RICHMOND, Va., April 23 /PRNewswire/ -- Fort James Corporation (NYSE: FJ)
today announced results for its first quarter ended March 29, 1998. Excluding
non-recurring items, earnings for the first quarter were $.55 per diluted
share, compared to $.43 per diluted share in 1997, an improvement of 27.9
percent. Including restructuring-related charges of $.02 per diluted share
and an extraordinary loss on the early extinguishment of debt of $.01 per
diluted share, the company reported income of $.52 per diluted share for the
first quarter of 1998.
First Quarter Results
Compared with the first quarter of 1997, income from operations increased
7.1 percent to $268.7 million from $250.8 million and net income increased
25.7 percent to $122.2 million from $97.2 million, excluding restructure and
debt extinguishment charges. Net sales for the quarter declined by 1.2
percent to $1,795.6 million from $1,817.8 million, primarily due to the impact
of foreign currency translation and divestitures. Excluding these impacts,
sales and operating income would have increased by 1.1 percent and 9.5
percent, respectively. Operating margins for the quarter increased to 15.0
percent from 13.8 percent in the first quarter of 1997, excluding
restructuring-related charges. Interest expense declined $20.8 million, or
21.7 percent, from a combination of reduced debt levels and lower average
borrowing costs.
Non-Recurring Items
Results for the current quarter include a pretax charge of $7.5 million
($4.6 million net of taxes, or $.02 per diluted share) for merger-related
relocation and other costs not accruable in 1997. The company recorded
extraordinary losses on the early extinguishment of debt of $4.2 million ($2.6
million net of taxes, or $.01 per diluted share) in the first quarter of 1998
and $2.2 million ($1.3 million net of taxes) in the first quarter of 1997.
First Quarter Results by Business Segment
The North American Consumer Products Business posted operating profits of
$214.4 million in the current quarter, compared to $204.6 million reported in
the first quarter of 1997, while sales were comparable at $1,073.4 million in
1998 versus $1,077.4 million in 1997. The improvement in profitability was
driven principally by a combination of reduced manufacturing costs realized in
connection with merger synergies and other cost reductions, and marginally
higher average pricing, partially offset by higher fiber costs. In comparison
to exceptionally strong 1997 tissue volumes, retail tissue and tabletop
product volumes were generally similar to prior year levels, while away-from-
home tissue volumes declined modestly from 1997 levels. The decline in away-
from-home volumes was primarily due to the company's election to less
aggressively pursue certain lower-margin economy business. At the end of the
first quarter, the company completed the planned permanent closures of its
Ashland, Wisconsin and Carthage, New York tissue mills. These mills, which
produced approximately 84,000 tons per year of primarily away-from-home tissue
products, were the company's oldest, smallest and least cost-competitive
domestic tissue mills.
The European Consumer Products Business reported operating profits of
$55.7 million in the first quarter of 1998, a 6.3 percent improvement over the
$52.4 million reported in the prior year, while sales declined 3.1 percent,
from $472.6 million in 1997 to $458.0 million in 1998. Changes in foreign
currency translation associated with the strengthening of the dollar caused
the decline in sales and also impacted operating profits. Absent this change,
the current quarter sales would have increased 3.2 percent and operating
profits would have increased 12.6 percent compared to the prior year's
quarter. The improvement in profits resulted from a 5.6 percent increase in
finished goods volumes, partially offset by somewhat lower average selling
prices.
The Packaging Business reported first quarter 1998 profits of $10.3
million on sales of $180.4 million, compared to the $21.2 million of profits
on $196.7 million of sales in the prior year. Results for the Packaging
Business declined from prior year levels due to a combination of lower folding
carton volumes associated with a turnover in its customer base and lower
average pricing.
Operating profits for the Communications Papers Business increased to
$10.9 million in the current quarter, compared to a loss of $3.6 million in
1997. Sales increased by 6.4 percent, to $126.9 million in 1998 compared to
$119.3 in 1997. Increased sales and profits were principally the result of
improved pricing for uncoated free sheet and uncoated groundwood papers,
partially offset by reduced volumes for both grades of papers.
General corporate expenses were similar, at $22.6 million in the first
quarter of 1998 compared to $23.8 million in 1997.
Other Activities
A number of events occurred in the first quarter that will have continuing
benefits to the company. In February, the company completed a secondary
offering of 14.4 million shares of common stock on behalf of First Plaza Group
Trust and Morgan Stanley, Dean Witter, Discover & Co., representing their
entire shareholdings. In March, the company issued $300 million of 6.234%
notes and used the proceeds to reduce borrowings under revolving credit
facilities.
Also in March, Fort James reached agreement with Crown Vantage Inc., which
was spun off from the company in 1995, with respect to the Crown Vantage pay-
in-kind notes held by Fort James. The agreement provides Crown Vantage with
an option, exercisable through September 1998, to purchase these notes for $80
million in cash. The agreement also provides for the termination of certain
contractual arrangements between the companies and the mutual release of
claims that arose from prior inter-company transactions. This agreement will
allow Fort James to monetize these notes more quickly.
Finally, in March the company announced it would redeem its Series K, L
and N preferred stocks as of April 10. These preferred stocks were
convertible by holders into common stock. Substantially all of the
outstanding preferred shares were converted prior to the redemption date into
9.5 million common shares, reducing annual dividend payments by $18.7 million.
The conversion is expected to have no impact on 1998 diluted earnings per
share.
Outlook
Commenting on the company's outlook, Miles L. Marsh, the company's
chairman and chief executive officer said, "The merger integration is
progressing as expected, and our rationalization plans continue on track. I
am particularly pleased with the successful completion of the broker network
and sales force integrations in our North American tissue business and the
good progress on cost reduction and synergies which allowed us to more than
offset higher fiber costs. We are pleased with the steady improvements in
earnings posted by our core Consumer Products Businesses, both in North
America and Europe. We believe we will continue to see meaningful year-over-
year improvements in the balance of the year."
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. The company has approximately
29,000 employees and more than 65 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 James
River and Fort Howard businesses; and the ability to achieve synergistic and
other cost reductions and efficiencies.
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.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fort James Corporation Quarters Ended
(in millions, except per share amounts) March 29, March 30,
1998 1997
Net sales $1,795.6 $1,817.8
Cost of goods sold 1,243.1 1,278.1
Selling and administrative expenses 283.8 288.9
Restructure and other unusual items 7.5
Income from operations 261.2 250.8
Interest expense 75.0 95.8
Other income, net 8.8 7.1
Income before income taxes
and extraordinary item 195.0 162.1
Income tax expense 77.4 64.9
Income before extraordinary item 117.6 97.2
Extraordinary loss on early extinguishment of debt (2.6) (1.3)
Net income $115.0 $95.9
Preferred dividend requirements (5.2) (14.6)
Net income applicable to common shares $109.8 $81.3
Net income per common share:
Before extraordinary item $.54 $.44
Extraordinary loss on
early extinguishment of debt (.01) (.01)
Net income per share $.53 $.43
Weighted average number of common shares 208.5 187.9
Net income per common share - assuming dilution:
Before extraordinary item $.53 $.43
Extraordinary loss on
early extinguishment of debt (.01)
Net income per share - assuming dilution $.52 $.43
Weighted average number of common shares and
common share equivalents 210.9 205.7
SEGMENT INFORMATION (a)(c)
Fort James Corporation First Second Third Fourth
(in millions) Quarter Quarter Quarter Quarter Year
1998 Net sales:
Consumer products:
North America $1,073.4 $1,073.4
Europe 458.0 458.0
Packaging 180.4 180.4
Communications papers 126.9 126.9
Intersegment elimination (43.1) (43.1)
Total net sales $1,795.6 $1,795.6
1997 Net sales:
Consumer products:
North America $1,077.4 $1,127.2 $1,109.2 $1,046.2 $4,360.0
Europe 472.6 465.4 438.5 451.6 1,828.1
Packaging 196.7 198.3 200.0 187.9 782.9
Communications papers 119.3 112.0 117.8 118.6 467.7
Intersegment elimination (48.2) (48.6) (40.1) (42.8) (179.7)
Total net sales $1,817.8 $1,854.3 $1,825.4 $1,761.5 $7,259.0
1998 Income (loss) from operations:
Consumer products:
North America $214.4 $214.4
Europe 55.7 55.7
Packaging 10.3 10.3
Communications papers 10.9 10.9
General corporate expenses (22.6) (22.6)
Restructure and
other unusual items (7.5) (7.5)
Income from operations $261.2 $261.2
1997 Income (loss) from operations:
Consumer products:
North America $204.6 $231.1 $219.9 $189.8 $845.4
Europe 52.4 52.9 48.3 48.8 202.4
Packaging 21.2 23.8 22.7 13.6 81.3
Communications papers (3.6) .4 11.0 12.0 19.8
General corporate expenses (23.8) (22.3) (24.0) (21.9) (92.0)
Restructure and
other unusual items 57.7 (53.9) (458.0) (454.2)
Income from operations $250.8 $343.6 $224.0 $(215.7) $602.7
(a) Results for the first quarter of 1998 included nonrecurring charges
of $7.5 million ($4.6 million net of taxes, or $.02 per diluted share)
for merger-related relocation and other costs.
(b) Net income for the first quarter of 1998 and 1997 included a net
charge of $2.6 million (or $.01 per diluted share) and $1.3 million,
respectively, for extraordinary loss on early extinguishment of debt.
(c) All of the financial information for Fort James Corporation in 1997
includes the 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.
CONSOLIDATED BALANCE SHEETS
Fort James Corporation March 29, December 28, March 30,
(in millions) 1998 1997 1997
ASSETS:
Cash and cash equivalents $21.7 $33.6 $58.8
Accounts receivable 820.1 787.8 762.4
Inventories 872.6 854.3 811.7
Other current assets 245.5 240.8 177.4
Total current assets 1,959.9 1,916.5 1,810.3
Net property, plant and equipment 4,532.0 4,565.3 4,858.4
Other assets 628.7 614.5 592.4
Goodwill 620.1 636.9 681.7
Total assets $7,740.7 $7,733.2 $7,942.8
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable
and accrued liabilities $1,463.9 $1,549.5 $1,271.9
Current portion of long-term debt 31.3 34.4 127.7
Total current liabilities 1,495.2 1,583.9 1,399.6
Long-term debt 4,154.6 4,155.5 4,290.1
Accrued postretirement benefits
other than pensions 472.8 474.8 457.3
Deferred income taxes 698.5 650.8 706.9
Other long-term liabilities 267.7 283.9 251.7
Preferred stock 270.1 352.7 738.4
Common shareholders' equity 381.8 231.6 98.8
Total liabilities
and shareholders' equity $7,740.7 $7,733.2 $7,942.8
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fort James Corporation Quarters Ended
(in millions) March 29, March 30,
1998 1997
Operating activities:
Net income $115.0 $95.9
Depreciation expense and cost
of timber harvested 114.1 122.1
Amortization of goodwill 4.8 5.2
Deferred income tax provision 49.2 30.7
Restructure and other unusual items 7.5
Loss on early extinguishment of debt 2.6 1.3
Change in current assets and liabilities:
Accounts receivable (44.2) (22.4)
Inventories (21.2) (21.6)
Other current assets (4.8) 12.8
Current liabilities (50.7) (93.6)
Restructure and integration payments (50.7) (6.5)
Foreign currency hedge (31.5)
Other, net (13.2) (.6)
Cash provided by operating activities 108.4 91.8
Investing activities:
Expenditures for property, plant and equipment (101.0) (75.3)
Cash received from sale of assets 4.4 1.6
Other, net 1.1 7.1
Cash used for investing activities (95.5) (66.6)
Financing activities:
Additions to long-term debt 306.9 134.9
Payments of long-term debt (306.8) (114.9)
Common stock issued on exercise of stock options 15.6 6.4
Dividends paid (37.3) (27.4)
Other, net (3.2)
Cash used for financing activities (24.8) (1.0)
Increase (decrease) in cash and cash equivalents $(11.9) $24.2
SOURCE Fort James Corporation
 back to top
Company News On-Call: http://www.prnewswire.com or
fax, 800-758-5804, ext. 457350
Related links:
http://www.fortjames.com
CONTACT:
Financial: Celeste Gunter, 804-649-4307, or
Media: Richard B. Elder, 804-343-4785, both of Fort James
|
