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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: June 30, 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
August 1, 1996:
85,087,066 shares
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JAMES RIVER CORPORATION
of Virginia
QUARTERLY REPORT ON FORM 10-Q
June 30, 1996
TABLE OF CONTENTS
Page No.
PART I. FINANCIAL INFORMATION:
ITEM 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 1996 and
December 31, 1995 3
Consolidated Statements of Operations for the
quarters and six months ended
June 30, 1996 and June 25, 1995 5
Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and June 25, 1995 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
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
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PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED BALANCE SHEETS
June 30, 1996 and December 31, 1995
(in millions, except share data)
June December
1996 1995
ASSETS
Current assets:
Cash and cash equivalents $63.9 $66.1
Accounts receivable 842.8 847.3
Inventories 714.0 821.4
Prepaid expenses and other current assets 45.2 52.3
Deferred income taxes 79.8 83.4
Total current assets 1,745.7 1,870.5
Property, plant and equipment 6,181.3 6,181.0
Accumulated depreciation (2,216.0) (2,106.9)
Net property, plant and equipment 3,965.3 4,074.1
Investments in affiliates 148.9 146.8
Other assets 386.8 395.8
Goodwill 743.3 771.7
Total assets $6,990.0 $7,258.9
The accompanying notes are an integral part
of the consolidated financial statements.
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JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED BALANCE SHEETS, Continued
(in millions, except share data)
June December
1996 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $533.2 $560.5
Accrued liabilities 530.7 493.7
Current portion of long-term debt 21.5 44.8
Total current liabilities 1,085.4 1,099.0
Long-term debt 2,294.7 2,503.0
Accrued postretirement benefits
other than pensions 466.3 464.7
Deferred income taxes 440.6 489.3
Other long-term liabilities 475.2 448.7
Total liabilities 4,762.2 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,
June 30, 1996 -- 85,016,246 and
December 31, 1995 -- 84,890,342 8.5 8.5
Additional paid-in capital 1,297.0 1,294.1
Retained earnings 182.0 211.3
Total shareholders' equity 2,227.8 2,254.2
Total liabilities and shareholders'
equity $6,990.0 $7,258.9
The accompanying notes are an integral part
of the consolidated financial statements.
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JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarters (13 Weeks) and Six Months (26 Weeks) Ended
June 30, 1996 and June 25, 1995
(in millions, except per share amounts)
Second Quarter Six Months
1996 1995 1996 1995
Net sales $1,496.8 $1,817.9 $2,983.4 $3,485.5
Cost of goods sold 1,108.9 1,407.0 2,225.8 2,726.7
Selling and administrative
expenses 282.1 279.9 552.0 527.9
Severance and other items 7.0 2.6 30.4 5.0
Income from operations 98.8 128.4 175.2 225.9
Interest expense 42.7 60.0 88.1 121.8
Other income, net 4.4 8.2 8.4 17.6
Income before income taxes
and minority interests 60.5 76.6 95.5 121.7
Income tax expense 26.6 32.9 42.0 52.3
Income before minority
interests 33.9 43.7 53.5 69.4
Minority interests (3.4) (2.7) (2.5) (1.9)
Net income $30.5 $41.0 $51.0 $67.5
Preferred dividend requirements (14.6) (14.6) (29.3) (29.2)
Net income applicable
to common shares $15.9 $26.4 $21.7 $38.3
Net income per common
share and common share
equivalent $.18 $.32 $.25 $.46
Cash dividends per common
share $.15 $.15 $.30 $.30
Weighted average number of
common shares and common share
equivalents 85.5 83.4 85.5 83.2
The accompanying notes are an integral part of the consolidated financial
statements.
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JAMES RIVER CORPORATION
of Virginia and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months (26 Weeks) Ended
June 30, 1996 and June 25, 1995
(in millions)
1996 1995
Cash provided by (used for) operating activities:
Net income $51.0 $67.5
Depreciation expense and cost of timber harvested 205.3 234.9
Amortization of goodwill 10.3 11.4
Deferred income tax provision 4.8 8.7
Equity in earnings of unconsolidated affiliates (1.4) (11.5)
Dividends received from unconsolidated affiliates 5.3 18.0
Severance and other items 30.4 5.0
Retirement benefits expense in excess of funding 2.0 7.5
Change in current assets and liabilities:
Accounts receivable (24.8) (16.2)
Inventories 67.0 (37.5)
Prepaid expenses and other current assets (.3) (10.4)
Accounts payable and accrued liabilities 31.5 12.4
Other, net (22.6) (4.4)
Cash provided by operating activities 358.5 285.4
Cash provided by (used for) investing activities:
Expenditures for property, plant and equipment (185.7) (208.7)
Cash received from sale of assets 66.5 2.8
Proceeds on sale of partnership option 24.3
Other, net 3.0 12.7
Cash used for investing activities (116.2) (168.9)
Cash provided by (used for) financing activities:
Additions to long-term debt 1.6 6.3
Payments of long-term debt (192.6) (88.1)
Common and preferred stock cash dividends paid (55.2) (53.8)
Other, net 1.7 5.5
Cash used for financing activities (244.5) (130.1)
Decrease in cash and cash equivalents (2.2) (13.6)
Cash and cash equivalents, beginning of period 66.1 59.3
Cash and cash equivalents, end of period $63.9 $45.7
The accompanying notes are an integral part
of the consolidated financial statements.
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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 June 30, 1996, and its results of
operations for the quarters (13 weeks) and the six months (26 weeks) ended
June 30, 1996, and June 25, 1995, and its cash flows for the six months then
ended. The balance sheet as of December 31, 1995, was derived from audited
financial statements as of that date. The results of operations for the six
months ended June 30, 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 and six months ended June 25,1995, 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
On June 29, 1996, the Company received notice, under an existing put and
call agreement, of Europaper Inc.'s ("Europaper") intention to sell its 14%
ownership in Jamont N.V. for approximately 1.04 billion French francs or $201.4
million dollars. At the time of the notice, James River's consolidation of
Jamont N.V. included the Europaper minority interest at a book value of $151
million. Concurrent with the receipt of the put exercise notice from Europaper,
James River recorded the acquisition of the remaining 14% minority interest
under the purchase method of accounting. The put settlement is due September 3,
1996, and the Company intends to finance the transaction with the proceeds from
the Flexible Packaging sale or long-term debt.
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. The specialty
operations business, which was a part of the North American Consumer Products
Business, consisted of a party goods facility in Indianapolis, Indiana, a
specialty mill in Gouverneur, New York, and a foodservice specialties plant in
Rancho Dominguez, California.
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, five film and converting
plants, and a rigid plastics container plant. The transaction is expected to be
completed in the third quarter and is subject to normal closing conditions and
adjustments. Proceeds from this transaction are expected to be used to settle
the Europaper put and reduce long-term debt.
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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 six months of 1996 included nonrecurring charges of
$30.4 million consisting of $18.7 million ($11.4 million net of tax benefits,
or $.14 per share) for costs related to severance and enhanced retirement
benefits for approximately 340 employees primarily at Corporate and North
American Consumer Products Business locations and net losses on asset
dispositions of $11.7 million ($7.1 million net of tax benefits, or $.08 per
share) at North American Consumer Products Business locations. During the past
six months, the Company made severance payments on current and prior year
accruals of $10.4 million. Results for the first six months of 1995 included
nonrecurring charges of $5.0 million ($3.6 million net of tax benefits and
minority interests, or $.04 per share) for costs related to severance for the
Company's European Consumer Products Business locations.
4. Other Income
The components of other income were as follows for the six months ended
June 30, 1996, and June 25, 1995 (in millions):
June June
1996 1995
Interest and investment income $3.4 $5.6
Equity in earnings of
unconsolidated affiliates 1.4 11.0
Foreign currency exchange gain (loss) 1.2 (.6)
Other, net 2.4 1.6
Total other income $8.4 $17.6
5. Income Taxes
The Company's effective income tax rate was 44% for the six
months ended June 30, 1996, compared to 43% for the first six months
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.
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6. Inventories
The components of inventories were as follows as of June 30,
1996, and December 31, 1995 (in millions):
June December
1996 1995
Raw materials $154.4 $197.1
Finished goods and work in process 480.7 557.6
Stores and supplies 149.7 151.4
784.8 906.1
Reduction to state certain inventories
at last-in, first-out cost (70.8) (84.7)
Total inventories $714.0 $821.4
7. Financial Instruments
The estimated fair value of the Company's $1,286 million
notional amount of interest rate swaps was a liability of $32 million
as of June 30, 1996, compared to a liability of $3 million as of
December 31,1995. The estimated fair value of the Company's debt
portfolio decreased to a liability in excess of book value of $52
million as of June 30, 1996, from a liability in excess of book value
of $152 million as of December 31, 1995. As of June 30, 1996, the
carrying value of foreign exchange contracts was a net liability of
$63 million and the estimated fair value of such contracts was a net
liability of $91 million, compared to net liabilities of $87 million
and $108 million, respectively, as of December 31, 1995.
Additionally, as of June 30, 1996, the pay-in-kind notes and related
accrued interest received from the spin-off of Crown Vantage Inc.
with original values totaling $89 million had a fair value of
approximately $78 million. The estimated fair values were based on
quoted market prices of comparable instruments and current market
rates as of June 30, 1996, and December 31, 1995.
8. Commitments and Contingent Liabilities
(a) 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
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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.
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 June 30, 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.
(b) 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. The Alabama case
has been certified as a class action and holders of
approximately one-half of the Debentures elected not to be part
of the class. Most of the holders electing out of the class are
plaintiffs in the Connecticut case. James River believes that
these claims are without merit and intends to defend them
vigorously.
In May 1996, James River settled the claim of Teachers
Insurance and Annuity Association of America which had held
approximately 16.54% of the Debentures, for $425,000 plus
reimbursement of attorneys fees. 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.
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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 and six months ended June
30, 1996, and June 25, 1995 (in millions):
Second Quarter Six Months
June June June June
1996 1995 1996 1995
Net sales:
Consumer products:
North America $698.2 $686.7 $1,369.5 $1,296.2
Europe 426.8 428.7 866.2 816.6
Packaging 314.8 431.5 648.3 851.8
Communications papers 107.2 325.9 213.7 627.2
Intersegment elimination (50.2) (54.9) (114.3) (106.3)
Total net sales $1,496.8 $1,817.9 $2,983.4 $3,485.5
Operating profit (loss):
Consumer products:
North America $60.4 $58.4 $127.8 $96.8
Europe 41.8 12.9 66.6 21.7
Packaging 24.1 16.5 50.2 34.5
Communications papers 3.1 60.2 7.2 104.7
General corporate expenses (23.6) (17.0) (46.2) (26.8)
Severance and other items (7.0) (2.6) (30.4) (5.0)
Income from operations $98.8 $128.4 $175.2 $225.9
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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 transaction
had occurred for the period indicated or which may be reported in the
future.
Pro Forma Consolidated Operating Data Quarter Ended Six Months Ended
(in millions, except per share data) June 25, 1995 June 25,1995
Net sales:
Consumer products:
North America $689.7 $1,302.1
Europe 428.7 816.6
Packaging 357.7 703.5
Communications papers 156.9 297.6
Intersegment elimination (53.8) (104.1)
Total net sales $1,579.2 $3,015.7
Operating profit:
Consumer products:
North America $59.1 $98.2
Europe 12.9 21.7
Packaging 17.4 36.0
Communications papers 39.4 61.9
General corporate expenses (14.6) (23.0)
Severance and other items (2.6) (5.0)
Income from operations $111.6 $189.8
Net income $37.5 $59.3
Net income per common share $.27 $.36
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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 $30.5 million, or $.18 per
share, for the second quarter ended June 30, 1996, compared with
$41.0 million, or $.32 per share for the same quarter of the prior
year. Net sales for the second quarter were $1,497 million, compared
to $1,818 million in the prior year. For the six months ended June
30, 1996, net income was $51.0 million, or $.25 per share, compared
with $67.5 million, or $.46 per share in 1995. Net sales for the
first six months of 1996 were $2,983 million compared to $3,486
million in 1995. The comparability of these results was impacted by
nonrecurring charges and by the spin-off to shareholders of Crown
Vantage Inc. ("Crown Vantage") in August, 1995 (see Note 10 of Notes
to Consolidated Financial Statements).
Items Affecting Comparability
Nonrecurring charges for the quarters and six months ended June
30, 1996, and June 25, 1995, were as follows (in millions, except per
share amounts):
June 30, 1996 June 25, 1995
Net Net
Income Per Income Per
Gross Impact Share Gross Impact Share
Quarters ended:
Severance costs $4.9 $3.0 $.04 $2.6 $1.7 $.02
Net loss on asset
divestitures 2.1 1.2 .02
Total $7.0 $4.2 $.06 $2.6 $1.7 $.02
Six months ended:
Severance costs $18.7 $11.4 $.14 $5.0 $3.6 $.04
Net loss on asset
divestitures 11.7 7.1 .08
Total $30.4 $18.5 $.22 $5.0 $3.6 $.04
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 $39.2 million,
or $.29 per share in the second quarter of 1995 and $62.9 million, or
$.40 per share for the six months ended June 25, 1995.
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North American Consumer Products Business
Operating profits for the North American Consumer Products
Business increased by 3%, from $58.4 million in the second quarter of
1995 to $60.4 million in the current quarter, while net sales
increased by 2% over the same period, from $687 million to $698
million. The increase in sales for the second quarter was largely
due to increases in volumes of approximately 20% in the club market
offset slightly by a 4% decrease in net sales in the commercial
market. The decline in net sales in the commercial market stems from
volume and pricing decreases in the foodservice product lines. Net
sales of retail products were comparable to those of the prior year's
second quarter. Operating profits benefited by the increase in club
volume, the decrease in raw material costs, including pulp and
wastepaper costs, and benefits of cost reduction initiatives. For the
six months ended June 30, 1996 operating profits were $127.8 million,
an increase of 32% over the comparable six months in 1995, on a 6%
increase in net sales for those same periods. The six month results
reflect pricing increases in the retail products early in the year,
increase in club volumes and reductions in raw material costs.
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 were reduced by
8.6% effective April 22 and prices for retail paper towels and
napkins were reduced by 5.3% and 5.5%, respectively, effective June
3. The impact of these retail price decreases will be fully
reflected in financial results starting in the third quarter of 1996.
Because of seasonality in retail tabletop markets, the third
quarter's results for this market are expected to decline from those
reported in the second quarter.
European Consumer Products Business
Operating profits for the European Consumer Products Business
more than tripled to $41.8 million, compared to $12.9 million in the
second quarter of 1995, while net sales were fairly level over the
same period, at $427 million in 1996 from $429 million. Operating
profits for this business for the six months ended June 30, 1996
improved to $66.6 million from $21.7 million for the same period in
the prior year on a 6% increase in net sales. The improvement in the
European Consumer Products Business' results for both periods was
attributable to a combination of stronger finished products volumes,
lower raw material costs and continuing cost reductions. Finished
products volumes were approximately 7% above the prior year level,
reflecting a combination of (i) weaker than normal 1995 volumes
resulting from price increase initiatives, (ii) new product
introductions benefiting 1996 volumes and (iii) growth of volumes in
certain smaller markets such as Spain and the Netherlands. Due to
significant declines in the cost of market pulp, pricing was under
pressure during 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, the European
Consumer Products Business has benefited from lower average pulp
costs in 1996.
Packaging Business
Excluding the results attributable to the operations spun off to
Crown Vantage, operating profits for the Packaging Business improved
to $24.1 million and to $50.2 million in the current quarter and
first six months, respectively, both 39% above the $17.4 million and
$36.0 million reported on a pro forma basis for the comparable
periods of the prior year. Pro forma net sales declined 12% to $315
million from $358 million for the current quarter and 8% to $648
million from $704 million for the six months compared to prior year.
The improved profitability was principally attributable to mix
upgrades and raw material and other cost reductions, partially offset
by unit volume declines. Average prices for folding cartons were
higher than prior period levels, while pricing for foodservice
products and flexible packaging were relatively flat. The cost of
pulp and wastepaper were below both the prior year's second quarter
and six month levels. For both the quarter and six months ended June
30, 1996, the operations to be sold with the Flexible Packaging group
(expected to close in the third quarter) and inks locations comprised
4% of the Company's consolidated and 16% of the Packaging Business'
operating profits.
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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 $3.1 million in the second
quarter of 1996 from $39.4 million in 1995 and the operating profits
for the six months decreased to $7.2 million from $61.9 million for
the same period in 1995. On this same basis, net sales declined by
32%, to $107 million in the second quarter of 1996 from $157 million
in the prior year and net sales for the six months decreased 28% to
$214 million from $298 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 reduced
demand, continuing a trend begun in the fourth quarter of 1995.
Second quarter pricing for uncoated free sheet was 20% to 30% below
last year's second quarter and volumes decreased 9% below the prior
year's quarter.
Other Income and Expense Items
General corporate expenses totaled $23.6 million and $46.2
million in the second quarter and first six months of 1996,
respectively, compared to $17.0 million and $26.8 million for the
same periods 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 $121.8 million to $88.1 million
between the first six months of 1995 and the first six months of
1996. This decrease was attributable to a reduction in average
outstanding debt of approximately $770 million since June 25, 1995.
Other income decreased to $8.4 million in the first six months of
1996 from $17.6 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 $358.5 million for
the six months ended June 30, 1996, compared with $285.4 million
provided in the comparable period of 1995. The Company's current
ratio was 1.6 as of June 30, 1996, and 1.7 as of December 31, 1995,
while working capital decreased to $660 million from $772 million for
the same periods. The decrease in working capital was principally
due to a reduction in the European Consumer Products Business'
inventories resulting from the lower cost of purchased raw materials
and increased sales volumes.
Capital expenditures were $185.7 million for the first six
months of 1996, compared to $208.7 million for the same period of
1995. The Company realized cash proceeds of approximately $67
million during the first six months of 1996 from the sale of the
specialty operations and 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 $232 million, from $2,548
million as of December 31, 1995, to $2,316 million as of June 30,
1996, due to the application of asset divestiture proceeds, operating
cash flows and the positive impact of foreign currency translation.
As of June 30, 1996, the Company had outstanding borrowings of
approximately $729 million supported by revolving credit facilities,
including $414 million outstanding under such facilities, $87 million
of commercial paper and $228 million of money market notes. Total
outstanding debt as of June 30, 1996, included approximately $1,509
million of fixed rate and $807 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.
<PAGE>
James River's ratio of total debt to total capitalization
decreased to 50.8% as of the end of the second 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. As of June 30, 1996, the
consolidation of Jamont no longer included minority interests of
approximately $151 million pursuant to the Europaper put agreement
(See Note 2 of Notes to Consolidated Financial Statements). 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 as of June 30,1996.
In April 1996, 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 completed 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 2 to Notes to Consolidated Financial Statements.)
Proceeds from these and other asset divestitures are expected to be
used to finance the settlement of the Europaper put and reduce long-
term debt, and are part of the Company's 1996 goal of generating $500
million in proceeds from divestitures.
<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, the consent
decree 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.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
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. 20
27(a) Financial Data Schedules for the six
months ended June 30, 1996,
(filed electronically only).
27(b) Financial Data Schedules restated for the
six months ended June 25, 1995,
(filed electronically only).
<PAGE>
(b) Reports on Form 8-K:
During the quarter ended June 30, 1996, and subsequent
thereto, the Company filed the following Current Reports 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.
<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/William A. Paterson
William A. Paterson
Senior Vice President and Controller
(Principal Financial and Accounting Officer)
Date: August 9, 1996
<PAGE>
Exhibit 11
JAMES RIVER CORPORATION of Virginia
COMPUTATION OF EARNINGS PER SHARE
For the Quarters (13 Weeks) and Six Months (26 Weeks) Ended
June 30, 1996 and June 25, 1995
(in millions, except per share amounts)
Second Quarter Six Months
PRIMARY: 1996 1995 1996 1995
Net earnings applicable
to common shares $15.9 $26.4 $21.7 $38.3
Weighted average number of common
shares and common share equivalents:
Common shares outstanding 85.0 82.1 85.0 81.9
Issuable upon exercise of
outstanding stock options and
pursuant to a deferred stock
award plan 2.0 4.9 2.0 4.3
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 (1.5) (3.8) (1.5) (3.3)
85.5 83.2 85.5 82.9
Primary earnings per common share $.18 $.32 $.25 $.46
<PAGE>
Exhibit 11 (continued)
JAMES RIVER CORPORATION of Virginia
COMPUTATION OF EARNINGS PER SHARE
For the Quarters (13 Weeks) and Six Months (26 Weeks)
Ended June 30, 1996 and June 25, 1995
(in millions, except per share amounts)
Second Quarter Six Months
FULLY DILUTED: 1996 1995 1996 1995
Net earnings applicable
to common shares $15.9 $26.4 $21.7 $38.3
Weighted average number of common
shares and common share equivalents:
Common shares outstanding 85.0 82.1 85.0 81.9
Issuable upon exercise of
outstanding stock options and
pursuant to a deferred stock
award plan 2.1 4.9 2.1 5.1
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 (1.6) (3.6) (1.6) (3.8)
85.5 83.4 85.5 83.2
Fully diluted earnings
per common share $.18 $.32 $.25 $.46
<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.
<TABLE> <S> <C>
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<LEGEND>
The schedule contains summary financial information extracted from James River
Corporation of Virginia's June 30, 1996, Form 10-Q financial statements and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
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<NAME> JAMES RIVER CORPORATION OF VIRGNINA
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<LEGEND>
The schedule contains restated summary financial information orginally extracted
from James River Corporation of Virginia's June 25, 1995, Form 10-Q financial
statements as restated in the June 30, 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-25-1995
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