DEERFIELD, Ill., July 21 /PRNewswire/ -- Fort James Corporation reported
second quarter 1999 net earnings of $135.2 million, or $0.62 per diluted
share, from continuing operations before unusual items. This compares to net
income of $137.9 million, or $0.63 per diluted share, reported in the second
quarter of 1998, on the same basis. Second quarter net sales of
$1,718.5 million were similar to 1998 sales of $1,731.1 million.
(Photo: http://www.newscom.com/cgi-bin/prnh/19990204/CGTH023 )
In April, Fort James announced the signing of a definitive agreement to
sell its Packaging business to ACX Technologies, Inc. for $830 million in
cash. The sale is expected to be completed in the third quarter. As a
result, the Packaging business has been shown in the financial statements as a
discontinued operation and information for prior periods has been restated.
The current quarter net loss from discontinued operations of $9.3 million, or
$0.04 per diluted share, includes Packaging operating profits, one-time
non-operating expenses, and an allocation of interest expense and taxes.
The company reported an extraordinary loss on the extinguishment of debt
of $31.0 million net of taxes, or $0.14 per diluted share, in the current
quarter. Fort James also reported non-recurring pretax income of $1.1 million
in 1999, compared to non-recurring charges of $8.8 million, or $0.03 per
diluted share, in 1998. Including these unusual items and the results of
discontinued operations, the company reported net earnings of $95.6 million,
or $0.44 per diluted share, in the second quarter of 1999, versus
$136.2 million, or $0.62 per diluted share, in 1998.
"Our company's second quarter results were clearly affected by market
conditions and activities in the North American tissue industry," said Miles
Marsh, chairman and chief executive officer of Fort James. "However, we were
able to post solid volume gains in our retail businesses supported by creative
marketing and new product initiatives. The sale of our Packaging business and
the acquisition of the Demak'Up business in Europe will sharpen our company's
consumer products focus."
Six Months Results
For the first six months of the year, the company generated net income of
$252.8 million, or $1.15 per diluted share, from continuing operations before
unusual items. This compares to $257.4 million, or $1.17 per diluted share,
on the same basis in 1998.
Second Quarter Operating Income
Income from continuing operations before unusual items declined 13 percent
to $252.2 million in the second quarter of 1999 from $290.7 million a year
earlier. The decline was principally attributable to reduced earnings in the
North American away-from-home tissue business and pricing-driven declines in
Communications Papers and Fiber.
The Tissue - North America business posted operating profits of
$183.5 million in the current quarter compared to $217.8 million reported in
the second quarter of 1998, while sales increased slightly to $913.7 million
compared to $904.6 million in 1998. Each of the company's flagship brands
gained market share, including Quilted Northern bath tissue, Brawny towels,
and Mardi Gras and Vanity Fair napkins. These gains were principally driven
by the combination of highly effective new advertising, product improvements,
and effective merchandising. Beginning in mid-July, Fort James is rolling out
an improved Quilted Northern bath tissue. This product is now thicker,
stronger, more absorbent, and significantly softer. Consumer preference
ratings have been very favorable.
The majority of the decline in Tissue -- North America profits occurred in
the away-from-home business. Away-from-home volumes were similar to the prior
year, but pricing was down due to competitive industry conditions.
Profits for both the retail and away-from-home businesses were negatively
impacted by increased distribution costs and inventory levels. These
increases reflect efforts to resolve last year's service issues and costs
associated with the transition to a common order entry and scheduling system.
Operating profits of the Tissue -- Europe business of $57.4 million were
equal to those reported in the prior year, while sales declined slightly to
$456.3 million in 1999 from $466.2 million in 1998. Changes in foreign
currency translation rates are estimated to have negatively affected sales and
operating profits by approximately 3 percent, or $14 million and $2 million,
respectively, compared to last year's quarter. Continuing above market growth
trends of the last few years, European finished goods volumes increased
4.5 percent, with notable gains in France, the British Isles, Spain and
Greece. The benefits of the volume gains, combined with cost reductions and
lower year-over-year raw material costs, were substantially offset by the
effect of competitive pricing conditions. On July 1st, the company completed
the previously announced acquisition of Demak'Up, the leading European brand
of make-up removal cotton pads.
Operating profits in the Dixie business in the seasonally strong second
quarter increased 16 percent to $38.6 million compared to $33.2 million in
1998, on sales of $220.3 million, versus $224.5 million in the prior year.
Profits and margins in both Dixie retail and foodservice improved over the
prior year levels. Retail Dixie performance benefited from strong volume
growth in both cups and plates, driven by good category momentum and market
share gains. New "value-pack" offerings in cups and plates were the primary
contributors to the strong volume growth. The company's rationalization
activities in the Dixie foodservice area contributed to this division's
improvement. While foodservice sales were significantly below those of the
prior year, reflecting the pruning of certain low-margin product lines, good
growth was posted in key targeted areas such as the PerfecTouch hot cup,
dense-pack cutlery, and Quilt-Rap premium food wraps.
The Communications Papers and Fiber business reported an operating loss
for the current quarter of $8.6 million on sales of $200.9 million, compared
to operating profits of $3.5 million on sales of $210.4 million in 1998.
Lower pricing for uncoated free sheet and groundwood papers and market pulp
was the primary cause of the lower year-over-year performance. However, the
operating loss narrowed from first quarter 1999 levels, as firming commodity
paper markets allowed modest price recovery.
Other Items
Cash provided by operations totaled $308.1 million for the first six
months of 1999, compared to $330.6 million in 1998. The decrease is primarily
due to lower earnings and increased working capital, partially offset by
reduced restructure-related and integration spending.
Lower average borrowing costs and net debt reduction resulted in an
approximate 12 percent decrease in interest expense both in the quarter and
the six months. During the quarter, the company refinanced approximately
$250 million of higher cost debt. Other income for the second quarter
included $9.3 million of interest income on prior year tax refunds.
The effective tax rate was 34.3 percent for the first six months of 1999,
down from 37.8 percent in 1998, primarily due to the benefits of tax planning
actions.
Comment and Outlook
"Several challenging marketplace developments and the complexities of
fully integrating our merged companies have made 1999 a challenging
transitional year," said Miles Marsh. "We have now put behind us important
steps such as combining retail and away-from-home order entry and invoicing
systems and price lists. Distribution integration has also taken place. Some
inefficiencies have resulted, but we are actively working to reduce or
eliminate them. At the same time, we are encouraged by solid marketplace
performances in our retail tissue, Dixie and European businesses. We are also
now able to move ahead on the completion of previously announced headcount
reduction programs, which should provide further support for ongoing
performance."
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. In 1998, the company had annual
sales of $7.3 billion, 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;
the ability to successfully implement new product initiatives; 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 and Six Months
Ended June 27, 1999 and June 28, 1998
Second Quarter Year
(in millions, except
per share amounts) 1999 (a) 1998 (b) 1999 (c) 1998 (d)
Net sales $1,718.5 $1,731.1 $3,387.5 $3,399.9
Income from operations,
before unusual items 252.2 290.7 488.6 548.9
Net income from continuing
operations, before unusual items 135.2 137.9 252.8 257.4
Diluted earnings per share:
From continuing operations,
before unusual items $0.62 $0.63 $1.15 $1.17
Discontinued operations (0.04) 0.02 (0.02) 0.03
Net income 0.44 0.62 0.88 1.14
(a) Net income for the second quarter of 1999 included net non-recurring
income of $1.1 million ($0.7 million after taxes) for the reversal of
liabilities settled on terms more favorable than anticipated which
were largely offset by merger related severance costs, a loss from
discontinued operations of $14.7 million ($9.3 million after taxes or
$0.04 per diluted share), and $50.8 million ($31.0 million after
taxes or $0.14 per diluted share) for an extraordinary loss on early
extinguishment of debt.
(b) Net income for the second quarter of 1998 included merger related
relocation costs of $8.8 million ($5.4 million after taxes or
$0.03 per diluted share) and income from discontinued operations of
$6.7 million ($3.7 million after taxes or $0.02 per diluted share).
(c) Net income for the first six months of 1999 included net non-
recurring income of $1.1 million ($0.7 million after taxes) for the
reversal of liabilities settled on terms more favorable than
anticipated which were largely offset by merger related severance
costs, a loss from discontinued operations of $6.8 million
($4.9 million after taxes or $0.02 per diluted share), and charges of
$54.4 million ($33.2 million after taxes or $0.15 per diluted share)
for an extraordinary loss on early extinguishment of debt and
$34.1 million ($22.1 million after taxes or $0.10 per diluted share)
for the cumulative effect of a change in accounting for start-up
costs.
(d) Net income for the first six months of 1998 included merger related
relocation costs of $15.3 million ($9.5 million after taxes or
$0.05 per diluted share), income from discontinued operations of
$10.6 million ($5.9 million after taxes or $0.03 per diluted share),
and $4.2 million ($2.6 million after taxes or $0.01 per diluted
share) for an extraordinary loss on early extinguishment of debt.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fort James Corporation
For the Quarters and Six Months
Ended June 27, 1999 and June 28, 1998
Quarter Six Months
(in millions, except per
share amounts) 1999 1998 1999 1998
Net sales $1,718.5 $1,731.1 $3,387.5 $3,399.9
Cost of goods sold (1,175.2) (1,164.5) (2,310.7) (2,299.4)
Selling and administrative
expenses (291.1) (275.9) (588.2) (551.6)
Restructure and other unusual items 1.1 (8.8) 1.1 (15.3)
Income from operations 253.3 281.9 489.7 533.6
Interest expense (59.4) (68.0) (121.9) (137.4)
Other income, net 14.2 (6.3) 18.1 2.5
Income from continuing operations
before income taxes,
extraordinary item, and
cumulative effect of a change
in accounting principle 208.1 207.6 385.9 398.7
Income tax expense (72.2) (75.1) (132.4) (150.8)
Income from continuing
operations before extraordinary
item and cumulative effect of a
change in accounting principle 135.9 132.5 253.5 247.9
Discontinued operations,
net of taxes (9.3) 3.7 (4.9) 5.9
Income before extraordinary item
and cumulative effect of a
change in accounting principle 126.6 136.2 248.6 253.8
Extraordinary loss on early
extinguishment of debt,
net of taxes (31.0) - (33.2) (2.6)
Cumulative effect of a change
in accounting principle,
net of taxes - - (22.1) -
Net income 95.6 136.2 193.3 251.2
Preferred dividend requirements - - - (5.2)
Net income available to
common stockholders $95.6 $136.2 $193.3 $246.0
Basic earnings per share:
Income from continuing operations
before extraordinary item
and the cumulative effect
of a change in
accounting principle $0.62 $0.61 $1.15 $1.13
Discontinued operations,
net of taxes (0.04) 0.02 (0.02) 0.03
Extraordinary loss on early
extinguishment of debt (0.14) - (0.15) (0.01)
Cumulative effect of a change
in accounting principle - - (0.10) -
Net income $0.44 $0.63 $0.88 $1.15
Weighted average common
shares outstanding 219.6 217.6 219.6 213.1
Diluted earnings per share:
Income from continuing operations
before extraordinary item
and the cumulative effect
of a change in accounting
principle $0.62 $0.60 $1.15 $1.12
Discontinued operations,
net of taxes (0.04) 0.02 (0.02) 0.03
Extraordinary loss on early
extinguishment of debt (0.14) - (0.15) (0.01)
Cumulative effect of a change
in accounting principle - - (0.10) -
Net income $0.44 $0.62 $0.88 $1.14
Weighted average common shares and
common share equivalents
outstanding 220.9 220.3 220.6 215.6
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 $1,813.1
Tissue - Europe 465.9 456.3 922.2
Dixie 175.6 220.3 395.9
Communications Papers
and Fiber 196.0 200.9 396.9
Intercompany (67.9) (72.7) (140.6)
Total net sales $1,669.0 $1,718.5 $3,387.5
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:
Tissue - North America $192.1 $183.5 $375.6
Tissue - Europe 61.1 57.4 118.5
Dixie 19.3 38.6 57.9
Communications Papers
and Fiber (14.2) (8.6) (22.8)
Corporate (21.9) (18.7) (40.6)
Income from continuing
operations before
restructure and
other unusual items $236.4 $252.2 $488.6
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
unusual items $258.2 $290.7 $287.8 $275.5 $ 1,112.2
CONSOLIDATED BALANCE SHEETS
Fort James Corporation
As of June 27, 1999, December 27, 1998, and June 28, 1998
June December June
(in millions) 1999 1998 1998
Assets:
Cash and cash equivalents $7.7 $5.3 $6.0
Accounts receivable 920.3 857.5 875.9
Inventories 819.2 806.5 789.5
Other current assets 145.4 187.0 212.5
Total current assets 1,892.6 1,856.3 1,883.9
Net property, plant and equipment 4,160.7 4,321.6 4,206.8
Goodwill 552.4 620.0 611.0
Net assets of discontinued operations 426.2 403.4 422.2
Other assets 551.4 526.7 575.5
Total assets $7,583.3 $7,728.0 $7,699.4
Liabilities and shareholders' equity:
Accounts payable and accrued
liabilities $1,174.7 $1,323.8 $1,395.2
Current portion of long-term debt 235.8 240.0 39.1
Total current liabilities 1,410.5 1,563.8 1,434.3
Long-term debt 3,658.5 3,646.4 4,064.0
Deferred income taxes 733.6 756.5 717.3
Accrued postretirement benefits
other than pensions 438.9 446.8 459.5
Other long-term liabilities 281.6 263.1 263.6
Common shareholders' equity 1,060.2 1,051.4 760.7
Total liabilities and
shareholders' equity $7,583.3 $7,728.0 $7,699.4
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fort James Corporation
For the Six Months Ended June 27, 1999 and June 28, 1998
(in millions) 1999 1998
Cash provided by (used for) operating activities:
Net income $193.3 $251.2
Depreciation expense 220.4 211.6
Amortization of goodwill 9.3 9.4
Deferred income tax provision 38.2 103.1
Restructure and other unusual items (1.1) (2.6)
(Income) loss from discontinued operations 4.9 (5.9)
Loss on early extinguishment of debt,
net of taxes 33.2 2.6
Cumulative effect of a change in accounting
principle, net of taxes 22.1 -
Change in current assets and liabilities,
excluding effects of discontinued
operations:
Accounts receivable (115.7) (130.6)
Inventories (28.1) 1.7
Prepaid expenses and other current assets (12.3) 2.6
Accounts payable and accrued liabilities (30.0) (73.4)
Other, net (26.1) (39.1)
Cash provided by operating activities 308.1 330.6
Cash provided by (used for) investing activities:
Expenditures for property, plant and equipment (220.7) (205.1)
Proceeds from sale of assets 3.5 10.2
Increase in net assets of discontinued
operations (34.5) (15.5)
Other, net (1.0) (6.5)
Cash used for investing activities (252.7) (216.9)
Cash provided by (used for) financing activities:
Additions to long-term debt 19.9 384.8
Payments of long-term debt (333.4) (379.2)
Net increase (decrease) in revolving debt 361.0 (84.8)
Debt premiums and issuance costs (54.2) (5.7)
Redemption of preferred stock - (6.6)
Common and preferred stock cash dividends paid (65.9) (73.4)
Proceeds from exercise of stock options 8.6 23.6
Other, net 11.0 -
Cash used for financing activities (53.0) (141.3)
Increase (decrease) in cash and cash equivalents 2.4 (27.6)
Cash and cash equivalents, beginning of period 5.3 33.6
Cash and cash equivalents, end of period $7.7 $6.0
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
Company News On-Call:
http://www.prnewswire.com/comp/457350.html or fax,
800-758-5804, ext. 457350
CONTACT:
Financial, Celeste Gunter, 847-317-5355, or
Media, Mark Lindley, 847-317-5280, both of Fort James
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