DEERFIELD, Ill., July 23 /PRNewswire/ -- Fort James Corporation (NYSE: FJ)
today announced results for its second quarter ended June 28, 1998. Excluding
non-recurring items, earnings for the second quarter were $.65 per diluted
share, compared to $.52 per diluted share in 1997, an improvement of 25
percent. Including non-recurring charges of $.03 per diluted share, the
company reported earnings of $.62 per diluted share for the second quarter of
1998.
Excluding non-recurring items, income from operations for the second
quarter increased 6.4 percent to $304.2 million from $285.9 million in the
prior year, and net income increased 24.1 percent to $142.1 million from
$114.5 million. Net sales of $1,857 million for the quarter were similar to
the $1,854 million reported in the prior year. Excluding foreign currency
translation and the effect of divestitures, sales and operating income would
have increased by 1.5 percent and 7.6 percent, respectively. Operating
margins for the quarter increased to 16.4 percent from 15.4 percent in the
second quarter of 1997, excluding non-recurring items.
Non-Recurring Items
Results for the current quarter included a net pretax charge of
$9.7 million ($5.9 million net of taxes, or $.03 per diluted share) for
merger-related costs not accruable in 1997. In the second quarter of 1997,
the company realized a gain of $57.7 million ($35.2 million net of taxes, or
$.16 per diluted share) on the sale of southern timberlands and an
extraordinary loss of $1.0 million ($0.6 million net of taxes) on the early
extinguishment of debt.
Six Months Results
For the first six months of the year, excluding non-recurring items, net
income increased 24.8 percent to $264.3 million, or $1.20 per diluted share,
in 1998 from $211.7 million, or $.95 per diluted share, in 1997. Including
the non-recurring items, the company reported net income of $251.2 million, or
$1.14 per diluted share, in 1998, compared to net income of $245.0 million, or
$1.11 per diluted share, in 1997. Net sales of $3,653 million in 1998, which
were similar to the $3,672 million reported in 1997, would have increased by
1.3 percent, absent changes in foreign currency translation and divestitures.
Second Quarter Results by Business Segment
The North American Consumer Products Business posted operating profits of
$245.4 million in the current quarter compared to $231.1 million reported in
the second quarter of 1997, while sales were comparable at $1,133.3 million in
1998 versus $1,127.2 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 higher average
pricing and volume for retail tissue products, partially offset by raw
material cost inflation. In the away-from-home tissue business, volumes,
which were impacted by the spring 1998 closures of the Ashland and Carthage
mills and subsequent transition to the remaining mill system, declined
modestly compared to exceptionally strong 1997 volumes. Competitive
conditions eroded the benefits of announced away-from-home tissue price
increases and only modest pricing gains were realized. The Dixie cup and
plate business also posted lower year-over-year volumes, principally due to
product rationalization activities in the commercial foodservice area;
however, improved average pricing and ongoing cost reduction benefits led to
margin improvements.
The European Consumer Products Business reported operating profits of
$57.4 million in the second quarter of 1998, an 8.5 percent improvement over
the $52.9 million reported in the prior year, while sales were comparable at
$466.2 million in 1998 versus $465.4 million in 1997. Changes in foreign
currency translation associated with the strengthening of the dollar impacted
both sales and operating profits. Absent this change, the current quarter
sales would have increased 3.1 percent and operating profits would have
increased 11.2 percent compared to the prior year's quarter. The improvement
in profits resulted primarily from increased finished goods volumes.
The Packaging Business reported second quarter 1998 profits of
$14.6 million on sales of $185.9 million, compared to $23.8 million of profits
on $198.3 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 carton and paperboard pricing. However, profits increased from the
first quarter 1998 level of $10.3 million, as the business continued to
replace volume.
Operating profits for the Communications Papers Business increased to
$8.0 million in the current quarter, compared to $0.4 million in 1997. Sales
increased by 5.5 percent, to $118.2 million in 1998 compared to $112.0 million
in 1997. The increased profitability was principally the result of improved
pricing for both uncoated free sheet and uncoated groundwood papers, partially
offset by higher wood costs and lower volumes.
General corporate expenses declined modestly to $21.2 million in the
second quarter of 1998 compared to $22.3 million in 1997.
Other Items
Interest expense declined by $20.6 million, or 21.8 percent, from $94.5
million in 1997 to $73.9 million in 1998, due to reduced debt levels and lower
average borrowing costs. Total debt declined by $82 million in the second
quarter of 1998. The company reported other, non-operating expenses of $6.3
million in the current quarter, compared to other income of $4.1 million in
1997. Foreign currency translation losses and additional expenses associated
with the company's Chinese tissue joint venture accounted for the majority of
the change in other income. The effective tax rate for the six months
declined to 38 percent in 1998, from 40.8 percent in 1997, principally as a
result of the benefits of tax planning actions.
Comment
Commenting on the company's outlook, Miles L. Marsh, the company's
chairman and chief executive officer said, "We are pleased to report another
strong quarter, reflecting the successful integration of our two predecessor
companies. In general, our businesses performed well and were successful in
achieving strong improvements in our overall cost position. Looking forward,
we anticipate that competitive conditions in the North American away-from-home
tissue markets are likely to continue and that import-induced weakness in our
Communications Papers Business will impact the second half of the year. At
the same time, we believe the recovery will proceed in our Packaging Business,
and our North American retail tissue and European Consumer Products businesses
will continue to perform well in the second half 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. 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; 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.
FINANCIAL SUMMARY
Fort James Corporation
For the Quarters (13 Weeks) and Six Months (26 Weeks)
Ended June 28, 1998 and June 29, 1997
(in millions, except per share amounts)
Second Quarter Year
1998 1997 1998 1997
(a) (c)(d)(e) (a)(b) (c)(d)(e)
Net sales $1,857.0 $1,854.3 $3,652.6 $3,672.1
Income from operations
before restructure
and nonrecurring items 304.2 285.9 572.9 536.7
Net income before restructure
and nonrecurring items 142.1 114.5 264.3 211.7
Diluted earnings per common share:
Before restructure and
nonrecurring items $0.65 $ 0.52 $ 1.20 $0.95
Net income $0.62 $ 0.68 $ 1.14 $1.11
(a) Results for the second quarter and first six months of 1998 included
nonrecurring merger-related relocation and other costs of $9.7 million
($5.9 million net of taxes or $0.03 per diluted share) and $17.2
million ($10.5 million net of taxes or $0.05 per diluted share),
respectively.
(b) Net income for the six months ended June 28, 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 both the second quarter and first six months of 1997
included a nonrecurring gain on asset divestitures of $57.7 million
($35.2 million net of taxes, or $0.16 per diluted share).
(d) Net income for the second quarter and six months ended June 29, 1997,
included a net charge of $0.6 million and $1.9, respectively, for an
extraordinary loss on early extinguishment of debt.
(e) 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.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fort James Corporation Quarter ended Six months ended
(in millions, except June 28, June 29, June 28, June 29,
per share amounts) 1998 1997 1998 1997
Net sales $1,857.0 $1,854.3 $3,652.6 $3,672.1
Cost of goods sold 1,268.0 1,286.1 2,511.1 2,564.2
Selling and administrative
expenses 284.8 282.3 568.6 571.2
Restructure and other unusual
items (9.7) 57.7 (17.2) 57.7
Income from operations 294.5 343.6 555.7 594.4
Interest expense 73.9 94.5 148.9 190.3
Other income (expense), net (6.3) 4.1 2.5 11.2
Income before income taxes
and extraordinary item 214.3 253.2 409.3 415.3
Income tax expense 78.1 103.5 155.5 168.4
Income before extraordinary item 136.2 149.7 253.8 246.9
Extraordinary loss on early
extinguishment of debt,
net of taxes -- (0.6) (2.6) (1.9)
Net income 136.2 149.1 251.2 245.0
Preferred dividend requirements -- (14.6) (5.2) (29.2)
Net income available
to common stockholders $136.2 $134.5 $246.0 $215.8
Basic earnings per common share:
Net income before extraordinary
item $0.63 $0.71 $1.16 $1.14
Extraordinary loss on early
extinguishment of debt -- -- (0.01) --
Net income $0.63 $0.71 $1.15 $1.14
Weighted average common
shares outstanding 217.6 189.1 213.1 188.5
Diluted earnings per common share:
Net income before extraordinary
item $0.62 $0.68 $1.15 $1.11
Extraordinary loss on early
extinguishment of debt -- -- (0.01) --
Net income $0.62 $0.68 $1.14 $1.11
Weighted average common shares and
common share equivalents
outstanding 220.3 216.3 215.6 206.2
CONSOLIDATED BALANCE SHEETS
Fort James Corporation June 28, December 28, June 29,
(in millions) 1998 1997 1997
ASSETS:
Cash and cash equivalents $6.0 $33.6 $217.2
Accounts receivable 916.7 787.8 774.0
Inventories 854.7 854.3 833.2
Other current assets 214.3 240.8 166.8
Total current assets 1,991.7 1,916.5 1,991.2
Net property, plant and equipment 4,539.1 4,565.3 4,768.0
Goodwill 619.9 636.9 663.8
Other assets 604.1 614.5 660.1
Total assets $7,754.8 $7,733.2 $8,083.1
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable and accrued
liabilities $1,441.4 $1,549.5 $1,321.5
Current portion of long-term debt 39.1 34.4 133.0
Total current liabilities 1,480.5 1,583.9 1,454.5
Long-term debt 4,064.7 4,155.5 4,156.4
Deferred income taxes 717.3 650.8 747.8
Accrued postretirement benefits
other than pensions 467.8 474.8 475.2
Other long-term liabilities 263.8 283.9 255.3
Preferred stock -- 352.7 738.4
Common shareholders' equity 760.7 231.6 255.5
Total liabilities and shareholders'
equity $7,754.8 $7,733.2 $8,083.1
SEGMENT INFORMATION
Fort James Corporation First Second Third Fourth
(in millions) Quarter Quarter Quarter Quarter Year
1998 Net sales:
Consumer products:
North America $1,073.4 $1,133.3 $2,206.7
Europe 458.0 466.2 924.2
Packaging 180.4 185.9 366.3
Communications papers 126.9 118.2 245.1
Intersegment elimination (43.1) (46.6) (89.7)
Total net sales $1,795.6 $1,857.0 $3,652.6
1997 Net sales: (a)
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: (b)
Consumer products:
North America $214.4 $245.4 $459.8
Europe 55.7 57.4 113.1
Packaging 10.3 14.6 24.9
Communications papers 10.9 8.0 18.9
General corporate expenses(22.6) (21.2) (43.8)
Restructure and other
unusual income (expense) (7.5) (9.7) (17.2)
Income (loss) from
operations $261.2 $294.5 $555.7
1997 Income (loss) from
operations: (a)(c)
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) 0.4 11.0 12.0 19.8
General corporate expenses (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) 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.
(b) Results for the first and second quarters of 1998 included
nonrecurring merger-related relocation and other costs of $7.5 million
($4.6 million net of taxes or $0.02 per diluted share) and $9.7
million ($5.9 million net of taxes or $0.03 per diluted share),
respectively.
(c) Results for 1997 included a nonrecurring gain of $57.7 million during
the second quarter for asset divestitures, nonrecurring charges of
$53.9 million during the third quarter for merger transaction costs,
and $458.0 million during the fourth quarter for restructure charges.
CONSOLIDATED STATEMENT OF CASH FLOWS
Fort James Corporation Six months ended
(in millions) June 28, 1998 June 29, 1997
Cash provided by (used for) operating
activities:
Net income $251.2 $245.0
Depreciation expense and cost of timber
harvested 232.7 242.2
Amortization of goodwill 9.7 10.2
Deferred income tax provision 103.1 77.6
Restructure and other unusual items 17.2 (57.7)
Loss on early extinguishment of debt,
net of tax 2.6 1.9
Change in current assets and liabilities:
Accounts receivable (133.8) (46.1)
Inventories 0.1 (46.7)
Prepaid expenses and other current assets 1.9 15.5
Accounts payable and accrued liabilities (4.6) (24.4)
Restructure and integration payments (95.9) (13.3)
Foreign currency hedge -- (31.5)
Net change in retirement benefit obligations (21.1) (4.6)
Other, net (21.6) (26.0)
Cash provided by operating activities 341.5 342.1
Cash provided by (used for) investing activities:
Expenditures for property, plant and equipment (238.8) (178.1)
Cash received from sale of assets 10.2 113.3
Other, net (1.6) 7.9
Cash used for investing activities (230.2) (56.9)
Cash provided by (used for) financing activities:
Additions to long-term debt 384.8 75.2
Payments of long-term debt (464.0) (170.1)
Common and preferred stock cash dividends paid (73.4) (54.8)
Redemption of preferred stock (6.6) --
Proceeds from exercise of stock options 23.6 47.1
Other, net (3.3) --
Cash used for financing activities (138.9) (102.6)
Increase (decrease) in cash and cash equivalents (27.6) 182.6
Cash and cash equivalents, beginning of period 33.6 34.6
Cash and cash equivalents, end of period $6.0 $217.2
SOURCE Fort James Corporation
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Related links:
http://www.fortjames.com
Company News On-Call: http://www.prnewswire.com or
fax, 800-758-5804, ext. 457350
CONTACT:
Celeste Gunter, financial, 804-649-4307 or
Chuck Wilson, media, 847-317-5290, both of Fort James
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