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): July 24, 1997
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JAMES RIVER CORPORATION OF VIRGINIA
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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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<PAGE>
Item 5. Other Events. O
On July 24, 1997, James River Corporation of Virginia ("James River" or the
"Company") published a press release announcing the Company's results for the
second quarter and six months ended June 29, 1997. The Company published its
consolidated condensed balance sheets as of June 29, 1997, December 29, 1996,
and June 30, 1996, its consolidated statements of operations for the quarters
(13 weeks) and six months (26 weeks) ended June 29, 1997, and June 30, 1996, its
consolidated statements of cash flows for the six months ended June 29, 1997,
and June 30, 1996, and certain segment information for the six months ended June
29, 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 July 24, 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 hereunto duly authorized.
JAMES RIVER CORPORATION OF VIRGINIA
By: /s/ Clifford A. Cutchins, IV
----------------------------------
Clifford A. Cutchins, IV
Senior Vice President and
General Counsel
Date: July 24, 1997
EXHIBIT 99
JAMES RIVER CORPORATION NEWS RELEASE
P.O. Box 2218, Richmond, VA 23218 (804) 644-5411
Release: Immediate Contact: Celeste Gunter, Financial (804) 649-4307
Richard B. Elder, Media (804) 343-4785
JAMES RIVER REPORTS IMPROVED SECOND QUARTER 1997 RESULTS
RICHMOND, Va., July 24, 1997 -- James River Corporation today reported
significantly improved second quarter 1997 earnings. Excluding non-recurring
items in both years, earnings were $.47 per share in the second quarter of 1997,
nearly double the $.24 per share posted in the second quarter of 1996. Net
income, as reported, was $90.8 million, or $.81 per share, for the quarter
compared to $30.5 million, or $.18 per share, for the same quarter in the prior
year.
Sales for the current quarter were $1.4 billion, compared to $1.6 billion
reported in 1996. Excluding divested operations, sales declined by approximately
2 percent. While unit sales volumes increased in each of the company's
businesses compared to last year, these gains were offset by lower general
market pricing and the effect of foreign currency translation.
NON-RECURRING ITEMS
During the second quarter of 1997, the company reported a pretax gain of
$57.7 million ($35.2 million net of taxes, or $.34 per share) on the sale of
approximately 95,000 acres of southern timberlands. Results for the second
quarter of 1996 included non-recurring charges of $7 million ($4.2 million net
of taxes, or $.06 per share) for severance costs and net losses on asset
dispositions.
FIRST HALF RESULTS
For the first six months, excludingnon-recurring items, net income was
$103.1 million, or $.85 per share, in 1997 compared with $69.5 million, or $.47
per share, in 1996. Net sales of $2.8 billion in 1997 were approximately 11
percent below the $3.1 billion reported in 1996, principally due to
divestitures. Excluding revenues of divested businesses, sales declined by
approximately 1 percent.
RESULTS BY BUSINESS SEGMENT
James River's North American Consumer Products Business posted operating
profits of $84 million in the current quarter, 39 percent higher than the $60.4
million reported in last year's second quarter. Sales for the two quarters were
similar, at $734 million in 1997, compared to $733 million in 1996, excluding
sales of the divested party goods business. Improved results were attributable
to a combination of higher sales volumes for tissue-based products sold in both
retail and away-from-home markets, with a significant contribution from new
product offerings; reduced raw material and manufacturing costs; and improved
promotional effectiveness. These gains were partially offset by lower average
selling prices and increased purchases of unconverted tissue parent rolls,
necessitated by the strong demand for the company's products.
<PAGE>
Operating profits for the European Consumer Products Business were $42
million in the second quarter of 1997, similar to the $41.8 million reported in
the prior year. Sales declined to $417 million in the current quarter from $452
million in the prior year. While finished product sales volumes were more than 5
percent higher than in the prior year, the operating profit benefits from these
stronger volumes and lower average raw material and other costs were largely
offset by the lower average selling prices and the impact of foreign currency
translation, due to the strengthening of the U.S. dollar.
The Packaging Business reported operating profits of $23.8 million,
slightly below the $24 million posted in the second quarter of 1996. Due
primarily to the divestitures of the Flexible Packaging and Inks divisions,
sales declined from $320 million in the second quarter of 1996 to $198 million
in the current quarter. Operating margins improved significantly from the prior
year due to the improved business mix, increased volumes for folding cartons and
paperboard, and lower manufacturing and raw material costs. These gains were
partially offset by lower average selling prices.
The Communications Papers Business reported lower operating income of
$0.4 million in the current quarter, compared to $3.2 million in the prior year,
while sales were comparable at $112 million in 1997 and $114 million in 1996.
Compared to the prior year's quarter, stronger sales volumes and lower costs
were more than offset by lower average selling prices. However, pricing for
uncoated printing and converting papers gradually improved during the current
quarter, allowing the business to post above-break-even results, as compared to
the $3.6 million operating loss reported in the first quarter of 1997.
General corporate expenses declined 24 percent to $17.9 million in the
current quarter, compared to $23.6 million in the same quarter of the prior
year, primarily as a result of reduced spending on new, integrated management
information systems.
CASH FLOWS AND OTHER ACTIVITIES
For the first half of 1997, cash provided by operations totaled $208
million. Net debt (total debt less cash and cash equivalents) declined to $1,737
million as of June 29, 1997, compared to $1,937 million as of December 29, 1996.
Lower average debt levels allowed the company to reduce interest expense by
approximately 15 percent in the first half of the year, from $88.1 million in
1996 to $75.3 million in 1997.
<PAGE>
In July 1997, James River announced that as of September 2, 1997, it is
calling its Series P 9% Cumulative Convertible Preferred Stock for conversion
into common stock at a conversion ratio of .9206 shares of common stock for each
Series P depositary share. The conversion of the Series P depositary shares will
reduce the company's aggregate cash dividends by approximately $16.5 million per
year. Based on current consensus earnings estimates, the conversion of the
Series P into common shares is not expected to have a material impact on the
company's calculation of fully diluted earnings per share, excluding
non-recurring charges.
MERGER WITH FORT HOWARD
On May 5, 1997, the company announced the signing of a definitive merger
agreement with Fort Howard Corporation, to create a preeminent worldwide
consumer products company. The merger will combine James River's strong
marketing capabilities, brands and global reach with Fort Howard's low cost
manufacturing capabilities and proprietary technologies. In connection with the
merger, which is subject to regulatory clearance and shareholder approvals at
special meetings scheduled for August 12, 1997, Fort Howard shareholders will
receive 1.375 shares of James River common stock for each Fort Howard common
share. James River shareholders will retain their current number of shares. The
new, combined company will be named Fort James Corporation. Excluding an
anticipated reorganization charge, the merger is expected to be accretive to
earnings. The company anticipates that the merger will generate operating cost
savings of more than $200 million per year over time, resulting from combining
complementary technologies, optimizing product manufacturing and logistics
across the combined systems, increasing purchasing efficiencies, eliminating
redundant overhead costs, consolidating work forces where duplication exists and
increasing product quality and productivity.
OUTLOOK
Commenting on the quarter, Miles Marsh, the company's chairman and chief
executive officer, said, "I am pleased to be able to report a continuing trend
of strong year-over-year operating performance improvement, occurring despite
lower average prices in many of our product lines. Our stronger performance is a
direct result of our profit improvement efforts over the past two years, which
have allowed us to focus the company more strongly on our less cyclical consumer
products related businesses, to achieve meaningful cost reductions and
productivity improvements, to build our brand equities and strengthen market
positons, and to significantly improve our financial position. The increasing
financial health of the company, together with the excellent progress being made
organizationally to smoothly combine the two companies, provides us with a high
level of confidence that our merger with Fort Howard will get off to a strong
start."
James River Corporation, headquartered in Richmond, Va., is a leading
marketer and manufacturer of paper-based consumer products, packaging, and
business, printing and converting papers. The second largest worldwide producer
of tissue products, James River markets such leading brands as QUILTED NORTHERN
bathroom tissue, BRAWNY paper towels, VANITY FAIR napkins, and DIXIE cups and
plates in North America, and Lotus bathroom tissue, towels, and facial tissue in
Europe. The company also markets QUILT-RAP sandwich wrap, QWIK WAVE microwave
packaging, and EUREKA! and WORD PRO copy papers. James River's current annual
sales rate is approximately $5.6 billion.
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; satisfaction of the conditions to close the merger with
Fort Howard; 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.
# # #
<PAGE>
FINANCIAL SUMMARY
James River Corporation of Virginia and Subsidiaries
For the Quarters (13 Weeks) and Six Months (26 Weeks) Ended
June 29, 1997 and June 30, 1996
(in millions, except per share amounts)
Second Quarter Six Months
---------------------------------------------
1997(a) 1996(b)(c) 1997(a) 1996(b)(c)
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Net sales $1,412.4 $1,570.2 $2,794.3 $3,125.6
Income from operations 190.0 98.8 302.5 175.2
Net income 90.8 30.5 138.3 51.0
Net income per common share $.81 $.18 $1.19 $.25
Net income per common share,
assuming full dilution $.78 $.18 $1.16 $.25
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(a) Results for the second quarter of 1997 included a nonrecurring gain of
$57.7 million ($35.2 million net of taxes, or $.34 per share) on the sale of
95,000 acres of southern timberlands.
(b) Results for the second quarter of 1996 included nonrecurring charges of
$7.0 million ($4.2 million net of tax benefits, or $.06 per share) for severance
costs and net losses on asset dispositions. Results for the first six months
included nonrecurring charges of $30.4 million ($18.5 million net of tax
benefits, or $.22 per share) for severance costs and net losses on asset
dispositions.
(c) 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 of
$73.4 million and $142.2 million for the quarter and six months ended June 30,
1996, respectively.
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
James River Corporation of Virginia and Subsidiaries
Quarters Ended Six Months Ended
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June 29, June 30, June 29, June 30,
(in millions, except per share amounts) 1997 (a) 1996 (b) (c) 1997 (a) 1996 (b) (c)
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<S> <C> <C> <C> <C>
Net sales $1412.4 $1,570.2 $2,794.3 $3,125.6
Cost of goods sold 1,029.1 1,177.9 2,048.3 2,359.9
Selling and administrative expenses 251.0 286.5 501.2 560.1
Severance and other items (income) expense (57.7) 7.0 (57.7) 30.4
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Income from operations 190.0 98.8 302.5 175.2
Interest expense 37.4 42.7 75.3 88.1
Other income, net 4.9 4.4 12.7 8.4
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Income before income taxes and
minority interests 157.5 60.5 239.9 95.5
Income tax expense 66.2 26.6 100.8 42.0
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Income before minority interests 91.3 33.9 139.1 53.5
Minority interests (0.5) (3.4) (0.8) (2.5)
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Net income $90.8 $30.5 $138.3 $51.0
===============================================================================================================================
Preferred dividend requirements (8.1) (14.6) (16.3) (29.3)
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Net income applicable to common shares $82.7 $15.9 $122.0 $21.7
===============================================================================================================================
Net income per common share and common share equivalents $.81 $.18 $1.19 $.25
===============================================================================================================================
Weighted average number of common shares and
common share equivalents 102.7 85.5 102.6 85.5
===============================================================================================================================
Net income per common share and common share equivalents,
assuming full dilution $.78 $.18 $1.16 $.25
===============================================================================================================================
Weighted average number of common shares and
common share equivalents,assuming full dilution 115.2 85.5 105.6 85.5
===============================================================================================================================
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
James River Corporation of Virginia and Subsidiaries June 29, December 29, June 30,
(in millions) 1997 1996 1996
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ASSETS:
<S> <C> <C> <C>
Cash and cash equivalents $213.1 $33.8 $63.9
Accounts receivable 696.5 717.9 842.8
Inventories 683.2 650.4 714.0
Other current assets 118.8 117.6 125.0
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Total current assets 1,711.6 1,519.7 1,745.7
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Net property, plant and equipment 3,531.8 3,751.5 3,965.3
Investments in affiliates 161.5 154.6 148.9
Other assets 428.6 385.7 386.8
Goodwill 663.8 730.0 743.3
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Total assets $6,497.3 $6,541.5 $6,990.0
==================================================================================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable and accrued liabilities $1,072.7 $1,103.4 $1,063.9
Current portion of long-term debt 126.0 116.9 21.5
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Total current liabilities 1,198.7 1,220.3 1,085.4
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Long-term debt 1,824.2 1,853.9 2,294.7
Accrued postretirement benefits other than pensions 457.8 458.0 466.3
Other long-term liabilities 224.2 259.9 475.2
Deferred income taxes 488.3 443.0 440.6
Preferred stock 738.4 738.4 740.3
Common shareholders' equity 1,565.7 1,568.0 1,487.5
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Total liabilities and shareholders' equity $6,497.3 $6,541.5 $6,990.0
==================================================================================================================================
</TABLE>
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<TABLE>
<CAPTION>
SEGMENT INFORMATION
James River Corporation of Virginia and Subsidiaries
(in millions) First Second Third Fourth
Quarter Quarter Quarter Quarter Year
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1997 NET SALES:
Consumer products:
<S> <C> <C> <C>
North America $687.5 $733.6 $1,421.1
Europe 426.6 417.1 843.7
Packaging 196.7 198.3 395.0
Communications papers 119.3 112.0 231.3
Intersegment elimination (48.2) (48.6) (96.8)
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Total net sales $1,381.9 $1,412.4 $2,794.3
===============================================================================================================================
1996 NET SALES (b):
Consumer products:
North America $710.9 $745.2 $685.3 $668.4 $2,809.8
Europe 464.9 452.4 445.2 434.7 1,797.2
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) (47.9) (48.9) (231.7)
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Total net sales $1,555.4 $1,570.2 $1,478.8 $1,367.5 $5,971.9
===============================================================================================================================
1997 INCOME (LOSS) FROM OPERATIONS (a):
Consumer products:
North America $68.4 $84.0 $152.4
Europe 45.3 42.0 87.3
Packaging 21.2 23.8 45.0
Communications papers (3.6) 0.4 (3.2)
General corporate expenses (18.8) (17.9) (36.7)
Severance and other items income 57.7 57.7
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Income from operations $112.5 $190.0 $302.5
===============================================================================================================================
1996 INCOME (LOSS) FROM OPERATIONS (b)(c) :
Consumer products:
North America $63.6 $60.4 $80.7 $68.1 $272.8
Europe 24.8 41.8 47.8 38.5 152.9
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 (22.6) (23.6) (25.3) (24.7) (96.2)
Severance and other items (expense) income (23.4) (7.0) 30.3 (10.6) (10.7)
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Income from operations $76.4 $98.8 $161.2 $96.5 $432.9
===============================================================================================================================
(a) Results for the second quarter of 1997 included a nonrecurring gain of
$57.7 million ($35.2 million net of taxes, or $.34 per share) on the sale of
95,000 acres of southern timberlands.
(b) Results for the second quarter of 1996 included nonrecurring charges of
$7.0 million ($4.2 million net of tax benefits, or $.06 per share) for severance
costs and net losses on asset dispositions. Results for the first six months
included nonrecurring charges of $30.4 million ($18.5 million net of tax
benefits, or $.22 per share) for severance costs and net losses on asset
dispositions.
(c) 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 of
$73.4 million and $142.2 million for the quarter and six months ended June 30,
1996, respectively.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
James River Corporation of Virginia and Subsidiaries SIX MONTHS ENDED
------------------------------------------
(in millions) June 29, 1997 June 30, 1996
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OPERATING ACTIVITIES:
<S> <C> <C>
Net income $138.3 $51.0
Depreciation expense and cost of timber harvested 190.6 205.3
Amortization of goodwill 10.2 10.3
Deferred income tax provision 53.6 4.8
Undistributed earnings of unconsolidated affiliates (1.7) 3.9
Severance and other items (income) expense (57.7) 30.4
Change in current assets and liabilities:
Accounts receivable (31.8) (24.8)
Inventories (47.9) 67.0
Other current assets 5.4 (.3)
Current liabilities 23.2 31.5
Foreign currency hedge (31.5)
Other, net (42.6) (20.6)
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Cash provided by operating activities 208.1 358.5
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INVESTING ACTIVITIES:
Expenditures for property, plant and equipment (133.7) (185.7)
Cash received from sale of assets 113.3 66.5
Other, net 7.9 3.0
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Cash used for investing activities (12.5) (116.2)
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FINANCING ACTIVITIES:
Additions to long-term debt 38.9 1.6
Payments of long-term debt (10.5) (192.6)
Dividends paid (54.8) (55.2)
Common stock issued on exercise of stock options 10.1 1.7
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Cash used for financing activities (16.3) (244.5)
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Increase (decrease) in cash and cash equivalents $179.3 $(2.2)
===========================================================================================================================
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