A Letter From The Chairman
To Union Camp Shareholders, Customers and Employees
Three years ago, we put in place a strategic process to transform Union Camp into a company driven to achieve superior shareholder value. This has meant changing many of the ways we do business - realigning our product and business mix, applying greater discipline to our capital expenditures, placing a heightened emphasis on marketing our products in a dynamic and global economy and relentlessly pursuing improvements in operating efficiencies.
We are continuing to see the benefits from this strategy. The depth of the down cycle in the paper industry last year kept prices at historically low levels, impacting our earnings severeIy. Although we are not satisfied with our 1997 net income, our business and financial strategies are sound. Our competitive position, which has never been stronger, and the favorable trend line in quarterly earnings are positive indicators of improving performance.
In fact, I am more encouraged than ever about the fundamentals of the paper and packaging business and the prospects for our company in the years ahead. Here's why:
First, the macroeconomic outlook is positive. The U.S. economy continues to expand with inflation near its lowest level in 30 years. Europe is growing stronger. In Asia, there is economic weakness near term but recovery programs being implemented are expected to restore economic health to that region long term.
Second, the fundamentals in our industry look very favorable, particularly in our uncoated free sheet and linerboard core businesses. New domestic capacity announcements in fine paper and linerboard appear to be near one percent annually, the lowest capacity expansion in over three decades. In addition, demand for paper and packaging should match the growth in the U. S. economy at 2-3 percent, well above the projected rate of capacity additions. On a global basis, capacity expansion going forward through the year 2001 is half the rate of growth over the past 10 years.
Third, Union Camp has achieved new levels of operating efficiencies in our largest businesses - paper and packaging. In addition, we are receiving a considerable lift from our profitable wood products and chemical operations, which help lessen the cyclicality of the paper business.
Before I review 1997 results in more detail, let's take a closer look at Asia. We are continuing to grow our linerboard exports to our Asian customers. Our product is well suited to producers who want high-performance packaging that meets the demanding standards required for international commerce. We are taking a selective and effective approach to building our converting businesses in Asia, emphasizing high-growth areas such as China where our joint venture has a second box plant under way.
Union Camp is a strong enterprise with sound business and financial strategies aimed at maximizing shareholder value.
In uncoated free sheet, the Asian market has not been an important export business for us. The significant slowdown in capacity expansion due to the Asian currency disruption is viewed quite favorably for improved supply-demand conditions in uncoated free sheet grades long term.
Financial Results for 1997
For the full year 1997, net income was $81.l million or $1.17 per share, compared to 1996 net income of $114.2 million, or $1.65 per share, before a special charge. After the charge,1996 net income was $85.3 million, or $l.23 per share. Net sales for the year were $4,477 million, which was a $464 million increase over 1996 sales of $4,013 million. This increase was largely attributable to the full-year sales of Alling and Cory, which was acquired in August 1996.
While these earnings results are not satisfactory, there is an important story behind the numbers. If we had operated in 1997 just as we had in 1996, the decreases in product prices would have reduced our earnings per share by $1.44, thus lowering our earnings from the 1996 level of $1.65 to just 21 cents.
But we did not operate the same way. In fact, through several initiatives, we strengthened our earning power. Lower costs, increased productivity and tighter controls added 54 cents. Improved volume, and product and customer mix delivered 35 cents. And 7 cents was added by improvements from our non-paper businesses. The combination of these factors largely offset the impact of lower prices, and we reported earnings of $1.17 per share.
Profit Enhancement Plan Ahead of Schedule
We made significant progress in 1997 in executing the Profit Enhancement Program we introduced at the start of the year. The program is designed to boost earning power by $100 million through a combination of cost reductions and asset realignments ($65 million) and mix improvement ($35 million). That's about $1.00 a share. The program is being implemented over the course of 1997 and 1998, with the final results to be reflected in our 1999 income statement.
In 1997, we estimated that the program added $65 million to our earnings power, which is two-thirds of the way to our goal. A few highlights: we've eliminated almost 70 percent of the 400 positions to be removed over the two-year period. Gains in productivity and process redesign have generated $44 million in savings, with a new centralized purchasing and materials handling process reducing costs structurally by some $10 million alone. Another $15 million has resulted from better product and customer mix, particularly in fine paper.
A key component to profit enhancement is our commitment to information technology. As I have reported to you, we put significant resources into building an information capability that will enable us to streamline processes, implement cycle time applications and become the leader in customer service in each of our businesses. We have elevated information technology to the level alongside operations, marketing and finance as the core functions driving our company forward in the 21st century.
W. Craig McClelland
Chairman and Chief Executive Officer
Jerry H. Ballengee
President and Chief Operating Officer
We are very pleased with the progress we are making in information technology. The successes we are achieving are designed to make us a more dynamic, more efficient and more profitable company, and I encourage you to read the section starting on page 7.
Cost Efficiency and Productivity Improvement
Our low cost manufacturing system is one of our greatest strengths. The size and efficiency of our paper machines compare favorably with the rest of the paper industry. We also achieve economies of scale because our entire primary paper manufacturing system is contained in four world scale, high output mills in the Southeastern United States. Located in the heart of one of the world's lowest cost wood fiber areas, it is near high growth domestic markets and deep water ports.
This cohesive system enables Union Camp to perform at higher levels every year. Last year our people achieved new production records at Savannah and Franklin, reached successful labor agreements at Prattville and Savannah and set new highs in safety performance.
Our safety record was excellent at our converting facilities also. Three more packaging plants earned OSHA's highest honor, Star Site Status in its Voluntary Protection Program. It is no coincidence that our safest plants tend to be among our most productive and profitable.
Adding Value Through Marketing
With our strong commitment to marketing leadership, we are focused on those segments where we can achieve the best growth rates and profit margins. We are developing marketing capabilities that differentiate Union Camp and enable us to capitalize on the dynamic changes in how paper products are being used and distributed.
An example is the success of our Great White® business papers, a leading brand in the higher growth, small office/home office market that continues to carry a sizable premium over other cut-size papers. Our Great White® product line is supported by a broad marketing mix, including branding, advertising, unique packaging and alternative channels of distribution.
In Packaging, our linerboard system emphasizes weight ranges where few producers can compete with us on quality. We are targeting specialty lightweight and heavyweight products where growth is accelerating due to world trade flows and end user high performance packaging demands.
And in Wood Products, we're investing in a higher margin product-laminated veneer lumber. Our new plant in Thorsby, Alabama will start up in mid-1998.
Throughout Union Camp, new ideas for an aggressive, imaginative approach to marketing are setting the direction for our company.
Disciplined Capital Expenditures
We reduced our capital spending in 1997 and plan to decrease it even further in 1998 to about $300 million, which will be below our level of depreciation. We are growing our company in an intelligent and constructive way that supports the specific profitability objectives in each of our businesses.
Union Camp is a strong enterprise with sound business and financial strategies aimed at maximizing shareholder value. Our long-term debt ratings are among the highest in the paper industry and we remain committed to a healthy balance sheet.
We also have a long record as a strong dividend payer and we intend to follow this policy. Another good way to return capital to our shareholders is through our stock repurchase program. To date, we have bought over three and one-half million shares in our five million share program. When circumstances are right, we plan to expand the program.
Important organizational moves have been put in place to prepare the company for future growth. Senior management promotions include Charles H. Greiner, Jr. as Executive Vice President; John T. Heald, Jr. as Executive Vice President, Packaging Group; and LH Puckett as Senior Vice President succeeding Charlie Greiner as General Manager of the Fine Paper Division. Also, Thomas G. Lambrix is now Senior Vice President, Communications and Public Affairs, and Susan M. Arseven, Chief Information Offcer, is now Senior Vice President and joins the Policy Group.
In addition, 1997 marked the retirement of James M. Reed, Vice Chairman and Chief Financial Officer. Jim played a vital role in the success of Union Camp for nearly three decades. A. William Hamill, Executive Vice President, succeeds Jim as Chief Financial Officer.
Cyclicality has always been a condition we face in the paper business. As I have stated in previous reports, our basic philosophy is to place emphasis on the disciplined use of cash flow. We are committed to funding business growth only when we believe it will exceed our cost of capital. Otherwise it will be used to preserve a strong balance sheet, or will be distributed to our shareholders.
We are well positioned to take advantage of the industry's opportunities and to deal with its challenges. We have the scale, flexibility, resources and drive to succeed in serving our customers and rewarding our shareholders.
I extend my appreciation to our employees for their significant contributions, to our customers for their business, to our directors for their counsel and to our shareholders for their confidence in Union Camp.
W. Craig McClelland
Chairman and Chief Executive Officer
Jerry H. Ballengee
President and Chief Operating Officer
Building Competitive Advantage Through
Union Camp is committed to achieving financial returns that rank us among the leaders in our industry. Delivering superior value for our shareholders year after year, that's what drives this company.
To produce exceptional value, we must achieve profitable growth and run an efficient, agile operation. It all starts with the products we make. We put tremendous care into everything we produce - our papers, packaging, chemicals, and wood products. We work hard to understand and anticipate what our consumers want, and we respond with innovative products that meet those needs. Moving forward, we will continue to differentiate ourselves on the strength of our products.
While producing high-quality, innovative products is an important starting point, we know that we achieve maximum customer satisfaction when great products are supported by outstanding service. It is our service that gives us true competitive advantage, and one vital component to our service leadership is information.
In putting our information technology in place, we asked ourselves the hard questions. What information really matters, to our customers, to the end users of our products, and to our customer-focused employees? How do we gather that information, store it, package it, and use it, to gain both marketplace advantage and greater efficiency?
Information technology is a major part of Union Camp's platform for differentiation in a crowded and highly competitive marketplace. In the pages that follow, you'll read about how we are turning information - and the way we use it - into a sustainable competitive advantage.
Developing Marketplace Advantage
The driving force behind our commitment to information technology is our customers. They expect a lot more than a product from Union Camp; they want a business relationship that adds value to their operations. A vital part of that relationship is information.
What it comes down to is giving customers the information they need to operate at peak efficiency. Information that helps them save time, reduce costs, and better serve their customers. Information that enables them to improve a product, reach a new end user, or get to market faster. Information, in short, that helps them succeed.
At Union Camp, we thrive on our ability to provide customers what they want to know, when they want to know it. Information, and the way we use it, is a key to securing our position as the preferred supplier.
Simplifying the Order Management Process
Across our divisions, we're rolling out applications that will enhance our customer service through the entire order management process. Our goal is to put customer information, product information, and inventory information in one place. As these systems come fully on line, our people will have instant access to up-to-date information about product availability, pricing, credit terms, scheduling, manufacturing, shipping, and accounts receivable. And the information will be accessible to a range of employees-from customer service to manufacturing to accounting - so they can work together to meet customer needs.
What does this mean for our customers? A lot. From quote to delivery, the process takes less time. Invoicing is simpler. And, because of the extensive database, customers can get immediate answers to questions like, "What did I order last time?" "Is there a seasonal spike in my order history?" "Has my order been shipped?" And "When will it get here?"
Here are some examples of how we are leveraging information to better serve our customers:
Kraft Paper and Board - This division is developing a customized software package - the Automated Sales Information Service Tool (ASIST) - that will track order taking, scheduling, planning, manufacturing, shipping, and delivery. ASIST will manage customer inventory and integrate customer forecasts into our production schedule. For some customers, we will even manage their inventory levels by computer and replenish supply when necessary, freeing up our customers to focus on other parts of their business. Our goals are ambitious: improve on-time delivery to 98 percent, reduce cycle time by 50 percent, and lower inventories by 33 percent.
At Union Camp, we thrive on our ability to provide customers what they want to know, when they want to know it. Information, and the way we use it, is a key to securing our position as the preferred supplier.
Container - By this summer, all domestic container plants will be using a new system that provides customers with accurate, up-to-date informatlon about any shipment. This system, called Best of Customer Service (BOCS), will provide superior customer service in addition to delivering substantial annual savings. Union Camp chose to develop customized BOCS software so we can integrate the full scope of information required to serve the unique needs of our customers.
Flexible Packaging - This division is also redesigning its entire order/delivery process. Called the Order Management System, it includes a replenishment component by which we use information technology and our manufacturing expertise to assist customers with inventory management. Already up and running for major customers in the pet food industry, no other flexible packaging company is doing anything like it. The customer benefits from reduced stock-outs, quicker turnaround, and lower supply chain inventory, with some users having reduced their inventory by as much as 50 percent. Union Camp will benefit from greater control of our manufacturing schedule, producing only what we can ship and bill, and we will be able to better analyze sales trends and other market data.
Technology enables us
to digitally enhance
packaging artwork and
streamline the production process
for our customers.
Fine Paper - Our Fine Paper team is moving ahead on a similar initiative that streamlines every element of the order management process. This project, called Order Fulfillment, features reengineered business processes enabled by new hardware and software and managed by employees specially trained to maximize the capability of this client-focused system. When a customer places an order, this system automatically specifies a delivery date that drives the entire order, manufacturing and delivery process. Coming on line in 1998, the system will deliver a new level of service for our customers. In fact, this will take us closer to our goal of providing a product delivery date within two minutes of fielding a customer's order, a response rate that's unheard of in our industry.
Enhancing Business Partnerships
When our sales professionals are armed with information, they become an even more powerful asset as valued partners to our customers.
Our sales professionals
can now tap into central databases
to give customers real-time information
about products, markets, and delivery dates.
Using their laptop computers, our sales people can share with their customers critical data about territories, accounts, and market dynamics. Our customers can use that information to find new avenues for profit and growth by identifying opportunities for product development, forecasting consumer demand, or finding new markets.
A new Fine Paper initiative, SalesLink, bridges the information gap between our traveling sales team and our home office to benefit our customers. Sales professionals targeting a corporate information center, for example, can use SalesLink to create a detailed profile of what they are likely to encounter in their selling effort. The profile could include information about the client's organization, account history, paper usage and printers, as well as product specifications and production and shipping updates.
Our Chemical Products Division is using a similar tool to gain competitive advantage. The Account Information Management System (AIMS) contains a wide range of data on line, including account and contact details, regulatory information, new product information, price lists, and sample requests. It also holds a sales library stocked with product literature, a discussion database, and detailed customer histories. AIMS is especially useful for our field sales personnel who now have timely and accurate information at their fingertips.
These and many other initiatives improve our ability to serve customers. We're meeting their needs, earning their loyalty, and building long-term partnerships that will generate more business.
Gaining Operating Advantage
Union Camp has always been cost-efficient; now we're building on that advantage. Through our commitment to technology, we are reducing costs by streamlining operations and communicating more effectively across the company.
Bringing our people together
Union Camp is a global enterprise, with 19,000 employees working at more than 100 locations on six continents. To maximize our potential as a company, we must make full use of the expertise of every one of our people, from the forester in Alabama to the box plant manager in Chile.
For starters, we must have a common communications technology for all employees. Under the direction of our information team, we now have standard hardware and software across the company, underpinned by world-class training programs and a strong technical group. As a result, we can tie all our systems and information together, while reducing purchasing, training, and ongoing support costs.
On top of those cost savings, we now have a much greater capacity for sharing information. More than 5,000 Union Camp employees in the United States and overseas use Lotus Notes to communicate with each other and with their customers and suppliers.
An advanced feature called a discussion database enables employees in different locations to function as a team. We can build databases that allow us to share and review proposals, budgets, and schedules. Notes also provides us with a gateway to both the Internet and to our intranet, Circuitree, the internal corporate network that is in wide use across the company.
With this software and hardware in place, we now have the technology that enables our employees to communicate more effectively with each other. It's so easy, our people are sharing and seeking out information that accelerates decision making and helps make Union Camp a more agile and responsive company.
One of Union Camp's traditional strengths is the management expertise that guides each of our operating businesses. Each business operates with a high degree of autonomy, enabling the employees who are closest to the market to make the critical business decisions that contribute to our success. At the same time, we recognize that there is real value in integrating certain functions that are common to all of our operating units. That's why we are using technology to streamline those functions, reduce costs, and increase efficiency.
Across Union Camp We Leverage
information to communicate, share knowledge, and increase operating efficiency.
We have a tradition of innovation across our company. Today our employees are enthusiastically embracing information technology because they see another opportunity to set Union Camp apart.
We're using a wide range
of technologies to improve
communication among our
19,000 employees worldwide.
As a company that purchases more than $52 billion in goods and services each year, we bring significant leverage to the bargaining table. Until recently, each division carried out its own purchasing activity. Last year we implemented a single procurement system for the entire company that standardizes how we order, receive, and pay for goods and services. As we consolidate our database of suppliers and our purchasing history, we streamline the entire procurement process, leading to greater efficiency and lower costs. Already, our coordinated buying, along with other productivity gains, has enabled us to reach agreements that have generated savings of about $10 million a year.
There is more to come. We are developing an on-line catalog containing current information about the location and inventory of goods and services across Union Camp. Now, for instance, an employee in Savannah who needs a certain part can check the catalog to see if the part is available at another mill.
Our general ledger program is another system that is improving productivity and enhancing decision support.This system, which features a companywide software package and a common chart of accounts, makes it easier to access and share accounting information across divisions and corporate departments. An early benefit of the project is the simplification of the monthly closing and reporting process.With this new software, our finance professionals now have another tool to enhance their effectiveness on the business management team.
Our Human Resources/Payroll project, due to be completed this year, is consolidating human resources and payroll processing and information that now exists in many locations into a single system, eliminating redundancies and inconsistencies. By standardizing the codes, reporting processes, and procedures used on personnel record keeping, we are now able to more effectively manage this information and reduce costs.
Building on Innovation
Union Camp has always been a company of great people whose ability to innovate is well known across the industry. A willingness to explore and embrace new ideas and share them across divisions has been a hallmark of Union Camp.
We have a tradition of innovation in our company-in our products, our manufacturing processes, our environmental technology, and in research and development. We also have a culture of teamwork that has enabled us to make the most of our ability to innovate.
Today, our employees are enthusiastically embracing information technology because they see another opportunity to set Union Camp apart. Our employees will continue to carry this company to new levels of excellence. Together, they are turning information technology into a significant competitive advantage for Union Camp.
To better manage our woodlands, our foresters tie into a satellite link to update information on planting, harvesting, and wildlife.
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 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.
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 6O,000 tons.
In order to better serve the fast-growing SOHO market, we created a separate Great White Consumer unit that targets consumers through office supply superstores and catalogers. It's already delivering increased sales for the Great White line.
In keeping with our consumer-oriented strategy, we are adding line extensions to the Great White brand. This fall, we agreed to market colored paper for computer printers under the Crayola name. The partnership not only adds to our range of retail products, it also links GreatWhite products to a highly visible and reputable brand name.
We continued to promote the Great White brand through advertising in print and on TV. We also introduced a new line of kraft envelopes under the Tiger Shark 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.
Our new Converting Innovation Center
in Franklin manufactures value-added
business papers for the retail market
in smaller, customized consumer packages.
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, solidfiber 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.
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, 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.
Through several acquisitions,
we have strengthened our leadership
in the point-of-purchase display market.
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 paper making 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.
The Chemical Group continues
to successfully target
in emerging overseas markets.
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 particle board 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.
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 Initiatives, 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.
In the field and in the lab,
Union Camp is a leader in
finding ways to increase fiber yield.
The Year in Paper Distribution
Acquired by Union Camp in 1996, The Alling & Cory Company is a leading distributor of business communications and printing papers, industrial packaging, and business products. Based in Rochester, New York, the company operates 17 distribution centers and 22 retail paper shops in Maryland, New Jersey, Ohio, Pennsylvania, Virginia, and West Virginia. It also operates The Alcor Envelope Company, Inc., an envelope converting operation in Hamburg, NewYork.<
Alling and Cory gives Union Camp a direct connection to the end-user market. Armed with this market intelligence, Union Camp is better able to develop products that meet the unique and changing needs of the marketplace.
Now that it is part of Union Camp, Alling and Cory is able to reduce costs by taking advantage of increased leverage across its purchasing, transportation, and logistics functions.
Alling and Cory continued to expand its retail paper shop network, the conveniently located warehouse outlets that offer a wide range of competitively priced products, by adding a new store in Scranton, Pennsylvania. It also acquired the Antietam Paper Company in Hagerstown, Maryland, adding warehouse operations in Maryland and, for the first time, Virginia.
Alling and Cory achieved market share growth based on the first full year of a new industrial marketing program. The program aligns sales strategies to specific business segments rather than geographic regions.
A new software system launched in 1997 will create new opportunities to improve electronic commerce capabilities with our customers and suppliers. Customers include Corning,IBM, and Kodak.
Alling and Cory is a part-owner of IPower, a company made up of six distributors from upstate New York. An integrated, information-based supply solution for corporate customers, IPower offers one-stop shopping for fluid power control, plumbing supplies, fasteners, ball bearings, and, through Alling and Cory, packaging and sanitary maintenance supplies. Xerox is among IPower's first customers.
Alling and Cory continued
to expand its network
of paper distribution warehouses in 1997.