SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
Annual Report Pursuant to Section 15(d) of
Securities Exchange Act of 1934
For the year ended December 31, 1998
Commission file number 1-7911
A. Full title of the plan and the address of the plan,
if different from that of the issuer named below:
FORT JAMES CORPORATION
CANADIAN EMPLOYEES STOCK PURCHASE PLAN
B. Name of issuer of the securities held pursuant to the
Plan and the address of its principal executive office:
FORT JAMES CORPORATION
1650 Lake Cook Road, Deerfield, Illinois 60015
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FORT JAMES CORPORATION
CANADIAN EMPLOYEES STOCK PURCHASE PLAN
INDEX TO FINANCIAL STATEMENTS AND SCHEDULES
Pages
Report of independent accountants 3
Financial statements:
Statements of financial condition as of
December 31, 1998 and 1997 4
Statements of income and changes in plan equity for
the years ended December 31, 1998, 1997 and 1996 5
Notes to financial statements 6-9
Supplemental schedules:
Schedules I, II and III are omitted because they are not
applicable or because substantially all of the information
is provided within the financial statements.
Signatures 10
Exhibits:
4.0 Fort James Corporation Canadian Employees Stock Purchase
Plan, as amended and restated effective August 28, 1995
(incorporated by reference to Exhibit 4 to Fort James
Corporation Canadian Stock Purchase Plan Annual Report on
Form 11-K for the year ended December 31, 1995)
4.1 Amendment to Fort James Corporation Canadian Employees
Stock Purchase Plan, effective January 1, 1997
(incorporated by reference to Exhibit 4.1 to Fort James
Corporation Canadian Stock Purchase Plan Annual Report
on Form 11-K for the year ended December 31, 1997)
23 Consent of independent accountants - filed herewith 11
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REPORT OF INDEPENDENT ACCOUNTANTS
To the Retirement Plans
Management Committee of Fort James Corporation:
In our opinion, the accompanying statements of financial condition and the
related statements of income and changes in plan equity present fairly, in all
material respects, the financial condition of the Fort James Corporation
Canadian Employees Stock Purchase Plan (the "Plan") at December 31, 1998 and
1997, and the income and changes in plan equity for each of the three years in
the period ended December 31, 1998 in conformity with generally accepted
accounting principles. These financial statements are the responsibility of the
Plan's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing standards which
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
/s/ PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
February 26, 1999
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Fort James Corporation Canadian Employees Stock Purchase Plan
Statements of Financial Condition
As of December 31, 1998 and 1997
1998 1997
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ASSETS:
Cash $112,190 $1,108
Contributions receivable:
Employer:
Basic 23,451 25,581
Additional 17,465 16,538
Employee 46,049 50,368
Investment in common stock, at market value:
Fort James (historical cost:
1998 - $1,915,380 and 1997-$1,853,577) 2,175,120 2,257,898
Crown Vantage Inc. (historical cost:
1998-$36,851 and 1997-$44,570) 3,737 14,539
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Total assets $2,378,012 $2,366,032
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PLAN EQUITY $2,378,012 $2,366,032
================================================================================
The accompanying notes are an integral part of the financial statements.
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Fort James Corporation Canadian Employees Stock Purchase Plan
Statements of income and changes in plan equity
For the years ended December 31, 1998, 1997 and 1996
1998 1997 1996
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ADDITIONS:
Investment income:
Cash dividends on Common Stock $ 30,463 $ 32,879 $ 29,996
Realized gain on sale of investments 7,057 29,274 -
Interest on bank deposits 379 38 758
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Total investment income 37,899 62,191 30,754
Change in net appreciation or
depreciation in fair value of investments (147,663) 63,620 424,064
- --------------------------------------------------------------------------------
Contributions and deposits:
Deposits by participating employees 645,737 635,794 557,847
Contributions by employer:
Basic 324,268 326,212 290,448
Additional 18,119 16,856 17,131
Administrative costs 17,739 26,113 21,153
Loss funded by Trustee - 34,046 -
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Total contributions and deposits 1,005,863 1,039,021 886,579
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Total additions 896,099 1,164,832 1,341,397
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DEDUCTIONS:
Withdrawals and expenditures:
Distributions to participants (844,035) (1,023,473) (769,239)
Administrative costs (17,739) (26,113) (21,153)
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Total withdrawals and expenditures (861,774) (1,049,586) (790,392)
Foreign currency remeasurement gain (loss) (22,345) (7,882) 135
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Total deductions (884,119) (1,057,468) (790,257)
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Net increase in plan equity 11,980 107,364 551,140
PLAN EQUITY:
Beginning of year 2,366,032 2,258,668 1,707,528
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End of year $2,378,012 $2,366,032 $2,258,668
================================================================================
The accompanying notes are an integral part of the financial statements.
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FORT JAMES CORPORATION
CANADIAN EMPLOYEES STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
1. General
The Fort James Corporation Canadian Employees Stock Purchase Plan (the
"Plan"), formerly the James River Corporation of Virginia Canadian Employees
Stock Purchase Plan, was adopted by the Board of Directors of Fort James
Corporation ("Fort James" or the "Company") for the benefit of the employees of
certain operating subsidiaries of Fort James located in Canada (the
"Participating Companies"). As of December 31, 1998, the Participating Companies
included Fort James Marathon, Ltd. ("Marathon") and Fort James Canada, Inc. ("FJ
Canada"). In 1997, James River Corporation of Virginia ("James River") and Fort
Howard Corporation ("Fort Howard") merged. In connection with the merger, James
River was renamed Fort James Corporation.
2. Summary of significant accounting policies
Cash
Substantially all contributions to the Plan are initially invested in an
interest-bearing account pending their investment in Fort James' common stock,
$0.10 par value ("FJ Common Stock"). Interest earned on such cash balances is
credited to the Participants' accounts. Cash balances are stated at cost which
approximates market value.
Investment valuation
The investments include FJ Common Stock and Crown Vantage Inc. common stock
("CV Common Stock") (see Note 3). The investments in FJ Common Stock and CV
Common Stock are stated at market value, based on the closing price on the New
York Stock Exchange Composite Tape on the last trading day of the period. The
closing market value per share of FJ Common Stock was $40.00 and $38.25 on
December 31, 1998 and December 31, 1997, respectively. The closing market value
per share of the CV Common Stock was $2.25 and $7.00 on December 31, 1998 and
December 31, 1997, respectively.
Security transactions and related investment income
Security transactions are accounted for as of the trade date and dividend
income is recorded as of the date of declaration. The cost of securities is
determined on an average-cost basis. The assets of the Plan are held by Canada
Trust (the "Trustee") under a Trust Agreement dated August 23, 1989.
Contributions and deposits
Employee and employer contributions are recorded on an accrual basis as of
the date the employees' contributions are withheld from the employees'
compensation. Employee and employer contributions are transferred to the Trustee
on a monthly basis. The Trustee uses such contributions to periodically purchase
shares of FJ Common Stock which are allocated to each Participant's account.
Residual cash amounts held by the Trustee are carried forward to the next month.
Foreign currency remeasurement
The functional currency of the Plan is the U.S. dollar. Assets and
liabilities of the Plan (except investments in common stock which are stated at
U.S. dollar market value) are remeasured from Canadian dollars to U.S. dollars
at the applicable year-end exchange rate. The cost of investments in common
stock and the related unrealized appreciation or depreciation are remeasured at
applicable historical exchange rates. Investment income, contributions and
deposits, and withdrawals and expenditures are remeasured at average exchange
rates for the applicable years. Foreign currency remeasurement gains and losses
are included in the net increase in plan equity.
Withdrawals
Participants may elect to either withdraw whole shares of common stock or
to have the shares sold and the net cash proceeds distributed to them.
Withdrawals of common stock are accounted for at the average historical cost of
the common stock distributed. Withdrawals in cash or in connection with shares
sold for distributions of fractional shares are accounted for at the fair market
value of the related common stock. Any Participant contributions which have not
yet been applied to the purchase of common stock will also be paid to each
withdrawing Participant.
Administrative costs
The Plan is reimbursed by the Participating Companies for its
administrative and operating costs, except for brokerage fees. Brokerage fees
are included in the cost of acquiring common stock and thus are borne by the
Participants.
Loss funded by Trustee
The loss funded by the Trustee is for reimbursements to Participants'
accounts in an amount equal to the appreciation in FJ Common Stock price for
funds that were not invested by the Trustee in the
FJ Common Stock in a timely manner.
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
periods. Actual results may differ from those estimates.
3. Description of Plan
The Plan was established to enable eligible employees of certain Fort James
subsidiaries located in Canada to acquire an ownership interest in Fort James,
the ultimate holding company. The Plan is a non-taxable employees profit sharing
plan as defined in Section 144(1)of the Income Tax Act (Canada) (the "Canadian
Tax Act").
On August 28, 1995, the Company spun off part of its Communications Papers
business, as well as the specialty paper based portion of its Packaging
Business, into a new company, Crown Vantage Inc. ("Crown Vantage"). The existing
shareholders of the Company on record as of August 25, 1995 received one share
of CV Common Stock for each ten shares of FJ Common Stock held by the
shareholder. The Plan was amended to allow for the inclusion of an investment in
CV Common Stock.
Participants may elect to contribute into the Plan, through payroll
deductions, from 1% to 10% of their compensation to be used to purchase FJ
Common Stock for their benefit. Participant contributions of up to six percent
of compensation ("Basic Member Contributions") are matched by the Participating
Companies ("Basic Employer Contributions") based on the following schedule:
Participating Company's
Contributions as a percentage
Participant's contributions of Participant's contributions
- ---------------------------- ------------------------------
1% of compensation 100%
2% of compensation 65%
3% to 6% of compensation 50%
The Participating Companies make no contributions with respect to a
Participant's contribution in excess of six percent of the Participant's
compensation.
The Participating Companies also make "Additional Employer Contributions".
The additional Employer Contributions are made on or before March 31 for each
participant who was employed by the participating companies as of the preceding
December 31 and who had not withdrawn any common stock from his Restricted
Account (hereinafter defined) during either of the two immediately preceding
calendar years. The Additional Employer Contribution equals 10% of the
participant's aggregate Basic Employer Contributions during the two preceding
calendar years.
Each Participant's "Restricted Account" includes the Basic Member
Contributions and Basic Employer Contributions made at any time during the
current or immediately preceding calendar year, and any FJ Common Stock or CV
Common Stock purchased with such contributions.
Each Participant is fully vested in all contributions and earnings at all
times. The Plan had approximately 470 Participants as of December 31, 1998 and
1997.
4. Contributions to the Plan
Employee and employer contributions for the years ended December 31, 1998,
1997 and 1996 were as follows:
1998 1997 1996
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Employee Employer Employee Employer Employee Employer
- --------------------------------------------------------------------------------
Marathon $433,272 $244,386 $471,740 $267,973 $413,090 $238,437
FJ Canada 212,465 115,740 164,054 101,208 144,757 90,295
- --------------------------------------------------------------------------------
$645,737 $360,126 $635,794 $369,181 $557,847 $328,732
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5. Investment in common stock
The unrealized appreciation or depreciation of investment in common stock
as of December 31, 1998, 1997 and 1996 and the change in such amount during each
period were as follows:
Market Appreciation
Value Cost (Depreciation)
- --------------------------------------------------------------------------------
December 31, 1995 $ 1,593,457 $ 1,706,851 $ (113,394)
Change for the year ended
December 31, 1996 400,239 (23,825) 424,064
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December 31, 1996 1,993,696 1,683,026 310,670
Change for the year ended
December 31, 1997 278,741 215,121 63,620
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December 31, 1997 2,272,437 1,898,147 374,290
Change for year ended
December 31, 1998 (93,580) 54,084 (147,663)
- --------------------------------------------------------------------------------
December 31, 1998 $ 2,178,857 $ 1,952,231 $ 226,627
================================================================================
The Plan held 54,378 shares and 59,030 shares of FJ Common Stock on
December 31, 1998 and 1997, respectively. In addition, the Plan held 1,661
shares and 2,077 shares of CV Common Stock on December 31, 1998 and 1997,
respectively.
6. Tax status
The Plan is an employee profit sharing plan and is subject to the Canadian
Tax Act; all amounts contributed to a Participant's account are taxable to such
Participant under Canadian income tax rules. The only U.S. taxes paid are U.S.
withholding taxes on cash dividends, which are withheld on behalf of
Participants. During 1997, the Trustee terminated its withholding of such taxes.
All U.S. taxes on cash dividends are now paid directly by the Participants.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
members of the Committee who administer the Plan have duly caused this annual
report to be signed by the undersigned hereunto duly authorized.
March 26, 1999 /s/ Clifford A. Cutchins, IV
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Date Committee Member - Clifford A. Cutchins, IV
March 26, 1999 /s/ Daniel J. Girvan
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Date Committee Member - Daniel J. Girvan
March 26, 1999 /s/ Ernst A. Haberli
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Date Committee Member - Ernst A. Haberli
March 26, 1999 /s/ R. Michael Lempke
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Date Committee Member - R. Michael Lempke
March 26, 1999 /s/ William A. Paterson
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Date Committee Member - William A. Paterson
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
of Fort James Corporation on Form S-8 (File No. 33-57153) of our report dated
February 26, 1999, on our audits of the financial statements of the Fort James
Corporation Canadian Employees Stock Purchase Plan as of December 31, 1998 and
1997, and for each of the three years in the period ended December 31, 1998,
which report is included in this Annual Report on Form 11-K.
/s/ PRICEWATERHOUSECOOPERS LLP
Chicago, Illinois
March 30, 1999
