SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: June 26, 1994 Commission File Number: 1-7911
JAMES RIVER CORPORATION of Virginia
(Exact name of registrant as specified in its charter)
Virginia 54-0848173
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
120 Tredegar Street, Richmond, VA 23219
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (804) 644-5411
Not Applicable
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months, and (2) has been
subject to such filing requirements for the past 90 days.
Yes X No
Number of shares of $.10 par value common stock outstanding as of
August 1, 1994:
81,673,726 shares
JAMES RIVER CORPORATION
of Virginia
QUARTERLY REPORT ON FORM 10-Q
June 26, 1994
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION:
ITEM 1. Financial Statements:
Consolidated Balance Sheets as of June 26, 1994 and
December 26, 1993 3
Consolidated Statements of Operations for the quarters
and six months ended June 26, 1994 and June 27, 1993 5
Consolidated Statements of Cash Flows for the six months
ended June 26, 1994 and June 27, 1993 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
PART II. OTHER INFORMATION:
ITEM 1. Legal Proceedings 19
ITEM 2. Changes in Securities 19
ITEM 3. Defaults Upon Senior Securities 19
ITEM 4. Submission of Matters to a Vote of Security Holders 19
ITEM 5. Other Information 20
ITEM 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 23
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED BALANCE SHEETS
June 26, 1994 and December 26, 1993
(in thousands, except share data)
June December
1994 1993
ASSETS
Current assets:
Cash and short-term securities $23,142 $23,620
Accounts receivable 445,442 422,894
Inventories 701,453 666,464
Prepaid expenses and other current assets 22,548 22,939
Refundable income taxes 15,429
Deferred income taxes 63,796 83,538
Net assets held for sale 74,669 62,868
Total current assets 1,346,479 1,282,323
Net property, plant, and equipment 3,509,055 3,571,492
Investments in affiliates 558,880 519,448
Other assets 315,883 324,724
Goodwill 150,957 153,315
$5,881,254 $5,851,302
The accompanying notes are an integral part
of the consolidated financial statements.
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED BALANCE SHEETS, Continued
(in thousands, except share data)
June December
1994 1993
LIABILITIES AND CAPITAL
Current liabilities:
Accounts payable and accrued liabilities $599,354 $616,192
Income taxes payable 5,183 4,463
Current portion of long-term debt 78,669 97,287
Accrued restructuring liability 46,978 63,134
Total current liabilities 730,184 781,076
Long-term debt 2,038,361 1,942,836
Accrued postretirement benefits other than
pensions 542,391 541,823
Other long-term liabilities 215,442 179,955
Deferred income taxes 415,534 430,421
Minority interests 5,461 7,010
Preferred stock, $10 par value, 5,000,000
shares authorized, issuable in series 452,808 454,108
Common stock, $.10 par value, 150,000,000
shares authorized; shares outstanding,
June 26, 1994--81,672,484 and
December 26, 1993--81,628,047 8,167 8,163
Additional paid-in capital 1,220,086 1,219,043
Retained earnings 252,820 286,867
$5,881,254 $5,851,302
The accompanying notes are an integral part
of the consolidated financial statements.
<TABLE>
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarters (13 Weeks) and Six Months (26 Weeks) Ended
June 26, 1994 and June 27, 1993
(in thousands, except per share amounts)
<CAPTION>
Second Quarter Six Months
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Net sales $1,198,145 $1,198,134 $2,303,648 $2,311,759
Cost of goods sold 990,697 983,337 1,925,563 1,918,057
Selling and administrative expenses 164,983 172,609 315,315 333,860
Income from operations 42,465 42,188 62,770 59,842
Interest expense 36,553 33,317 71,510 72,502
Other income, net 15,509 13,730 18,100 17,919
Income before income tax expense 21,421 22,601 9,360 5,259
Income tax expense 8,521 8,865 3,546 1,653
Net income $12,900 $13,736 $5,814 $3,606
Preferred dividend requirements (8,201) (8,205) (16,403) (16,413)
Net income (loss) applicable to
common shares $4,699 $5,531 $(10,589) $(12,807)
Net income (loss) per common share and
common share equivalent $.06 $.06 $(.13) $(.16)
Cash dividends per common share $.15 $.15 $.30 $.30
Weighted average number of common shares
and common share equivalents 81,901 81,846 81,883 81,795
The accompanying notes are an integral part
of the consolidated financial statements.
</TABLE>
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months (26 Weeks) Ended
June 26, 1994, and June 27, 1993
(in thousands)
1994 1993
Cash provided by (used for) operating activities:
Net income $5,814 $3,606
Items not affecting cash:
Depreciation expense and cost of timber harvested 178,038 182,088
Deferred income tax provision (benefit) 662 (584)
Undistributed (earnings) losses of unconsolidated
affiliates (4,164) 1,841
Amortization and other 9,115 8,223
Change in current assets and liabilities:
Accounts receivable (21,496) (20,401)
Inventories (35,665) 4,841
Prepaid expenses and other current assets 371 7,467
Net assets held for sale (1,278) (1,736)
Accounts payable and accrued liabilities (17,739) (11,139)
Income taxes payable 619 5,359
Accrued restructuring liability (14,956) (16,616)
Retirement benefits expense in excess of funding 14,044 16,623
Other, net (5,263) 8,456
Cash provided by operating activities 108,102 188,028
Cash provided by (used for) investing activities:
Expenditures for property, plant, and equipment (143,363) (149,639)
Cash received from sale of assets 8,935 26,148
Investments in affiliates (12,108) (220)
Proceeds received from redemption of SCI preferred
stock 47,050
Other, net 2,777 4,317
Cash used for investing activities (143,759) (72,344)
Cash provided by (used for) financing activities:
Additions to long-term debt 98,568 38,220
Payments of long-term debt (21,083) (455,706)
Common and preferred stock cash dividends paid (40,907) (40,819)
Other, net (1,399) (133)
Cash provided by (used for) financing activities 35,179 (458,438)
Decrease in cash and short-term securities (478) (342,754)
Cash and short-term securities, beginning of period 23,620 375,492
Cash and short-term securities, end of period $23,142 $32,738
The accompanying notes are an integral part
of the consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
In the opinion of management, the accompanying unaudited
consolidated financial statements of James River Corporation of
Virginia and Subsidiaries (the "Company" or "James River") contain
all adjustments (consisting of only normal recurring accruals)
necessary to present fairly the Company's consolidated financial
position as of June 26, 1994 and June 27, 1993, its results of
operations for the quarters (13 weeks) and the six months (26 weeks)
then ended, and its cash flows for the six months then ended. The
balance sheet as of December 26, 1993 was derived from audited
financial statements as of that date. The results of operations for
the six months ended June 26, 1994 are not necessarily indicative of
the results to be expected for the full year.
Certain amounts in the prior year's financial statements and
supporting footnote disclosures have been reclassified to conform to
the current year's presentation.
2. Acquisitions and Dispositions
Prior to July 5, 1994, James River and Rayne Holdings Inc.
("Rayne") each owned 50% of Jamont Holdings N.V. ("Jamont Holdings")
which, in turn, owned 86.4% of Jamont N.V. ("Jamont"). In February
1994, the Company made an additional investment of $11.8 million in
Jamont Holdings which, in accordance with the terms of an agreement
with Rayne, did not result in a change in James River's then 50%
ownership interest in Jamont Holdings. On July 5, 1994, subsequent
to quarter end, James River completed the acquisition of Rayne's
43.2% indirect ownership interest in Jamont for a total consideration
of approximately $575 million in cash. Jamont, with operations in 12
European countries and 1993 sales of $1.5 billion, produces branded
and private label tissue, hygiene, and foodservice products for the
retail and away-from-home markets. (See Notes 10 and 12 for other
information regarding James River's investment in Jamont Holdings).
In March 1994, the Company sold its 50% interest in Coastal
Paper Company, a Mississippi-based producer of lightweight papers.
During the first six months of 1994, James River also completed the
sale of approximately 18,100 acres of timberlands that it had
acquired as part of its acquisition of Diamond Occidental Forest Inc.
in 1993. The estimated realizable value of the timberlands was
included in net assets held for sale prior to their disposition.
(See Note 9 for summarized information related to these
dispositions).
3. Other Income
The components of other income were as follows for the six
months ended June 26, 1994 and June 27, 1993 (in thousands):
June June
1994 1993
Interest and investment income $10,926 $22,116
Equity in net income (losses)
of unconsolidated affiliates 4,164 (608)
Minority interests in (gains) losses
of subsidiaries 405 1,034
Foreign currency exchange losses (357) (8,429)
Write-off of investment (2,168)
Other, net 2,962 5,974
Total other income $18,100 $17,919
4. Income Taxes
The Company's effective income tax rate was 37.9% for the six
months ended June 26, 1994, compared to 31.4% for the comparable
period of 1993. The effective rates for each period have been
affected by the relative size of minority interests, which is
included net of income taxes in pretax earnings, in comparison to
pretax earnings. The 1994 income tax rate has been affected by the
Omnibus Budget Reconciliation Act of 1993, enacted in August 1993,
which provided for, among other things, an increase in the federal
corporate income tax rate from 34% to 35%.
5. Inventories
The components of inventories were as follows as of June 26,
1994 and December 26, 1993 (in thousands):
June December
1994 1993
Raw materials $148,690 $161,093
Finished goods and work in process 467,561 425,640
Stores and supplies 143,333 139,457
759,584 726,190
Reduction to state certain inventories
at last-in, first-out cost (58,131) (59,726)
Total inventories $701,453 $666,464
6. Property, Plant, and Equipment
The components of net property, plant, and equipment were as
follows as of June 26, 1994 and December 26, 1993 (in thousands):
June December
1994 1993
Land and improvements $147,565 $147,805
Buildings 628,172 622,509
Machinery and equipment 4,426,401 4,364,416
Construction in progress 170,202 119,431
5,372,340 5,254,161
Accumulated depreciation (1,995,749) (1,829,267)
3,376,591 3,424,894
Timber and timberlands, net 132,464 146,598
Net property, plant, and equipment $3,509,055 $3,571,492
7. Long-Term Debt
On May 2, 1994, the Company filed a registration statement with
the Securities and Exchange Commission for a shelf registration of up
to $600 million of debt securities to be issued from time to time in
the future. James River currently expects to use a portion of the
proceeds from the offering to repay floating rate notes or a portion
of the Company's borrowings under its long-term revolving credit
agreements, its commercial paper borrowings, or its new credit
facilities which were used to help finance a portion of James River's
acquisition of Rayne's indirect interest in Jamont (see Note 12).
The remaining portion of the proceeds may be used for general
corporate purposes, which may include capital expenditures,
acquisitions, and working capital requirements. As of August 8,
1994, the Company has not entered into any agreement with a third
party with respect to any acquisition other than the acquisition of
Jamont.
8. Preferred Stock
Outstanding preferred stock, stated at liquidation value, was as
follows as of June 26, 1994 and December 26, 1993:
Liquidation Value
Liquidation Shares Outstanding (in thousands)
Value June December June December
Per Share 1994 1993 1994 1993
Series D $100 13,000 $1,300
Series K 50 1,999,995 1,999,995 $100,000 100,000
Series L 200 1,000,000 1,000,000 200,000 200,000
Series N 200 264,042 264,042 52,808 52,808
Series O 500 200,000 200,000 100,000 100,000
Total preferred stock 3,464,037 3,477,037 $452,808 $454,108
James River called its outstanding shares of Series D Cumulative
Preferred Stock ("Series D") for redemption on June 16, 1994 and
deposited the funds required to be delivered upon such redemption on
June 20, 1994. Pursuant to the terms of such shares, the Series D is
deemed to be no longer outstanding as of June 20, 1994 for any
purpose, and all rights with respect thereto ceased and terminated on
that date except the right to receive payment of the consideration
payable, including accrued dividends, upon redemption.
On June 30, 1994, subsequent to quarter end, the Company issued
its Series P 9% Cumulative Convertible Preferred Stock (see Note 12
for further information).
9. Statements of Cash Flows Supplemental Data
Cash payments for income taxes of consolidated subsidiaries
totalled approximately $3.2 million and $2.7 million for the six
months ended June 26, 1994 and June 27, 1993, respectively. Interest
paid totalled $69.7 million for the six months ended June 26, 1994
and $82.9 million for the six months ended June 27, 1993. Interest
costs incurred and amounts capitalized in fixed asset accounts for
the six months ended June 26, 1994 and June 27, 1993 were as follows
(in thousands):
June June
1994 1993
Total interest costs $72,761 $75,374
Interest capitalized (1,251) (2,872)
Net interest expense $71,510 $72,502
Businesses sold during the six months ended June 26, 1994 and
June 27, 1993 are summarized as follows (in thousands):
June June
1994 1993
Fair value of assets sold $10,935 $28,848
Non-cash consideration received (2,000) (2,700)
Cash received from sale of assets $8,935 $26,148
10. Commitments and Contingent Liabilities
(a) Put and Call Arrangements:
James River's acquisition of Rayne's 50% ownership interest
in Jamont Holdings on July 5, 1994, (see Note 12) terminated a
previously disclosed put and call arrangement that had existed
between James River and Rayne related to such interest.
James River is also a party to a separate put and call
arrangement related to its investment in Jamont. In March 1993,
EuroPaper Inc. ("EuroPaper"), an unrelated entity, purchased the
approximate 14% interest in Jamont previously owned by Nokia
Corporation. In connection with this transaction, EuroPaper
entered into a put and call agreement with James River.
Pursuant to the agreement, EuroPaper may put its interest in
Jamont (the "EuroPaper Shares") to James River during May 1996
and James River may call the EuroPaper Shares during August
1996, each at a fixed price of approximately 1.04 billion French
francs (approximately $191 million using exchange rates in
effect as of June 30, 1994). In addition, Jamont Holdings has a
separate call agreement with EuroPaper under which it may call
the EuroPaper Shares through April 1996 at a formula price.
James River and CRSS Capital, Inc. ("CRSS") each own 50% of
the Naheola Cogeneration Limited Partnership (the "Naheola
Partnership"), which was formed in order to develop and operate
a $300 million chemical recovery unit at the Company's Naheola
mill. James River has an option to purchase CRSS's interest at
fair value. CRSS also has an option to put its interest in the
partnership to James River at fair value. CRSS's option may
only be exercised (i) if the facility becomes subject to
regulation as a public utility, (ii) if production levels at the
Naheola mill fall below certain levels due to the Company's
shifting of production to other mills, or (iii) if the Naheola
mill is sold to a competitor of CRSS; management believes the
probability of the occurrence of any of these events is remote.
(b) Hedge and Swap Agreements:
The Company is a party to foreign currency contracts that
hedge a portion of the foreign currency exposure of its net
investment in Jamont. As of June 26, 1994, the Company had
outstanding foreign currency contracts covering a total notional
principal amount of $488 million, primarily denominated in
French francs, British pounds, Belgian francs, and Spanish
pesetas. The carrying value of these contracts was a net
liability of $34.9 million as of June 26, 1994. Currency gains
and losses on the contracts are recorded in the foreign currency
translation component of retained earnings. These contracts
mature on September 1, 1998. In connection with these
contracts, the Company has entered into interest swap agreements
to manage the related interest rate exposure. Gains and losses
on these agreements are included in other income as incurred.
In 1994, the Company also entered into five-year interest
rate swap and periodic cap agreements primarily to manage its
interest rate exposure on certain issues of long-term debt. The
agreements effectively converted $325 million of fixed rate
debt, with a weighted average fixed rate of approximately 7.1%,
to LIBOR-based floating rate debt. Gains and losses on these
agreements are recorded in interest expense, as incurred. For
the six months ended June 26, 1994, interest expense was
decreased by $1.2 million related to the effect of these
agreements.
(c) Environmental Matters:
Like its competitors, James River is subject to extensive
regulation by various federal, state, provincial, and local
agencies concerning compliance with environmental control
statutes and regulations. These regulations impose limitations
on the discharge of materials into the environment, including
effluent and emission limitations, as well as require the
Company to obtain and operate in compliance with the conditions
of permits and other governmental authorizations. Future
regulations could materially increase the Company's capital
requirements and certain operating expenses in future years.
In December 1993, the U.S. Environmental Protection Agency
(the "EPA") published draft rules, informally referred to as the
"cluster rules," which contain proposed revisions to the
effluent guidelines under the Clean Water Act in conjunction
with new regulations relating to the discharge of certain
substances under the Clean Air Act. The final rules are likely
to be issued in early 1996, with a nominal compliance date of
1999. The new rules may require significant changes in the
pulping and/or bleaching process presently used in some U.S.
pulp mills, including several of James River's mills,
necessitating additional capital expenditures to achieve
compliance by approximately 1999. Based on preliminary
estimates, the Company anticipates that such capital
expenditures could be at least $300 million for James River.
This estimate could change, depending on several factors,
including, among others, (i) the ability of the Company and
other pulp manufacturers to convince the EPA that the proposed
regulations are unnecessarily complex, burdensome, and
environmentally unjustified; (ii) the outcome of potential
administrative and judicial challenges; (iii) new developments
in control and process technology; and (iv) any unfavorable
revisions to the proposed cluster rules based on public comment.
In addition, James River has been identified as a
potentially responsible party ("PRP") and is involved in
remedial investigations and actions under federal and state
laws. It is James River's policy to accrue remediation costs
when it is probable that such costs will be incurred and when
they can be reasonably estimated. As of June 26, 1994, James
River's accrued environmental remediation liabilities totalled
$19.5 million. This amount reflects management's best estimate
of James River's liability for such costs. The Company
periodically reviews the status of all significant existing or
potential environmental issues and adjusts its accrual as
necessary. Estimates of costs for future remediation are
necessarily imprecise due to, among other things, the
identification of presently unknown remediation sites and the
allocation of costs among PRP's. The Company believes that its
share of the costs of cleanup for its current remediation sites
will not have a material adverse impact on its financial
condition. As is the case with most manufacturing and many
other entities, there can be no assurance that the Company will
not be named as a PRP at additional sites in the future or that
the costs associated with such additional sites would not be
material.
11. Segment Information
James River's net sales and income from operations by business
segment were as follows for the quarters and six months ended June
26, 1994 and June 27, 1993 (in thousands):
Second Quarter Six Months
June June June June
1994 1993 1994 1993
Net sales:
Consumer products $621,370 $615,932 $1,178,594 $1,174,737
Food and consumer packaging 399,328 389,340 775,065 776,735
Communications papers 220,453 237,718 435,497 453,630
Intersegment elimination (43,006) (44,856) (85,508) (93,343)
Total net sales $1,198,145 $1,198,134 $2,303,648 $2,311,759
Operating profit (loss):
Consumer products $46,991 $33,885 $75,307 $57,075
Food and consumer packaging 34,310 29,676 60,943 52,985
Communications papers (26,516) (12,297) (51,575) (32,578)
General corporate expenses (12,320) (9,076) (21,905) (17,640)
Income from operations $42,465 $42,188 $62,770 $59,842
12. Subsequent Events
(a) Jamont Acquisition:
On July 5, 1994, subsequent to the end of the quarter,
James River completed the acquisition of an additional 43.2%
indirect ownership interest in Jamont for a total purchase price
of approximately $575 million. This transaction increased James
River's indirect ownership interest from 43.2% to 86.4% and will
result in the consolidation of Jamont beginning in the third
quarter. One-half of the purchase price was financed with the
proceeds from a new series of preferred stock issued early in
the third quarter (see Note 12(b)). The balance of the purchase
price was financed with a combination of borrowings under
existing and new lines of credit. These borrowings may be
refinanced with a portion of James River's existing $600 million
shelf registration of debt securities (see Note 7). Following
the acquisition, James River intends to continue to report its
operations in its existing three business segments, with Jamont
reported as part of its Consumer Products segment.
(b) Issuance of Series P Preferred Stock:
On June 29, 1994, subsequent to quarter end, the Series P
9% Cumulative Convertible Preferred Stock was issued as a
Dividend Enhanced Convertible Stock ("DECS"), in the form of
depositary shares, with each depositary share representing a one-
hundredth interest in a share of the preferred stock. A total
of 16.7 million depositary shares were issued, for total gross
proceeds of $287.5 million, after reflecting the exercise of the
underwriters' over-allotment option. The DECS are convertible
into common stock at the option of the holder, at any time, at a
rate of .8547 common shares for each depositary share, subject
to adjustment in certain events, and are redeemable by the
Company beginning in July 1997 at a call price payable in shares
of common stock. The number of shares to be issued upon
redemption is tied to the market value of the Company's common
stock at the time of redemption. If still outstanding, the DECS
will automatically convert into common shares on a one-for-one
basis in July 1998.
(c) Pro Forma Data:
The following pro forma information gives effect to (i) the
acquisition by James River of the remaining 50% ownership
interest in Jamont Holdings for a purchase price of $575 million
in cash and (ii) the assumed financing of such acquisition with
the proceeds from the issuance of $287.5 million of debt
securities and $287.5 million of preferred stock. The pro forma
information is presented as if these transactions had been
completed as of the first day of the periods presented for the
pro forma consolidated operating data and as of June 26, 1994
for the pro forma consolidated balance sheet data and had
resulted in the consolidation of Jamont Holdings by James River.
The pro forma financial information does not purport to be
indicative of the results of operations which would actually
have been reported if the transactions had occurred for the
periods indicated or which may be reported in the future.
Pro Forma Consolidated Operating Data Six Months Ended
(in millions, except per share data) June 26, 1994 June 27, 1993
Net sales $3,046.3 $2,960.7
Net loss $(3.7) $(4.5)
Net loss applicable to common shares
(after preferred dividend requirements) $(33.0) $(33.8)
Net loss per common share and
common share equivalent $(.40) $(.41)
Pro Forma Consolidated Balance Sheet Data
(in millions) June 26, 1994
Total assets $7,982.1
Total debt, including current portion $3,191.0
Total shareholders' equity $2,213.4
<TABLE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Comparison of Quarters (13 Weeks) and Six Months (26 Weeks) Ended
June 26, 1994 and June 27, 1993
($ in millions)
<CAPTION>
Quarter Ended Six Months Ended
June 26, 1994 June 27, 1993 June 26, 1994 June 27, 1993
% of % of % of % of
Net Net Net Net
$ Sales $ Sales $ Sales $ Sales
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $1,198.1 100.0% $1,198.1 100.0% $2,303.6 100.0% $2,311.8 100.0%
Cost of goods sold 990.7 82.7 983.3 82.1 1,925.5 83.6 1,918.1 83.0
Selling and administrative expenses 164.9 13.8 172.6 14.4 315.3 13.7 333.9 14.4
Income from operations 42.5 3.5 42.2 3.5 62.8 2.7 59.8 2.6
Interest expense 36.6 3.0 33.3 2.8 71.5 3.1 72.5 3.1
Other income, net 15.5 1.3 13.7 1.1 18.1 .8 17.9 .8
Income before income taxes 21.4 1.8 22.6 1.8 9.4 .4 5.2 .3
Income tax expense 8.5 .7 8.9 .7 3.6 .1 1.6 .1
Net income $12.9 1.1% $13.7 1.1% $5.8 .3% $3.6 .2%
</TABLE>
Results of Operations (continued)
Net sales for the quarter were $1.2 billion, equivalent to the
prior year and up approximately 8% above sales of $1.1 billion in the
first quarter of this year. The Company reported net income of $12.9
million for the quarter, slightly below the prior year, but
significantly above the net loss of $7.1 million reported in the
first quarter. On a per share basis after preferred dividends,
earnings of $.06 per share were equal to those of the prior year's
second quarter and improved over the loss of $.19 per share reported
in the first quarter of this year. Results for the second quarter of
1994 included $9.0 million of non-recurring interest income ($5.4
million after taxes, or $.07 per share) on the favorable settlement
of certain prior years' income tax returns. Last year's second
quarter also included non-recurring other income of approximately
$6.7 million ($4.1 million after taxes, or $.05 per share).
Income from operations totalled $42.5 million, equivalent to the
second quarter of 1993 and more than double the $20.3 million
reported in the first quarter of this year. The upturn from the
first quarter reflects continuing improvements in profitability in
both the Consumer Products and the Food and Consumer Packaging
Businesses, offset in part by the continuing weaknesses in pricing
experienced by the Communications Papers Business. Operating income
for the Consumer Products Business totalled $47 million, representing
increases of 39% compared to last year's second quarter and 66%
compared to first quarter levels. This also represents the highest
level of quarterly profitability for this business since 1991, driven
principally by the Company's cost reduction efforts, as well as
strong retail tabletop volumes. While price increases in commercial
tissue products have been announced for the third quarter, pricing in
both retail tissue and tabletop markets remained competitive during
the quarter. Operating income of $34.3 million for the Food and
Consumer Packaging Business represented improvements of 16% and 29%,
respectively, over profits reported last year and in the first
quarter. Operating losses in the Communications Papers Business
widened slightly to $26.5 million, compared to losses of $25.1
million in the first quarter and $12.3 million in last year's second
quarter. Price increases in uncoated free sheet and other grades
were being implemented at the close of the second quarter, however,
average pricing for the second quarter was below that of the first
quarter. Sales and income from operations by business segment are
included in Note 11 of Notes to Consolidated Financial Statements,
which should be read in conjunction herewith.
For the six months, James River reported sales of $2.3 billion
in 1994, compared to $2.3 billion in 1993. Net income for the first
half of 1994 was $5.8 million, or a loss of $.13 per share after
preferred dividend requirements, compared to 1993's net income of
$3.6 million, or a loss of $.16 per share. Interest expense for the
first six months of 1994 declined by $1.0 million compared with the
same period in 1993 and gross interest costs decreased by $2.6
million. The decline in net interest expense reflects the higher
levels of interest expense due to additional borrowings in the early
months of 1993 and interest savings in 1994 resulting from the
Company's refinancing program, which was completed in April 1993.
This decrease was partially offset by lower amounts of capitalized
interest and was also affected by the interest rate swap agreements
discussed in Note 10 of Notes to Consolidated Financial Statements.
Other income increased slightly to $18.1 million for the first six
months of 1994 from $17.9 million for 1993. Both periods include
approximately $9.0 million ($5.4 million after taxes, or $.07 per
share) of interest income on refunds resulting from the favorable
settlement of certain prior years' income tax returns. In addition,
the amount for the first six months of 1993 includes increased
interest income generated by the higher-than-normal levels of cash
and short-term securities held during the early part of 1993 in
connection with the refinancing program offset by increased losses of
unconsolidated affiliates and the write-off of preferred stock
received in a prior divestiture. (See Note 3 of Notes to
Consolidated Financial Statements). The change in the effective tax
rate for 1994 is discussed in Note 4 of Notes to Consolidated
Financial Statements.
As part of its ongoing efforts to improve the effectiveness of
manufacturing operations and reduce costs, the Company announced
plans for the closure of its Sandston, Virginia, specialty
foodservice plant. Production from this facility will be
consolidated at other Company facilities.
On July 5, 1994, subsequent to the end of the quarter, James
River completed the acquisition of an additional 43.2% indirect
ownership interest in Jamont N.V. for a total purchase price of
approximately $575 million. This transaction increased James River's
ownership interest from 43.2% to 86.4% and will result in the
consolidation of Jamont beginning in the third quarter. With annual
sales of $1.5 billion, Jamont is the number two European producer of
towel and tissue products. One-half of the purchase price was
financed with the proceeds from a new series of preferred stock
issued early in the third quarter. The balance of the purchase price
has been financed with a combination of borrowings under existing and
new lines of credit. These borrowings may be refinanced with a
portion of James River's existing $600 million shelf registration of
debt securities.
The Series P 9% Cumulative Convertible Preferred Stock was
issued on June 29, 1994, as a Dividend Enhanced Convertible Stock
("DECS"), in the form of depositary shares, with each depositary
share representing a one-hundredth interest in a share of the
preferred stock. A total of 16.7 million depositary shares were
issued, for total gross proceeds of $287.5 million, after reflecting
the exercise of the underwriters' over-allotment option. The DECS
are convertible into common stock at the option of the holder, at any
time, at a rate of .8547 common shares for each depositary share and
are redeemable by the Company beginning in July 1997 at a call price
payable in shares of common stock. If still outstanding, the DECS
will automatically convert into common shares on a one-for-one basis
in July 1998.
Subsequent to the acquisition of Jamont, James River will
continue to be comprised of three independent business segments.
The Consumer Products Business is the largest of these, with
worldwide annual sales of $4 billion, or over 60% of total James
River sales. This business produces premium towel and tissue and
tabletop products for both U.S. and European markets. The Food and
Consumer Packaging Business with annual sales of $1.6 billion
represents approximately 25% of total sales, and the Communications
Papers Business with annual sales of $.9 billion represents slightly
less than 15% of total sales. James River continues to pursue
strategies and structures to enhance recognition of the market values
of these businesses.
Beginning July 26, 1994, James River's Kalamazoo, Michigan,
recycled paperboard mill and folding carton plants went on strike
when the local union, representing the 627 hourly employees at these
facilities, failed to approve a new contract. Limited manufacturing
operations were continued during the work stoppage period, and
customers continued to be served from this and other James River
packaging facilities. Normal operations at the affected facilities
resumed on July 31, 1994, upon the ratification of a new contract by
the union. The impact of this strike will be reflected in the
results of the Food & Consumer Packaging Business in the third
quarter.
Beginning on August 1, 1994, work stopped at James River's
Lexington, Kentucky, manufacturing plant as a result of a strike by
the local union, representing the 389 hourly employees at this plant,
following the expiration of the existing labor contract. Limited
operations have been continued at the Lexington plant, which
manufactures paper and plastic cups. Customers continue to be served
from this and other James River cup manufacturing plants. On
August 9, 1994, a new labor agreement was negotiated subject to the
ratification of the union; management expects that the union will ratify the
proposed agreement and that normal operations will resume shortly after this
date. This strike
will impact the results of the Consumer Products Business in the
third quarter.
Financial Condition
Capital expenditures for the first six months of 1994 totalled
$143.4 million, comparable to the $149.6 million of spending in the
first six months of 1993. This reflects the Company's continued
focus on a reduced level of capital appropriations in response to
recent operating performance. Cash provided by operations for the
six months ended June 26, 1994 totalled $108.1 million, compared to
$188.0 million in the comparable period of 1993. This decrease is
primarily due to (i) increased production levels relative to demand
for certain packaging inventories and (ii) planned increases in
certain consumer products inventory levels in anticipation of
seasonally stronger demand.
During the first six months of 1994, the Company realized a
total of $8.9 million in cash from the sale of assets, including the
sale of its 50% interest in Coastal Paper Company and certain
timberlands. These transactions are described in Note 2 of Notes to
Consolidated Financial Statements.
As of June 26, 1994, under the most restrictive provisions of
the Company's debt agreements, the Company had additional borrowing
capacity of approximately $155 million and net worth in excess of the
minimum requirement specified by such agreements of approximately
$230 million.
James River's ratio of total debt, including the current
portion, to total capitalization was 52.3% as of June 26, 1994,
compared to 50.9% as of December 26, 1993. For purposes of
calculating this ratio, total capitalization represents the sum of
current and long-term debt and equity accounts. For the year ended
December 26, 1993, the ratio of earnings to fixed charges was 1.04.
For the six months ended June 26, 1994, the ratio of earnings to
fixed charges was 1.07.
In April 1994, Standard & Poor's and Moody's Investors Service
Inc. ("Moody's") each placed James River's securities ratings under
review following the announcement of James River's intent to acquire
a controlling interest in Jamont and the potential increase in the
Company's debt levels associated with this acquisition. In June
1994, Standard & Poor's and Moody's each downgraded James River's
securities ratings. Standard & Poor's lowered its ratings on James
River's senior debt from BBB with a negative outlook to BBB- and on
James River's preferred stock from BBB- to BB+. Moody's downgraded
the Company's senior debt from Baa1 to Baa3 and the Company's
preferred stock from baa2 to ba2.
In May 1994, the Company filed a registration statement with the
Securities and Exchange Commission for a shelf registration of up to
$600 million of debt securities. James River currently expects to
use a portion of the proceeds from such offering to refinance certain
borrowings made for the acquisition of Jamont. (See Note 7 of Notes
to Consolidated Financial Statements).
The Company's current ratio increased to 1.84 as of June 26,
1994 from 1.64 as of December 26, 1993 and working capital increased
to $616 million from $501 million for the same time period. The
increase in working capital of $115 million was primarily
attributable to an increase in receivables and inventory levels and a
decrease in the current portion of long-term debt and other current
liabilities.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
During the second quarter, James River was notified by the U.S.
Environmental Protection Agency (the "EPA") of a proposed civil
action relating to certain environmental violations at the Company's
Berlin, New Hampshire, mill. The Company is currently negotiating a
settlement with the EPA relating to this action which may involve
penalties in excess of $100,000.
Item 2. CHANGES IN SECURITIES.
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Shareholders was held on April 28, 1994,
at which time all of management's nominees for members of the Board
of Directors were elected, and the designation of Coopers & Lybrand
as the Company's independent accountants for the fiscal year which
will end on December 25, 1994 was approved. Additionally, the
Company's common shareholders voted upon several proposals related to
certain employee benefit plans and considered a proposal submitted by
certain shareholders urging the Company's Northern Ireland affiliate
to implement and/or increase activity on the nine MacBride
Principles. These proposals are more fully described in the James
River Proxy Statement for the Annual Meeting held on April 28, 1994.
Votes were cast as follows:
Vote
Voted Voted Withheld or Broker
For Against Abstained Non-Votes
Nominees for election of Directors:
FitzGerald Bemiss 72,673,234 835,329
William T. Burgin 72,734,787 773,776
Worley H. Clark, Jr. 72,753,991 754,572
William T. Comfort, Jr. 72,744,134 764,429
William V. Daniel 72,736,452 772,111
Bruce C. Gottwald 72,747,558 761,005
Robert M. O'Neil 72,748,136 760,427
Joseph T. Piemont 72,705,727 802,836
Anne M. Whittemore 72,716,493 792,070
Robert C. Williams 72,677,047 831,516
Appointment of Coopers &
Lybrand as auditors 72,172,656 839,950 495,957
Amend and restate the
Stock Purchase Plan 61,955,723 3,176,415 1,000,860 7,375,565
Amend and restate the
1987 Stock Option Plan 66,323,912 6,052,684 1,131,967
Amend and restate the
Deferred Stock Plan 65,999,077 6,339,905 1,169,581
Adopt the 1993 Profit Sharing
Plan for Salaried Employees 58,716,503 6,375,734 973,419 7,442,907
A motion was made for the proposal concerning the MacBride
Principles, however, this proposal failed for the lack of a second to
the motion. However, the votes submitted by proxy with respect to
this proposal were 11,502,565 voted for, 49,349,015 voted against,
5,832,001 abstained, and 6,824,982 broker non-votes.
Item 5. OTHER INFORMATION.
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
The exhibits listed below are filed as part of this
quarterly report. Each Exhibit is listed according to the
number assigned to it in the Exhibit Table of Item 601 of
Regulation S-K.
Exhibit Starts
Number Description on Page
11 Computation of Earnings (Loss) per Common
Share and Common Share Equivalent -- filed
herewith. 24
12 Computation of Ratio of Earnings to Fixed
Charges -- filed herewith. 27
99 Unaudited pro forma James River and Jamont
Holdings consolidated condensed balance
sheet as of June 26, 1994, the unaudited
pro forma consolidated statements of
operations for such entities for the six
months ended June 26, 1994, and the year
ended December 26, 1993, and the related
notes thereto which give effect to the
Jamont acquisition which was completed on
July 5, 1994 -- filed herewith. 30
(b) Reports on Form 8-K:
During the quarter ended June 26, 1994, and subsequent
thereto, the Company filed the following Current Reports on
Form 8-K:
1) April 21, 1994 The Company published a press release
announcing its results of operations
for the first quarter ended March 27,
1994.
2) April 27, 1994 The Company announced the signing of a
share acquisition agreement with
Montedison S.p.A. and Rayne Holdings
Inc. Also included were the audited
financial statements of Jamont Holdings
N.V. for the year ended December 31,
1993, presented in U.S. dollars and
prepared in accordance with accounting
standards generally accepted in The
Netherlands.
3) June 1, 1994 The Company announced its intent to
offer $250 million of cumulative
convertible preferred stock in the form
of Dividend Enhanced Convertible Stock
("DECS"). Also included were the
unaudited pro forma James River and
Jamont Holdings N.V. consolidated
capitalization and condensed balance
sheet as of March 27, 1994, the
unaudited pro forma consolidated
statements of operations for such
entities for the three months ended
March 27, 1994 and the year ended
December 26, 1993 and the related notes
to such pro forma financial statements.
4) June 29, 1994 The Company published a press release
announcing the completion of a public
offering of 15,000,000 depositary
shares, each representing a one-
hundredth interest in a share of James
River's Series P 9% Cumulative
Convertible Preferred Stock (the
"Series P Preferred Stock"). The
related Underwriting Agreement,
Articles of Amendment, and Deposit
Agreement were also included.
5) July 5, 1994 The Company announced the completion of
the acquisition of the 43.2% indirect
ownership interest in Jamont N.V.
previously owned by Rayne Holdings Inc.
for a total consideration of
approximately $575 million in cash.
Related to the acquisition, the Company
received notice from Salomon Brothers
Inc, as representatives for the
Underwriters of the Series P Preferred
Stock, of such Underwriters' full
exercise of an option to purchase up to
an additional 1,666,666 depositary
shares for the purpose of covering over-
allotments.
6) July 21, 1994 The Company published a press release
announcing its results of operations
for the second quarter and six months
ended June 26, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
JAMES RIVER CORPORATION of Virginia
By: /s/Stephen E. Hare
Stephen E. Hare
Senior Vice President, Corporate Finance
and Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: August 8, 1994
Exhibit 11
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
COMPUTATION OF EARNINGS PER COMMON SHARES AND COMMON SHARE EQUIVALENT
For the Quarters (13 Weeks) and Six Months (26 Weeks) Ended
June 26, 1994 and June 27, 1993
(in thousands, except per share amounts)
Second Quarter Six Months
PRIMARY: 1994 1993 1994 1993
Net earnings (loss) applicable
to common shares $4,699 $5,531 $(10,589) $(12,807)
Weighted average number of common
shares and common share equivalents:
Common shares outstanding 81,672 81,607 81,652 81,593
Issuable upon exercise of outstanding
stock options and pursuant to a
deferred stock award plan 355 2,182 407 1,238
Less assumed acquisition of common
shares, using proceeds from stock
options and the impact of a deferred
stock award plan, under the treasury
stock method (127) (1,943) (176) (1,038)
81,900 81,846 81,883 81,793
Primary earnings (loss) per common share $.06 $.06 $(.13) $(.16)
Exhibit 11 (continued)
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
COMPUTATION OF EARNINGS PER COMMON SHARES AND COMMON SHARE EQUIVALENT
For the Quarters (13 Weeks) and Six Months (26 Weeks) Ended
June 26, 1994 and June 27, 1993
(in thousands, except per share amounts)
Second Quarter Six Months
FULLY DILUTED: 1994 1993 1994 1993
Net earnings (loss) applicable
common shares $4,699 $5,531 $(10,589) $(12,807)
Weighted average number of common
shares and common share equivalents:
Common shares outstanding 81,672 81,607 81,652 81,593
Issuable upon exercise of outstanding
stock options and pursuant to a
deferred stock award plan 355 2,182 407 1,246
Less assumed acquisition of common
shares, using proceeds from stock
options and the impact of a deferred
stock award plan, under the treasury
stock method (126) (1,943) (176) (1,044)
81,901 81,846 81,883 81,795
Fully diluted earnings (loss)
per common share $.06 $.06 $(.13) $(.16)
Exhibit 11 (continued)
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
NOTES TO COMPUTATIONS OF EARNINGS PER
COMMON SHARE AND COMMON SHARE EQUIVALENT
Primary earnings per common share is computed by dividing net
income, after deducting dividends on outstanding preferred shares, by
the weighted average number of common shares and dilutive common
share equivalents outstanding during the period. Common share
equivalents consist of shares issuable pursuant to stock options and
a deferred stock award plan, and are calculated using an average
market price for the period.
Fully diluted earnings per common share is computed using the
same method as for the primary computation except that (i) common
share equivalents are computed using the higher of the market price
at the end of the period or the average market price for the period,
and (ii) the average number of common shares and dilutive common
share equivalents outstanding is increased by the assumed conversion,
if dilutive, of the Company's Series K $3.375 Cumulative Convertible
Exchangeable Preferred Stock (the "Series K"), its Series L $14.00
Cumulative Convertible Exchangeable Preferred Stock (the "Series L"),
and its Series N $14.00 Cumulative Convertible Exchangeable Preferred
Stock (the "Series N"). The conversions of the Series K, the Series
L, and the Series N have not been assumed for the periods presented,
as such conversions are not dilutive.
<TABLE>
Exhibit 12
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (a)
(Dollar amounts in 000's)
<CAPTION>
Fiscal Year Ended
April April December December December December
30, 1989 29, 1990 30, 1990 29, 1991 27, 1992 26, 1993
(53 weeks) (52 weeks) (35 weeks) (52 weeks) (52 weeks) (52 weeks)
(b) (c,d)
<S> <C> <C> <C> <C> <C> <C>
Pretax income (loss) from
continuing operations,
before minority interests $446,954 $371,501 $44,352 $115,170 $(182,817) $14,115
Add:
Interest charged to operations 171,964 198,743 133,716 191,344 192,962 183,035
Portion of rental expense
representative of interest
factor (assumed to be one-third) 19,900 23,400 15,100 19,891 19,426 19,094
Total earnings, as adjusted $638,818 $593,644 $193,168 $326,405 $29,571 $216,244
Fixed charges:
Interest charge to operations $171,964 $198,743 $133,716 $191,344 $192,962 $183,035
Capitalized interest 28,793 25,475 10,759 31,740 12,778 5,291
Portion of rental expense
representative of interest
factor (assumed to be one-third) 19,900 23,400 15,100 19,891 19,426 19,094
Total fixed charges $220,657 $247,618 $159,575 $242,975 $225,166 $207,420
Ratio 2.90 2.40 1.21 1.34 -- 1.04
See accompanying footnote explanations.
</TABLE>
Exhibit 12 (continued)
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (a)
(Dollar amounts in 000's)
Six Months Ended
June 27, June 26,
1993 1994
(26 Weeks) (26 Weeks)
Pretax income (loss) from continuing
operations, before minority interests $3,984 $8,195
Add:
Interest charged to operations 94,506 89,824
Portion of rental expense representative of
interest factor (assumed to be one-third) 9,713 9,547
Total earnings, as adjusted $108,203 $107,566
Fixed charges:
Interest charged to operations $94,506 $89,824
Capitalized interest 2,872 1,251
Portion of rental expense representative of
interest factor (assumed to be one-third) 9,713 9,547
Total fixed charges $107,091 $100,622
Ratio 1.01 1.07
See accompanying footnote explanations.
Exhibit 12 (continued)
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
NOTES TO COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(a) In computing the ratio of earnings to fixed charges, earnings
consist of income before income taxes, minority interests, and
fixed charges excluding capitalized interest. Fixed charges
consist of interest expense, capitalized interest, and that
portion of rental expense (one-third) deemed representative of
the interest factor. Earnings and fixed charges also include
the Company's proportionate share of such amounts for
unconsolidated affiliates which are owned 50% or more and
distributed income from less than 50% owned affiliates.
(b) During 1990, the Company changed its fiscal year from one ending
on the last Sunday in April to one ending on the last Sunday in
December. During this period, the Company initiated an
operational restructuring program designed to focus the
Company's operations on those businesses in which it commands a
substantial market share and which are less cyclical. In
connection with that program, the Company recorded a $200
million pretax charge which has been included in the calculation
of the ratio of earnings to fixed charges for this period.
(c) During 1992, the Company initiated a productivity enhancement
program and recorded a $112 million pretax charge which has been
included in the calculation of the ratio of earnings to fixed
charges for this year.
(d) For the year ended December 27, 1992, earnings were inadequate
to cover fixed charges by $195.6 million.
EXHIBIT 99
UNAUDITED PRO FORMA JAMES RIVER AND JAMONT HOLDINGS
FINANCIAL INFORMATION
The following pro forma consolidated condensed balance sheet as of June 26,
1994, and the pro forma consolidated statements of operations for the six months
ended June 26, 1994, and the year ended December 26, 1993, give effect to the
following transactions:
(a) the acquisition by James River Corporation of Virginia ("James River")
of the remaining 50% ownership interest in Jamont Holdings N.V.
("Jamont Holdings"), which was completed on July 5, 1994, for a
purchase price of $575 million in cash; and
(b) the financing of such acquisition with the proceeds from the issuance
of $287.5 million of James River's Series P 9% Cumulative Convertible
Preferred Stock ("Series P") and the balance of proceeds from funded
indebtedness, which included borrowings under existing credit
facilities and issuances of commercial paper and debt securities.
James River previously owned 50% of Jamont Holdings, which was accounted
for using the equity method of accounting. James River's additional 50%
investment in Jamont Holdings will be accounted for using the purchase method of
accounting and will result in the consolidation of Jamont Holdings beginning in
the third quarter of 1994.
The unaudited pro forma consolidated condensed financial information is
presented as if these transactions had been completed as of June 26, 1994, for
the pro forma consolidated condensed balance sheet and as of the first day of
each period for which pro forma consolidated statements of operations are
presented.
The pro forma financial information does not purport to be indicative of
the actual financial position as it will finally be recorded, or the results of
operations which would actually have been reported if the transactions had
occurred on the dates or for the periods indicated, or which may be reported in
the future. The pro forma financial information should be read in conjunction
with the separate historical consolidated financial statements and the related
notes to such financial statements of James River and of Jamont Holdings.
1
<PAGE>
JAMES RIVER AND JAMONT HOLDINGS
AND CONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED CONDENSED BALANCE SHEET
(UNAUDITED)
JUNE 26, 1994
(IN MILLIONS)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
HISTORICAL INCREASE PRO FORMA
JAMES RIVER JAMONT HOLDINGS (DECREASE) CONSOLIDATED
(NOTE 2)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and short-term securities $ 23.1 $ 39.0 $ 62.1
Accounts receivable 445.4 462.1 907.5
Inventories 701.5 211.6 913.1
Other current assets 176.4 6.8 183.2
Total current assets 1,346.4 719.5 2,065.9
Property, plant, and equipment 5,504.8 1,519.5 7,024.3
Less accumulated depreciation 1,995.7 329.7 2,325.4
Net property, plant, and
equipment 3,509.1 1,189.8 4,698.9
Investments in affiliates 558.9 20.9 $(460.2)(a) 119.6
Other assets 315.9 33.8 3.0 (c) 352.7
Goodwill 151.0 490.8 103.2 (b) 745.0
Total assets $ 5,881.3 $ 2,454.8 $(354.0) $7,982.1
LIABILITIES AND SHAREHOLDERS'
EQUITY
Current liabilities:
Current portion of long-term
debt $ 78.7 $ 177.1 $ 255.8
Other current liabilities 651.5 458.6 1,110.1
Total current liabilities 730.2 635.7 1,365.9
Long-term debt 2,038.4 597.9 $ 287.5 (d) 2,935.2
11.4 (c)
Other long-term liabilities 757.8 30.2 788.0
Deferred income taxes 415.5 104.8 520.3
Minority interests 5.5 153.8 159.3
Shareholders' equity:
Preferred stock 452.8 287.5 (d) 740.3
Common shareholders' equity 1,481.1 932.4 (932.4)(e) 1,473.1
(8.0)(c)
Total shareholders' equity 1,933.9 932.4 (652.9) 2,213.4
Total liabilities and
shareholders' equity $ 5,881.3 $ 2,454.8 $(354.0) $7,982.1
</TABLE>
The accompanying notes are an integral part of this pro forma information.
2
<PAGE>
JAMES RIVER AND JAMONT HOLDINGS
AND CONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 26, 1994
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
HISTORICAL INCREASE PRO FORMA
JAMES RIVER JAMONT HOLDINGS (DECREASE) CONSOLIDATED
(NOTE 3)
<S> <C> <C> <C> <C>
Net sales $ 2,303.6 $ 742.7 $3,046.3
Cost of goods sold 1,925.5 465.0 $ 1.2 (a) 2,391.7
Selling and administrative
expenses 315.3 243.7 559.0
Income from operations 62.8 34.0 (1.2) 95.6
Interest expense 71.5 28.3 12.0 (b) 111.8
Other income, net 17.7 4.0 0.1 (c) 21.8
Income before income taxes and
minority interest 9.0 9.7 (13.1) 5.6
Income tax expense 3.6 9.8 (4.7)(d) 8.7
Income (loss) before minority
interest 5.4 (0.1) (8.4) (3.1)
Minority interest 0.4 (1.0) (0.6)
Net income (loss) $ 5.8 $ (1.1) $ (8.4) $ (3.7)
Preferred dividend requirements (16.4) (12.9)(e) (29.3)
Net loss applicable to common
shares $ (10.6) $ (1.1) $ (21.3) $ (33.0)
Net loss per common share and
common share equivalent $ (.13) $ (.40)
Weighted average number of common
shares and common share
equivalents 81.9 81.9
</TABLE>
The accompanying notes are an integral part of this pro forma information.
3
<PAGE>
JAMES RIVER AND JAMONT HOLDINGS
AND CONSOLIDATED SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
FOR THE YEAR ENDED DECEMBER 26, 1993
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ADJUSTMENTS
HISTORICAL INCREASE PRO FORMA
JAMES RIVER JAMONT HOLDINGS (DECREASE) CONSOLIDATED
(NOTE 3)
<S> <C> <C> <C> <C>
Net sales $ 4,650.2 $ 1,482.1 $6,132.3
Cost of goods sold 3,858.6 947.9 $ 2.4 (a) 4,808.9
Selling and administrative
expenses 677.6 466.1 1,143.7
Income from operations 114.0 68.1 (2.4) 179.7
Interest expense 137.5 72.3 23.9 (b) 233.7
Other income, net 40.0 17.6 (2.5)(c) 55.1
Income before income taxes and
minority interest 16.5 13.4 (28.8) 1.1
Income tax expense 18.9 15.7 (9.3)(d) 25.3
Loss before minority interest (2.4) (2.3) (19.5) (24.2)
Minority interest 2.1 2.0 4.1
Net loss $ (0.3) $ (0.3) $ (19.5) $ (20.1)
Preferred dividend requirements (32.8) (25.9)(e) (58.7)
Net loss applicable to common
shares $ (33.1) $ (0.3) $ (45.4) $ (78.8)
Net loss per common share and
common share equivalent $ (.40) $ (.96)
Weighted average number of common
shares and common share
equivalents 81.9 81.9
</TABLE>
The accompanying notes are an integral part of this pro forma information.
4
<PAGE>
JAMES RIVER AND JAMONT HOLDINGS
AND CONSOLIDATED SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
1. BASIS OF REPORTING
The accompanying pro forma consolidated condensed balance sheet as of June 26,
1994, and the pro forma consolidated statements of operations for the six months
ended June 26, 1994, and the year ended December 26, 1993, give effect to the
acquisition of the remaining 50% interest in Jamont Holdings using the purchase
method of accounting. The aggregate purchase price paid for the additional
interest in Jamont Holdings was approximately $575 million, excluding
acquisition and financing costs of $11.4 million. The accompanying pro forma
consolidated financial statements give effect to the issuance of approximately
$287.5 million of preferred stock and the incurrence of funded indebtedness of
approximately $298.9 million, the proceeds of which were used to finance the
acquisition of Jamont Holdings.
The values assigned to the net assets acquired have been based upon a
determination, upon the completion of the transaction, of the fair values of the
assets acquired and liabilities assumed. Jamont Holdings was originally formed
in 1990, at which time its assets and liabilities were adjusted to then fair
values. In 1991, Jamont Holdings commenced an approximately $600 million capital
expansion program which was completed in 1993. Accordingly, based on the
relatively recent valuations of Jamont Holdings' assets and liabilities, for the
purpose of these pro forma consolidated financial statements, the excess of the
purchase price over such estimated fair value of the net assets acquired,
approximating $103.2 million, has been allocated to goodwill.
Historical financial information on Jamont Holdings contained in the pro forma
consolidated financial statements has been derived from the audited financial
statements of Jamont Holdings as of December 31, 1993, and for the year then
ended and the unaudited financial statements as of June 30, 1994, and for the
six months then ended, each prepared in accordance with accounting standards
generally accepted in The Netherlands and measured in European Currency Units.
Such financial information has been adjusted to conform to U.S. generally
accepted accounting principles and translated into U.S. dollars.
2. PRO FORMA BALANCE SHEET AND CAPITALIZATION ADJUSTMENTS
The pro forma consolidated condensed balance sheet gives effect to the
adjustments described below.
(a) To eliminate James River's existing investment in Jamont Holdings as of
June 26, 1994, previously accounted for using the equity method.
(b) To record estimated goodwill, representing the excess of James River's
purchase price over the estimated fair value of Jamont Holdings' net
equity.
(c) To record $11.4 million of acquisition and financing costs, funded
through borrowings under the Company's revolving credit facility,
detailed as follows:
(i) $0.4 million related to the acquisition of Jamont Holdings,
excluding financing-related costs;
(ii) $3.0 million related to the incurrence of $287.5 million of funded
indebtedness; and
(iii) $8.0 million related to the issuance of $287.5 million of the
Series P.
(d) To record the incurrence and issuance of the following:
(i) $287.5 million of funded indebtedness incurred in connection with
the acquisition of Jamont Holdings; and
(ii) $287.5 million of the Series P issued in connection with the
acquisition of Jamont Holdings.
(e) To eliminate the Jamont Holdings historical shareholders' equity
balances.
5
<PAGE>
JAMES RIVER AND JAMONT HOLDINGS
AND CONSOLIDATED SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION, CONTINUED
(UNAUDITED)
3. PRO FORMA STATEMENTS OF OPERATIONS ADJUSTMENTS
The pro forma consolidated statement of operations gives effect to the
adjustments described below.
(a) To record amortization of the incremental goodwill, using the
straight-line method over an assumed life of 40 years.
(b) To record interest expense on the $298.9 million of incremental funded
indebtedness, at an assumed interest rate of 8.0%.
(c) To reverse James River's share of the earnings of Jamont Holdings
associated with its existing 50% ownership interest, previously
accounted for using the equity method.
(d) To record income tax benefits related to the incremental interest
expense.
(e) To reflect increased preferred dividend requirements related to the
issuance of $287.5 million of the Series P, at a dividend yield of
9.0%.
4. PRO FORMA CONSOLIDATED SEGMENT INFORMATION
Following the acquisition of the remaining interest in Jamont Holdings, James
River intends to continue to report its operations in its existing three
business segments. These segments are: Consumer Products, which includes the
manufacture and marketing of towel and tissue and disposable foodservice
products; Food and Consumer Packaging, which includes the manufacture of folding
cartons, flexible packaging, and packaging papers used in packaging food and
other retail consumer goods; and Communications Papers, which includes the
manufacture and marketing of a variety of uncoated business and printing papers,
coated groundwood printing papers, and premium printing papers. Upon its
consolidation, James River intends to report the results of Jamont Holdings as
part of its Consumer Products segment.
5. PRO FORMA RATIOS
On a pro forma basis after reflecting the acquisition and financing of Jamont
Holdings, James River's earnings were inadequate to cover fixed charges for the
year ended December 26, 1993, and for the six months ended June 26, 1994. For
the year ended December 26, 1993, the amount of the deficiency of pro forma
earnings compared to pro forma fixed charges was $12.9 million, and for the six
months ended June 26, 1994, the amount of the deficiency of pro forma earnings
compared to pro forma fixed charges was $1.2 million.
6
