------ ABC Container Corporation..........................Delaware The Alling & Cory Company..........................New York Cartonajes Union, S.A.................................Spain Escort City Enterprises Ltd.........................England Union Camp Chemicals Limited...................England Fleetwood Container & Display, Inc...............California Forest Land Investments, Inc.......................Delaware Phoenix Display and Packaging Corp...............New Jersey Puerto Rico Container Company, Inc.................Delaware Transtates Properties Incorporated.................Delaware The Branigar Organization, Inc................Illinois Branigar Credit Corporation..............Illinois U.C. Realty Corporation............................Delaware Union Camp Business Development Corporation........Delaware Union Camp Foreign Sales Corporation...............Barbados Union Camp Holding B.V......................The Netherlands Union Camp Holdings Chile S.A.........................Chile Union Camp Chile S.A.............................Chile Union Camp Holdings Limited.............Republic of Ireland Union Camp Ireland Limited.........Republic of Ireland Puntapel S.A.................................Argentina Union Camp Hong Kong Limited......................Hong Kong Union Camp International Sales Corporation.........Delaware Union Camp Patent Holding, Inc.....................Delaware Bush Boake Allen Inc..........................Virginia A. Boake Roberts & Company (Holding) Ltd..England Bush Boake Allen Limited..................England Union Camp Technology, Inc.........................Virginia Union Camp Trading S.A............................Argentina - ------------------ 1 The names of other subsidiaries have been omitted, since such unnamed subsidiaries in the aggregate would not constitute a significant subsidiary. EX-27 9 EXHIBIT 27.1
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE ANNUAL REPORT ON FORM 10-K UNION CAMP CORPORATION FOR THE ANNUAL PERIOD ENDED DECEMBER 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. THIS SCHEDULE SHALL NOT BE DEEMED TO BE FILED FOR PURPOSES OF SECTION 11 OF THE SECURITIES ACT OF 1933, SCTION 18 OF THE SECURITIES EXCHANGE ACT OF 1934 AND SECTION 323 OF THE TRUST INDENTURE ACT OF 1939, OR OTHERWISE SUBJECT TO THE LIABILITIES OF SUCH SECTIONS, NOR SHALL IT BE DEEMED A PART OF ANY REGISTRATION STATEMENT TO WHICH IT RELATES. 1,000 12-MOS DEC-31-1997 DEC-31-1997 34878 0 655915 17785 495313 1211577 7164703 3404918 5241701 803018 1367450 69264 0 0 1966454 5241701 4476761 4476761 3399559 4219549 (3888) 0 117290 143810 51804 81070 0 0 0 81070 1.17 1.16 REFLECTS ADJUSTMENT FOR MINORITY INTEREST (NET OF TAX) OF $10936 EX-27 10 EXHIBIT 27.2
5 1,000 12-MOS DEC-31-1996 DEC-31-1996 44917 0 561590 17270 496433 1134110 6913799 3161450 5096307 779869 1252475 69217 0 0 2024377 5096307 4013197 4013197 2965149 3760658 (10792) 0 112286 151045 55250 85308 0 0 0 85308 1.23 1.23
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