SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: March 29, 1998 Commission File Number: 1-7911
FORT JAMES CORPORATION
(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.)
1650 Lake Cook Road, Deerfield, IL 60015-4753
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 317-5000
Not Applicable
(Former name, former address, and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------------- ------------
Number of shares of $.10 par value common stock outstanding as of May 1, 1998:
220,409,791 shares
------------------
<PAGE>
FORT JAMES CORPORATION
QUARTERLY REPORT ON FORM 10-Q
March 29, 1998
TABLE OF CONTENTS
<TABLE>
<S> <C>
Page No.
--------
PART I. FINANCIAL INFORMATION:
ITEM 1. Financial Statements:
Consolidated Balance Sheets as of March 29, 1998 and
December 28, 1997 3
Consolidated Statements of Operations for the quarters ended
March 29, 1998 and March 30, 1997 5
Consolidated Statements of Cash Flows for the quarters ended
March 29, 1998 and March 30, 1997 6
Notes to Consolidated Financial Statements 7
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
PART II. OTHER INFORMATION:
ITEM 1. Legal Proceedings 16
ITEM 2. Changes in Securities 16
ITEM 3. Defaults Upon Senior Securities 16
ITEM 4. Submission of Matters to a Vote of Security Holders 16
ITEM 5. Other Information 16
ITEM 6. Exhibits and Reports on Form 8-K 17
SIGNATURES 18
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
FORT JAMES CORPORATION
CONSOLIDATED BALANCE SHEETS
March 29, 1998 and December 28, 1997
(in millions, except share data)
<TABLE>
<CAPTION>
March December
1998 1997
---- ----
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents $21.7 $33.6
Accounts receivable 820.1 787.8
Inventories 872.6 854.3
Deferred income taxes 215.4 214.4
Prepaid expenses and other current assets 30.1 26.4
------- --------
Total current assets 1,959.9 1,916.5
------- --------
Property, plant and equipment 7,840.3 7,784.1
Accumulated depreciation (3,308.3) (3,218.8)
-------- ----------
Net property, plant and equipment 4,532.0 4,565.3
Other assets 628.7 614.5
Goodwill 620.1 636.9
-------- --------
Total assets $7,740.7 $7,733.2
======== =========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
FORT JAMES CORPORATION
CONSOLIDATED BALANCE SHEETS, Continued
(in millions, except share data)
<TABLE>
<CAPTION>
March December
1998 1997
----- ----
<S> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $584.3 $636.5
Accrued liabilities 879.6 913.0
Current portion of long-term debt 31.3 34.4
-------- --------
Total current liabilities 1,495.2 1,583.9
-------- --------
Long-term debt 4,154.6 4,155.5
Deferred income taxes 698.5 650.8
Accrued postretirement benefits
other than pensions 472.8 474.8
Other long-term liabilities 267.7 283.9
-------- --------
Total liabilities 7,088.8 7,148.9
-------- --------
Preferred stock, $10 par value, 5.0 million
shares authorized, issuable in series;
shares outstanding, March 29, 1998 - 1.7
million and December 28, 1997 3.3 million 270.1 352.7
Common stock, $.10 par value, 500.0
million shares authorized; shares
outstanding, March 29, 1998 -- 212.8 million and
December 28, 1997 -- 209.3 million 21.3 20.9
Additional paid-in capital 2,912.1 2,807.9
Accumulated comprehensive loss (170.8) (137.6)
Accumulated deficit (2,380.8) (2,459.6)
-------- --------
Total shareholders' equity 651.9 584.3
-------- --------
Total liabilities and shareholders' equity $7,740.7 $7,733.2
======== ========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
FORT JAMES CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Quarters (13 Weeks) Ended
March 29, 1998 and March 30, 1997
(in millions, except per share amounts)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C>
Net sales $1,795.6 $1,817.8
Cost of goods sold 1,243.1 1,278.1
Selling and administrative expenses 283.8 288.9
Restructure and other unusual items 7.5
------- --------
Income from operations 261.2 250.8
Interest expense 75.0 95.8
Other income, net 8.8 7.1
------- --------
Income before income taxes and extraordinary item 195.0 162.1
Income tax expense 77.4 64.9
------- --------
Income before extraordinary item 117.6 97.2
Extraordinary loss on early extinguishment of debt,
net of taxes of $1.6 million in 1998 and $ .9 million in 1997 (2.6) (1.3)
------- --------
Net income $115.0 $95.9
======= ========
Preferred dividend requirements (5.2) (14.6)
------- --------
Net income applicable to common shares $109.8 $81.3
======= ========
Net income per share:
Before extraordinary item $.54 $.44
Extraordinary loss on early extinguishment of debt (.01) (.01)
------- ---------
Net income per common share $.53 $.43
======= =========
Weighted average number of common shares 208.5 187.9
======= =========
Net income per diluted share:
Before extraordinary item $.53 $.43
Extraordinary loss on early extinguishment of debt (.01)
------- ---------
Net income per common share and common share equivalent $.52 $.43
======= =========
Weighted average number of common shares
and common share equivalents 210.9 205.7
======= =========
Cash dividends per common share $.15 $.15
------- ---------
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
<PAGE>
FORT JAMES CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Quarters (13 Weeks) Ended
March 29, 1998 and March 30, 1997
(in millions)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C>
Cash provided by (used for) operating activities:
Net income $115.0 $95.9
Depreciation expense and cost of timber harvested 114.1 122.1
Amortization of goodwill 4.8 5.2
Deferred income tax provision 49.2 30.7
Restructure and other unusual items 7.5
Loss on early extinguishment of debt, net of tax 2.6 1.3
Change in current assets and liabilities:
Accounts receivable (44.2) (22.4)
Inventories (21.2) (21.6)
Prepaid expenses and other current assets (4.8) 12.8
Accounts payable and accrued liabilities (50.7) (93.6)
Restructure and integration payments (50.7) (6.5)
Foreign currency hedge (31.5)
Other, net (13.2) (.6)
--------- ---------
Cash provided by operating activities 108.4 91.8
--------- ---------
Cash provided by (used for) investing activities:
Expenditures for property, plant and equipment (101.0) (75.3)
Cash received from sale of assets 4.4 1.6
Other, net 1.1 7.1
--------- ---------
Cash used for investing activities (95.5) (66.6)
--------- ---------
Cash provided by (used for) financing activities:
Additions to long-term debt 306.9 134.9
Payments of long-term debt (306.8) (114.9)
Common and preferred stock cash dividends paid (37.3) (27.4)
Proceeds from exercise of stock options 15.6 6.4
Other, net (3.2)
--------- ---------
Cash used for financing activities (24.8) (1.0)
--------- ---------
Increase (decrease) in cash and cash equivalents (11.9) 24.2
Cash and cash equivalents, beginning of period 33.6 34.6
--------- ---------
Cash and cash equivalents, end of period $21.7 $58.8
========= =========
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies
Basis of Presentation:
The consolidated financial statements of Fort James Corporation (the
"Company" or "Fort James") have been prepared to give retroactive effect to the
merger of a wholly-owned subsidiary of James River Corporation of Virginia
("James River") with and into Fort Howard Corporation ("Fort Howard") on August
13, 1997, which was accounted for as a pooling of interests. In connection with
the merger, James River was renamed Fort James Corporation. Accordingly, the
Company's consolidated financial statements have been restated for all periods
prior to the business combination to include the combined financial results of
James River and Fort Howard. In the opinion of management, the accompanying
unaudited consolidated financial statements of Fort James contain all
adjustments (consisting of only normal recurring accruals) necessary to present
fairly the Company's consolidated financial position as of March 29, 1998, and
its results of operations and cash flows for the quarters (13 weeks) ended March
29, 1998, and March 30, 1997. The balance sheet as of December 28, 1997, was
derived from audited financial statements as of that date. The results of
operations for the quarter ended March 29, 1998, are not necessarily indicative
of the results to be expected for the full year.
Certain amounts in the financial statements and supporting footnote
disclosures have been reclassified to conform to the current year's
classification including a reclassification of minority interests and the
related income tax effects to other income.
Adoption of Accounting Pronouncements:
In 1998 the Company adopted, Financial Accounting Standards Board
("FASB") Statement No. 130, "Reporting Comprehensive Income." Comprehensive
income for the periods ended March 29, 1998, and March 30, 1997, was $81.8
million and $ 2.2 million, respectively. The difference between net income and
comprehensive income is primarily due to foreign currency translation.
In 1997, the FASB issued Statement No. 131, "Disclosures about Segments
of an Enterprise and Related Information" which establishes standards for the
way public companies report information about operating segments, including
related disclosure about products and services, geographic areas and major
customers. The Company has not determined what, if any, impact Statement No. 131
will have on the reported operating segments and the related disclosures.
Statement No. 131 is effective for periods ending after December 15, 1998.
In February 1998, the FASB issued Statement No. 132, "Employer's
Disclosures about Pensions and Other Postretirement Benefits--an amendment to
FASB Statements No. 87, 88, and 106" which will require the Company to revise
disclosures about pension and other postretirement benefit plans.
Statement No. 132 is effective for fiscal years beginning after December 15,
1997.
2. Restructure and Other Unusual Items
Results for the first quarter of 1998 included charges of $7.5 million
($4.6 million net of taxes, or $.02 per diluted share) for merger-related
relocation and other costs paid during the quarter. During the current quarter,
the Company completed the permanent closures of two tissue mills and made
payments of $43.2 million for asset closures and employee-related costs.
<PAGE>
3. Net Income Per Common Share and Common Share Equivalent
In February 1997, the FASB issued Statement No. 128, "Earnings per
Share" ("SFAS 128"), which is effective for periods ending after December 15,
1997, including interim periods. Earnings per share for the quarters ended March
29, 1998, and March 30, 1997, were calculated under SFAS 128 as follows (in
millions):
<TABLE>
<CAPTION>
March 1998 March 1997
---------- ----------
Income Shares Income Shares
------- ------- ------ ------
<S> <C>
Income before extraordinary item $117.6 $97.2
Preferred stock dividends (5.2) (14.6)
-------- -------
Amounts used to compute basic
earnings per share 112.4 208.5 82.6 187.9
Effect of dilutive securities:
Options 2.4 2.5
Convertible preferred stock 6.5 15.3
-------- ------- ------- -------
Amounts used to compute diluted
earnings per share $112.4 210.9 $89.1 205.7
======== ======= ======= =======
</TABLE>
Series K, L and N preferred stocks were antidilutive for all periods
presented. An immaterial number of options to purchase shares of common stock
were outstanding but not included in the computation of diluted earnings per
share because the option exercise price was greater than the average market
price of the common shares.
4. Other Income
The components of other income were as follows for the quarters ended
March 29, 1998, and March 30, 1997 (in millions):
<TABLE>
<CAPTION>
March March
1998 1997
------ ------
<S> <C>
Interest and investment income $.9 $1.7
Equity in (loss) earnings of unconsolidated affiliates (.2) 3.0
Gain on sale of assets 2.0 2.1
Minority interests (1.1) .1
Foreign currency exchange gain (loss) 5.3 (.3)
Other, net 1.9 .5
------ ------
Total other income $8.8 $7.1
====== ======
</TABLE>
5. Income Taxes
The Company's effective income tax rate was 39.7% for the quarter ended
March 29, 1998, compared to 40% for the first quarter of 1997. The decrease in
the effective tax rate from the prior year was primarily due to the reduced
relative size of permanent differences compared to pretax income.
6. Inventories
The components of inventories were as follows as of March 29, 1998, and
December 28, 1997 (in millions):
<TABLE>
<CAPTION>
March December
1998 1997
---- ----
<S> <C>
Raw materials $172.0 $184.3
Finished goods and work in process 575.0 550.2
Stores and supplies 163.4 159.4
------ ------
910.4 893.9
Reduction to state certain inventories
at last-in, first-out cost (37.8) (39.6)
------ ------
Total inventories $872.6 $854.3
====== ======
</TABLE>
7. Financial Instruments
The Company held $1,438 million and $1,138 million in notional amount
of interest rate swaps with fair value liabilities of $6 million and $8 million
as of March 29, 1998 and December 28, 1997, respectively. The fair value of the
Company's debt was approximately $100 million greater than book value of $4.2
billion as of March 29, 1998 and December 28, 1997, respectively. The estimated
fair values of the Company's financial instruments were based on quoted market
prices of comparable instruments and current market rates as of March 29, 1998
and December 28, 1997, respectively.
Based on the Company's debt portfolio outstanding and current market
perception, a 100 basis point change in interest rates as of December 28, 1997
and March 29, 1998 would have changed the fair value of the debt portfolio by
approximately $116.8 million and $114.8 million, respectively. A 100 basis point
change in interest rates as of December 28, 1997 and March 29, 1998 would have
changed the fair value of the Company's interest rate swap portfolio by a
maximum of $4.8 million and $3.0 million, respectively.
8. Commitments and Contingent Liabilities
Environmental Matters:
Like its competitors, Fort James is subject to extensive regulation by
various federal, state, provincial, and local agencies concerning compliance
with environmental control statutes and regulations. These regulations impose
limitations on the discharge of materials into the environment, including
effluent and emission limitations, as well as require the Company to obtain and
operate in compliance with the conditions of permits and other governmental
authorizations. Future regulations could materially increase the Company's
capital requirements and certain operating expenses in future years.
Fort James has been identified as a potentially responsible party
("PRP"), 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. Among these sites, the Company, along
with six other current and former operators of pulp and paper facilities, has
been identified as a PRP by the U.S. Fish and Wildlife Service and other state
and federal agencies, including the EPA, and tribal entities, regarding
contamination of the lower Fox River by hazardous substances. These agencies and
tribes seek primary restoration of the river, and natural resources damages. At
this time, the Company, in conjunction with other PRPs, has agreed to
participate with the State of Wisconsin in the funding of primary restoration
studies and a natural resources damages assessment and is engaged in
negotiations with federal and state agencies and tribes to resolve outstanding
claims.
It is Fort James' 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. As of March 29, 1998, Fort James' accrued
environmental liabilities, including remediation and landfill closure costs,
totaled $55.7 million. The Company periodically reviews the status of all
significant existing or potential environmental issues and adjusts its accrual
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 PRPs. The Company believes that its
share of the costs of cleanup for its current remediation sites will not have a
material adverse impact on its consolidated financial position, but could have a
material effect on consolidated results of operations in a given quarter or
year. As is the case with most manufacturing and many other entities, there can
be no assurance that the Company will not be named as a PRP at additional sites
in the future or that the costs associated with such additional sites would not
be material.
Litigation:
In May 1997, the Attorney General of the State of Florida filed a civil
action in the United States District Court for the Northern District of Florida
at Gainesville, against the Company and eight other manufacturers of sanitary
commercial paper products alleging violations of federal and state antitrust and
unfair competition laws. James River and Fort Howard are both named defendants.
The complaint sought damages on behalf of the state under Florida law of $1
million for each violation against each defendant, unspecified treble damages
and injunctive relief. That filing was followed by additional filings on behalf
of an alleged class of injured plaintiffs in Gainesville and numerous other
federal and state courts, all seeking similar damages for similar alleged
violations. Pursuant to the order of the Judicial Panel for Multidistrict
Litigation, the federal cases were consolidated in the U.S. District Court for
the Northern District of Florida at Gainesville. State class actions were filed
in California and Tennessee on behalf of another alleged class of purchasers.
Discovery was commenced in the federal cases and briefs filed on the issue of
whether the class can be certified to proceed. No specific date for a decision
on this issue can be predicted. The Company believes that these cases are
without merit and is vigorously defending both the federal and state actions.
Although the ultimate disposition of legal proceedings cannot be
predicted with certainty, it is the opinion of the Company's management that the
outcome of any claim which is pending or threatened, either individually or on a
combined basis, will not have a materially adverse effect on the consolidated
financial condition of Fort James but could materially affect consolidated
results of operations in a given quarter or year.
<PAGE>
9. Segment Information
Fort James' net sales and income from operations by business segment
were as follows for the quarters ended March 29, 1998, and March 30, 1997 (in
millions):
<TABLE>
<CAPTION>
Consumer Products
----------------- Intersegment
North Communications elimination/
America Europe Packaging Papers Corporate Total
<S> <C> -------- ------ --------- -------------- ------------ -----
March 1998
Net sales $1,073.4 $458.0 $180.4 $126.9 $(43.1) $1,795.6
Segment results before restructure
and other unusual items 214.4 55.7 10.3 10.9 (22.6) 268.7
Restructure and other unusual items (2.6) (1.0) (3.9) (7.5)
------- ------- ------- ------- ------- -------
Income from operations 211.8 55.7 9.3 10.9 (26.5) 261.2
------- ------- ------- ------- ------- -------
March 1997
Net sales $1,077.4 $472.6 $196.7 $119.3 $(48.2) $1,817.8
Income from operations 204.6 52.4 21.2 (3.6) (23.8) 250.8
------- ------- ------- ------- ------- -------
</TABLE>
<PAGE>
10. Fort James Operating Company
The Consolidated Financial statements for Fort James Operating Company
("FJOC"), which includes the merged operations of Fort Howard, have been omitted
because certain securities registered under the Securities Act of 1933, of which
FJOC is an obligor (thus subjecting them to reporting requirements under Section
13 or 15(d) of the Securities Exchange Act of 1934), are fully and
unconditionally guaranteed by Fort James and management has determined that such
information is not material to the holders of the Fort Howard securities.
Financial information relating to FJOC is presented herein in accordance with
Staff Accounting Bulletin No. 53 as an addition to the notes to the financial
statements of Fort James. Summarized financial information for FJOC is as
follows (in millions):
March March
1998 1997
---- ----
Condensed income statement information:
Net sales $1,193.4 $1,204.5
Gross profit 360.5 346.7
Income before extraordinary item 43.2 44.8
Net income 40.6 43.5
-------- --------
March December
1998 1997
---- ----
Condensed balance sheet information:
Current assets $964.0 $928.4
Noncurrent assets 3,467.2 3,292.8
Current liabilities 754.7 861.1
Noncurrent liabilities 5,108.9 4,989.3
Deficit (1,432.4) (1,629.2)
-------- --------
11. Subsequent Events:
In April 1998, the Company completed the redemption and conversion of
its Series K $3.375 Cumulative Convertible Exchangeable Preferred Stock, its
Series L $14.00 Cumulative Convertible Exchangeable Preferred Stock and its
Series N $14.00 Cumulative Convertible Exchangeable Preferred Stock (the
"Preferred Stock"). Substantially all of the outstanding Preferred Stock was
converted into 9.5 million shares of common stock with the balance redeemed
for $1.8 million in cash. The conversion will reduce annual dividend payments
by $18.7 million and is not expected to impact 1998 diluted earnings per
share.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Results of Operations
Overview
Fort James reported net income of $115.0 million, or $.52 per diluted
share, for the first quarter ended March 29, 1998, compared with $95.9 million,
or $.43 per diluted share for the same quarter of the prior year. Net sales for
the first quarter were $1,796 million, compared to $1,818 million in the prior
year. The comparability of these results was impacted by nonrecurring charges in
the first quarter of 1998.
Items Affecting Comparability
Results for the first quarter of 1998 included merger-related charges
of $7.5 million ($4.6 million net of taxes, or $.02 per diluted share) which
could not be recognized in 1997 under applicable accounting principles and an
extraordinary loss for the early extinguishment of debt of $4.2 million ($2.6
million net of taxes, or $.01 per diluted share). Results for the first quarter
of 1997 included an extraordinary loss for the early extinguishment of debt of
$2.2 million ($1.3 million net of taxes).
North American Consumer Products Business
Operating results before restructure and other unusual items for the
North American Consumer Products Business increased by 4.8%, from $204.6 million
in the first quarter of 1997 to $214.4 million in the current quarter. First
quarter 1998 net sales of $1,073 million were comparable to the $1,077 million
reported in 1997. The improvement in profitability was driven principally by a
combination of reduced manufacturing costs realized in connection with merger
synergies and other cost reductions, and marginally higher average pricing,
partially offset by higher fiber costs which reduced profitability by
approximately $15 million. Pricing for the overall retail business increased
approximately 2% versus the prior year reflecting both mix improvement and some
initial benefit from the recent retail tissue price increase. Away-from-home
tissue pricing was comparable to the prior year's first quarter. In comparison
to the exceptionally strong 1997 tissue volumes, retail tissue and tabletop
product volumes were generally similar to prior year levels, while
away-from-home volumes declined 1.8% from 1997 levels. The decline in the
away-from-home volumes was principally due to the Company's election to less
aggressively pursue certain lower-margin economy business.
At the end of the first quarter, the Company completed the planned
permanent closures of its Ashland, Wisconsin and Carthage, New York tissue
mills. These mills, which produced approximately 84,000 tons per year of
primarily away-from-home products, were the Company's oldest, smallest and least
cost-competitive domestic tissue mills.
European Consumer Products Business
Operating profits for the European Consumer Products Business increased
6.3% to $55.7 million compared to $52.4 million in the first quarter of 1997.
Net sales declined by 3.1% to $458 million in the current quarter from $473
million in 1997. Changes in foreign currency translation associated with the
strengthening of the U.S. dollar caused the decline in sales and also impacted
operating profits. Excluding the effect of foreign currency translation, the
current quarter sales would have increased 3.2% and operating profits would have
increased 12.6% compared to the prior year's quarter. The improvement in profits
resulted from a 5.6% increase in finished goods volumes, partially offset by
average selling prices which were 2% to 3% lower than the prior year.
<PAGE>
Packaging Business
Operating results before restructure and other unusual items for the
Packaging Business declined by 51.4% to $10.3 million in the current quarter
from $21.2 million in the prior year's first quarter. Net sales decreased 8.3%
to $180 million from $197 million for the same periods. The decline in results
from prior year levels was due to a combination of 5.8% lower folding carton and
other converted packaging volumes associated with a turnover in its customer
base and a decline in average prices of 2.7%.
Communications Papers Business
Operating profits for the Communications Papers Business increased to
$10.9 million from an operating loss of $3.6 million in the first quarter of
1997. Net sales improved by 6.4%, to $127 million in 1998 from $119 million in
the prior year. Increased sales and profits were principally the result of a
13.1% improvement in pricing for uncoated free sheet and uncoated groundwood
papers, partially offset by reduced volumes of 6.0% for both grades of papers.
Other Income and Expense Items
General corporate expenses before restructure and other unusual items
of $22.6 million in the first quarter of 1998 were similar to the $23.8 million
reported in 1997. Interest expense decreased from $95.8 million to $75.0 million
between the first quarter of 1997 and the first quarter of 1998. This decrease
was attributable to the impact of the Company's debt refinancing activities in
1997 and 1998 which lowered average interest rates and reduced average
outstanding debt. Other income increased to $8.8 million in the current quarter
from $7.1 million in 1997 largely due to foreign currency exchange gains. The
Company's effective income tax rate was 39.7% for the quarter ended March 29,
1998, compared to 40% for the first quarter of 1997. The decrease in the
effective tax rate from the prior year was primarily due to the reduced relative
size of permanent differences compared to pretax income.
Effect of New Accounting Standards
In 1997, the FASB issued Statement No. 131, "Disclosures about Segments
of an Enterprise and Related Information" which establishes standards for the
way public companies report information about operating segments, including
related disclosure about products and services, geographic areas and major
customers. The Company has not determined what, if any, impact Statement No. 131
will have on the reported operating segments and the related disclosures.
Statement No. 131 is effective for periods ending after December 15, 1998.
In February 1998, the FASB issued Statement No. 132, "Employer's
Disclosures about Pensions and Other Postretirement Benefits -- an amendment
to FASB Statements No. 87, 88, and 106" which will require the Company to
revise disclosures about pension and other postretirement benefit plans.
Statement No. 132 is effective for fiscal years beginning after December 15,
1997.
Year 2000 Date Conversion
In 1997, the Company commenced an enterprise-wide Year 2000 date
conversion project to address all necessary code conversion, software
replacement, testing and implementation. The Company expects to spend a total of
approximately $40 million to $60 million between 1997 and 1999 to make the
required system modifications and replacements to remedy Year 2000 issues prior
to December 31, 1999. The financial impact of such spending has not been and is
not expected to be material to the Company's consolidated financial position or
results of operations. The Company expects its Year 2000 conversion to be
completed on a timely basis; however, due to the interdependent nature of
computer systems there can be no assurance that the systems of other entities on
which the Company's systems rely will also be timely converted or that any such
failure to convert by another entity would not have an adverse effect on the
Company's systems.
Financial Condition
Cash provided by operating activities totaled $108.4 million in the
first quarter of 1998, compared with the $91.8 million provided in the prior
year. This increase in cash provided by operating activities resulted primarily
from improved operating results. In the first quarter of 1998, the Company spent
$50.7 million on restructure-related items and achieved estimated synergy and
cost reduction savings of approximately $50 million. The Company anticipates
that substantially all restructure-related spending will be completed in 1998.
The Company's current ratio was 1.3 as of March 29, 1998, and 1.2 as of December
28, 1997, while working capital increased to $464.7 million from $332.6 million
for the same periods. Capital expenditures were $101.0 million in the current
quarter, compared to $75.3 million in the prior year's first quarter.
Total indebtedness decreased slightly from $4,190 million as of
December 28, 1997, to $4,186 million as of March 29, 1998. The early
extinguishment of $64 million of 10% subordinated notes in the first quarter of
1998 contributed to this decline in debt levels. As of March 29, 1998, the
Company had outstanding borrowings of approximately $1,497 million supported by
revolving credit facilities compared to $1,732 million as of December 28, 1997.
In March 1998, the Company issued $300 million of 6.234% notes and used the
proceeds to reduce borrowings under revolving credit facilities. As of March 29,
1998, total outstanding debt (including the effect of interest rate swaps)
included approximately $2,191 million of fixed rate and $1,995 million of
floating rate obligations compared to $2,266 million and $1,924 million,
respectively, as of December 28, 1997. As of March 29, 1998, under the most
restrictive provisions of the Company's debt agreements, Fort James had
additional borrowing capacity of approximately $1.9 billion.
Based on the Company's debt portfolio outstanding and current market
perception, a 100 basis point change in interest rates as of December 28, 1997
and March 29, 1998 would have changed the fair value of the debt portfolio by
approximately $116.8 million and $114.8 million, respectively. A 100 basis point
change in interest rates as of December 28, 1997 and March 29, 1998 would have
changed the fair value of the Company's interest rate swap portfolio by
approximately $4.8 million and $3.0 million, respectively.
In April 1998, the Company completed the redemption and conversion of
its Series K $3.375 Cumulative Convertible Exchangeable Preferred Stock, its
Series L $14.00 Cumulative Convertible Exchangeable Preferred Stock and its
Series N $14.00 Cumulative Convertible Exchangeable Preferred Stock (the
"Preferred Stock"). Substantially all of the outstanding Preferred Stock was
converted into 9.5 million shares of common stock with the balance redeemed for
$1.8 million in cash. The conversion will reduce annual dividend payments by
$18.7 million and is not expected to impact 1998 diluted earnings per share.
Forward-looking statements in this report are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are not guarantees of future performance and are
subject to risks and uncertainties that could cause actual results and Company
plans and objectives to differ materially from those projected. Such risks and
uncertainties include, but are not limited to, general business and economic
conditions; competitive pricing pressures for the Company's products; changes in
raw material, energy and other costs; and opportunities that may be presented to
and pursued by the Company; determinations by regulatory and governmental
authorities; the ability to successfully integrate the James River and Fort
Howard businesses; and the ability to achieve synergistic and other cost
reductions and efficiencies.
<PAGE>
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
In the fourth quarter of 1997, Fort James received a notice of
violation from the Maine Department of Environmental Protection concerning
alleged air emission license violations between 1991 and 1997 and proposed a
penalty of approximately $130,000. The Company is currently negotiating a
settlement.
Item 2. CHANGES IN SECURITIES.
None.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
None.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Annual Meeting of Shareholders was held on April 23, 1998, at which
time all of management's nominees for members of the Board of Directors were
elected. Shareholders of record of the Company's common stock at the close of
business on February 23, 1998, were entitled to vote at the Annual Meeting.
Votes were cast as follows:
<TABLE>
<CAPTION>
Vote
Voted Voted Withheld or Broker
For Against Abstained Non-Votes
--- ------- --------- ---------
<S> <C>
Nominees for election of Directors:
Barbara L. Bowles 180,819,676 567,233
William T. Burgin 180,804,269 582,640
James L. Burke 180,822,312 564,597
Worley H. Clark, Jr. 180,751,193 635,716
William T. Comfort, Jr. 180,824,560 562,349
Gary P. Coughlan 180,826,761 560,148
William V. Daniel 180,756,805 630,104
Miles L. Marsh 180,785,765 601,144
Robert M. O'Neil 180,807,029 579,880
Michael T. Riordan 180,812,648 574,261
Richard L. Sharp 152,847,364 28,539,545
Anne M. Whittemore 180,768,996 617,913
</TABLE>
Item 5. OTHER INFORMATION.
None.
<PAGE>
Item 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits:
The exhibits listed below are filed as part of this quarterly
report. Each exhibit is listed according to the number
assigned to it in the Exhibit Table of Item 601 of Regulation
S-K.
<TABLE>
<CAPTION>
Exhibit Starts
Number on Page
------ -------
<S> <C>
3(a) Amended and Restated Bylaws of Fort James Corporation
as of April 23, 1998. E-1
27(a) Financial Data Schedules for the quarter ended
March 29, 1998 (filed electronically only).
27(b) Financial Data Schedules restated for the quarter
ended March 30, 1997 (filed electronically only).
27(c) Financial Data Schedules restated for the six
months ended June 29, 1997 (filed electronically
only).
27(d) Financial Data Schedules restated for the nine
months ended September 28, 1997 (filed
electronically only).
</TABLE>
(b) Reports on Form 8-K:
During the quarter ended March 29, 1998, and subsequent
thereto, the Company filed the following Current Reports on
Form 8-K:
Date of Report Event Reported
-------------- --------------
February 3, 1998 The Company published a press release
announcing its results of operations for
the fourth quarter ended December 28, 1997.
March 2, 1998 The Company filed certain information
concerning Fort James Corporation that was
filed in a registration statement
subsequent to the merger.
March 9, 1998 The Company filed consolidated financial
statements of Fort James Corporation as of
December 28, 1997, and December 29, 1996,
for each of the three years ended December
28, 1997, together with Management's
Discussion and Analysis of Results of
Operations and Financial Condition.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
FORT JAMES CORPORATION
By:/s/William A. Paterson
------------------------------------------------
William A. Paterson
Senior Vice President and Controller
(Principal Accounting Officer)
By:/s/Ernst A. Haberli
------------------------------------------------
Ernst A. Haberli
Executive Vice President and Chief Financial Officer
(Principal Financial Officer)
Date: May 8, 1998
EXHIBIT 3(a)
AMENDED AND RESTATED
BYLAWS OF
FORT JAMES CORPORATION
(as of April 23, 1998)
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
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.
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
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.
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.
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 twelve. 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 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.
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 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.
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.
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.
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.
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
(ss.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, "FORT JAMES CORPORATION". 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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM FORT JAMES CORPORATION'S MARCH 29, 1998, FORM 10-Q
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000053117
<NAME> FORT JAMES CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-END> MAR-29-1998
<CASH> 22
<SECURITIES> 0
<RECEIVABLES> 820
<ALLOWANCES> 0
<INVENTORY> 873
<CURRENT-ASSETS> 1,960
<PP&E> 7,840
<DEPRECIATION> 3,308
<TOTAL-ASSETS> 7,741
<CURRENT-LIABILITIES> 1,495
<BONDS> 4,155
0
270
<COMMON> 21
<OTHER-SE> 361
<TOTAL-LIABILITY-AND-EQUITY> 7,741
<SALES> 1,796
<TOTAL-REVENUES> 1,796
<CGS> 1,243
<TOTAL-COSTS> 1,243
<OTHER-EXPENSES> (8)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75
<INCOME-PRETAX> 195
<INCOME-TAX> 77
<INCOME-CONTINUING> 118
<DISCONTINUED> 0
<EXTRAORDINARY> (3)
<CHANGES> 0
<NET-INCOME> 115
<EPS-PRIMARY> 0.53
<EPS-DILUTED> 0.52
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM FORT JAMES CORPORATION'S MARCH 29, 1998, FORM 10-Q
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<RESTATED>
<CIK> 0000053117
<NAME> FORT JAMES CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> MAR-30-1997
<CASH> 59
<SECURITIES> 0
<RECEIVABLES> 762
<ALLOWANCES> 0
<INVENTORY> 812
<CURRENT-ASSETS> 1,810
<PP&E> 7,863
<DEPRECIATION> 3,005
<TOTAL-ASSETS> 7,943
<CURRENT-LIABILITIES> 1,400
<BONDS> 4,290
0
738
<COMMON> 9
<OTHER-SE> 90
<TOTAL-LIABILITY-AND-EQUITY> 7,943
<SALES> 1,818
<TOTAL-REVENUES> 1,818
<CGS> 1,278
<TOTAL-COSTS> 1,278
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 96
<INCOME-PRETAX> 162
<INCOME-TAX> 65
<INCOME-CONTINUING> 97
<DISCONTINUED> 0
<EXTRAORDINARY> (1)
<CHANGES> 0
<NET-INCOME> 96
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM FORT JAMES CORPORATION'S JUNE 29, 1997, SUPPLEMENTAL
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<RESTATED>
<CIK> 0000053117
<NAME> FORT JAMES CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> JUN-29-1997
<CASH> 217
<SECURITIES> 0
<RECEIVABLES> 774
<ALLOWANCES> 0
<INVENTORY> 833
<CURRENT-ASSETS> 1,991
<PP&E> 7,874
<DEPRECIATION> 3,106
<TOTAL-ASSETS> 8,083
<CURRENT-LIABILITIES> 1,455
<BONDS> 4,156
0
738
<COMMON> 19
<OTHER-SE> 236
<TOTAL-LIABILITY-AND-EQUITY> 8,083
<SALES> 3,672
<TOTAL-REVENUES> 3,672
<CGS> 2,564
<TOTAL-COSTS> 2,564
<OTHER-EXPENSES> (58)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 190
<INCOME-PRETAX> 415
<INCOME-TAX> 168
<INCOME-CONTINUING> 247
<DISCONTINUED> 0
<EXTRAORDINARY> (2)
<CHANGES> 0
<NET-INCOME> 245
<EPS-PRIMARY> 1.14
<EPS-DILUTED> 1.11
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM FORT JAMES CORPORATION'S SEPTEMBER 28, 1997, FORM 10-Q
FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<RESTATED>
<CIK> 0000053117
<NAME> FORT JAMES CORPORATION
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-28-1997
<PERIOD-END> SEP-28-1998
<CASH> 35
<SECURITIES> 0
<RECEIVABLES> 814
<ALLOWANCES> 0
<INVENTORY> 843
<CURRENT-ASSETS> 1,826
<PP&E> 7,861
<DEPRECIATION> 3,140
<TOTAL-ASSETS> 7,832
<CURRENT-LIABILITIES> 1,516
<BONDS> 3,880
0
450
<COMMON> 21
<OTHER-SE> 510
<TOTAL-LIABILITY-AND-EQUITY> 7,832
<SALES> 5,498
<TOTAL-REVENUES> 5,498
<CGS> 3,835
<TOTAL-COSTS> 3,835
<OTHER-EXPENSES> (4)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 278
<INCOME-PRETAX> 563
<INCOME-TAX> 245
<INCOME-CONTINUING> 316
<DISCONTINUED> 0
<EXTRAORDINARY> (47)
<CHANGES> 0
<NET-INCOME> 269
<EPS-PRIMARY> 1.21
<EPS-DILUTED> 1.18
</TABLE>
