DEERFIELD, Ill., Jan. 27 /PRNewswire/ -- Fort James Corporation
(NYSE: FJ) today announced fourth quarter 1999 earnings of $105.3 million, or
$0.49 per diluted share. This compares to earnings of $134.4 million, or
$0.61 per diluted share, in the prior year. These results exclude unusual and
non-recurring items. Net sales for the quarter increased to $1,700.6 million
versus $1,689.0 million in 1998. Sales volume increases of approximately 4%
were largely offset by pricing declines and the impact of foreign currency
translation.
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For the year, the company reported earnings of $468.3 million, or $2.13
per diluted share, versus $536.7 million, or $2.44 per diluted share, in 1998,
each excluding unusual and non-recurring items. Sales increased modestly to
$6,827.4 million from $6,802.6 million, as volume increases were largely
offset by weaker pricing and foreign currency translation changes.
"Nineteen ninety-nine was a difficult year for Fort James," said Miles L.
Marsh, Chairman and Chief Executive Officer. "Our results were affected by
elevated competitive spending in the tissue category, increased distribution
and warehousing costs, and significant escalation in raw material costs in the
latter part of the year. However, our sales and market shares remained strong
in 1999, and we executed a number of initiatives that both improved our
business mix and strengthened our balance sheet."
Operating Highlights
The North American Tissue business reported lower income from operations
in 1999, despite solid performance in the market place. Income from
operations of $143.5 million in the current quarter was affected by the
combination of higher recycled fiber costs, lower away-from-home pricing,
increased retail promotional activities, and higher distribution and
warehousing costs, as compared to the $225.2 million reported in the prior
year.
Fourth quarter sales increased modestly to $910.5 million from
$904.7 million in 1998, as the more competitive pricing environment largely
offset the benefit of a strong 4% increase in unit volume. Aggregate market
share improvements were realized in retail bath tissue and towels, primarily
as a result of favorable consumer response to the newly reformulated Quilted
Northern brand and gains in the warehouse club channel. Aggregate retail
napkin market shares, while still over 50%, declined modestly, as the company
is rolling out a repositioned Quilted Northern Thick 'n Strong napkin. Closer
in thickness and absorbency to a towel product, this premium single ply napkin
replaces the everyday Northern napkin, and is positioned to serve a previously
unmet consumer niche. In the away-from-home tissue category, volume gains
were in line with category growth in the second half of 1999, reversing the
modest share erosion trend of the last few years.
For the full year, North American Tissue income from operations fell to
$679.4 million, excluding unusual items, from $872.1 million in 1998, while
sales increased to $3,673.9 million from $3,634.1 million. The factors
affecting fourth quarter performance were also the primary drivers of the
reduced year-over-year results.
Fourth quarter income from operations and sales of the Tissue - Europe
business declined to $41.1 million and $459.7 million, respectively, compared
to $63.8 million and $481.7 million in the prior year. Strong unit volume
gains in excess of 4% were more than offset by higher costs due to increases
in raw material prices and competitive pricing activity, particularly in the
United Kingdom. In addition, changes in currency exchange rates negatively
affected operating profits and sales for the quarter by approximately 8% and
10%, respectively, compared to last year.
Full-year income from operations and sales declined to $210.4 million and
$1,834.0 million, respectively, compared to $236.2 million and
$1,869.4 million a year ago. Changes in currency exchange rates negatively
affected full year operating profits and sales by approximately 4% compared to
the prior year.
Fourth quarter income from operations in the Dixie business increased more
than 50% to $26.9 million versus $17.5 million in 1998, while sales increased
6% to $195.8 million from $184.9 million. Operating income improvements were
primarily the result of volume growth and cost reduction benefits. Unit
volume continued to be strong in retail plates and cups, up more than 9%,
largely on the strength of new products and increased distribution. During
the fourth quarter, the company introduced the new Toy Story II bath cup
designs to strong acceptance and continued to enjoy volume gains from its
high-count "value pack" offerings. Aggregate retail market shares increased
during the quarter, as retail volume growth was nearly twice the category
rate.
The Dixie foodservice category achieved positive volume growth following a
period of product rationalization, with particular strength in cutlery driven
by the dense-pack cutlery initiative. Incremental capacity for the company's
innovative PerfecTouch insulated hot cup was brought on-line during the
quarter.
For the full year, Dixie delivered income from operations of
$106.0 million, excluding unusual items, up 19% over the prior year, breaking
the $100 million barrier for the first time. Sales increased 1.5%, as strong
retail volume increases were largely offset by the effects of foodservice
rationalization in the first half of the year. The Dixie business will launch
its Rinse & ReUse disposable stoneware plates and expand distribution of
PerfecTouch cups in the first quarter.
The Communications Papers and Fiber business reported fourth quarter
income from operations of $12.3 million on sales of $228.3 million, compared
to a loss from operations of $9.5 million on sales of $181.1 million in 1998.
The improvement from the year-ago quarter was due to substantially higher
prices for uncoated freesheet papers and pulp, lower manufacturing costs, and
increased pulp sales volumes.
For the year, Communications Papers and Fiber reported a loss from
operations of $6.6 million, excluding unusual items, on sales of
$834.5 million, as first half losses were not fully offset by the improving
commodity pricing conditions experienced in the second half of the year. This
business reported income from operations of $2.4 million on sales of
$796.6 million in 1998.
Other Items
Interest expense decreased approximately 14% for both the quarter and full
year, excluding the effects of an interest rate swap termination loss,
primarily due to reduced debt levels and lower average borrowing costs. Other
income for the quarter and full year was $13.0 million and $33.3 million
favorable to the prior year, respectively, primarily due to foreign currency
gains.
Excluding unusual and non-recurring items, the effective tax rate was
33.5% for the current year, down from 36.5% in 1998, primarily due to the
benefits of tax planning actions.
Cash provided by operations totaled $674.5 million for the current year,
compared to $870.3 million in 1998. The decrease is primarily due to lower
operating income and higher income tax payments related to the sale of the
Packaging business, partially offset by reduced merger-related spending.
Total debt decreased to $3.5 billion at the end of December from $3.9 billion
in December 1998.
Under an existing stock buy-back program, the company purchased
5.6 million common shares at a cost of $146.1 million in the fourth quarter,
and 7.1 million common shares at a cost of $199.7 million for the full year.
Portfolio Activities
During the quarter, Fort James signed an agreement to sell its Marathon,
Ontario pulp mill to a joint venture between Tembec Inc. and Kruger Inc. for
Cdn $100 million. The company also announced its intent to exit the
groundwood paper business by shutting down its groundwood operations at the
Wauna, Oregon mill. In the aggregate, these actions, which are expected to be
completed in the first quarter of 2000, will reduce the company's production
of commodity products by nearly 40%. Additionally, in December, Fort James
acquired the remaining 50% interest in its Naheola Cogeneration Limited
Partnership for $54 million. Upon completion of this transaction, the company
refinanced approximately $141 million of assumed debt on more favorable terms.
Unusual and Non-recurring Items
These portfolio enhancement driven activities negatively impacted the
fourth quarter of 1999. Non-recurring items included a charge of
$157.1 million ($96.4 million net of tax, or $0.45 per diluted share)
associated with the sale of the Marathon pulp mill and exiting the groundwood
paper business. In addition, the company recorded, in interest expense, an
interest rate swap termination fee of $11.3 million ($6.9 million net of tax,
or $0.03 per diluted share) incurred in refinancing the Naheola Cogeneration
Limited Partnership debt. The company also reported a net extraordinary
after-tax loss of $3.9 million, or $0.02 per diluted share, representing a
loss on the early extinguishment of debt, partially offset by a favorable
adjustment to the gain on the sale of the Packaging business. Including these
items, the company reported a fourth quarter net loss of $1.9 million.
Comment and Outlook
"We were clearly disappointed with our 1999 results," said Marsh.
"However, while still cautious in our near-term outlook, we believe many of
the negative factors that affected 1999 will gradually dissipate in 2000. We
understand the cost issues that affected 1999 and are aggressively engaged in
remedial activities. Fiber costs are continuing to escalate, but we have
announced price increases in many of our businesses that should alleviate the
situation, once they are fully effective. And as such, we believe we're
entering a period where our greater backward integration will be an advantage.
These factors, combined with our strong new product pipeline, give us
confidence in our outlook for 2000."
Fort James is a leading international consumer products company, serving
consumers both at home and away-from-home with bathroom and facial tissue,
paper towels, napkins, and cups, plates, cutlery and food wrap products. The
company's popular brands include Quilted Northern, Brawny, Dixie, Vanity Fair,
Mardi Gras, Soft 'N Gentle and So-Dri in North America and Lotus, Colhogar
Tenderly, Embo, and Kittensoft in Europe. The Company has current annual
sales of $6.8 billion and approximately 50 manufacturing facilities in the
U.S., Canada and 11 other countries around the world.
Forward-looking statements in this release are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Such forward-looking statements are not guarantees of future performance and
are subject to risks and uncertainties that could cause actual results and
company plans and objectives to differ materially from those projected. Such
risks and uncertainties include, but are not limited to, the Company's ability
to sustain momentum in the retail marketplace, maintain continuing improvement
in the away from home market, successfully introduce new products, increase
customer service levels and concurrently manage distribution costs and the
ability to achieve projected net cost reductions.
Copies of today's news release, along with additional information on Fort
James, is available, at no charge, by calling 888-526-3711. You may also
access the company's web site at Internet address http://www.fortjames.com .
FINANCIAL SUMMARY
Fort James Corporation
For the Quarters and Twelve Months
Ended December 26, 1999 and December 27, 1998
Fourth Quarter Year
(in millions, except
per share amounts) 1999(a) 1998(b) 1999(c) 1998(d)
Net sales $1,700.6 $1,689.0 $6,827.4 $6,802.6
Income from operations $44.5 $212.4 $715.8 $1,021.1
Adjusted for unusual and
non-recurring items:
Cost of goods sold
(litigation and severance) -- -- 17.8 --
Selling and administrative
expenses (litigation
and severance) -- -- 28.2 --
Restructure and other items 157.1 63.1 142.6 91.1
Income from operations, before
unusual and non-recurring items $201.6 $275.5 $904.4 $1,112.2
Net income (loss) $(1.9) $95.7 $516.5 $497.6
Adjusted for unusual and
non-recurring items, each net of taxes:
Cost of goods sold
(litigation and severance) -- -- 10.9 --
Selling and administrative
expenses (litigation and
severance) -- -- 17.2 --
Interest expense 6.9 -- 6.9 --
Restructure and other items 96.4 38.1 83.7 44.9
(Income) loss from
discontinued operations -- 0.6 6.4 (8.4)
Extraordinary items 3.9 -- (195.4) 2.6
Cumulative effect of a change
in accounting principle -- -- 22.1 --
Earnings, before unusual
and non-recurring items $105.3 $134.4 $468.3 $536.7
Diluted earnings per share:
Net income (loss) $(0.01) $0.43 $2.35 $2.26
Adjusted for:
Unusual items, net 0.03 -- 0.16 --
Restructure and other items, net 0.45 0.18 0.38 0.21
Discontinued operations -- -- 0.03 (0.04)
Extraordinary items 0.02 -- (0.89) 0.01
Cumulative effect of a change
in accounting principle -- -- 0.10 --
From earnings, before unusual
and non-recurring items $0.49 $0.61 $2.13 $2.44
(a) Net income for the fourth quarter of 1999 included a non-recurring
charge of $96.4 million for the estimated loss on the sale of Fort
James -- Marathon, LTD. and exiting the groundwood paper business. In
addition, the company recorded an unusual charge of $6.9 million for an
interest rate swap termination fee, an extraordinary loss of $6.6 million
on early extinguishment of debt and a favorable adjustment to the
extraordinary gain on the sale of the Packaging business of $2.7 million.
(b) Net income for the fourth quarter of 1998 included a non-recurring
charge of $38.1 million including merger-related costs not accruable in
1997, a permanent impairment write-down of a non-operating asset and plant
closure costs; partially offset by the net reversal of previously accrued
merger-related restructure accruals and tax reserves.
(c) Net income for the year ended December 1999 included a net
non-recurring charge of $83.7 million for the estimated loss on the sale
of Fort James -- Marathon LTD., exiting the groundwood paper business and
a permanent impairment write-down of a non-operating asset; partially
offset by the net reversal of merger-related restructure accruals due to
revisions of estimates. In addition, the company recorded unusual charges
of $35.0 million for severance and other costs related to a
reduction-in-force program, accruals for on-going litigation, and an
interest rate swap termination fee. The company also recognized an
extraordinary loss on early extinguishment of debt of $39.8 million,
offset by an extraordinary gain on the sale of the Packaging business of
$235.2 million.
(d) Net income for the year ended December 1998 included a non-recurring
charge of $44.9 million including merger-related relocation costs and
costs not accruable in 1997, a permanent impairment write-down of a
non-operating asset and plant closure costs; partially offset by the net
reversal of previously accrued merger-related restructure accruals and tax
reserves.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fort James Corporation
For the Quarters and Twelve Months
Ended December 26, 1999 and December 27, 1998
Quarter Twelve Months
(in millions, except
per share amounts) 1999 1998 1999 1998
Net sales $1,700.6 $1,689.0 $6,827.4 $6,802.6
Cost of goods sold (1,206.1) (1,115.3) (4,724.5) (4,547.4)
Selling and
administrative expenses (292.9) (298.2) (1,244.5) (1,143.0)
Restructure and
other items (157.1) (63.1) (142.6) (91.1)
Income from operations 44.5 212.4 715.8 1,021.1
Interest expense (63.9) (61.8) (239.4) (264.8)
Other income (expense), net 9.4 (3.6) 27.9 (5.4)
Income from continuing
operations before income
taxes, extraordinary items,
and cumulative effect of a
change in accounting
principle (10.0) 147.0 504.3 750.9
Income tax
(expense) benefit 12.0 (50.7) (154.7) (259.1)
Income from continuing
operations before extraordinary
items and cumulative
effect of a change in
accounting principle 2.0 96.3 349.6 491.8
Income (loss) from
discontinued operations,
net of taxes -- (0.6) (6.4) 8.4
Income before extraordinary
items and cumulative effect
of a change in
accounting principle 2.0 95.7 343.2 500.2
Extraordinary loss on
early extinguishment of
debt, net of taxes (6.6) -- (39.8) (2.6)
Extraordinary gain on sale
of discontinued operations,
net of taxes 2.7 -- 235.2 --
Cumulative effect of a
change in accounting
principle, net of taxes -- -- (22.1) --
Net income (loss) (1.9) 95.7 516.5 497.6
Preferred dividend
requirements -- 0.8 -- (4.4)
Net income (loss)
available to common
stockholders $(1.9) $96.5 $516.5 $493.2
Basic earnings per share:
Income from continuing
operations before
extraordinary items and
the cumulative effect of
a change in
accounting principle $0.01 $0.43 $1.60 $2.25
Income (loss) from
discontinued operations,
net of taxes -- -- (0.03) 0.04
Extraordinary loss on
early extinguishment of
debt, net of taxes (0.03) -- (0.18) (0.01)
Extraordinary gain on
sale of discontinued
operations, net of taxes 0.01 -- 1.07 --
Cumulative effect of a
change in accounting
principle, net of taxes -- -- (0.10) --
Net income (loss) $(0.01) $0.43 $2.36 $2.28
Weighted average common
shares outstanding 215.8 219.3 218.5 216.1
Diluted earnings per share:
Income from continuing
operations before
extraordinary items and
the cumulative effect of
a change in
accounting principle $0.01 $0.43 $1.59 $2.23
Income (loss) from
discontinued operations,
net of taxes -- -- (0.03) 0.04
Extraordinary loss on
early extinguishment of
debt, net of taxes (0.03) -- (0.18) (0.01)
Extraordinary gain on
sale of discontinued
operations, net of taxes 0.01 -- 1.07 --
Cumulative effect of a
change in accounting
principle, net of taxes -- -- (0.10) --
Net income (loss) $(0.01) $0.43 $2.35 $2.26
Weighted average common
shares and common share
equivalents outstanding 216.3 220.5 219.4 217.9
SEGMENT INFORMATION
Fort James Corporation
First Second Third Fourth
(in millions) Quarter Quarter Quarter Quarter Year
1999 Net sales:
Tissue - North
America $899.4 $913.7 $950.3 $910.5 $3,673.9
Tissue - Europe 465.9 456.3 452.1 459.7 1,834.0
Dixie 175.6 220.3 195.2 195.8 786.9
Communications
Papers and Fiber 196.0 200.9 209.3 228.3 834.5
Intercompany (67.9) (72.7) (67.6) (93.7) (301.9)
Total net
sales $1,669.0 $1,718.5 $1,739.3 $1,700.6 $6,827.4
1998 Net sales:
Tissue - North
America $889.1 $904.6 $935.7 $904.7 $3,634.1
Tissue - Europe 458.0 466.2 463.5 481.7 1,869.4
Dixie 172.8 224.5 193.3 184.9 775.5
Communications
Papers and Fiber 215.5 210.4 189.6 181.1 796.6
Intercompany (66.6) (74.6) (68.4) (63.4) (273.0)
Total net
sales $1,668.8 $1,731.1 $1,713.7 $1,689.0 $6,802.6
1999 Income (loss)
from operations (a):
Tissue - North
America $192.1 $183.5 $125.6 $143.5 $644.7
Tissue - Europe 61.1 57.4 50.8 41.1 210.4
Dixie 19.3 38.6 20.3 26.9 105.1
Communications
Papers and Fiber (14.2) (8.6) 1.8 12.3 (8.7)
Corporate (21.9) (18.7) (30.3) (22.2) (93.1)
Income from
continuing
operations before
restructure
and other $236.4 $252.2 $168.2 $201.6 $858.4
1998 Income (loss)
from operations:
Tissue - North
America $200.8 $217.8 $228.3 $225.2 $872.1
Tissue - Europe 55.7 57.4 59.3 63.8 236.2
Dixie 17.9 33.2 20.5 17.5 89.1
Communications
Papers and Fiber 6.4 3.5 2.0 (9.5) 2.4
Corporate (22.6) (21.2) (22.3) (21.5) (87.6)
Income from
continuing
operations before
restructure
and other $258.2 $290.7 $287.8 $275.5 $1,112.2
(a) Third quarter and year-to-date income from operations included
$46.0 million of unusual items for severance and litigation accruals.
Details by segment are as follows:
Income From Operations
Unusual Excluding Unusual Items
Items Third Quarter Year
Tissue -- North America $34.7 $160.3 $679.4
Tissue -- Europe -- 50.8 210.4
Dixie 0.9 21.2 106.0
Communications Papers and Fiber 2.1 3.9 (6.6)
Corporate 8.3 (22.0) (84.8)
Total $46.0 $214.2 $904.4
CONSOLIDATED BALANCE SHEETS
Fort James Corporation
As of December 26, 1999, and December 27, 1998
(in millions) 1999 1998
Assets:
Cash and cash equivalents $10.3 $5.3
Accounts receivable 880.5 857.5
Inventories 790.4 806.5
Other current assets 147.2 187.0
Total current assets 1,828.4 1,856.3
Net property, plant and equipment 4,352.1 4,321.6
Goodwill 528.8 620.0
Net assets of discontinued operations -- 403.4
Other assets 548.9 526.7
Total assets $7,258.2 $7,728.0
Liabilities and shareholders' equity:
Accounts payable and accrued
liabilities $1,187.8 $1,323.8
Current portion of long-term debt 81.9 240.0
Total current liabilities 1,269.7 1,563.8
Long-term debt 3,432.0 3,646.4
Deferred income taxes 748.6 756.5
Accrued postretirement benefits
other than pensions 417.1 446.8
Other long-term liabilities 263.5 263.1
Common shareholders' equity 1,127.3 1,051.4
Total liabilities and
shareholders' equity $7,258.2 $7,728.0
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fort James Corporation
For the Twelve Months Ended December 26, 1999 and December 27, 1998
(in millions) 1999 1998
Cash provided by (used for) operating activities:
Net income $516.5 $497.6
Depreciation expense 445.0 428.3
Amortization of goodwill 18.4 19.2
Deferred income tax provision 4.9 148.1
Restructure and other items 142.6 24.9
(Income) loss from discontinued
operations, net of taxes 6.4 (8.4)
Gain on sale of discontinued
operations, net of taxes (235.2) --
Loss on early extinguishment
of debt, net of taxes 39.8 2.6
Cumulative effect of a change in accounting
principle, net of taxes 22.1 --
Change in current assets and
liabilities, excluding
effects of acquisitions and dispositions:
Accounts receivable (93.8) (92.7)
Inventories (11.9) (26.4)
Prepaid expenses and other current assets (10.7) (1.8)
Accounts payable and accrued liabilities (130.2) (75.8)
Other, net (39.4) (45.3)
Cash provided by operating activities 674.5 870.3
Cash provided by (used for) investing activities:
Expenditures for property,
plant and equipment (533.8) (492.8)
Cash paid for acquisitions, net (110.3) (2.5)
Increase in net assets of
discontinued operations (34.4) 3.9
Proceeds from sale of
discontinued operations 836.3 --
Proceeds from sale assets -- 5.9
Other, net 14.9 (2.0)
Cash provided by (used for)
investing activities 172.7 (487.5)
Cash provided by (used for)
financing activities:
Additions to long-term debt 356.7 466.3
Payments of long-term debt (590.6) (108.4)
Net decrease in revolving debt (236.5) (659.5)
Premiums paid on early
extinguishment of debt
and debt issuance costs (67.2) (5.6)
Redemption of preferred stock -- (6.6)
Common and preferred stock
cash dividends paid (131.8) (139.5)
Proceeds from exercise
of stock options 15.9 30.4
Repurchase of common stock (199.7) --
Other, net 11.0 11.8
Cash used for financing
activities (842.2) (411.1)
Increase (decrease) in cash
and cash equivalents 5.0 (28.3)
Cash and cash equivalents,
beginning of year 5.3 33.6
Cash and cash equivalents,
end of year $10.3 $5.3
SOURCE Fort James Corporation
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Related links:
http://www.fortjames.com
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or PR Newswire Photo Desk, 888-776-6555 or 201-369-3467
CONTACT:
Financial, Celeste Gunter, 847-317-5355, or
Media, Mark Lindley, 847-317-5280, of Fort James Corporation
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