Union Camp Reports Fourth Quarter Loss of $4.4 Million
Union Camp Corp. has announced a fourth quarter loss of $4.4 million, or $0.06/share. This compares to a year-earlier fourth quarter income of $33.3 million, or $.047/share, and third quarter 1998 net income of $14.4 million, or $0.20/share before a special after-tax charge of $36.2 million, or $0.52/share, primarily related to a restructuring. All earnings per share amounts in this report are on a diluted basis.
Net sales for the fourth quarter were $1,117 million, compared with year-earlier fourth quarter sales of $1,187 million and third quarter 1998 sales of $1,107 million.
For the full year 1998, net income before the special charge was $55.5 million, or $0.80/share. After the charge, net income for 1998 was $19.3 million, or $0.28/ share, compared with 1997 net income of $81.1 million, or $1.16/share. Net sales for the year were $4,503 million, compared with $4,477 million in 1997.
The company pointed out that fourth quarter results reflected soft market conditions, extensive downtime, and higher maintenance costs associated with that downtime. Lower prices in the company's core product lines of uncoated free sheet and linerboard affected results.
In response to these conditions, Union Camp took unprecedented levels of downtime to reduce inventories. For the quarter, it took 144,000 tons of downtime at its linerboard mills and 38,000 tons of downtime at its uncoated free sheet mills. The company undertook extensive maintenance during the downtime, resulting in unusually high maintenance costs for the quarter.
In addition to its operating activities during the fourth quarter, Union Camp negotiated the terms of an agreement under which it will merge with the International Paper Co. The transaction is expected to be completed by the end of the first quarter.
"The fourth quarter was an extraordinary one for Union Camp," observed Craig McClelland, chairman and CEO. "In addition to working intensively on the announced merger with International Paper, we significantly adjusted our operating schedules and took record levels of downtime to address the weak market environment for our major product lines. At the same time, we continued making changes to enhance long-term profitability. These changes included a total restructuring of research and development activities, meaningful reductions in selling, general and administrative costs, and advancing initiatives to improve our business mix and customer service. Capital spending has also been restrained to well below our depreciation level."
Outlook for 1999
Looking ahead, McClelland said there are signs of improving market conditions. "Our linerboard and free sheet inventories have decreased by about 90,000 tons since mid-year, and customer and end-user inventories have declined significantly," he explained, adding that "at Union Camp, domestic demand for both products has been stable and our linerboard exports in the fourth quarter rose to slightly higher levels than in the third quarter."
Against that backdrop, Union Camp has announced price increases on both linerboard and uncoated free sheet. "As we move into the new year, Union Camp is well positioned for what we think will be improving market conditions in 1999," McClelland concluded.
Based in Wayne, NJ, Union Camp is a leading manufacturer of paper, packaging, chemicals, and wood products, and ranks among the nation's 200 largest industrial companies.