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 March 27, 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 May 2,
1994:
81,631,601 shares
<PAGE>
JAMES RIVER CORPORATION
of Virginia
QUARTERLY REPORT ON FORM 10-Q
March 27, 1994
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION:
ITEM 1. Financial Statements:
Consolidated Balance Sheets as of March 27, 1994
and December 26, 1993 . . . . . . . . . . . . . . . . . 3
Consolidated Statements of Operations for the quarters
ended March 27, 1994 and March 28, 1993 . . . . . . . . 5
Consolidated Statements of Cash Flows for the quarters
ended March 27, 1994 and March 28, 1993 . . . . . . . . 6
Notes to Consolidated Financial Statements. . . . . . . . 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations . . . . . . . . . . . . . . . . . . . . 14
PART II. OTHER INFORMATION:
ITEM 1. Legal Proceedings. . . . . . . . . . . . . . . . . . 17
ITEM 2. Changes in Securities. . . . . . . . . . . . . . . . 17
ITEM 3. Defaults Upon Senior Securities. . . . . . . . . . . 17
ITEM 4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . . . 17
ITEM 5. Other Information. . . . . . . . . . . . . . . . . . 17
ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 17
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 19
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED BALANCE SHEETS
March 27, 1994 and December 26, 1993
(in thousands, except share data)
March December
1994 1993
ASSETS
Current assets:
Cash and short-term securities $ 24,569 $ 23,620
Accounts receivable 410,092 422,894
Inventories 707,322 666,464
Prepaid expenses and other
current assets 22,259 22,939
Deferred income taxes 80,885 83,538
Net assets held for sale 61,688 62,868
Total current assets 1,306,815 1,282,323
Net property, plant, and equipment 3,540,715 3,571,492
Investments in affiliates 527,065 519,448
Other assets 314,381 324,724
Goodwill 152,136 153,315
$5,841,112 $5,851,302
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED BALANCE SHEETS, Continued
March December
1994 1993
LIABILITIES AND CAPITAL
Current liabilities:
Accounts payable and accrued
liabilities $ 617,867 $ 616,192
Income taxes payable 4,597 4,463
Current portion of long-term debt 79,383 97,287
Accrued restructuring liability 50,321 63,134
Total current liabilities 752,168 781,076
Long-term debt 1,999,668 1,942,836
Accrued postretirement benefits
other than pensions 548,173 541,823
Other long-term liabilities 186,297 179,955
Deferred income taxes 418,162 430,421
Minority interests 5,806 7,010
Preferred stock, $10 par value,
5,000,000 shares authorized,
issuable in series 454,048 454,108
Common stock, $.10 par value,
150,000,000 shares authorized;
shares outstanding,
March 27, 1994--81,630,635 and
December 26, 1993--81,628,047 8,163 8,163
Additional paid-in capital 1,219,089 1,219,043
Retained earnings 249,538 286,867
$5,841,112 $5,851,302
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarters (13 Weeks) Ended
March 27, 1994 and March 28, 1993
(in thousands, except per share amounts)
1994 1993
Net sales $1,105,503 $1,113,625
Cost of goods sold 934,866 934,720
Selling and administrative expenses 150,332 161,251
Income from operations 20,305 17,654
Interest expense 34,957 39,185
Other income, net 2,591 4,189
Loss before income taxes (12,061) (17,342)
Income tax benefit (4,975) (7,212)
Net loss $ (7,086) $ (10,130)
Preferred dividend requirements (8,202) (8,208)
Net loss applicable to common
shares $ (15,288) $ (18,338)
Net loss per common share and
common share equivalent $(.19) $(.22)
Quarterly rate of cash dividends
per common share $ .15 $ .15
Weighted average number of common
shares and common share
equivalents 81,866 81,745
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarters (13 Weeks) Ended
March 27, 1994 and March 28, 1993
(in thousands)
1994 1993
Cash provided by (used for) operating activities:
Net loss $(7,086) $(10,130)
Items not affecting cash:
Depreciation expense and cost of timber harvested 88,474 88,375
Deferred income tax benefit (6,885) (8,762)
Undistributed losses of unconsolidated affiliates 382 4,388
Amortization and other 2,777 3,052
Change in current assets and liabilities:
Accounts receivable 12,913 1,094
Inventories (41,553) (11,192)
Prepaid expenses and other current assets 656 12,063
Net assets held for sale (1,164) 1,458
Accounts payable and accrued liabilities 2,174 3,417
Income taxes payable 142 5,798
Accrued restructuring liability (8,335) (7,219)
Retirement benefits expense in excess of
(less than) funding 10,160 11,284
Other, net (325) (1,798)
Cash provided by operating activities 52,330 91,828
Cash provided by (used for) investing activities:
Expenditures for property, plant, and equipment (65,335) (62,957)
Cash received from sale of assets 5,268 2,798
Investments in affiliates (12,108) (59)
Proceeds received from redemption of SCI
preferred stock 47,050
Other, net 1,880 2,172
Cash used for investing activities (70,295) (10,996)
Cash provided by (used for) financing activities:
Additions to long-term debt 58,413 132,688
Payments of long-term debt (18,992) (176,785)
Common and preferred stock cash dividends paid (20,447) (20,376)
Other, net (60) (105)
Cash provided by (used for) financing activities 18,914 (64,578)
Increase in cash and short-term securities 949 16,254
Cash and short-term securities,
beginning of period 23,620 375,492
Cash and short-term securities, end of period $24,569 $391,746
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
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 March
27, 1994 and March 28, 1993 and its results of operations and cash flows
for the quarters (13 weeks) then ended. The results of operations for
the quarter ended March 27, 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
In February 1994, the Company paid approximately $11.8 million as an
additional investment in Jamont Holdings N.V. ("Holdings"). In
accordance with the terms of the agreement with the other 50% owner of
this investment, Rayne Holdings Inc., this transaction did not result in
a change in James River's 50% ownership of Holdings. (See Notes 9 and
11 for other information regarding James River's investment in
Holdings).
In March 1994, the Company sold its 50% interest in Coastal Paper
Company, a Mississippi-based producer of lightweight papers. During the
first quarter of 1994, James River also completed the sale of
approximately 9,300 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 8 for summarized
information related to these dispositions).
3. Other Income
The components of other income were as follows for the quarters
ended March 27, 1994 and March 28, 1993 (in thousands):
March March
1994 1993
Interest and investment income $2,975 $5,783
Equity in net losses of
unconsolidated affiliates (382) (3,831)
Minority interests in losses of
subsidiaries 330 641
Foreign currency exchange gain (loss) 6 (2,610)
Other, net (338) 4,206
Total other income $2,591 $4,189
4. Income Taxes
The Company's effective income tax rate was 41.2% for the quarter
ended March 27, 1994, compared to 41.6% for the first quarter of 1993.
In August 1993, the Omnibus Budget Reconciliation Act of 1993 was
enacted providing for, among other things, an increase in the federal
corporate income tax rate from 34% to 35%. This change in the federal
rate increased the Company's effective tax rate from 1993 to 1994;
however, the increase was offset by (i) favorable settlements on the
finalization of audits on prior years' tax returns in the first quarter
of 1993 and (ii) the favorable effect of a charitable conservation
easement donation during the first quarter of 1994. In addition, the
effective rates for the quarters ended March 27, 1994 and March 28, 1993
were impacted by the relative size of nondeductible items to pretax
income.
5. Inventories
The components of inventories were as follows as of March 27, 1994
and December 26, 1993 (in thousands):
March December
1994 1993
Raw materials $162,152 $161,093
Finished goods and work in process 461,497 425,640
Stores and supplies 141,181 139,457
764,830 726,190
Reduction to state certain inventories
at last-in, first-out cost (57,508) (59,726)
Total inventories $707,322 $666,464
6. Property, Plant, and Equipment
The components of net property, plant, and equipment were as follows
as of March 27, 1994 and December 26, 1993 (in thousands):
March December
1994 1993
Land and improvements $ 148,203 $ 147,805
Buildings 624,932 622,509
Machinery and equipment 4,384,230 4,364,416
Construction in progress 145,706 119,431
5,303,071 5,254,161
Accumulated depreciation (1,908,204) (1,829,267)
3,394,867 3,424,894
Timber and timberlands, net 145,848 146,598
Net property, plant, and equipment $3,540,715 $3,571,492
7. Preferred Stock
Outstanding preferred stock, stated at liquidation value, was as
follows as of March 27, 1994 and December 26, 1993:
Shares Liquidation Value
Liquidation Outstanding (in thousands)
Value March December March December
Per Share 1994 1993 1994 1993
Series D $100 12,400 13,000 $ 1,240 $ 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 3,476,437 3,477,037 $454,048 $454,108
8. Statements of Cash Flows Supplemental Data
Cash payments for income taxes of consolidated subsidiaries totalled
approximately $2.3 million and $1.4 million for the quarters ended March
27, 1994 and March 28, 1993, respectively. Interest paid totalled $17.0
million for the quarter ended March 27, 1994 and $28.8 million for the
quarter ended March 28, 1993. Interest costs incurred and amounts
capitalized in fixed asset accounts for the quarters ended March 27,
1994 and March 28, 1993 were as follows (in thousands):
March March
1994 1993
Total interest costs $35,464 $40,682
Interest capitalized (507) (1,497)
Net interest expense $34,957 $39,185
Businesses sold during the quarters ended March 27, 1994 and March
28, 1993 are summarized as follows (in thousands):
March March
1994 1993
Fair value of assets sold $7,268 $5,498
Non-cash consideration received (2,000) (2,700)
Cash received from sale of assets $5,268 $2,798
9. Commitments and Contingent Liabilities
(a) Put and Call Arrangements:
James River is a party to put and call arrangements in connection
with its investment in Jamont N.V. ("Jamont"), the pan-European consumer
products company in which James River currently has a 43% indirect
ownership interest. James River and Rayne Holdings Inc. ("Rayne"), a
British Virgin Islands company, each own 50% of Jamont Holdings N.V.
("Holdings"), which owns approximately 86% of Jamont. James River and
Rayne are parties to a put and call agreement that provides various
options by which James River may purchase Rayne's interest in Holdings
(the "Option Shares"). James River has the option, exercisable until
June 15, 1996 and again between September 1, 1996 and June 15, 1998, to
purchase either 80% or 100% of the Option Shares at escalating amounts
pursuant to a formula (the "Formula Price"). In addition, Rayne may put
80% of the Option Shares to James River during July and August 1996 and
the remaining 20% of such shares during July and August 1998 at a
proportionate value equal to the then Formula Price. If it has not
otherwise been acquired, James River also has the option to purchase the
remaining 20% of the Option Shares during September 1998 for 20% of the
then Formula Price. The Formula Price was approximately $639 million in
March 1994 for 100% of the Option Shares. In connection with this put
and call agreement, the Company has obtained a letter of credit securing
the contingent obligation to purchase 80% of the Option Shares.
In April 1994, subsequent to the end of the first quarter, the
Company announced the signing of a share acquisition agreement whereby
it will acquire the 50% ownership interest in Holdings currently owned
by Rayne for approximately $575 million in cash (see Note 11).
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 $181.8 million
using exchange rates in effect as of March 31, 1994). In addition,
Holdings has a separate call agreement with EuroPaper under which it may
call the EuroPaper Shares through April 1996 at a scheduled escalating
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 March 27, 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 $9.9 million as of March 27, 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 the first quarter of 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
an average 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 quarter ended March 27, 1994, interest
expense was decreased by approximately $800,000 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 scheduled to be issued in late 1995, with a nominal
compliance date of 1998. 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
1998. 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 March 27,
1994, James River's accrued environmental remediation liabilities
totalled $22.4 million. This amount reflects management's best estimate
of James River's ultimate 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 ultimate 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.
10. Segment Information
James River's net sales and income from operations by business
segment were as follows for the quarters ended March 27, 1994 and March
28, 1993 (in thousands):
March March
1994 1993
Net sales:
Consumer products $ 557,224 $ 558,805
Food and consumer packaging 375,737 387,395
Communications papers 215,044 215,912
Intersegment elimination (42,502) (48,487)
Total net sales $1,105,503 $1,113,625
Operating profit (loss):
Consumer products $28,316 $23,190
Food and consumer packaging 26,633 23,309
Communications papers (25,059) (20,281)
General corporate expenses (9,585) (8,564)
Income from operations $20,305 $17,654
11. Subsequent Events
(a) Jamont Acquisition Agreement
On April 27, 1994, James River announced the signing of a share
acquisition agreement with Montedison S.p.A. and Rayne, whereby James
River will acquire the 50% ownership interest in Holdings currently
owned by Rayne for approximately $575 million in cash. Upon the
consummation of the acquisition, Jamont will become a consolidated
subsidiary of James River. The final transaction, which is subject to
normal closing conditions, as well as obtaining necessary financing and
securing the approval of James River's lenders, is expected to be
completed during the third quarter of 1994.
(b) Securities Offerings
On May 2, 1994, the Company filed registration statements with the
Securities and Exchange Commission for shelf registrations of up to $600
million of debt securities and up to $287.5 million of preferred stock
(or related depositary shares) to be issued from time to time in the
future. James River currently expects to use a portion of the proceeds
from these offerings to finance the acquisition of Rayne's interest in
Jamont. The remainder of the proceeds may be used for the refinancing
of existing long-term debt or for general corporate purposes, which may
include capital expenditures, acquisitions, and working capital
requirements. As of May 9, 1994, James River had not entered into any
agreement with a third party with respect to an acquisition, other than
as described in Note 11(a).
(c) Pro Forma Operating Data
The following pro forma information gives effect to (i) the
acquisition by James River of the remaining 50% ownership interest in
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 $325 million of debt securities and $250 million of
preferred stock. The pro forma results of operations assume that these
transactions occurred on the first day of the year ended December 26,
1993 and resulted in the consolidation of 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 period indicated or which may be
reported in the future.
1993
Pro Forma
(in millions, except per share data) Consolidated
Net sales $6,132.3
Net loss $(20.8)
Net loss per common share and
common share equivalent $(0.88)
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Comparison of Quarters (13 Weeks) Ended
March 27, 1994 and March 28, 1993
($ in millions)
March 27, 1994 March 28, 1993
% of % of
Net Net
$ Sales $ Sales
Net sales $1,105.5 100.0% $1,113.6 100.0%
Cost of goods sold 934.9 84.6 934.7 83.9
Selling and administrative
expenses 150.3 13.6 161.2 14.5
Income from operations 20.3 1.8 17.7 1.6
Interest expense 35.0 3.2 39.2 3.5
Other income, net 2.6 0.3 4.2 0.4
Loss before income taxes (12.1) (1.1) (17.3) (1.5)
Income tax benefit (5.0) (0.5) (7.2) (0.6)
Net loss $ (7.1) (0.6)% $ (10.1) (0.9)%
Net sales for the quarter were $1.1 billion, equivalent to the prior
year's first quarter. The Company reported a net loss of $7.1 million,
representing an improvement over the loss of $10.1 million reported in
the first quarter of 1993. On a per share basis after preferred
dividends, losses were $0.19 per share in 1994's first quarter compared
to losses of $0.22 per share in the prior year.
Income from operations totalled $20.3 million in the first quarter
of 1994, a 15% improvement over the prior year's first quarter, despite
the severe winter weather conditions and depressed paper and board
prices, which hampered many of the Company's operations. Results for
the Consumer Products Business increased by over 20%, to $28.3 million
from $23.2 million, principally from strong retail volume and the
benefits realized from productivity improvements. Operating results for
the Food and Consumer Packaging Business increased 14%, to $26.6 million
in 1994 from $23.3 million in 1993 due to improved production of coated
recycled board, partially offset by softer volumes in both folding
carton and flexible packaging because of customers using up existing
packaging before the phase-in date for the new federally required
labels. In the Communications Papers Business, operating losses
increased 24%, to $25.1 million from $20.3 million last year, as pricing
in most white paper grades continued to decline due to additional
industry capacity and substantially higher levels of imports. Sales and
income from operations by business segment are included in Note 10 of
Notes to Consolidated Financial Statements, which should be read in
conjunction herewith.
Interest expense for the first quarter of 1994 declined by $4.2
million compared with the same period in 1993 and gross interest costs
decreased by $5.2 million. The decline in net interest expense reflects
the higher levels of interest expense due to additional borrowings in
the first quarter 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, as well as the effect of the interest rate swap agreements
discussed in Note 9(b) of Notes to Consolidated Financial Statements.
Other income decreased to $2.6 million in the first quarter of 1994 from
$4.2 million in the first quarter of 1993. The decrease includes a
decrease in the level of interest income, related to the higher-than-
normal levels of cash held in the first quarter of 1993 in connection
with the refinancing program. (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.
During the first quarter, the Company continued to implement its
restructuring and cost reduction programs. In March, James River sold
its 50% interest in Coastal Paper Company, a Mississippi-based producer
of lightweight papers. Staffing reductions of approximately 200
employees were also realized during the quarter, bringing total staffing
reductions to over 2,400 during the past year.
In April 1994, the Company announced the signing of a share
acquisition agreement pursuant to which James River will acquire an
additional 43% indirect interest in Jamont. This agreement is described
in Note 11 of Notes to Consolidated Financial Statements.
Financial Condition
Capital expenditures for the first quarter of 1994 totalled
approximately $65 million, comparable to the $63 million of spending in
the first quarter 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 quarter
ended March 27, 1994 totalled $52 million, compared to $92 million in
the comparable period of 1993. This decrease is primarily due to (i)
increased communications papers inventory levels and (ii) increases in
certain consumer products inventories partially in anticipation of the
stronger summer season.
During the first quarter of 1994, the Company realized a total of
$5.3 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 March 27, 1994, under the most restrictive provisions of the
Company's debt agreements, the Company had additional borrowing capacity
of approximately $275 million and net worth in excess of the minimum
requirement specified by such agreements of approximately $250 million.
James River's ratio of total debt, including the current portion, to
total capitalization was 51.8% as of March 27, 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 quarters ended March 27,
1994 and March 28, 1993, earnings were inadequate to cover fixed
charges. Earnings were inadequate to cover combined fixed charges and
preferred stock dividends for the year ended December 26, 1993 and the
quarters ended March 27, 1994 and March 28, 1993.
In April 1994, Standard & Poor's and Moody's Investors Service Inc.
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. Moody's placed the ratings under
review for a downgrade and Standard & Poor's placed the ratings on
CreditWatch, with negative implications, which indicates that the rating
group is aware of a potential for a rating change. Standard & Poor's
currently rates James River's senior debt as BBB and preferred stock as
BBB-, and Moody's currently rates such securities as Baa1 and baa2,
respectively. If James River's ratings are lowered, management believes
it is unlikely that such ratings will fall below investment grade.
In May 1994, subsequent to quarter end, the Company filed
registration statements with the Securities and Exchange Commission for
shelf registrations of up to $600 million of debt securities and up to
$287.5 million of preferred stock. James River currently expects to use
a portion of the proceeds from such offerings to finance the acquisition
of Jamont.
The Company's current ratio increased to 1.74 as of March 27, 1994
from 1.64 as of December 26, 1993 and working capital increased to $555
million from $501 million for the same time period. The increase in
working capital of $54 million was primarily attributable to an increase
in inventory levels and a decrease in the current portion of long-term
debt.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
None.
Item 2. CHANGES IN SECURITIES.
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no matters submitted to a vote of security holders during
the quarter ended March 27, 1994. The Annual Meeting of Shareholders
was held on April 28, 1994; the information related to this meeting will
be reported in the quarterly report on Form 10-Q for the quarter ending
June 26, 1994, as required.
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
10 Share Acquisition Agreement, dated April
26, 1994, among James River Corporation
of Virginia, James River International
Holdings, Ltd., Montedison S.p.A., Tissue
Paper Holding S.A., and Rayne Holdings
Inc.
-- filed herewith. 20
11 Computation of Earnings per Common Share
and Common Share Equivalent
-- filed herewith. 31
12.1 Computation of Ratio of Earnings to Fixed
Charges
-- filed herewith. 34
12.2 Computation of Ratio of Earnings to
Combined Fixed Charges and Preferred
Stock Dividends
-- filed herewith. 37
(b) Reports on Form 8-K:
During the quarter ended March 27, 1994, and subsequent thereto,
the Company filed the following Current Reports on Form 8-K:
Date of Report Event Reported
1) January 25, 1994 The Company published a press release
announcing its results of operations for
the fourth quarter and year ended December
26, 1993.
2) February 22, 1994 The Company announced the nomination of
Anne Marie Whittemore, partner in the
Richmond law firm of McGuire, Woods,
Battle & Boothe, to the Board of Directors
of James River and other organizational
changes.
3) April 21, 1994 The Company published a press release
announcing its results of operations for
the first quarter ended March 27, 1994.
4) 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.
<PAGE>
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
Senior Vice President,
Corporate Finance and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: May 9, 1994
Exhibit 10
SHARE ACQUISITION AGREEMENT
This Share Acquisition Agreement is made as of April 26, 1994 among
James River Corporation of Virginia, a company organized under the laws
of the Commonwealth of Virginia of the United States of America ("James
River"), James River International Holdings, Ltd., a company organized
under the laws of the Commonwealth of Virginia of the United States of
America and a wholly-owned subsidiary of James River ("JRIH"),
Montedison S.p.A., a company organized under the laws of Italy
("Montedison"), Tissue Paper Holding S.A., a company organized under the
laws of the Grand Duchy of Luxembourg and a wholly-owned subsidiary of
Montedison ("Tissue Paper"), and Rayne Holdings Inc., a company
organized under the laws of the British Virgin Islands ("Rayne").
RECITALS
A. Before or concurrently with the execution of this Agreement,
Montedison and Tissue Paper have entered into arrangements with Rayne
providing for the acquisition by Tissue Paper from Rayne of the Shares
(as defined below) which will enable James River to acquire the Shares
from Tissue Paper as contemplated herein.
B. James River desires to acquire the shares.
NOW, THEREFORE, in consideration of the covenants and obligations
set forth in this Agreement, the parties hereto agree as follows:
1. Share Acquisition. Subject to the other terms and conditions
of this Agreement, at the Closing (as defined below), James River will,
directly or indirectly, acquire from Tissue Paper, and Tissue Paper will
convey or cause to be conveyed, all of the shares and any rights to
shares (the "Shares") of JAMONT Holdings N.V. ("Holdings") currently
owned or hereafter acquired by Rayne. The Shares currently outstanding
are numbered (in Holdings' share register) as follows: 358,532 up to and
including 717,062; 1,431,230 up to and including 9,891,446; 17,637,497
up to and including 17,825,837; and 20,168,486 up to and including
24,422,292. The legal title to such Shares is held by Morgan Guaranty
Trust Company of New York ("Morgan"), as escrow agent, under the Escrow
Agreement dated as of September 21, 1991 among Rayne, James River and
Morgan (the "Escrow Agreement").
2. Acquisition Price. Against delivery of the Shares, James
River will pay or cause to be paid to Tissue Paper or its designee for
the Shares at the Closing an amount equal to $569,060,191 plus interest
thereon accruing from March 1, 1994 to the date of payment at a rate per
annum (on a basis of a 365-day year for the actual number of days
involved) equal to 3.75%.
3. Montedison's and Tissue Paper's Representations and
Warranties. Tissue Paper and Montedison, jointly and severally,
represent and warrant to James River that (i) subject to James River
fulfilling its obligations under the third sentence of Section 9 and
subject to obtaining the consents and approvals contemplated by clause
(vi) below (and assuming for purposes of making the representation as to
its current right, that James River has already fulfilled such
obligations and that all such consents and approvals have been obtained)
Montedison has taken all steps necessary to cause Tissue Paper to have,
and Tissue Paper currently has, the right (pursuant to the separate
arrangements with Rayne referred to in the recitals to this Agreement)
to, and at the Closing it will, transfer or cause to be transferred to
James River good and valid title to the Shares free and clear of any
liens, charges or other encumbrances, (ii) they each have the corporate
power and authority to execute and deliver this Agreement and to
consummate the transactions contemplated hereby, (iii) the execution and
delivery by Montedison and Tissue Paper of this Agreement and the
consummation by each of them of the transactions contemplated hereby
have been duly authorized by their respective boards of directors, and
no other corporate proceedings on the part of Montedison or Tissue Paper
are necessary with respect thereto, (iv) the execution and delivery by
Montedison and Tissue Paper of this Agreement and the consummation by
each of them of the transactions contemplated hereby does not require
the consent of Rayne or Cragnotti & Partners Capital Investment, S.A.
("C&P") except for those consents already obtained by Montedison or
Tissue Paper before the date hereof, (v) this Agreement constitutes a
valid and binding obligation of each of Montedison and Tissue Paper
enforceable in accordance with its terms, (vi) except for filings with
and approvals of the Celtona B. V. Works Council, there is no
requirement applicable to Montedison or Tissue Paper to make any filing
with, or to obtain any permit, authorization, consent or approval of,
any public body as a condition to the execution of this Agreement and
consummation of the transactions contemplated by this Agreement, (vii)
there is no requirement applicable to Montedison or Tissue Paper to make
any filing with, or to obtain any permit, authorization, consent or
approval of, any bank or other financial institution as a condition to
the execution of this Agreement and the consummation of the transactions
contemplated by this Agreement, (viii) the execution of this Agreement
and the consummation of the transactions contemplated hereby will not
violate or result in a breach of any order or decree applicable to
Montedison's, Tissue Paper's or any of their affiliates' financial
reorganization, and (ix) the execution of this Agreement and the
consummation of the transactions contemplated hereby will not violate or
result in a breach of any agreement to which Montedison, Tissue Paper or
any of their affiliates is a party. Montedison will indemnify James
River and JRIH for any losses, damages, claims, liabilities, expenses or
other costs incurred in respect of any breach of these representations
and warranties or of any other covenant contained herein. Montedison's
and Tissue Paper's representations and warranties set forth in this
Section shall survive the Closing.
4. James River's Representations and Warranties. James River
represents and warrants to Montedison and Tissue Paper that (i) it has
the corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby, (ii) the
execution and delivery by James River of this Agreement and the
consummation by it of the transactions contemplated hereby have been
duly authorized by its board of directors, and no other corporate
proceedings on the part of James River are necessary with respect
thereto, (iii) this Agreement constitutes a valid and binding obligation
of James River enforceable in accordance with its terms, (iv) except as
contemplated by Sections 5(a) and (b) and except for filings with and
approvals of the French Ministry of Economy, the Celtona B. V. Works
Council, the Italian Ministry of Industry, the Irish Ministry of
Industry-Department of Enterprise and Employment, and the United
Kingdom's Office of Fair Trading, there is no requirement applicable to
James River to make any filing with, or to obtain any permit,
authorization, consent or approval of, any public body or any bank or
other financial institution as a condition to the consummation of the
transactions contemplated by this Agreement, and (v) subject to
satisfying the condition in Section 5(a), the execution of this
Agreement and the consummation of the transactions contemplated hereby
will not violate or result in a breach of any agreement to which James
River or any of its affiliates is a party. James River will indemnify
Montedison and Tissue Paper for any losses, damages, claims,
liabilities, expenses or other costs incurred in respect of any breach
of these representations and warranties or of any other covenant
contained herein. James River's representations and warranties set
forth in this Section 4 shall survive the Closing.
5. James River's Closing Conditions. James River's obligation to
acquire the Shares is subject, to the extent not waived by James River,
to the delivery of all documents required to be delivered by Montedison,
Tissue Paper or third parties other than James River before the Closing,
the performance of all actions required to be taken by Montedison or
Tissue Paper before the Closing and the satisfaction of the following
conditions:
(a) James River shall have renegotiated, or obtained
appropriate waivers under, the covenants in its existing financing
instruments on such terms as James River shall approve to permit it to
obtain third party debt and equity financing in an aggregate amount
equal to the acquisition price for the Shares (the "Financing").
(b) James River shall have obtained the Financing on such
terms as James River shall reasonably approve.
(c) All consents, authorizations, orders or approvals of
governmental or regulatory authorities which are necessary, and of other
entities which are materially necessary, for James River to obtain
before acquiring the Shares (including without limitation those filings
and approvals referred to in clause (iv) of Section 4) shall have been
obtained and all required waiting periods specified by law shall have
expired or been terminated.
(d) No order of any court, arbitrator or administrative
agency shall be in effect which restrains or prohibits the transfer of
the Shares to James River and there shall not have been threatened, nor
shall there be pending, any action or proceeding by or before any court
or governmental agency or other regulatory or administrative agency or
commission, seeking to prohibit or delay or challenging the validity of
the transfer of the Shares to James River and such action or proceeding
can reasonably be expected to result in an order which will restrain or
prohibit the transfer of the Shares to James River.
(e) No statute, rule or regulation shall have been enacted
which prohibits, restricts or delays, in any material respect, the
transfer of the Shares to James River.
(f) The Shares shall be validly issued, fully paid and non-
assessable.
(g) Montedison shall have caused to be delivered to James
River a legal opinion from a law firm reasonably acceptable to James
River in the form attached to this Agreement as Exhibit A.
(h) Rayne's designees on the governing boards of Holdings,
Jamont N.V. and Stichting European Tissue shall have resigned effective
as of the Closing and those designees shall have executed such documents
as may be required to amend Stichting European Tissue's Articles of
Association to eliminate Rayne's right to designate directors of that
entity.
(i) The representations and warranties of Montedison and
Tissue Paper contained in Section 3 shall be true and correct in all
material respects as of the date of this Agreement and as of the
Closing.
6. Montedison's Closing Conditions. Montedison's obligations
hereunder to cause Tissue Paper to convey or cause to be conveyed the
Shares, and Tissue Paper's obligation to convey or cause to be conveyed
the Shares, shall be subject, to the extent not waived by Montedison or
Tissue Paper, to the delivery of all documents required to be delivered
by James River or third parties other than Montedison or Tissue Paper
before the Closing, the performance of all actions required to be taken
by James River before the Closing, and the satisfaction of the following
conditions:
(a) All consents, authorizations, orders or approvals of
governmental or regulatory authorities which are necessary, and of other
entities which are materially necessary, for Montedison or Tissue Paper
to obtain before conveying or causing to be conveyed the Shares
(including without limitation those approvals referred to in clause (vi)
of Section 3) shall have been obtained and all required waiting periods
specified by law shall have expired or been terminated.
(b) No order of any court, arbitrator or administrative
agency (including but not limited to the Italian Stock Exchange
Commission ("CONSOB")) shall be in effect which restrains or prohibits
the transfer of the Shares to James River and there shall not have been
threatened, nor shall there be pending, any action or proceeding by or
before any court or governmental agency or other regulatory or
administrative agency or commission, seeking to prohibit or delay or
challenging the validity of the transfer of the Shares to James River
and such action or proceeding can reasonably be expected to result in an
order which will restrain or prohibit the transfer of the Shares to
James River.
(c) No statute, rule or regulation shall have been enacted
which prohibits, restricts or delays, in any material respect, the
transfer of the Shares to James River.
(d) James River shall have caused to be delivered to
Montedison a legal opinion from a law firm reasonably acceptable to
Montedison in the form attached to this Agreement as Exhibit B.
(e) The representations and warranties of James River
contained in Section 4 shall be true and correct in all material
respects as of the date of this Agreement and as of the Closing.
7. Closing. The closing of the transfer of the Shares to James
River (the "Closing") shall take place at the principal office of James
River, or at such other place as the parties shall otherwise agree, on
June 30, 1994 or, if later, the date on which all the conditions set
forth in Sections 5 and 6 are satisfied or waived before termination
hereunder as provided in Section 10, unless that day is not a business
day, in which case on the next day which is a business day.
8. Amendment. This Agreement may be amended, modified or
supplemented only by written agreement executed by James River,
Montedison and Tissue Paper.
9. Assignment. The provisions of this Agreement shall be binding
upon James River, Montedison and Tissue Paper and their respective
heirs, legal representatives, successors and assigns. No assignment of
this Agreement by a party shall relieve that party of its obligations
hereunder. Immediately before the Closing, James River, Montedison and
Tissue Paper shall execute or cause to be executed any documents and
take any and all action as may be required or advisable to facilitate
the transfer of the Shares hereunder including but not limited to the
release of the Shares from escrow and termination of the Escrow
Agreement.
10. Termination. This Agreement shall terminate if the Closing
has not occurred by June 30, 1994 or, if James River has notified
Montedison on or before June 30, 1994 that Montedison or Tissue Paper is
in breach of any of its representations in clause (iv), (vii) or (viii)
of Section 3 (Montedison or Tissue Paper, as the case may be, shall have
the right, up to and including July 11, 1994, to cure such breach
without being in default hereunder with respect to such breach) and such
breach has not been cured on or before July 11, 1994, then this
Agreement shall terminate on July 11, 1994 (as applicable, the "Original
Termination Date"); provided that if James River or Montedison and
Tissue Paper, as the case may be, is in the process of satisfying a
condition in Sections 5(c), 5(d), 5(e), 6(a), 6(b) or 6(c), then such
termination shall be postponed until the date which is ten days after
the date on which written notice of the satisfaction of such condition
has been given to both James River and Montedison or Tissue Paper, but
not beyond August 31, 1994; and provided, further, that James River has
two successive options to extend the date of termination to July 11,
1994 (the "First Option Period") and to August 31, 1994 (the "Second
Option Period"), respectively, which options are exercisable at any time
on or before the then current termination date by the delivery of notice
thereof from James River to Montedison and Tissue Paper (in the case of
the Second Option Period, the notice shall be delivered on or before
11:00 a.m. (Richmond, Virginia time) on July 8, 1994), in the case of
(i) the First Option Period, the interest rate referred to in Section 2
applicable to interest accruing after the Original Termination Date and
up to and including July 11, 1994 shall be deemed to be 6.5% and (ii)
the Second Option Period, the interest rate referred to in Section 2
applicable to interest accruing after July 11, 1994 and up to and
including August 31, 1994 shall be deemed to be 9.5%. If James River
elects to extend the date of termination into the Second Option Period,
James River will reimburse Tissue Paper for 100% of any fees payable in
respect of the calendar quarter in which the Second Option Period falls
under the Agreement with respect to Letter of Credit Fees dated as of
January 17, 1992 to keep Union Bank of Switzerland's Irrevocable Letter
of Credit No. SBY 501335 in effect during that quarter. James River
will not be obligated to make such reimbursement to Tissue Paper if
Tissue Paper pays such fees before July 11, 1994. The time that any
such termination shall become effective shall be at midnight, Richmond,
Virginia time, on the date of termination. The termination of this
Agreement shall not affect the parties' respective indemnity rights and
liabilities under Sections 3 and 4 in respect of any breach of the
representations and warranties set forth in either of such Sections
which shall have accrued before such termination. Upon termination of
this Agreement without the Closing having occurred hereunder, the
parties shall continue to have their respective rights under the
existing agreements related to Holdings and their respective interests
therein and any consents or waivers granted by any party in
contemplation of effecting the transactions contemplated by this
Agreement, including without limitation any consent to a change in
control of Rayne or any consent to the transfer of the legal or
beneficial title to the Shares (but excluding any change in the written
instructions from Rayne to Morgan made in accordance with the Escrow
Agreement), shall be void ab initio.
11. Recapitalizations, Exchanges, Etc. Affecting the Shares. The
provisions of this Agreement shall apply, to the full extent set forth
herein with respect to the Shares or the shares of capital stock of any
successor or assign of Holdings (whether by merger, consolidation, sale
of assets or otherwise) which may be issued in respect of, in exchange
for, or in substitution for the Shares by reason of any stock dividend,
split, reverse split, combination, recapitalization, reclassification,
merger, consolidation or otherwise. Except as otherwise expressly
provided herein, this Agreement is not intended to confer upon any other
person except James River, Montedison and Tissue Paper any rights or
remedies hereunder.
12. Further Assurances. (a) Each party hereto shall (whether in
its capacity as a shareholder of any entity or any other capacity
whatsoever) do and perform or cause to be done and performed (including
but not limited to causing any of its subsidiaries and affiliates to do
or perform) all such further acts and things and shall execute and
deliver all such other agreements, certificates, instruments and
documents as any other party hereto may reasonably request to carry out
the intent and accomplish the purposes of this Agreement and the
consummation of the transactions contemplated hereby.
(b) James River agrees to use its commercially reasonable
efforts consistent with those efforts customarily taken by an issuer of
securities in the United States public markets rated Baa1 (Moody's) and
BBB (Standard & Poor's) to satisfy the conditions in Sections 5(a) and
5(b) promptly following the date hereof.
(c) James River, Montedison and Tissue Paper agree to use
their respective commercially reasonable efforts to cause the parties to
whom fees have been paid under the Agreement with respect to Letter of
Credit Fees dated as of January 17, 1992 in respect of periods after the
Closing to refund such fees. James River shall be entitled to the
amount of any refunded fees.
(d) The parties agree that a portion of the acquisition price
payable hereunder will be reported to the U.S. Internal Revenue Service,
on Forms 1042 and 1042-S, as a payment of interest, and further agree
that if Tissue Paper (or its designee) provides James River with (or
causes to be provided to James River) such documentation as may be
required properly to establish entitlement to an exemption from U.S.
withholding under the U.S. Internal Revenue Code of 1986, as amended
(the "Code") (including Form W-8, Form 1001 and such other forms and
affidavits as may be required under the Code), then payment of such
acquisition price shall be made free and clear of and without deduction
for any such withholding, provided that if such documentation is at the
time of Closing invalid, inaccurate or otherwise insufficient to
establish the recipient's entitlement to exemption from withholding
under the Code, then James River shall withhold such taxes as are
required under the Code, and James River shall not be required to pay
any additional amounts hereunder. In addition, the parties intend that
payment of the acquisition price payable hereunder be made free and
clear of and without deduction for any and all current or future taxes,
levies, imposts, deductions, charges or withholdings other than those
required under the Code (collectively, "Non-Code Withholdings"), and
agree that they will cooperate in effecting the payment thereof so as to
attempt to eliminate any such Non-Code Withholdings which might
otherwise be applicable, but in any case James River will not be
obligated to pay any additional amounts hereunder if any such Non-Code
Withholdings are required.
(e) The parties shall provide each other in advance of
issuance any press release or other public filings describing the
transactions contemplated hereby except where impracticable because of
requirements of law or any exchange listing agreement.
13. Approvals for Transfer. The parties shall take all steps
necessary to obtain all consents, authorizations, orders or approvals of
governmental and regulatory authorities and of other entities which are
necessary for the transfer of the Shares.
14. Governing Law; Exclusive jurisdiction. This Agreement and the
rights and obligations of the parties hereunder shall be governed by and
construed and interpreted in accordance with the laws of the State of
New York. The parties hereby submit to the exclusive jurisdiction of
the United States Federal District Court for the Southern District of
New York with respect to the enforcement of any rights or remedies
hereunder.
15. Invalidity of Provision. (a) The invalidity or
unenforceability of any provision of this Agreement in any jurisdiction
shall not affect the validity or enforceability of the remainder of this
Agreement in that jurisdiction or the validity or enforceability of this
Agreement, including that provision, in any other jurisdiction.
(b) If any of the covenants, terms or conditions of this
Agreement are held illegal and, further, if director and/or shareholder
action (including but not limited to the execution of any documents or
instruments) will make such covenants, terms or conditions legal and
enforceable, each of the parties hereby agrees that it shall take such
action as may reasonably be required to make any such covenants, terms
or conditions valid and enforceable.
16. Notices. All notices and other communications hereunder shall
be in writing in English and, unless otherwise provided herein, shall be
deemed duly given (i) one business day after delivery, if delivered
personally; or (ii) one business day after dispatch, if sent by telefax
(with a confirmatory copy sent within one day thereafter by a courier
service of good international reputation) to the parties at the
following addresses (or at such other address for the party as shall be
specified by like notice):
(a) If to James River, to:
James River Corporation of Virginia
Tredegar Street
Richmond, Virginia 23219
Attention: Clifford A. Cutchins IV, Esquire
Telecopy: (804) 343-4609
with copies to:
McGuire, Woods, Battle & Boothe
One James Center
Richmond, Virginia 23219
Attention: Marshall H. Earl, Jr., Esquire
Telecopy: (804) 775-1061
(b) If to Montedison or Tissue Paper, to:
Montedison, S.p.A.
Foro Buonparte, 31
20121 Milano, Italy
Attention: General Counsel
Telecopy: (39 2) 877-266
with copies to:
Shook, Hardy & Bacon P.C.
One Kansas City Place
1200 Main Street
Kansas City, Missouri 64105-2118
Attention: Kevin Sweeney, Esq.
Telecopy: (816) 421-5547
17. Headings; Counterparts. (a) The headings and captions
contained herein are for convenience of reference only and shall not
control or affect the meaning or construction of any provision hereof.
Terms (including defined terms) used in the plural include the singular
and vice versa, unless the context otherwise requires.
(b) This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of
which together shall constitute one and the same instrument.
18. Entire Agreement. This Agreement, including any exhibits and
schedules hereto and the documents and instruments referred to herein,
together with any contemporaneously executed agreements which refer to
this Agreement, embodies the entire agreement and understanding of the
parties hereto in respect of the subject matter contained herein. There
are no restrictions, promises, representations, warranties, covenants or
undertakings by or between the parties hereto, other than those
expressly set forth or referred to herein. This Agreement supersedes
all prior agreements and understandings between the parties with respect
to such subject matter.
19. Injunctive Relief; Remedies. Anything in this Agreement to
the contrary notwithstanding, the parties hereto agree that each of the
parties hereto may institute and prosecute proceedings in any court of
competent jurisdiction in New York to enforce specific performance of or
to enjoin breaches of this Agreement or to otherwise obtain equitable
relief. Such remedies shall be cumulative and not exclusive and shall
be in addition to any other remedy available to the parties hereto.
20. Service of Process. Each of the parties hereby appoints
Prentice-Hall Corporation System, Inc. acting through its offices at 15
Columbus Circle, in New York, New York 10023-7773, and its successors as
its authorized agent (the "Authorized Agent") upon which process may be
served in any action arising out of or based on this Agreement. Such
appointment shall be irrevocable until December 31, 2004, except that,
if for any reason the Authorized Agent ceases to be able to act as
Authorized Agent or no longer has an address in New York, New York, the
parties hereto will appoint another person in New York, New York as such
Authorized Agent. Each party hereto shall take any and all action,
including the filing of any and all documents and instruments, that may
be necessary to continue such appointment in full force and effect as
aforesaid. Service of process upon the Authorized Agent at its address
indicated above, as such address may be changed within New York, New
York by notice given by the Authorized Agent to each party hereto, shall
be deemed, in every respect, effective service of process upon such
party.
21. Effect of Closing. All of the parties hereto acknowledge
that, upon the Closing and the transfer of title to the Shares to James
River as provided for herein, James River will directly or indirectly
own all of the capital stock of Holdings and as a result thereof the
JA/Mont Holdings Joint Venture Agreement, dated as of September 21,
1991, among Holdings, C&P, Rayne, James River and JRIH and the Puts and
Calls Agreement, dated as of September 21, 1991, among Rayne, James
River and C&P will terminate pursuant to their respective terms. In
addition, upon the Closing and the transfer of title to the Shares to
James River as provided for herein, all of the parties hereto agree to
execute and deliver such documents and take such actions as may be
reasonably requested by any party hereto to terminate (i) irrevocable
Letter of Credit No. SBY 501335 issued by Union Bank of Switzerland in
favor of Rayne (the "Letter of Credit"), (ii) the Agreement with respect
to Letter of Credit Fees dated as of January 17, 1992 (related to the
Letter of Credit), and (iii) the Escrow Agreement.
22. Rayne and JRIH as Parties. Rayne and JRIH join in this
Agreement for the purpose of acknowledging its existence and agreeing
that (a) before or at the Closing contemplated herein, they will execute
such documents and take such other actions as James River, Montedison or
Tissue Paper may request in connection with the transfer, directly or
indirectly, of the Shares to James River, to terminate the interests, if
any, of Rayne as a shareholder in Holdings, Jamont N.V. and their
respective subsidiaries, to cancel the Letter of Credit and to terminate
the Escrow Agreement, and (b) before or at the Closing, they will
cooperate with James River, Montedison and Tissue Paper and take such
actions as James River, Montedison or Tissue Paper may reasonably
request in connection with carrying out the terms of the foregoing
Agreement. The parties agree that, upon termination of this Agreement
without the Closing having occurred hereunder, any documents executed,
or actions taken, by Rayne or JRIH pursuant to this Section 22 shall be
void ab initio and that the last sentence of Section 10 shall be
applicable to Rayne and JRIH.
23. EC Consultation. For purposes of making the representations
and warranties in Section 3(vi), Montedison and Tissue Paper have
assumed that the transactions contemplated on their respective parts by
this Agreement do not constitute a "notifiable transaction" by
Montedison or Tissue Paper under the European Commission's Merger
Control Regulations. For purposes of making the representations and
warranties in Section 4(iv), James River has assumed that the
transactions contemplated on its and JRIH's parts by this Agreement do
not constitute a "notifiable transaction" by James River or JRIH under
the European Commission's Merger Control Regulations. After the date of
this Agreement, such parties are going to seek the informal concurrence
of the European Commission as to these assumptions. If the European
Commission does not concur in these assumptions and requires the parties
to notify the European Commission, they agree that they will cooperate
in making such notifications and that the representations and warranties
in Sections 3(vi) and 4(iv) will not be considered to have been breached
(and will not be deemed to be untrue or incorrect) as a result of these
assumptions being incorrect and correspondingly the conditions to
closing in Sections 5(c) and 6(a) will be deemed to include without
limitation the notifications to and approval of the European Commission.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed by each
of the parties hereto as of the date first above written.
MONTEDISON S.p.A.
By:/s/Enrico Bondi
Title: Chief Executive Officer
and Managing Director
JAMES RIVER CORPORATION OF VIRGINIA
By:/s/Robert C. Williams
Title: Chairman, President, and
Chief Executive Officer
JAMES RIVER INTERNATIONAL
HOLDINGS, LTD.
By:/s/Stephen E. Hare
Title: Senior Vice President
RAYNE HOLDINGS INC.
By:/s/Carlo Galiano
Title: Director
TISSUE PAPER HOLDING S.A.
By:/s/Fabio Todeschini
Title: Director
By:/s/Renato Papetti
Title: Director
Exhibit 11
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
COMPUTATION OF EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENT
for the Quarters (13 weeks) Ended
March 27, 1994 and March 28, 1993
(in thousands, except per share amounts)
First Quarter
PRIMARY: 1994 1993
Net loss applicable to common shares $(15,288) $(18,338)
Weighted average number of
common shares and common
share equivalents:
Common shares outstanding 81,630 81,579
Issuable upon exercise of
outstanding stock options
and pursuant to a deferred
stock award plan 460 295
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 (224) (133)
81,866 81,741
Primary loss per common share $(.19) $(.22)
<PAGE>
Exhibit 11 (continued)
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
COMPUTATION OF EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENT
for the Quarters (13 weeks) Ended
March 27, 1994 and March 28, 1993
(in thousands, except per share amounts)
First Quarter
FULLY DILUTED: 1994 1993
Net loss applicable to common shares $(15,288) $(18,338)
Weighted average number of
common shares and common
share equivalents:
Common shares outstanding 81,630 81,579
Issuable upon exercise of
outstanding stock options
and pursuant to a deferred
stock award plan 460 311
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 (224) (145)
81,866 81,745
Fully diluted loss per common share $(.19) $(.22)
<PAGE>
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 12.1
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 charged 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>
<PAGE>
Exhibit 12.1 (continued)
JAMES RIVER CORPORATION of Virginia
and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (a)
(Dollar amounts in 000's)
Quarter Ended
March 28, March 27,
1993 1994
(13 weeks) (13 weeks)
(d) (d)
Pretax income (loss) from continuing operations,
before minority interests $(17,121) $(11,661)
Add:
Interest charged to operations 50,241 52,203
Portion of rental expense representative of
interest factor (assumed to be one-third) 4,857 4,773
Total earnings, as adjusted $ 37,977 $ 45,315
Fixed charges:
Interest charged to operations $ 50,241 $ 52,203
Capitalized interest 1,497 507
Portion of rental expense representative
interest factor (assumed to be one-third) 4,857 4,773
Total fixed charges $ 56,595 $ 57,483
Ratio -- --
See accompanying footnote explanations.
<PAGE>
Exhibit 12.1 (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 following periods, earnings were inadequate to cover fixed
charges, and the amount of the deficiencies were: year ended
December 27, 1992 - $195.6 million; quarter ended March 28, 1993 -
$18.6 million; and quarter ended March 27, 1994 - $12.2 million.
<TABLE>
Exhibit 12.2
JAMES RIVER CORPORATION of Virginia
and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (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) (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 and preferred
stock dividends:
Interest charged 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
Pretax earnings require-
ment for preferred
dividend coverage 36,727 35,839 27,190 41,735 40,540 57,287
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
and preferred stock
dividends $257,384 $283,457 $186,765 $284,710 $ 265,706 $264,707
Ratio 2.48 2.09 1.03 1.15 -- --
See accompanying footnote explanations.
</TABLE>
<PAGE>
Exhibit 12.2 (continued)
JAMES RIVER CORPORATION of Virginia
and Subsidiaries
COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED
STOCK DIVIDENDS (a)
(Dollar amounts in 000's)
Quarter Ended
March 28, March 27,
1993 1994
(13 weeks) (13 weeks)
(d) (d)
Pretax income (loss) from continuing operations,
before minority interests $(17,121) $(11,661)
Add:
Interest charged to operations 50,241 52,203
Portion of rental expense representative of
interest factor (assumed to be one-third) 4,857 4,773
Total earnings, as adjusted $ 37,977 $ 45,315
Fixed charges and preferred stock dividends:
Interest charged to operations $ 50,241 $ 52,203
Capitalized interest 1,497 507
Pretax earnings requirement for preferred
dividend coverage 14,052 13,961
Portion of rental expense
representative interest factor
(assumed to be one-third) 4,857 4,773
Total fixed charges and preferred
stock dividends $ 70,647 $ 71,444
Ratio -- --
See accompanying footnote explanations.
<PAGE>
Exhibit 12.2 (continued)
JAMES RIVER CORPORATION of Virginia
and Subsidiaries
NOTES TO COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
(a) In computing the ratio of earnings to combined fixed charges and
preferred stock dividends, 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. Fixed charges are increased
by the preferred stock dividend requirements of James River
adjusted to amounts representing the pretax earnings which would be
required to cover such dividend requirements. 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 combined
fixed charges and preferred stock dividends 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 combined
fixed charges and preferred stock dividends for this year.
(d) For the following periods, earnings were inadequate to cover
combined fixed charges and preferred stock dividends, and the
amounts of the deficiencies were: year ended December 27, 1992 -
$236.1 million; year ended December 26, 1993 - $48.5 million;
quarter ended March 28, 1993 - $32.7 million; and quarter ended
March 27, 1994 - $26.1 million.
