SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 23, 1997
FORT JAMES CORPORATION
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(Exact name of registrant as specified in its charter)
Virginia
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(State or other jurisdiction of incorporation)
1-7911 54-0848173
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(Commission File Number) (IRS Employer Identification Number)
120 Tredegar Street, Richmond, Virginia 23219
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(Address of principal executive offices, including zip code)
Registrant's telephone number, including area code: (804) 644-5411
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James River Corporation of Virginia
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(Former name, former address, and former fiscal year,
if changed since last report)
<PAGE>
Item 5. Other Events.
On October 23, 1997, Fort James Corporation ("Fort James" or the
"Company") published a press release announcing the Company's results
for the third quarter and nine months ended September 28, 1997. The
Company published its consolidated condensed balance sheets as of
September 28, 1997, December 29, 1996, and September 29, 1996, its
consolidated statements of operations for the quarters (13 weeks) and
nine months (39 weeks) ended September 28, 1997, and September 29,
1996, its consolidated statements of cash flows for the nine months
ended September 28, 1997, and September 29, 1996, and certain segment
information for the nine months ended September 28, 1997, and the year
ended December 29, 1996. A copy of the press release, which includes
the consolidated financial statements, is filed herewith as Exhibit
99.
Item 7. Financial Statements and Exhibits
(c) 99 Press release dated October 23, 1997, published by the
registrant - filed herewith.
<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.
FORT JAMES CORPORATION
By:/s/ William A. Paterson
William A. Paterson
Senior Vice President & Controller
(Principal Accounting Officer)
Date: October 23, 1997
<PAGE>
EXHIBIT 99
NEWS RELEASE
Fort James Corporation
120 Tredegar Street
Richmond, Virginia 23219
Contact:
Celeste Gunter, Financial 804.649.4307
Richard B. Elder, Media 804.343.4785
FORT JAMES CORPORATION ANNOUNCES IMPROVED THIRD QUARTER 1997 RESULTS
RICHMOND, VIRGINIA, October 23, 1997 -- Fort James Corporation today
announced higher operating profits, earnings and earnings per share for its
third quarter ended September 28, 1997, excluding non-recurring transactional
and refinancing costs. Fort James was created through the merger of James River
Corporation and Fort Howard Corporation in August 1997. The merger has been
accounted for as a pooling of interests and, accordingly, results for 1997 and
1996 have been restated to include those of both companies.
THIRD QUARTER RESULTS
Compared with the third quarter of 1996, income from operations increased
five percent to $277.9 million from $264.6 million, net income rose 22 percent
to $122.6 million from $100.2 million and earnings per share climbed 20 percent
to $.54 versus $.45, before the effects of the transactional and refinancing
costs and other nonoperating items. Net sales declined five percent to $1,825
million from $1,926 million, primarily due to divestitures and the impact of
foreign currency translation. Excluding divested operations and the impact of
foreign currency translation, sales increased approximately two percent over
those of the prior year. Operating margins increased to 15.2 percent for the
current quarter, from 13.7 percent in 1996.
Including the non-recurring items, third quarter 1997 income from
operations was $224 million and net income was $23.5 million, or $.07 per share,
while third quarter 1996 income from operations was $294.9 million and net
income was $114 million, or $.52 per share.
NON-RECURRING ITEMS
Third quarter results for both 1997 and 1996 included certain non-recurring
items. Results for the current quarter reflect a pretax charge of $53.9 million
(not tax-deductible, equivalent to $.25 per share) for fees and expenses
associated with the merger and an extraordinary charge on the early
extinguishment of debt of $74.9 million ($45.2 million net of taxes, or $.22 per
share). In the third quarter of 1996, the company reported a pretax gain of
$46.9 million ($24.2 million net of taxes, or $.12 per share) on the sale of the
Flexible Packaging division. This was partially offset by severance and other
costs of $16.6 million ($10.4 million net of taxes, or $.05 per share).
-MORE-
<PAGE>
Page 2 -- Fort James Announces Improved Third Quarter 1997 Results
October 23, 1997
NINE MONTHS RESULTS
For the first nine months, excluding non-recurring items, net income
increased 43 percent to $334.3 million, or $1.49 per share, in 1997 from $233
million, or $1.04 per share, in 1996. Net sales of $5,498 million in 1997 were
approximately seven percent below the $5,922 million reported in 1996, due to
divestitures and foreign currency translation. Net sales increased approximately
one percent excluding these items.
RESULTS BY BUSINESS SEGMENT
The North American Consumer Products Business posted operating profits of
$220 million and an operating margin of 19.8 percent in the current quarter,
similar to the $218 million operating profits and 20 percent margin reported in
the 1996 third quarter. The performance reflected lower sales volumes in
commercial foodservice markets, offset by increased volumes in away-from-home
tissue markets and reduced manufacturing costs.
The European Consumer Products Business reported operating profits of $48.3
million in the third quarter of 1997,compared to $54.5 million in the prior
year. Changes in foreign currency translation associated with the strengthening
of the U.S. dollar caused the year-over-year decline in results. Absent this
change, results would have been modestly higher than those of the prior year.
With operating profits of $22.7 million, the Packaging Business' third
quarter results were comparable to the $22.9 million reported in the prior year.
The benefits of improved sales volumes and cost reduction were largely offset by
lower average pricing, increased wastepaper costs and transition costs incurred
in connection with new customers. Quarterly operating profits for the
Communications Papers Business increased to $11 million, compared to $4.8
million in 1996, on improved volumes and lower wood costs.
General corporate expenses declined to $24 million in the current quarter
compared to $35.4 million in the 1996 quarter, primarily as a result of reduced
spending on new, integrated management information systems.
CASH FLOW AND REFINANCING ACTIVITIES
For the first nine months of 1997, cash provided by operations totaled $565
million and total debt was reduced by $415 million. Lower average debt levels,
combined with some initial benefits from the company's refinancing activities,
allowed the company to reduce interest expense by 15 percent in the first nine
months, from $327.3 million in 1996 to $277.6 million in 1997. In early October,
the company completed the refinancing of a total of approximately $2.3 billion
of debt, partially necessitated by the merger, as well as to take advantage of
Fort James' investment grade debt rating. An additional extraordinary charge on
the early extinguishment of debt of approximately $80 million, net of taxes, is
anticipated to be recorded in the fourth quarter in connection with the
completion of the refinancings. As a result of this program, the company expects
to reduce interest expense by more than $50 million annually.
-MORE-
<PAGE>
Page 3 -- Fort James Announces Improved Third Quarter 1997 Results
October 23, 1997
During the quarter, the company also converted its Series P preferred stock
into approximately 15.3 million common shares and called its Series O preferred
stock for redemption as of October 1. These actions will reduce aggregate cash
dividends by $25 million annually.
RESTRUCTURING ACTIVITIES
The company is currently developing a detailed restructuring plan in
conjunction with the merger, and expects to recognize a restructuring charge in
the fourth quarter of 1997. The range of possible restructuring charges cannot
be reasonably estimated until this plan is complete.
OUTLOOK
Commenting on the quarter, Miles Marsh, the company's chairman and chief
executive officer, said, "Conditions in the away-from-home tissue markets
continue to be quite good, however, conditions in the retail tissue markets have
become somewhat more competitive and are expected to remain this way for the
near-term. We are very pleased with the rapid and smooth completion of the
merger of our two companies, and we are now moving in a thoughtful manner to
integrate the two companies. We are on track with our rationalization plans,
which we continue to believe will ultimately provide merger savings in excess of
$200 million, and I am enthusiastic on the growth prospects for the company."
Fort James is a leading international consumer products company, serving
consumers both at home and away-from-home with bathroom and facial tissue, paper
towels, napkins, and cups and plates. The company's popular brands include
Quilted Northern, Brawny, Dixie, Vanity Fair, Mardi Gras, Green Forest, Soft 'N
Gentle and So-Dri in North America and Lotus, Tenderly, Colhogar and Kittensoft
in Europe. Fort James also produces folding cartons for packaging food and
pharmaceuticals and communications papers such as printing, publishing and
office copy paper. The company has approximately 30,000 employees and more than
65 manufacturing facilities in the U.S., Canada and 12 European countries.
Forward-looking statements in this release are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are not guarantees of future performance and are
subject to risks and uncertainties that could cause actual results and company
plans and objectives to differ materially from those projected. Such risks and
uncertainties include, but are not limited to, general business and economic
conditions; competitive pricing pressures for the company's products; changes in
raw material, energy and other costs; opportunities that may be presented to and
pursued by the company; determinations by regulatory and governmental
authorities; the ability to successfully integrate the James River and Fort
Howard businesses; and the ability to achieve synergistic and other cost
reductions and efficiencies.
# # #
Copies of today's news release, along with additional information on Fort
James, is available, at no charge, by calling (888) 526 3711. You may also
access the company's web site at Internet address http://www.fortjames.com.
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL SUMMARY
Fort James Corporation and Subsidiaries
For the Quarters (13 Weeks) and Nine Months (39 Weeks) Ended
September 28, 1997 and September 29, 1996
(in millions, except per share amounts)
Third Quarter Nine Months
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1997(a) (b) 1996 (c) (d) 1997(a) (b) 1996 (c) (d)
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<S> <C> <C> <C> <C>
Net sales $1,825.4 $1,925.9 $5,497.5 $5,921.5
Income from operations before restructure and
other unusual items 277.9 264.6 814.6 709.1
Income before restructure and other unusual items
and extraordinary item 122.6 100.2 334.3 233.0
Net income per common share:
Before restructure and other unusual items
and extraordinary item $.54 $.45 $1.49 $1.04
Net income $.07 $.52 $1.18 $1.00
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</TABLE>
(a) Results for the third quarter of 1997 included a nonrecurring charge
related to transaction costs which are non-deductible for taxes of
$53.9 million (or $.25 per share). Results for the first nine months
of 1997 included the transaction costs offset by a nonrecurring gain
of $57.7 million ($35.2 million net of tax expense, or $.17 per share)
on the sale of 95,000 acres of southern timberlands.
(b) Net income for the third quarter of 1997 included a net charge of
$45.2 million (or $.22 per share) for extraordinary loss on early
extinguishment of debt. Net income for the first nine months of 1997
included a net charge of $47.1 million (or $.23 per share) related to
extraordinary loss on early extinguishment of debt.
(c) Results for the third quarter of 1996 included a nonrecurring gain of
$46.9 million ($24.2 million net of tax expense, or $.12 per share)
for the disposition of Flexible Packaging assets and nonrecurring
charges of $16.6 million ($10.4 million net of tax benefits, or $.05
per share) for severance and related exit costs. The results for the
first nine months of 1996 included a nonrecurring gain of $46.9
million ($24.2 million net of tax expense, or $.14 per share) for the
disposition of the Flexible Packaging assets and nonrecurring charges
of $47.0 million ($28.9 million net of tax benefits, or $.16 per
share) for severance and related exit costs and net losses on other
asset dispositions. Net income for the first nine months of 1996
included a net charge of $3.3 million (or $.02 per share) related to
extraordinary loss on early extinguishment of debt.
(d) All financial information for Fort James Corporation includes the
results of James River Corporation of Virginia and Fort Howard
Corporation for all periods presented giving retroactive effect to the
merger on August 13, 1997, which has been accounted for as a pooling
of interests. Certain amounts in the prior year's financial statements
have been reclassified to conform to the current year's presentation
including a reclassification of customer freight charges from net
sales to cost of sales.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
Fort James Corporation and Subsidiaries
<S> <C> <C> <C> <C>
Quarters Ended Nine Months Ended
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September 28, September 29, September 28, September 29,
(in millions, except per share amounts) 1997 1996 1997 1996
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Net sales $1,825.4 $1,925.9 $5,497.5 $5,921.5
Cost of goods sold 1,270.4 1,358.8 3,834.6 4,258.4
Selling and administrative expenses 277.1 302.5 848.3 954.0
Restructure and other unusual it
ems
income (expense) (53.9) 30.3 3.8 (.1)
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Income from operations 224.0 294.9 818.4 709.0
Interest expense 87.3 102.2 277.6 327.3
Other income, net 11.1 5.0 22.3 12.4
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Income before income taxes, minority
interests and extraordinary item 147.8 197.7 563.1 394.1
Income tax expense 77.3 83.6 244.9 163.2
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Income before minority interests and
extraordinary item 70.5 114.1 318.2 230.9
Minority interests (1.8) (.1) (2.6) (2.6)
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Income before extraordinary item 68.7 114.0 315.6 228.3
Extraordinary loss on early
extinguishment of debt (45.2) (47.1) (3.3)
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Net income $23.5 $114.0 $268.5 $225.0
==========================================================================================================================
Preferred dividend requirements (8.1) (8.1) (24.4) (43.9)
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Net income applicable to
common shares $15.4 $105.9 $244.1 $181.1
==========================================================================================================================
Net income per common share:
Before extraordinary item $.29 $.52 $1.41 $1.02
Extraordinary loss on early
extinguishment of debt (.22) (.23) (.02)
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Net income per share $.07 $.52 $1.18 $1.00
==========================================================================================================================
Weighted average number of common shares
and common share equivalents 209.4 204.1 207.7 181.1
==========================================================================================================================
CONSOLIDATED BALANCE SHEETS (d)
Fort James Corporation and Subsidiaries September 28, December 29, September 29,
(in millions) 1997 1996 1996
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ASSETS:
Cash and cash equivalents $34.6 $34.6 $63.2
Accounts receivable 813.5 781.3 877.5
Inventories 843.0 801.6 783.0
Other current assets 135.1 191.1 169.9
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Total current assets 1,826.2 1,808.6 1,893.6
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Net property, plant and equipment 4,720.9 4,999.3 4,954.5
Investments in affiliates 163.5 154.6 152.9
Other assets 471.4 464.4 479.0
Goodwill 650.2 730.0 732.4
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Total assets $7,832.2 $8,156.9 $8,212.4
=========================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable and accrued liabilities $1,376.4 $1,413.1 $1,341.7
Current portion of long-term debt 139.2 128.9 83.2
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Total current liabilities 1,515.6 1,542.0 1,424.9
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Long-term debt 3,879.9 4,305.3 4,534.3
Accrued postretirement benefits other than pensions 475.1 475.9 475.8
Other long-term liabilities 254.8 291.7 295.4
Deferred income taxes 725.7 690.5 731.9
Preferred stock 450.4 738.4 738.4
Common shareholders' equity 530.7 113.1 11.7
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Total liabilities and
shareholders' equity $7,832.2 $8,156.9 $8,212.4
=========================================================================================================================
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SEGMENT INFORMATION (d)
Fort James Corporation and Subsidiaries First Second Third Fourth
(in millions) Quarter Quarter Quarter Quarter Year
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<S> <C> <C> <C> <C> <C>
1997 Net sales:
Consumer products:
North America $1,077.4 $1,127.2 $1,109.2 $3,313.8
Europe 472.6 465.4 438.5 1,376.5
Packaging 196.7 198.3 200.0 595.0
Communications papers 119.3 112.0 117.8 349.1
Intersegment elimination (48.2) (48.6) (40.1) (136.9)
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Total net sales $1,817.8 $1,854.3 $1,825.4 $5,497.5
====================================================================================================================================
1996 Net sales:
Consumer products:
North America $1,091.0 $1,145.3 $1,086.2 $1,039.5 $4,362.0
Europe 510.4 496.7 491.6 481.5 1,980.2
Packaging 341.2 319.9 280.0 198.8 1,139.9
Communications papers 112.2 113.8 116.2 114.5 456.7
Intersegment elimination (73.8) (61.1) (48.1) (48.7) (231.7)
- ------------------------------------------------------------------------------------------------------------------------------------
Total net sales $1,981.0 $2,014.6 $1,925.9 $1,785.6 $7,707.1
====================================================================================================================================
1997 Income (loss) from operations (a):
Consumer products:
North America $204.6 $231.1 $219.9 $655.6
Europe 52.4 52.9 48.3 153.6
Packaging 21.2 23.8 22.7 67.7
Communications papers (3.6) 0.4 11.0 7.8
General corporate expenses (23.8) (22.3) (24.0) (70.1)
Restructure and other unusual
items income (expense) 57.7 (53.9) 3.8
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Income from operations $250.8 $343.6 $224.0 $818.4
====================================================================================================================================
1996 Income (loss) from operations (c):
Consumer products:
North America $177.6 $184.2 $217.8 $173.7 $753.3
Europe 31.1 48.8 54.5 42.7 177.1
Packaging 29.8 24.0 22.9 15.2 91.9
Communications papers 4.2 3.2 4.8 10.0 22.2
General corporate expenses (28.7) (29.7) (35.4) (30.7) (124.5)
Restructure and other unusual
items income (expense) (23.4) (7.0) 30.3 (10.6) (10.7)
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Income from operations $190.6 $223.5 $294.9 $200.3 $909.3
====================================================================================================================================
</TABLE>
(a) Results for the third quarter of 1997 included a nonrecurring charge
related to transaction costs which are non-deductible for taxes of
$53.9 million (or $.25 per share). Results for the first nine months
of 1997 included the transaction costs offset by a nonrecurring gain
of $57.7 million ($35.2 million net of tax expense, or $.17 per share)
on the sale of 95,000 acres of southern timberlands.
(b) Net income for the third quarter of 1997 included a net charge of
$45.2 million (or $.22 per share) for extraordinary loss on early
extinguishment of debt. Net income for the first nine months of 1997
included a net charge of $47.1 million (or $.23 per share) related to
extraordinary loss on early extinguishment of debt.
(c) Results for the third quarter of 1996 included a nonrecurring gain of
$46.9 million ($24.2 million net of tax expense, or $.12 per share)
for the disposition of Flexible Packaging assets and nonrecurring
charges of $16.6 million ($10.4 million net of tax benefits, or $.05
per share) for severance and related exit costs. The results for the
first nine months of 1996 included a nonrecurring gain of $46.9
million ($24.2 million net of tax expense, or $.14 per share) for the
disposition of the Flexible Packaging assets and nonrecurring charges
of $47.0 million ($28.9 million net of tax benefits, or $.16 per
share) for severance and related exit costs and net losses on other
asset dispositions. Net income for the first nine months of 1996
included a net charge of $3.3 million (or $.02 per share) related to
extraordinary loss on early extinguishment of debt.
(d) All financial information for Fort James Corporation includes the
results of James River Corporation of Virginia and Fort Howard
Corporation for all periods presented giving retroactive effect to the
merger on August 13, 1997, which has been accounted for as a pooling
of interests. Certain amounts in the prior year's financial statements
have been reclassified to conform to the current year's presentation
including a reclassification of customer freight charges from net
sales to cost of sales.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
Fort James Corporation and Subsidiaries Nine Months Ended
-----------------------------------------------------------------
(in millions) September 28, 1997 September 29, 1996
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<S> <C> <C>
Operating activities:
Net income $268.5 $225.0
Depreciation expense and cost of timber harvested 358.7 379.9
Amortization of goodwill 15.1 15.8
Deferred income tax provision 78.3 58.1
Restructure and other unusual items (3.8) .1
Loss on debt repurchases, net of taxes 47.1 3.3
Undistributed earnings of unconsolidated affiliates 1.4 4.2
Change in current assets and liabilities:
Accounts receivable (109.4) 7.9
Inventories (63.4) 103.6
Other current assets 30.8 6.6
Current liabilities 13.8 25.6
Foreign currency hedge (31.5)
Other, net (41.1) (26.2)
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Cash provided by operating activities 564.5 803.9
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Investing activities:
Expenditures for property, plant and equipment (313.5) (328.7)
Cash received from sale of assets 144.3 440.9
Cash paid for acquisitions, net (199.9)
Other, net 13.2 5.9
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Cash used for investing activities (156.0) (81.8)
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Financing activities:
Additions to long-term debt 633.4 3.4
Payments of long-term debt (982.3) (865.1)
Common stock issued, net of offering costs 205.1
Common and preferred stock cash dividends paid (82.4) (69.9)
Premiums paid on early extinguishment of debt (45.5)
Common stock issued on exercise of stock options 68.3 3.9
Other, net (3.4)
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Cash used for financing activities (408.5) (726.0)
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Increase (decrease) in cash and cash equivalents - $(3.9)
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</TABLE>
