SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
of the
SECURITIES EXCHANGE ACT OF 1934
For the year ended Commission File
December 29, 1996 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, Virginia 23219
(Address of Principal Executive Offices)
Registrant's Telephone Number, Including Area Code
(804) 644-5411
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common Stock, $.10 par value New York Stock Exchange
Rights to Purchase Series M New York Stock Exchange
Cumulative Participating
Preferred Stock, $10 par value
Series K $3.375 Cumulative New York Stock Exchange
Convertible Exchangeable
Preferred Stock, $10 par value
Depositary Shares Representing New York Stock Exchange
Series L $14.00 Cumulative
Convertible Exchangeable
Preferred Stock, $10 par value
Depositary Shares Representing New York Stock Exchange
Series O 8 1/4% Cumulative
Preferred Stock, $10 par value
Depositary Shares Representing New York Stock Exchange
Series P 9% Cumulative Convertible
Preferred Stock, $10 par value
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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
Aggregate market value of voting stock, including common stock and depositary
shares representing Series P 9% Cumulative Convertible Preferred Stock, held
by non-affiliates of the registrant, at close of business,
February 20, 1997............................................. $2,750,746,261
Number of shares of $.10 par value common stock outstanding,
as of February 20, 1997. ............................................86,305,095
Documents Incorporated by Reference:
(1) Portions of the registrant's Annual Report to Shareholders for the year
ended December 29, 1996, incorporated into Parts I and II hereof; and (2)
Portions of the registrant's definitive Proxy Statement for the Annual Meeting
of Shareholders to be held on April 24, 1997, incorporated into Part III hereof.
<PAGE>
JAMES RIVER CORPORATION OF VIRGINIA
Annual Report on Form 10-K
December 29, 1996
TABLE OF CONTENTS
PART I
Page
Item 1. Business......................................................... 3
Item 2. Properties........................................................ 11
Item 3. Legal Proceedings................................................. 12
Item 4. Submission of Matters to a Vote of Security Holders................12
Executive Officers of the Registrant.............................. 13
PART II
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters...................................... 15
Item 6. Selected Financial Data........................................... 15
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 15
Item 8. Financial Statements and Supplementary Data....................... 15
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.............................. 16
PART III
Item 10. Directors and Executive Officers of the Registrant................ 16
Item 11. Executive Compensation............................................ 16
Item 12. Security Ownership of Certain Beneficial Owners
and Management................................................... 16
Item 13. Certain Relationships and Related Transactions.................... 16
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K.............................................. 17
<PAGE>
PART I
ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS
James River Corporation of Virginia (together with its subsidiaries, "James
River" or the "Company") was founded in 1969 and is incorporated in the
Commonwealth of Virginia. James River is a marketer and manufacturer of consumer
products, including towel and tissue and disposable food and beverage service
products; as well as packaging, including folding cartons and foodservice
products; and communications papers, including business papers and specialty
papers. James River is one of the industry leaders in terms of sales within the
United States and Europe in towel and tissue products. James River is an
industry leader, as measured by sales of disposable foodservice items and
folding cartons, within the United States, and, on the West Coast, in uncoated
business papers. During its twenty-eight year history, James River has pursued a
strategy of internal growth and acquisition which has allowed the Company to
significantly expand its business and broaden its product lines. Disclosures
made herein are as of December 29, 1996, or for the 52-week year then ended.
Portions of the James River Corporation of Virginia Annual Report to
Shareholders for the year ended December 29, 1996, (the "1996 Annual Report")
are incorporated in this Form 10-K by specific reference.
One of the Company's key strategies in recent years has been to focus on its
core, paper technology-based consumer products and packaging businesses. In
support of this strategic focus, the Company has entered into a number of
transactions in the past few years. The Company's most significant investment
during the last five years was in its European Consumer Products subsidiary. In
July 1994, the Company increased its share of ownership in the European Consumer
Products Business from 43% to 86% at a cost of approximately $575 million. The
Company acquired the remaining 14% interest in September, 1996, at a cost of
$200 million to bring its ownership to 100%. In the Company's efforts to focus
on its core businesses, James River has also divested of a number of non-core
operations in 1996 and 1995. In August 1996, the Company completed the sale of
its Flexible Packaging group which included four lamination and coating plants,
five film and converting plants, and a rigid plastics container plant. Gross
cash proceeds of $373 million from the sale were used to purchase the remaining
14% interest in the European Consumer Products Business with the remaining
proceeds used to reduce long-term variable-rate borrowings. Additionally, the
Company completed the sale of its Inks Division of the Packaging Business in
October 1996 for cash proceeds of $27 million and the sale of its Handi-Kup foam
cup operations and its specialty operations of the North American Consumer
Products Business for proceeds of $52 million and $30 million, respectively.
Outstanding debt was reduced by $577 million in 1996 using a combination of net
divestiture proceeds and cash flows provided by operations. In 1995, James River
spun off Crown Vantage Inc. ("Crown Vantage") which consisted of a large part of
its Communications Papers Business along with the specialty paper-based portion
of the Packaging Business. As a result of this spin-off, the Company decreased
its exposure to the cyclical printing and publishing papers market and reduced
debt by $500 million. Acquisitions, dispositions and investments during the
three years ended December 29, 1996, are discussed in Notes 2 and 17 of Notes to
Consolidated Financial Statements in the 1996 Annual Report, which information
is incorporated herein by reference.
The Company continues to focus on reducing costs, intensifying marketing and new
product development activities to further strengthen its brands, fixing
underperforming businesses, and restructuring its portfolio of assets. The
Company currently expects that the rationalization of its portfolio of assets
will continue in 1997 and may include, among other items, the divestiture of
some of James River's owned timberlands. Future divestiture proceeds and free
cash flow will be directed toward capital structure simplification, debt
reduction, or possibly, strategic acquisitions.
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(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS
James River currently conducts its business in three major segments: (i) the
Consumer Products segment, which manufactures and markets paper-based personal
care and disposable tabletop products; (ii) the Packaging segment, which
provides retail packaging for food and consumer products; and (iii) the
Communications Papers segment, which manufactures and markets uncoated business
and printing papers serving the commercial printing and office markets.
Financial information on the Company's segments for the three years ended
December 29, 1996, is presented in Note 16 of Notes to Consolidated Financial
Statements and Supplemental Pro Forma Financial Information (Unaudited) in the
1996 Annual Report, which information is incorporated herein by reference.
(c) NARRATIVE DESCRIPTION OF BUSINESS
Principal Products
James River processes basic raw materials, such as wood, wood pulp, wastepaper,
paperboard and plastic resins, into products which generally are close to or in
their end use form.
Consumer Products Business - North America. The North American Consumer
Products Business, headquartered in Norwalk, Connecticut, represented
approximately 45% of the Company's consolidated sales in 1996 and would have
comprised 47% of consolidated sales as the Company was configured at December
29, 1996. This business produces personal care products such as bathroom tissue
and towels; and disposable tabletop products such as paper and plastic cups,
paper plates, napkins and plastic cutlery. The North American Consumer Products
Business is organized along retail and commercial market channels, with each
channel carrying both personal care products and tabletop products. The retail
group markets a number of popular national brands including QUILTED NORTHERN
bathroom tissue; BRAWNY paper towels; VANITY FAIR premium napkins; and DIXIE
plates, cups and cutlery; as well as a number of regional brands. Retail
products are marketed principally through grocery stores, mass merchants, drug
stores and warehouse clubs. The commercial group markets the broadest line of
personal care and tabletop products in the industry under the DIXIE, MARATHON
and JAMES RIVER - CANADA brand names, as well as a variety of regional brands. A
national sales force sells these products to fast food chains, sanitary paper
distributors, janitorial supply distributors and foodservice distributors for
use in restaurants, hotels, offices, factories and schools.
Consumer Products Business - Europe. The European Consumer Products
Business, headquartered in Brussels, Belgium, comprised approximately 29% of the
Company's consolidated sales in 1996 and would have comprised 30% of
consolidated sales as the Company was configured at December 29, 1996. The
European Consumer Products Business' product lines, which are sold in both the
retail and away-from-home markets, include towel and tissue products such as
bathroom and facial tissue, paper towels, and tabletop products such as napkins,
placemats, cups and plates. The European Consumer Products Business also
produces unconverted tissue, feminine hygiene products, as well as various
nonwoven products. The European Consumer Products Business' branded products
include LOTUS bathroom tissue and VANIA feminine hygiene products, both of which
occupy leading positions in the French market, TENDERLY bathroom tissue sold in
Italy and COLHOGAR bathroom tissue sold in Spain.
Packaging Business. The Packaging Business, headquartered in Milford,
Ohio, produces packaging for many consumer products and pharmaceutical companies
and other diversified businesses throughout the United States. This business
accounted for approximately 19% of the Company's consolidated sales in 1996 and
would have comprised 15% of consolidated sales as the Company is configured at
December 29, 1996. Products provided by this business include folding cartons
and paperboard (such as ice cream cartons, cereal boxes and microwave packages),
and foodservice products (such as QUILT-RAP and other sandwich wraps, freezer
papers and interfolded paper products). Folding cartons are produced from both
<PAGE>
bleached and recycled paperboard. Folding carton operations are supported by a
polyethylene extrusion coating plant and an automated carton die manufacturing
plant. Foodservice products utilize paper or paperboard based substrates that
are coated, treated, or laminated to create packaging materials suitable for
"ready to serve" food products.
Communications Papers Business. The Company's Communications Papers
Business, headquartered in Norwalk, Connecticut, represented approximately 7% of
the Company's consolidated sales in 1996 and would have comprised 8% of
consolidated sales as the Company is configured at December 29, 1996. The
Communications Papers Business is primarily focused on two major product lines:
printing and publishing papers and converting and specialty papers. Printing and
publishing papers serve the commercial printing and office markets. These
products are designed to meet the needs of the printing and publishing markets
and are sold either on a direct basis or through merchants and brokers to
consumers, publishers and printers. The Company's WORD PRO, XEROBOND and private
label business papers are used in offices and by retail printers for copy
machines and offset presses. James River also produces numerous recycled
business and printing papers including EUREKA! 20, recycled-content office
papers, printing papers, forms and envelope converting papers; and EUREKA! copy
paper, formsbond and offset printing papers.
Marketing
Marketing of the Company's North American consumer products, packaging products,
and communications papers is managed at the product group level and along
distribution channels in order to supply customers with a broad line of products
and to focus on national and regional market needs. The Company's products are
marketed directly to customers both through national and regional sales
organizations as well as through outside distributors who focus on specific
market segments, including James River's Commercial Products sales force, which
markets both personal care and tabletop products to the commercial markets.
Regional distribution centers located throughout the United States are utilized
to minimize inventories and transportation costs to customers.
Marketing of the Company's products within Europe is similar to the United
States. National (i.e. individual country) sales organizations are necessary due
to the customer, consumer and cultural differences among countries.
Additionally, despite the elimination of many tariffs and trade barriers in
Europe, logistics costs remain much higher than in the United States due to
infrastructure differences, language issues, varying customer service
requirements, and local delivery customs or preferences. Thus, the majority of
products are produced and sold within national markets. As customers move in a
more pan-European direction via expansion, mergers and cross-border alliances,
multi-national sales force cooperation and pan-European sales, marketing and
logistics efforts are established to service their changing needs.
New Products
James River is continually enhancing the quality and design of its products, and
expanding its product offerings to meet various customer needs. During 1996,
each of the Company's three businesses introduced new or expanded products to
the marketplace. Within the North American Consumer Products Business, the
Company introduced for the retail market, QUILTED NORTHERN ULTRA DOUBLE ROLL
bathroom tissue and for the commercial market DIXIE PERFECTOUCH paper hot cup
and COMPACT coreless bathroom tissue. The Company's new QUILTED NORTHERN ULTRA
DOUBLE ROLL bathroom tissue, a super premium tissue product, is an enhancement
to the Company's QUILTED NORTHERN tissue line. The Company's European Consumer
Products Business introduced several product enhancements to strengthen its
position in markets where it already holds strong branded positions and in
emerging markets with high growth potential such as Russia and the Baltic
countries. The Company developed and introduced new bathroom tissue (2 ply and 3
ply), kitchen towels and handkerchiefs using innovative embossing techniques.
<PAGE>
The Company's Packaging Business provided superior microwave packaging with its
patented QWIK WAVE family of products, which was expanded to include QWIK CHECK
and MICROFLEX Q. The materials in these microwave packages use microwave energy
to crisp and brown foods. During 1996, the Communications Papers Business
continued to expand and improve its branded product lines.
Raw Materials and Supplies
James River utilizes a variety of raw materials in its manufacturing processes.
These include wood, wood pulp, wastepaper, other natural and synthetic fibrous
materials, selected base papers and boards, plastic films, resins and chemicals.
James River believes there is generally a sufficient supply of these or
substitutable raw materials.
In addition to these materials, pulp and paper production depends on an adequate
supply of water, electric power and various forms of fuel. The Company directly
generates approximately 20 percent of its electrical power needs internally
through turbine-generators and hydroelectric stations, which are located
principally in New England, the Midwest and the Southeast. The Company operates
or is associated with a number of cogeneration facilities which produce
electricity for sale to local utilities and which effectively generate steam
used in the papermaking process, while reducing both air and water emissions.
James River generates more than one-half of its fuel needs through the
utilization of black liquor (which is a by-product of the pulping process), wood
waste and other residue.
The Company's paper products are manufactured principally from wood pulp which
is produced internally or is purchased from external sources. James River's
virgin pulping facilities include those producing both chemical and mechanical
pulp. Additionally, the Company produces secondary fiber pulp through the
recycling of wastepaper and other reclaimable fiber sources. This secondary
fiber pulp is generally used internally for paper production processes. The
capacity of James River's pulping facilities, in North America and Europe, is
summarized as follows:
Capacity
Pulp Type (Tons Per Year)
--------- ---------------
Chemical ........................................ 1,795,000
Mechanical ....................................... 120,000
Secondary ....................................... 938,000
----------
Total ........................................ 2,853,000
==========
In addition to the Company's internal sources, several types of pulp are
purchased from other suppliers in the United States, Canada and other parts of
the world. Purchased pulp is used to supply partially integrated paper mills, to
obtain types of pulp not produced by the Company, or to minimize transportation
costs. James River is a net seller in North America of approximately 200,000
tons per year of market pulp. These market pulp sales are reported in the North
American Consumer Products Business. The Company's paper machines in Europe are
supplied through a combination of James River's North American pulp production,
secondary fiber pulp and purchased chemical pulp. Substantially all of the pulp
acquired within the United States is purchased at or below prevailing market
prices through the use of volume discounts. James River purchases wastepaper
from a variety of collection agents and outside vendors for use in the
production of secondary fiber pulp. Secondary fiber pulp represents
approximately 30% of James River's total worldwide pulp production.
Pulpwood and woodchips used in James River's pulp mills are obtained from a
combination of owned and leased lands, lands covered by long-term cutting rights
agreements, pulpwood and woodchip supply contracts, and open market purchases.
All of the timberlands controlled by James River or its affiliates are managed
on a sustained-yield basis, and the rate of harvesting is generally equal to or
less than the average growth rate. James River presently has controlled access
to the timber supply from a total of approximately 3.0 million acres of
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timberland. Of the total current timber supply, approximately 260,000 acres are
located in New England, the Southeast and the Northwest. An additional 2.6
million acres located in Canada are leased by James River-Marathon, Ltd.
("Marathon") and its joint venture affiliate, Dubreuil Forest Products Limited.
The remaining 140,000 acres include lands which are subject to cutting rights
contracts and managed land programs.
James River also purchases paper and paperboard from outside vendors for use in
its converting plants. The largest of these items is bleached paperboard used
for folding cartons, plates and cups and as a coating base stock. These products
utilize bleached paperboard with weights ranging from standard to very
lightweight cup stock. James River produces over 73% of its bleached paperboard
needs at its Naheola, Alabama, mill. The balance of the Company's requirements
is purchased from outside bleached paperboard producers, over two-thirds of
which is acquired pursuant to long-term contracts with prices that are at or
below prevailing market prices.
James River purchases a significant amount of plastic resins, which are utilized
in the production of tabletop products. The North American Consumer Products
Business uses over 160 million pounds per year of polystyrene and polypropylene
plastic resins in producing plastic containers; lids for plastic and paper
containers; and plastic cutlery. The Company purchases plastic resins pursuant
to negotiated arrangements with a variety of suppliers.
Trademarks and Patents
James River has a large number of trademarks and trade names registered
domestically and in certain foreign countries under which it conducts its
business. Trademarks include, among others, QUILTED NORTHERN, BRAWNY, VANITY
FAIR, NICE 'N SOFT, VANIA, MARINA, DIXIE, SUPERWARE, LOTUS, COLHOGAR, TENDERLY,
DIXIE/MARATHON, QUILT-RAP, QWIK CRISP, EUREKA!, and WORD PRO. The Company
considers its trademarks, in the aggregate, to be material to its business, and
consequently, seeks trademark protection by all available means. The Company
also has a variety of material patents and licenses related to its business.
While, in the aggregate, the foregoing patents and licenses are of material
importance to James River's business, the loss of any one or any related group
of such intellectual property rights would not have a material adverse effect on
the operations of James River.
Seasonal Business
While seasonal variation in demand is not a major factor in the Company's
business, the first and fourth quarters of the year are generally the lowest in
net sales and operating income. Net sales and profit margins in the Consumer
Products Business are generally higher in the spring and summer (second and
third quarters) compared to the winter (fourth and first quarters) due to the
seasonal volume strength of the retail DIXIE paper cup and plate business during
the summer months. In addition, the commercial tissue portion of the Consumer
Products Business generally experiences softer sales volumes in the fourth
quarter, when many industrial customers are on extended holiday shutdowns.
Profit margins for the Company have also historically been lower in the first
and fourth quarters because of holiday, vacation and maintenance shutdowns and
seasonal energy costs.
Customers
Sales to James River's five largest customers in the aggregate accounted for
approximately 16% of consolidated net sales in 1996 and 1995, and 17% in 1994.
For 1996, sales to the five largest customers of the Consumer Products Business
in North America and Europe accounted for approximately 30% and 27% of sales,
respectively; sales to the five largest customers of the Packaging Business
represented approximately 22% of its sales; and sales to the five largest
customers of the Communications Papers Business accounted for approximately 48%
of its sales. There were no individual customers, however, to which sales
exceeded 10% of James River's consolidated net sales. The Company's loss of any
customer would not have a material adverse effect on the financial condition of
the Company.
<PAGE>
Order Backlog
In the Consumer Products and Packaging Businesses, the Company maintains product
inventories to meet delivery requirements of its customers; therefore, the
backlog of customer orders for these segments is not significant. In the
Communications Papers Business, the Company's backlogs were generally 10 to 25
days depending on the product, as of December 29, 1996, and 5 to 20 days as of
December 31, 1995. Order backlog does not vary substantially on a seasonal
basis.
Competition
James River competes domestically and in Europe and is among the largest
suppliers of paper products within the segments that they serve. The Company
competes on the basis of price, product quality and performance, product
development effectiveness, service, and sales and distribution support. In
addition, advertising and promotion are important tools for competing for
consumer sales. The segment in which the Communications Papers Business operates
can be impacted by increased levels of imports from European and other producers
when pulp prices are low.
Consumer Products Business - North America. James River competes in
both the retail and commercial channels for sales of towel and tissue products.
The retail channel, which is primarily tied to population growth and new
household growth, is mature with an annual growth rate of 1% to 2%. The
commercial channel has had a slightly higher annual growth rate in recent years;
however, it is more significantly affected by downturns in the economy.
Marketing of towel and tissue products is generally characterized as being
highly competitive. During 1996, approximately two-thirds of the Company's net
sales of towel and tissue products were to retail channels and one-third to
commercial channels. Towel and tissue production in the U.S. is concentrated
among a few large manufacturers and certain smaller regional producers. Based on
industry sales volume statistics, James River is one of the largest U.S.
manufacturers, along with Chesapeake Corporation, Fort Howard Corporation,
Georgia-Pacific Corporation, Kimberly-Clark Corporation and The Procter & Gamble
Company.
James River has one of the broadest and most diversified tabletop product lines.
Approximately 56% of the Company's tabletop sales are to the retail channel and
44% are to the commercial channel. In the retail tabletop channel, James River
believes it holds a leading position along with The Solo Cup Company and Tenneco
Corporation. In the commercial channel, James River also believes it holds a
leading position along with Sweetheart Cup Company, Inc.
Several factors contribute to James River's competitive strengths in the sale of
personal care and tabletop products. These include superior product quality,
significant research and development efforts, broad product lines, well-known
brand franchises, innovative graphic design, and full-service distribution. The
Company is continually improving product quality and design in order to deliver
greater value to customers while reducing costs. In addition, James River's
emphasis on increasing its usage of recycled fiber enhances its ability to
produce recycled tissue, responding to environmentally-conscious consumers.
Consumer Products Business - Europe. The European tissue industry is
rapidly consolidating and James River holds the number three position with a 15%
share behind Kimberly-Clark Corporation and Svenska Cellulosa Aktiebolaget
(SCA). The majority of the remaining competitors are small regional producers,
none of which has a European share exceeding 5%. James River's products
generally hold either the number one or number two position in each market in
which they compete, and James River's LOTUS brand holds the leading position in
France. James River currently has no operations in Germany and has minimal
export sales to Germany. James River is growing its business through the
strengthening of its brand franchise, the introduction of innovative branded
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products and their deployment in new territories, and the expansion in Italy,
France and the United Kingdom of high quality private label business. At the
same time, James River continues to seek the strongest competitive cost position
through strategic sourcing, manufacturing rationalization and improved
information systems.
Packaging Business. The Packaging industry is generally characterized
by relatively non-cyclical demand. The Company is the third largest
manufacturer, based on sales, of folding cartons, slightly behind Jefferson
Smurfit Corporation and the recently merged Rock-Tenn/Waldorf. James River is
one of the few folding carton producers with integrated manufacturing facilities
for both bleached and recycled paperboard. James River, as a national
manufacturer of foodservice products, competes with numerous small regional and
local manufacturers. James River forms long-term relationships with leading food
and consumer products companies to integrate packaging and marketing
initiatives. The Company also believes it is one of the technological leaders in
this industry. Through its pioneering of enhanced microwave cooking packaging
for folding carton, the Company has strengthened its leadership position in this
fast-growing segment of the market. James River is also well-known for its
superior graphic design and its web litho and flexographic printing
capabilities.
Communications Papers Business. The Company has two large, integrated mills
serving the western business papers market: its Camas, Washington mill and its
Wauna mill in Clatskanie, Oregon. The Company estimates that it is one of the
largest producers of uncoated freesheet papers in the west. Major competitors in
the uncoated freesheet segment include Weyerhaeuser Company, Boise Cascade
Corporation, International Paper Co. and Georgia-Pacific Corporation. James
River believes that it is generally equal or superior to its competitors in
product development effectiveness, product quality and service.
Research and Development
The Company's major research and development centers are located in Neenah,
Wisconsin; Kunheim, France; Milford, Ohio; and Camas, Washington. The Company
has pilot plants located in Camas, Washington; Kunheim, France; and Neenah,
Wisconsin, providing pulp and papermaking developmental work and experimental
trials. Pilot plant facilities for paper and board packaging, laminating, and
printing are located in the Company's Technology and Business Center in Milford,
Ohio. Additionally, James River has engineering centers in Neenah, Wisconsin;
Kunheim, France; Camas, Washington; and Kalamazoo, Michigan.
Other information with respect to James River's research and development efforts
is set forth in Note 1 of Notes to Consolidated Financial Statements in the 1996
Annual Report, which information is incorporated herein by reference.
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.
James River has made and will continue to make substantial capital investments
and operating expenditures, as well as production adjustments, in order to
comply with increasingly stringent standards for air, water, and solid and
hazardous waste regulations. During 1996, capital expenditures totaling
approximately $20 million were made by James River for pollution control
facilities and equipment. Capital expenditures for such purposes on existing
facilities are estimated to be approximately $11 million for 1997. The estimated
1997 capital expenditures exclude any expenditures which may be required by the
U.S. Environmental Protection Agency's ("EPA's") draft rules or "cluster rules"
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as set forth in "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Environmental Matters," which information is
incorporated herein by reference. Estimates of costs for future environmental
compliance are necessarily imprecise due to, among other things, the continuing
emergence of new environmental laws and regulations and environmental control or
process technology developments. While the Company believes that its
environmental control costs are likely to increase as environmental regulations
become broader and more stringent, James River is unable to predict the amount
or timing of such increases. Such future regulations could materially increase
the Company's capital requirements in future years.
Further information pertaining to hazardous substance cleanup, accrued
environmental liabilities and other environmental matters affecting the Company
is set forth in "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Environmental Matters" and Note 15 of Notes to
Consolidated Financial Statements in the 1996 Annual Report, which information
is incorporated herein by reference.
Personnel
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Contractual Labor Agreements" on page 26 of the 1996 Annual Report,
which information is incorporated herein by reference.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
Financial information regarding the Company's domestic and foreign operations is
included in Note 16 of Notes to Consolidated Financial Statements in the 1996
Annual Report, which information is incorporated herein by reference.
International operations are generally characterized by the same conditions
discussed in the narrative description of business and may also be affected by
additional elements including changing currency values and different rates of
inflation and economic growth. The effects of these additional elements are more
significant in the Consumer Products segment, which includes substantially all
of the Company's international business.
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ITEM 2. PROPERTIES
The pulp and papermaking facilities of James River, the number of paper or
paperboard machines, and the principal types of products produced at each
facility are as follows:
Principal
Business Unit Facility Locations Machines Products
- ------------------ --------------------------------- -------- -----------------
Consumer Products
-North America Pennington, Alabama (Naheola)(B) 7 Tissue, bleached
Old Town, Maine(B) 2 Tissue
Carthage, New York(C) 2
Halsey, Oregon(C) 2
Clatskanie, Oregon (Wauna) (D) 3
Camas, Washington(B) 6
Ashland, Wisconsin(C) 2
Green Bay, Wisconsin(C) 6
Marathon, Canada(B) Kraft pulp
Consumer Products
- -Europe Nokia, Finland(C) 3 Tissue
Gien, France 3
Louviers (Hondouville), France(E) 2
Muntzenheim (Kunheim), France 2
Patras (Achaia), Greece 1
Castelnuovo, Italy 1
Cava die Terreni, Italy 1
Potenza (Avigliano), Italy 1
Cuijk, Netherlands(E) 2
Allo, Spain 2
Karamursel, Turkey(C) (F) 2
Mid-Glamorgan (Bridgend), U.K.(C) 3
Larne, U.K.(C) 2
North Sheffield(Oughtibridge),U.K.(C) 2
Packaging Kalamazoo, Michigan 2 Recycled paperboard
Communications
Papers Clatskanie, Oregon(Wauna) 2 Uncoated groundwood,
uncoated freesheet
Camas, Washington 6 Uncoated freesheet
- --------------------------------------------------------------------------------
Total 67
- --------------------------------------------------------------------------------
(A) The locations listed for James River's consolidated subsidiaries are held
in fee by the Company.
(B) Includes one chemical pulp facility.
(C) Includes one secondary fiber facility.
(D) Includes one groundwood pulp facility.
(E) Includes two secondary fiber facilities.
(F) Unconsolidated subsidiary.
<PAGE>
James River's network of manufacturing facilities provides for an annual virgin
and recycled pulp capacity of approximately 2.9 million tons and an annual paper
and paperboard capacity of approximately 3.3 million tons. The Company believes
that its production facilities are suitable for their purposes and are adequate
to support their businesses. The extent of utilization of individual facilities
varies; however, during 1996, James River's pulp and paper mills generally had
production levels of over 90% of capacity.
James River also operates both integrated and non-integrated converting plants
which perform a variety of converting operations. These converting plants
(excluding converting operations which may be performed at pulp and papermaking
facilities already listed above) are summarized as follows:
Number of Converting Plants
-------------------------------------
Principal Products Domestic International Total
- --------------------------------------------------------------------------------
Paper and plastic foodservice products 10 3 13
Folding cartons 15 15
Paper converting and other 9 9
- --------------------------------------------------------------------------------
Total 25 12 37
================================================================================
James River's manufacturing and converting facilities are complemented by an
integrated network of sales offices and distribution terminals. The Company
operates a short-line railroad, primarily used to transport shipments of raw
materials and finished goods between its locations. The Company also operates a
public warehouse and terminal service that provides tug, barge, freight
interchange and other services on the Columbia, Willamette and Snake Rivers in
the Pacific Northwest.
ITEM 3. LEGAL PROCEEDINGS
During 1994, James River was sued in Connecticut and Alabama by certain former
holders of James River's 10-3/4% Debentures due on October 1, 2018. Most of
these debentures were retired by means of a tender offer to all holders which
commenced on September 18, 1992. James River believes these cases are without
merit and intends to defend them vigorously. The Connecticut and Alabama cases
are being defended in The United States District Court, Connecticut and the
Circuit Court, Morgan County, Alabama, respectively. These legal proceedings are
discussed in further detail in Note 15 of Notes to Consolidated Financial
Statements in the Company's 1996 Annual Report, which information is
incorporated herein by reference.
Other than the cases discussed above and the information set forth in Note 15 of
Notes to Consolidated Financial Statements in the Company's 1996 Annual Report,
the Company is not involved in any litigation the outcome of which management
believes would have a materially adverse effect on the Company's results of
operations, financial condition or competitive position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the last quarter
of 1996.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table reflects the name, age, length of service as an officer of
James River, and current position for each of the current executive officers of
the Company as of February 20, 1997. Previous positions and areas of
responsibility over the past five years are included in the footnotes that
follow the table. Each officer is elected by the Board of Directors to serve a
one-year term. There is no family relationship between any of these officers or
between any such officer and any director of the Company; nor is there any
arrangement or understanding between any officer and any other person pursuant
to which the officer was selected.
Calendar
Year First
Elected as
Name Age an Officer Current Position
- --------------------------------------------------------------------------------
Miles L. Marsh (1) 49 1995 Chairman of the Board of
Directors, President and
Chief Executive Officer
Michael J. Allan (2) 43 1996 Vice President,
Corporate Treasurer
Gordon B. Bonfield, III (3) 45 1996 President, Packaging
Clifford A. Cutchins, IV (4) 48 1990 Senior Vice President,
General Counsel,
Corporate Secretary
Daniel J. Girvan (5) 48 1993 Senior Vice President,
Human Resources
James K. Goodwin (6) 50 1991 President, North American
Consumer Products
Ernst A. Haberli (7) 48 1996 Senior Vice President, Strategy
John F. Lundgren (8) 45 1995 President, European
Consumer Products
Joseph W. McGarr (9) 45 1996 Vice President,
Cost and Systems Effectiveness
Joe R. Neil (10) 58 1996 President, North American
Commercial Products
William A. Paterson (11) 53 1996 Senior Vice President
and Controller
(1) Mr. Marsh was elected to the position of Chief Executive Officer in
1995. He was appointed to the position of Chairman of the Board of
Directors in 1996. From 1991 to 1995, he served as Chairman and Chief
Executive Officer of Pet Inc. Mr. Marsh served as President and Chief
Operating Officer of Pet's former parent company, Whitman Corporation,
from 1989 to 1991. Prior to that, he spent eight years in executive
positions with various divisions of Dart & Kraft Inc., Kraft Inc. and
General Foods USA, all of which are part of Philip Morris Companies
Inc.
<PAGE>
(2) Mr. Allan was appointed to his current position in 1996. He joined
James River in 1992 as Vice President, Treasurer. Prior to joining
James River, he was Managing Director, Corporate Finance with
Toronto-Dominion Bank (a Canadian Bank), which he joined in 1976.
(3) Mr. Bonfield was appointed to his current position in 1996. He joined
James River in 1988 as Vice President, Carton Group, East. Prior to
joining James River he was with the Packaging Corporation of America
in various managerial positions, including Vice President, General
Manager of their Carton Business. Most recently he served as Senior
Vice President, Packaging Business Operations.
(4) Mr. Cutchins joined James River in 1990 in his current position. From
1982 until joining James River, he served as Partner with the law firm
of McGuire, Woods, Battle & Boothe, L.L.P., which he joined in 1975.
(5) Mr. Girvan was elected to his current position in 1993. He joined
James River in 1986 as Director, Human Resources, Communications
Papers, in connection with the acquisition of Crown Zellerbach
Corporation, which he joined in 1977.
(6) Mr. Goodwin was elected to his current position in 1992. He joined
James River in 1991 as Vice President, Corporate Marketing Strategy.
Prior to joining James River, he served as Vice President, Corporate
Sales, for The Procter & Gamble Company, which he joined in 1968.
(7) Mr. Haberli joined James River in his current position in 1996. From
1990 to 1995, he served as President of Pet International. Prior to
that, since 1985, he held various executive positions in strategic
planning and development with Kraft General Foods, Kraft International
and Kraft Inc.
(8) Mr. Lundgren was appointed to his current position in 1995. He joined
James River in 1982 as Director of Marketing for Northern paper
products, in connection with the acquisition of American Can Company.
He served in various managerial and executive positions from 1982 to
1995.
(9) Mr. McGarr was appointed to his current position in 1996. He joined
James River in 1982 as Director of Strategy for Consumer Products
Business, in connection with the acquisition of American Can Company.
He served in various managerial and executive positions from 1982 to
1996.
(10) Mr. Neil was appointed to his current position in 1996. He joined
James River in 1986 as Vice President, General Manager, White Papers
Business, in connection with the Crown Zellerbach acquisition. He
served in various managerial and executive positions from 1986 to
1996.
(11) Mr. Paterson was elected to his current position in 1996. He joined
James River in 1996 as Vice President, Controller. Prior to joining
James River, he served as Senior Vice President, Finance and
Administration for General Foods Corporation. Prior to that, he held
various executive positions in finance with Hobart Corporation, Dart
Industries and Kraft Inc.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the New York Stock Exchange. Information
with respect to quarterly high and low sales prices for James River's common
stock, quarterly dividends and other quarterly information related to common
shares is contained in Note 18 of Notes to Consolidated Financial Statements in
the 1996 Annual Report, which information is incorporated herein by reference.
The payment of dividends and the amounts thereof will be dependent upon James
River's earnings, financial position, cash requirements and other relevant
factors. Common shares of the Company reserved for issuance are described in
Note 12 of Notes to Consolidated Financial Statements in the 1996 Annual Report,
which information is incorporated herein by reference. In addition, covenants of
certain of the Company's senior note agreements impose restrictions on the
amount of net worth which, in turn, may limit the funds available for the
payment of dividends; these covenants are described under the heading "Liquidity
and Capital Resources - Financing Activities" in Management's Discussion and
Analysis of Financial Condition and Results of Operations and in Note 10 of
Notes to Consolidated Financial Statements in the 1996 Annual Report, which
information is incorporated herein by reference. On February 20, 1997, there
were approximately 11,100 shareholders of record of the Company's common stock.
ITEM 6. SELECTED FINANCIAL DATA
See Selected Financial Data on pages 58 and 59 of the 1996 Annual Report, which
information for fiscal years 1992 through 1996 is incorporated herein by
reference. The data presented for each period reflects operations acquired from
the respective acquisition dates. Acquisitions, dispositions and other
transactions from 1994 through 1996 are described in Note 2 of Notes to
Consolidated Financial Statements in the 1996 Annual Report, which information
is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 21 through 29 of the 1996 Annual Report, which information
is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See the consolidated financial statements and selected quarterly financial
information, under the headings "Consolidated Statements of Operations,"
"Consolidated Balance Sheets," "Consolidated Statements of Cash Flows,"
"Consolidated Statements of Changes in Capital Accounts," "Notes to Consolidated
Financial Statements" and "Supplemental Pro Forma Financial Information
(Unaudited)" on pages 30 through 55 of the 1996 Annual Report, which information
is incorporated herein by reference.
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There have been no changes in or disagreements with accountants on accounting
and financial disclosures prior to the date of the most recent financial
statements included herein.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
For information with respect to the Company's Directors, see "Election of
Directors," "Information on Nominees," "Board of Directors and Committees" and
"Compensation of Directors" on pages 1 through 4 and "Section 16(a) Beneficial
Ownership Reporting Compliance" on pages 14 and 15 of the Company's Proxy
Statement for the Annual Meeting of Shareholders to be held on April 24, 1997
(the "1997 Proxy Statement"), which information is incorporated herein by
reference. Information with respect to the Company's Executive Officers is
contained under the heading "Executive Officers of the Registrant" on pages 13
and 14 of Part I of this Form 10-K Annual Report.
ITEM 11. EXECUTIVE COMPENSATION
See "Compensation of Directors" on pages 3 and 4, "Stock Option Plan for Outside
Directors" and "Retirement Plan for Outside Directors" on page 4, "Executive
Compensation" on pages 8 through 11, "Performance Graph" on page 12, and
"Compensation Committee Report on Executive Compensation" on pages 13 and 14 of
the Company's 1997 Proxy Statement, which information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See "Stock Ownership of Directors and Executive Officers" and "Principal
Shareholders" on pages 5 through 7 of the Company's 1997 Proxy Statement, which
information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See "Information on Nominees" on page 2 of the Company's 1997 Proxy
Statement, which information is incorporated herein by reference.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents Filed as Part of This Report:
1) Financial Statements:
The Consolidated Financial Statements of James River
Corporation of Virginia and Subsidiaries, the Notes to
Consolidated Financial Statements, and the Report of
Independent Accountants listed below are incorporated herein
by reference from pages 30 through 57 of the Company's 1996
Annual Report. With the exception of the aforementioned
information, and the information incorporated by reference in
numbered Items 1, 3, 5, 6, 7 and 8, no other data appearing in
the 1996 Annual Report is deemed to be "filed" as part of this
Form 10-K Annual Report.
"Consolidated Statements of Operations" for each of the three
fiscal years in the period ended December 29, 1996 (see page
30 of the 1996 Annual Report)
"Consolidated Balance Sheets" as of December 29, 1996 and
December 31, 1995 (see page 31 of the 1996 Annual Report)
"Consolidated Statements of Cash Flows" for each of the three
fiscal years in the period ended December 29, 1996 (see page
32 of the 1996 Annual Report)
"Consolidated Statements of Changes in Capital Accounts" for
each of the three fiscal years in the period ended December
29, 1996 (see page 33 of the 1996 Annual Report)
"Notes to Consolidated Financial Statements" (see pages 34
through 54 of the 1996 Annual Report) "Supplemental Pro Forma
Financial Information (Unaudited)" (see page 55 of the 1996
Annual Report)
"Report of Independent Accountants" (see page 57 of the 1996
Annual Report) with respect to the financial statements listed
above
2) Financial Statement Schedules:
None required
<PAGE>
3) Exhibits:
Each Exhibit is listed according to the number assigned to it in the
Exhibit Table of Item 601 of Regulation S-K. The Exhibits identified
with an asterisk (*) are management contracts or compensatory plans
available to certain key employees or directors.
Exhibit
Number Description Section
- --------------------------------------------------------------------------------
3(a) James River Corporation of Virginia Amended and Restated
Articles of Incorporation, as amended effective January 4,
1990 (incorporated by reference to Exhibit 3(a) to the
Company's Annual Report on Form 10-K for the year ended
December 26, 1993).
3(b) James River Corporation of Virginia Articles of Amendment to
the Amended and Restated Articles of Incorporation
Designating the Series O 8-1/4% Cumulative Preferred Stock
($10.00 par value), effective October 1, 1992 (incorporated
by reference to Exhibit 3(b) to the Company's Annual Report
on Form 10-K for the year ended December 26, 1993).
3(c) Articles of Amendment to the Amended and Restated Articles
of Incorporation of James River Corporation of Virginia
Designating the Series P 9% Cumulative Convertible Preferred
Stock ($10.00 par value) (incorporated by reference to
Exhibit 3.1 to the Company's Current Report on Form 8-K
dated June 29, 1994).
3(d) Amended and Restated Bylaws of James River Corporation of E-1
Virginia, amended as of February 20, 1997, filed herewith.
4(a) Amended and Restated Rights Agreement dated May 12, 1992,
between James River Corporation of Virginia and Nations Bank
of Virginia, N.A., as Rights Agent, and Amendment No. 1 to
such Agreement, dated June 8, 1992 (incorporated by
reference to Exhibits 2 and 3, respectively, to the
Company's filing of Amendment 1 dated July 28, 1992, to its
Form 8-A dated March 3, 1989).
4(b) Amendment No. 2 to Amended and Restated Rights Agreement
dated May 12, 1992, as amended by Amendment No. 1, dated
June 8, 1992, between James River Corporation of Virginia
and Wachovia Bank of North Carolina, N.A. dated January 31,
1996 (incorporated by reference to Exhibi 4(b) to the Company's
Annual Report on Form 10-K for the year ended December 31, 1995).
4(c) In reliance upon Item 601(b)(4)(iii)(A) of Regulation S-K,
various instruments defining the rights of holders of
long-term debt of the Registrant and its subsidiaries are not
being filed because the total amount of securities authorized
and outstanding under each such instrument does not exceed
10% of the total assets of the Registrant and its
subsidiaries on a consolidated basis. The Registrant hereby
agrees to furnish a copy of any such instrument to the
Commission upon request.
<PAGE>
Exhibit
Number Description Section
- --------------------------------------------------------------------------------
10(a)* Employment Agreement for Miles L. Marsh, dated August 22, 1996
(incorporated by reference to Exhibit 10(a) to the Company's
Quarterly Report on Form 10-Q for the quarter ended September
29, 1996).
10(b)* Form of Employment Agreement for Executive Officers, dated
August 22, 1996 (incorporated by reference to Exhibit 10(b)
to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 29, 1996).
10(c)* James River Corporation of Virginia Deferred Compensation Plan
for Outside Directors, amended and restated effective as of
July 1, 1989 (incorporated by reference to Exhibit 10(c) to
the Company's Annual Report on Form 10-K for the year ended
April 30, 1989).
10(d)* James River Corporation of Virginia Stock Option Plan for
Outside Directors, amended and restated as of April 11, 1991
(incorporated by reference to Exhibit 10(e) to the Company's
Transition Report on Form 10-K for the transition period from
April 30, 1990 to December 30, 1990).
10(e)* James River Corporation of Virginia Retirement Plan for Outside
Directors, 1994 Amendment and Restatement, effective February 18,
1994 (incorporated by reference to Exhibit 10(h) to the
Company's Annual Report on Form 10-K for the year ended
December 26, 1993).
10(f)* James River Corporation of Virginia Director Stock
Ownership Plan, effective April 25, 1996 (incorporated by
reference to Exhibit B to the Company's Proxy Statement dated
March 13, 1996).
10(g)* James River Corporation of Virginia Amended and Restated
Stock Option Plan, dated April 12, 1984, and subsequently
amended through October 1, 1990 (incorporated by reference to
Exhibit 4 to the Company's Registration Statement on Form
S-8 (Post-Effective Amendment No. 1 to Registration Statement
No. 2-83979), dated December 18, 1984, and Exhibit 10(c) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
October 28, 1990).
10(h)* James River Corporation of Virginia 1987 Stock Option Plan,
1993 Amendment and Restatement, effective as of December 16,
1993 (incorporated by reference to Exhibit 10(j) to the Company's
Annual Report on Form 10-K for the year ended December 26, 1993).
10(i)* James River Corporation of Virginia Stock Appreciation
Rights Plan, dated April 9, 1987, and subsequently amended
through October 1, 1990 (incorporated by reference to Exhibit
10(f) to the Company's Annual Report on Form 10-K for the year
ended April 26, 1987, and Exhibit 10(e) to the Company's
Quarterly Report on Form 10-Q for the quarter ended October 28,
1990).
<PAGE>
Exhibit
Number Description Section
- --------------------------------------------------------------------------------
10(j)* James River Corporation of Virginia 1996 Stock Incentive
Plan, effective April 25, 1996 (incorporated by reference to
Exhibit A to the Company's Proxy Statement dated March 13, 1996).
10(k)* James River Corporation of Virginia Deferred Stock Plan
1993 Amendment and Restatement, effective December 16, 1993
(incorporated by reference to Exhibit 10(l) to the Company's
Annual Report on Form 10-K for the year ended December 26, 1993).
10(l)* James River Corporation of Virginia Supplemental Deferral
Plan, 1993 Amendment and Restatement, effective as of January 1,
1994 (incorporated by reference to Exhibit 10(m) to the
Company's Annual Report on Form 10-K for the year ended
December 26, 1993).
10(m)* James River Corporation of Virginia Management Incentive Plan,
effective as of January 25, 1996 incorporated by reference to
Exhibit 10(l) to the Company's Annual Report on Form 10-K for
the year ended December 31, 1995).
10(n)* James River Corporation of Virginia Supplemental Benefit Plan,
amended and restated effective June 1, 1991 (incorporated by
reference to Exhibit 10(m) to the Company's Annual Report on Form
10-K for the year ended December 29, 1991).
10(o)* 1994 Amendment to the James River Corporation of Virginia
Supplemental Benefit Plan, dated March 1, 1994 (incorporated
by reference to Exhibit 10(q) to the Company's Annual Report on
Form 10-K for the year ended December 25, 1994).
10(p)* Amended and Restated James River Corporation of Virginia E-2
Miles L. Marsh Supplemental Retirement Plan,
effective as of March 1, 1997, filed herewith.
11 Computation of Earnings Per Share, filed herewith. E-3
13 Certain sections of the Company's Annual Report to Shareholders E-4
for the year ended December 29, 1996, filed herewith.
21 Subsidiaries of the Company as of December 29, 1996, E-5
filed herewith.
23 Consent of Independent Accountants, filed herewith. E-6
27 Financial Data Schedules for the year ended December 29, 1996
(filed electronically only).
<PAGE>
(b) Reports on Form 8-K:
During the last quarter of 1996 and subsequent thereto, the Company filed
the following Current Report on Form 8-K:
Date of Report Event Reported
-------------------------------------------------------------------
None
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Registrant
By: /s/William A. Paterson
Date: March 18, 1997 William A. Paterson
Senior Vice President and Controller
(Principal Financial and Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: March 18, 1997 Signature and Title
By: /s/Miles L. Marsh
Miles L. Marsh
Chairman, President and
Chief Executive Officer
By: /s/William A. Paterson
William A. Paterson
Senior Vice President and Controller
(Principal Financial and Accounting Officer)
<PAGE>
Pursuant to General Instruction D to Form 10-K, this report has been signed
below by a majority of the Board of Directors:
/s/ Barbara L. Bowles March 22, 1997
------------------------------------------------- --------------
Barbara L. Bowles Date
/s/ William T. Burgin March 25, 1997
------------------------------------------------- --------------
William T. Burgin Date
/s/ Worley H. Clark, Jr. March 18, 1997
------------------------------------------------- --------------
Worley H. Clark, Jr. Date
/s/ William T. Comfort, Jr. March 24, 1997
-------------------------------------------------- --------------
William T. Comfort, Jr. Date
/s/ Gary P. Coughlan March 18, 1997
-------------------------------------------------- --------------
Gary P. Coughlan Date
/s/ William V. Daniel March 20, 1997
------------------------------------------------- --------------
William V. Daniel Date
/s/ Bruce C. Gottwald March 20, 1997
------------------------------------------------- --------------
Bruce C. Gottwald Date
/s/ Miles L. Marsh March 18, 1997
-------------------------------------------------- --------------
Miles L. Marsh Date
/s/ Robert M. O'Neil March 24, 1997
--------------------------------------------------- -------------
Robert M. O'Neil Date
/s/ Richard L. Sharp March 18, 1997
------------------------------------------------- --------------
Richard L. Sharp Date
/s/ Anne Marie Whittemore March 20, 1997
------------------------------------------------- --------------
Anne Marie Whittemore Date
Exhibit 3(d)
AMENDED AND RESTATED
BYLAWS OF
JAMES RIVER CORPORATION OF VIRGINIA
(amended as of February 20, 1997)
ARTICLE I - MEETINGS OF STOCKHOLDERS
Section 1.1 Closing of Transfer Books and Fixing of
Record Date. For the purpose of determining stockholders
entitled to notice of, or to vote at, any meeting of stockholders
or any adjournment thereof, or entitled to receive payment of any
dividend, or in order to make a determination of stockholders for
any other proper purpose, the Board of Directors or the Executive
Committee shall fix in advance a date as the record date for any
such determination of stockholders, such date to be not more than
70 days before the meeting or action. When a determination of
stockholders entitled to vote at any meeting of stockholders has
been made as provided in this article, such determination shall
apply to any adjournment thereof, except as is otherwise provided
by law.
Section 1.2 Place and Time of Meetings. Meetings of
stockholders shall be held at such place, either within or
without the Commonwealth of Virginia, and at such time, as may be
provided in the notice of the meeting.
Section 1.3 Organization and Order of Business. The
Chairman of the Board of Directors (the "Chairman") or, in his
absence, the President shall serve as chairman at all meetings of
the stockholders. In the absence of both of the foregoing
officers or if both of them decline to serve, a majority of the
shares entitled to vote at such meeting may appoint any person to
act as Chairman. The Secretary of the Corporation or, in his
absence, an Assistant Secretary, shall act as secretary at all
meetings of the stockholders. In the event that neither the
Secretary nor any Assistant Secretary is present, the Chairman
may appoint any person to act as secretary of the meeting.
The Chairman shall have the authority to make such rules and
regulations, to establish such procedures and to take such steps
as he may deem necessary or desirable for the proper conduct of
each meeting of the stockholders, including, without limitation,
the authority to make the agenda and to establish procedures for
(i) the dismissal of business not properly presented, (ii) the
maintenance of order and safety, (iii) placing limitations on the
time allotted to questions or comments on the affairs of the
Corporation, (iv) placing restrictions on attendance at a meeting
by persons or classes of persons who are not stockholders or
their proxies, (v) restricting entry to a meeting after the time
prescribed for the commencement thereof and (vi) the
commencement, conduct and close of voting on any matter.
E-1
<PAGE>
Section 1.4 Annual Meeting. The annual meeting of
stockholders shall be held on the third or fourth Thursday in
April of each year as set by the Board of Directors or on such
other dates as shall be approved by the Board of Directors.
At each annual meeting of stockholders, only such business
shall be conducted as is proper to consider and has been brought
before the meeting (i) by or at the direction of the Board of
Directors or (ii) by a stockholder of the Corporation who is a
stockholder of record of a class of shares entitled to vote on
such business at the time of the giving of the notice hereinafter
described in this Section 1.4 and who complies with the notice
procedures set forth in this Section 1.4. In order to bring
business before an annual meeting of stockholders, a stockholder,
in addition to complying with any other applicable requirements,
must have given timely written notice of his intention to bring
such business before the meeting to the Secretary of the
Corporation. To be timely, a stockholder's notice must be given,
either by personal delivery or by United States certified mail,
postage prepaid, addressed to the Secretary of the Corporation at
the principal office of the Corporation and received (i) on or
after December 1st of the year immediately preceding the year in
which the meeting will be held and before January 1st of the year
in which the meeting will be held or (ii) not less than 60 days
before the date of the annual meeting if the date of such
meeting, as prescribed in these Bylaws, has been changed by more
than 30 days.
Each such stockholder's notice shall set forth as to each
matter the stockholder proposes to bring before the annual
meeting (i) the name and address, as they appear on the
Corporation's stock transfer books, of the stockholder proposing
such business, (ii) the class and number of shares of stock of
the Corporation beneficially owned by such stockholder, (iii) a
representation that such stockholder is a stockholder of record
and intends to appear in person or by proxy at such meeting to
bring before the meeting the business specified in the notice,
(iv) a brief description of the business desired to be brought
before the meeting, including the complete text of any
resolutions to be presented at the meeting and the reasons for
wanting to conduct such business, and (v) any material interest
which the stockholder has in such business.
The Secretary of the Corporation shall deliver each such
stockholder's notice that has been timely received to the
Chairman or a committee designated by the Board of Directors for
review.
Notwithstanding the foregoing provisions of this
Section 1.4, a stockholder seeking to have a proposal included in
the Corporation's proxy statement for an annual meeting of
stockholders shall comply with the requirements of Regulation 14A
under the Securities Exchange Act of 1934, as amended from time
to time, or with any successor regulation.
Section 1.5 Special Meetings. Special meetings of the
stockholders may be called by the Chairman, the President or the
Board of Directors. Only business within the purpose or purposes
described in the notice for a special meeting of stockholders may
be conducted at the meeting.
<PAGE>
Section 1.6 Notice of Meetings. Written notice stating
the place, day and hour of each meeting of stockholders and, in
the case of a special meeting, the purpose or purposes for which
the meeting is called, shall be given by mail not less than ten
nor more than 60 days before the date of the meeting (except when
a different time is required in these Bylaws or by law) to each
stockholder of record entitled to vote at such meeting and to
such nonvoting stockholders as may be required by law. Such
notice shall be deemed to be effective when deposited in the
United States mail with postage thereon prepaid, addressed to the
stockholder at his address as it appears on the stock transfer
books of the Corporation.
Notice of a stockholders' meeting to act on (i) an amendment
of the Articles of Incorporation; (ii) a plan of merger or share
exchange; (iii) the sale, lease, exchange or other disposition of
all or substantially all the property of the Corporation
otherwise than in the usual and regular course of business, or
(iv) the dissolution of the Corporation, shall be given, in the
manner provided above, not less than 25 nor more than 60 days
before the date of the meeting. Any notice given pursuant to
this paragraph shall state that the purpose, or one of the
purposes, of the meeting is to consider such action and shall be
accompanied by (x) a copy of the proposed amendment, (y) a copy
of the proposed plan of merger or share exchange, or (z) a
summary of the agreement pursuant to which the proposed
transaction will be effected. If only a summary of the agreement
is sent to the stockholders, the Corporation shall also send a
copy of the agreement to any stockholder who requests it.
If a meeting is adjourned to a different date, time or
place, notice need not be given if the new date, time or place is
announced at the meeting before adjournment. However, if a new
record date for an adjourned meeting is fixed (which shall be
done if the meeting is adjourned to a date more than 120 days
after the date fixed for the original meeting), notice of such
date shall be given to those persons entitled to notice who are
stockholders as of the new record date, unless a court provides
otherwise.
Section 1.7 Quorum and Voting Requirements. Each
outstanding share of common stock shall be entitled to one vote
on each matter submitted to a vote at a meeting of stockholders.
Shares of other classes and series shall be entitled to such vote
as may be provided in the Articles of Incorporation.
Shares entitled to vote as a separate voting group may take
action on a matter at a meeting only if a quorum of those shares
exists with respect to that matter. Unless otherwise required by
law, a majority of the votes entitled to be cast on a matter by a
voting group constitutes a quorum of that voting group for action
on that matter. Once a share is represented for any purpose at a
meeting, it is deemed present for quorum purposes for the
remainder of the meeting and for any adjournment of that meeting
unless a new record date is or shall be set for that adjourned
meeting. If a quorum exists, action on a matter, other than the
election of directors, by a voting group is approved if the votes
cast within the voting group favoring the action exceed the votes
cast opposing the action, unless a greater number of affirmative
votes is required by law or by the Articles of Incorporation.
Directors shall be elected by a plurality of the votes cast by
the shares entitled to vote in the election at a meeting at which
<PAGE>
a quorum is present unless a different vote in required by the
Articles of Incorporation. Less than a quorum may adjourn a
meeting.
Section 1.8 Proxies. A stockholder may vote his shares
in person or by proxy. A stockholder may appoint a proxy to vote
or otherwise act for him by signing an appointment form, either
personally or by his attorney-in-fact. An appointment of a proxy
is effective when received by the Secretary or other officer or
agent authorized to tabulate votes and is valid for 11 months
unless a longer period is expressly provided in the appointment
form. An appointment of a proxy is revocable by the stockholder
unless the appointment form conspicuously states that it is
irrevocable and the appointment is coupled with an interest.
The death or incapacity of the stockholder appointing a
proxy does not affect the right of the Corporation to accept the
proxy's authority unless notice of the death or incapacity is
received by the Secretary or other officer or agent authorized to
tabulate votes before the proxy exercises his authority under the
appointment. An irrevocable appointment is revoked when the
interest with which it is coupled is extinguished. A transferee
for value of shares subject to an irrevocable appointment may
revoke the appointment if he did not know of its existence when
he acquired the shares and the existence of the irrevocable
appointment was not noted conspicuously on the certificate
representing the shares. Subject to any legal limitations on the
right of the Corporation to accept the vote or other action of a
proxy and to any express limitation on the proxy's authority
appearing on the face of the appointment form, the Corporation is
entitled to accept the proxy's vote or other action as that of
the stockholder making the appointment. Any fiduciary entitled
to vote any shares may vote such shares by proxy.
Section 1.9 Waiver of Notice; Attendance at Meeting. A
stockholder may waive any notice required by law, the Articles of
Incorporation or these Bylaws before or after the date and time
of the meeting that is the subject of such notice. The waiver
shall be in writing, be signed by the stockholder entitled to the
notice, and be delivered to the Secretary of the Corporation for
inclusion in the minutes or filing with the corporate records.
A stockholder's attendance at a meeting (i) waives objection
to lack of notice or defective notice of the meeting, unless the
stockholder at the beginning of the meeting objects to holding
the meeting or transacting business at the meeting, and (ii)
waives objection to consideration of a particular matter at the
meeting that is not within the purpose or purposes described in
the meeting notice, unless the stockholder objects to considering
the matter when it is presented.
<PAGE>
Section 1.10 Action Without Meeting. Action required or
permitted to be taken at a stockholders' meeting may be taken
without a meeting and without action by the Board of Directors if
the action is taken by all the stockholders entitled to vote on
the action. The action shall be evidenced by one or more written
consents describing the action taken, signed by all the
stockholders entitled to vote on the action, and delivered to the
Secretary of the Corporation for inclusion in the minutes or
filing with the corporate records. Action taken under this
section shall be effective according to its terms when all
consents are in the possession of the Corporation. A stockholder
may withdraw a consent only by delivering a written notice of
withdrawal to the Corporation prior to the time that all consents
are in the possession of the Corporation.
If not otherwise fixed pursuant to the provisions of Section
1.1, the record date for determining stockholders entitled to
take action without a meeting is the date the first stockholder
signs the consent described in the preceding paragraph.
If notice of proposed action is required to be given to
nonvoting stockholders and the action is to be taken by unanimous
consent of the voting stockholders, the Corporation shall give
its nonvoting stockholders written notice of the proposed action
at least ten days before the action is taken. The notice shall
contain or be accompanied by the same material that would have
been required by law to be sent to nonvoting stockholders in a
notice of a meeting at which the proposed action would have been
submitted to the stockholders for action.
Section 1.11 Voting List. The officer or agent having
charge of the stock transfer books of the Corporation shall make,
at least ten days before each meeting of stockholders, a complete
list of the stockholders entitled to vote at such meeting or any
adjournment thereof, with the address of and the number of shares
held by each. The list shall be arranged by voting group and
within each voting group by class or series of shares. Such list
shall be kept on file at the registered office of the
Corporation, or at its principal office or at the office of its
transfer agent or registrar, for a period of ten days prior to
such meeting and shall be subject to the inspection of any
stockholder at any time during usual business hours. Such list
shall also be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any stockholder
during the whole time of the meeting for the purposes thereof.
The original stock transfer books shall be prima facia evidence
as to who are the stockholders entitled to examine such list or
transfer books or to vote at any meeting of the stockholders.
The right of a stockholder to inspect such list at any other time
shall be subject to the limitations established by law.
If the requirements of this section have not been
substantially complied with, the meeting shall, on the demand of
any stockholder in person or by proxy, be adjourned until such
requirements are met. Refusal or failure to prepare or make
available the stockholders' list does not affect the validity of
action taken at the meeting prior to the making of any such
demand, but any action taken by the stockholders after the making
of any such demand shall be invalid and of no effect.
<PAGE>
ARTICLE II - DIRECTORS
Section 2.1 General Powers. The Corporation shall have a
Board of Directors. All corporate powers shall be exercised by
or under the authority of, and the business and affairs of the
Corporation managed under the direction of, its Board of
Directors, subject to any limitation set forth in the Articles of
Incorporation.
Section 2.2 Number and Term. The number of directors of
the Corporation shall be eleven. This number may be changed from
time to time by amendment to these Bylaws to increase or decrease
by 30 percent or less the number of directors last elected by the
stockholders, but only the stockholders may increase or decrease
the number by more than 30 percent. No decrease in number shall
have the effect of shortening the term of any incumbent director.
Each director shall hold office until his death, resignation or
removal or until his successor is elected.
Section 2.3 Nomination of Candidates. No person shall be
eligible for election as a director unless nominated (i) by the
Board of Directors upon recommendation of the Nominating
Committee or otherwise or (ii) by a stockholder entitled to vote
on the election of directors pursuant to the procedures set forth
in this Section 2.3; provided, however, that no person shall be
eligible to be elected a director after age seventy, except that
directors who are sixty-three or over and serving on February 20,
1997 shall not be eligible to be elected a director after age
seventy-two.
Nominations, other than those made by the Board of
Directors, may be made only by a stockholder who is a stockholder
of record of a class of shares entitled to vote for the election
directors at the time of the giving of the notice hereinafter
described in this Section 2.3 and only if written notice of the
stockholder's intent to nominate one or more persons for election
as directors at a meeting of stockholders has been given, either
by personal delivery or by United States certified mail, postage
prepaid, addressed to the Secretary of the Corporation at the
principal office of the Corporation and received (i) on or after
December 1st of the year immediately preceding the year in which
the meeting will be held and before January 1st of the year in
which the meeting will be held, if the meeting is to be an annual
meeting and clause (ii) is not applicable, or (ii) not less than
60 days before an annual meeting, if the date of the applicable
annual meeting, as prescribed in these Bylaws, has been changed
by more than 30 days, or (iii) not later than the close of
business on the tenth day following the day on which notice of a
special meeting of stockholders called for the purpose of
electing directors is first given to stockholders.
Each such stockholder's notice shall set forth the
following: (i) as to the stockholder giving the notice (a) the
name and address of such stockholder as they appear on the
Corporation's stock transfer books, (b) the class and number of
shares of stock of the Corporation beneficially owned by such
stockholder, (c) a representation that such stockholder is a
stockholder of record and intends to appear in person or by proxy
at such meeting to nominate the person or persons specified in
the notice, and (d) a description of all arrangements or
understandings, if any, between such stockholder and each nominee
<PAGE>
and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made;
and (ii) as to each person whom the stockholder wishes to
nominate for election as a director (a) the name, age, business
address and, if known, residence address of such person, (b) the
principal occupation or employment of such person, (c) the class
and number of shares of the Corporation which are beneficially
owned by such person, and (d) all other information that is
required to be disclosed about nominees for election as directors
in solicitations of proxies for the election of directors under
the Securities Exchange Act of 1934, as amended, or otherwise by
the rules and regulations of the Securities and Exchange
Commission. In addition, each such notice shall be accompanied
by the written consent of each proposed nominee to serve as a
director if elected. Each such consent shall also contain a
statement from the proposed nominee to the effect that the
information about him contained in the notice is correct.
Section 2.4 Election. Except as provided in Section 2.5
of this Article and in the Articles of Incorporation, the
directors shall be elected by the common stockholders and
preferred stockholders entitled to vote with the common
stockholders at the annual meeting of stockholders, and those
nominees who receive the greatest number of votes shall be deemed
elected even though they do not receive a majority of the votes
cast. No individual shall be named or elected as a director
without his prior consent.
Section 2.5 Removal; Vacancies. The stockholders may
remove one or more directors, with or without cause. If a
director is elected by a voting group, only the stockholders of
that voting group may vote to remove him. Unless the Articles of
Incorporation require a greater vote, a director may be removed
if the number of votes cast to remove him constitutes a majority
of the votes entitled to be cast at an election of directors of
the voting group or voting groups by which such director was
elected. A director may be removed by the stockholders only at a
meeting called for the purpose of removing him and the notice of
the meeting must state that the purpose, or one of the purposes
of the meeting, is removal of the director.
A vacancy on the Board of Directors, including a vacancy
resulting from the removal of a director or an increase in the
number of directors, may be filled by (i) the stockholders, (ii)
the Board of Directors or (iii) the affirmative vote of a
majority of the remaining directors though less than a quorum of
the Board of Directors, and may, in the case of a resignation
that will become effective at a specified later date, be filled
before the vacancy occurs but the new director may not take
office until the vacancy occurs.
Section 2.6 Compensation. The Board of Directors may fix
the compensation of directors for their services and may provide
for the payment of all expenses incurred by directors in
attending regular and special meetings of the Board of Directors.
Section 2.7 Change of Responsibility. A member of the
Board of Directors who has a significant change in job
responsibility or who ceases to continue to hold the job held at
the last Annual Shareholders' Meeting, shall offer a letter of
resignation to the Board of Directors promptly upon such change
of responsibility or job.
<PAGE>
ARTICLE III - DIRECTORS' MEETINGS
Section 3.1 Annual and Regular Meetings. An annual
meeting of the Board of Directors, which shall be considered a
regular meeting, shall be held immediately following each annual
meeting of stockholders, for the purpose of electing officers and
carrying on such other business as may properly come before the
meeting. The Board of Directors may also adopt a schedule of
additional meetings which shall be considered regular meetings.
Regular meetings shall be held at such times and at such places,
within or without the Commonwealth of Virginia, as the Chairman
or, in his absence, the President, shall designate. If no place
is designated, regular meetings shall be held at the principal
office of the Corporation.
Section 3.2 Special Meetings. Special meetings of the
Board of Directors shall be held on the call of the Chairman, the
President or any three members of the Board of Directors at the
principal office of the Corporation or at such other place as the
Chairman, or in his absence, the President, shall designate.
Section 3.3 Telephone Meetings. The Board of Directors
may permit any or all directors to participate in a regular or
special meeting by, or conduct the meeting through the use of,
any means of communication by which all directors participating
may simultaneously hear each other during the meeting. A
director participating in a meeting by this means is deemed to be
present in person at the meeting.
Section 3.4 Notice of Meetings. No notice need be given
of regular meetings of the Board of Directors.
Notice of special meetings of the Board of Directors shall
be given to each director in person or delivered to his residence
or business address, or such other place as he may have directed
in writing, not less than 24 hours before the meeting by mail,
messenger, telecopy, telegraph, or other means of written
communication or by telephoning such notice to him. Any such
notice shall set forth the time and place of the meeting and
state the purpose for which it is called.
Section 3.5 Quorum; Voting. A majority of the number of
directors fixed in these Bylaws shall constitute a quorum for the
transaction of business at a meeting of the Board of Directors.
If a quorum is present when a vote is taken, the affirmative vote
of a majority of the directors present is the act of the Board of
Directors unless the act of a greater number is required by law,
the Articles of Incorporation or these Bylaws. A director who is
present at a meeting of the Board of Directors when corporate
action is taken is deemed to have assented to the action taken
unless (i) he objects at the beginning of the meeting, or
promptly upon his arrival, to holding it or transacting specified
business at the meeting; or (ii) he votes against, or abstains
from, the action taken.
Section 3.6 Waiver of Notice; Attendance at Meeting. A
director may waive any notice required by law, the Articles of
Incorporation, or these Bylaws before or after the date and time
stated in the notice, and such waiver shall be equivalent to the
giving of such notice. Except as provided in the next paragraph
<PAGE>
of this section, the waiver shall be in writing, signed by the
director entitled to the notice and filed with the minutes or
corporate records.
A director's attendance at or participation in a meeting
waives any required notice to him of the meeting unless the
director at the beginning of the meeting or promptly upon his
arrival objects to holding the meeting or transacting business at
the meeting and does not thereafter vote for or assent to action
taken at the meeting.
Section 3.7 Action Without Meeting. Action required or
permitted to be taken at a Board of Directors' meeting may be
taken without a meeting if the action is taken by all members of
the Board. The action shall be evidenced by one or more written
consents describing the action taken, signed by each director
either before or after the action taken, and included in the
minutes or filed with the corporate records reflecting the action
taken. Action taken under this section shall be effective when
the last director signs the consent unless the consent specifies
a different effective date in which event the action taken is
effective as of the date specified therein, provided the consent
states the date of execution by each director.
ARTICLE IV - COMMITTEE OF DIRECTORS
Section 4.1 Committees. The Board of Directors may
create one or more committees and appoint members of the Board of
Directors to serve on them. Unless otherwise provided herein,
each committee shall have two or more members who serve at the
pleasure of the Board of Directors. The creation of a committee
and appointment of members to it shall be approved by the number
of directors required to take action under Section 3.5 of these
Bylaws.
Section 4.2 Authority of Committees. To the extent
specified by the Board of Directors, each committee may exercise
the authority of the Board of Directors, except that a committee
may not (i) approve or recommend to stockholders action that is
required by law to be approved by stockholders; (ii) fill
vacancies on the Board of Directors or any of its committees;
(iii) amend the Articles of Incorporation without stockholder
approval; (iv) adopt, amend, or repeal these Bylaws; (v) approve
a plan of merger not requiring stockholder approval; (vi)
authorize or approve a distribution, except according to a
general formula or method prescribed by the Board of Directors;
or (vii) authorize or approve the issuance, or sale or contract
for sale of stock, or determine the designation and relative
rights, preferences, and limitations of a class or series of
stock, except that the Board of Directors may authorize a
committee, or a senior executive officer of the Corporation, to
do so within limits specifically prescribed by the Board of
Directors.
Section 4.3 Executive Committee. The Board of Directors
shall appoint an Executive Committee consisting of two or more
directors, which committee shall have all of the authority of the
Board of Directors except to the extent such authority is limited
by the provisions of Section 4.2.
<PAGE>
Section 4.4 Audit Committee. The Board of Directors
shall appoint an Audit Committee consisting of not less than
three directors, none of whom shall be officers, which committee
shall regularly review the adequacy of the Corporation's internal
financial controls, review with the Corporation's independent
public accountants the annual audit and other financial
statements, and recommend the selection of the Corporation's
independent public accountants.
Section 4.5 Nominating Committee. The Board of Directors
shall appoint a Nominating Committee consisting of not less than
three directors, a majority of whom shall not be officers or
employees, which committee shall recommend to the Board of
Directors the names of persons to be nominated for election as
directors of the Corporation.
Section 4.6 Compensation Committee. The Board of
Directors shall appoint a compensation committee consisting of
not less than three directors, none of whom shall be officers,
which committee shall recommend to the Board of Directors the
compensation of directors and those officers of the Corporation
who are directors, make awards under the Corporation's
discretionary employee benefit plans, and make recommendations
from time to time to the Board of Directors regarding the
Corporation's compensation program.
Section 4.7 Committee Meetings; Miscellaneous. The
provisions of these Bylaws which govern meetings, action without
meetings, notice and waiver of notice, and quorum and voting
requirements of the Board of Directors shall also apply to
committees of directors and their members.
ARTICLE V - OFFICERS
Section 5.1 Officers. The officers of the Corporation
shall be a Chairman, a Chief Executive Officer, a President, a
Secretary, a Chief Financial Officer, and such additional
officers, including Vice Presidents and other officers, as the
Chief Executive Officer or the Board of Directors may deem
necessary or advisable to conduct the business of the
Corporation. The Chairman and the President shall be members of
the Board of Directors and one of them shall be designated as
Chief Executive Officer. The Board of Directors shall also
designate those officers who are deemed to be "Executive
Officers." Any two offices may be combined except the offices of
President and Secretary.
Section 5.2 Election, Term. Executive Officers shall be
elected at each annual meeting of the Board of Directors and
shall hold office, unless removed, until the next annual meeting
of the Board of Directors or until their successors are elected.
All other officers shall be appointed by the Chief Executive
Officer and shall hold office, unless removed, until their
successors are appointed. Any officer may resign at any time
upon written notice to the authority which appointed him.
<PAGE>
Section 5.3 Removal of Officers. Officers elected by the
Board of Directors may be removed, with or without cause, at any
time by the Board of Directors. Appointed officers may be
similarly removed by the person having the authority to appoint
them.
Section 5.4 Duties of the Chief Executive Officer. The
Chief Executive Officer shall have general charge of, and be
charged with, the duty of supervision of the business of the
Corporation. In addition, he shall perform such duties, from
time to time, as may be assigned to him by the Board of
Directors.
Section 5.5 Duties of the Chairman. Unless he declines
to serve, the Chairman shall preside at all meetings of the
stockholders and the Board of Directors and perform such duties,
from time to time, as may be assigned to him by the Board of
Directors.
Section 5.6 Duties of the President. The President shall
have such powers and duties as generally pertain to that position
and, in the absence of the Chairman, unless he declines to serve,
he shall preside at all meetings of the stockholders and the
Board of Directors. He shall further perform such duties as may,
from time to time, be assigned to him by the Chief Executive
Officer or the Board of Directors.
Section 5.7 Duties of the Secretary. The Secretary shall
have the duty to see that a record of the proceedings of each
meeting of the stockholders and the Board of Directors, and any
committee of the Board of Directors, is properly recorded and
that notices of all such meetings are duly given in accordance
with the provisions of these Bylaws or as required by law; he may
affix the corporate seal to any document the execution of which
is duly authorized, and when so affixed may attest the same; and,
in general, he shall perform all duties incident to the office of
secretary of a corporation, and such other duties as, from time
to time, may be assigned to him by the Chief Executive Officer or
the Board of Directors, or as may be required by law.
Section 5.8 Duties of the Chief Financial Officer. The
Chief Financial Officer shall have charge of and be responsible
for all securities, funds, receipts and disbursements of the
Corporation, and shall deposit or cause to be deposited, in the
name of the Corporation, all monies or valuable effects in such
banks, trust companies or other depositories as shall, from time
to time, be selected by or under authority granted by the Board
of Directors; he shall be custodian of the financial records of
the Corporation; he shall keep or cause to be kept full and
accurate records of all receipts and disbursements of the
Corporation and shall render to the Chairman, the President and
the Board of Directors, whenever requested, an account of the
financial condition of the Corporation; and shall perform such
duties as may be assigned to him by the Chief Executive Officer
or the Board of Directors.
Section 5.9 Duties of Other Officers. The other officers
of the Corporation shall have such authority and perform such
duties as shall be prescribed by the Board of Directors or by
officers authorized to appoint them to their respective offices.
To the extent that such duties are not so stated, such officers
shall have such authority and perform the duties which generally
pertain to their respective offices, subject to the control of
the Chief Executive Officer or the Board of Directors.
<PAGE>
Section 5.10 Voting Securities of Other Corporations. Any
one of the Chairman, the President or the Chief Financial Officer
shall have power to act for and vote on behalf of the Corporation
at all meetings of the stockholders of any corporation in which
this Corporation holds stock, or in connection with any consent
of stockholders in lieu of any such meeting.
Section 5.11 Certain Agents. The Chief Executive Officer
or such other officer as he may authorize may from time to time
engage employees of subsidiaries of the Corporation to be agents
for the Corporation to perform staff or operational functions.
Such persons may act on behalf of the Corporation under such
titles (including designations as divisional officers) as may be
specified from time to time by the Chief Executive Officer, but
no engagement under this section shall constitute such agent an
employee or officer of the Corporation. Such agents shall
perform the duties assigned to them from time to time by the
Chief Executive Officer or by any other officer of the
Corporation authorized to make such assignments. Any such agent
may be removed, with or without cause, at any time by the Chief
Executive Officer. This section shall not limit the authority
any officer or any other employee of the Corporation may
otherwise have respecting the engagement of agents for the
Corporation.
Section 5.12 Bonds. The Board of Directors may require
that any or all officers, employees and agents of the Corporation
give bond to the Corporation, with sufficient sureties,
conditioned upon the faithful performance of the duties of their
respective offices or positions.
ARTICLE VI - CERTIFICATES OF STOCK
Section 6.1 Form. Stock of the Corporation shall, when
fully paid, be evidenced by certificates containing such
information as is required by law and approved by the Board of
Directors. Certificates shall be signed by the President or any
Vice President and the Secretary or an Assistant Secretary or the
Treasurer or an Assistant Treasurer and may (but need not) be
sealed with the seal of the Corporation. Any such signature may
be a facsimile, engraved or printed, if the certificate is
countersigned, manually or by facsimile, by a transfer agent, or
registered by a registrar, other than the Corporation itself or
an employee of the Corporation. In case any such officer or
authorized officer of the transfer agent or registrar who has
signed or whose facsimile signature has been placed upon any such
certificate shall have ceased to be such officer or authorized
officer of the transfer agent or registrar before such
certificate is issued, the certificate shall, nevertheless, be
valid.
Section 6.2 Lost, Stolen or Destroyed Stock Certificates.
The Corporation may issue a new stock certificate in the place of
any certificate theretofore issued which is alleged to have been
lost, stolen or destroyed and may require the owner of such
certificate, or his legal representative, to give the Corporation
a bond, sufficient to indemnify it against any claim that may be
made against it on account of the alleged loss, theft or
destruction of any such certificate or the issuance of any such
new certificate.
<PAGE>
Section 6.3 Transfer. The Board of Directors may make
such rules and regulations concerning the issue, registration and
transfer of certificates representing the stock of the
Corporation as it deems necessary or proper and may appoint
transfer agents and registrars. Unless otherwise provided,
transfers of stock and of the certificates representing such
stock shall be made upon the books of the Corporation by
surrender of the certificates for the stock transferred,
accompanied by written assignments given by the owners or their
attorneys-in-fact.
ARTICLE VII - VIRGINIA CONTROL
SHARE ACQUISITION STATUTE
The provisions of Article 14.1 of the Virginia Stock
Corporation Act (13.1-728.1 et seq.) in effect on the 8th day of
February, 1990, shall not apply to the acquisition of shares of
this Corporation.
ARTICLE VIII - MISCELLANEOUS PROVISIONS
Section 8.1 Corporate Seal. The corporate seal of the
Corporation shall be circular and shall have inscribed thereon,
within and around the circumference, "JAMES RIVER CORPORATION OF
VIRGINIA". In the center shall be the word "SEAL".
Section 8.2 Fiscal Year. The fiscal year of the
Corporation shall be determined in the discretion of the Board of
Directors, but in the absence of any such determination it shall
be a fiscal year of either 52 or 53 weeks ending on the last
Sunday in December.
Section 8.3 Constitutive Resolutions. A "Constitutive
Resolution" is a resolution of the Board of Directors which is
(i) designated therein as a "Constitutive Resolution" and (ii)
adopted by the unanimous vote of the directors present and voting
if a quorum is present when a vote is taken. Notwithstanding
anything in Section 3.5 or any other provision of these Bylaws to
the contrary, a Constitutive Resolution can only be rescinded,
revoked, amended or modified by the affirmative vote of all the
directors then in office and the quorum of the Board of Directors
which shall be present to consider such action shall be the
number of directors then in office.
Section 8.4 Amendments. These Bylaws may be amended or
repealed, and new Bylaws may be made, at any regular or special
meeting of the Board of Directors by a majority of the Board
except that action to adopt or amend a bylaw that changes the
quorum or voting requirement applicable to meetings of the Board
of Directors must meet the quorum requirement and be adopted by
the vote required to take action under the quorum and voting
requirement then in effect. Bylaws made by the Board of
Directors may be repealed or changed and new Bylaws may be made
by the stockholders, and the stockholders may prescribe that any
Bylaw made by them shall not be altered, amended or repealed by
the Board of Directors.
Exhibit 10(p)
JAMES RIVER CORPORATION OF VIRGINIA
MILES L. MARSH
SUPPLEMENTAL RETIREMENT PLAN
Amendment and Restatement
Effective as of March 1, 1997
1. Purpose. The Plan is an unfunded deferred compensation
arrangement established for the benefit of Miles L. Marsh
("Executive"), one of a select group of management or highly
compensated Employees, intended to be excluded from the
participation and vesting, funding and fiduciary
responsibility provisions of ERISA. The Board has
determined that the benefits to be paid to Executive
constitute reasonable compensation for the services rendered
and to be rendered by such Executive.
2. Definitions. As used in the Plan, the following terms
have the meanings indicated:
a) "Actuarial Equivalent" means an amount or benefit equal
in value to the aggregate amounts expected to be received
under different forms of payment based on assumptions as to
the occurrence of future events. The future events to be
taken into account are mortality for Executive, mortality
for Beneficiaries, and an interest discount for the time
value of money. For this Plan, the actuarial assumptions
are the same as those defined in the Pension Plan.
b) "Beneficiary" means the person or entity who is to
receive benefits attributable to the Executive under the
Pension Plan after the Executive's death.
c) "Board" means the Board of Directors of the Company.
d) "Cause" means fraud or material misappropriation with
respect to the business or assets of the Company,
persistent refusal or willful failure of the Executive to
perform his duties and responsibilities to the Company,
which continues after the Executive receives written notice
of such refusal or failure, willful misconduct that
materially harms or has the potential to cause material harm
to the Company, breach of a fiduciary duty, which has a
material adverse effect on the Company, conviction of a
felony or crime involving moral turpitude, or the use of
drugs or alcohol that interferes materially with the
Executive's performance of his duties.
e) "Change of Control" means:
i) the acquisition by any unrelated person of beneficial
ownership (as that term is used for purposes of the
Securities Exchange Act of 1934 (the "Act")) of 20% or more
of the then outstanding shares of common stock of the
Company or the combined voting power of the then outstanding
voting securities of the Company entitled to vote generally
in the election of directors. The term "unrelated person"
means any person other than (x) the Company and its
subsidiaries, (y) an employee benefit plan or trust of the
Company or its subsidiaries, and (z) a person who acquires
stock of the Company pursuant to an agreement with the
Company that is approved by the Board in advance of the
acquisition, unless the acquisition results in a Change of
Control pursuant to subsection (ii) below. For purposes of
E-2
<PAGE>
this subsection, a "person" means an individual, entity or
group, as that term is used for purposes of the Act.
ii) any tender or exchange offer, merger or other business
combination, sale of assets or contested election, or any
combination of the foregoing transactions, the persons who
were directors of the Company before such transactions shall
cease to constitute a majority of the Board of Directors of
the Company or any successor to the Company.
f) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and regulations thereunder.
g) "Committee" means the Compensation Committee of the
Board.
h) "Company" means James River Corporation of Virginia or
any successor by merger or otherwise.
i) "Compensation" means an amount equal to the sum of (i)
twelve times Executive's monthly salary at the highest rate
in effect during the Compensation Period, cash incentive
compensation paid during the Compensation Period (or due and
unpaid) under any cash incentive compensation plan in which
Executive is then a Participant with respect to an incentive
performance period that immediately precedes or ends within
the Compensation Period, and any prorated incentive
compensation authorized under the terms of any cash
incentive compensation plan in which Executive is then a
participant with respect to an incentive performance period
that began during the Compensation Period. The term
"Compensation" does not include income recognized upon the
exercise of any stock option granted by the Company or any
subsidiary of the Company, and any contributions for
benefits under this Plan or any other plan of deferred
compensation maintained by the Company. The term
"Compensation" also does not include special allowances,
such as amounts paid to Executive during an authorized leave
of absence, moving expenses, car expenses, tuition
reimbursement, meal allowances, the cost of excess group
life insurance income includable in taxable income, and
similar items.
j) "Compensation Period" means the twelve full months
immediately preceding the date of Executive's Retirement.
k) "Effective Date" means December 7, 1995.
l) "ERISA" means the Employee Retirement Income Security
Act of 1974.
m) "Normal Retirement Date" means the first day of the
month coinciding with or next following the date on which
Executive attains age 55.
n) "Pension Benefit" means the benefit payable to
Executive under the Pension Plan in the normal form at his
Normal Retirement Date. In computing the benefit offsets
pursuant to Section 3(c), if Executive becomes entitled to
benefits under this Plan before he is eligible to receive
benefits under the Pension Plan, his Pension Benefit means
the amount of the benefit that will be payable at the
earliest possible date under the Pension Plan.
o) "Pension Plan" means the James River Corporation of
Virginia Retirement Plan for Salaried and Other Non-
Bargaining Unit Employees, as amended and in effect from
time to time.
p) "Plan" means the James River Corporation of Virginia
Miles L. Marsh Supplemental Retirement Plan, as amended and
restated.
q) "Plan Year" means a calendar year.
r) "Preretirement Death Benefit" means an amount, payable
to Executive's surviving Spouse pursuant to Section 7 in the
event of Executive's death before his retirement while
employed by the Company.
<PAGE>
s) "Retirement" or "Retires" means the termination of
Executive's employment for reasons other than death or
Cause.
t) "Service" means years of employment in years and
completed full months with the Company or any subsidiary of
the Company.
u) "Spouse" means the person who is the Executive's
"spouse" as such term is defined in the Pension Plan.
3. Benefits at Retirement.
a) The Basic Benefit. If Executive Retires and he has
completed 7 years of Service, he will be entitled to receive
a lifetime annual benefit (payable monthly) beginning on the
date of his Retirement that is equal to 50% of his
Compensation, subject to the adjustments and offsets as
provided in 3(b), (c) and (d).
b) Service Adjustment. If at the time of Retirement
Executive has completed fewer than 7 years of Service, the
amount determined in (a) shall be reduced proportionately to
the extent that Executive has less than 7 years Service.
c) Benefit Offsets. The amount of the benefit determined
under the preceding paragraphs shall be offset by the sum of
the amount of Executive's Pension Benefit then payable or
payable in the future if Executive is not then eligible for
payment of benefits, and the amount of Executive's Social
Security benefit at time of Retirement. If Executive
Retires before he is eligible to receive a Social Security
benefit, the amount of the Social Security reduction shall
be the amount which will become payable at the earliest date
when a Social Security benefit could become payable to
Executive, as determined by the Committee.
d) Form of Benefit Adjustment. If instead of lifetime
payments Executive elects to receive the benefit determined
under the preceding paragraphs in one of the optional forms
of payment permitted under the Pension Plan, the benefit
shall further be actuarially reduced in accordance with the
factors, methods and assumptions then used under the Pension
Plan for determining optional forms of benefit payments.
4. Commencement of Benefits. Executive may elect when
payment of his benefits will commence. In no event may
Executive's benefits commence later than his Normal
Retirement Date. If payment of Executive's benefits are to
commence before his Normal Retirement Date, the amount
determined under Section 3 shall be further adjusted to
reflect the earlier payment commencement date and longer
period of payment as follows:
a) Normal Retirement Date to Age 53. If commencement of
Executive's benefits occurs before his Normal Retirement
Date and after attainment of age 53, his benefits will be
reduced by 4% for each year by which Executive's age at
commencement of his benefits is less than 55 and more than
52.
b) Prior to Age 53. If commencement of Executive's
benefits occurs before attainment of age 53, his benefits
will be further reduced (in addition to the reduction
pursuant to (a)) by 6% for each year by which the
Executive's age at commencement of his benefits is less than
age 53.
<PAGE>
5. Benefit Enhancements Upon Change of Control. If a
Change of Control occurs, the following adjustments and
enhancements will apply:
a) Benefit Accrual. At Retirement, Executive will be
credited with up to an additional two full years of Service.
b) Benefit Rate Increase. The Basic Benefit determined
under Section 3(a) shall be increased by (i) 5% if Executive
Retires at age 54, and (ii) 10% if Executive Retires at or
after his Normal Retirement Date.
c) Payment Reduction Factors. If payment of benefits
begins before Executive has attained his Normal Retirement
Date, the reduction factors for early payment set forth in
Section 4 shall not apply.
d) Lump Sum Payment. The present value of the benefits
which Executive would be entitled to receive over time upon
his Retirement, as determined under Sections 4 and 5, shall
be paid in a lump sum. The determination of the amount of
lump sum payment shall be made by the Company's actuaries in
accordance with the methods, factors and assumptions used in
determining contributions and benefits under the Pension
Plan.
6. Termination of Employment for Cause. If Executive's
employment is terminated by the Company for Cause, as
determined by the Committee, and a Change of Control has not
occurred, Executive's rights under the Plan shall
immediately terminate and neither Executive nor his Spouse
shall be entitled to any benefits under the Plan.
7. Death Before Retirement/Preretirement Death Benefit.
a) If Executive dies before Retirement and while still an
employee of the Company, Executive's Spouse shall be
entitled to receive a Preretirement Death Benefit beginning
with the first day of the month coinciding with or next
following the date of the Executive's death. The
Preretirement Death Benefit is an annual benefit (payable
monthly) equal to 50% of the Basic Benefit (determined under
Sections 3(a) and (b), before offsets under 3(c) and (d),
and with adjustments and enhancements pursuant to Section 5,
if applicable) that would have been payable to Executive had
he Retired the day before his death.
b) The monthly Preretirement Death Benefit payment will
then be reduced by an amount equal to the sum of the
surviving Spouse's preretirement monthly benefit when
payable under the Pension Plan, the Spouse's monthly
benefit under Social Security, and the amount of the
monthly death benefit payable (or annuitized monthly
equivalent of the death benefit if paid in a lump sum) to
the Executive's Spouse under any other plan maintained by
the Company qualified under Section 401(a) of the Code in
which the Executive participated. If as to the Executive
and his Spouse the preretirement death benefit provisions of
the Pension Plan do not apply, the Preretirement Death
Benefit will be reduced at the time and in the amount equal
to the preretirement death benefit under the Pension Plan
that would have otherwise been payable to the Spouse if it
had applied.
<PAGE>
8. Exclusion from Supplemental Benefit Plan. The benefits
provided to Executive and his Spouse under the Plan are in
lieu of benefits that might otherwise be available to
Executive and his Spouse, or either of them, under the
Company's Supplemental Benefit Plan (or any of its component
parts), as amended and restated June 1, 1995, or as later
amended, and Executive's participation in the Plan and the
attendant benefits available to Executive and his Spouse
that thereby accrue, constitutes a waiver of all his and his
Spouse's rights under the Supplemental Benefit Plan.
9. Lump Sum Payment. The Company reserves the right in
its sole discretion to pay in a lump sum the Actuarial
Equivalent of any amounts due the Executive (or the
Executive's Spouse, as the case may be) under the Plan.
10. Administration.
a) This Plan shall be administered by the Committee.
Subject to the Plan's provisions, the Committee may adopt
rules and regulations necessary to carry out the Plan's
purposes. The amount of and entitlement to the payment of
benefits under, and the general administration of, this Plan
with respect to the computation and entitlement to benefits
in determining offsets and adjustments shall be determined
by the provisions of the Pension Plan, and the rules,
regulation and interpretations adopted in administering the
Pension Plan. Beneficiary designations made with respect to
benefits payable under the Pension Plan shall apply to this
Plan unless otherwise specifically designated by the
Executive.
b) If for any reason a benefit under the Plan is not paid
when due, the individual entitled to the benefit may file a
written claim with the Committee. If the claim is denied or
if no response is received within 90 days (in which case the
claim will be deemed to have been denied), the individual
may appeal the denial to the Committee within 60 days of the
denial. In pursuing an appeal, an individual may request
that the Committee review the denial and the individual may
review pertinent documents and submit issues and comments in
writing. A decision on appeal will be made within 60 days
after the appeal is made, unless special circumstances
require the Committee to extend the period for another 60
days.
11. Restrictions and Transfer. Any benefits to which
Executive or his Spouse or Beneficiary may become entitled
under this Plan are not subject in any manner to
anticipation, alienation, sale, transfer, assignment,
pledge, or encumbrance, and any attempt to do so is void.
Benefits are not subject to attachment or legal process for
the debts, contracts, liabilities, engagements or torts of
Executive or his Spouse or Beneficiary. This Plan does not
give Executive or his Spouse or Beneficiary any interest,
lien, or claim against any specific assets of the Company,
and they have only the rights of a general creditor of the
Company.
<PAGE>
12. Amendment and Termination. The Board reserves the
right to amend or terminate the Plan at any time without the
consent of Executive, but no amendment or termination shall
deprive Executive or his Spouse of the right to continue to
receive payments under Section 4 or 7 once payments have
begun. Notwithstanding the foregoing, if a Change of
Control occurs, Executive, regardless of his age or Service,
shall be eligible for benefits under the Plan when Executive
ceases to be an employee, and the Plan may not be terminated
and no amendment may be made that would adversely affect the
right of Executive or his Spouse to receive a benefit under
the Plan.
13. Method of Payment of Benefits. The Company has the
obligation to pay all benefits provided for in the Plan as
they become due. Without affecting its obligations to or
rights of Executive under the Plan, the Company may
establish a grantor trust (within the meaning of Sections
671 through 679 of the Code) for Executive and deposit funds
with the trustee of such trust for investment to provide the
benefits to which the Executive (or the Executive's Spouse)
may be entitled under the Plan. The funds deposited with
the trustee or trustees of any such trust, and the earnings
thereon, will be dedicated to the payment of the benefits
under the Plan but shall remain subject to the claims of the
general creditors of the Company. The expenses of
establishing and maintaining such trust shall be paid by the
Company. When Executive (or Executive's Spouse) becomes
eligible for payment of benefits under the Plan, such
benefits will be paid out of the trust fund or funds unless
paid directly by the Company.
14. Construction. This Plan shall be construed in
accordance with the laws of the Commonwealth of Virginia.
The headings in this Plan have been inserted for convenience
of reference only and are to be ignored in any construction
of the provision. If a provision of this Plan is not valid,
that invalidity does not affect other provisions.
Exhibit 11
JAMES RIVER CORPORATION
of Virginia
COMPUTATION OF EARNINGS PER SHARE (a)
For the Three Years Ended December 29, 1996
(in millions, except per share data)
Years Ended
----------------------------------
December December December
PRIMARY 29, 1996 31, 1995 25, 1994
Net income (loss) $157.3 $126.4 $(13.0)
Less preferred stock dividend
requirements (b) (58.5) (58.5) (45.8)
Net income (loss), as adjusted for
the primary calculation $98.8 $67.9 $(58.8)
Weighted average number of common
shares and common share
equivalents:
Common shares outstanding 85.4 83.0 81.7
Issuable upon exercise of out-
standing stock options and
pursuant to a deferred stock
award plan 2.3 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 (1.7) (2.6)
86.0 84.1 81.7
Primary income (loss) per share $1.15 $.81 $(.72)
(a) See Note 1 of Notes to Consolidated Financial Statements in the 1996
Annual Report.
(b) See Note 13 of Notes to Consolidated Financial Statements in the 1996
Annual Report.
E-3
<PAGE>
Exhibit 11 (Continued)
JAMES RIVER CORPORATION
of Virginia
COMPUTATION OF EARNINGS PER SHARE (a)
For the Three Years Ended December 29, 1996
(in millions, except per share data)
Years Ended
----------------------------------
December December December
FULLY DILUTED 29, 1996 31, 1995 25, 1994
Net income (loss) $157.3 $126.4 $(13.0)
Less preferred stock dividend
requirements (b) (58.5) (58.5) (45.8)
Net income (loss), as adjusted for
the fully diluted calculation $98.8 $67.9 $(58.8)
Weighted average number of common
shares and common share
equivalents:
Common shares outstanding 85.4 83.0 81.7
Issuable upon exercise of out-
standing stock options and
pursuant to a deferred stock
award plan 3.4 3.8
Less assumed acquisition of
common shares, using proceeds
from stock options and a defer-
red stock award plan, under the
treasury stock method (2.3) (2.7)
86.5 84.1 81.7
Fully diluted income (loss) per share $1.14 $.81 $(.72)
(a) See Note 1 of Notes to Consolidated Financial Statements in the
1996 Annual Report.
(b) See Note 13 of Notes to Consolidated Financial Statements in
the 1996 Annual Report.
Exhibit 13
Management's Discussion and Analysis of
Financial Condition and Results of Operations
RESULTS OF OPERATIONS- 1996 COMPARED TO 1995
Net sales decreased to $5,690 million in 1996 from $6,800 million in 1995, while
net income increased to $157.3 million from $126.4 million during the same
periods. The comparability of revenues and results was affected by divestitures
and non-recurring items. In 1996, the company sold its Flexible Packaging and
related Inks divisions, as well as several small domestic Consumer Products
Business mills. In 1995, James River spun off Crown Vantage Inc. ("Crown
Vantage") to its common shareholders. Crown Vantage included a large part of
what was formerly in the company's Communications Papers Business, as well as
the specialty paper-based portion of the Packaging Business. Acquisitions and
divestitures are more fully described in Note 2 of Notes to Consolidated
Financial Statements.
Non-recurring severance and other charges for 1996 and 1995, which are
further described in Note 3 of Notes to Consolidated Financial Statements,
included the following (in millions):
<TABLE>
<CAPTION>
1996 1995
---------------------- ------------------------
Pretax Net Pretax Net
================================================================================================
<S> <C>
Severance costs $(40.6) $(25.3) $(42.7) $(25.3)
Asset write-downs (59.3) (36.7) (4.2) (2.6)
Gain on divestitures 89.2 49.1
Crown Vantage spin-off costs (5.0) (4.2)
French statutory tax rate increase (6.3)
------- ------- ------- -------
Total $(10.7) $(12.9) $(51.9) $(38.4)
======= ======= ======= =======
</TABLE>
Excluding non-recurring items, net income was $170.2 million, or $1.30 per
share, in 1996 compared with $164.8 million, or $1.26 per share, in 1995.
Segment Data
The following tables set forth sales and operating results, before severance and
other items, by business segment for 1996 and 1995. The pro forma information is
presented as if Crown Vantage and the Flexible Packaging division were excluded
from each year's results.
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------- ------------------------
Segment Segment
1996 (in millions): Net Sales Results(a) Net Sales Results(a)
===================================================================================================
<S> <C>
Consumer Products:
North American $2,642.3 $277.0 $2,642.3 $277.0
European 1,693.2 152.9 1,693.2 152.9
Packaging 1,109.6 87.7 824.2 85.3
Communications Papers 427.4 22.2 427.4 22.2
Intersegment eliminations
and corporate expenses (182.0) (96.2) (160.7) (96.2)
---------- --------- ---------- ----------
Total $5,690.5 $443.6 $5,426.4 $441.2
========== ========= =========== ==========
</TABLE>
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------ ------------------------
Segment Segment
1995 (in millions): Net Sales Results(a) Net Sales Results(a)
================================================================================================
<S> <C>
Consumer Products:
North American $2,689.1 $235.1 $2,697.1 $237.1
European 1,654.7 45.9 1,654.7 45.9
Packaging 1,620.4 61.0 935.2 75.8
Communications Papers 1,038.8 191.2 592.9 126.7
Intersegment eliminations
and corporate expenses (203.5) (58.0) (166.4) (52.3)
---------- ---------- ----------- ---------
Total $6,799.5 $475.2 $5,713.5 $433.2
========== ========== =========== =========
</TABLE>
(a) Represents segment results before severance and other items. The allocation
of severance and other items by segment is presented in Note 16 of Notes to
Consolidated Financial Statements and Supplemental Pro Forma Financial
Information.
21
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
North American Consumer Products Business
In 1996, the company's North American Consumer Products Business reported sales
of $2,642 million and operating results, before severance and other items, of
$277 million. Sales declined by $47 million, or 2 percent, from the $2,689
million reported in 1995, while operating results, before severance and other
items, improved by $42 million, or 18 percent, from the $235 million reported in
1995. This business' return on sales, before severance and other items, improved
to 10.5 percent in 1996 from 8.7 percent in 1995.
The decline in net sales was principally attributable to the
divestitures of the company's foam cup and specialty operations businesses,
combined with the decline in average selling price for the company's excess
North American pulp.
Net sales of retail products were comparable in 1996 and 1995, as unit
volume increases of approximately 3 percent for retail personal care products
were offset by lower retail tabletop volumes. Average pricing was comparable to
the prior year for retail personal care products, but slightly higher for retail
tabletop products. List prices for retail tissue and towel products were
increased twice in 1995, but were reduced in the spring of 1996 by between 5 and
8 percent, following competitive pricing actions tied to the falling cost of
market pulp.
Net sales into the commercial channel declined by 3.7 percent from the
prior year, reflecting a combination of unit volume increases for personal care
products, more than offset by unit volume and price decreases for foodservice
products. Average pricing for commercial personal care products improved
slightly compared to 1995 levels. High industry utilization rates contributed to
relatively stable commercial personal care pricing throughout 1996, despite
significantly lower average waste paper costs. Commercial foodservice products
experienced lower average pricing in 1996 compared to the prior year, as
competitive price reductions were taken following raw material cost reductions.
Net sales into the warehouse club and private label channels continued
to increase, up more than 10 percent over 1995 sales, driven by both stronger
volumes and higher average selling prices.
The North American Consumer Products Business is fully integrated for
its pulp requirements, with excess capacity of between 200,000 and 250,000
metric tons per year sold as market pulp. Net sales of market pulp fell sharply
from 1995 levels, resulting from the precipitous decline in industry selling
prices during 1996.
The improvement in operating results for the North American Consumer
Products Business was driven by a combination of cost reduction initiatives,
lower raw material costs and lower levels of trade spending, partially offset by
increased advertising and marketing costs and reduced market pulp profitability.
On a discretionary basis, the company currently plans to continue to
increase spending on advertising and marketing supporting its consumer branded
products in 1997, to be funded with a portion of the incremental savings
expected to be realized from cost reduction activities.
European Consumer Products Business
In 1996, the company's European Consumer Products Business reported sales of
$1,693 million and operating results, before severance and other items, of $153
million. Sales increased by $38 million, or 2 percent, from the $1,655 million
reported in 1995, while operating results increased by $107 million, or more
than 230 percent, from the $46 million reported in 1995. This business' return
on sales, before severance and other items, improved to 9 percent in 1996 from
2.8 percent in 1995.
Increased sales in 1996 were attributable to market share gains,
partially offset by a small decline in average net selling prices. Converted
product unit volumes increased by 6.5 percent in 1996, despite a two-month
strike at the company's Spanish tissue facility. Volume gains occurred in all
geographic regions and were attributable, in part, to successful new product
innovations, as well as a recovery of lower than normal volumes experienced in
1995. Average finished goods pricing declined by approximately 3 percent
compared to 1995, in response to dramatically lower raw material costs.
Similar to most of its European tissue competitors, James River's
European Consumer Products Business is not an integrated producer. Approximately
two-thirds of the business' fiber requirements
22
<PAGE>
are met with purchased market pulp (some of which is purchased from James
River's North American Consumer Products Business), while the remaining
one-third is provided by its deinked pulp facilities. After climbing
dramatically in 1995, market pulp and waste paper costs fell sharply in the
first half of 1996. The reduction in fiber costs, without a commensurate
reduction in average selling prices, contributed to the higher margins reported
in 1996.
In addition to lower fiber costs, operating profit improvements were
generated by manufacturing cost reductions and increased volumes, partially
offset by lower average selling prices and increased expenses for advertising,
consumer promotion and trade spending.
Although improving, the European-wide tissue capacity utilization rate
is not at an optimal level. Therefore, the company expects continued competitive
pressure on tissue pricing in 1997 in the face of continued low raw material
costs.
Packaging Business
In 1996, the company's Packaging Business reported sales of $1,110 million and
operating results, before severance and other items, of $88 million. Sales
decreased by $510 million from the $1,620 million reported in 1995, while
operating profits, before severance and other items, increased by $27 million
from the $61 million reported in 1995. The majority of the decline in sales was
due to divestitures. On a pro forma basis, excluding the Flexible Packaging
division and the packaging facilities spun off to Crown Vantage, sales decreased
from $935 million in 1995 to $824 million in 1996, while operating profits,
before severance and other items, increased from $76 million to $85 million,
respectively. This business' pro forma return on sales, before severance and
other items, improved to 10.3 percent in 1996 from 8.1 percent in 1995.
The decline in pro forma sales was principally attributable to lower
volumes for folding cartons and foodservice products, partially offset by
increased volumes for coated recycled board. Selling prices for coated recycled
board averaged approximately 10 percent lower in 1996 compared to 1995. Average
folding carton prices were similar in 1996 and 1995, as prices trended higher
throughout 1995, before trending lower during 1996, directionally following
bleached and recycled paperboard raw material costs.
The increase in the Packaging Business' operating profits was
attributable to a combination of lower raw material costs, particularly for
purchased waste paper, and manufacturing cost reductions, partially offset by
the lower volumes and pricing for certain packaging grades. Operating profits
also improved following the sale of the Flexible Packaging division and the
spin-off of packaging operations to Crown Vantage, as these divisions reported
operating losses in 1995.
Communications Papers Business
In 1996, the Communications Papers Business reported sales of $427 million and
operating results, before severance and other items, of $22 million. Sales
decreased by $612 million, from $1,039 million in 1995, while operating profits,
before severance and other items declined by $169 million, from $191 million in
1995. The majority of the decline in sales was due to the spin-off of a large
portion of the Communications Papers Business to Crown Vantage in August 1995.
On a pro forma basis, excluding the spun-off operations, sales decreased from
$593 million in 1995 to $427 million in 1996, while profits declined from $127
million to $22 million, respectively. This business' pro forma return on sales,
before severance and other items, declined from 21.4 percent in 1995 to 5.2
percent in 1996.
The decline in pro forma sales was attributable to lower average selling
prices and lower unit volumes in both uncoated free sheet and uncoated
groundwood papers. After increasing sharply during the first nine months of
1995, selling prices fell steadily throughout 1996, due to major customer
inventory corrections combined with weaker demand growth and excess industry
capacity. Selling prices for uncoated free sheet averaged approximately $250 per
ton lower in 1996 compared to 1995, while selling prices for uncoated groundwood
averaged approximately $50 per ton lower. Unit volumes declined from 1995 levels
23
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
by 6 to 7 percent for both uncoated free sheet and uncoated groundwood. The
majority of the volume declines occurred in the first half of 1996, as
substantial market-related downtime was taken to prevent a build-up of
inventory.
The decline in the Communications Papers Business' pro forma operating
profits was a direct result of the decline in selling prices and volumes,
partially offset by lower wood chip costs. James River's two Communications
Papers Business facilities are located in the Pacific Northwest, where the
company does not own a significant amount of timberlands. Accordingly, James
River relies on purchased wood chips to supply these integrated facilities.
Northwestern wood chip costs, which have been higher than in other regions
because of environmental restrictions on timber harvesting, increased sharply
during the first nine months of 1995 in connection with the over-heated pulp and
paper markets, before declining between 20 and 25 percent in 1996.
Other Income and Expense Items
General corporate expenses increased to $96 million in 1996 from $58 million in
1995. The increase principally resulted from consulting and other costs incurred
during 1996 in installing new integrated management information systems to
support the company's cost reduction programs. Corporate costs are expected to
begin trending lower in 1997, as the new systems installations are completed.
Interest expense decreased by $61 million, from $226 million in 1995 to
$165 million in 1996, principally due to significant reductions in outstanding
debt. The application of divestiture proceeds, net of acquisitions, and free
cash flow to pay down debt resulted in a $918 million reduction in outstanding
debt during 1995 and 1996, as debt declined from $2,889 million as of the
beginning of 1995 to $1,971 million as of the end of 1996.
Other income declined by $19 million, from $40 million in 1995 to $21
million in 1996, due to a $15 million reduction in equity earnings of
unconsolidated affiliates and a $4 million reduction in interest income. The
company's share of equity earnings of Aracruz Celulose S.A., the world's largest
producer of eucalyptus market pulp, was lower in 1996 following the downturn in
worldwide market pulp prices during 1996.
The company's effective tax rate was 44 percent in 1996, compared to 43
percent in 1995, excluding the effect of the charge resulting from the French
income tax rate increase. The effective tax rate differed from the combined
federal and state statutory rate primarily because of the relative size of
nondeductible goodwill amortization expense and, in 1995, certain foreign pretax
losses for which no tax benefit was then available.
- -------------------------------------------------------------------------------
LIQUIDITY
AND
CAPITAL
RESOURCES
Operating Activities
Cash provided by operations increased to $719 million in 1996, 18 percent higher
than the $609 million provided in 1995. Working capital reductions generated
$147 million of cash in 1996, including $71 million from inventory reductions
resulting principally from lower per unit valuations. Free cash flow (cash
provided by operations, less expenditures for property, plant and equipment and
dividends) increased to $196 million in 1996, from $48 million in 1995, before
the effect of divestitures and acquisitions.
Investing Activities
Net cash used for investing activities totaled $119 million during 1996 and
included $426 million of capital expenditures and $200 million of cash paid for
the remaining 14 percent minority interest in the company's European Consumer
Products Business, net of $497 million of cash proceeds from asset sales and $10
million of other miscellaneous cash proceeds. During 1995, net cash used for
investing activities was $432 million and included capital spending of $441
million and cash paid for acquisitions of $53 million, net of cash proceeds from
assets sales and other items of $62 million.
24
<PAGE>
The $497 million of 1996 cash proceeds from divestitures included $373
million from the sale of the Flexible Packaging division, $52 million from the
sale of the foam cup operations, $30 million from the sale of the specialty
operations, $27 million from the sale of the Inks division, and $15 million from
other miscellaneous asset sales. The company currently expects that the asset
rationalization process will continue in 1997 and may include, among other
items, the divestiture of some of the company's owned timberlands. Future
divestiture proceeds and free cash flow will be directed toward capital
structure simplification, debt reduction, or possibly, strategic acquisitions.
Capital spending of $426 million in 1996 declined by $15 million
compared to 1995 spending of $441 million. On a pro forma basis, excluding
spending for Flexible Packaging and Crown Vantage from both years, spending was
approximately $414 million in 1996 compared to $361 million in 1995. Nearly
three-quarters of the total 1996 expenditures were for the Consumer Products
Business, including approximately $25 million of spending on tissue converting
equipment modernizations at the Pennington, Alabama, mill and $15 million for
secondary fiber capacity expansions in Green Bay, Wisconsin. The company
currently expects 1997 capital spending to be in the range of $400 million.
Contractual capital commitments as of December 29, 1996, were not material.
Financing Activities
Total indebtedness decreased by $577 million, from $2,548 million as of December
31, 1995, to $1,971 million as of December 29, 1996, principally from the use of
divestiture proceeds, net of acquisitions, and free cash flow. During 1996, new
borrowings totaled $4 million and debt payments totaled $545 million.
Additionally, changes in foreign currency translation rates reduced debt
denominated in foreign currencies by $36 million.
As of December 29, 1996, James River and its subsidiaries had domestic
and foreign revolving credit facilities providing for unsecured borrowings of up
to $1,162 million, of which $935 million expire in December 1999 and the balance
expires between 1997 and 1998. The company also had domestic and foreign
commercial paper programs, supported by the revolving credit facilities,
providing for issuances of up to $624 million. In addition, James River had
agreements with several banks under which it may borrow funds on an uncommitted
basis at below-prime rates. On December 29, 1996, the company had outstanding
borrowings of $399 million that were supported by the revolving credit
facilities, including $341 million outstanding under such facilities, $48
million of money market notes and $10 million of commercial paper.
Total outstanding debt of $1,971 million on December 29, 1996, included
approximately $1,526 million of fixed rate and $445 million of floating rate
obligations. As of December 29, 1996, the company also had outstanding interest
rate swap agreements that effectively converted $1,286 million of fixed rate
debt and other financial obligations to variable rate obligations. The effect of
the swaps was an increase in interest expense of approximately $4 million in
1996 and $8 million in 1995. These contracts expire between September 1998 and
January 1999. As of December 29, 1996, the interest rate swaps had a fair value
of $(15) million. Additional information on the interest rate swaps is provided
in Note 11 of Notes to Consolidated Financial Statements. As of the end of 1996,
James River's weighted-average interest rate was 7.53 percent (including the
impact of the interest rate swaps), compared to 7.38 percent as of the end of
1995. Subsequent to the end of 1996, the company effectively unwound $648
million of the swap agreements.
The company's ratio of total debt to total capitalization decreased to
46 percent as of the end of 1996, from 51.3 percent as of the end of 1995,
resulting from the decrease in debt levels. The company defines total
capitalization as the sum of current and long-term debt, preferred and common
equity and minority interests.
The company's most restrictive debt covenants contain limitations on
borrowings and require the maintenance of a minimum amount of net worth. As of
December 29, 1996, under the most restrictive provisions of the company's debt
agreements, the company had additional borrowing capacity of $1.6 billion and
net worth in excess of the minimum requirement of approximately $390 million.
25
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
As of December 29, 1996, the company's debt ratings were investment grade and
were as follows:
Senior Preferred Commercial
Outlook Debt Stock Paper
----------------------------------------------------
Moody's Investors Services Stable Baa3 ba2 Prime-3
Standard & Poor's Positive BBB- BB+ A-3
As of December 29, 1996, James River had $738 million face value of outstanding
preferred stocks. Of this total, (i) $287 milllion (the Series P preferred
stock) may be redeemed by the company at a call price payable in common shares
beginning July 1, 1997; (ii) $353 million (the Series K, L, and N preferred
stocks) were redeemable at a cash price of $355 million; and (iii) $98 million
(the Series O preferred stock) may be redeemed at face value beginning in
October 1997. The Series K, L, and N preferred stocks are also exchangeable by
the company for convertible subordinated debentures. The terms of these
preferred stocks are more fully described in Note 13 of Notes to Consolidated
Financial Statements. The company is currently reviewing its options regarding
the Series P preferred stock, one of which would be to redeem them beginning
July 1, 1997, resulting in an additional 15.3 million outstanding common shares
and a $26 million reduction in annual preferred dividend requirements. James
River is also currently studying its alternatives regarding the other
outstanding series of preferred stocks.
Dividends paid declined from $120 million in 1995 to $97 million in
1996. The decline was solely attributable to timing, with five common dividend
payment dates occurring in 1995, versus three quarterly payment dates occurring
in 1996.
As of the end of 1996, the company had outstanding foreign currency
contracts totaling $470 million, which were designated as a hedge of a portion
of the investment in the European Consumer Products Business. These contracts
were principally denominated in French francs, British pounds, Belgian francs
and Spanish pesetas and expire on September 1, 1998. Subsequent to the end of
the year, the company unwound all $470 million of the foreign currency
contracts. See Note 17 of Notes to Consolidated Financial Statements.
Contractual Labor Agreements
James River currently employs approximately 23,000 people. The majority of
hourly employees are members of unions. Contracts covering approximately 3,000
domestic and Canadian employees are scheduled for renegotiation in 1997.
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, as well as
require the company to obtain and operate in compliance with the conditions of
permits and other governmental authorizations.
James River has made and will continue to make substantial capital
investments and operating expenditures, as well as production adjustments, to
comply with increasingly stringent standards for air, water, and solid and
hazardous waste regulations. Capital expenditures totaling approximately $20
million in 1996 and $50 million in 1995 were made by James River for pollution
control facilities and equipment.
In 1993, the U.S. Environmental Protection Agency published draft
regulations, generally referred to as the "Cluster Rules," intended to reduce
air and water discharges of specific substances from U.S. pulp and paper mills.
The final rules are likely to be issued in 1997. These rules may require
significant changes in the pulping and/or bleaching processes presently used in
some U.S. pulp mills, including several of James River's mills. Based on its
evaluation of the rules as they are currently expected to be issued, the company
believes that capital expenditures totaling approximately $100 million may be
required during the nominal three-year compliance period following the date of
promulgation, in order to bring James River's facilities into compliance.
26
<PAGE>
As of December 29, 1996, James River had been identified as a
"potentially responsible party," along with others, under federal or state laws
with respect to approximately 50 sites where hazardous substances or other
contaminants are located. Note 15 of Notes to Consolidated Financial Statements
provides information on the company's accrued remediation liabilities.
Contingent Liabilities
During 1994, James River was sued by certain former holders of James River's
103/4% Debentures due October 1, 2018. Most of these debentures were retired by
means of a tender offer to all holders which commenced on September 18, 1992.
The remainder were redeemed on November 2, 1992. In general, the complaints
allege violations of a covenant prohibiting the use of lower cost borrowed funds
to redeem the debentures before October 1, 1998, and violations 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. Further information on
James River's contingent liabilities is included in Note 15 of Notes to
Consolidated Financial Statements.
Effect of Changing Prices
Prior to 1994, the company had experienced only moderate levels of inflation for
several years. Between mid-1994 and mid-1995, the company experienced
significant increases in the cost of many of its base raw materials. In almost
all cases, selling price increases followed these cost increases, although on a
lag basis. In the second half of 1995 and throughout 1996, costs of many of
these same raw materials declined.
- ------------------------------------------------------------------------------
RESULTS OF
OPERATIONS--
1995 COMPARED
WITH 1994
James River's 1995 consolidated net sales increased 25 percent to $6,800 million
compared with $5,417 million in 1994. The change in results was impacted by (i)
the effect of the inclusion of the European Consumer Products Business sales for
a full year in 1995, (ii) the spin-off of Crown Vantage in 1995, and (iii) the
impact of higher pricing for many of James River's products. Income from
operations totaled $423 million in 1995, a nearly three-fold improvement over
the $147 million reported in 1994. The company reported net income of $126
million, or $.81 per share, in 1995, versus a net loss of $13 million, or $(.72)
per share, in 1994.
The 1995 results included $32 million, net of taxes and minority
interests, primarily for severance and related costs and $6 million, net of
minority interests, for the cumulative effect of an increase in the French
income tax rate. Non-recurring items reported in 1994 included $16 million, net
of taxes, for severance, litigation and environmental costs, and after-tax
income of $5 million for interest income on tax refunds. Excluding non-recurring
items, net income was $165 million, or $1.26 per share, in 1995 compared to a
net loss of $2 million, or $(.59) per share, in 1994.
In July 1994, James River increased its ownership interest in the
European Consumer Products Business from 43.2% to 86.4% for a purchase price of
approximately $575 million. This business was included in James River's
consolidated results for all of 1995, compared to only five months in 1994,
accounting for approximately $815 million of the increase in net sales and $35
million of the increase in operating profits between 1994 and 1995. In addition,
interest expense and preferred dividend requirements increased by approximately
$39 million and $13 million, respectively, due to this purchase.
North American Consumer Products Business
Reported net sales for the North American Consumer Products Business increased
by 11 percent, to $2,689 million in 1995 from $2,423 million in 1994. Net sales
of retail products increased by 7 percent over the prior year, principally due
to higher net selling prices. For the first nine months of 1995, retail
27
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
product volumes averaged approximately 2.5 percent higher than the prior year;
however, fourth quarter retail volumes were significantly below the prior year's
due to reduced promotional spending in the quarter. Net sales of commercial
products increased by 11 percent over the prior year, reflecting significantly
higher selling prices, partially offset by lower volumes. Price increases were
implemented in commercial markets several times during the first half of 1995,
following a sharp escalation in waste paper costs. Commercial product volumes
declined by approximately 8 percent compared to 1994 levels, resulting from a
combination of the company's decision to reduce its product line offerings and
more competitive pricing conditions experienced in the second half of 1995. Net
sales of warehouse club products increased by 15 percent, reflecting both higher
volumes and higher average selling prices.
Operating profits for the North American Consumer Products Business
increased to $235 million in 1995 from $143 million in 1994, while operating
margins improved to 8.7 percent from 5.9 percent. The improved profitability was
driven by cost reduction initiatives combined with pricing gains which outpaced
raw material cost increases.
European Consumer Products Business
Reported 1995 net sales for the European Consumer Products Business were up
sharply due to the inclusion of this business in consolidated results for all of
1995, versus only five months in 1994. On a pro forma basis, reflecting a full
year of results in both 1994 and 1995, sales increased by 14 percent, from
$1,446 million in 1994 to $1,655 million in 1995. Increased pro forma sales were
driven by a combination of price increases, implemented to recover sharply
higher raw material costs, and mix improvements, partially offset by lower
shipments. Market pulp and waste paper cost increases during 1994 and 1995
outpaced tissue price increases, resulting in a contraction in margins. In
addition, volumes declined in response to the business' aggressive program to
increase pricing. The negative impact of these items was largely offset by cost
reduction program benefits, as work force reductions of approximately 10 percent
were made during 1995. On a pro forma basis, operating profits improved slightly
from $42 million in 1994 to $46 million in 1995.
Packaging Business
Reported net sales for the Packaging Business were relatively level, at $1,620
million in 1995 compared to $1,610 million in 1994. On a pro forma basis,
excluding the specialty packaging papers facilities spun off to Crown Vantage,
net sales increased by 6 percent, from $1,333 million in 1994 to $1,419 million
in 1995. Net sales increases reflected higher average prices for most products,
on relatively level shipments. Price increases were implemented in all major
product categories, including folding cartons, paperboard and flexible
packaging, in an effort to pass through the cost escalation in major raw
material inputs, such as waste paper, plastic resins, and paperboard,
experienced in the first half of 1995. Operating profits declined from $97
million in 1994 to $61 million in 1995. On a pro forma basis, excluding the
spun-off facilities, the decline in profitability was less sharp, falling from
$84 million in 1994 to $65 million in 1995. While the spun-off operations
contributed approximately $13 million to 1994 profits, they generated an
operating loss during the eight months they were included in 1995 results, due
to unrecovered pulp cost increases. Flexible packaging 1995 results were also
below 1994 levels, and were negatively affected by unrecovered raw material cost
increases, competitive markets caused in part by new industry capacity and
higher manufacturing costs.
Communications Papers Business
Net sales for the Communications Papers Business increased to $1,039 million in
1995 from $930 million in 1994, despite the exclusion of the facilities spun off
to Crown Vantage during the last four months of 1995. On a pro forma basis,
assuming the spin-off had occurred at the beginning of 1994, net sales would
have totaled $593 million in 1995 versus $411 million in 1994.
28
<PAGE>
Selling prices for uncoated free sheet papers increased sharply during
the first nine months of 1995, before falling slightly in the fourth quarter.
Average selling prices for the retained uncoated free sheet operations increased
from $600 per ton in 1994 to $970 per ton in 1995. During the first half of
1995, shipments for the retained uncoated free sheet operations were comparable
to the prior year. However, shipments fell approximately 20 percent during the
second half of the year due to major customer inventory corrections and weaker
economic growth, causing James River to curtail production in the fourth
quarter. Average selling prices for uncoated groundwood papers increased from
$445 per ton in 1994 to $675 per ton in 1995, while shipments were comparable
with those of the prior year.
Reported operating results improved from a loss of $36 million in 1994
to a profit of $191 million in 1995. On a pro forma basis, excluding facilities
spun off to Crown Vantage, this business had an operating loss of $22 million in
1994 compared to a profit of $127 million in 1995. The improved profitability
was driven principally by significantly higher pricing, partially offset by
higher Northwestern wood chip and other raw material costs.
Other Income and Expense Items
General corporate expenses increased to $58 million in 1995, from $55 million in
1994. Corporate expenses for 1994 included $11 million of non-recurring
litigation and environmental costs, while 1995 expenses included more than $10
million of costs for systems redesign efforts related to cost reduction
initiatives.
Interest expense increased by $41 million, from $185 million in 1994 to
$226 million in 1995. The majority of the increase was due to the full year's
impact of the European Consumer Products Business consolidation, partially
offset by the debt reduction following the Crown Vantage spin-off. On a pro
forma basis, assuming the consolidation and the spin-off had occurred at the
beginning of 1994, interest expense would have increased from $199 million in
1994 to $204 million in 1995, due to higher average short-term interest rates.
Other income increased to $40 million in 1995, from $29 million in 1994.
Substantially all of the increase was attributable to higher equity earnings of
unconsolidated affiliates, principally from the improved performance of Aracruz
following the sharp upturn in worldwide market pulp prices in 1995.
In 1995, the company reported an effective tax rate of 43 percent,
excluding the charge for the French income tax rate increase. This differed from
the combined federal and state statutory rate primarily because of the relative
size of nondeductible goodwill amortization expense and certain foreign pretax
losses for which no tax benefit was then available. At 45.2 percent, the 1994
effective tax rate was slightly higher than the 1995 rate, principally because
of the smaller absolute pretax results.
29
<PAGE>
James River Corporation of Virginia and Subsidiaries
Consolidated Statements of Operations
<TABLE>
<CAPTION>
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
December 29, December 31, December 25,
(in millions, except per share amounts) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net sales $ 5,690.5 $6,799.5 $ 5,417.3
Cost of goods sold 4,216.7 5,258.9 4,452.0
Selling and administrative expenses 1,030.2 1,065.4 808.7
Severance and other items 10.7 51.9 9.6
---------- -------- -----------
Income from operations 432.9 423.3 147.0
Interest expense 165.4 226.4 185.6
Other income, net 21.6 40.3 28.9
---------- -------- -----------
Income (loss) before income taxes and minority interests 289.1 237.2 (9.7)
Income tax expense:
Tax on current income or loss 127.2 102.0 4.4
Effect of tax rate change 7.4
---------- -------- -----------
Total income tax expense 127.2 109.4 4.4
---------- -------- -----------
Income (loss) before minority interests 161.9 127.8 (14.1)
Minority interests (4.6) (1.4) 1.1
---------- -------- -----------
Net income (loss) $ 157.3 $ 126.4 $ (13.0)
========== ======== ===========
Preferred dividend requirements (58.5) (58.5) (45.8)
---------- -------- -----------
Net income (loss) applicable to common shares $ 98.8 $ 67.9 $ (58.8)
========== ======== ===========
Net income (loss) per share $ 1.15 $ .81 $ (.72)
========== ======== ===========
Weighted-average number of common shares
and common share equivalents 86.0 84.1 81.7
========== ======== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
30
<PAGE>
James River Corporation of Virginia and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 29, December 31,
(in millions) 1996 1995
- -------------------------------------------------------------------------------------------
<S> <C>
Assets
Current assets:
Cash and cash equivalents $ 33.8 $ 66.1
Accounts receivable 717.9 847.3
Inventories 650.4 821.4
Prepaid expenses and other current assets 39.1 52.3
Deferred income taxes 78.5 83.4
-------- ----------
Total current assets 1,519.7 1,870.5
-------- ----------
Net property, plant and equipment 3,751.5 4,074.1
Investments in affiliates 154.6 146.8
Other assets 385.7 395.8
Goodwill 730.0 771.7
--------- ---------
Total assets $ 6,541.5 $ 7,258.9
========= =========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 507.8 $ 560.5
Accrued liabilities 595.6 493.7
Current portion of long-term debt 116.9 44.8
-------- ----------
Total current liabilities 1,220.3 1,099.0
-------- ----------
Long-term debt 1,853.9 2,503.0
Accrued postretirement benefits other than pensions 458.0 464.7
Deferred income taxes 443.0 489.3
Other long-term liabilities 259.9 448.7
-------- ----------
Total liabilities 4,235.1 5,004.7
-------- ----------
Shareholders' equity:
Preferred stock 738.4 740.3
Common stock, $.10 par value; shares outstanding,
1996-86.2 million and 1995-84.9 million 8.6 8.5
Additional paid-in capital 1,307.6 1,294.1
Retained earnings 251.8 211.3
-------- ----------
Total shareholders' equity 2,306.4 2,254.2
-------- ----------
Total liabilities and shareholders' equity $6,541.5 $ 7,258.9
======== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
31
<PAGE>
James River Corporation of Virginia and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
December 29, December 31, December 25,
(in millions) 1996 1995 1994
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Cash provided by (used for) operating activities:
Net income (loss) $ 157.3 $ 126.4 $ (13.0)
Depreciation expense and cost of timber harvested 400.9 461.4 398.4
Amortization of goodwill 21.4 24.4 12.1
Deferred income tax provision (benefit) 21.0 33.0 (4.6)
Severance and other items 10.7 51.9 9.6
Undistributed earnings of unconsolidated affiliates (1.1) (1.9) (13.7)
Change in current assets and liabilities,
net of effects of acquisitions and dispositions:
Accounts receivable 61.6 (6.6) (25.5)
Inventories 70.7 (48.3) 46.3
Other current assets 7.3 (0.8) (17.6)
Accounts payable and accrued liabilities 7.5 (30.7) (19.3)
Other, net (38.1) 0.5 38.4
-------- -------- ---------
Cash provided by operating activities 719.2 609.3 411.1
-------- -------- ---------
Cash provided by (used for) investing activities:
Expenditures for property, plant and equipment (426.1) (441.2) (351.7)
Cash paid for acquisitions, net (199.9) (52.5) (538.0)
Cash received from sale of assets 496.6 10.9 34.6
Other, net 10.3 50.9 (4.1)
-------- -------- ---------
Cash used for investing activities (119.1) (431.9) (859.2)
-------- -------- ---------
Cash provided by (used for) financing activities:
Additions to long-term debt 4.2 9.1 439.5
Payments of long-term debt (545.2) (608.5) (145.2)
Proceeds from spin-off of Crown Vantage Inc. 480.4
Preferred stock issued, net of issuance costs 278.8
Common and preferred stock cash dividends paid (97.2) (120.4) (88.4)
Common stock issued on exercise of stock options 7.8 68.8 0.4
Other, net (2.0) (1.3)
-------- -------- ---------
Cash provided by (used for) financing activities (632.4) (170.6) 483.8
-------- -------- ---------
Increase (decrease) in cash and cash equivalents (32.3) 6.8 35.7
Cash and cash equivalents, beginning of year 66.1 59.3 23.6
-------- -------- ---------
Cash and cash equivalents, end of year $ 33.8 $ 66.1 $ 59.3
======== ======== =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
32
<PAGE>
James River Corporation of Virginia and Subsidiaries
Consolidated Statements of Changes in Capital Accounts
<TABLE>
<CAPTION>
52 Weeks 53 Weeks 52 Weeks
Ended Ended Ended
December 29, December 31, December 25,
(in millions) 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Preferred stock
Balance, beginning of year $ 740.3 $ 740.3 $ 454.1
Issuance of Series P preferred stock 287.5
Other (1.9) (1.3)
----------- ----------- ------------
Balance, end of year $ 738.4 $ 740.3 $ 740.3
=========== =========== ============
Common shareholders' equity
Common stock:
Balance, beginning of year $ 8.5 $ 8.2 $ 8.2
Exercise of stock options and awards .3
Restricted stock awards .1
----------- ----------- -----------
Balance, end of year 8.6 8.5 8.2
----------- ----------- -----------
Additional paid-in capital:
Balance, beginning of year 1,294.1 1,211.9 1,219.0
Exercise of stock options and awards, net of tax effect 10.6 82.2 1.6
Restricted stock compensation earned 2.9
Preferred stock issuance costs (8.7)
----------- ----------- -----------
Balance, end of year 1,307.6 1,294.1 1,211.9
----------- ----------- -----------
Retained earnings:
Balance, beginning of year 211.3 201.2 286.9
Net income (loss) 157.3 126.4 (13.0)
Common stock cash dividends declared (51.2) (50.0) (49.0)
Preferred stock cash dividends declared (58.5) (58.5) (45.8)
Spin-off of Crown Vantage Inc. (38.2)
Change in equity component of minimum pension liability 11.6 .5 14.9
Foreign currency translation and other (18.7) 29.9 7.2
----------- ----------- -----------
Balance, end of year 251.8 211.3 201.2
----------- ----------- -----------
Common shareholders' equity, end of year $ 1,568.0 $ 1,513.9 $ 1,421.3
=========== =========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
33
<PAGE>
Notes to Consolidated Financial Statements
Note 1
- -----------------------------------------------------------------------------
SUMMARY OF
SIGNIFICANT
ACCOUNTING
POLICIES
Principles of Consolidation
The consolidated financial statements present the operating results and
financial position of James River Corporation of Virginia and its majority owned
subsidiaries ("James River" or the "Company"). Significant intercompany balances
and transactions have been eliminated. Investments in unconsolidated affiliates
which are at least 20% owned are accounted for using the equity method and are
stated at cost plus the Company's share of undistributed earnings and foreign
currency translation adjustments, as applicable, since acquisition.
Fiscal Year
James River's fiscal year includes the 52 or 53 weeks ending on the last Sunday
in December. The years ended December 29, 1996, and December 25, 1994, each
included 52 weeks while the year ended December 31, 1995, included 53 weeks. In
1995, the Company changed the fiscal year end of its European Consumer Products
subsidiary from November 30 to December 31 to eliminate the one-month lag in
reporting. The one-month lag was eliminated as an adjustment to retained
earnings of $8 million.
Use of Estimates
Financial statements prepared in conformity with generally accepted accounting
principles require management to make estimates and assumptions that affect
amounts reported therein. Actual results could differ from those estimates.
Cash and Cash Equivalents
The Company invests cash in marketable securities, including commercial paper,
government repurchase agreements, and time deposits, with original maturities of
three months or less. The carrying value of cash and cash equivalents
approximates fair value because of the short maturity of these investments.
Inventories
Inventories are stated at the lower of cost or market and include the cost of
materials, labor and manufacturing overhead. The last-in, first-out cost flow
assumption is used for valuing substantially all domestic inventories other than
stores and supplies. Other inventories, including all inventories held by
foreign subsidiaries, are valued using first-in, first-out or average cost
assumptions.
Property, Plant and Equipment
Property, plant and equipment is stated at cost, less accumulated depreciation.
Expenditures for improvements which increase asset values or extend useful lives
are capitalized. Maintenance and repair costs are expensed as incurred. For
financial reporting purposes, depreciation is computed using the straight-line
method over the estimated useful lives of the respective assets, which range
from 20 to 45 years for buildings and 5 to 20 years for machinery and equipment.
For income tax purposes, depreciation is calculated using accelerated methods.
Certain assets are depreciated using composite depreciation methods;
accordingly, no gain or loss is recognized on partial sales or retirements of
these assets.
Timber and Timberlands
Timber and timberlands are stated at cost less accumulated cost of timber
harvested. Cost of timber harvested is recorded as timber is cut at rates which
are determined annually based on the relationship of unamortized timber cost to
the estimated volume of recoverable timber.
34
<PAGE>
Intangible Assets
The excess of the purchase price over the fair value of identifiable net assets
of acquired companies is allocated to goodwill and amortized over 40 years.
Goodwill is presented net of accumulated amortization of $108.7 million as of
December 29, 1996, and $92.2 million as of December 31, 1995. Differences
between the Company's carrying value of investments in unconsolidated affiliates
and its share of the underlying net assets of such affiliates are amortized over
periods of up to 40 years.
The recoverability of goodwill is periodically evaluated to determine
whether current events or circumstances warrant adjustments to the carrying
value. Such evaluation is based upon whether the goodwill is fully recoverable
from the projected undiscounted cash flows of the assets and businesses to which
the goodwill relates. On December 29, 1996, and December 31, 1995, the Company
believes that no impairment of goodwill was indicated.
Interest Costs
The Company capitalizes interest costs as part of the cost of constructing
certain facilities and equipment.
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C>
Total interest costs $ 170.5 $ 233.3 $ 188.7
Interest capitalized (5.1) (6.9) (3.1)
--------- --------- ----------
Net interest expense $ 165.4 $ 226.4 $ 185.6
========= ========= ==========
Interest paid $ 168.7 $ 233.9 $ 168.3
========= ========= ==========
</TABLE>
Other Operating Expenses
Research and development expenditures are expensed as incurred. Direct and
readily identifiable indirect research and development costs totaled $46.4
million in 1996, $53.5 million in 1995 and $47.0 million in 1994. Advertising
costs are expensed as incurred and amounted to $92.0 million in 1996, $100.2
million in 1995 and $82.8 million in 1994.
Foreign Currency Translation
The accounts of most foreign subsidiaries and affiliates are measured using
local currency as the functional currency. For those entities, assets and
liabilities are translated into U.S. dollars at period-end exchange rates, and
income and expense accounts are translated at average monthly exchange rates.
Net exchange gains or losses resulting from such translation are excluded from
net earnings and accumulated as a separate component of retained earnings.
Gains and losses from foreign currency transactions are included in
other income. The U.S. dollar is used as the functional currency for
subsidiaries and affiliates operating in highly inflationary economies, for
which both translation adjustments and gains and losses on foreign currency
transactions are included in other income.
The change in the cumulative gain (loss) included in the translation
component of retained earnings resulting from the translation of assets and
liabilities of foreign subsidiaries and affiliates, net of the effect of
exchange rate hedges, was as follows:
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C>
Balance, beginning of year $ 13.1 $ (31.3) $ (38.5)
Translation adjustments (19.2) 19.8 (6.5)
Related income tax effect (3.9) 24.6 13.7
---------- ---------- -----------
Balance, end of year $ (10.0) $ 13.1 $ (31.3)
========== ========== ===========
</TABLE>
Derivative Financial Instruments
The Company's debt structure and international operations give rise to exposure
to market risks from changes in interest rates and foreign currency exchange
rates. To manage these risks, derivative financial
35
<PAGE>
Notes to Consolidated Financial Statements
instruments are utilized by the Company including interest rate swaps and
options on its long-term debt and foreign exchange contracts on certain of its
net investments in foreign operations. The Company does not hold or issue
financial instruments for trading purposes. Translation gains and losses on
hedges of net foreign investments are deferred and accumulated in the foreign
currency translation component of retained earnings. Gains and losses on
transactional hedges are recognized in income and offset the foreign exchange
gains and losses on related transactions. The gains and losses on interest rate
swap and option agreements are recognized in interest expense as incurred.
Net Income (Loss) Per Common Share and Common Share Equivalent
Net income (loss) per common share is computed based on the weighted-average
number of common shares and dilutive common share equivalents outstanding during
the period. Net income (loss) used in these computations is reduced by preferred
dividend requirements. Fully diluted earnings per share are considered to be
equal to primary earnings per share in all periods presented because the assumed
conversion of potentially dilutive securities which are not common share
equivalents was not dilutive.
Reclassifications
Certain amounts in the prior years' financial statements and supporting footnote
disclosures have been reclassified to conform to the current year's
presentation.
NOTE 2
- -----------------------------------------------------------------------------
ACQUISITIONS,
DISPOSITIONS
AND OTHER
TRANSACTIONS
1996
On September 3, 1996, the Company purchased the remaining 14% minority interest
in its European Consumer Products subsidiary, under an existing put and call
agreement, from EuroPaper Inc. ("EuroPaper") for $199.9 million. Prior to the
settlement, James River's consolidation of its European Consumer Products
subsidiary included the EuroPaper minority interest at a book value of $151
million. Concurrent with the receipt of the put exercise notice from EuroPaper
on June 29, 1996, James River recorded the acquisition of the remaining 14%
minority interest under the purchase method of accounting.
On August 22, 1996, the Company completed the sale of its Flexible
Packaging group for gross cash proceeds of $372.7 million. The Flexible
Packaging group included ten manufacturing facilities with 2,200 employees.
These facilities included four lamination and coating plants, five film and
converting plants, and a rigid plastics container plant. Net assets sold totaled
$336.7 million, net of total liabilities of $8.4 million. The Flexible Packaging
group had annual net sales of $483 million. Proceeds from this transaction were
used to settle the EuroPaper put and reduce long-term debt. Pro forma results
for 1996 and 1995, adjusted for the Flexible Packaging group sale, are presented
under the heading Supplemental Pro Forma Financial Information, herein.
In October 1996, the Company completed the sale of its Inks division of
the Packaging Business, which included seven plants, for gross cash proceeds of
$27 million. This division manufactured and sold high quality inks for packaging
applications with annual sales of approximately $47 million. In May 1996, James
River completed the sale of its specialty operations business, which was a part
of the North American Consumer Products Business, for cash proceeds of
approximately $30 million and a combination of subordinated long-term notes and
preferred stock. The specialty operations business, with annual sales of
approximately $125 million, consisted of a party goods facility, a specialty
mill, and a foodservice specialties plant. In January 1996, the Company
contributed its Handi-Kup foam cup operations, formerly part of the North
American Consumer Products Business, to a joint venture for $26 million of cash,
approximately $10 million face value of subordinated long-term notes, and a 45%
minority interest in the joint venture. The Handi-Kup operations contributed to
the joint venture included four foam cup plants, with annual sales of
approximately $96 million. The Company's interest in the joint venture was
subsequently sold in December 1996 for cash proceeds of $26 million, including
the collection of the subordinated long-term notes.
36
<PAGE>
1995
On August 25, 1995, the Company completed the spin-off to shareholders of Crown
Vantage Inc. ("Vantage") which included a large part of the Company's
Communications Papers Business, along with the specialty paper-based portion of
its Packaging Business. Net proceeds from Vantage's financings totaling $480
million and pay-in-kind notes valued at $85 million were received by James River
as a result of the spin-off. These amounts were treated as a return of the
Company's investment. The book value of net assets spun off to Vantage less
proceeds received totaled $38 million which was recorded as an adjustment to
retained earnings. The operating results of the facilities which comprise
Vantage were included in the consolidated statement of operations and the
consolidated statement of cash flows through the eight months (35 weeks) ended
August 27, 1995. Pro forma results for 1995, adjusted for the Vantage spin-off,
are presented under the heading Supplemental Pro Forma Financial Information,
herein.
In November 1995, the Company acquired the cutlery division of Benchmark
Holdings, Inc. for $52.5 million. In May 1995, James River sold its option to
purchase its partners' 50% interest in the chemical recovery and cogeneration
facility at the Pennington, Alabama, pulp and paper mill for $22.2 million. The
net proceeds were recognized as a deferred gain and are being amortized over 18
years. James River retained ownership of the remaining 50% interest in this
facility.
1994
Prior to July 5, 1994, James River and Rayne Holdings Inc. ("Rayne") each owned
50% of Jamont Holdings N.V. ("Jamont Holdings") which, in turn, owned 86.4% of
the European Consumer Products Business. The European Consumer Products Business
produces branded and private label tissue, feminine hygiene and foodservice
products for the retail and away-from-home markets in Europe. On July 5, 1994,
James River completed the acquisition of Rayne's 50% ownership interest in
Jamont Holdings for approximately $575 million in cash. The European Consumer
Products Business was consolidated beginning in July 1994; prior to that time,
it was accounted for using the equity method.
In March 1994, the Company sold its 50% interest Coastal Paper
Company, a Mississippi-based producer of lightweight papers. The Company also
completed the sale of certain assets of its inactive Fitchburg, Massachusetts,
facility in September 1994, and the sale of its Sandston, Virginia, specialty
tabletop facility in November 1994. During 1994, James River also completed the
sale of 47,000 acres of timberlands.
Summary
The purchase prices of acquisitions were allocated to the acquired net assets
based on their respective fair values as summarized below.
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C>
Acquisitions of consolidated entities:
Fair value of assets acquired $ 199.9 $ 55.2 $ 2,119.9
Liabilities assumed or created (2.7) (1,543.0)
--------- ---------- ---------
Cash paid for acquisitions 199.9 52.5 576.9
--------- ---------- ---------
Cash acquired (38.9)
--------- ---------- ---------
Cash paid for acquisitions, net $ 199.9 $ 52.5 $ 538.0
========= ========== ==========
Dispositions (other than Vantage spin-off):
Fair value of assets sold $ 508.9 $ 13.7 $ 37.0
Noncash consideration received (12.3) (2.8) (2.4)
--------- ---------- ---------
Cash received from sale of assets $ 496.6 $ 10.9 $ 34.6
========= ========== ==========
</TABLE>
37
<PAGE>
Notes to Consolidated Financial Statements
NOTE 3
- ---------------------------------------------------------------------------
SEVERANCE
AND OTHER
ITEMS
1996
During 1996, the Company recorded a net severance and other items charge of
$10.7 million which included $40.6 million of severance charges and $59.3
million of asset write-downs offset by $89.2 million in net gains on business
dispositions (see Note 2). Severance charges related to the termination of 580,
200 and 90 employees at the Company's North American Consumer Products Business,
European Consumer Products Business and other domestic manufacturing and
corporate facilities, respectively. Asset write-downs related to the phase-out
of certain packaging equipment and planned asset consolidations in Europe. The
Company has made severance payments of $69.7 million to approximately 2,000
employees for whom severance costs have been accrued since December 1994.
1995
During 1995, the Company recorded $51.9 million which included severance charges
for announced reductions in work force of $42.7 million, related fixed asset
write-offs of $4.2 million and transaction costs associated with the Vantage
spin-off of $5.0 million (see Note 2). Severance charges were primarily related
to the termination of approximately 1,050 employees located in Europe and 370
employees located at domestic manufacturing and corporate facilities.
1994
In December 1994, the Company recorded $9.6 million which included severance
charges for announced reductions-in-force of $16.4 million, asset write-offs of
$28.9 million, and the reversal of $35.7 million of reserves associated with a
1992 restructuring program. Severance charges represent the costs related to the
termination of approximately 650 employees primarily located at Communications
Papers and Packaging facilities. Asset write-offs related to the phase-out of
certain packaging equipment and planned asset consolidations in Europe. The
reversal of a portion of the 1992 restructuring charge results from the
Company's decision not to dispose of certain facilities.
NOTE 4
- ---------------------------------------------------------------------------
OTHER INCOME
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C>
Equity in earnings of unconsolidated affiliates $ 10.2 $ 25.7 $ 13.7
Interest income 6.6 11.2 9.9
Gain on sale of assets 5.1 4.3 5.2
Foreign currency exchange gains (losses) .8 (.3) (.6)
Other, net (1.1) (.6) .7
---------- --------- ----------
Total other income $ 21.6 $ 40.3 $ 28.9
========== ========= ==========
</TABLE>
NOTE 5
- -------------------------------------------------------------------------------
INCOME TAXES
The components of income (loss) before income taxes and minority interests were
as follows:
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
- ---------------------------------------------------------------------------------
<S> <C>
Domestic $ 210.6 $ 197.2 $ 7.2
Foreign 78.5 40.0 (16.9)
---------- --------- -----------
Income (loss) before income taxes
and minority interests $ 289.1 $ 237.2 $ (9.7)
========== ========= ===========
</TABLE>
38
<PAGE>
Income tax expense (benefit) consisted of the following:
(in millions) 1996 1995 1994
- -----------------------------------------------------------------------
Current:
Federal $ 65.3 $ 66.5 $ 3.6
State 10.5 6.3 1.3
Foreign 30.4 3.6 4.1
-------- ------- ---------
Total current income
tax provision 106.2 76.4 9.0
-------- ------- ---------
Deferred:
Federal 14.1 1.3 (3.3)
State .5 8.1 (.6)
Foreign 6.4 23.6 (.7)
-------- ------- ---------
Total deferred income
tax provision (benefit) 21.0 33.0 (4.6)
-------- ------- ---------
Income tax expense $ 127.2 $ 109.4 $ 4.4
======== ======= =========
During 1996 and 1995, tax benefits credited to shareholders' equity which
primarily related to the redemption of stock options were $1.1 million and $12.4
million, respectively. Cash payments for income taxes totaled $58.5 million in
1996, $78.7 million in 1995 and $14.1 million in 1994.
No provision for income taxes has been made for $66.2 million of
undistributed earnings of certain of the Company's foreign subsidiaries and
affiliates which have been indefinitely reinvested. It is not practicable to
determine the amount of U.S. income tax which would be payable if such
undistributed foreign earnings were repatriated because any U.S. taxes payable
on such repatriation would be offset, at least in part, by foreign tax credits.
Principal reasons for the difference between the federal statutory
income tax rate on income (loss) before income taxes and minority interests and
the Company's effective income tax rate were as follows:
<TABLE>
<CAPTION>
Percent of Pretax Income or (Loss)
------------------------------------
1996 1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C>
Federal statutory income tax rate 35.0% 35.0% (35.0)%
State income taxes, net of federal income tax effect 2.5 3.9 5.1
Charitable contributions fair market value in excess
of basis (22.9)
Foreign losses not benefitted 4.4 63.4
Goodwill 4.0 3.3 43.3
Other items, net 2.5 (3.6) (8.7)
------- ------- ------
Effective income tax rate on current income (loss) 44.0% 43.0% 45.2%
------- ------- ------
Effect of increase in income tax rate 3.1
------- ------- ------
Effective income tax rate 44.0% 46.1% 45.2%
====== ===== ======
</TABLE>
In August 1995, the French Parliament passed a law imposing a 10% tax surcharge
on the normal corporate tax rate, effectively increasing this rate 3%. The
Company recorded a $7.4 million charge ($6.3 million, net of minority interests)
to increase the deferred tax liability for the effect of this increase in tax
rate.
39
<PAGE>
Notes to Consolidated Financial Statements
The income tax effects of temporary differences that gave rise to the
net deferred tax liability as of December 29, 1996, and December 31, 1995, were
as follows:
<TABLE>
<CAPTION>
(in millions) 1996 1995
- -----------------------------------------------------------------------------------------------
<S> <C>
Excess of book over tax basis of property, plant and equipment $ 680.8 $ 785.8
Pension benefits 76.1 72.5
Other items 64.0 49.9
--------- ---------
Total deferred tax liabilities 820.9 908.2
--------- ---------
Postretirement benefits other than pensions (181.3) (184.3)
Alternative minimum tax credit carryforwards (92.7) (126.5)
Accrued liabilities (113.3) (105.2)
Tax loss carryforwards (40.0) (63.3)
Other items (60.1) (66.8)
--------- ---------
Total deferred tax assets (487.4) (546.1)
--------- --------
Valuation allowance 31.0 43.8
-------- ----------
Net deferred tax liability $ 364.5 $ 405.9
========= ===========
</TABLE>
The valuation allowance as of December 29, 1996, and December 31, 1995, reflects
the impact of foreign net operating losses and tax credits for which the Company
does not currently anticipate receiving future tax benefits. If recognized in
the future, $9.5 million of these tax benefits will be allocated to reduce
goodwill of certain acquired subsidiaries.
The Internal Revenue Service is currently reviewing the Company's federal
income tax returns for the years 1990 through 1992. In the opinion of
management, potential adjustments resulting from these examinations will not
have a material effect on the Company's financial condition.
As of December 29, 1996, the Company had $104.3 million of foreign net
operating loss carryforwards which expire primarily from 1997 through 2005 and
$2.8 million of foreign tax credit carryforwards which expire from 1998 through
2000. The Company also had alternative minimum tax ("AMT") credit carryforwards
of $92.7 million which have been reflected as a reduction of deferred taxes. AMT
credits may generally be carried forward indefinitely and used in future years
to the extent the Company's regular tax liability exceeds the AMT liability for
such future years.
NOTE 6
- ----------------------------------------------------------------------------
PENSION PLANS
James River sponsors various contributory and noncontributory pension plans
which cover substantially all employees. The Company also participates in
several multiemployer retirement plans which provide defined benefits to
employees covered under certain collective bargaining agreements. Benefits under
the majority of plans for hourly employees are primarily based on stated
benefits per year of credited service. Benefits for salaried employees are
primarily related to compensation and years of credited service. The Company
makes contributions to its plans sufficient to meet the minimum funding
requirements of applicable laws and regulations plus additional amounts, if any,
as the Company, in consultation with its actuaries, deems to be appropriate.
Contributions to multiemployer plans are generally based on negotiated labor
contracts. The Company's contributions totaled $19.5 million, $32.6 million and
$26.7 million in 1996, 1995 and 1994, respectively. Plan assets consist
principally of equity securities and corporate and government obligations.
40
<PAGE>
The components of net pension cost were as follows:
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C>
Service cost $ 16.7 $ 16.2 $ 20.8
Interest accrued on projected benefit obligation 84.8 95.5 95.0
Net investment (income) loss on plan assets:
Actual (162.9) (246.0) (12.8)
Deferral of difference between actual and
expected investment income 59.1 137.0 (97.4)
Net amortization 11.9 8.8 19.8
Contributions to multiemployer pension plans 4.6 5.1 5.1
--------- ---------- -----------
Net pension cost $ 14.2 $ 16.6 $ 30.5
========= =========== ===========
</TABLE>
Net amortization included amortization of the net transition assets, net
experience gains and losses, and prior service costs over 15 to 20 years. The
Company incurred termination benefit and curtailment costs associated with the
1996, 1995 and 1994 business dispositions and severance programs. Charges of
$18.3 million, $8.0 million and $4.1 million are included with severance and
other expenses for the years ended December 29, 1996, December 31, 1995, and
December 25, 1994, respectively.
The actuarial assumptions used in determining net pension costs were as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
- ----------------------------------------------------------------------------------------------
<S> <C>
Discount rate 7.5% 8.6% 7.4%
Assumed rate of increase in compensation levels 5.0% 5.0% 5.5%
Expected long-term rate of return on plan assets 10.0% 10.0% 10.0%
</TABLE>
The following table sets forth the funded status of the Company's plans:
<TABLE>
<CAPTION>
1996 1995
-------------------------- --------------------------
Assets Accumulated Assets Accumulated
Exceed Benefits Exceed Benefits
Accumulated Exceed Accumulated Exceed
(in millions) Benefits Assets Benefits Assets
- ------------------------------------------------------------------------------------------------
<S> <C>
Actuarial present value of:
Vested benefits $ 902.2 $ 164.0 $ 859.9 $216.4
Nonvested benefits 31.6 17.6 29.8 23.3
---------- ---------- ---------- -----------
Accumulated benefit obligation 933.8 181.6 889.7 239.7
Effect of projected future salary
increases 22.8 .8 25.0 .5
---------- ---------- ---------- -----------
Projected benefit obligation 956.6 182.4 914.7 240.2
---------- ---------- ---------- -----------
Plan assets at fair value 1,200.4 158.0 1,067.6 198.7
---------- ---------- ---------- -----------
Plan assets in excess of (less than)
projected benefit obligation 243.8 (24.4) 152.9 (41.5)
Unrecognized net (gain) loss (82.6) 11.9 10.0 31.9
Unrecognized prior service cost 33.3 30.9 30.9 40.6
Unrecognized net transition asset (7.7) (3.0) (8.7) (4.4)
Minimum pension liability (39.0) (67.6)
---------- ---------- ---------- -----------
Net pension asset (liability) $ 186.8 $ (23.6) $ 185.1 $ (41.0)
========== ========== ========== ==========
</TABLE>
As of December 29, 1996, benefit obligations were determined using a discount
rate of 7.75% and an assumed rate of increase in compensation levels of 5.0%.
The effect of the changes in these assumptions was a decrease in the projected
benefit obligation of $28.6 million.
Other assets included net noncurrent pension assets of $202.2 million as
of December 29, 1996, and $211.7 million as of December 31, 1995, exclusive of
the additional minimum pension liabilities. As of December 29, 1996, $39.0
million of additional minimum pension liabilities for underfunded plans were
included in other long-term liabilities, offset by an intangible asset of $30.5
million and a charge of $5.1
41
<PAGE>
Notes to Consolidated Financial Statements
million to retained earnings, net of deferred taxes of $3.4 million. As of
December 31, 1995, the additional minimum pension liability of $67.6 million was
offset by an intangible asset of $40.2 million and a charge to retained earnings
of $16.7 million, net of deferred taxes of $10.7 million.
In 1995, net noncurrent pension assets and minimum pension liabilities
were reduced by $28.7 million and $22.2 million, respectively, reflecting plans
spun off with Vantage. Under certain conditions, including the inability of
Vantage to fund required contributions, the Company has agreed to assume the
liability for any underfunded benefits for the plans spun off. In the opinion of
the Company's management, it is unlikely that these conditions will occur.
NOTE 7
- --------------------------------------------------------------------------
POSTRETIREMENT
BENEFITS OTHER
THAN PENSIONS
James River provides certain medical and life insurance benefits to eligible
retired employees. Salaried employees hired before January 1, 1993, generally
become eligible for retiree medical benefits after reaching age 55 with 15 years
of service or after reaching age 65. Under the salaried plan, post-age 65
eligible retirees are reimbursed for a portion of the cost of premiums of
Medicare supplement insurance policies, based upon vested years of service.
Post-age 65 salaried retirees are also reimbursed for certain prescription drug
costs, less deductibles. Pre-age 65 eligible retirees are paid a stated
percentage of covered medical expenses, less deductibles. Salaried employees
hired after January 1, 1993, are not eligible for retiree medical benefits.
Benefits, eligibility and cost-sharing provisions for hourly employees vary by
location and collective bargaining unit. All of the Company's retiree medical
plans are unfunded.
The components of net periodic postretirement benefit cost were as
follows:
<TABLE>
<CAPTION>
(in millions) 1996 1995 1994
- ------------------------------------------------------------------------------------------------
<S> <C>
Service cost $ 8.0 $ 10.4 $ 11.4
Interest cost on accumulated
postretirement benefit obligation 28.2 39.7 38.8
Net amortization (7.0) (8.4) (7.4)
---------- --------- -----------
Net periodic postretirement benefit cost $ 29.2 $ 41.7 $ 42.8
========== ========= ===========
</TABLE>
Net amortization included amortization of prior service gains and net experience
gains and losses over 15 years. In 1996, the Company incurred curtailment gains
of $12.2 million related to its business dispositions. The discount rate used in
determining the net periodic postretirement benefit cost was 7.4% for 1996, 8.5%
for 1995 and 7.5% for 1994. The discount rate used in determining the
accumulated postretirement benefit obligation was 7.6% as of December 29, 1996.
The effect of the increase in the discount rate was a decrease in the
accumulated benefit obligation of $10.7 million.
Summary information on the Company's plans was as follows:
<TABLE>
<CAPTION>
(in millions) 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C>
Accumulated postretirement benefit obligation:
Retirees $ 183.1 $ 179.0
Fully eligible active participants 40.8 50.3
Other active participants 118.8 157.5
-------- ----------
Total accumulated postretirement benefit obligation 342.7 386.8
Unrecognized net gain 63.3 18.4
Unrecognized prior service gain 74.4 81.5
-------- ----------
Accrued postretirement benefit obligation $ 480.4 $ 486.7
======== ==========
</TABLE>
42
<PAGE>
As of December 29, 1996, and December 31, 1995, the Company has included $22.4
million and $22.0 million of accrued postretirement benefit costs in accrued
liabilities, respectively, representing the estimated current portion of this
liability.
The assumed health care cost trend rate used in measuring the
accumulated postretirement benefit obligation was 8.5% in 1996, declining by .5%
per year through 2003 and .25% thereafter through 2005 to an ultimate rate of
5.0%. If the health care cost trend rate assumptions were increased by 1%, the
accumulated postretirement benefit obligation as of December 29, 1996, would
have increased by $33.8 million. The effect of this change on the sum of the
service cost and interest cost components of net periodic postretirement benefit
cost for 1996 would have been an increase of $4.4 million.
NOTE 8
- ------------------------------------------------------------------------------
SUPPLEMENTAL
BALANCE SHEET
INFORMATION
<TABLE>
Inventories
<CAPTION>
(in millions) 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C>
Raw materials $135.7 $197.1
Finished goods and work in process 418.2 557.6
Stores and supplies 131.6 151.4
-------- --------
685.5 906.1
Subtraction to state certain inventories at last-in, first-out cost (35.1) (84.7)
-------- --------
Total inventories $650.4 $821.4
======== ========
Valued at lower of cost or market:
Last-in, first-out $365.7 $482.9
First-in, first-out or average 284.7 338.5
-------- --------
Total inventories $650.4 $821.4
======== ========
</TABLE>
<TABLE>
Property, Plant and Equipment
<CAPTION>
(in millions) 1996 1995
- ----------------------------------------------------------------------------------------------
<S> <C>
Land and improvements $ 168.9 $ 177.5
Buildings 824.4 894.9
Machinery and equipment 4,564.6 4,788.7
Construction in progress 219.1 226.8
-------- --------
5,777.0 6,087.9
Accumulated depreciation (2,115.7) (2,106.9)
-------- --------
3,661.3 3,981.0
Timber and timberlands, net 90.2 93.1
-------- --------
Net property, plant and equipment $ 3,751.5 $ 4,074.1
======== ========
</TABLE>
<TABLE>
Accrued Liabilities
<CAPTION>
(in millions) 1996 1995
- ---------------------------------------------------------------------------------------------
<S> <C>
Taxes payable, other than income taxes $ 95.8 $ 93.3
Employee insurance benefits 69.9 63.6
Compensated absences 53.7 61.7
Income taxes payable 55.1 3.5
Other items 321.1 271.6
-------- --------
Total accrued liabilities $ 595.6 $ 493.7
======== ========
</TABLE>
43
<PAGE>
Notes to Consolidated Financial Statements
NOTE 9
- --------------------------------------------------------------------------------
INVESTMENTS
IN AFFILIATES
As of December 29, 1996, James River's principal investments in affiliates
accounted for using the equity method included investments in Aracruz Celulose
S.A. ("Aracruz"), the Naheola Cogeneration Limited Partnership (the "Naheola
Partnership"), Dubreuil Forest Products Limited ("Dubreuil"), and Ipek Kagit
Sanayi ve Ticaret A.S. ("Ipek Kagit"). Aracruz, in which James River has a 5.2%
indirect ownership interest, is a major Brazilian eucalyptus pulp producer.
James River's investment in Aracruz is accounted for using the equity method, as
the Company has direct ownership interests in excess of 20% in certain
intervening holding companies. James River has a 50% ownership interest in the
Naheola Partnership, which owns and operates a $300 million chemical recovery
cogeneration facility at the Company's Pennington, Alabama, pulp and paper mill.
Dubreuil, in which James River has a 40% indirect ownership interest, operates a
sawmill in Dubreuilville, Ontario. James River has a 50% ownership interest in
Ipek Kagit, a Turkish producer of sanitary paper products.
Changes in James River's investments in affiliates during 1996 and 1995
were as follows:
(in millions) 1996 1995
- ---------------------------------------------------------------------------
Balance, beginning of year $ 146.8 $125.1
Foreign currency translation adjustments, net (1.1) 1.2
Equity in net income 10.2 25.7
Dividends received (9.1) (23.8)
Other, net 7.8 18.6
--------- ------
Balance, end of year $ 154.6 $146.8
========= ======
James River's share of undistributed earnings of affiliates included in
consolidated retained earnings was $71.5 million as of December 29, 1996, and
$61.9 million as of December 31, 1995.
James River's investments in affiliates and equity in net income were
not material to the financial condition and results of operations for the year
ended December 29, 1996. The summarized financial information presented below
represents an aggregation of 100% of the principal companies accounted for by
the equity method for the year ended December 31, 1995.
(in millions) 1995
- -------------------------------------------------------------------------
Condensed income statement information:
Revenues $ 184.5
Gross profit 62.1
Net earnings 74.2
Consolidated balance sheet information:
Current assets $ 70.6
Noncurrent assets, including intangibles 509.9
Current liabilities 45.0
Noncurrent liabilities 193.6
Equity 341.9
James River's share of equity $ 153.4
=========
44
<PAGE>
NOTE 10
- -------------------------------------------------------------------------------
INDEBTEDNESS
<TABLE>
<CAPTION>
(in millions) 1996 1995
- -------------------------------------------------------------------------------------------------
<S> <C>
Revolving credit facilities, 4.82% average interest rate $ 341.0 $ 498.6
Money market notes, 6.95% average interest rate 48.4 305.0
Commercial paper, 3.33% average interest rate 9.5 119.7
Notes and debentures:
6.7% notes, payable in 2003 249.6 249.6
6.75% notes, payable in 1999 199.8 199.7
7.57% average interest rate medium-term notes,
payable from 1997 to 2004 200.0 200.0
7.75% debentures, payable in 2023 149.7 149.7
7.50% average interest rate notes, payable to 2009 106.0 153.9
8.375% notes, payable in 2001 199.5 199.4
9.25% debentures, payable in 2021 200.0 200.0
9.77% note, payable from 2005 to 2014 200.0 200.0
Revenue bonds, average interest rate 7.03%, payable to 2028 67.3 72.2
------- -------
Total 1,970.8 2,547.8
Less current portion 116.9 44.8
------- -------
Long-term debt $1,853.9 $2,503.0
======== ========
</TABLE>
Minimum Principal Payments
Minimum principal payments on long-term debt, excluding commercial paper, money
market notes and revolving credit borrowings, for the next five years are as
follows:
(in millions) 1997 1998 1999 2000 2001
- -----------------------------------------------------------------------------
Scheduled maturities $ 116.9 $ 21.0 $ 215.6 $ 41.5 $ 208.8
======= ======= ======= ======= =======
If the current level of commercial paper, money market notes and revolving
credit agreements remains outstanding until the expiration of the underlying or
supporting agreements, additional payments of $399 million would be required in
1999. It is the Company's current intention to refinance or renew such
agreements prior to their expiration.
Revolving Credit Facilities
As of December 29, 1996, James River and its consolidated subsidiaries had
revolving credit agreements with various domestic and foreign banks providing
for unsecured borrowings of up to approximately $1,162 million. The interest
rates associated with the revolving credit agreements are primarily based, at
the option of the Company, on the prime rate, the London Interbank Offered Rate
("LIBOR"), the Paris Interbank Offered Rate, certificate of deposit rates, or
bankers' acceptance rates. Annual commitment fees of up to 25 basis points of
the unused portion of the commitments may be incurred during the revolving loan
periods; additionally, certain agreements provide for facility fees which may
range from 10 to 20 basis points of the committed amounts. The majority of the
Company's domestic and foreign revolving credit agreements, totaling $935
million, expire in December 1999; the remaining agreements expire between 1997
and 1998.
Commercial Paper and Money Market Notes
As of December 29, 1996, James River had domestic and foreign commercial paper
programs providing for commercial paper issuances of up to $624.1 million. In
addition, James River had agreements with several banks providing for other
borrowings, dependent upon bank availability. Commercial paper and money market
notes generally bear interest at below-prime rates. As of December 31, 1995, the
outstanding commercial paper and money market notes had average interest rates
of 4.68% and 6.69%, respectively. Because of the availability of long-term
financing through the Company's global revolving
45
<PAGE>
Notes to Consolidated Financial Statements
credit capacity and the Company's intention to refinance commercial paper and
money market notes, these borrowings have been classified as long-term debt.
During 1996, the Company made payments on long-term debt of $545
million, resulting in the reduction of commercial paper and money market
borrowings of $358 million, revolving credit agreements of $138 million and
notes and debentures of $49 million. This reduction in long-term debt was
primarily funded through divestiture proceeds (see Note 2) and cash flows from
operations.
Notes and Debentures
The Company's most restrictive debt agreements contain limitations on borrowings
and require maintenance of a minimum amount of net worth. As of December 29,
1996, under the most restrictive provisions of the Company's debt agreements,
the Company had additional borrowing capacity of $1.6 billion and net worth in
excess of the minimum requirement of approximately $390 million.
Certain of the Company's notes and revenue bonds are collateralized by
assets consisting of property, plant and equipment, accounts receivable and
inventories. Such assets are immaterial in relation to total assets.
NOTE 11
- --------------------------------------------------------------------------------
FINANCIAL INSTRUMENTS
The Company is subject to market rate risk from exposure to changes in interest
rates and currency exchange rates and enters into various interest rate and
foreign exchange contracts to manage this exposure. Financial instruments used
for these purposes are evaluated against the Company's policies for managing
this risk, including counterparty performance and hedging practices, and are
monitored using techniques such as market valuations and sensitivity analysis.
Interest Rate Instruments
The Company's strategy is to optimize the ratio of the Company's fixed to
variable rate financing consistent with maintaining an acceptable level of
exposure to the risk of interest rate fluctuation. To obtain this mix, the
Company primarily uses interest rate swaps and options that have the effect of
converting specific debt obligations of the Company from fixed to variable rate,
or vice versa, as required.
The Company has entered into interest rate swap agreements under which
it pays to counterparties a variable interest rate based on LIBOR and the
counterparties pay the Company a fixed interest rate on a notional principal
amount of $1,286 million. Additionally, the Company entered into options under
which premiums are paid to a counterparty in exchange for protection from paying
the LIBOR based rates in excess of 6.5% up to 8.01% on $646 million of the
$1,286 million in notional amount of interest rate swaps. These contracts mature
in September 1998 and January 1999. The weighted average pay rate and receive
rate under the interest rate contracts were 4.0% and 3.7%, respectively, for the
years ended December 29, 1996, and December 31, 1995.
The fair value of the Company's financial instruments related to its
indebtedness were as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------------- ---------------------------
Carrying Carrying
Value or Value or
Gross Notional Fair Gross Notional Fair
(in millions) Amount Value Amount Value
- ---------------------------------------------------------------------------------------------------
<S> <C>
Long-term debt, including current maturities $ (1,971) $ (2,065) $ (2,548) $ (2,700)
Interest rate swaps 1,286 (15) 1,286 (3)
</TABLE>
The estimates of fair values of the Company's financial instruments related to
indebtedness are based on quoted market prices of comparable instruments or on
current rates available to the Company for financial instruments with similar
terms and remaining maturities. Based on the Company's total indebtedness at
46
<PAGE>
December 29, 1996, a 10 basis point interest rate change would impact the fair
value of the total debt portfolio by approximately $9.6 million. This exposure
would be offset by a $2.5 million change to the fair value of the interest rate
swap portfolio.
Currency Instruments
The Company entered into foreign exchange contracts that hedge a portion of its
net investment in its European Consumer Products Business. The total notional
amount of such hedges was $470 million as of December 29, 1996, and December 31,
1995. Of such notional amount, $330 million was denominated in French francs and
the remaining $140 million was denominated in British pounds, Belgian francs and
Spanish pesetas. In connection with these contracts, the Company has entered
into interest rate swap agreements to mitigate the related interest rate
exposure of the foreign exchange contracts. The weighted-average pay and receive
rates on the interest rate agreements were 7.6% and 5.1%, and 7.9% and 5.4%,
respectively, for the years ended December 29, 1996, and December 31, 1995,
respectively. These contracts mature on September 1, 1998.
As of December 29, 1996, and December 31, 1995, the carrying value of
foreign exchange contracts was a net liability of $59.3 million and $86.7
million, respectively, and the fair value, based on quoted market prices of
comparable instruments, was a net liability of $85.3 million and $108.0 million,
respectively.
The Company's European Consumer Products Business entered into foreign
exchange contracts which mature in one year or less to hedge its market rate
risk from exposure to changes in foreign currency exchange rates primarily
resulting from intercompany financing and commercial transactions. As of
December 29, 1996, and December 31, 1995, the Company had net unrealized
(losses) gains of $(.1) million and $.4 million, respectively, on a notional
amount of $47 million and $81 million, respectively, for these hedge
instruments.
Credit Risk
The counterparties to the Company's interest rate and foreign exchange contracts
consist of a number of major financial institutions. The Company continually
monitors its positions with, and the credit quality of, these institutions and
does not anticipate nonperformance by the counterparties.
NOTE 12
- --------------------------------------------------------------------------------
COMMON
STOCK
The Company has 150 million authorized shares of common stock, $.10 par value
("Common Stock"), of which 86,194,612 shares were outstanding on December 29,
1996. Common shares reserved for issuance as of December 29, 1996, were as
follows:
1996
- -------------------------------------------------------------------------
Stock option plans 2,813,038
Incentive stock plan 2,772,158
Deferred stock plan 374,051
Director stock ownership plan 97,175
Conversion of Series K preferred stock 2,675,087
Conversion of Series L preferred stock 5,451,077
Conversion of Series N preferred stock 1,439,313
Conversion of Series P preferred stock 15,341,215
----------
Total common shares reserved for issuance 30,963,114
==========
Shareholder Rights Plan
Under a shareholder rights plan, preferred stock purchase rights ("Rights") are
issued at the rate of one Right for each share of Common Stock. Each Right
entitles its holder to purchase one one-thousandth of a share of Series M
Cumulative Participating Preferred Stock ("Series M") at an exercise price of
$150,
47
<PAGE>
Notes to Consolidated Financial Statements
subject to adjustment. The Rights will only be exercisable if a person or group
acquires, has the right to acquire, or has commenced a tender offer for 15% or
more of the outstanding Common Stock. The Rights are nonvoting, pay no
dividends, expire on March 1, 1999, and may be redeemed by the Company for $.01
per Right at any time before the tenth day (subject to adjustment) after a 15%
position is acquired. The Rights have no effect on earnings per share until they
become exercisable.
After the Rights are exercisable, if the Company is acquired in a merger
or other business combination, or if 50% or more of the Company's assets are
sold, each Right will entitle its holder (other than the acquiring person or
group) to purchase, at the then-current exercise price, common stock of the
acquiring person having a value of twice the exercise price. In addition, in the
event a 15% or greater shareholder (i) acquires the Company through a merger
where James River is the surviving corporation, (ii) engages in certain
self-dealing transactions, or (iii) increases his ownership other than through a
cash tender offer providing fair value to all holders of Common Stock, each
Right will entitle its holder (other than the acquiring person or group) to
purchase, at the then-current exercise price, Common Stock having a value of
twice the exercise price.
NOTE 13
- --------------------------------------------------------------------------------
PREFERRED
STOCK
The Company is authorized to issue up to five million shares of preferred stock,
$10 par value. The preferred shares are issuable in series, each with varying
dividend rates, redemption rights, conversion terms, liquidation values and
voting rights. Outstanding series of preferred stock were as follows:
<TABLE>
<CAPTION>
Depositary Shares
----------------------------------------- Preferred Annual Liquidation Value
Liquidation Shares Annual Shares Dividend (in millions)
Value Outstanding Dividend Outstanding Requirement --------------------
Per Share 1996 Per Share 1996 (in millions) 1996 1995
- -------------------------------------------------------------------------------------------------------------
<S> <C>
Series K* $ 50 $ 3.3750 1,999,895 $ 6.7 $ 100.0 $ 100.0
Series L 50 4,000,000 3.5000 1,000,000 14.0 200.0 200.0
Series N 50 1,056,168 3.5000 264,042 3.7 52.8 52.8
Series 0 25 3,924,600 2.0625 196,230 8.1 98.1 100.0
Series P 17.25 16,664,366 1.5525 166,644 25.9 287.5 287.5
--------- ------ ------- -------
Total 3,626,811 $58.4 $ 738.4 $ 740.3
========= ====== ======= =======
</TABLE>
*Amounts listed for Series K are for preferred shares
The Company has reserved 150,000 preferred shares for the issuance of Series M
preferred stock under the Shareholder Rights Plan.
The Series K $3.375 Cumulative Convertible Exchangeable Preferred Stock
("Series K") is convertible at the option of the holder into Common Stock at
$37.38 per common share (or 1.3376 shares of Common Stock for each preferred
share). The Series K is redeemable by the Company at $50 per share plus accrued
dividends. The Series K is exchangeable at the option of the Company for 6.75%
Convertible Subordinated Debentures due November 1, 2016, at $50 principal
amount per share of Series K. If issued, these debentures will be convertible
into Common Stock on the same terms as the Series K.
The Series L $14.00 Cumulative Convertible Exchangeable Preferred Stock
("Series L") and the Series N $14.00 Cumulative Convertible Exchangeable
Preferred Stock ("Series N") are each held in the form of depositary shares,
with each depositary share representing a one-quarter interest in a preferred
share. The Series L and the Series N depositary shares are convertible at the
option of the holder into Common Stock at $36.69 per common share (or 1.3626
shares of Common Stock per depositary share). The Series L and Series N
depositary shares are each redeemable by the Company at a redemption price
declining from $50.35 per depositary share as of December 29, 1996, to $50 per
depositary share in October 1997, and thereafter, plus accrued dividends. The
Series L and Series N depositary shares are
48
<PAGE>
each exchangeable at the option of the Company for 7% Convertible Subordinated
Debentures due October 1, 2017, at $50 principal amount per depositary share.
If issued, these debentures will be convertible into Common Stock on the same
terms as the depositary shares.
The Series O 8 1/4% Cumulative Preferred Stock ("Series O") is held in
the form of depositary shares, with each depositary share representing a
one-twentieth interest in a preferred share. The Series O depositary shares are
not redeemable prior to October 1, 1997. On or after that date, they are
redeemable by the Company at $25 per depositary share, plus accrued dividends.
The Series P 9% Cumulative Convertible Preferred Stock ("Series P") is
held in the form of depositary shares, with each depositary share representing a
one-hundredth interest in a preferred share. Each depositary share is entitled
to .8547 of a vote, voting as a single group with holders of Common Stock. The
Series P depositary shares are convertible at the option of the holder into
Common Stock at a rate of .9206 common shares for each depositary share. After
July 1, 1997, the Series P depositary shares are redeemable by the Company at a
call price payable in shares of Common Stock. The number of shares to be issued
upon redemption is tied to the market value of Common Stock at the time of
redemption. If still outstanding on July 1, 1998, each Series P depositary share
will automatically convert into 1.0771 shares of Common Stock.
NOTE 14
- -------------------------------------------------------------------------------
EMPLOYEE
BENEFIT PLANS
The Company applies APB 25 and related Interpretations in accounting for its
stock-based compensation plans. Had compensation cost for the Company's
stock-based compensation plans been determined based on the fair value at the
grant dates for awards under those plans consistent with the method of FASB
Statement 123, "Accounting for Stock-Based Compensation," pro forma net income
and earnings per share would have been as follows:
(in millions, except per share amounts) 1996 1995
- ----------------------------------------------------------------------------
Net income $154.0 $125.2
Earnings per share $ 1.11 $ .79
Stock Options
The Company's stock option plans provide for the granting of options to purchase
Common Stock to certain directors, officers and key employees. Options are
granted at exercise prices equal to the fair market value of such stock as of
the date of grant and have terms of ten years. Options vest in two or three
equal annual installments. As of December 29, 1996, there were 852 employees and
directors holding options.
Stock option activity was as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------------------ ------------------- -------------------
Weighted Weighted Weighted
Average Average Average
(in thousands, Exercise Exercise Exercise
except per share amounts) Shares Price Shares Price Shares Price
- -----------------------------------------------------------------------------------------------------------
<S> <C>
Balance, beginning of year 3,273 $ 25.59 5,892 $ 22.52 5,408 $ 23.81
Granted 1,385 26.66 1,203 30.00 938 16.35
Forfeited (110) 27.12 (171) 20.79 (136) 21.72
Exercised (375) 20.67 (3,477) 21.99 (23) 19.78
Expired (209) 27.77 (174) 28.62 (295) 27.20
----- ------- ----- ------- ----- -------
Balance, end of year 3,964 $ 26.28 3,273 $ 25.59 5,892 $ 22.52
===== ======= ===== ======= ===== =======
Exercisable 1,788 1,555 4,178
Available for grant 132 1,473 2,261
Weighted-average fair value of options
granted during the year $ 7.95 $ 8.82
</TABLE>
49
<PAGE>
Notes to Consolidated Financial Statements
The fair value of each option grant was estimated on the grant date
using the Black-Scholes option-pricing model with the following assumptions:
1996 1995
- -----------------------------------------------------------------------------
Dividend yield 2.00% 2.00%
Volatility rate 27.26% 26.02%
Risk-free interest rate 6.18% 6.37%
Expected option life 5 years 5 years
The following table summarizes information about fixed stock options outstanding
as of December 29, 1996:
<TABLE>
<CAPTION>
(in thousands, except year and per share amounts)
- --------------------------------------------------------------------------------------------------
Options Outstanding Options Exercisable
------------------------------------------------- -----------------------------
Weighted-Average Weighted-Average Weighted-Average
Range of Number Remaining Exercise Number Exercise
Exercise Prices Outstanding Contractual Life Price Exercisable Price
- --------------------------------------------------------------------------------------------------
<S> <C>
$15.63 - $22.97 917 6.7 years $18.47 719 $18.91
$23.07 - $31.87 2,114 7.6 years 26.39 651 26.34
$32.25 - $40.66 933 7.2 years 33.69 418 33.83
----- -----
Total 3,964 1,788
===== =====
</TABLE>
Deferred Stock Plan
The Company's Deferred Stock Plan provides for the award of hypothetical shares
of Common Stock ("Units") to certain officers and key employees. The value of
each Unit on the award date is equal to the current market value of a share of
Common Stock. Benefits will be paid in cash and Common Stock as vested or, at
the option of the holder, over varying periods after retirement. As of December
29, 1996, Units were held by 40 employees. The Company recognized compensation
expense under the Deferred Stock Plan of $1.1 million in 1996, $2.1 million in
1995 and $3.4 million in 1994.
Deferred Stock Plan activity was as follows:
(in thousands) 1996 1995 1994
- -----------------------------------------------------------------------------
Outstanding Units, beginning of year 537 559 631
Granted 39 108 8
Accrued dividends 7 19 16
Distributed (104) (77) (74)
Canceled (105) (72) (22)
------ ------ ------
Outstanding Units, end of year 374 537 559
====== ====== ======
Available for grant 1,043 1,099
Restricted and Incentive Stock
Pursuant to the Company's 1996 Stock Incentive Plan and the Director Stock
Ownership Plan, James River may also grant restricted stock and incentive stock
awards to certain directors, officers and key employees. Restricted stock awards
of 715,650 shares of Common Stock were granted in 1996 (of which 2,825 shares
were deferred) at a weighted-average grant date fair value of $26.79 per share.
Awards granted to officers and key employees will vest in eight years, with the
potential for earlier vesting based on the Company's performance, and awards
granted to directors will vest one year from the date of grant. Incentive stock
awards of 150,000 shares of Common Stock were granted in 1996 at a
weighted-average grant date fair value of $26.44 per share. Vesting of these
shares is based on the Company's financial performance. James River recognized
compensation expense related to restricted and incentive stock awards of $3.0
million in 1996. As of December 29, 1996, there were 1,489 thousand shares
available for grant pursuant to the 1996 Stock Incentive Plan which may be
granted as options, restricted stock or incentive stock. The Director Stock
Ownership Plan has 94 thousand shares available for grant as of December 29,
1996.
50
<PAGE>
Stock Plans for Employees
The Company's StockPlus Investment Plan is available to substantially all
domestic employees. Several alternative investment funds are available,
including an investment fund consisting of Common Stock (the "James River Stock
Fund"). Participating employees may contribute, through periodic payroll
deductions, up to 10% of their compensation. Participant contributions of up to
6% of compensation are matched by the Company at a 50% rate. The Company
additionally contributes 1% of all eligible employees' base salary to the plan.
As of December 29, 1996, there were 22,000 participants in the plan, and the
plan held 10 million shares of Common Stock and $77 million of other
investments. Company contributions to this plan totaled $16.8 million in 1996,
$15.2 million in 1995 and $16.1 million in 1994.
In addition, the Company maintains a stock purchase plan for the benefit
of certain Canadian employees. As of December 29, 1996, 65,000 shares of Common
Stock were held in this plan.
NOTE 15
- ------------------------------------------------------------------------------
COMMITMENTS
AND CONTINGENT
LIABILITIES
Leases
The Company leases certain facilities, vehicles and equipment over varying
periods. None of the agreements contain unusual renewal or purchase options. As
of December 29, 1996, future minimum rental payments under noncancelable
operating leases were as follows:
Minimum
(in millions) Rentals
- ------------------------------------------------------
1997 $ 25.1
1998 22.8
1999 20.5
2000 19.8
2001 16.6
Later years 48.4
---------
Total future minimum rentals $153.2
=========
Rent expense totaled $70.3 million in 1996, $71.6 million in 1995 and $72.7
million in 1994. Leases which may be considered capital leases are not material.
Litigation and Environmental Matters
The Company is a party to various legal proceedings generally incidental to its
business and is subject to a variety of environmental and pollution control laws
and regulations. As is the case with other companies in similar industries,
James River faces exposure from actual or potential claims and legal
proceedings.
During 1994, James River was sued in Morgan County, Alabama, in a class
action and in Bridgeport, Connecticut, by certain former holders of James
River's 103/4% Debentures due October 1, 2018. Most of these Debentures were
retired by means of a tender offer to all holders which 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
51
<PAGE>
Notes to Consolidated Financial Statements
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 an institutional
holder of 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 present 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 year.
In addition, James River has been identified as a potentially
responsible party, along with others, at various U.S. Environmental Protection
Agency ("EPA") designated superfund sites and is involved in remedial
investigations and actions under federal and state laws. It is the Company's
policy to accrue remediation costs on an undiscounted basis when it is probable
that such costs will be incurred and when a range of loss can be reasonably
estimated. James River's accrued environmental liabilities, including
remediation and landfill closure costs, totaled $20.3 million and $24.2 million
as of December 29, 1996, and December 31, 1995, respectively. The Company
periodically reviews the status of all significant existing or potential
environmental issues and adjusts its accruals as necessary. The accruals do not
reflect any possible future insurance recoveries. 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 potentially responsible parties. 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 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 potentially responsible party at
additional sites in the future or that the costs associated with such additional
sites would not be material.
In December 1993, the EPA published draft rules which contain proposed
regulations affecting pulp and paper industry discharges of wastewater and
gaseous emissions, commonly referred to as the "cluster rules." The final rules
are likely to be issued in 1997. These rules may require significant changes in
the pulping and/or bleaching processes presently used in some U.S. pulp mills,
including several of James River's mills. 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 during the nominal
compliance period of three years following the date of promulgation to bring
James River's facilities into compliance.
52
<PAGE>
NOTE 16
- -------------------------------------------------------------------------------
SEGMENT
INFORMATION
The Company operates in the following industry segments: (i) the Consumer
Products segment, which consists of the manufacture and marketing of personal
care products including tissue and towels and disposable tabletop products
including napkins, plates and cutlery organized along retail and commercial
market channels; (ii) the Packaging segment, which after the sale of the
Flexible Packaging group, manufactures folding cartons and foodwrap papers
principally for food and other consumer products manufacturers; and (iii) the
Communications Papers segment, which after the spin-off to Vantage (see Note 2),
manufactures and markets uncoated business and printing papers serving the
commercial printing and office markets. The Company's operations are principally
domestic other than the Consumer Products segment, which includes the European
Consumer Products Business. The European Consumer Products Business' operations
results have been included beginning in July 1994, when it became a consolidated
subsidiary.
<TABLE>
<CAPTION>
Consumer Products
------------------- Intersegment
North Communications elimination/
(in millions) America Europe Packaging Papers Corporate Total
- --------------------------------------------------------------------------------------------------------------
<S> <C>
1996
Net sales $2,642.3 $1,693.2 $1,109.6 $427.4 $(182.0) $5,690.5
Segment results before
severance and other items 277.0 152.9 87.7 22.2 (96.2) 443.6
Severance and other items (13.1) (42.0) 49.0 (4.6) (10.7)
--------- --------- -------- ------ -------- ---------
Income from operations 263.9 110.9 136.7 22.2 (100.8) 432.9
Depreciation and amortization 189.7 119.7 61.5 48.6 4.4 423.9
Capital expenditures 222.9 90.5 63.4 34.1 15.2 426.1
Total assets 2,328.0 2,438.5 503.0 603.4 668.6 6,541.5
==============================================================================
1995
Net sales $2,689.1 $1,654.7 $1,620.4 $1,038.8 $(203.5) $6,799.5
Segment results before
severance and other items 235.1 45.9 61.0 191.2 (58.0) 475.2
Severance and other items (5.1) (22.3) (7.1) (2.2) (15.2) (51.9)
--------- --------- --------- --------- -------- ---------
Income from operations 230.0 23.6 53.9 189.0 (73.2) 423.3
Depreciation and amortization 179.3 128.9 72.2 103.1 4.3 487.8
Capital expenditures 203.5 91.2 99.5 45.7 1.3 441.2
Total assets 2,378.7 2,631.1 879.6 672.4 697.1 7,258.9
==============================================================================
1994
Net sales $2,422.7 $ 630.9 $1,609.9 $ 929.7 $(175.9) $5,417.3
Segment results before
severance and other items 143.4 6.9 97.4 (35.8) (55.3) 156.6
Severance and other items (5.8) (15.7) 11.3 2.2 (1.6) (9.6)
-------- -------- -------- -------- -------- --------
Income from operations 137.6 (8.8) 108.7 (33.6) (56.9) 147.0
Depreciation and amortization 164.8 46.1 70.8 125.4 7.0 414.1
Capital expenditures 148.7 32.4 99.2 60.0 11.4 351.7
Total assets 2,230.5 2,495.2 1,079.9 1,457.4 661.3 7,924.3
==============================================================================
</TABLE>
53
<PAGE>
Notes to Consolidated Financial Statements
Intersegment sales are recorded at market prices and are eliminated in
consolidation. Corporate assets consist primarily of cash and cash equivalents,
current deferred income taxes, investments in unconsolidated affiliates, and the
net pension asset. During each of the three years in the period ended December
29, 1996, export sales to foreign markets from the Company's domestic operations
represented less than 10% of total sales to unaffiliated customers; no single
customer accounted for more than 10% of total sales in any year.
NOTE 17
- --------------------------------------------------------------------------------
SUBSEQUENT
EVENTS
In January and February 1997, the Company unwound $470 million in notional
amount of foreign exchange contracts, along with related interest rate
agreements, at a cost of $31 million, net of tax benefits. The foreign exchange
contracts were designated as hedges of a portion of the Company's net investment
in its European Consumer Products Business (see Note 11). The Company terminated
such contracts prior to their original expiration in September 1998.
Additionally, the Company effectively unwound $648 million of the $1,286 million
in notional amount of interest rate swaps (see Note 11), following the overall
reduction of debt in 1996.
On February 21,1997, the Company signed an agreement for the sale of
approximately 95,000 acres of timberlands located in Alabama and Mississippi.
Cash proceeds from the sale are expected to be in excess of $110 million.
NOTE 18
- --------------------------------------------------------------------------------
SELECTED
QUARTERLY
FINANCIAL
DATA
(UNAUDITED)
<TABLE>
<CAPTION>
Per Common Share
------------------------------------
Stock Price
(in millions, Gross Net Net Dividends ---------------
except per share amounts) Net Sales Profit Income Income Declared High Low
- ------------------------------------------------------------------------------------------------
<S> <C>
December 1996:(a,b,c,d)
1st Quarter $1,486.6 $369.7 $20.5 $.07 $.15 $28 1/8 $22 3/8
2nd Quarter 1,496.8 387.9 30.5 .18 .15 27 3/8 24 3/4
3rd Quarter 1,407.4 383.0 70.9 .62 .15 27 1/4 24 5/8
4th Quarter 1,299.7 333.2 35.4 .24 .15 34 1/4 27 5/8
- ------------------------------------------------------------------------------------------------
December 1995:(e,f)
1st Quarter $1,667.6 $347.9 $26.5 $.14 $.15 $25 5/8 $20
2nd Quarter 1,817.9 410.9 41.0 .32 .15 28 5/8 23 1/4
3rd Quarter 1,734.7 412.0 37.3 .27 .15 37 3/8 25 3/8
4th Quarter 1,579.3 369.8 21.6 .08 .15 33 3/4 22 1/4
- ------------------------------------------------------------------------------------------------
</TABLE>
(a) Results for the fourth quarter of 1996 included nonrecurring charges of
$10.6 million ($8.2 million net of taxes, or $.09 per share) for severance
costs, asset write-downs and net gains on asset dispositions.
(b) Results for the third quarter of 1996 included a nonrecurring gain of $46.9
million ($24.2 million net of taxes, or $.24 per share) for the Flexible
Packaging disposition and nonrecurring charges of $16.6 million ($10.4
million net of taxes, or $.10 per share) for severance costs.
(c) Results for the second quarter of 1996 included nonrecurring charges of $7.0
million ($4.2 million net of taxes, or $.06 per share) for severance costs
and net losses on asset dispositions.
(d) Results for the first quarter of 1996 included nonrecurring charges of $23.4
million ($14.3 million net of taxes, or $.16 per share) for severance costs
and net losses on asset dispositions.
(e) Results for the fourth quarter of 1995 included nonrecurring charges of
$26.1 million ($13.8 million net of taxes and minority interests, or $.17
per share) primarily for severance and related exit costs.
(f) Results for the third quarter of 1995 included nonrecurring charges of $20.8
million ($14.0 million net of taxes and minority interests, or $.16 per
share) primarily for severance and transaction costs related to the spin-off
of Vantage. Also during the third quarter of 1995, the Company recorded a
charge of $8.3 million ($7.1 million net of minority interests, or $.08 per
share) for an increase in the French corporate tax rate.
54
<PAGE>
SUPPLEMENTAL PRO FORMA FINANCIAL INFORMATION
===============================================================================
(UNAUDITED)
In August 1996, James River sold its Flexible Packaging group and 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 (see Note 2). These transactions made reported
results for 1996 not comparable to 1995. Accordingly, the following pro forma
information is presented to report 1996 and 1995 on a more comparable basis.
Results for 1996 and 1995 have been adjusted to give pro forma effect to (i)
James River's receipt of cash in connection with the sale of the Flexible
Packaging group and the spin-off of Vantage, (ii) the receipt of pay-in-kind
notes to James River from Vantage and (iii) the execution of the transition
agreements between James River and Vantage. The pro forma information is
presented as if these transactions had been completed as of the beginning of
each period for which pro forma consolidated operating data is presented. 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 on the dates or for the periods indicated, or which may be reported in
the future.
<TABLE>
<CAPTION>
(in millions, except per share data) 1996 1995
- --------------------------------------------------------------------------------
<S> <C>
Net sales:
Consumer Products:
North America $ 2,642.3 $ 2,697.1
Europe 1,693.2 1,654.7
Packaging 824.2 935.2
Communications Papers 427.4 592.9
Intersegment elimination (160.7) (166.4)
------------ ------------
Total net sales $ 5,426.4 $ 5,713.5
============ ============
Segment results before severance and other items:
Consumer Products:
North America $ 277.0 $ 237.1
Europe 152.9 45.9
Packaging 85.3 75.8
Communications Papers 22.2 126.7
General corporate expenses (96.2) (52.3)
Severance and other items (a) (10.7) (7.3)
------------ ------------
Income from operations $ 430.5 $ 425.9
============ ============
Net income $ 164.4 $ 143.4
============ ============
Net income per share $ 1.23 $ 1.01
============ ============
</TABLE>
(a) In 1996, pro forma severance and other items (expense) income included in
segment income from operations would have been $(13.1) million, $(42.0) million,
$49.0 million and $(4.6) million for the North American Consumer Products,
European Consumer Products, Packaging and Corporate segments, respectively. In
1995, pro forma severance and other items (expense) income included in segment
income from operations would have been $(5.1) million, $(22.3) million, $37.5
million, $(2.2) million and $(15.2) million for the North American Consumer
Products, European Consumer Products, Packaging, Communications Papers and
Corporate segments, respectively.
55
<PAGE>
Management Responsibility Statement
- -------------------------------------------------------------------------------
The management of James River Corporation of Virginia is responsible for the
preparation, integrity and fair presentation of the consolidated financial
statements and other information contained in this Annual Report. The
consolidated financial statements have been prepared in accordance with
generally accepted accounting principles, and include, where necessary, amounts
which are based on management's best estimates and judgments.
The Company maintains a system of internal accounting controls designed to
provide reasonable assurance that assets are safeguarded, transactions are
executed and recorded in accordance with proper authorizations, and financial
records are maintained so as to permit the preparation of reliable financial
statements. The system of internal controls is enhanced by written policies and
procedures, an organizational structure which provides appropriate division of
responsibilities, careful selection and training of qualified people, and a
program of periodic audits by both internal auditors and independent
accountants. The control environment is further enhanced by the Company's
"Standards of Business Conduct Policy" which sets standards of professionalism
and integrity for employees worldwide.
The Audit Committee of the Board of Directors, composed entirely of
non-employee directors, meets periodically with management, the internal
auditors, and the independent accountants to review the adequacy of internal
accounting controls, reported financial results, and the nature, extent and
results of internal and external audits. The independent accountants and
internal auditors have direct and independent access to the Audit Committee.
/s/ Miles L. Marsh /s/ William A. Paterson
Miles L. Marsh William A. Paterson
Chairman and Chief Executive Officer Senior Vice President
and Controller
56
<PAGE>
Report of Independent Accountants
- --------------------------------------------------------------------------------
THE BOARD OF
DIRECTORS AND
SHAREHOLDERS OF
JAMES RIVER
CORPORATION
OF VIRGINIA:
We have audited the accompanying consolidated balance sheets of James River
Corporation of Virginia and Subsidiaries as of December 29, 1996, and December
31, 1995, and the related consolidated statements of operations, cash flows, and
changes in capital accounts for each of the three fiscal years in the period
ended December 29, 1996. These financial statements are the responsibility of
the management of James River Corporation of Virginia. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of James River
Corporation of Virginia and Subsidiaries as of December 29, 1996, and December
31, 1995, and the consolidated results of their operations and their cash flows
for each of the three fiscal years in the period ended December 29, 1996, in
conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
Richmond, Virginia
January 23, 1997, except as to
the information presented
in Note 17, for which the date
is February 21, 1997
57
<PAGE>
Selected Financial Data(a)
<TABLE>
<CAPTION>
(in millions, except ratios and per share amounts) 1996 1995 1994
- ----------------------------------------------------------------------------------------------------------------------
<S> <C>
Operations
Net sales $5,690.5 $6,799.5 $5,417.3
Costs and expenses 5,246.9 6,324.3 5,260.7
Restructuring, severance and other items 10.7 51.9 9.6
Interest expense 165.4 226.4 185.6
Income (loss) before income taxes, minority interests, extraordinary items
and accounting changes 289.1 237.2 (9.7)
Extraordinary items and accounting changes, net of income tax benefits
Net income (loss) 157.3 126.4 (13.0)
Net income (loss) applicable to common shares 98.8 67.9 (58.8)
======== ======== =========
Financial Position, End of Year
Total current assets $1,519.7 $1,870.5 $1,975.5
Property, plant and equipment, net 3,751.5 4,074.1 4,679.9
Investments in affiliates 154.6 146.8 125.1
Goodwill 730.0 771.7 776.0
Total assets 6,541.5 7,258.9 7,924.3
Total current liabilities 1,220.3 1,099.0 1,568.9
Current debt 116.9 44.8 446.5
Long-term debt 1,853.9 2,503.0 2,668.0
Minority interests 11.3 165.3 154.9
Preferred stock 738.4 740.3 740.3
Common shareholders' equity 1,568.0 1,513.9 1,421.3
======== ======== ========
Common Stock Information
Per Share of Common Stock
Net income (loss) before extraordinary items and accounting changes $ 1.15 $ 0.81 $ (0.72)
Extraordinary items and accounting changes
Net income (loss) 1.15 0.81 (0.72)
Annual rate of dividends declared 0.60 0.60 0.60
Book value 18.19 17.84 17.40
Common Stock Market Price
High $ 34.25 $ 37.38 $ 24.75
Low 22.38 20.00 15.63
Year-end 34.00 24.13 21.00
Weighted-average number of common shares and equivalents 86.0 84.1 81.7
======== ======== =========
Other Data
Capital expenditures (excluding acquisitions) $ 426.1 $ 441.2 $ 351.7
Depreciation and amortization expense 426.6 487.8 414.1
Return on average capital employed 7.7% 7.1% 3.1%
Return on average common equity 6.4% 4.6% (4.0)%
Ratio of total debt to total capitalization 46.0% 51.3% 57.4%
Current ratio 1.25 1.70 1.26
Cash dividend payout ratio 69.7% 85.9% +100%
Ratio of earnings to interest 2.6 2.0 .9
======== ======== =========
</TABLE>
(a) Adjusted for three-for-two common stock splits on June 23, 1986.
(b) Represents the 35-week transition period resulting from the change in fiscal
year from April to December.
Book value per common share:
Common shareholders' equity less unrecognized accretion or unamortized discount
on preferred stock, divided by outstanding shares of common stock.
Return on average capital employed:
Income (loss) before restructuring charges, extraordinary items, the cumulative
effect of accounting changes, interest expense and income taxes, divided by
average capital employed. Capital employed is calculated as total assets,
excluding assets held for sale, minus non-interest bearing current liabilities.
Income for the 35-week transition period ended December 1990 has been
annualized.
Return on average common equity:
Income (loss) applicable to common shares before after-tax restructuring
charges, extraordinary items, and the cumulative effect of accounting changes,
divided by average common shareholders' equity. Common shareholders' equity has
been adjusted to exclude net restructuring charges, extraordinary items, and
accounting changes which occurred in that year. Income for the 35-week
transition period ended December 1990 has been annualized.
58
<PAGE>
<TABLE>
<CAPTION>
(in millions, except ratios and per share amounts) 1993 1992 1991
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
Operations
Net sales $4,650.2 $4,728.2 $4,561.7
Costs and expenses 4,536.2 4,678.9 4,317.7
Restructuring, severance and other items 111.7
Interest expense 137.6 149.1 138.0
Income (loss) before income taxes, minority interests, extraordinary items
and accounting changes 16.7 (188.1) 132.9
Extraordinary items and accounting changes, net of income tax benefits (305.3)
Net income (loss) (0.3) (427.3) 78.3
Net income (loss) applicable to common shares (33.1) (453.8) 53.7
======== ======== =========
Financial Position, End of Year
Total current assets $1,282.3 $1,697.2 $1,533.3
Property, plant and equipment, net 3,571.5 3,502.8 2,933.1
Investments in affiliates 519.4 587.8 619.7
Goodwill 153.3 158.0 172.4
Total assets 5,851.3 6,336.3 5,626.6
Total current liabilities 781.1 928.2 705.5
Current debt 97.3 212.7 131.0
Long-term debt 1,942.8 2,153.9 1,758.1
Minority interests 7.0 10.2 2.3
Preferred stock 454.1 454.3 354.6
Common shareholders' equity 1,514.1 1,659.3 2,220.8
======== ======= =======
Common Stock Information
Per Share of Common Stock
Net income (loss) before extraordinary items and accounting changes $ (0.40) $ (1.82) $ 0.66
Extraordinary items and accounting changes (3.73)
Net income (loss) (0.40) (5.55) 0.66
Annual rate of dividends declared 0.60 0.60 0.60
Book value 18.55 20.34 27.25
Common Stock Market Price
High $ 23.38 $ 23.38 $ 29.25
Low 16.25 17.00 17.00
Year-end 18.50 18.00 19.88
Weighted-average number of common shares and equivalents 81.6 81.8 81.9
======== ======== =======
Other Data
Capital expenditures (excluding acquisitions) $ 331.1 $ 469.7 $ 467.5
Depreciation and amortization expense 365.9 364.5 298.6
Return on average capital employed 2.9% 1.4% 6.0%
Return on average common equity (2.1)% (3.6)% 2.4%
Ratio of total debt to total capitalization 50.8% 52.7% 42.3%
Current ratio 1.64 1.83 2.17
Cash dividend payout ratio +100% +100% 88.6%
Ratio of earnings to interest 1.1 .5 1.6
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
(in millions, except ratios and per share amounts) 1990(b) 1990 1989 1988
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Operations
Net sales $3,391.5 $5,950.0 $5,871.8 $5,098.0
Costs and expenses 3,063.9 5,490.2 5,307.0 4,670.3
Restructuring, severance and other items 200.0
Interest expense 104.2 182.2 161.5 115.5
Income (loss) before income taxes, minority interests, extraordinary items
and accounting changes 51.6 372.2 441.3 377.5
Extraordinary items and accounting changes, net of income tax benefits
Net income (loss) 9.7 221.6 255.1 209.0
Net income (loss) applicable to common shares (6.9) 200.0 233.6 193.8
======== ======== ======= =======
Financial Position, End of Year
Total current assets $1,910.7 $1,454.4 $1,456.1 $1,443.9
Property, plant and equipment, net 2,843.4 3,491.9 3,386.0 2,935.7
Investments in affiliates 600.9 495.0 376.7 269.3
Goodwill 181.0 201.9 225.2 224.6
Total assets 5,741.4 5,818.4 5,558.1 5,005.7
Total current liabilities 788.8 811.8 734.6 730.1
Current debt 86.2 156.1 102.6 81.4
Long-term debt 1,801.9 1,771.2 1,918.3 1,623.0
Minority interests 2.3 18.8 12.2 7.8
Preferred stock 354.8 355.0 302.4 304.9
Common shareholders' equity 2,212.2 2,203.0 2,045.8 1,877.5
======= ======= ======= =======
Common Stock Information
Per Share of Common Stock
Net income (loss) before extraordinary items and accounting changes $ (0.08) $ 2.45 $ 2.87 $ 2.36
Extraordinary items and accounting changes
Net income (loss) (0.08) 2.45 2.87 2.36
Annual rate of dividends declared 0.60 0.60 0.48 0.40
Book value 27.21 27.14 25.24 23.12
Common Stock Market Price
High $ 27.12 $ 34.38 $ 30.75 $ 39.00
Low 18.50 22.75 21.12 18.50
Year-end 26.38 22.88 28.50 24.63
Weighted-average number of common shares and equivalents 81.8 81.7 81.5 82.3
======== ======== ======= =======
Other Data
Capital expenditures (excluding acquisitions) $ 272.1 $ 574.6 $ 684.6 $ 623.1
Depreciation and amortization expense 202.1 307.6 253.3 209.5
Return on average capital employed 11.1% 10.8% 12.8% 12.2%
Return on average common equity 8.8% 9.4% 11.9% 10.7%
Ratio of total debt to total capitalization 42.4% 42.8% 46.1% 43.8%
Current ratio 2.42 1.79 1.98 1.98
Cash dividend payout ratio +100% 34.4% 23.5% 22.5%
Ratio of earnings to interest 2.8 2.6 3.1 3.6
======= ======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
(in millions, except ratios and per share amounts) 1987 1986
- ---------------------------------------------------------------------------------------------------------
<S> <C>
Operations
Net sales $4,479.0 $2,607.0
Costs and expenses 4,071.1 2,421.7
Restructuring, severance and other items
Interest expense 111.6 44.3
Income (loss) before income taxes, minority interests, extraordinary items
and accounting changes 356.3 150.0
Extraordinary items and accounting changes, net of income tax benefits
Net income (loss) 169.9 95.3
Net income (loss) applicable to common shares 165.9 89.2
======= =======
Financial Position, End of Year
Total current assets $1,343.1 $ 743.8
Property, plant and equipment, net 2,529.6 1,205.8
Investments in affiliates
Goodwill 240.7
Total assets 4,210.5 1,972.2
Total current liabilities 631.3 303.0
Current debt 69.5 10.1
Long-term debt 1,280.4 646.5
Minority interests 5.9 2.7
Preferred stock 106.9 8.9
Common shareholders' equity 1,747.2 744.2
======= =======
Common Stock Information
Per Share of Common Stock
Net income (loss) before extraordinary items and accounting changes $ 2.03 $ 1.73
Extraordinary items and accounting changes
Net income (loss) 2.03 1.73
Annual rate of dividends declared 0.40 0.37
Book value 21.22 14.40
Common Stock Market Price
High $ 43.75 $ 31.12
Low 22.00 17.12
Year-end 36.00 30.75
Weighted-average number of common shares and equivalents 81.8 51.5
======= =======
Other Data
Capital expenditures (excluding acquisitions) $ 509.0 $ 281.1
Depreciation and amortization expense 175.1 82.5
Return on average capital employed 17.4% 12.2%
Return on average common equity 10.0% 13.2%
Ratio of total debt to total capitalization 42.1% 46.5%
Current ratio 2.13 2.45
Cash dividend payout ratio 21.4% 27.2%
Ratio of earnings to interest 3.6 3.2
======== =======
</TABLE>
Ratio of total debt to total capitalization:
Total debt divided by the sum of total debt, minority interests,
preferred stock and common shareholder's equity.
Current Ratio:
Total current assets divided by total current liabilities.
Cash dividend payout ratio:
The sum of common and preferred stock cash dividends, divided by net income
(loss).
Ratio of earnings to interest:
Income (loss) before restructuring charges, extraordinary items, the cumulative
effect of accounting changes, interest expense and income taxes, divided by
total interest cost. Total interest cost is interest expense, plus capitalized
interest plus interest charged to the accrued restructuring liability, as
applicable.
59
<PAGE>
Exhibit 13 - Appendix A
Operating Income - North American Consumer Products bar chart as defined by the
following data points:
(in millions) 1994 1995 1996
1st Quarter $28.3 $38.4 $67.4
2nd Quarter 47.0 58.4 60.4
3rd Quarter 44.0 77.2 82.9
4th Quarter 24.1 61.1 66.3
Operating Income - European Consumer Products bar chart as defined by the
following data points:
(in millions) 1994 1995 1996
1st Quarter $ 8.8 $24.8
2nd Quarter 12.9 41.8
3rd Quarter $0.5 8.5 47.8
4th Quarter 6.4 15.7 38.5
Operating Income - Packaging bar chart as defined by the following data points:
(in millions) 1994 1995 1996
1st Quarter $26.6 $18.0 $26.1
2nd Quarter 34.3 16.5 24.1
3rd Quarter 16.5 8.5 20.5
4th Quarter 20.0 18.0 17.0
Operating Income - Communications Papers bar chart as defined by the following
data points:
(in millions) 1994 1995 1996
1st Quarter $(25.1) $44.5 $4.1
2nd Quarter (26.5) 60.2 3.1
3rd Quarter (4.1) 60.8 5.0
4th Quarter 19.9 25.7 10.0
Pretax Interest Coverage Ratio bar chart as defined by the following data
points:
1992 1993 1994 1995 1996
Pretax interest coverage ratio .45 1.08 .98 2.21 2.73
Working Capital bar chart as defined by the following data points:
(in millions) 1992 1993 1994 1995 1996
Working capital $769 $501 $407 $772 $299
Capital Expenditures and Cash Flow from Operations bar chart as defined by the
following data points:
(in millions) 1992 1993 1994 1995 1996
Capital expenditures $470 $331 $352 $441 $426
Cash flow from operations 313 441 411 609 719
Total Debt to Capitalization Ratio bar chart as defined by the following data
points:
1992 1993 1994 1995 1996
Total debt to capitalization ratio 52.7 50.8 57.4 51.3 46.0
Total Capitalization bar chart as defined by the following data points:
(in billions) 1992 1993 1994 1995 1996
Total debt $2.37 $2.04 $3.11 $2.55 $1.97
Minority interests .01 .01 .15 .17 .01
Total preferred stock .45 .45 .74 .74 .74
Common shareholders' equity 1.66 1.51 1.42 1.51 1.57
Total Assets bar chart as defined by the following data points:
(in billions) 1992 1993 1994 1995 1996
Current assets $1.70 $1.28 $1.98 $1.87 $1.52
Net fixed and other assets 4.64 4.57 5.95 5.39 5.02
Annual Rate of Cash Dividends Per Common Share bar chart as defined by the
following data points:
(in dollars) 1992 1993 1994 1995 1996
Annual rate of cash dividends $.60 $.60 $.60 $.60 $.60
Exhibit 21
JAMES RIVER CORPORATION of Virginia
SUBSIDIARIES (a)(b)
as of December 29, 1996
James River Corporation of Virginia, a corporation organized
under the laws of Virginia, has the following majority-owned
subsidiaries:
Organized Under
Name the Laws of
Brusara Participacoes, Ltda. Brazil
Cartellas S.A. Greece
Celtona B.V. Netherlands
Crown Zellerbach AG Zug Switzerland
Crown Zellerbach International, Inc. Delaware
Diamond Occidental Forest Inc. Delaware
Garant SarL France
ILC Inc. Virginia
James River Canada Inc. Canada
James River Fiber Company Virginia
James River International Holdings, Ltd. Virginia
James River Maine, Inc. Maine
James River-Marathon, Ltd. Ontario
James River Paper Company, Inc. Virginia
James River-Pennington, Inc. Alabama
James River Timber Corporation Alabama
E-5
<PAGE>
Exhibit 21 (continued)
Organized Under
Name the Laws of
James River Tredegar, Inc. Virginia
Jamont N.V. Netherlands
Jamont Services S.N.C. Belgium
Jamont Ireland Ltd. Ireland
Jamont Tisu S.A. Spain
Jamont UK Limited United Kingdom
Jarapar Participacoes, Ltda. Brazil
JRF Immobiliere S.A. Belgium
Kaysersberg, S.A. France
Meridian & Bigbee Railroad Company Mississippi
MidSouth Lumber Company Virginia
Nokian Paperi Oy Finland
St. Francis Insurance Company Ltd. Bermuda
Sodipan S.A. France
Unikay S.r.L. Italy
(a) Certain subsidiaries which, if considered in the aggregate,
would not constitute a significant subsidiary are not listed.
(b) Unconsolidated affiliates for which the Company owns, directly
or indirectly, 50% or less of the outstanding voting stock and
which are not controlled by the Company have been excluded from
this listing.
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference:
(i) in Registration Statement No. 33-54491 on Form S-8
pertaining to the James River Corporation of Virginia StockPlus
Investment Plan;
(ii) in Registration Statement No. 33-57153 on Form S-8
pertaining to the James River Corporation of Virginia Canadian
Employees Stock Purchase Plan;
(iii) in Registration Statement No. 33-43894 on Form S-8
pertaining to the James River Corporation of Virginia Stock Option
Plan for Outside Directors;
(iv) in Post-Effective Amendment No. 1 to Registration
Statement No. 2-83979 on Form S-8, serving as Post-Effective
Amendment No. 5 to Registration Statement No. 2-64057, and as Post-
Effective Amendment No. 2 to Registration Statement No. 2-76900, each
pertaining to the James River Corporation of Virginia Stock Option
Plan;
(v) in Registration Statement No. 33-56657 on Form S-8
pertaining to the James River Corporation of Virginia 1987 Stock
Option Plan;
(vi) in Registration Statement No. 33-53413 on Form S-3
pertaining to the shelf registration of $600,000,000 of debt securities
of James River Corporation of Virginia;
(vii) in Registration Statement No. 333-02217 on Form S-8
pertaining to the James River Corporation of Virginia 1996 Stock
Incentive Plan; and
(viii) in Registration Statement No. 333-02213 on Form S-8
pertaining to the James River Corporation of Virginia Director Stock
Ownership Plan
of our report, dated January 23, 1997, except as to the information
presented in Note 17, for which the date is February 21, 1997, on our
audits of the consolidated financial statements of James River
Corporation of Virginia and Subsidiaries as of December 29, 1996 and
December 31, 1995, and for each of the three fiscal years in the
period ended December 29, 1996, which report is incorporated by
reference in this Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Richmond, Virginia
March 26, 1997
E-6
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from James
River Corporation of Virginia's December 29, 1996 Form 10-K 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>
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<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> DEC-29-1996
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0
738
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</TABLE>
