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 31, 1996 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, 1996:
84,960,839 shares
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JAMES RIVER CORPORATION
of Virginia
QUARTERLY REPORT ON FORM 10-Q
March 31, 1996
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION:
ITEM 1. Financial Statements:
Consolidated Balance Sheets as of March 31, 1996 and
December 31, 1995 3
Consolidated Statements of Operations for the quarters
ended March 31, 1996 and March 26, 1995 5
Consolidated Statements of Cash Flows for the quarters
ended March 31, 1996 and March 26, 1995 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 18
ITEM 2. Changes in Securities 18
ITEM 3. Defaults Upon Senior Securities 18
ITEM 4. Submission of Matters to a Vote of Security Holders 19
ITEM 5. Other Information 19
ITEM 6. Exhibits and Reports on Form 8-K 20
SIGNATURES 21
2
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and December 31, 1995
(in millions, except share data)
March December
1996 1995
ASSETS
Current assets:
Cash and cash equivalents $42.7 $66.1
Accounts receivable 862.8 847.3
Inventories 798.0 821.4
Prepaid expenses and other current assets 41.6 52.3
Deferred income taxes 85.2 83.4
Total current assets 1,830.3 1,870.5
Property, plant and equipment 6,159.4 6,181.0
Accumulated depreciation (2,152.5) (2,106.9)
Net property, plant and equipment 4,006.9 4,074.1
Investments in affiliates 149.0 146.8
Other assets 381.8 395.8
Goodwill 702.9 771.7
Total assets $7,070.9 $7,258.9
The accompanying notes are an integral part
of the consolidated financial statements.
3
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JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED BALANCE SHEETS, Continued
(in millions, except share data)
March December
1996 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $541.2 $560.5
Accrued liabilities 533.0 493.7
Current portion of long-term debt 19.4 44.8
Total current liabilities 1,093.6 1,099.0
Long-term debt 2,413.9 2,503.0
Accrued postretirement benefits
other than pensions 465.5 464.7
Deferred income taxes 440.8 489.3
Other long-term liabilities 271.2 283.4
Minority interests 160.3 165.3
Total liabilities 4,845.3 5,004.7
Preferred stock, $10 par value, 5,000,000
shares authorized, issuable in series;
shares outstanding, 3,630,581 740.3 740.3
Common stock, $.10 par value, 150,000,000
shares authorized; shares outstanding,
March 31, 1996 -- 84,954,799 and
December 31, 1995 -- 84,890,342 8.5 8.5
Additional paid-in capital 1,295.6 1,294.1
Retained earnings 181.2 211.3
Total shareholder's equity 2,225.6 2,254.2
Total liabilities and
shareholders' equity $7,070.9 $7,258.9
The accompanying notes are an integral part
of the consolidated financial statements.
4
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JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarters (13 Weeks) Ended
March 31, 1996 and March 26, 1995
(in millions, except per share amounts)
1996 1995
Net sales $1,486.6 $1,667.6
Cost of goods sold 1,116.9 1,319.7
Selling and administrative expenses 269.9 248.0
Severance and other items 23.4 2.4
Income from operations 76.4 97.5
Interest expense 45.4 61.8
Other income, net 4.0 9.4
Income before income taxes and
minority interests 35.0 45.1
Income tax expense 15.4 19.4
Income before minority interests 19.6 25.7
Minority interests .9 .8
Net income $20.5 $26.5
Preferred dividend requirements (14.7) (14.6)
Net income applicable to common shares $5.8 $11.9
Net income per common share
and common share equivalent $.07 $.14
Cash dividends per common share $.15 $.15
Weighted average number of common shares
and common share equivalents 85.5 82.7
The accompanying notes are an integral part
of the consolidated financial statements.
5
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JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarters (13 Weeks) Ended
March 31, 1996 and March 26, 1995
(in millions)
1996 1995
Cash provided by (used for) operating activities:
Net income $20.5 $26.5
Items not affecting cash:
Depreciation expense and cost of timber harvested 101.7 116.5
Amortization of goodwill 5.2 5.6
Deferred income tax provision (benefit) (2.4) 1.2
Equity in earnings of unconsolidated affiliates (.8) (5.6)
Severance and other items 23.4 2.4
Retirement benefits expense in excess of funding .8 3.9
Change in current assets and liabilities:
Accounts receivable (31.7) 26.1
Inventories 9.7 (27.1)
Prepaid expenses and other current assets 4.4 (8.2)
Accounts payable and accrued liabilities 37.5 (17.2)
Dividends received from unconsolidated affiliates 1.5 15.5
Other, net (21.1) 7.1
Cash provided by operating activities 148.7 146.7
Cash provided by (used for) investing activities:
Expenditures for property, plant and equipment (81.7) (91.3)
Cash received from sale of assets 26.1 1.2
Other, net 1.7 3.3
Cash used for investing activities (53.9) (86.8)
Cash provided by (used for) financing activities:
Additions to long-term debt and short-term borrowings .9 22.2
Payments of long-term debt (92.1) (80.7)
Common and preferred stock cash dividends paid (27.8) (26.9)
Other, net .8 .3
Cash used for financing activities (118.2) (85.1)
Decrease in cash and cash equivalents (23.4) (25.2)
Cash and cash equivalents, beginning of period 66.1 59.3
Cash and cash equivalents, end of period $42.7 $34.1
The accompanying notes are an integral part
of the consolidated financial statements.
6
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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 31, 1996, and its results of operations and cash
flows for the quarters (13 weeks) ended March 31, 1996, and March 26,
1995. The balance sheet as of December 31, 1995, was derived from
audited financial statements as of that date. The results of
operations for the quarter ended March 31, 1996, are not necessarily
indicative of the results to be expected for the full year.
In 1995, the Company changed the fiscal year end of Jamont N.V.
("Jamont"), the Company's European Consumer Products subsidiary, from
November 30 to December 31 to eliminate the one-month lag in
reporting. Results for the quarter ended March 26, 1995, have been
restated. 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 January 1996, the Company completed the formation of a joint
venture of its Handi-Kup foam cup operations with Benchmark
Corporation of Delaware's WinCup foam cup operations. The Handi-Kup
operations contributed to the joint venture included four foam cup
plants, located in Corte Madera, California; Jacksonville, Florida;
Metuchen, New Jersey and West Chicago, Illinois. James River
received consideration of $26 million of cash, approximately $10
million face value of subordinated long-term notes and a 45% minority
interest in the joint venture.
3. Severance and Other Items
Results for the first quarter of 1996 included nonrecurring
charges of $23.4 million consisting of $13.8 million ($8.4 million
net of tax benefits, or $.10 per share) for costs related to enhanced
retirement benefits for a reduction of approximately 200 employees
and net losses on asset dispositions of $9.6 million ($5.9 million
net of tax benefits, or $.06 per share) at North American Consumer
Products Business locations. During the current quarter, the Company
made severance payments of $1.9 million. Results for the first
quarter of 1995 included nonrecurring charges of $2.4 million ($1.9
million net of tax benefits and minority interests, or $.02 per
share) for costs related to severance for the Company's European
Consumer Products Business locations.
7
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4. Other Income
The components of other income were as follows for the quarters
ended March 31, 1996, and March 26, 1995 (in millions):
March March
1996 1995
Interest and investment income $2.3 $3.6
Equity in earnings of
unconsolidated affiliates .8 5.6
Foreign currency exchange gain
(loss) 1.0 (.4)
Other, net (.1) .6
Total other income $4.0 $9.4
5. Income Taxes
The Company's effective income tax rate was 44% for the quarter
ended March 31, 1996, compared to 43% for the first quarter of 1995.
The increase in the effective tax rate from the prior year was
primarily due to the relative size of non-tax-deductible permanent
differences.
6. Inventories
The components of inventories were as follows as of March 31,
1996, and December 31, 1995 (in millions):
March December
1996 1995
Raw materials $183.5 $197.1
Finished goods and work in process 543.6 557.6
Stores and supplies 149.6 151.4
876.7 906.1
Reduction to state certain inventories
at last-in, first-out cost (78.7) (84.7)
Total inventories $798.0 $821.4
8
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7. Financial Instruments
The estimated fair value of the Company's $1,286 million
notional amount of interest rate swaps was a liability of $25.6
million as of March 31, 1996, compared to a liability of $3 million
as of December 31, 1995. The change in the fair value of swaps
partially offsets the change in the estimated fair values of the
Company's debt portfolio which decreased to a liability in excess of
book value of $64 million as of March 31, 1996, from a liability in
excess of book value of $152 million as of December 31, 1995. As of
March 31, 1996, the carrying value of foreign exchange contracts was
a net liability of $69.4 million and the estimated fair value of such
contracts was a net liability of $100.6 million, compared to net
liabilities of $86.7 million and $108 million, respectively, as of
December 31, 1995. Additionally, as of March 31, 1996, the pay-in-
kind notes received from the spin-off of Crown Vantage Inc.
originally valued at $85 million had a fair value of approximately
$70 million. The estimated fair values were based on quoted market
prices of comparable instruments and current market rates as of March
31, 1996, and December 31, 1995, respectively.
8. Commitments and Contingent Liabilities
(a) Put and Call Arrangements:
James River is a party to a put and call arrangement
related to the 14% minority interest in Jamont N.V. currently
owned by EuroPaper Inc. ("EuroPaper"). EuroPaper may put its
interest in Jamont to James River during May 1996, for
settlement in September 1996, and James River may call these
shares during August 1996, each at a fixed price of
approximately 1.04 billion French francs (approximately $207.3
million using exchange rates in effect as of March 31, 1996).
(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 the fall of 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 of the rules as they are currently expected to be
issued, the Company believes that capital expenditures of
approximately $100 million may be required to bring James
River's facilities into compliance. This estimate could change,
depending on several factors, including changes to the proposed
regulations, new developments in control and process technology,
and inflation.
9
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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 31, 1996, James
River's accrued environmental liabilities, including remediation
and landfill closure costs, totaled $24.1 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.
10
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9. Segment Information
James River's net sales and income from operations by business
segment were as follows for the quarters ended March 31, 1996, and
March 26, 1995 (in millions):
March March
1996 1995
Net sales:
Consumer products:
North America $671.3 $609.5
Europe 439.4 387.9
Packaging 333.5 420.3
Communications papers 106.5 301.3
Intersegment elimination (64.1) (51.4)
Total net sales $1,486.6 $1,667.6
Operating profit (loss):
Consumer Products:
North America $67.4 $38.4
Europe 24.8 8.8
Packaging 26.1 18.0
Communications papers 4.1 44.5
General corporate expenses (22.6) (9.8)
Severance and other items (23.4) (2.4)
Income from operations $76.4 $97.5
11
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10. Pro Forma Data
In August 1995, James River completed the spin-off to
shareholders of a large part of the Company's Communications Papers
Business, along with the specialty paper-based portion of its
Packaging Business forming Crown Vantage Inc. The following pro
forma information assumes that the spin-off of Crown Vantage Inc.
occurred as of the beginning of 1995. 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.
Pro Forma Consolidated Operating Data Quarter Ended
(in millions, except per share data) March 26, 1995
Net sales:
Consumer products:
North America $612.4
Europe 387.9
Packaging 345.8
Communications papers 140.7
Intersegment elimination (50.3)
Total net sales $1,436.5
Operating profit:
Consumer products:
North America $39.1
Europe 8.8
Packaging 18.6
Communications papers 22.5
General corporate expenses (8.4)
Severance and other items (2.4)
Income from operations $78.2
Net income $21.8
Net income per common share $.09
12
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11. Subsequent Events
Effective May 5, 1996, James River completed the sale of its
specialty operations business for cash proceeds of approximately $30
million and a combination of subordinated long-term notes and
preferred stock having a face value of approximately $17 million.
The specialty operations business, which is currently part of the
North American Consumer Products Business, consists of a party goods
business in Indianapolis, Indiana, a specialty mill in Gouverneur,
New York, and a foodservice specialties plant in Rancho Dominguez,
California. Additionally, on April 10, 1996, the Company signed a
definitive agreement for the sale of its Flexible Packaging group for
gross cash proceeds of approximately $365 million. With 1995 sales of
approximately $490 million, the Flexible Packaging group includes ten
manufacturing facilities with 2,300 employees. These facilities
include: four lamination and coating plants, located in St. Louis,
Missouri, Dayton, Ohio, Shreveport, Louisiana, and San Leandro,
California; five film and converting plants located in New Castle,
Delaware, Orange, Texas, Greensburg, Indiana, Jackson, Tennessee, and
Aguascalientes, Mexico; and a rigid plastics container plant in
Williamsburg, Virginia. The transaction is expected to be completed
by mid-year and is subject to normal closing conditions and
adjustments. Proceeds from both of these transactions are expected
to be used to reduce long-term debt.
13
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Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Results of Operations
Overview
James River reported net income of $20.5 million, or $.07 per
share, for the first quarter ended March 31, 1996, compared with
$26.5 million, or $.14 per share for the same quarter of the prior
year. Net sales for the first quarter were $1,487 million, compared
to $1,668 million in the prior year. The comparability of these
results was impacted by nonrecurring charges and by the spin-off to
shareholders of Crown Vantage Inc. ("Crown Vantage") occurring during
1995 (see Note 10 of Notes to Consolidated Financial Statements).
Items Affecting Comparability
Results for the current quarter included nonrecurring charges of
$23.4 million ($14.3 million net of taxes, or $.16 per share),
consisting of domestic severance costs of $13.8 million ($8.4 million
net of taxes, or $.10 per share) and anticipated net losses on
pending asset divestitures of $9.6 million ($5.9 million net of
taxes, or $.06 per share). The first quarter of 1995 included
nonrecurring severance charges of $2.4 million ($1.9 million net of
taxes and minority interests, or $.02 per share). Excluding
nonrecurring charges, net income was $34.8 million, or $.23 per share
in the first quarter of 1996, compared to $28.4 million, or $.16 per
share in the first quarter of 1995.
The comparability of results was also affected by James River's
spin-off of Crown Vantage to common shareholders in August 1995,
which included a large part of what was formerly James River's
Communications Papers Business as well as the specialty paper-based
portion of its Packaging Business. On a pro forma basis, excluding
the results attributable to the operations spun off to Crown Vantage
and the nonrecurring items, net income would have been $23.7 million,
or $.11 per share in the first quarter of 1995.
North American Consumer Products Business
Operating profits for the North American Consumer Products
Business increased by 75%, from $38.4 million in the first quarter of
1995 to $67.4 million in the current quarter, while net sales
increased by 10% over the same period, from $609 million to $671
million. Net sales of retail products increased by 9% over the prior
year, principally due to higher average net selling prices. Net
sales of commercial products were comparable to those of the prior
year's first quarter, reflecting a combination of higher average
selling prices on a lower volume base. While unit volumes in
commercial personal care products were similar to the prior year,
unit volumes for commercial foodservice products were below prior
year levels. Net sales of warehouse club and private label products
increased by 18% over the prior year, as both unit volumes and
average prices improved.
The improvement in profitability over the prior year was primarily
attributable to the higher average selling prices, cost reduction
initiatives and lower costs for certain raw materials, including
wastepaper. Increased operating results were partially offset by
reduced profits attributable to market pulp. Following the spin-off
of Crown Vantage, this business has approximately 200,000 tons of
pulp capacity in excess of its annual requirements, which is sold as
market pulp. Average net selling prices of market pulp decreased by
approximately $100 per ton from the prior year's level.
14
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In April, following similar moves by competitors, James River
announced a reduction in list prices of products sold in the U.S.
retail market. Prices for retail bathroom tissue are being reduced
by 8.6% effective April 22 and prices for retail paper towels and
napkins are being reduced by 5.3% and 5.5%, respectively, effective
June 3. Because of seasonality in retail tabletop markets, the
second quarter is normally the strongest quarter of the year for the
North American Consumer Products Business. However, results for the
second quarter of 1996 may be lower than first quarter levels, as the
retail price decreases and further reductions in market pulp prices
combine to more than offset the benefit of the normally stronger
seasonal cup and plate volumes.
European Consumer Products Business
Operating profits for the European Consumer Products Business
increased nearly threefold to $24.8 million, compared to $8.8 million
in the first quarter of 1995, while net sales increased by 13% over
the same period, to $439 million from $388 million. The improvement
in Jamont's results was attributable to a combination of stronger
volumes, and lower raw material cost and other cost reductions,
partially offset by lower average pricing and higher promotional
costs. Finished goods volumes were approximately 5% above the prior
year level, reflecting a combination of (i) weaker than normal 1995
volumes resulting from Jamont's price increase initiatives, (ii) new
product introductions benefiting 1996 volumes and (iii) growth of
volumes in certain smaller markets. Due to significant declines in
the cost of market pulp, pricing was under pressure for much of the
quarter, creating both list prices decreases and trade promotional
spending increases. As a net buyer of approximately 450,000 tons per
year of market pulp, Jamont is expected to continue to benefit from
further declines in the cost of this raw material in the second
quarter.
Packaging Business
On a pro forma basis, excluding the results attributable to the
operations spun off to Crown Vantage, operating profits for the
Packaging Business improved to $26.1 million in the current quarter
from $18.6 million in the prior year's first quarter, despite a
slight decline in sales to $334 million from $346 million for the
same periods. The improved profitability was principally due to
achieving a more reasonable balance between raw material costs and
finished product pricing. Average prices for folding cartons,
foodservice products and flexible packaging were all higher than
prior year levels, while the cost of wastepaper and plastic resins
were below the prior year's first quarter level. However, volumes
were generally somewhat lower than those of the prior year, across
all major product categories.
Communications Papers Business
On a pro forma basis, excluding the results attributable to the
operations spun off to Crown Vantage, operating profits for the
Communications Papers Business declined to $4.1 million from $22.5
million in the first quarter of 1995. On this same basis, net sales
declined by 25%, to $106 million from $141 million in the prior year.
Sales and profitability were negatively impacted by a combination of
declining selling prices for uncoated free sheet grades of paper, and
extensive amounts of market-related production curtailments,
continuing a trend begun in the fourth quarter of 1995. While first
quarter average pricing for uncoated free sheet was similar to the
prior year's first quarter, prices were substantially below fourth
quarter levels. Declines in prices were attributable to major
customer inventory corrections and weaker economic growth. First
quarter shipments were more than 30% below the prior year's quarter,
causing James River to curtail production by approximately 30,000
tons. Uncoated groundwood markets were less negatively affected in
the first quarter.
15
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Following similar moves by competitors, James River announced a
price increase of $80 per ton on cut-size and offset papers effective
in late April, followed by a second price increase of $80 per ton on
cut-size and converting grades effective in early June. Second
quarter results for the Communications Papers Business may be
somewhat weaker than first quarter levels, since average pricing will
likely be lower than first quarter levels.
Other Income and Expense Items
General corporate expenses totaled $22.6 million in the first
quarter of 1996, compared to $9.8 million in the prior year. The
majority of the increase was related to costs incurred in installing
new integrated management information systems to support the
Company's cost reduction programs. Interest expense decreased from
$61.8 million to $45.4 million between the first quarter of 1995 and
the first quarter of 1996. This decrease was attributable to a
reduction in average outstanding debt of approximately $650 million
and lower average variable interest rates. Other income decreased to
$4.0 million in the current quarter from $9.4 million in 1995,
principally due to reduced earnings of pulp-producing unconsolidated
affiliates. The change in the effective tax rate for 1996 is
discussed in Note 5 of Notes to Consolidated Financial Statements.
Financial Condition
Cash provided by operating activities totaled $148.7 million in
the first quarter of 1996, similar to the $146.7 million provided in
the prior year. The Company's current ratio was 1.7 as of both March
31, 1996, and December 31, 1995, while working capital decreased to
$737 million from $772 million for the same periods. The decrease in
working capital was principally due to a reduction in Jamont's
inventories resulting from the lower cost of purchased raw materials
and increased sales volumes.
Capital expenditures were $81.7 million in the current quarter,
compared to $91.3 million in the prior year's first quarter. The
Company realized cash proceeds of approximately $26 million during
the current quarter from the contribution of the Handi-Kup foam cup
operations to a joint venture as further described in Note 2 of Notes
to Consolidated Financial Statements.
Total indebtedness decreased by $115 million, from $2,548
million as of December 31, 1995, to $2,433 million as of March 31,
1996, due to both asset divestiture proceeds and operating cash
flows. As of March 31, 1996, the Company had outstanding borrowings
of approximately $839 million supported by revolving credit
facilities, including $428 million outstanding under such facilities,
$115 million of commercial paper and $296 million of money market
notes. Total outstanding debt as of March 31, 1996, included
approximately $1,515 million of fixed rate and $918 million of
floating rate obligations. Note 7 of Notes to Consolidated Financial
Statements describes the Company's interest rate swap agreements and
foreign currency contracts.
James River's ratio of total debt to total capitalization
decreased to 50.5% as of the end of the first quarter, from 51.3 % as
of the prior year end, resulting from the decrease in debt levels.
For purposes of this calculation, the Company defines total
capitalization as the sum of current and long-term debt, preferred
and common equity and minority interests. For the quarter ended
March 31, 1996, and the year ended December 31, 1995, the ratios of
earnings to fixed charges were 1.61 and 1.80, respectively. As of
March 31, 1996, under the most restrictive provisions of the
Company's debt agreements, James River had additional borrowing
capacity of approximately $1 billion and net worth in excess of the
minimum requirements specified by such agreements of approximately
$400 million.
16
<PAGE>
Following the end of the first quarter, James River announced
the signing of a definitive agreement with Printpack Inc. of Atlanta,
Georgia for the sale of the Company's Flexible Packaging division for
gross cash proceeds of $365 million. James River also announced the
completion of the sale of the Company's specialty operations business
to The Fonda Group for approximately $30 million in cash and other
securities having a face value of $17 million. (See Note 11 to Notes
to Consolidated Financial Statements.) Proceeds from these and other
asset divestitures are expected to be used to reduce long-term debt,
and are part of the Company's 1996 goal of generating $500 million in
proceeds from divestitures.
17
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
As previously disclosed, James River had been notified by the
EPA of a civil action filed in the federal court in New Hampshire
related to certain environmental violations at the Company's
previously owned Berlin, New Hampshire, mill. The Company agreed to
a settlement of $200,000 as well as the implementation of
environmentally beneficial capital improvements which cost
approximately $500,000. As part of the Company's spin-off of certain
of its assets to Crown Vantage Inc. on August 25, 1995, the liability
for the penalty and the supplemental environmental improvement
projects was transferred to Crown Vantage Inc. However, a consent
decree issued by the EPA requires James River to pay the penalty in
the event Crown Vantage Inc. fails to do so.
Item 2. CHANGES IN SECURITIES.
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None.
18
<PAGE>
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Shareholders was held on April 26, 1996,
at which time all of management's nominees for members of the Board
of Directors were elected. Additionally, the Company's common
shareholders voted on two proposals related to certain stock
ownership plans which were adopted as well as two proposals submitted
by certain shareholders which were defeated: (i) a proposal
recommending the cessation of non-employee director pension benefits
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 26, 1996.
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 cast as follows:
Vote
Withheld
Voted Voted or Broker
For Against Abstained Non-Votes
Nominees for election of
Directors:
William T. Burgin 84,267,417 515,171
Worley H. Clark, Jr. 84,271,239 511,349
William T. Comfort, Jr. 84,293,963 488,625
Gary P. Coughlan 84,305,244 477,344
William V. Daniel 84,261,987 520,601
Bruce C. Gottwald 77,104,768 7,677,820
Miles L. Marsh 84,295,658 486,930
Robert M. O'Neil 84,275,831 506,757
Richard L. Sharp 84,301,783 480,805
Anne M. Whittemore 83,204,413 1,578,175
Adopt the 1996 Stock
Incentive Plan 63,719,085 14,156,020 575,588 6,331,895
Adopt the Director Stock
Ownership Plan 75,946,620 1,827,967 676,106 6,331,895
Shareholder proposal -
Non-employee Director
Pension Benefits 17,116,887 60,635,063 698,744 6,331,894
Shareholder proposal -
Equal Employment Report 7,774,461 64,361,642 6,314,591 6,331,894
Item 5. OTHER INFORMATION.
None.
19
<PAGE>
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. 22
12 Computation of Ratio of Earnings to Fixed
Charges -- filed herewith. 25
27(a) Financial Data Schedules for the quarter
ended March 31, 1996 (filed electronically
only).
27(b) Financial Data Schedules restated for the
quarter ended March 26, 1995 (filed
electronically only).
(b) Reports on Form 8-K:
During the quarter ended March 31, 1996, and subsequent
thereto, the Company filed the following Current Report on
Form 8-K:
Date of Report Event Reported
April 10, 1996 The Company published a press release announcing the
signing of a definitive agreement for the sale of the
Company's Flexible Packaging group.
20
<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
Stephen E. Hare
Senior Vice President, Corporate Finance and
Chief Financial Officer
(Principal Financial Officer)
By:/s/William A. Paterson
William A. Paterson
Vice President, Controller
(Principal Accounting Officer)
Date: May 13, 1996
21
<PAGE>
Exhibit 11
JAMES RIVER CORPORATION of Virginia
COMPUTATION OF EARNINGS PER SHARE
For the Quarters Ended March 31, 1996 and March 26, 1995
(in millions, except per share data)
First Quarter
PRIMARY 1996 1995
Net earnings applicable
to common shares $ 5.8 $11.9
Weighted average number of common
shares and common share
equivalents:
Common shares outstanding 85.0 81.7
Issuable upon exercise of out-
standing stock options and
pursuant to a deferred stock
award plan 2.0 3.7
Less assumed acquisition of
common shares, using proceeds
from stock options and a defer-
red stock award plan, under the
treasury stock method (1.5) (2.9)
85.5 82.5
Primary earnings per common share $ .07 $ .14
22
<PAGE>
Exhibit 11 (continued)
JAMES RIVER CORPORATION of Virginia
COMPUTATION OF EARNINGS PER SHARE
For the Quarters Ended March 31, 1996 and March 26,1995
(in millions, except per share data)
First Quarter
FULLY DILUTED 1996 1995
Net earnings applicable
to common shares $ 5.8 $11.9
Weighted average number of common
shares and common share
equivalents:
Common shares outstanding 85.0 81.7
Issuable upon exercise of out-
standing stock options and
pursuant to a deferred stock
award plan 2.0 4.2
Less assumed acquisition of
common shares, using proceeds
from stock options and a defer-
red stock award plan, under the
treasury stock method (1.5) (3.2)
85.5 82.7
Fully diluted earnings per
common share $ .07 $ .14
23
<PAGE>
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.
24
<PAGE>
Exhibit 12
<TABLE>
JAMES RIVER CORPORATION of Virginia
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (a)
(Dollar amounts in millions)
Fiscal
Year Ended
December December December December December
29, 1991 27, 1992 26, 1993 25, 1994 31, 1995
(52 weeks) (52 weeks) (52 weeks) (52 weeks) (53 weeks)
(b,c) (c)
<S> <C> <C> <C> <C> <C>
Pretax income (loss) from
continuing operations,
before minority interests $115.2 $(182.8) $14.1 $(15.7) $220.4
Add:
Interest charged to operations 191.3 193.0 183.0 210.1 236.0
Portion of rental expense
representative of interest
factor (assumed to be one-third) 19.9 19.4 19.1 24.2 23.9
Total earnings, as adjusted $326.4 $29.6 $216.2 $218.6 $480.3
Fixed charges:
Interest charged to operations $191.3 $193.0 $183.0 $210.1 $236.0
Capitalized interest 31.8 12.8 5.3 3.1 6.9
Portion of rental expense
representative of interest
factor (assumed to be one-third) 19.9 19.4 19.1 24.2 23.9
Total fixed charges $243.0 $225.2 $207.4 $237.4 $266.8
Ratio 1.34 -- 1.04 -- 1.80
See accompanying footnote explanations.
</TABLE>
25
<PAGE>
Exhibit 12 (continued)
JAMES RIVER CORPORATION of Virginia
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (a)
(Dollar amounts in millions)
Quarter
Ended
March 31, March 26,
1996 1995
(13 Weeks) (13 Weeks)
Pretax income from continuing
operations, before minority interests $34.3 $46.1
Add:
Interest charged to operations 48.0 64.2
Portion of rental expense representative of
interest factor (assumed to be one-third) 5.9 6.0
Total earnings, as adjusted $88.2 $116.3
Fixed charges:
Interest charged to operations $48.0 $64.2
Capitalized interest 0.9 1.1
Portion of rental expense representative of
interest factor (assumed to be one-third) 5.9 6.0
Total fixed charges $54.8 $71.3
Ratio 1.61 1.63
See accompanying footnote explanations.
26
<PAGE>
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 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.
(c) 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.
27
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM JAMES RIVER
CORPORATION OF VIRGINIA'S MARCH 31, 1996 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> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> MAR-31-1996
<CASH> 43
<SECURITIES> 0
<RECEIVABLES> 863
<ALLOWANCES> 0
<INVENTORY> 798
<CURRENT-ASSETS> 1,830
<PP&E> 6,159
<DEPRECIATION> 2,152
<TOTAL-ASSETS> 7,071
<CURRENT-LIABILITIES> 1,094
<BONDS> 2,414
0
740
<COMMON> 9
<OTHER-SE> 1,477
<TOTAL-LIABILITY-AND-EQUITY> 7,071
<SALES> 1,487
<TOTAL-REVENUES> 1,487
<CGS> 1,117
<TOTAL-COSTS> 1,117
<OTHER-EXPENSES> 23
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 45
<INCOME-PRETAX> 35
<INCOME-TAX> 15
<INCOME-CONTINUING> 21
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 21
<EPS-PRIMARY> .07
<EPS-DILUTED> .07
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS RESTATED SUMMARY FINANCIAL INFORMATION ORIGINALLY
EXTRACTED FROM JAMES RIVER CORPORATION OF VIRGINIA'S MARCH 26, 1995, FORM 10-Q
FINANCIAL STATEMENTS AS RESTATED IN THE MARCH 31, 1996, FORM 10-Q FINANCIAL
STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0000053117
<NAME> JAMES RIVER CORPORATION OF VIRGINIA
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-26-1995
<CASH> 34
<SECURITIES> 0
<RECEIVABLES> 902
<ALLOWANCES> 0
<INVENTORY> 879
<CURRENT-ASSETS> 1,984
<PP&E> 7,052
<DEPRECIATION> 2,360
<TOTAL-ASSETS> 7,956
<CURRENT-LIABILITIES> 1,546
<BONDS> 2,664
0
740
<COMMON> 8
<OTHER-SE> 1,417
<TOTAL-LIABILITY-AND-EQUITY> 7,956
<SALES> 1,668
<TOTAL-REVENUES> 1,668
<CGS> 1,320
<TOTAL-COSTS> 1,320
<OTHER-EXPENSES> 2
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62
<INCOME-PRETAX> 45
<INCOME-TAX> 19
<INCOME-CONTINUING> 27
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 27
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
