Quarterly Earnings per Share Increased 31% Over Prior Year, Excluding Non-
Recurring Items
DEERFIELD, Ill., Feb. 4 /PRNewswire/ -- Fort James Corporation (NYSE: FJ),
an international leader in paper-based consumer products, today reported that
fourth quarter 1998 diluted earnings per share, excluding non-recurring items,
increased 31 percent to $0.63 per share from $0.48 per share in the same
quarter of 1997.
Excluding non-recurring items, fourth quarter operating income increased
18 percent to $287.1 million from $242.3 million in the previous year's
quarter. Operating margins expanded to 15.9 percent from 13.8 percent in the
1997 quarter. Sales increased 3 percent to $1.807 billion in the fourth
quarter of 1998. Net income before non-recurring items increased 29 percent
to $137.0 million in the 1998 quarter from $106.5 million in the same quarter
of 1997.
Miles L. Marsh, Fort James' chairman and chief executive officer, said,
"We're very pleased with the results generated by a number of our segments
during the fourth quarter. In particular, our tissue businesses in North
America and Europe -- our largest and most important segments -- reported
record fourth quarter sales and profits, and the benefits of cost reduction
programs and merger synergies yielded very strong margin and earnings
improvements."
Full Year Results
Excluding non-recurring items, earnings per share increased 27% to $2.51
per diluted share during fiscal 1998 from $1.97 per diluted share in 1997 and
net income increased 25 percent to $550.4 million during fiscal 1998 from
$439.5 million in fiscal 1997. Excluding non-recurring items, income from
operations during 1998 increased 10 percent to $1.162 billion. Operating
margins rose to 15.9% in 1998 from 14.6% in 1997. Net sales of $7.301 billion
in 1998 were essentially flat with the $7.259 billion reported in 1997, having
been adversely affected by changes in foreign currency translation and
divestitures. Excluding these factors, net sales would have risen an
estimated 1.3%.
New Business Segment Reporting
During the fourth quarter, the Company adopted Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" (FAS 131), which revised standards for the way public
companies report information about operating segments. As a result, the
Consumer Products businesses have been renamed Tissue; the Dixie business has
been reported as a separate segment; and the Communications Papers and Fiber
segments, for which individual reporting is not required, have been combined.
Both Dixie and Fiber were previously reported in the Consumer Products --
North America business. The Packaging business continues to be reported as a
separate segment.
Results by Business Segment
The Tissue -- North America business posted both improved operating
profits and sales in both the fourth quarter and the full year. Fourth
quarter operating profits increased 28 percent to $221.7 million from
$173.0 million in 1997, while sales were 8 percent higher at $861.8 million in
1998 versus $796.3 million in 1997. The improved profitability was primarily
the result of merger synergies and other cost reductions, strong retail tissue
volumes and moderately higher retail pricing. For the full year, operating
profits improved 10 percent to $864.8 million, compared to $783.0 million in
1997. During 1998, retail tissue prices improved over 1997 levels, while
away-from-home prices were essentially unchanged. In 1998, the Company
unveiled several improvements to its tissue products, including Quilted
Northern bath tissue with 40% more quilted thickness, and continued to expand
distribution of its retail products.
Operating profits for the Tissue -- Europe business increased 31 percent
to $63.8 million in the current quarter compared to $48.8 million in the prior
year, while sales increased 7 percent to $481.7 million versus $451.6 million
in 1997. For the full year, operating profits rose to $236.2 million,
compared to $202.4 million in 1997. The benefits of cost reduction
initiatives and strong finished goods volume growth were the primary drivers
of the improvements, but were partially offset by lower average prices
resulting from increased promotional activities. In addition, new product
offerings also contributed to this growth. During 1998, the Company
introduced or completed the rollout of new products into selected European
markets, including improved 2-ply and 3-ply bathroom tissues and uniquely
embossed kitchen roll towels. The Company also expanded an improved Lotus
handkerchief and unveiled an updated line of Lotus Professional away-from-home
products.
The Dixie business reported operating profits of $17.5 million on sales of
$184.9 million during the current quarter compared to operating profits of
$16.2 million on sales of $188.7 million in the prior year. For the full year
1998, operating profits rose 32 percent to $89.1 million compared to
$67.5 million in 1997. Cost reduction benefits were the main reason for the
improvements. Continued product rationalization activities have resulted in
lower away-from-home volumes, but improved product mix and pricing. During
1998, the Company introduced new Dixie designs and products, including a
number of value packs, which increased exposure and awareness of the brand.
The Packaging business reported fourth quarter 1998 operating profits of
$15.1 million on sales of $167.3 million, compared to $13.6 million of profits
on $187.9 million of sales in the prior year. Cost reduction, partially
offset by reduced market prices, was the primary driver of improved operating
profits. For 1998, the Packaging business reported profits of $56.6 million
compared to $81.3 million in the prior year. The business continues to
replace volume lost following a turnover in its customer base. This
replacement volume, however, is at lower average prices and, combined with
lower board market prices, resulted in an unfavorable year over year pricing
comparison. The volume and price declines were partially offset by cost
reductions. The purchase of the assets and technology of Beckett Technologies
in 1998 gave the Company a new and improved form of microwave packaging
technology.
The Communications Papers and Fiber businesses reported a fourth quarter
operating loss of $9.5 million and sales of $181.1 million compared to fourth
quarter 1997 operating profits of $12.6 million and sales of $210.0 million.
The decrease in operating profits and sales were primarily the result of lower
uncoated free sheet paper and market pulp prices. For the full year, 1998
income from operations was $2.4 million compared to $14.7 million in 1997.
The decline is primarily attributable to lower market pulp prices.
Non-Recurring Items
Fourth quarter results for both 1998 and 1997 include certain
non-recurring items. Results for the current quarter include net
non-recurring expenses of $69.1 million ($44.8 million after taxes or $0.21
per diluted share). Included in this total are merger-related expenses which
could not be recognized in 1997 under applicable accounting principles
($40.8 million), a non-operating asset impairment write-down ($26.2 million),
costs associated with additional plant closures ($19.7 million), and other net
miscellaneous costs of $7.6 million. These costs were partially offset by a
net reversal of accruals related to the 1997 restructure charge due to
revisions of estimates or settlement of such liabilities on terms more
favorable than anticipated ($25.2 million). In addition, the Company reversed
$3.5 million ($0.01 per diluted share) of merger-related tax reserves
established in 1997 in accordance with temporary IRS regulations, which have
since been rescinded. Results for the fourth quarter of 1997 reflected a
pretax charge of $458.0 million ($317.6 million after taxes, or $1.53 per
diluted share) for restructuring and other unusual items and an extraordinary
charge on the early extinguishment of debt of $138.2 million ($84.4 million
after taxes, or $0.41 per diluted share). Including these non-recurring
items, reported net income for the fourth quarter of 1998 was $95.7 million,
or $0.43 per diluted share, and the reported net loss for the fourth quarter
of 1997 was $295.5 million, or $1.46 per diluted share.
Other Results
Cash provided by operations totaled $924.8 million for the current year
and, despite approximately $150 million of restructuring payments, total debt
was reduced by more than $300 million. Lower average borrowing costs and
reduced debt levels continue to positively affect interest costs. For the
current quarter, interest expense declined 8 percent, to $67.9 million versus
$74.2 million in 1997. For the year, interest expense decreased by
$63.3 million, or 18 percent, to $288.5 million.
The Company reported other expenses of $6.2 million in 1998 compared to
other income of $18.8 million in 1997. The decrease is primarily due to lower
earnings of unconsolidated subsidiaries and to increased foreign currency
transaction losses.
Excluding the effect of non-recurring items, the effective tax rate for
the year declined to 36.5 percent in 1998 from 39.3 percent in 1997. The
effective tax rate, excluding non-recurring items, declined due to the
benefits of tax planning actions realized in 1998.
Outlook
"We enter 1999 having made solid progress over the last year in our
businesses and brands," said Miles Marsh. "Our cost positions are improved
significantly and we have an impressive list of new products and other growth
initiatives being implemented. However, market conditions in our
Communications Papers and Board businesses make year over year comparisons
difficult. Also, recent competitive developments in the North American tissue
sector will require strengthened marketing plans and expenditures.
Consequently, we believe earnings in 1999 could be roughly equal to 1998
levels through at least the first half of the year. We view this as a
temporary pause in momentum and are convinced our current programs will
continue to drive improved results in our business. We also anticipate
substantial cash flow improvements in 1999, even in the current environment."
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 and plates. The company's popular brands
include Quilted Northern, Brawny, Dixie, Vanity Fair, Mardi Gras, Green
Forest, Soft 'N Gentle and So-Dri in North America and Lotus, Tenderly,
Colhogar and Kittensoft in Europe. Fort James also produces folding cartons
for packaging food and pharmaceuticals and communications papers such as
printing, publishing and office copy paper. With annual sales of
$7.3 billion, the company has approximately 28,000 employees and more than 60
manufacturing facilities in the U.S., Canada and 10 European countries.
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, general business and
economic conditions; competitive pricing pressures for the company's products;
changes in raw material, energy and other costs; opportunities that may be
presented to and pursued by the company; determinations by regulatory and
governmental authorities; the ability to successfully integrate the former
James River and Fort Howard businesses; the ability to achieve synergistic and
other cost reductions and efficiencies; and the ability to successfully
remediate Year 2000 problems.
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 (13 Weeks) and Years (52 Weeks)
Ended December 27, 1998 and December 28, 1997
(in millions, except per share amounts)
Fourth Quarter Year
1998 1997 1998 1997
(a) (c)(d) (a)(b) (c)(d)
Net sales $1,806.6 $1,761.5 $7,301.1 $7,259.0
Income from operations
before nonrecurring
items 287.1 242.3 1,161.5 1,056.9
Net income before
extraordinary and
nonrecurring items 137.0 106.5 550.4 439.5
Diluted earnings per
share:
Before extraordinary and
nonrecurring items $0.63 $0.48 $2.51 $1.97
Net Income $0.43 $(1.46) $2.26 $(0.28)
(a) Results for the fourth quarter included nonrecurring costs of
$69.1 million ($44.8 million after taxes or $0.21 per diluted share).
Results for year ended December 27, 1998 included nonrecurring costs of
$100.8 million ($64.2 million after taxes or $0.30 per diluted share). In
addition, the Company reversed $3.5 million ($0.01 per diluted share) for
the quarter and $14.0 million ($0.06 per diluted share) for the year of
merger-related tax reserves that were established in 1997 in accordance
with temporary IRS regulations, which have since been rescinded.
(b) Net income for the year ended December 27, 1998, included a net charge
of $2.6 million ($0.01 per diluted share) for an extraordinary loss on
early extinguishment of debt.
(c) Results for the fourth quarter of 1997 included a nonrecurring
restructure charge of $458.0 million ($317.6 million after taxes or $1.53
per diluted share). Results for the year ended December 28, 1997 included
net nonrecurring charges of $454.2 million ($335.0 million after taxes or
$1.62 per diluted share).
(d) Net income for the fourth quarter and year ended December 28, 1997
included a net charge of $84.4 million ($0.41 per diluted share) and
$131.5 million ($0.63 per diluted share), respectively, for an
extraordinary loss on early extinguishment of debt.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fort James Corporation
For the Quarters (13 Weeks) and Years (52 Weeks)
Ended December 27, 1998 and December 28, 1997
(in millions, except per share amounts)
Quarter Year
1998 1997 1998 1997
Net sales $1,806.6 $1,761.5 $7,301.1 $7,259.0
Cost of goods sold 1,213.8 1,243.1 4,965.1 5,077.7
Selling and administrative
expenses 305.7 276.1 1,174.5 1,124.4
Restructure and other
unusual items 69.1 458.0 100.8 454.2
Income (loss) from
operations 218.0 (215.7) 1,060.7 602.7
Interest expense 67.9 74.2 288.5 351.8
Other income (expense), net (4.4) (1.9) (6.2) 18.8
Income (loss) before
income taxes and
extraordinary item 145.7 (291.8) 766.0 269.7
Income tax expense (benefit) 50.0 (80.7) 265.8 165.2
Income (loss) before
extraordinary item 95.7 (211.1) 500.2 104.5
Extraordinary loss on early
extinguishment of debt,
net of taxes - (84.4) (2.6) (131.5)
Net income (loss) 95.7 (295.5) 497.6 (27.0)
Preferred dividend
requirements 0.8 (6.1) (4.4) (43.4)
Net income (loss)
available to common
stockholders $96.5 $(301.6) $493.2 $(70.4)
Basic earnings per share:
Income before
extraordinary item $0.43 $(1.05) $2.29 $0.31
Extraordinary loss on
early extinguishment
of debt - (0.41) (0.01) (0.67)
Net income $0.43 $(1.46) $2.28 $(0.36)
Weighted average common
shares outstanding 219.3 207.2 216.1 195.5
Diluted earnings per share:
Income before
extraordinary item $0.43 $(1.05) $2.27 $0.35
Extraordinary loss on
early extinguishment
of debt - (0.41) (0.01) (0.63)
Net income $0.43 $(1.46) $2.26 $(0.28)
Weighted average common
shares and common share
equivalents outstanding 220.5 207.2 217.9 207.6
CONSOLIDATED BALANCE SHEETS
Fort James Corporation
December 27, 1998 and December 28 1997
(in millions)
1998 1997
Assets:
Cash and cash equivalents $5.3 $33.6
Accounts receivable 891.5 787.8
Inventories 869.5 854.3
Other current assets 187.8 240.8
Total current assets 1,954.1 1,916.5
Property, plant and equipment 4,654.3 4,565.3
Goodwill 628.7 636.9
Other assets 555.2 614.5
Total assets $7,792.3 $7,733.2
Liabilities and shareholders' equity:
Accounts payable and accrued liabilities $1,375.3 $1,549.5
Current portion of long-term debt 240.0 34.4
Total current liabilities 1,615.3 1,583.9
Long-term debt 3,647.2 4,155.5
Deferred income taxes 756.5 650.8
Accrued postretirement benefits other
than pensions 458.8 474.8
Other long-term liabilities 263.1 283.9
Preferred stock - 352.7
Common shareholders' equity 1,051.4 231.6
Total liabilities and shareholders' equity $7,792.3 $7,733.2
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fort James Corporation
For the Years Ended December 27, 1998 and December 28, 1997
(in millions)
1998 1997
Cash provided by (used for) operating activities:
Net income (loss) $497.6 $(27.0)
Depreciation expense and cost of timber
harvested 471.1 474.7
Amortization of goodwill 19.7 20.1
Deferred income tax provision (benefit) 148.1 (41.4)
Restructure and other unusual items 34.6 366.4
Loss on early extinguishment of debt, net of tax 2.6 131.5
Change in current assets and liabilities:
Accounts receivable (89.1) (88.8)
Inventories (25.8) (79.7)
Other current assets (1.6) 23.5
Accounts payable and accrued liabilities (89.4) 69.4
Foreign currency hedge - (31.5)
Other, net (43.0) (53.0)
Cash provided by operating activities 924.8 764.2
Cash provided by (used for) investing activities:
Expenditures for property, plant and equipment (545.8) (490.2)
Proceeds from sale of assets 5.9 190.1
Other, net (4.5) 2.4
Cash used for investing activities (544.4) (297.7)
Cash provided by (used for) financing activities:
Additions to long-term debt 466.3 2,200.9
Payments of long-term debt (767.9) (2,378.4)
Common and preferred stock cash dividends paid (139.5) (121.6)
Premiums paid on early extinguishment of debt (3.2) (152.3)
Redemption of preferred stock (6.6) (98.1)
Proceeds from exercise of stock options 30.4 82.0
Other, net 11.8 -
Cash used for financing activities (408.7) (467.5)
Increase (decrease) in cash and cash equivalents (28.3) (1.0)
Cash and cash equivalents, beginning of year 33.6 34.6
Cash and cash equivalents, end of year $5.3 $33.6
SEGMENT INFORMATION
Fort James Corporation
(in millions)
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
1998 Net sales: (a)
Tissue - North
America $841.9 $851.5 $885.7 $861.8 $3,440.9
Tissue - Europe 458.0 466.2 463.5 481.7 1,869.4
Dixie 172.8 224.5 193.3 184.9 775.5
Packaging 180.4 185.9 184.1 167.3 717.7
Communications Papers
& Fiber 215.5 210.4 189.6 181.1 796.6
Intercompany (73.0) (81.5) (74.3) (70.2) (299.0)
Total net sales $1,795.6 $1,857.0 $1,841.9 $1,806.6 $7,301.1
1997 Net sales: (a)(b)
Tissue - North
America $837.3 $837.7 $843.1 $796.3 $3,314.4
Tissue - Europe 472.6 465.4 438.5 451.6 1,828.1
Dixie 173.0 224.3 194.8 188.7 780.8
Packaging 196.7 198.3 200.0 187.9 782.9
Communications Papers
& Fiber 220.1 209.4 219.5 210.0 859.0
Intercompany (81.9) (80.8) (70.5) (73.0) (306.2)
Total net sales $1,817.8 $1,854.3 $1,825.4 $1,761.5 $7,259.0
1998 Income (loss)
from operations: (a)(c)
Tissue - North America $201.0 $216.7 $225.4 $221.7 $864.8
Tissue - Europe 55.7 57.4 59.3 63.8 236.2
Dixie 17.9 33.2 20.5 17.5 89.1
Packaging 10.3 14.6 16.6 15.1 56.6
Communications Papers
& Fiber 6.4 3.5 2.0 (9.5) 2.4
Corporate (22.6) (21.2) (22.3) (21.5) (87.6)
Restructure and other
unusual income
(expense) (7.5) (9.7) (14.5) (69.1) (100.8)
Income (loss) from
operations $261.2 $294.5 $287.0 $218.0 $1,060.7
1997 Income (loss) from
operations: (a)(b)(d)
Tissue - North America $201.4 $207.1 $201.5 $173.0 $783.0
Tissue - Europe 52.4 52.9 48.3 48.8 202.4
Dixie 7.6 27.7 16.0 16.2 67.5
Packaging 21.2 23.8 22.7 13.6 81.3
Communications Papers
& Fiber (8.0) (3.3) 13.4 12.6 14.7
Corporate (23.8) (22.3) (24.0) (21.9) (92.0)
Restructure and other
unusual income
(expense) - 57.7 (53.9) (458.0) (454.2)
Income (loss) from
operations $250.8 $343.6 $224.0 $(215.7) $602.7
(a) As a result of the adoption of SFAS 131, the Consumer Products
businesses have been renamed Tissue; the Dixie business has been reported
as a separate segment; and the Communications Papers and Fiber segments,
for which individual reporting is not required have been combined. Both
Dixie and Fiber were previously reported in the Consumer Products -- North
America business. Packaging continues to be reported as a separate
segment.
(b) The 1997 financial information includes the combined results of James
River Corporation of Virginia and Fort Howard Corporation giving
retroactive effect to the merger on August 13, 1997, which has been
accounted for as a pooling of interests. Certain amounts in the prior
year's financial statements have been reclassified to conform to the
current year's presentation.
(c) Results for the fourth quarter and year ended December 27, 1998
included nonrecurring costs of $69.1 million and $100.8 million,
respectively.
(d) Results for the fourth quarter and year ended December 28, 1997
included nonrecurring restructure charges of $458.0 million and
$454.2 million, respectively.
SOURCE Fort James Corporation
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Photo Notes:http://www.newscom.com/cgi-bin/prnh/19990204/CGTH023
or NewsCom,213-237-5431
Related links:
www.fortjames.com
CONTACT:
Financial, Celeste Gunter, 847-317-5355, or
Media, Mark Lindley, 847-317-5280, both of Fort James Corporation
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