Filed Pursuant to Rule
424(b)(3) of the Rules and
Regulations Under the
Securities Act of 1933
Registration Statement Nos.
33-23826, 33-43448, 33-51876
and 33-51557
PROSPECTUS SUPPLEMENT
(To Prospectus dated July 6, 1994)
FORT HOWARD CORPORATION
12-5/8% Subordinated Debentures Due 2000
14-1/8% Junior Subordinated Discount Debentures Due 2004
9-1/4% Senior Notes Due 2001
10% Subordinated Notes Due 2003
8-1/4% Senior Notes Due 2002
9% Senior Subordinated Notes Due 2006
1991 Pass Through Trust, Pass Through Certificates, Series 1991
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RECENT DEVELOPMENTS
Attached hereto and incorporated by reference herein is the news release
announcing Fort Howard Corporation's financial results for the quarter ended
September 30, 1994.
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This Prospectus Supplement, together with the Prospectus, is to be used
by Morgan Stanley & Co. in connection with offers and sales of the
above-referenced securities in market-making transactions at negotiated prices
related to prevailing market prices at the time of sale. Morgan Stanley & Co.
Incorporated may act as principal or agent in such transactions.
October 28, 1994
For the third quarter, Fort Howard's net sales increased 10.2% to
$340,068,000 compared to third quarter 1993 net sales of $308,611,000. For
the first nine months of 1994, net sales were $930,697,000, an increase of
3.9% over 1993 net sales of $895,768,000 for the same period.
Operating income for the third quarter of 1994 was $85,184,000 compared
to an operating loss of $1,905,301,000 for the third quarter of 1993. The
operating loss in the third quarter of 1993 resulted primarily from the write-
off of Fort Howard's then remaining goodwill balance of $1.98 billion.
Excluding the goodwill write-off and amortization and the reversal of accrued
employee stock compensation expense from 1993 results, operating income would
have increased 5.3% for the third quarter of 1994 compared to the third
quarter of 1993.
Operating income was $224,206,000 in the first nine months of 1994
compared to an operating loss of $1,788,089,000 for the first nine months of
1993. Excluding the goodwill write-off and amortization and the reversal of
accrued employee stock compensation expense from 1993 results, operating
income would have decreased 1.3% for the first nine months of 1994 compared
to the first nine months of 1993.
For the third quarter of 1994, earnings before depreciation, interest,
amortization and taxes (EBDIAT) increased 6.8% to $109,191,000 from
$102,259,000 in the third quarter of 1993. For the first nine months of 1994,
EBDIAT increased 1.4% to $293,992,000 from $289,975,000 in the first nine
months of 1993.
Third quarter net sales increased in 1994 due to higher domestic tissue
net selling prices and, to a lesser degree, higher domestic tissue sales
volume. The net sales increase was also significantly affected by higher net
selling prices at the Company's wastepaper brokerage subsidiary. The increase
in operating income for the third quarter of 1994 reflects the higher domestic
tissue net selling prices and sales volume, offset by rising wastepaper costs
both domestically and in the U.K., and the increased proportion of net sales
represented by the Company's wastepaper brokerage subsidiary which typically
has lower margins than the Company's tissue operations.
On October 14, 1994, the company entered into an amendment of its Bank
Credit Agreement, 1993 Term Loan Agreement and Senior Secured Note Agreement.
Among other things, this amendment adjusted certain financial covenants,
including the reduction of the required ratio of earnings before non-cash
charges, interest and taxes to cash interest through December 31, 1995. The
ratio was adjusted because of the company's higher aggregate cash interest
expense which will result from the company's 14 1/8% Debentures accruing
interest in cash beginning on November 1, 1994, with cash interest payments
commencing on May 1, 1995.
Extraordinary losses related to debt repurchases in 1994 and 1993 (See
Notes to Financial Information) impacted the company's financial performance
in the first nine months of 1994 and 1993.
The company reported net income of $290,000 during the third quarter of
1994 compared to a net loss of $1,986,260,000 for the third quarter of 1993.
For the first nine months of 1994, the net loss decreased to $45,101,000 from
$2,046,048,000 for the first nine months of 1993. The large losses in 1993
resulted primarily from the write-off of Fort Howard's then remaining goodwill
balance of $1.98 billion.
(Financial information and notes follow on separate pages. The notes are an
integral part of this statement.)
# # # # #
FORT HOWARD CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1994 1993 1994 1993
---- ---- ---- ----
(In thousands)
Net Sales $340,068 $ 308,611 $930,697 $ 895,768
Cost of Sales 227,338 199,786 624,399 590,147
-------- ----------- -------- -----------
Gross Income 112,730 108,825 306,298 305,621
Selling, General and
Administrative--Note 3 27,546 19,508 82,092 70,707
Amortization of Goodwill--
Note 2 -- 14,191 -- 42,576
Goodwill Write-off--Note 2 -- 1,980,427 -- 1,980,427
-------- ----------- -------- -----------
Operating Income (Loss) 85,184 (1,905,301) 224,206 (1,788,089)
Interest Expense 84,209 84,845 251,562 259,157
Other Expense (Income),
Net--Note 4 (87) (5,471) 215 (5,475)
-------- ----------- -------- -----------
Income (loss) Before Taxes 1,062 (1,984,675) (27,571) (2,041,771)
Income Taxes (Credit) 772 1,585 (10,640) (5,483)
-------- ----------- -------- -----------
Income (loss) Before
Extraordinary Item 290 (1,986,260) (16,931) (2,036,288)
Extraordinary Item -- Losses
on Debt Repurchases,
Net--Note 1 -- -- (28,170) (9,760)
-------- ----------- -------- -----------
Net Income (Loss) $ 290 $(1,986,260) $(45,101) $(2,046,048)
======== =========== ======== ===========
*****
FORT HOWARD CORPORATION
NOTES TO FINANCIAL INFORMATION
1. In the first nine months of 1994, the company reported an extraordinary
loss of $28 million (net of income taxes of $15 million) representing the
redemption premiums and write-offs of deferred loan costs associated with the
repayment of $100 million of term loan indebtedness under the company's Bank
Credit Agreement on February 10, 1994 and the repurchases of all the company's
remaining 12 3/8% Senior Subordinated Notes and $238 million of the company's
12 5/8% Subordinated Debentures on March 11, 1994. In the first nine months
of 1993, the company reported an extraordinary loss of $10 million (net of
income taxes of $6 million) representing the write-off of deferred loan costs
associated with the repayment of $250 million of term loan indebtedness under
the company's Bank Credit Agreement on March 23, 1993 and the repurchases of
all the company's Junior Subordinated Debentures on April 21, 1993.
2. The Company's goodwill balance was originally recorded as an intangible
asset at the time of its leveraged buyout in 1988. In the third quarter of
1993, the Company concluded its previously announced study to evaluate the
carrying value of its goodwill. Low industry operating rates, aggressive
competitive activity, overcapacity, adverse economic conditions and other
factors had been adversely affecting tissue industry operating conditions and
the Company's operating results from 1991 through the third quarter of 1993.
Accordingly, the Company revised its projections as of September 30, 1993 and
determined that its projected results would not support the future
amortization of the Company's remaining goodwill balance of approximately
$1.98 billion at September 30, 1993. As a result, the Company wrote-off its
remaining goodwill balance in the third quarter of 1993.
3. Also in 1993, due to the effects of adverse tissue industry operating
conditions on its long-term earnings forecast as of September 30, 1993, the
Company decreased the estimated fair market valuation of its common stock and,
as a result, reversed all previously accrued employee stock compensation
expense in the third quarter of 1993. The reversal of accrued employee stock
compensation expense resulted in a reduction of selling, general and
administrative expenses of $8.4 million and $7.8 million for the third quarter
and first nine months of 1993, respectively.
4. Other income in the third quarter of 1993 includes a $5.1 million gain
upon the disposition of the Company's then remaining equity interest in
Sweetheart Holdings Inc. ("Sweetheart"), the Company's former North American
cup operations. The Company had previously reduced the carrying value of its
investment in Sweetheart to zero in 1991.
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