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 and
33-51876
PROSPECTUS SUPPLEMENT
(To Prospectus dated November 24, 1993)
FORT HOWARD CORPORATION
12-3/8% Senior Subordinated Notes Due 1997
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
1991 Pass Through Trust, Pass Through Certificates, Series 1991
- - - - - - - - - - - - - - -
RECENT DEVELOPMENTS
Attached hereto and incorporated by reference herein is the news release
announcing Fort Howard Corporation's financial results for its fiscal year
ended December 31, 1993.
- - - - - - - - - - - - - - -
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.
February 15, 1994
Fort Howard's sales for the fourth quarter increased to $291,619,000 from
$285,709,000 for the fourth quarter of 1992. For fiscal year 1993, Fort
Howard's net sales were $1,187,387,000, a 3.1% increase over 1992 net sales of
$1,151,351,000. Domestic tissue pricing and, to a lesser extent, volume
improved in the fourth quarter of 1993 compared to 1992. These improvements
were partially offset by a decline in fourth quarter 1993 net sales in the
company's United Kingdom tissue operations compared to 1992 due to slightly
lower volume and significantly lower selling prices.
For the fourth quarter of 1993, operating income was $71,453,000 compared
to $57,267,000 for the same period of 1992. Operating income for the fourth
quarter benefited from the elimination of amortization of goodwill of $14
million for the quarter as a result of the company's goodwill write-off in the
third quarter of 1993. However, operating income was adversely impacted in
the fourth quarter of 1993 by approximately $2 million of additional
depreciation resulting from the acceleration of the depreciable lives of
certain equipment. Excluding the effects of these items, reported operating
income for the fourth quarter of 1993 increased slightly compared to the
fourth quarter of 1992.
Principally as a result of the goodwill write-off, the company incurred
an operating loss of $1,716,636,000 for 1993 compared to operating income of
$270,675,000 in 1992. Excluding the effects of the goodwill write-off, the
reversal of previously accrued employee stock compensation and the
acceleration of the depreciable lives of certain equipment, operating income
would have declined 10.2% for the full year of 1993.
An extraordinary loss related to debt repurchases in 1993 and the
adoption of Statement of Financial Accounting Standards No. 106 in 1992 (See
Notes to Financial Information), impacted the company's financial performance
in 1993 compared to the same period in 1992.
For the fourth quarter of 1993, the company's net loss decreased to
$6,034,000 from $28,004,000 for the same period in 1992, in part due to the
elimination of the amortization of goodwill. As a result of the goodwill
write-off, the company's net loss for the fiscal year 1993 increased to
$2,052,082,000 from $79,989,000 in 1992.
As previously announced, on February 2, 1994, the company sold $100
million principal amount of 8 1/4% Senior Notes due 2002 and $650 million
principal amount of 9% Senior Subordinated Notes due 2006. The proceeds from
the sale of the 8 1/4% Senior Notes and the 9% Subordinated Notes have been
used to prepay $100 million of the company's term loan indebtedness under its
Bank Credit Agreement on February 10, 1994 and will be used to redeem all of
its remaining 12 3/8% Senior Subordinated Notes and $238 million of its 12
5/8% Subordinated Debentures on March 11, 1994.
(Financial information and notes follow on a separate page. The notes are an
integral part of this statement.)
# # # #
FORT HOWARD CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Year Ended
December 31, December 31,
------------ ------------
1993 1992 1993 1992
---- ---- ---- ----
(In thousands)
Net Sales $ 291,619 $ 285,709 $ 1,187,387 $ 1,151,351
Operating Income (Loss) 71,453 57,267 (1,716,636) 270,675
Interest Expense 83,635 89,681 342,792 338,374
Other (Income) Expense, Net 2,479 2,479 (2,996) 2,101
--------- ---------- ----------- -----------
Loss Before Taxes (14,661) (34,893) (2,056,432) (69,800)
Income Taxes (Credit) (10,831) (6,889) (16,314) (398)
--------- ---------- ----------- -----------
Net Loss Before Extraordinary
Item and Adjustment for
Accounting Change (3,830) (28,004) (2,040,118) (69,402)
Extraordinary Item - Loss on
Debt Repurchases, Net (2,204) - (11,964) -
Adjustment for Adoption of
SFAS 106 - - - (10,587)
--------- ---------- ----------- -----------
Net Loss $ (6,034) $ (28,004) $(2,052,082) $ (79,989)
========= ========= =========== ===========
*****
FORT HOWARD CORPORATION
NOTES TO FINANCIAL INFORMATION
1. 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 have been adversely affecting tissue
industry operating conditions and the company's operating results since
1991. Accordingly, the company has revised its projections and has
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.
2. Due to the effects of adverse tissue industry operating conditions on
its long-term earnings forecast, 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 $7.8 million for the fiscal year 1993.
3. Other income in 1993 includes a $5.1 million gain upon the disposition
of the company's 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.
4. As announced during the first quarter of 1993, on March 22, 1993 the
company sold $450 million principal amount of 9 1/4% Senior Notes due
2001 and $300 million principal amount of 10% Subordinated Notes due
2003 in a registered public offering. The proceeds from the sale of the
9 1/4% Senior Notes and the 10% Subordinated Notes together with funding
from a new $100 million bank term loan agreement were used to prepay
$250 million of the company's term loan indebtedness under its Bank
Credit Agreement and all the company's outstanding 14 5/8% Junior
Subordinated Debentures.
5. In the first quarter of 1993, the company reported an extraordinary loss
of $9.8 million (net of income taxes of $6.0 million) representing the
write-off of unamortized deferred loan costs associated with the
repayment of $250 million of term loan indebtedness under the company's
Bank Credit Agreement and the repurchases of all the company's 14 5/8%
Junior Subordinated Debentures. In the fourth quarter of 1993, the
company reported an extraordinary loss of $2.2 million (net of income
taxes of $1.3 million) representing the write-off of unamortized
deferred loan costs associated with the repurchases of $50 million of
the company's 12 3/8% Senior Subordinated Notes.
6. The company adopted Statement of Financial Accounting Standards ("SFAS")
No. 106, "Employers' Accounting for Postretirement Benefits Other Than
Pensions" during the first quarter of 1992. The standard requires that
the expected cost of postretirement health care benefits must be charged
to expense during the years that employees render service. The
cumulative effect on years prior to 1992 of adopting SFAS No. 106 is
stated separately in the company's consolidated statement of income for
1992 as a one-time, after-tax charge of $10.6 million.
# # # # #
