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
- - - - - - - - - - - - - - -
RECENT DEVELOPMENTS
Attached hereto and incorporated by reference herein is the news release
announcing Fort Howard Corporation's financial results for its fourth quarter
and fiscal year ended December 31, 1994.
- - - - - - - - - - - - - - -
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 6, 1995
<PAGE>
Fort Howard's sales for the fourth quarter increased 17.9% to
$343,748,000 from $291,619,000 for the fourth quarter of 1993. For fiscal
year 1994, Fort Howard's sales were $1,274,445,000, a 7.3% increase over 1993
net sales of $1,187,387,000. Domestic tissue sales increased 15.0% for the
fourth quarter of 1994 compared to 1993 principally due to higher sales volume
and higher selling prices. The net sales increase was also attributable to
higher net selling prices at the Company's wastepaper brokerage subsidiary.
For the fourth quarter of 1994, operating income was $52,597,000 compared
to $71,453,000 for the same period of 1993. The decrease in operating income
for the fourth quarter of 1994 reflects a charge of $20,000,000 which
represents the Company's current estimate of environmental remediation, legal
and consulting costs for past events. (See Notes to Financial Information.)
Excluding the environmental charge, fourth quarter operating income increased
1.6%, reflecting the higher sales volume and selling prices in domestic tissue
operations, offset by rising wastepaper costs both domestically and in the
U.K. In the Company's domestic tissue operations, wastepaper prices for the
grades of wastepaper used in Fort Howard's products nearly doubled from July
1994 to December 1994. As a result of these rapidly increasing costs, the
Company announced price increases in the fourth quarter of 1994 for both the
commercial and consumer markets effective in January 1995. These price
increases follow a commercial market price increase effective mid-October
1994, which is expected to principally benefit 1995 results.
The Company's operating income increased to $276,803,000 for 1994
compared to an operating loss of $1,716,636,000 in 1993. The operating loss
in 1993 resulted entirely from the Company's goodwill write-off in that year.
(See Notes to Financial Information). Excluding the environmental charge from
1994 results and the goodwill write-off, amortization of goodwill and the
reversal of employee stock compensation expense from 1993 results, operating
income declined to $296,803,000 in 1994 from $298,535,000 in 1993.
For the fourth quarter of 1994, earnings before the environmental charge,
interest, taxes, depreciation and amortization ("EBITDA") increased 1.9% to
$98,538,000 from $96,657,000 in the fourth quarter of 1994. For fiscal year
1994, EBITDA increased 1.5% to $392,530,000 from $386,632,000 in 1993.
Extraordinary losses related to debt repurchases in 1994 and 1993 (See
Notes to Financial Information) impacted the Company's financial performance
in 1994 compared to 1993.
For the fourth quarter of 1994, the Company's net loss increased to
$25,194,000 from $6,034,000 for the same period in 1993 due principally to the
environmental charge. The Company's net loss for fiscal year 1994 decreased
to $70,295,000 from $2,052,082,000 in 1993. The significant net loss in 1993
principally resulted from the goodwill write-off.
- 2 -<PAGE>
FORT HOWARD CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Year Ended
December 31, December 31,
------------------ ----------------
1994 1993 1994 1993
---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C>
Net Sales $343,748 $291,619 $1,274,445 $1,187,387
Operating Income (Loss) (See Note 1) 52,597 71,453 276,803 (1,716,636)
Interest Expense 86,139 83,635 337,701 342,792
Other (Income) Expense, Net (97) 2,479 118 (2,996)
-------- -------- ---------- ----------
Loss Before Taxes (33,445) (14,661) (61,016) (2,056,432)
Income Taxes (Credit) (8,251) (10,831) (18,891) (16,314)
-------- -------- ---------- ----------
Loss Before Extraordinary Items (25,194) (3,830) (42,125) (2,040,118)
Extraordinary Items--Losses on Debt
Repurchases, Net -- (2,204) (28,170) (11,964)
-------- -------- ---------- ----------
Net Loss $(25,194) $ (6,034) $ (70,295) (2,052,082)
======== ======== ========== ==========
</TABLE>
- 3 -<PAGE>
FORT HOWARD CORPORATION
NOTES TO FINANCIAL INFORMATION
1. Based upon currently available information and analysis, and taking into
account all the Company's clean-up obligations and damages related to
matters subject to legal proceedings or pertaining to on-going
operations, the Company recorded a $20 million charge in the fourth
quarter of 1994, which represents its current estimate of environmental
remediation, legal and consulting costs for past events.
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 had
revised its projections as of September 30, 1993 and had 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 $7.8 million for fiscal
year 1993.
4. In 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 1993,
the Company reported an extraordinary loss of $12 million (net of income
taxes of $7 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, the
repurchases of all the Company's Junior Subordinated Debentures on
April 21, 1993, and the repurchase of $50 million of the Company's
12 3/8% Senior Subordinated Notes on November 1, 1993.
- 4 -
