DEERFIELD, Ill., Oct. 20 /PRNewswire/ -- Fort James Corporation (NYSE: FJ)
today announced third quarter 1999 net earnings, excluding unusual and
non-recurring items, of $110.2 million, or $0.50 per diluted share. This
compares to net earnings of $144.9 million, or $0.66 per diluted share,
reported in the third quarter of 1998, on the same basis. Net sales for the
third quarter increased modestly to $1,739.3 million versus $1,713.7 million
in 1998.
(Photo: http://www.newscom.com/cgi-bin/prnh/19990204/CGTH023 )
"As we previously stated, a number of factors affected Fort James' results
in the third quarter," said Miles L. Marsh, chairman and chief executive
officer. "These included lower prices for many of our products, higher
promotional spending, and increased warehousing and distribution costs."
Unusual and Non-Recurring Items
Third quarter income from operations of $181.6 million included unusual
items as well as certain non-recurring items. Unusual items include severance
costs associated with the previously announced reduction-in-force that,
together with accruals for on-going litigation, totaled $46.0 million
($28.1 million net of taxes, or $0.13 per diluted share). These costs have
been charged to costs of goods sold and selling and administrative expense,
and are included in segment results. Non-recurring items included a credit
for restructure and other items totaling $13.4 million ($12.0 million net of
taxes, or $0.06 per diluted share). This credit relates to the reversal of
certain 1997 merger-related restructure accruals due to revisions of
estimates, partially offset by a permanent impairment write-down of a
non-operating asset. These non-recurring items are recorded as restructure
and other items and have been excluded from segment results. Excluding all
unusual and non-recurring items, income from operations was $214.2 million.
Net income was also affected by two additional items. On August 2, Fort
James completed the sale of its Packaging business to ACX Technologies, Inc.
The company recorded an extraordinary gain of $232.5 million, net of taxes, or
$1.05 per diluted share on the disposal of this business segment. Prior to
the disposal date, the business generated a third-quarter loss of
$1.5 million, net of an allocation of interest and taxes. These results are
treated as a discontinued operation.
In 1998, results for the third quarter include a charge of $12.7 million
($7.8 million net of taxes, or $0.03 per diluted share) for merger-related
costs, offset by the reversal of $10.5 million ($0.05 per diluted share) of
merger-related tax reserves caused by rescinding of temporary IRS regulations.
Nine Months Results
For the first nine months of the year, the company generated net earnings,
excluding unusual and non-recurring items, of $363.0 million, or $1.65 per
diluted share. This compares to $402.3 million, or $1.83 per diluted share,
on the same basis in 1998.
Third Quarter Operating Income
Income from operations, excluding unusual and non-recurring items,
declined to $214.2 million in the third quarter of 1999 from $287.8 million a
year earlier. The decline was principally attributable to reduced earnings in
the Tissue - North America business.
The Tissue - North America business posted income from operations,
excluding unusual items, of $160.3 million in the current quarter, compared to
$228.3 million reported in the third quarter of 1998. Sales increased by
approximately 2 percent to $950.3 million compared to $935.7 million in 1998.
The tissue business posted solid volume gains versus the prior year, with
notable increases in retail bath tissue and towel and away-from-home bath
tissue. In July, the company began shipping its new Quilted Northern Bathroom
Tissue, which is thicker, stronger and more absorbent and represents a
significant improvement in consumer appeal for this premium brand. In
addition, Mardi Gras Rainbow Pack napkins, introduced in March, continue to
demonstrate solid growth, surpassing initial expectations. Higher retail
promotional spending, lower away-from-home pricing, and increased distribution
and warehousing costs, however, more than offset the effect of the volume
gains.
Third quarter income from operations and sales of the Tissue - Europe
business declined to $50.8 million and $452.1 million, respectively, compared
to $59.3 million and $463.5 million in the prior year. Changes in currency
exchange rates negatively affected operating profits and sales by
approximately 5 percent, or $3 million and $23 million, respectively, compared
to last year's quarter. Aggregate finished goods volumes increased modestly,
as continued robust volume growth in primary branded markets was substantially
offset by lower private label volumes. Results continue to be negatively
influenced by competitive pricing activity and higher inflationary costs. On
July 1, the company completed the previously announced acquisition of
Demak'Up, broadening the company's European product portfolio with the leading
European brand of cotton facial cleansing pads.
In the Dixie business, income from operations, excluding unusual items,
increased 3 percent to $21.2 million from $20.5 million in 1998. Sales
increased to $195.2 million, versus $193.3 million in the prior year.
Earnings improvements were the result of strong retail volumes and cost
reduction. Volume was strong in retail plates and plastic party cups due to
new value packs and strength in the warehouse club channel. During the
quarter, management announced the retail launch of new DIXIE Rinse & ReUse
Disposable Stoneware plates and the expansion in foodservice channels of
PERFECTOUCH insulated hot cups.
The Communications Papers and Fiber business reported income from
operations, excluding unusual items, for the current quarter of $3.9 million
on sales of $209.3 million, compared to income from operations of $2.0 million
on sales of $189.6 million in 1998, primarily due to increased market pulp
volumes and cost reduction benefits.
Other Items
Cash provided by operations totaled $542.8 million for the first nine
months of 1999, compared to $620.0 million in 1998. The decrease is primarily
due to lower operating profits and decreased accounts payable and accrued
liabilities, partially offset by reduced merger-related restructure spending.
In the third quarter of 1999, the company received cash proceeds of
$825.8 million from the sale of its Packaging business, which were primarily
used to reduce revolving credit borrowings. Additionally, concurrent with the
sale of the Packaging business, the company began execution of the previously
announced $500 million, 18 month stock buy-back program. During the quarter,
1.5 million shares were repurchased at a total cost of $53.6 million.
Total debt declined to $3.1 billion at the end of September from
$3.9 billion in June. Reduced debt and lower average borrowing costs resulted
in an 18 percent decrease in interest expense versus the prior year's quarter.
Excluding unusual and non-recurring items, the effective tax rate was 33.5
percent for the first nine months of 1999, down from 36.5 percent in 1998,
primarily due to the benefits of tax planning actions.
Comment and Outlook
"While we are clearly dissatisfied with our current financial performance,
it is important to remember that the issues that have affected our earnings
are not permanent ones," Miles Marsh concluded. "We continue to aggressively
implement programs and processes that will reduce our costs. At the same
time, we are introducing new and enhanced products that build upon the
strength of our brands and businesses. We are confident that these concurrent
steps will allow us to regain our momentum."
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 has current annual
sales of $6.8 billion and approximately 50 manufacturing facilities in the
U.S., Canada and 11 other countries around the world.
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, the Company's ability
to sustain momentum in the retail marketplace, maintain continuing improvement
in the away from home market, successfully introduce new products, increase
customer service levels and concurrently manage distribution costs, the
ability to achieve projected net cost reductions, 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 Nine Months
Ended September 26, 1999 and September 27, 1998
Third Quarter Year
(in millions, except per
share amounts) 1999(a) 1998(b) 1999(c) 1998(d)
Net sales $1,739.3 $1,713.7 $5,126.8 $5,113.6
Income from operations,
before unusual and
non-recurring items $214.2 $287.8 $702.8 $836.7
Net earnings, before
unusual and non-recurring
items $110.2 $144.9 $363.0 $402.3
Diluted earnings per share:
From net earnings, before
unusual and non-recurring
items $0.50 $0.66 $1.65 $1.83
Discontinued operations $(0.01) $0.01 $(0.03) $0.04
Net income $1.47 $0.69 $2.35 $1.83
(a) Net income for the third quarter of 1999 included non-recurring
credits of $13.4 million ($12.0 million after taxes or $0.06 per diluted
share) from the reversal of merger-related restructure accruals due to
revisions of estimates partially offset by a permanent impairment
write-down of a non-operating asset, and unusual charges of $46.0 million
($28.1 million after taxes or $0.13 per diluted share) for severance and
other costs related to a reduction-in-force program and accruals for
on-going litigation. In addition, a loss from discontinued operations of
$2.3 million ($1.5 million after taxes or $0.01 per diluted share) was
offset by an extraordinary gain on the sale of the Packaging business of
$381.9 million ($232.5 million after taxes or $1.05 per diluted share).
(b) Net income for the third quarter of 1998 included merger related
costs not accruable in 1997 of $12.7 million ($7.8 million after taxes or
$0.03 per diluted share), partially offset by a reversal of $10.5 million
($0.05 per diluted share) for merger related tax reserves established in
1997 in accordance with temporary IRS regulations, which were subsequently
rescinded and income from discontinued operations of $5.8 million
($3.1 million after taxes or $0.01 per diluted share).
(c) Net income for the first nine months of 1999 included non-recurring
income of $14.5 million ($12.7 million after taxes or $0.06 per diluted
share) from the reversal of merger-related restructure accruals due to
revisions of estimates, partially offset by a permanent impairment
write-down of a non-operating asset, and unusual charges of $46.0 million
($28.1 million after taxes or $0.13 per diluted share) for severance and
other costs related to a reduction-in-force program and accruals for
on-going litigation. In addition, a loss from discontinued operations of
$9.1 million ($6.4 million after taxes or $0.03 per diluted share),
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 were
offset by an extraordinary gain on the sale of the Packaging business of
$381.9 million ($232.5 million after taxes or $1.05 per diluted share).
(d) Net income for the first nine months of 1998 included merger related
relocation costs and costs not accruable in 1997 of $28.0 million
($17.3 million after taxes or $0.08 per diluted share), income from
discontinued operations of $16.4 million ($9.0 million after taxes or
$0.04 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, partially offset by a reversal of $10.5 million ($0.05 per
diluted share) for merger related tax reserves established in 1997 in
accordance with temporary IRS regulations, which were subsequently
rescinded.
CONSOLIDATED STATEMENTS OF OPERATIONS
Fort James Corporation
For the Quarters and Nine Months
Ended September 26, 1999 and September 27, 1998
Quarter Nine Months
(in millions, except
per share amounts) 1999 1998 1999 1998
Net sales $1,739.3 $1,713.7 $5,126.8 $5,113.6
Cost of goods sold (1,207.7) (1,132.7) (3,518.4) (3,432.1)
Selling and
administrative
expenses (363.4) (293.2) (951.6) (844.8)
Restructure and
other items 13.4 (12.7) 14.5 (28.0)
Income from operations 181.6 275.1 671.3 808.7
Interest expense (53.6) (65.6) (175.5) (203.0)
Other income, net 0.4 (4.3) 18.5 (1.8)
Income from continuing
operations before
income taxes, extraordinary
item, and cumulative
effect of a change in
accounting principle 128.4 205.2 514.3 603.9
Income tax expense (34.3) (57.6) (166.7) (208.4)
Income from continuing
operations before
extraordinary item and
cumulative effect of a
change in accounting
principle 94.1 147.6 347.6 395.5
Income (loss) from
discontinued operations,
net of taxes (1.5) 3.1 (6.4) 9.0
Income before
extraordinary item and
cumulative effect of a
change in accounting
principle 92.6 150.7 341.2 404.5
Extraordinary loss on
early extinguishment of
debt, net of taxes -- -- (33.2) (2.6)
Extraordinary gain on
sale of Packaging,
net of taxes 232.5 -- 232.5 --
Cumulative effect of a
change in accounting
principle, net of taxes -- -- (22.1) --
Net income 325.1 150.7 518.4 401.9
Preferred dividend
requirements -- -- -- (5.2)
Net income available
to common
stockholders $325.1 $150.7 $518.4 $396.7
Basic earnings per share:
Income from continuing
operations before
extraordinary item and
the cumulative effect of
a change in accounting
principle $0.43 $0.69 $1.58 $ 1.82
Income (loss) from
discontinued operations,
net of taxes (0.01) 0.01 (0.03) 0.04
Extraordinary loss on
early extinguishment of
debt, net of taxes -- -- (0.15) (0.01)
Extraordinary gain on
sale of Packaging,
net of taxes 1.06 -- 1.06 --
Cumulative effect of
a change in accounting
principle, net of taxes -- -- (0.10) --
Net income $1.48 $0.70 $2.36 $1.85
Weighted average common
shares outstanding 219.2 219.0 219.4 215.0
Diluted earnings per share:
Income from continuing
operations before
extraordinary item
and the cumulative effect
of a change in accounting
principle $0.43 $0.68 $1.58 $1.80
Income (loss) from
discontinued operations,
net of taxes (0.01) 0.01 (0.03) 0.04
Extraordinary loss on early
extinguishment of debt,
net of taxes -- -- (0.15) (0.01)
Extraordinary gain on sale
of Packaging, net of taxes 1.05 -- 1.05 --
Cumulative effect of a change
in accounting principle,
net of taxes -- -- (0.10) --
Net income $1.47 $0.69 $2.35 $1.83
Weighted average common
shares and common share
equivalents outstanding 220.2 220.0 220.5 217.1
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 $950.3 $-- $2,763.4
Tissue - Europe 465.9 456.3 452.1 -- 1,374.3
Dixie 175.6 220.3 195.2 -- 591.1
Communications Papers
and Fiber 196.0 200.9 209.3 -- 606.2
Intercompany (67.9) (72.7) (67.6) -- (208.2)
Total net sales $1,669.0 $1,718.5 $1,739.3 $-- $5,126.8
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 (a):
Tissue - North
America $192.1 $183.5 $125.6 -- $501.2
Tissue - Europe 61.1 57.4 50.8 -- 169.3
Dixie 19.3 38.6 20.3 -- 78.2
Communications Papers
and Fiber (14.2) (8.6) 1.8 -- (21.0)
Corporate (21.9) (18.7) (30.3) -- (70.9)
Income from
continuing operations
before restructure
and other $236.4 $252.2 $168.2 0 $656.8
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 $258.2 $290.7 $287.8 $275.5 $1,112.2
(a) Third quarter and year-to-date income from operations included
$46.0 million of unusual items for severance and litigation accruals, of
which $17.8 million is included in cost of sales and $28.2 million is
included in selling and administrative expense. Details by segment are as
follows:
Excluding Unusual
Items
Unusual Third Year-to-
items Quarter Date
Tissue - North America $34.7 $160.3 $535.9
Tissue - Europe -- 50.8 169.3
Dixie 0.9 21.2 79.1
Communications Papers and Fiber 2.1 3.9 (18.9)
Corporate 8.3 (22.0) (62.6)
Total $46.0 $214.2 $702.8
CONSOLIDATED BALANCE SHEETS
Fort James Corporation
As of September 26, 1999, December 27, 1998, and September 27, 1998
September December September
(in millions) 1999 1998 1998
Assets:
Cash and cash equivalents $7.7 $5.3 $19.9
Accounts receivable 965.2 857.5 922.4
Inventories 819.3 806.5 807.0
Other current assets 131.8 187.0 185.6
Total current assets 1,924.0 1,856.3 1,934.9
Net property, plant and equipment 4,250.0 4,321.6 4,253.6
Goodwill 577.0 620.0 639.7
Net assets of discontinued operations 0.0 403.4 417.9
Other assets 525.4 526.7 567.9
Total assets $7,276.4 $7,728.0 $7,814.0
Liabilities and shareholders' equity:
Accounts payable and
accrued liabilities $1,310.7 $1,323.8 $1,430.3
Current portion of long-term debt 236.9 240.0 40.2
Total current liabilities 1,547.6 1,563.8 1,470.5
Long-term debt 2,876.6 3,646.4 3,932.5
Deferred income taxes 808.7 756.5 727.5
Accrued postretirement
benefits other than pensions 418.8 446.8 457.6
Other long-term liabilities 273.6 263.1 264.4
Common shareholders' equity 1,351.1 1,051.4 961.5
Total liabilities
and shareholders' equity $7,276.4 $7,728.0 $7,814.0
CONSOLIDATED STATEMENTS OF CASH FLOWS
Fort James Corporation
For the Nine Months Ended September 26, 1999 and September 27, 1998
(in millions) 1999 1998
Cash provided by (used for)
operating activities:
Net income $518.4 $401.9
Depreciation expense 332.9 318.0
Amortization of goodwill 14.2 14.2
Deferred income tax provision 52.7 128.0
Restructure and other items (14.5) (20.5)
(Income) loss from discontinued
operations, net of taxes 6.4 (9.0)
Gain on sale of discontinued
operations, net of taxes (232.5) --
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 (125.0) (146.5)
Inventories (16.3) (4.0)
Prepaid expenses and other current assets (6.1) 7.2
Accounts payable and accrued liabilities (26.6) (34.3)
Other, net (16.1) (37.6)
Cash provided by operating activities 542.8 620.0
Cash provided by (used for)
investing activities:
Expenditures for property,
plant and equipment (346.5) (321.7)
Cash paid for acquisitions, net (56.7) (2.5)
Increase in net assets of
discontinued operations (34.4) (9.9)
Proceeds from sale of
discontinued operations 825.8 --
Other, net 2.2 14.6
Cash provided by (used for)
investing activities 390.4 (319.5)
Cash provided by (used for)
financing activities:
Additions to long-term debt 357.3 466.0
Payments of long-term debt (340.5) (94.3)
Net increase (decrease) in revolving debt (764.9) (594.6)
Premiums paid on early extinguishment
of debt and debt issuance costs (56.2) (5.6)
Redemption of preferred stock -- (6.6)
Common and preferred stock cash dividends paid (98.9) (106.6)
Proceeds from exercise of stock options 15.0 27.5
Repurchase of common stock (53.6) --
Other, net 11.0 --
Cash used for financing activities (930.8) (314.2)
Increase (decrease) in cash and cash equivalents 2.4 (13.7)
Cash and cash equivalents, beginning of period 5.3 33.6
Cash and cash equivalents, end of period $7.7 $19.9
SOURCE Fort James Corporation
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Related links:
http://www.fortjames.com
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or PR Newswire Photo Desk, 888-776-6555 or 201-369-3467
CONTACT:
Financial, Celeste Gunter, 847-317-5355, or
media, Mark Lindley, 847-317-5280, both of Fort James Corporation
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