RICHMOND, Va., Feb. 3 /PRNewswire/ -- Fort James Corporation today
announced results for its fourth quarter and fiscal year ended December 28,
1997. Excluding non-recurring items, earnings for the fourth quarter were
$.48 per diluted share, compared to $.30 per diluted share in 1996, an
improvement of 60 percent. Including a restructuring charge of $1.53 per
diluted share and an extraordinary charge on the early extinguishment of debt
of $.41 per diluted share, the company reported a net loss of $1.46 per
diluted share for the fourth quarter of 1997. The restructuring and debt
extinguishment charges were both related to the recent merger of James River
Corporation and Fort Howard Corporation.
Fourth Quarter Results
Compared with the fourth quarter of 1996, income from operations increased
15 percent to $242.3 million from $210.9 million and net income increased 48
percent to $106.5 million from $71.9 million, excluding restructure and debt
extinguishment charges and a 1996 tax benefit. Net sales for the quarter
declined approximately 1 percent to $1,761.5 million from $1,785.6 million,
primarily due to the impact of foreign currency translation. Excluding this
impact, sales increased approximately 1 percent. Operating margins for the
quarter increased to 13.8 percent, from 11.8 percent in the fourth quarter of
1996, excluding restructuring charges.
Non-Recurring Items
Results for the current quarter reflect a pretax charge of $458.0 million
($317.6 million net of taxes, or $1.53 per diluted share) for restructuring
and other unusual items and an extraordinary charge on the early
extinguishment of debt of $138.2 million ($84.4 million net of taxes, or $.41
per diluted share). In the fourth quarter of 1996, the company reported a
non-recurring charge of $10.6 million ($8.2 million net of taxes, or $.04 per
diluted share). The company also recorded a $36 million tax benefit ($.19 per
diluted share) in 1996 as a result of a U.S. Tax Court decision allowing the
company to deduct certain expenses relating to Fort Howard's 1988 leveraged
buy-out. Additionally, the fourth quarter of 1996 included a loss on the
early extinguishment of debt of $7.9 million ($4.8 million net of taxes, or
$.03 per diluted share).
Full Year Results
For the full year, excluding non-recurring items, net income increased 44
percent to $439.5 million, or $1.97 per diluted share, in 1997 from $304.9
million, or $1.35 per diluted share, in 1996. Including the non-recurring
items, the company reported a net loss of $27.0 million, or a loss of $.28 per
diluted share, in 1997, compared to net income of $319.9 million, or $1.43 per
diluted share, in 1996. Net sales of $7,259.0 million in 1997 were 5.8
percent below the $7,707.1 million reported in 1996, due to divestitures and
foreign currency translation. Net sales increased approximately 1 percent
excluding these items.
Fourth Quarter Results by Business Segment
The North American Consumer Products Business posted operating profits of
$189.8 million in the current quarter, compared to the $173.7 million reported
in the fourth quarter of 1996, while sales increased slightly to $1,046.2
million in 1997 versus $1,039.5 million in 1996. Results for the prior year's
quarter included an $18 million charge for revised estimates of costs for
certain environmental matters. The fourth quarter performance of this
business was impacted by a number of transition issues related to the recent
merger. The former Fort Howard operations were converted to the James River
52/53-week fiscal year cut-off, resulting in a loss of three days of shipments
in the quarter. Additionally, discretionary downtime was taken at selected
tissue mills to adjust inventory levels and to perform maintenance originally
scheduled for 1998. Volumes in both the retail tissue and retail Dixie
tabletop businesses improved over the prior year levels and aggregate market
shares have strengthened. Volumes declined in the away-from-home tissue
business, principally as a result of the early year-end cut-off for the Fort
Howard operations. Volumes also declined in the away-from-home Dixie
foodservice business. Pricing in the company's retail tissue and Dixie
businesses was generally unchanged from the prior year's quarter, (before the
effect of modestly higher promotional spending,) while away-from-home tissue
prices were modestly higher reflecting a fourth quarter price increase.
The European Consumer Products Business reported operating profits of
$48.8 million in the fourth quarter of 1997, a 14 percent improvement over the
$42.7 million reported in the prior year, while sales declined 6.2 percent,
from $481.5 million in 1996 to $451.6 million in 1997. Changes in foreign
currency translation associated with the strengthening of the dollar caused
the decline in sales and also impacted operating profits. Absent these
changes, the current quarter sales would have increased 2.5 percent and
operating profits would have increased 22 percent compared to the prior year's
quarter. The improvement in profits resulted from a 2.3 percent increase in
finished goods volumes, partially offset by slightly lower pricing and higher
raw material costs. In addition, the prior year's quarter was adversely
impacted by a two-month strike at the company's Spanish tissue facility.
The Packaging Business reported fourth quarter 1997 profits of $13.6
million on sales of $187.9 million, down from the $15.2 million of profits on
$198.8 million of sales in the prior quarter. Transition issues associated
with a significant change in its customer base negatively impacted the
Packaging Business' sales and profits.
Operating profits for the Communications Papers Business increased
modestly to $12.0 million in the current quarter, compared to $10.0 million in
1996. Sales increased by 3.6 percent, to $118.6 million in 1997 compared to
$114.5 million in 1996. Increased sales and profits were principally the
result of a small increase in volumes and average pricing for uncoated free
sheet papers.
General corporate expenses declined to $21.9 million compared to $30.7
million in 1996, primarily as a result of reduced spending on new, integrated
management information systems.
Full Year Results by Business Segment
Compared to 1996, operating profits for the North American Consumer
Products Business improved 12.2 percent to $845.4 million in 1997. Operating
profits for the European Consumer Products Business increased to $202.4
million in 1997, a 22 percent increase over the prior year, excluding the
effects of changes in foreign currency translation. The Packaging Business
posted profits of $81.3 million in 1997, a decrease of 5 percent from the
prior year, excluding divested operations. The Communications Papers Business
reported 1997 operating profits of $19.8 million, an 11 percent decline over
1996 profits, despite a steady improvement in results during the current year.
Restructuring Charge
In conjunction with the merger integration, the company recorded a $458
million pretax restructuring charge in the fourth quarter. This charge covers
activities which will integrate the operations of James River and Fort Howard
and enable the company to realize merger-related savings estimated to
ultimately total $200 million annually. The restructuring charge includes
approximately $235 million of costs associated with planned plant closures and
the write-off of redundant assets. On January 20, 1998, the company announced
it will permanently close its two smallest U.S. tissue facilities, in Ashland,
Wisconsin, and Carthage, New York, in the spring of 1998. Production from
these two mills, which produce approximately 84,000 tons per year of away-
from-home tissue products, will be transferred to other, more modern Fort
James tissue mills. Also included in the reserve are amounts for additional
rationalization of the company's manufacturing operations planned in North
America and Europe. The restructuring charge includes severance and other
employee-related costs in excess of $100 million associated with a planned net
headcount reduction of approximately 2,500 employees, representing 8% of Fort
James' current worldwide workforce. Cash costs of the restructure program are
estimated to total approximately $150 million, net of tax benefits. An
additional estimated $60 million of merger-related costs, which could not be
recognized in 1997 under applicable accounting regulations, will be recorded
in 1998 as incurred.
Cash Flow and Refinancing Activities
Cash provided by operations totaled $764.2 million for the year in 1997.
Total debt was reduced by $244.3 million during the year. In addition, $98.1
million of cash was used to redeem the company's Series O preferred stock and
$152.3 million of cash premiums were paid on the early extinguishment of debt.
Lower average debt levels, combined with the benefits from the company's
refinancing activities allowed the company to reduce interest expense by 17
percent, from $424.4 million in 1996 to $351.8 million in 1997. In early
October, the company completed the refinancing of a total of approximately
$2.1 billion of debt. The company estimates these debt refinancings will
reduce annual interest expense by more than $50 million. An extraordinary
charge of $215.0 million ($131.5 million net of taxes, or $.63 per diluted
share) was recorded in the third and fourth quarters of 1997 associated with
the refinancings.
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 we had expected, and our rationalization plans are on track.
We continue to believe the merger will ultimately provide annual savings in
excess of $200 million. Additionally, the Company's ongoing cost reduction
programs should continue to be successful in increasing operating profits.
"Industry conditions in our North American Consumer Products Business
appear to be improving and we expect to continue to experience good demand,
strong capacity utilization rates, and a favorable pricing environment.
Conditions in Europe are somewhat more competitive, but relatively stable raw
material costs, continued volume gains and ongoing cost reduction progress
should lead to improved earnings here, as well. Our Packaging Business will
face a challenging year in 1998, principally due to continuing customer
transition issues. Current conditions in our Communications Papers Business
appear generally good, as pricing has stabilized and demand and capacity
growth are more in balance, but risks do exist from weakening pulp markets and
higher wood costs. We also expect to see significant reductions in financing
costs, as we realize the benefits of our debt refinancings and use free cash
flow to reduce debt. Overall, the outlook is encouraging and we are confident
that 1998 will be another year of solid progress."
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
30,000 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 guaranteed 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 projects. 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 BALANCE SHEETS (e)
Fort James Corporation and Subsidiaries
(in millions)
December 28, December 29,
1997 1996
ASSETS:
Cash and cash equivalents $33.6 $34.6
Accounts receivable 787.8 781.3
Inventories 854.3 801.6
Other current assets 240.8 191.1
Total current assets 1,916.5 1,808.6
Net property, plant and
equipment 4,565.3 4,999.3
Other assets 614.5 619.0
Goodwill 636.9 730.0
Total assets $7,733.2 $8,156.9
LIABILITIES AND SHAREHOLDERS'
EQUITY:
Accounts payable and accrued
liabilities $1,549.5 $1,413.1
Current portion of long-term
debt 34.4 128.9
Total current liabilities 1,583.9 1,542.0
Long-term debt 4,155.5 4,305.3
Accrued postretirement
benefits other than pensions 474.8 475.9
Other long-term liabilities 283.9 291.7
Deferred income taxes 650.8 690.5
Preferred stock 352.7 738.4
Common shareholders' equity 231.6 113.1
Total liabilities and
shareholders' equity $7,733.2 $8,156.9
CONSOLIDATED STATEMENTS OF OPERATIONS(e)
Fort James Corporation and Subsidiaries
Quarters Ended Twelve Months Ended
December 28, December 29, December 28, December 29,
1997(a)(b) 1996(c)(d) 1997(a)(b) 1996(c)(d)
(in millions, except per
share amounts)
Net sales $1,761.5 $1,785.6 $7,259.0 $7,707.1
Cost of goods sold 1,243.1 1,305.8 5,077.7 5,564.2
Selling and
administrative
expenses 276.1 268.9 1,124.4 1,222.9
Restructure and other
unusual items 458.0 10.6 454.2 10.7
Income (loss) from
operations (215.7) 200.3 602.7 909.3
Interest expenses 74.2 97.1 351.8 424.4
Other income (expense),
net (.9) 6.3 21.4 18.7
Income (loss) before
income taxes, minority
interests and
extraordinary item (290.8) 109.5 272.3 503.6
Income tax expense
(benefit) (80.9) 7.8 164.0 171.0
Income (loss) before
minority interests
and extraordinary
item (209.9) 101.7 108.3 332.6
Minority interests (1.2) (2.0) (3.8) (4.6)
Income (loss) before
extraordinary item (211.1) 99.7 104.5 328.0
Extraordinary loss on
early extinguishment
of debt (84.4) (4.8) (131.5) (8.1)
Net income (loss) $(295.5) $94.9 $(27.0) $319.9
Preferred dividend
requirements (6.1) (14.6) (43.4) (58.5)
Net income (loss)
applicable to common
shares $(301.6) $80.3 $(70.4) $261.4
Net income (loss) per
common share:
Before extraordinary
item $(1.05) $.46 $.31 $1.49
Extraordinary loss on
early extinguishment
of debt (.41) (.03) (.67) (.05)
Net income (loss)
per share $(1.46) $.43 $(.36) $1.44
Weighted average number
of common shares 207.2 187.2 195.5 181.4
Net income (loss) per
common share - assuming
dilution:
Before extraordinary
item $(1.05) $.45 $.35 $1.47
Extraordinary loss on
early extinguishment
of debt (.41) (.03) (.63) (.04)
Net income (loss) per
share - assuming
dilution $(1.46) $.42 $(.28) $1.43
Weighted average number
of common shares and
common share
equivalents 207.2 189.6 207.6 183.1
SEGMENT INFORMATION (e)
Fort James Corporation and Subsidiaries
(in millions)
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
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
1996 Net sales:
Consumer products:
North
America $1,091.0 $1,145.3 $1,086.2 $1,039.5 $4,362.0
Europe 510.4 496.7 491.6 481.5 1,980.2
Packaging 341.2 319.9 280.0 198.8 1,139.9
Communications
papers 112.2 113.8 116.2 114.5 456.7
Intersegment
elimination (73.8) (61.1) (48.1) (48.7) (231.7)
Total net
sales $1,981.0 $2,014.6 $1,925.9 $1,785.6 $7,707.1
1997 Income (loss) from operations (a):
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 items
income
(expense) 57.7 (53.9) (458.0) (454.2)
Income (loss)
from
oper-
ations $250.8 $343.6 $224.0 $(215.7) $602.7
1996 Income (loss) from operations (c):
Consumer products:
North
America $177.6 $184.2 $217.8 $173.7 $753.3
Europe 31.1 48.8 54.5 42.7 177.1
Packaging 29.8 24.0 22.9 15.2 91.9
Communications
papers 4.2 3.2 4.8 10.0 22.2
General
corporate
expenses (28.7) (29.7) (35.4) (30.7) (124.5)
Restructure
and other
unusual items
income
(expense) (23.4) (7.0) 30.3 (10.6) (10.7)
Income from
operations $190.6 $223.5 $294.9 $200.3 $909.3
(a) Results for the fourth quarter of 1997 included a nonrecurring
restructure charge of $458.0 million ($317.6 million net of taxes, or $1.53
per diluted share). Results for the year ended December 28, 1997, included a
nonrecurring restructure charge of $454.2 million ($335.0 million net of
taxes, or $1.62 per diluted share).
(b) Net income (loss) for the fourth quarter and year ended December 28,
1997, included a net charge of $84.4 million (or $.41 per diluted share) and
$131.5 million (or $.63 per diluted share), respectively, related to
extraordinary loss on early extinguishment of debt.
(c) Results for the fourth quarter and year ended December 29, 1996,
included nonrecurring charges of $10.6 million ($8.2 million net of taxes, or
$.04 per diluted share) and $10.7 million ($12.9 million net of taxes, or $.07
per diluted share), respectively, for severance costs, asset write-downs and
net gains on asset dispositions. Additionally, the results for the fourth
quarter and year ended December 29, 1996, included a $36.0 million (or $.19
per diluted share) nonrecurring tax benefit for a favorable tax settlement.
(d) Net income (loss) for the fourth quarter and year ended December 29,
1996, included a net charge of $4.8 million (or $.03 per diluted share) and
$8.1 million (or $.04 per diluted share), respectively, related to
extraordinary loss on early extinguishment of debt.
(e) All financial information for Fort James Corporation includes the
results of James River Corporation of Virginia and Fort Howard Corporation for
all periods presented 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 including a reclassification of customer
freight charges from net sales to cost of sales.
CONSOLIDATED STATEMENTS OF CASH FLOWS (e)
Fort James Corporation and Subsidiaries
(in millions) Years Ended
December 28, 1997 December 29, 1996
Operating activities:
Net income (loss) $(27.0) $319.9
Depreciation expense and
cost of timber harvested 474.7 502.5
Amortization of goodwill 20.1 21.4
Deferred income tax provision
(benefit) (41.4) 53.7
Restructure and other unusual
items 454.2 10.7
Loss on early extinguishment
of debt, net of tax 131.5 8.1
Change in current assets
and liabilities:
Accounts receivable (88.8) 96.1
Inventories (79.7) 82.5
Other current assets 23.5 (2.1)
Current liabilities (18.4) 53.8
Foreign currency hedge (31.5)
Other, net (53.0) (62.0)
Cash provided by operating
activities 764.2 1,084.6
Investing activities:
Expenditures for property,
plant and equipment (505.9) (499.5)
Cash received from sale
of assets 190.1 496.6
Cash paid for acquisitions,
net (199.9)
Other, net 18.1 10.3
Cash used for investing
activities (297.7) (192.5)
Financing activities:
Additions to long-term debt 2,200.9 4.2
Payments of long-term debt (2,378.4) (1,049.2)
Common stock issued, net
of offering costs 203.8
Common and preferred stock
cash dividends paid (121.6) (97.2)
Premiums paid on early
extinguishment of debt (152.3)
Preferred stock redemption (98.1)
Common stock issued on
exercise of stock options 82.0 16.1
Other, net (2.2)
Cash used for financing
activities (467.5) (924.5)
Increase (decrease) in cash
and cash equivalents $(1.0) $(32.4)
SOURCE Fort James Corporation
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Related links:
http://www.fortjames.com
CONTACT:
Celeste Gunter, Financial, 804-649-4307; or
Richard B. Elder, Media, 804-343-4785, both of Fort James
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