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 26, 1995 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
1, 1995:
81,878,126 shares
JAMES RIVER CORPORATION
of Virginia
QUARTERLY REPORT ON FORM 10-Q
March 26, 1995
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION:
ITEM 1. Financial Statements:
Consolidated Balance Sheets as of March 26, 1995 and
December 25, 1994 3
Consolidated Statements of Operations for the
quarters ended March 26, 1995 and March 27, 1994 5
Consolidated Statements of Cash Flows for the
quarters ended March 26, 1995 and March 27, 1994 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 18
ITEM 6. Exhibits and Reports on Form 8-K 18
SIGNATURES 20
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED BALANCE SHEETS
March 26, 1995 and December 25, 1994
(in thousands, except share data)
March December
1995 1994
ASSETS
Current assets:
Cash and cash equivalents $34,079 $59,296
Accounts receivable 901,937 913,501
Inventories 879,124 844,111
Prepaid expenses and other current 68,516 63,496
assets
Deferred income taxes 100,224 95,126
Total current assets 1,983,880 1,975,530
Property, plant and equipment 7,052,280 6,925,036
Accumulated depreciation (2,360,357) (2,245,137)
Net property, plant and equipment 4,691,923 4,679,899
Investments in affiliates 120,645 125,097
Other assets 366,289 367,770
Goodwill 793,304 776,032
Total assets $7,956,041 $7,924,328
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)
March December
1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $572,272 $597,141
Accrued liabilities 536,137 513,599
Short-term borrowings 175,993 225,132
Current portion of long-term debt 245,091 221,367
Income taxes payable 21,286 11,647
Total current liabilities 1,550,779 1,568,886
Long-term debt 2,664,483 2,667,960
Accrued postretirement benefits
other than pensions 548,652 545,009
Deferred income taxes 589,383 594,793
Other long-term liabilities 281,503 231,129
Minority interests 160,199 154,930
Preferred stock, $10 par value, 5,000,000
shares authorized, issuable in series;
shares outstanding, 3,630,604 740,303 740,303
Common stock, $.10 par value, 150,000,000
shares authorized; shares outstanding,
March 26, 1995 -- 81,713,473 and
December 25, 1994 -- 81,695,419 8,171 8,170
Additional paid-in capital 1,212,269 1,211,904
Retained earnings 200,299 201,244
Total liabilities and shareholders'
equity $7,956,041 $7,924,328
The accompanying notes are an integral part
of the consolidated financial statements.
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarters (13 Weeks) Ended
March 26, 1995 and March 27, 1994
(in thousands, except per share amounts)
1995 1994
Net sales $1,637,284 $1,105,503
Cost of goods sold 1,300,382 934,866
Selling and administrative expenses 242,296 150,332
Severance and other items 8,271
Income from operations 86,335 20,305
Interest expense 60,273 34,957
Other income, net 10,715 2,261
Income (loss) before income taxes
and minority interests 36,777 (12,391)
Income tax expense (benefit) 15,814 (4,975)
Income (loss) before minority interests 20,963 (7,416)
Minority interests 1,180 330
Net income (loss) $22,143 $(7,086)
Preferred dividend requirements (14,643) (8,202)
Net income (loss) applicable to
common shares $7,500 $(15,288)
Net income (loss) per common share
and common share equivalent $.09 $(.19)
Cash dividends per common share $.15 $.15
Weighted average number of common shares
and common share equivalents 82,653 81,866
The accompanying notes are an integral part
of the consolidated financial statements.
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarters (13 Weeks) Ended
March 26, 1995 and March 27, 1994
(in thousands)
1995 1994
Cash provided by (used for) operating activities:
Net income (loss) $22,143 $(7,086)
Items not affecting cash:
Depreciation expense and cost of timber harvested 116,493 88,474
Deferred income tax provision (benefit) 1,160 (6,885)
Equity in (earnings) losses of unconsolidated
affiliates (5,598) 382
Severance and other items 8,271
Retirement benefits expense in excess of funding 3,937 10,160
Amortization of goodwill 5,622 1,179
Change in current assets and liabilities:
Accounts receivable 26,100 12,913
Inventories (27,149) (41,553)
Prepaid expenses and other current assets (8,160) (508)
Accounts payable and accrued liabilities (28,221) 2,174
Other current liabilities 10,969 (8,193)
Dividends received from unconsolidated affiliates 15,486
Other, net 5,671 1,273
Cash provided by operating activities 146,724 52,330
Cash provided by (used for) investing activities:
Expenditures for property, plant and equipment (91,311) (65,335)
Cash received from sale of assets 1,217 5,268
Investments in affiliates (12,108)
Other, net 3,258 1,880
Cash used for investing activities (86,836) (70,295)
Cash provided by (used for) financing activities:
Increase in short-term borrowings 10,637
Additions to long-term debt 11,557 58,413
Payments of long-term debt (80,689) (18,992)
Common and preferred stock cash dividends paid (26,897) (20,447)
Other, net 287 (60)
Cash provided by (used for) financing activities (85,105) 18,914
Increase (decrease) in cash and cash equivalents (25,217) 949
Cash and cash equivalents, beginning of period 59,296 23,620
Cash and cash equivalents, end of period $34,079 $24,569
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 March 26, 1995, and its results of operations and cash
flows for the quarters (13 weeks) ended March 26, 1995, and March 27,
1994. The balance sheet as of December 25, 1994, was derived from
audited financial statements as of that date. The results of
operations for the quarter ended March 26, 1995, are not necessarily
indicative of the results to be expected for the full year. The
results of Jamont Holdings N.V. ("Jamont Holdings"), the Company's
European consumer products subsidiary, are included on the basis of
closing dates which lag the Company's fiscal periods by one month.
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. Severance and Other Items
Results for the first quarter of 1995 included a nonrecurring
charge of $8.3 million ($5.3 million net of tax benefits and minority
interest, or $.06 per share) primarily for costs related to a
reduction of approximately 500 employees at European Consumer
Products Business locations in the British Isles. During the current
quarter, the Company made severance payments of $1.5 million to
approximately 60 terminated employees in the United States for whom
severance costs were accrued in December 1994.
3. Other Income
The components of other income were as follows for the quarters
ended March 26, 1995, and March 27, 1994 (in thousands):
March March
1995 1994
Interest and investment income $4,136 $2,975
Equity in earnings (losses) of
unconsolidated affiliates 5,598 (382)
Foreign currency exchange gain
(loss) (941) 6
Other, net 1,922 (338)
Total other income $10,715 $2,261
4. Income Taxes
The Company's effective income tax rate was 43% for the quarter
ended March 26, 1995, compared to 40.2% for the first quarter of
1994. The increase in the effective tax rate from the prior year was
primarily due to (i) the relative size of non-tax-deductible
permanent differences, the most significant of which relates to
goodwill resulting from the consolidation of Jamont beginning in the
third quarter of 1994, and (ii) foreign net operating losses for
which valuation allowances have been established.
5. Inventories
The components of inventories were as follows as of March 26,
1995, and December 25, 1994 (in thousands):
March December
1995 1994
Raw materials $200,346 $187,634
Finished goods and work in process 573,605 543,872
Stores and supplies 188,753 184,457
962,704 915,963
Reduction to state certain inventories
at last-in, first-out cost (83,580) (71,852)
Total inventories $879,124 $844,111
6. Financial Instruments
The estimated fair value of the Company's $1,286 million
notional amount of interest rate swaps was a liability of $59.6
million as of March 26, 1995, compared to a liability $128 million as
of December 25, 1994. As of March 26, 1995, the carrying value of
foreign exchange contracts was a net liability of $75.8 million and
the estimated fair value of such contracts was a net liability of
$109.6 million, compared to net liabilities of $39.6 million and $73
million, respectively, as of December 25, 1994. The estimated fair
values were based on quoted market prices of comparable instruments
and current market rates as of March 26, 1995, and December 25, 1994,
respectively.
7. Commitments and Contingent Liabilities
(a) Put and Call Arrangements:
James River is a party to a put and call arrangement
related to the 13.6% minority interest in Jamont N.V. ("Jamont")
currently owned by EuroPaper Inc. ("EuroPaper"). EuroPaper may
put its interest in Jamont to James River during May 1996 and
James River may call these shares during August 1996, each at a
fixed price of approximately 1.04 billion French francs
(approximately $209.2 million using exchange rates in effect as
of March 26, 1995). In addition, Jamont Holdings has a separate
call agreement with EuroPaper under which it may call
EuroPaper's 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. In November 1994, James River initiated the exercise of
its call option to purchase CRSS's interest in the facility. On
April 4, 1995, James River and CRSS reached a settlement on
litigation that arose surrounding this call option. Pursuant to
the settlement, in May 1995, CRSS will receive approximately $35
million for its interest in the facility. James River is
currently remarketing the right to purchase the additional
interest to a new investor while retaining its original 50%
ownership interest.
(b) 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
("EPA") published draft rules which contain proposed regulations
affecting pulp and paper industry discharges of wastewater and
gaseous emissions ("cluster rules"). The final rules are likely
to be issued in late 1996, with a nominal compliance date of
1999. These 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. The
implementation of the rules could materially increase the
Company's capital expenditures between 1997 and 1999. Based on
its evaluation, the Company expects that such capital
expenditures could be at least $300 million for James River, if
the regulations are approved as originally proposed. This
estimate could change, depending on several factors, including
changes to the proposed regulations, new developments in control
and process technology, and inflation.
In addition, James River has been identified as a
potentially responsible party ("PRP"), along with others, at
various EPA designated Superfund sites 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 26, 1995, James
River's accrued environmental liabilities, including remediation
and landfill closure costs, totaled $37.1 million. 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 consolidated
financial position but could have a material effect on
consolidated results of operations in a given quarter or year.
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.
(c) Bondholder Litigation:
In 1994, James River was sued in Morgan County, Alabama, in
a purported class action and in Bridgeport, Connecticut, by
certain former holders of James River's 10-3/4% Debentures due
October 1, 2018. Most of these Debentures were retired by means
of a tender offer to all holders commenced on September 18,
1992. The remainder were redeemed on November 2, 1992. Merrill
Lynch & Co., which acted as James River's dealer manager for the
tender, is also named as a defendant in the Alabama case. In
general, the complaints allege violations of a covenant
prohibiting use of lower cost borrowed funds to redeem the
Debentures before October 1, 1998, and of various disclosure
obligations, and seek damages in excess of $50 million plus
punitive damages in excess of $500 million. James River
believes that these claims are without merit and intends to
defend them vigorously. Although the ultimate disposition of
legal proceedings cannot be predicted with certainty, it is the
opinion of the Company's management that the outcome of any
claim which is pending or threatened, either individually or on
a combined basis, will not have a materially adverse effect on
the consolidated financial condition of James River but could
materially affect consolidated results of operations in a given
quarter or year.
8. Segment Information
James River's net sales and income from operations by business
segment were as follows for the quarters ended March 26, 1995, and
March 27, 1994 (in thousands):
March March
1995 1994
Net sales:
Consumer products:
North America $609,498 $557,224
Europe 357,640
Total consumer products 967,138 557,224
Food and consumer packaging 420,313 375,737
Communications papers 301,310 215,044
Intersegment elimination (51,477) (42,502)
Total net sales $1,637,284 $1,105,503
Operating profit (loss):
Consumer Products:
North America $38,425 $28,316
Europe 3,547
Total consumer products 41,972 28,316
Food and consumer packaging 18,020 26,633
Communications papers 44,501 (25,059)
Severance and other items (8,271)
General corporate expenses (9,887) (9,585)
Income from operations $86,335 $20,305
9. Pro Forma Data
In July 1994, James River increased its ownership interest in
Jamont from 43.2% to 86.4% for approximately $575 million and began
accounting for Jamont as a consolidated subsidiary. The following
pro forma information assumes that the acquisition of the additional
interest in Jamont occurred as of the beginning of 1994. 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. Jamont is included in the consolidated
balance sheets as of March 26, 1995, and December 25, 1994, and its
results of operations are consolidated for all of 1995.
Pro Forma Consolidated Quarter
Operating Data Ended
(in millions, except per share March 27,
data) 1994
Net sales $1,429.5
Operating profit 35.3
Net loss (8.4)
Net loss applicable to common shares
(after preferred dividend requirements) (23.1)
Net loss per common share $(.28)
10. Subsequent Events
On March 29, 1995, the Company announced its Board of Directors
had approved proceeding with a spin-off to shareholders of a large
part of the Company's Communications Papers Business, along with the
specialty papers operations which were formerly part of this
business. The new company, which is expected to have annual sales of
over $1 billion in 1995, will include papermaking operations with an
annual capacity of approximately one million short tons. The assets
of the new company will include mills located in St. Francisville,
La; Berlin, N.H.; Adams, Mass.; Newark, Del.; Richmond, Va.; St.
Andrews and Penicuik, Scotland; Ypsilanti, Parchment and Port Huron,
Mich.; and Milford, N.J. The St. Francisville, La., and Berlin,
N.H., mills include annual pulping capacity of nearly 600,000 short
tons, or approximately three-quarters of the new company's fiber
needs. Approximately 120,000 acres of managed forests supporting the
Berlin and St. Francisville mills will also be included in the new
company. The spin-off is planned to be tax-free to shareholders and
is expected to be effective during the summer of 1995.
In April 1995, the Company announced its decision to discontinue
towel and tissue converting operations at its Berlin, New Hampshire,
facility by the end of June. This decision will affect approximately
150 salaried and hourly positions. One small tissue machine will be
taken out of production, and selected converting equipment will be
transferred to other James River facilities. The Company currently
expects that any fixed asset write-offs associated with the closure
will not be material. The majority of the assets that comprise the
Berlin pulp and paper mill will be part of the spin-off to a new
company, as discussed above.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
For the first quarter ended March 26, 1995, net income rose to
$22.1 million, principally due to improving operations and pricing in
many product categories. This compares favorably to losses of $18.7
million reported in the fourth quarter and $7.1 million in last
year's first quarter. Earnings per share of $.09 were similarly
improved over per share losses of $.41 and $.19 reported in the
fourth and first quarters of 1994. Net sales of $1,637 million in
the first quarter were comparable to fourth quarter levels and 48%
above the prior year's $1,106 million of sales. The increase in
sales from the prior year was primarily due to the July 1994
consolidation of the Company's European Consumer Products Business,
combined with stronger pricing or unit volumes in many product lines.
Results for the first quarter of 1995 include severance charges of
$8.3 million ($5.3 million net of tax benefits and minority interest,
or $.06 per share) for workforce reductions of approximately 500
employees at Consumer Products Business locations in the United
Kingdom and Ireland. Excluding these charges, first quarter net
income was $27.4 million, or $.15 per share.
Income from operations totaled $86.3 million for the quarter,
more than four times last year's first quarter and more than twice
fourth quarter levels. Operating profits in the North American
Consumer Products Business increased 36%, from $28.3 million in last
year's first quarter to $38.4 million in the current quarter, while
net sales increased by 9% over the same period, from $557 million to
$609 million. Improved profitability was driven by better pricing,
principally in the commercial tissue and foodservice markets,
combined with improving volumes and market shares in retail markets.
Price increases began to be put into place late in 1994 in response
to higher raw material costs. Net pricing in commercial tissue and
foodservice products improved by an average of 8% to 10% over 1994
first quarter levels as a result of price increases effective in both
October 1994 and January 1995. Average net pricing for retail
products increased slightly year-over-year, as price increases
announced for the beginning of 1995 began to be realized in the
second half of the quarter. Further retail price increases of
between 6% and 9% for towel and tissue and certain tabletop products
were announced in mid-March to be effective in May; commercial tissue
prices are also scheduled to increase as of the beginning of April.
Compared to the prior year's first quarter, unit volumes increased by
almost 5% in retail towel and tissue categories and were comparable
in retail tabletop products. Unit volumes declined slightly for both
commercial tissue and foodservice products as the Company began
reducing the number of its SKU's.
Operating profits for the European Consumer Products Business
declined to $3.5 million, compared to $15 million on a pro forma
basis in last year's first quarter, while net sales increased to $358
million in this year's first quarter from $324 million on a pro forma
basis in the prior year. Profitability of the European Consumer
Products Business has been hindered by significant increases in the
cost of market pulp, waste paper and other raw materials during 1994
and 1995 without commensurate increases in finished goods prices.
While James River has lead price increase initiatives in many
European countries, such increases have been difficult to implement
due to excess tissue capacity and lower utilization rates in Europe.
Unit volumes for the first quarter of 1995 declined approximately 6%
compared to the prior year's quarter, as James River's leading
position on price increases resulted in opportunistic pricing by
competitors. First quarter 1995 sales increased approximately $30
million over the prior year due to changes in foreign currency
exchange rates.
The Food and Consumer Packaging Business reported a decline in
profits, from $26.6 million in last year's first quarter to $18.0
million in the current quarter, while net sales increased by 12%,
from $376 million to $420 million for the comparable periods.
Operating profits began to be negatively affected in the second half
of 1994 by a dramatic rise in raw material costs, particularly in
plastic resins, waste paper and purchased paperboard and pulp. Price
increases have been aggressively pursued to recover rising raw
material costs; however, net realizations have lagged cost increases.
First quarter unit volumes for flexible packaging were approximately
6% higher than the prior year. Total folding carton volumes were
comparable to the prior year, but with a higher percentage mix of
recycled cartons. Customer sales of recycled paperboard experienced
40% year-over-year volume gains.
Results for the Communications Papers Business continued the
dramatic rebound begun in the second half of 1994. Operating profits
increased to $44.5 million in 1995's first quarter compared with a
loss of $25.1 million a year ago, while net sales increased by over
40% from $215 million last year to $301 million this year. Price
increases for uncoated free sheet and coated and uncoated groundwood
papers combined with the benefits of cost reduction efforts caused
the sharp year-over-year improvement. Additional price increases
have been announced on many grades, effective for late March or early
April. Unit volumes also improved, with first quarter shipments
approximately 6% ahead of the prior year, and backlogs remained
strong. First quarter results were negatively affected, however, by
increased costs for wood fiber, particularly in the Pacific
Northwest, where wood chip costs increased between 15% and 20% over
the prior year. Higher costs for wood chips were caused by a
combination of factors, including the declining supply of wood
harvested from Federal lands, difficult first quarter harvesting
conditions, the soft lumber markets, and higher demand for wood chips
caused by the tight conditions in the pulp and paper market. Wood
chip costs in this region may increase further, as these conditions
persist.
First quarter general corporate expenses of $9.9 million were
comparable with those of the prior year. Interest expense for the
first quarter of 1995 increased by $25.3 million compared with the
same period in 1994 as consolidated total debt increased from $2,079
million on March 27, 1994, to $3,086 million on March 26, 1995. The
increase in debt was attributable to the July 1994 purchase and
consolidation of Jamont. Other income increased to $10.7 million in
the current quarter from $2.3 million for 1994. This increase
primarily relates to improvements in equity in earnings of
unconsolidated affiliates, particularly the Company's earnings from
its Brazilian affiliate which has benefited from increases in
worldwide market pulp prices (see Note 3 of Notes to Consolidated
Financial Statements). The change in the effective tax rate for 1995
is discussed in Note 4 of Notes to Consolidated Financial Statements.
On March 29, 1995, the Company announced that it is proceeding
with a spin-off to shareholders of a large part of the Communications
Papers Business, along with the specialty papers operations which
were formerly part of this business. On a combined basis, this new
company is expected to have annual sales of over $1 billion from
eleven manufacturing facilities and a total papermaking capacity of
approximately one million short tons per year. The spin-off, which
is planned to be tax-free to shareholders, is expected to be
effective this summer (see Note 10 of Notes to Consolidated Financial
Statements). This transaction is a part of the Company's
comprehensive efforts to reduce debt, reduce cyclicality, narrow the
focus of the Company's business, and maximize total shareholder
value. The Company also announced that it is continuing to evaluate
strategic alternatives for the Food and Consumer Packaging Business.
The Company expects to see further profit improvements as the
year progresses. North American Consumer Products' results should
continue to improve, as announced price increases are more fully
implemented in retail channels. Results for both the European
Consumer Products Business and the Food and Consumer Packaging
Business are also expected to improve, as pricing increases offset
rising raw material costs. Communications Papers' results are
expected to remain strong, as market conditions continue to be
favorable.
Financial Condition
Capital expenditures totaled $91.3 million for the first quarter
of 1995 compared with $65.3 million for the first quarter of 1994.
This increase is primarily due to the effect of the consolidation of
Jamont's capital spending in 1995. Cash provided by operations for
the quarter ended March 26, 1995, totaled $146.7 million, compared to
$52.3 million in the comparable period of 1994. This increase is
primarily due to increases in net income, changes in domestic working
capital components (mainly decreased inventories and increased
payables), and dividends received from its unconsolidated Brazilian
affiliate and the Naheola Partnership in 1995. The Company's current
ratio increased slightly to 1.28 as of March 26, 1995, from 1.26 as
of December 25, 1994, and working capital increased to $433 million
from $407 million for the same time period. The increase in working
capital of $26 million was attributable to the net decrease in short-
term borrowings and current maturities of long-term debt.
James River's ratio of total debt, including the current portion
and short-term borrowings, to total capitalization was 57.1% as of
March 26, 1995, compared to 57.4% as of December 25, 1994. For
purposes of calculating this ratio, total capitalization represents
the sum of current and long-term debt, including short-term
borrowings, minority interests and equity accounts. On December 14,
1994, the Company refinanced Jamont's European currency unit ("ECU")
borrowing facility which was reduced in size from ECU 400 million to
ECU 330 million. For the quarter ended March 26, 1995, the ratio of
earnings to fixed charges was 1.52. For the year ended December 25,
1994, earnings were inadequate to cover fixed charges by $18.8
million.
As of March 26, 1995, under the most restrictive provisions of
the Company's debt agreements, the Company had additional borrowing
capacity of approximately $600 million and net worth in excess of the
minimum requirement specified by such agreements of approximately
$450 million.
In November 1994, James River initiated the exercise of its call
option for CRSS's 50% interest in the Naheola Partnership. The call
price was determined based on a formula established at the inception
of the partnership. The Company is currently remarketing the right
to purchase the additional interest at expected proceeds in excess of
the call price (see Note 7(a) of Notes to Consolidated Financial
Statements).
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
James River has been notified by the EPA of a proposed civil
action relating to certain environmental violations at the Company's
Berlin, New Hampshire, mill. The Company is currently finalizing a
settlement with the EPA and the Department of Justice relating to
this action which will likely involve penalties of approximately
$200,000. In addition, the Company has agreed to implement
environmentally beneficial capital improvements at a cost of at least
$400,000.
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 20, 1995,
at which time all of management's nominees for members of the Board
of Directors were elected, and the designation of Coopers & Lybrand
L.L.P. as the Company's independent accountants for the fiscal year
which will end December 31, 1995, was approved. Additionally, the
Company's common shareholders voted on two proposals submitted by
certain shareholders: (i) a proposal urging the Company's Northern
Ireland affiliate to implement and/or increase activity on the nine
MacBride Principles and (ii) a proposal requesting the preparation of
an equal employment report to be made available upon request to all
shareholders and employees. These proposals are more fully described
in the James River Proxy Statement for the Annual Meeting held on
April 20, 1995. Shareholders of record of the Company's common stock
and its Series P 9% Cumulative Convertible Preferred Stock at the
close of business on February 13, 1995, were entitled to vote at the
Annual Meeting. Votes were casts as follows:
Vote
Voted Voted Withheld or Broker
For Against Abstained Non-Votes
Nominees for election of Directors:
William T. Burgin 79,368,355 2,656,920
Worley H. Clark, Jr. 71,088,467 10,936,808
William T. Comfort, Jr. 79,377,191 2,648,084
William V. Daniel 79,306,074 2,719,201
Bruce C. Gottwald 71,094,907 10,930,368
Robert M. O'Neil 79,351,662 2,673,613
Joseph T. Piemont 79,294,520 2,730,755
Anne M. Whittemore 79,410,904 2,614,371
Robert C. Williams 79,172,883 2,852,392
Vote
Voted Voted Withheld or Broker
For Against Abstained Non-Votes
Appointment of Coopers &
Lybrand L.L.P. as auditors 81,701,048 182,135 142,092
Shareholder proposal -
MacBride Principles 4,963,568 63,338,828 6,073,290 7,649,589
Shareholder proposal -
Equal Employment Report 6,276,146 61,882,318 6,217,222 7,649,589
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 per Share -- filed
herewith. 21
12 Computation of Ratio of Earnings to Fixed
Charges -- filed herewith. 24
27 Financial Data Schedules
(filed electronically only)
(b) Reports on Form 8-K:
During the quarter ended March 26, 1995, and subsequent
thereto, the Company filed the following Current Reports on
Form 8-K:
Date of Report Event Reported
January 25, 1995 The Company published a press release
announcing its results of operations for the
fourth quarter and year ended December 25,
1994.
March 29, 1995 The Company published a press release
announcing that the Board of Directors
approved proceeding with a spin-off to
shareholders which includes a large
part of the Communications Papers Business
and certain specialty packaging papers
operations included in its Food and Consumer
Packaging Business.
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: May 5, 1995
Exhibit 11
JAMES RIVER CORPORATION of Virginia
COMPUTATION OF EARNINGS PER SHARE
For the Quarters Ended March 26, 1995 and March 27, 1994
(in thousands, except per share data)
First Quarter
PRIMARY 1995 1994
Net earnings (loss) applicable
to common shares $7,500 $(15,288)
Weighted average number of common
shares and common share
equivalents:
Common shares outstanding 81,713 81,630
Issuable upon exercise of out-
standing stock options and
pursuant to a deferred stock
award plan 3,723 460
Less assumed acquisition of
common shares, using proceeds
from stock options and a defer-
red stock award plan, under the
treasury stock method (2,922) (224)
82,514 81,866
Primary earnings (loss) per common share $.09 $(.19)
Exhibit 11 (continued)
JAMES RIVER CORPORATION of Virginia
COMPUTATION OF EARNINGS PER SHARE
For the Quarters Ended March 26, 1995 and March 27,1994
(in thousands, except per share data)
First Quarter
FULLY DILUTED 1995 1994
Net earnings (loss) applicable to
common shares $7,500 $(15,288)
Weighted average number of common
shares and common share
equivalents:
Common shares outstanding 81,713 81,630
Issuable upon exercise of out-
standing stock options and
pursuant to a deferred stock
award plan 4,210 460
Less assumed acquisition of
common shares, using proceeds
from stock options and a defer-
red stock award plan, under the
treasury stock method (3,270) (224)
82,653 81,866
Fully diluted earnings (loss)
per common share $.09 $(.19)
Exhibit 11 (continued)
JAMES RIVER CORPORATION of Virginia
NOTES TO COMPUTATIONS OF EARNINGS
PER SHARE
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, its Series L $14.00 Cumulative
Convertible Exchangeable Preferred Stock, its Series N $14.00
Cumulative Convertible Exchangeable Preferred Stock, and its Series P
9% Cumulative Convertible Preferred Stock. No conversions of any of
the convertible preferred stocks have been assumed for the periods
presented, as such conversions are not dilutive.
Exhibit 12
JAMES RIVER CORPORATION of Virginia
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (a)
(Dollar amounts in thousands)
<TABLE>
Fiscal Year Ended
<CAPTION>
April December December December December December
29, 1990 30, 1990 29, 1991 27, 1992 26, 1993 25, 1994
(52 (35 (52 (52 (52 (52
weeks) weeks) weeks) weeks) weeks) weeks)
(b) (c,d) (d)
<S> <C> <C> <C> <C> <C> <C>
Pretax income (loss) from
continuing operations,
before minority interests $371,501 $44,352 $115,170 $(182,817) $14,115 $(15,693)
Add:
Interest charged to operations 198,743 133,716 191,344 192,962 183,035 210,063
Portion of rental expense
representative of interest
factor (assumed to be one-third) 23,400 15,100 19,891 19,426 19,094 24,224
Total earnings, as adjusted $593,644 $193,168 $326,405 $29,571 $216,244 $218,594
Fixed charges:
Interest charged to operations $198,743 $133,716 $191,344 $192,962 $183,035 $210,063
Capitalized interest 25,475 10,759 31,740 12,778 5,291 3,080
Portion of rental expense
representative of interest
factor (assumed to be one-third) 23,400 15,100 19,891 19,426 19,094 24,224
Total fixed charges $247,618 $159,575 $242,975 $225,166 $207,420 $237,367
Ratio 2.40 1.21 1.34 -- 1.04 --
</TABLE>
See accompanying footnote explanations.
Exhibit 12 (continued)
JAMES RIVER CORPORATION of Virginia
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (a)
(Dollar amounts in thousands)
Quarter Ended
March 27, March 26,
1994 1995
(13 Weeks) (13 Weeks)
(d)
Pretax income (loss) from continuing
operations, before minority interests $(11,661) $37,652
Add:
Interest charged to operations 52,203 62,682
Portion of rental expense representative of
interest factor (assumed to be one-third) 4,773 6,056
Total earnings, as adjusted $45,315 $106,390
Fixed charges:
Interest charged to operations $52,203 $62,682
Capitalized interest 507 1,138
Portion of rental expense representative of
interest factor (assumed to be one-third) 4,773 6,056
Total fixed charges $57,483 $69,876
Ratio -- 1.52
See accompanying footnote explanations.
Exhibit 12 (continued)
JAMES RIVER CORPORATION of Virginia
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 amounts of the
deficiencies were: year ended December 27, 1992 -
$195.6 million; year ended December 25, 1994 - $18.8
million; and quarter ended March 27, 1994 - $12.2
million.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JAMES RIVER
CORPORATION OF VIRGINIA'S MARCH 26, 1995 FORM 10-Q FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000053117
<NAME> JAMES RIVER CORPORATION OF VIRGINIA
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-26-1995
<CASH> 34,079
<SECURITIES> 0
<RECEIVABLES> 901,937
<ALLOWANCES> 0
<INVENTORY> 879,124
<CURRENT-ASSETS> 1,983,880
<PP&E> 7,052,280
<DEPRECIATION> 2,360,357
<TOTAL-ASSETS> 7,956,041
<CURRENT-LIABILITIES> 1,550,779
<BONDS> 2,664,483
<COMMON> 8,171
0
740,303
<OTHER-SE> 1,412,568
<TOTAL-LIABILITY-AND-EQUITY> 7,956,041
<SALES> 1,637,284
<TOTAL-REVENUES> 1,637,284
<CGS> 1,300,382
<TOTAL-COSTS> 1,300,382
<OTHER-EXPENSES> 8,271
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60,273
<INCOME-PRETAX> 36,777
<INCOME-TAX> 15,814
<INCOME-CONTINUING> 22,143
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,143
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0.09
</TABLE>
