DEERFIELD, Ill., July 19 /PRNewswire/ -- Fort James Corporation today
announced second quarter 2000 net earnings, excluding unusual and
non-recurring items, of $110.8 million, or $0.54 per diluted share. This
compares to net earnings of $135.2 million, or $0.62 per diluted share,
reported on the same basis in the second quarter of 1999. Net sales for the
second quarter increased modestly to $1,756.6 million versus $1,718.5 million
in 1999. Excluding the effects of currency translation and divested
operations, net sales increased approximately 7 percent. Compared to the
first quarter of 2000, net sales increased by more than 4 percent and net
earnings, excluding unusual and nonrecurring items, increased approximately 15
percent.
(Photo: http://www.newscom.com/cgi-bin/prnh/19990204/CGTH023 )
"Strong cost reduction and improved product pricing combined to strengthen
Fort James' results for the second quarter," said Miles L. Marsh, Chairman and
Chief Executive Officer of Fort James. "We are still, however, feeling the
effects of higher raw material costs on a worldwide basis."
Second Quarter Results by Segment
Income from operations, excluding unusual and non-recurring items,
declined to $225.8 million in the second quarter of 2000 from $252.2 million
in 1999. The decline was principally attributable to reduced earnings in the
Tissue - North America and Tissue - Europe businesses, driven by escalating
costs in key raw materials, partially offset by increased earnings in the
Communications Papers and Fiber businesses.
Sales for the Tissue - North America business increased 4 percent in the
second quarter of 2000 to $951.0 million compared to $913.7 million a year
ago. Income from operations of $172.1 million was 6 percent lower than the
$183.5 million reported in 1999, but represented a 19 percent increase over
the $144.1 million posted in the first quarter of 2000. Compared to the prior
year, the decline in income from operations was primarily attributable to
increased raw material costs, principally recycled paper. However, strong
improvements in manufacturing cost reductions and the benefits of pricing
initiatives partially offset the higher raw material costs. Distribution and
warehousing costs continued to decline compared to both the prior year and the
first quarter of 2000, despite rising fuel costs, as product flow improvement
programs took effect. In addition, three major mill maintenance outages were
successfully completed in the second quarter, in a shorter timeframe and with
less expense than originally anticipated.
The away-from-home category experienced top-line growth driven by higher
pricing and mix improvements from our Sofpull(R) and NuRoll(R) towels,
coreless Compact(R) tissue and CoolColor(TM) dispenser product lines. Volumes
declined slightly compared to the prior year, as the company pursued pricing
policies to help alleviate the impacts of the significant raw material
inflation.
Volume in the retail category was comparable to 1999 with gains in bath
tissue offset by lower napkin volumes. During the quarter, list price
increases were implemented across all product lines.
Second quarter sales and income from operations of the Tissue - Europe
business declined to $433.6 million and $24.4 million, respectively, compared
to $456.3 million and $57.4 million in the prior year. Changes in currency
exchange rates negatively affected sales and operating profits by
approximately $44 million and $5 million, respectively, compared to last
year's quarter. The second quarter 2000 operating profits were negatively
impacted by continued raw material inflation, partially offset by finished
good pricing increases which have been initiated in all countries. Europe
also experienced good volume growth in all countries, except the United
Kingdom, with notable gains in France and the Nordic region compared to a year
ago.
Sales in the Dixie business increased 9 percent in the second quarter of
2000 to $240.6 million, compared to $220.3 million in 1999, while income from
operations in the current quarter was generally consistent with last year at
$37.3 million compared to $38.6 million. The current quarter sales
improvement was driven by volume gains in excess of 6 percent for both the
retail and foodservice categories, with notable gains in retail plates, the
club channel and foodservice plastic cutlery and cups. Income from operations
was affected by strong sales growth and cost reduction efforts, offset by raw
material inflation, particularly in plastic resins. Dixie has announced price
increases in all channels to recover raw material inflation. Dixie's Rinse &
ReUse, a new disposable stoneware product launched in the first quarter, had
strong acceptance in virtually every launch area and has achieved market share
in line with that of its premium competitors.
Second quarter 2000 sales for the Communications Papers and Fiber
businesses increased 13 percent to $226.8 million from $200.9 million a year
ago. Income from operations in the current quarter increased to
$10.2 million, compared to a loss from operations of $8.6 million in 1999.
The improved earnings were the result of significantly higher pulp and
uncoated freesheet prices, partially offset by the effect of lower pulp
volumes as a result of the January 2000 sale of Marathon, LTD ("Marathon") the
company's non-integrated pulp mill located in Ontario, Canada. Although
uncoated freesheet prices are significantly higher than last year, they
leveled in the second quarter after increasing steadily from the third quarter
of 1999.
Other Items
Other expense for the quarter was $3.1 million compared to other income of
$14.2 million in 1999. This decrease was primarily due to foreign currency
losses in the current quarter compared to foreign currency gains in the prior
year and interest income received in 1999 related to prior year tax refunds.
Cash provided by operations totaled $338.3 million for the first six
months of 2000, compared to $308.1 million in 1999. The increase was
primarily due to lower investments in working capital partially offset by
lower income from operations.
As part of the company's $500 million stock purchase program, the company
purchased 3.3 million common shares at a total cost of $75.2 million in the
quarter, 9.4 million common shares at a total cost of $198.9 million for the
year, and 16.5 million common shares at a total cost of $398.6 million since
the inception of the program in August 1999.
Unusual and Non-Recurring Items
Second quarter income from operations included non-recurring income of
$8.6 million ($5.6 million after taxes, or $0.03 per diluted share) related to
the settlement of divestiture liabilities on terms more favorable than
anticipated. These divestiture liabilities, recorded in 1999, related to the
closure of the groundwood paper business and the sale of Marathon.
Six Months Results
For the first six months of 2000, the company generated net earnings,
excluding unusual and non-recurring items, of $207.2 million, or $0.99 per
diluted share, compared to $252.8 million, or $1.15 per diluted share in 1999.
Comment
"After a difficult period, largely resulting from very significant raw
material cost increases, there is progress in our second quarter results,"
said Miles Marsh. "Some pricing has been achieved to partially offset the
cost increases, although full recovery remains some way off. Our cost
reduction programs have been successfully accelerated and our distribution
costs are meaningfully down despite rising fuel costs.
"We strongly believe the company's strategies and programs are sound and
are seeing the evidence of this in a variety of ways. Our positions in the
market remain very solid and our new marketing initiatives are meeting with
considerable success. However, we also believe the Georgia-Pacific initiative
to acquire Fort James represents strong immediate value to our shareholders
and removes execution risk. With this in mind, management has worked
diligently to bring this opportunity to our shareholders."
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 currently has
approximately 50 manufacturing facilities in the U.S., Canada and 11 other
countries around the world and had $6.8 billion of net sales in 1999.
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;
the ability to successfully introduce new products; changes in raw material,
energy and other costs; the ability to achieve net costs reductions;
opportunities that may be presented to and pursued by the company; and
determinations by regulatory and governmental authorities.
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 Six Months Ended
June 25, 2000 and June 27, 1999
Quarter Six Months
(in millions, except
per share data) 2000 (a) 1999 (b) 2000 (a) 1999 (b)
Net sales $1,756.6 $1,718.5 $3,433.2 $3,387.5
Income from operations,
before unusual and
non-recurring items $225.8 $252.2 $413.0 $488.6
Net earnings, before
unusual and
non-recurring items $110.8 $135.2 $207.2 $252.8
Diluted earnings
per share:
Net earnings, before
unusual and
non-recurring items $0.54 $0.62 $0.99 $1.15
Discontinued operations $- $(0.04) $- $(0.02)
Net income $0.57 $0.44 $1.02 $0.88
(a) Net income for the second quarter and first six months of 2000
included non-recurring income of $8.6 million ($5.6 million after taxes,
or $0.03 per diluted share) for the settlement of divestiture liabilities
on terms more favorable than anticipated.
(b) Net income for the second quarter and first six months of 1999
included non-recurring income of $1.1 million ($0.7 million after taxes),
a loss from discontinued operations of $9.3 million and $4.9 million, or
$0.04 and $0.02 per diluted share, and an extraordinary loss on the early
extinguishment of debt of $31.0 million and $33.2 million, or $0.14 and
$0.15 per diluted share, respectively. Net income for the first six
months also included a charge for the cumulative effect of a change in
accounting for start-up costs of $22.1 million, or $0.10 per diluted
share.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fort James Corporation
For the Quarters and Six Months
Ended June 25, 2000 and June 27, 1999
Quarter Six Months
(in millions, except
per share data) 2000 1999 2000 1999
Net sales $1,756.6 $1,718.5 $3,433.2 $3,387.5
Cost of goods sold (1,231.7) (1,175.2) (2,433.0) (2,310.7)
Selling and
administrative
expenses (299.1) (291.1) (587.2) (588.2)
Restructure and
other items 8.6 1.1 8.6 1.1
Income from
operations 234.4 253.3 421.6 489.7
Interest expense (58.6) (59.4) (115.6) (121.9)
Other income
(expense), net (3.1) 14.2 11.7 18.1
Income from continuing
operations before
income taxes,
extraordinary items,
and cumulative effect
of a change in
accounting principle 172.7 208.1 317.7 385.9
Income tax expense (56.3) (72.2) (104.9) (132.4)
Income from continuing
operations before
extraordinary items and
cumulative effect of
a change in
accounting principle 116.4 135.9 212.8 253.5
Loss from discontinued
operations, net
of taxes - (9.3) - (4.9)
Income before
extraordinary items
and cumulative effect
of a change in
accounting principle 116.4 126.6 212.8 248.6
Extraordinary loss on
early extinguishment of
debt, net of taxes - (31.0) - (33.2)
Cumulative effect of
a change in accounting
principle, net
of taxes - - - (22.1)
Net income $116.4 $95.6 $212.8 $193.3
Basic earnings per share:
Income from continuing
operations before
extraordinary items
and cumulative effect
of a change in
accounting principle $0.57 $0.62 $1.02 $1.15
Loss from discontinued
operations, net
of taxes - (0.04) - (0.02)
Extraordinary loss
on early extinguishments
of debt, net of taxes - (0.14) - (0.15)
Cumulative effect of a
change in accounting
principle, net
of taxes - - - (0.10)
Net income $0.57 $0.44 $1.02 $0.88
Weighted average common
shares outstanding 205.5 219.6 207.8 219.6
Diluted earnings per share:
Income from continuing
operations before
extraordinary items
and cumulative effect
of a change in
accounting principle $0.57 $0.62 $1.02 $1.15
Loss from discontinued
operations, net of taxes - (0.04) - (0.02)
Extraordinary loss on
early extinguishments
of debt, net of taxes - (0.14) - (0.15)
Cumulative effect of
a change in accounting
principle,
net of taxes - - - (0.10)
Net income $0.57 $0.44 $1.02 $0.88
Weighted average
common shares and common
share equivalents
outstanding 205.9 220.9 208.1 220.6
SEGMENT INFORMATION
Fort James Corporation
First Second Third Fourth
(in millions) Quarter Quarter Quarter Quarter Year
2000 Net sales:
Tissue -
North America $913.2 $951.0 $- $- $1,864.2
Tissue - Europe 449.9 433.6 - - 883.5
Dixie 179.2 240.6 - - 419.8
Communications
Papers and Fiber 237.2 226.8 - - 464.0
Intercompany (102.9) (95.4) - - (198.3)
Total net sales $1,676.6 $1,756.6 $- $- $3,433.2
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
2000 Income
(loss) from
operations:
Tissue -
North America $144.1 $172.1 $- $- $316.2
Tissue - Europe 29.1 24.4 - - 53.5
Dixie 19.4 37.3 - - 56.7
Communications
Papers and Fiber 14.3 10.2 - - 24.5
Corporate (19.7) (18.2) - - (37.9)
Income from
operations before
restructure
and other
items $187.2 $225.8 $- $- $413.0
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
operations
before restructure
and other
items $236.4 $252.2 $168.2 $201.6 $858.4
(a) Third quarter and full year 1999 income from operations included $46.0
million of unusual items for severance and litigation accruals.Details by
segment are as follows:
1999 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 June 25, 2000, December 26, 1999, and June 27, 1999
June December June
(in millions) 2000 1999 1999
Assets:
Cash and cash equivalents $4.6 $10.3 $7.7
Accounts receivable 895.5 880.5 920.3
Inventories 801.4 790.4 819.2
Other current assets 129.8 147.2 145.4
Total current assets 1,831.3 1,828.4 1,892.6
Net property, plant
and equipment 4,273.8 4,352.1 4,160.7
Goodwill, net 497.8 528.8 552.4
Net assets of
discontinued operations - - 426.2
Other assets 502.7 548.9 551.4
Total assets $7,105.6 $7,258.2 $7,583.3
Liabilities and
shareholders' equity:
Accounts payable and
accrued liabilities $1,150.5 $1,187.8 $1,174.7
Current portion of
long-term debt 70.3 81.9 235.8
Total current liabilities 1,220.8 1,269.7 1,410.5
Long-term debt 3,449.1 3,432.0 3,658.5
Deferred income taxes 726.6 748.6 733.6
Accrued postretirement
benefits other than pensions 406.4 417.1 438.9
Other long-term liabilities 256.3 263.5 281.6
Common shareholders' equity 1,046.4 1,127.3 1,060.2
Total liabilities and
shareholders' equity $7,105.6 $7,258.2 $7,583.3
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fort James Corporation
For the Six Months Ended June 25, 2000 and June 27, 1999
(in millions) 2000 1999
Cash provided by (used for)
operating activities:
Net income $212.8 $193.3
Depreciation expense 232.8 220.4
Amortization of goodwill 8.7 9.3
Deferred income tax provision 8.1 38.2
Restructure and other items (8.6) (1.1)
Loss from discontinued operations, net of taxes - 4.9
Loss on early extinguishment of debt, net of taxes - 33.2
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 (43.2) (115.7)
Inventories (18.9) (28.1)
Other current assets (6.1) (12.3)
Accounts payable and accrued liabilities (11.7) (30.0)
Other, net (35.6) (26.1)
Cash provided by operating activities 338.3 308.1
Cash provided [used for] by
investing activities:
Expenditures for property,
plant and equipment (222.5) (220.7)
Proceeds from sale of assets 92.4 3.5
Increase in net assets of
discontinued operations - (34.5)
Other, net (0.5) (1.0)
Cash used for investing activities (130.6) (252.7)
Cash provided by (used for)
financing activities:
Additions to long-term debt 4.0 19.9
Payments of long-term debt (30.8) (333.4)
Net increase in revolving debt 74.5 361.0
Premiums paid on early
extinguishment of debt
and debt issuance costs - (54.2)
Common stock dividends paid (63.7) (65.9)
Proceeds from exercise of stock options 1.5 8.6
Common stock purchases (198.9) -
Other, net - 11.0
Cash used for financing activities (213.4) (53.0)
Increase (decrease) in cash and cash equivalents (5.7) 2.4
Cash and cash equivalents, beginning of period 10.3 5.3
Cash and cash equivalents, end of period $4.6 $7.7
SOURCE Fort James Corporation
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Related links:
http://www.fortjames.com
Photo Notes:http://www.newscom.com/cgi-bin/prnh/19990204/CGTH023
or PR Newswire Photo Desk, 888-776-6555 or 201-369-3467
CONTACT:
Celeste Gunter, Financial, 847-317-5355, or
Mark Lindley, Media, 847-317-5280, both of Fort James Corporation
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