-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, oMl5RAiRW2s1gt5LCb1sLoz09sNPxxBPTu8u65v6dYIgczlM10hrV7/6hDN+x0BN ZPsCG48vF1omvrgO4tAdMw== 0000038195-95-000033.txt : 19950427 0000038195-95-000033.hdr.sgml : 19950427 ACCESSION NUMBER: 0000038195-95-000033 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950426 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORT HOWARD CORP CENTRAL INDEX KEY: 0000038195 STANDARD INDUSTRIAL CLASSIFICATION: PAPER MILLS [2621] IRS NUMBER: 391090992 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20473 FILM NUMBER: 95531589 BUSINESS ADDRESS: STREET 1: 1919 S BROADWAY CITY: GREEN BAY STATE: WI ZIP: 54304 BUSINESS PHONE: 4144358821 FORMER COMPANY: FORMER CONFORMED NAME: FORT HOWARD PAPER CO/DE DATE OF NAME CHANGE: 19870506 FORMER COMPANY: FORMER CONFORMED NAME: MARYLAND CUP CORP/WI DATE OF NAME CHANGE: 19840612 FORMER COMPANY: FORMER CONFORMED NAME: FORT HOWARD PAPER CO DATE OF NAME CHANGE: 19830926 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 0-20473 FORT HOWARD CORPORATION (Exact name of registrant as specified in its charter) Delaware 39-1090992 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 1919 South Broadway, Green Bay, Wisconsin 54304 (Address of principal executive offices) (Zip Code) Registrant's telephone number including area code: 414/435-8821 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 (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at April 26, 1995 ----- ----------------------------- Common Stock, par value $.01 per share 63,370,794 PART I. FINANCIAL INFORMATION FORT HOWARD CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) Three Months Ended March 31, -------------------- 1995 1994 ---- ---- (In thousands, except per share data) Net sales................................. $367,376 $275,330 Cost of sales............................. 267,856 188,495 -------- -------- Gross income.............................. 99,520 86,835 Selling, general and administrative....... 28,745 26,702 -------- -------- Operating income.......................... 70,775 60,133 Interest expense.......................... 86,770 84,318 Other (income) expense, net............... (224) 588 -------- -------- Loss before taxes......................... (15,771) (24,773) Income tax credit......................... (6,253) (9,601) -------- -------- Loss before extraordinary item............ (9,518) (15,172) Extraordinary item -- loss on debt repurchases (net of income taxes of $11,986 in 1995 and $14,731 in in 1994)................................ (18,748) (28,170) -------- -------- Net loss.................................. $(28,266) $(43,342) ======== ======== Loss per share: Net loss before extraordinary item...... $ (0.22) $ (0.40) Extraordinary item...................... (0.44) (0.74) -------- -------- Net loss................................ $ (0.66) $ (1.14) ======== ======== Average shares outstanding................ 42,546 38,107 ======== ======== The accompanying notes are an integral part of these condensed consolidated financial statements. - 2 - FORT HOWARD CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, December 31, 1995 1994 --------- ------------ (In thousands) Assets Current assets: Cash and cash equivalents................. $ 210 $ 422 Receivables, less allowances of $1,675 in 1995 and $1,589 in 1994.............. 139,284 123,150 Inventories............................... 145,311 130,843 Deferred income taxes..................... 20,000 20,000 Income taxes receivable................... 8,200 5,200 ---------- ---------- Total current assets.................... 313,005 279,615 Property, plant and equipment............... 1,949,068 1,932,713 Less: Accumulated depreciation........... 637,574 611,762 ---------- ---------- Net property, plant and equipment....... 1,311,494 1,320,951 Other assets................................ 101,326 80,332 ---------- ---------- Total assets............................ $1,725,825 $1,680,898 ========== ========== Liabilities and Shareholders' Deficit Current liabilities: Accounts payable.......................... $ 126,809 $ 100,981 Interest payable.......................... 63,192 84,273 Income taxes payable...................... 112 224 Other current liabilities................. 50,595 75,450 Current portion of long-term debt......... 11,669 116,203 ---------- ---------- Total current liabilities............... 252,377 377,131 Long-term debt.............................. 3,123,994 3,189,644 Deferred and other long-term income taxes... 194,231 209,697 Other liabilities........................... 37,332 41,162 Common Stock with put right................. -- 11,711 Shareholders' deficit: Common Stock.............................. 631 381 Additional paid-in capital................ 892,598 600,090 Cumulative translation adjustment......... (484) (2,330) Retained deficit.......................... (2,774,854) (2,746,588) ---------- ---------- Total shareholders' deficit............. (1,882,109) (2,148,447) ---------- ---------- Total liabilities and shareholders' deficit............................... $1,725,825 $1,680,898 ========== ========== The accompanying notes are an integral part of these condensed consolidated financial statements. - 3 - FORT HOWARD CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, ------------------ 1995 1994 ---- ---- (In thousands) Cash provided from (used for) operations: Net loss........................................ $(28,266) $(43,342) Depreciation.................................... 24,331 22,098 Non-cash interest expense....................... 3,223 21,287 Deferred income tax credit...................... (16,191) (21,760) Pre-tax loss on debt repurchases................ 30,734 42,901 Increase in receivables......................... (16,134) (6,954) Increase in inventories......................... (14,468) (3,320) Increase in income taxes receivable............. (3,000) (2,100) Increase (decrease) in accounts payable......... 25,828 (2,402) Decrease in interest payable.................... (21,081) (22,123) Increase (decrease) in income taxes payable..... (112) 133 All other, net.................................. (30,281) (28,646) -------- -------- Net cash used for operations.................. (45,417) (44,228) Cash used for investment activity -- Additions to property, plant and equipment...... (10,845) (30,411) Cash provided from (used for) financing activities: Proceeds from long-term borrowings.............. 655,800 800,600 Repayment of long-term borrowings............... (832,596) (703,770) Debt issuance costs............................. (48,201) (21,635) Issuance of Common Stock, net of offering costs. 281,047 -- -------- -------- Net cash provided from financing activities... 56,050 75,195 -------- -------- Increase (decrease) in cash....................... (212) 556 Cash at beginning of period....................... 422 227 -------- -------- Cash at end of period........................... $ 210 $ 783 ======== ======== Supplemental Cash Flow Disclosures: Interest paid................................... $105,660 $ 88,014 Income taxes paid - net......................... 956 691 The accompanying notes are an integral part of these condensed consolidated financial statements. - 4 - FORT HOWARD CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. BASIS OF PRESENTATION The condensed consolidated financial statements reflect all adjustments (consisting only of normally recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. Certain reclassifications have been made to conform prior years' data to the current format. These financial statements should be read in conjunction with the Company's annual report on Form 10-K for the year ended December 31, 1994. 2. COMMON STOCK SPLIT On January 31, 1995, the Company's shareholders approved an increase in the number of authorized shares of voting Common Stock to 99,400,000 shares and approved a 6.5-for-one stock split of the Common Stock, effective January 31, 1995. All share and per share amounts included in the condensed consolidated financial statements and notes thereto have been restated to give effect to the increase in authorized shares and the stock split. 3. LOSS PER SHARE Loss per share is computed on the basis of the weighted average number of common shares outstanding during the periods. The weighted average number of common shares outstanding for the three month periods ended March 31, 1995 and 1994 were 42,545,683 and 38,107,128, respectively. The assumed exercise of all outstanding stock options has been excluded from the computation of loss per share for the three month periods ended March 31, 1995 and 1994 because the results were antidilutive. 4. INVENTORIES Inventories consist of: March 31, December 31, 1995 1994 --------- ------------ (In thousands) Raw materials and supplies.............. $ 65,330 $ 63,721 Finished and partly-finished products... 79,981 67,122 -------- -------- $145,311 $130,843 ======== ======== 5. COMMON STOCK OFFERING On March 16, 1995, the Company issued 25 million shares of Common Stock at $12.00 per share in a public offering (the "Offering"). Proceeds from the Offering, net of underwriting commissions and other related expenses totaling $19 million, were $281 million. On April 12, 1995, an additional 269,555 shares of Common Stock were issued at $12.00 per share upon the exercise of a portion of the underwriters' over-allotment option granted in connection with - 5 - the Offering, resulting in additional net proceeds of $3 million after deducting underwriting commissions. The Offering was part of a recapitalization plan (the "Recapitalization") implemented by the Company to prepay or redeem a substantial portion of its indebtedness in order to reduce the level and overall cost of its debt, extend certain debt maturities, increase shareholders' equity and enhance its access to capital markets (see Note 6). The balance of Common Stock with put right of approximately $12 million was reclassified to Common Stock and Additional Paid-In Capital in the accompanying condensed consolidated financial statements because the put right terminated effective with the consummation of the Offering. 6. LONG-TERM DEBT As a part of the Recapitalization (see Note 5), the Company entered into a bank credit agreement (the "New Bank Credit Agreement") consisting of a $300 million revolving credit facility (the "1995 Revolving Credit Facility"), an $810 million term loan (the "1995 Term Loan A") and a $330 million term loan (the "1995 Term Loan B" and together with the 1995 Term Loan A, the "New Term Loans"); and entered into a receivables credit agreement consisting of a $60 million term loan (the "1995 Receivables Facility"). On March 16, 1995, the net proceeds of the Offering, together with borrowings of $652 million under the New Bank Credit Agreement, were used to prepay or repurchase all the outstanding indebtedness under the 1988 Bank Credit Agreement, the 1993 Term Loan and the Senior Secured Notes. On April 14, 1995, further borrowings of $762 million under the New Bank Credit Agreement and 1995 Receivables Facility were used to redeem on April 15, 1995 all outstanding 14 1/8% Debentures (at par) and 12 5/8% Debentures (at 102.5% of the principal amount thereof). The Company incurred an extraordinary loss of $19 million (net of income taxes of $12 million) in the first quarter of 1995 representing the redemption premiums on the repurchases of all the Company's outstanding 12 5/8% Debentures at the redemption price of 102.5% of the principal amount thereof and write-offs of deferred loan costs associated with the prepayment or repurchases of all indebtedness outstanding under the Company's 1988 Bank Credit Agreement, the 1993 Bank Term Loan and the Senior Secured Notes on March 16, 1995, and the redemption of all outstanding 12 5/8% Debentures and 14 1/8% Debentures on April 15, 1995. The New Bank Credit Agreement and the 1995 Receivables Facility include restrictions on the Company's operating activities and require the maintenance of certain financial ratios at prescribed levels. The Company believes that such limitations should not impair its plans for continued maintenance and modernization of facilities or other operating activities. At March 31, 1995, the available capacity under the Company's 1995 Revolving Credit Facility was $271 million. On April 15, 1995, following the redemption of the 14 1/8% Debentures and 12 5/8% Debentures, the available capacity under the Company's 1995 Revolving Credit Facility had declined to $91 million. - 6 - 7. LEGAL PROCEEDINGS The Company and its subsidiaries are parties to lawsuits and state and federal administrative proceedings incidental to their businesses. Although the final results in such suits and proceedings cannot be predicted with certainty, the Company currently believes that the ultimate resolution of all such lawsuits and proceedings, after taking into account the liabilities accrued with respect to such matters, will not have a material adverse effect on the Company's financial condition or on its results of operations. - 7 - FORT HOWARD CORPORATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS First Quarter 1995 Compared to 1994 Three Months Ended March 31, -------------------- 1995 1994 ---- ---- (In thousands, except percentages) Net sales: Domestic tissue......................... $293,928 $229,370 International operations................ 36,187 32,500 Harmon.................................. 37,261 13,460 -------- -------- Consolidated............................ $367,376 $275,330 ======== ======== Operating income: Domestic tissue......................... $ 67,364 $ 59,288 International operations................ 1,972 495 Harmon.................................. 1,439 350 -------- -------- Consolidated............................ 70,775 60,133 Depreciation.............................. 24,331 22,098 -------- -------- EBITDA(a)............................. $ 95,106 $ 82,231 ======== ======== Consolidated net loss..................... $(28,266) $(43,342) ======== ======== EBITDA as a percent of net sales(a)....... 25.9% 29.9% - --------------------- (a) EBITDA is reported by the Company, not as a measure of operating results, but rather as a measure of the Company's debt service ability. Certain financial and other restrictive covenants in the Company's New Bank Credit Agreement and other instruments governing the Company's indebtedness are based on the Company's EBITDA, subject to certain adjustments. Net Sales. Consolidated net sales increased 33.4% to $367 million in the first quarter of 1995 compared to $275 million in the first quarter of 1994. Domestic tissue net sales increased 28.1% in the first quarter of 1995 compared to the first quarter of 1994 due to a 17.5% increase in sales volume and a 9.0% increase in net selling prices. Sales volume growth for the first quarter of 1995 was significant in both the commercial and consumer markets but stronger in the commercial market where shipments had fallen significantly during the first quarter of 1994 compared to the first quarter of 1993. Net selling prices increased to a greater extent in the commercial market than in the consumer market for the first quarter of 1995 compared to the first - 8 - quarter of 1994. From the fourth quarter of 1994 to the first quarter of 1995, overall domestic net selling prices increased 8.7% as a result of price increase announcements for the commercial market effective mid-October 1994 and January 1995 and for the consumer market effective January 1995. Price improvement occurred at a slightly higher pace from the fourth quarter of 1994 to the first quarter of 1995 in the commercial market compared to the consumer market. The Company has announced further domestic price increases for the commercial market effective April 1995 and for the consumer market effective mid-May 1995. Because historically a substantial portion of the Company's commercial sales were pursuant to contracts which specified pricing over periods up to one year, there is a time lag before the Company realizes the full benefit of commercial market price increases. In recent months as commercial contracts have been renewed, the Company has reduced the periods of its price guarantees of those contracts to a maximum of three months. Net sales of the Company's international operations increased 11.3% in the first quarter of 1995 compared to the first quarter of 1994 due to a 6.9% increase in net selling prices on flat volume plus the benefit from the change in foreign exchange rates. The 176.8% increase in net sales of the Company's wastepaper brokerage subsidiary, Harmon Associates Corp. ("Harmon"), principally reflects higher selling prices and, to a much lesser degree, higher sales volume. Gross Income. For the first quarter of 1995, consolidated gross income increased 14.6% to $100 million from $87 million for the first quarter of 1994 due to the higher selling prices and sales volumes, partially offset by higher raw material costs. Consolidated gross margins decreased to 27.1% for the first quarter of 1995 from 31.5% for the first quarter of 1994. Domestic tissue gross margins decreased for the first quarter of 1995 compared to the first quarter of 1994 primarily due to rapidly escalating wastepaper prices experienced in the second half of 1994 and continuing into 1995. From July 1994 to March 1995, wastepaper prices for the grades of wastepaper used in Fort Howard's domestic products increased approximately 150% and such wastepaper prices may increase further due to increased demand for those wastepaper grades used by the Company. From the fourth quarter of 1994 to the first quarter of 1995, Fort Howard's domestic wastepaper prices increased 38%. Costs of other raw materials also increased during the first quarter of 1995 compared to the first quarter of 1994 but by a much lower percentage while all other costs held flat or declined due to efficiencies achieved from higher volumes. Gross margins of international operations increased in the first quarter of 1995 compared to the first quarter of 1994 in spite of higher wastepaper prices due to the effects of product rationalization on first quarter of 1994 earnings. From July 1994 to March 1995, wastepaper prices doubled for the grades of wastepaper used by international operations and wastepaper prices are expected to increase further for such operations due to increased demand for those wastepaper grades used by the Company. In addition, consolidated gross margins were negatively affected for the first quarter of 1995 compared to the first quarter of 1994 by the significant increased proportion of net sales represented by the Company's wastepaper brokerage subsidiary which typically has very low margins compared to domestic tissue operations. Selling, General and Administrative Expenses. Selling, general and administrative expenses, as a percent of net sales, decreased to 7.8% for the first quarter of 1995 compared to 9.7% in 1994 principally due to the impact of the higher net sales. - 9 - Operating Income. Operating income increased 17.7% to $71 million in the first quarter of 1995 compared to $60 million in the first quarter of 1994. Operating income as a percent of net sales decreased to 19.3% in the first quarter of 1995 compared to 21.8% in the first quarter of 1994. Domestic tissue operating income as a percent of net sales decreased to 22.9% in the first quarter of 1995 from 25.8% in the first quarter of 1994 principally because the rate of increase in wastepaper costs exceeded the rate of increase in net selling prices. In addition, consolidated operating income declined as a percent of net sales due to the significant increased proportion of net sales represented by the Company's wastepaper brokerage subsidiary which typically has very low operating income margins compared to either domestic tissue or international operations. Income Taxes. The income tax credits for the first quarters of 1995 and 1994 principally reflect the reversal of previously provided deferred income taxes. Extraordinary Loss. The Company's net loss in the first quarter of 1995 was increased by an extraordinary loss of $19 million (net of income taxes of $12 million) representing the redemption premiums on the repurchases of all the Company's outstanding 12 5/8% Debentures at the redemption price of 102.5% of the principal amount thereof, and write-offs of deferred loan costs associated with the prepayment or repurchases of all indebtedness outstanding under the Company's 1988 Bank Credit Agreement, the 1993 Bank Term Loan and the Senior Secured Notes on March 16, 1995, and the redemption of all outstanding 12 5/8% Debentures and 14 1/8% Debentures on April 15, 1995. The Company's net loss in the first quarter of 1994 was increased by an extraordinary loss of $28 million (net of income taxes of $15 million) representing the redemption premiums on the repurchases of all the Company's remaining 12 3/8% Notes at the redemption price of 105% of the principal amount thereof and of $238 million of 12 5/8% Debentures at the redemption price of 105% of the principal amount thereof on March 11, 1994, and the write- off of deferred loan costs associated with the prepayment of $100 million of the 1988 Term Loan on February 10, 1994, and the repurchases of the 12 3/8% Notes and the 12 5/8% Debentures. Net Loss. For the first quarter of 1995, the Company's net loss decreased 34.8% to $28 million from $43 million in the first quarter of 1994. FINANCIAL CONDITION For the first three months of 1995, cash decreased $212,000. Capital additions of $11 million, debt repayments of $833 million, including the prepayment or repurchase of all of the 1988 Term Loan, the 1988 Revolving Credit Facility, the 1993 Term Loan and the Senior Secured Notes, and cash used for operations of $45 million, were funded principally by net proceeds of $281 million from the sale of Common Stock and borrowings of $608 million (net of $48 million of debt issuance costs) pursuant to the Recapitalization (see below). During the first three months of 1995, receivables increased $16 million due principally to higher net selling prices in the domestic tissue and wastepaper brokerage operations and inventories increased by $14 million principally for seasonal sales requirements. Accounts payable increased $26 million due to rising wastepaper costs and the seasonal inventory build. The liability for interest payable decreased $21 million due to the early payment of interest in connection with the Recapitalization. Other current - 10 - liabilities declined $25 million resulting from the payment of obligations due on an annual basis, including employee bonuses and customer incentive payments. As a result of all these changes and the prepayment of the remaining $107 million outstanding under the 1988 Term Loan from the net proceeds of the Recapitalization, net working capital increased to $61 million at March 31, 1995 from a deficit of $98 million at December 31, 1994. For the first quarter of 1995, cash was used for operations due to seasonal working capital requirements. On April 15, 1995, the Company completed a recapitalization plan (the "Recapitalization") to prepay or redeem a substantial portion of its indebtedness in order to reduce the level and overall cost of its debt, extend certain debt maturities, increase shareholders' equity and enhance its access to capital markets. The Recapitalization included the following components: (1) The offer and sale by the Company of 25,000,000 shares of Common Stock on March 16, 1995 and 269,555 additional shares of Common Stock on April 12, 1995 pursuant to the exercise of a portion of the underwriters' over-allotment option, at $12.00 per share (the "Offering"); (2) Entering into a bank credit agreement (the "New Bank Credit Agreement") consisting of a $300 million revolving credit facility (the "1995 Revolving Credit Facility"), an $810 million term loan (the "1995 Term Loan A") and a $330 million term loan (the "1995 Term Loan B" and, together with the 1995 Term Loan A, the "New Term Loans"); and entering into a receivables credit agreement consisting of a $60 million term loan (the "1995 Receivables Facility"); (3) The application on March 16, 1995 of the net proceeds of the sale of 25,000,000 shares of Common Stock pursuant to the Offering, together with borrowings under the New Term Loans, to prepay or redeem all the Company's indebtedness outstanding under the 1988 Bank Credit Agreement, 1993 Term Loan and Senior Secured Notes. (4) The application on April 15, 1995 of borrowings under the New Term Loans, the 1995 Receivables Facility and the 1995 Revolving Credit Facility to redeem all outstanding 14 1/8% Debentures (at par) and 12 5/8% Debentures (at 102.5% of the principal amount thereof). The Company's 1995 Revolving Credit Facility, which may be used for general corporate purposes, has a final maturity of March 16, 2002. At March 31, 1995, the Company had $271 million in available capacity under the 1995 Revolving Credit Facility. On April 15, 1995, following the redemption of the 14 1/8% Debentures and 12 5/8% Debentures, the available capacity under the 1995 Revolving Credit Facility had declined to $91 million. - 11 - PART II. OTHER INFORMATION 1. LEGAL PROCEEDINGS None 2. CHANGES IN SECURITIES None 3. DEFAULTS UPON SENIOR SECURITIES None 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Effective as of January 31, 1995, shareholders of the Company representing 23,865,731 shares or 63% of the Company's then outstanding common stock (i) approved a 6.5-for-one stock split of the Company's Common Stock, (ii) approved the amendment of the Company's Restated Certificate of Incorporation to increase the number of authorized shares of Common Stock, (iii) approved the further amendment and restatement of the Company's Restated Certificate of Incorporation, (iv) elected Donald H. DeMeuse, Kathleen J. Hempel, Michael T. Riordan, Donald Patrick Brennan, Frank V. Sica, Robert H. Niehaus and James S. Hoch (who has since resigned) as directors of the Company, (v) approved the Fort Howard Corporation 1995 Stock Incentive Plan and (vi) approved the Fort Howard Corporation 1995 Stock Plan for Non-Employee Directors. 5. OTHER INFORMATION None 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits: Exhibit No. Description 27 Financial Data Schedule for the three months ended March 31, 1995. 99 News release containing financial results for the quarter ended March 31, 1995. b) The Company filed a Form 8-K dated February 8, 1995, reporting under Item 5 the Company's audited consolidated financial statements for the year ended December 31, 1994. The Company filed a Form 8-K dated March 9, 1995, reporting under Item 5 the effectiveness of its registration statement for the initial public offering of Common Stock. - 12 - FORT HOWARD CORPORATION SIGNATURES Pursuant to the requirement 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 HOWARD CORPORATION Registrant April 26, 1995 /s/ Kathleen J. Hempel --------------------------------------- Kathleen J. Hempel, Vice Chairman and Chief Financial Officer April 26, 1995 /s/ James W. Nellen II -------------------------------------- James W. Nellen II, Vice President and Secretary April 26, 1995 /s/ Charles L. Szews -------------------------------------- Charles L. Szews Controller (Principal Accounting Officer) - 13 - INDEX TO EXHIBITS Exhibit No. Description 27 Financial Data Schedule for the three months ended March 31, 1995. 99 News release containing financial results for the quarter ended March 31, 1995. - 14 - EX-27 2
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORT HOWARD CORPORATION'S UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000038195 FORT HOWARD CORPORATION 1,000 U.S. DOLLARS 3-MOS DEC-31-1995 MAR-31-1995 1 210 0 140,959 1,675 145,311 313,005 1,949,068 637,574 1,725,825 252,377 3,135,663 631 0 0 (1,882,740) 1,725,825 367,376 367,376 267,856 267,856 0 0 86,770 (15,771) (6,253) (9,518) 0 (18,748) 0 (28,266) (0.66) (0.66)
EX-99 3 EXHIBIT 99 NEWS For further information contact: Media: [Logo] Fort Howard Cliff Bowers, Ext. 4087 Corporation P. O. Box 19130 Financial: Green Bay, WI 54307-9130 Mike Lempke Ext. 2492 414/435-8821 FOR RELEASE: IMMEDIATELY FORT HOWARD ANNOUNCES FIRST QUARTER, 1995 RESULTS GREEN BAY, WI - April 26, 1995 - Fort Howard Corporation today announced financial results for its first quarter ended March 31, 1995. For the first quarter, Fort Howard's net sales increased 33.4% to a record $367,376,000 compared to first quarter 1994 net sales of $275,330,000. Domestic tissue sales increased 28.1% for the first quarter of 1995 compared to 1994 due to a 17.5% increase in unit sales volume and a 9.0% increase in net selling prices. Net sales of the company's international operations increased 11.3% for the first quarter of 1995 compared to 1994 due to a 6.9% increase in net selling prices on flat volume plus the benefit from the change in foreign exchange rates. The net sales increase was also attributable to a 176.8% increase in net sales at the company's wastepaper brokerage subsidiary, principally reflecting higher selling prices. -- More -- - Ad One - Operating income increased 17.7% for the first quarter of 1995 to $70,775,000 compared to $60,133,000 for the first quarter of 1994. The increase resulted from higher sales and was partially offset by significantly higher wastepaper costs both domestically and in the company's international operations. Wastepaper costs for domestic tissue operations were up approximately 150% in the first quarter of 1995 compared to the first quarter of 1994. Earnings before interest, taxes, depreciation and amortization increased 15.7% to $95,106,000 in the first quarter of 1995 from $82,231,000 in the first quarter of 1994. "Fort Howard's improved results for the quarter reflect both higher volume and increased selling prices," said Don DeMeuse, Fort Howard Chairman and Chief Executive Officer. "In light of stronger industry operating conditions, we have sought and will continue to seek price increases in response to higher raw material costs." As previously announced on March 16, 1995, the company issued 25 million shares of common stock at $12.00 per share in a public stock offering. The proceeds from the sale, together with the borrowing of new bank debt pursuant to a new bank credit agreement were used to prepay or repurchase on March 16, 1995 all the outstanding indebtedness under the 1988 Bank Credit Agreement, the 1993 Term Loan and the Senior Secured Floating Rate Notes. The remaining proceeds were used to repurchase all outstanding 12 5/8% Subordinated Debentures and 14 1/8% Junior Subordinated Discount Debentures on April 15, 1995. - More - - Ad Two - Extraordinary losses related to debt repurchases in 1995 and 1994 (See Note to Financial Information) impacted the company's financial performance in the first quarters of 1995 and 1994. The net loss for the first quarter of 1995 decreased to $28,266,000 from $43,342,000 for the same period in 1994. The net loss per share before extraordinary items decreased to $0.22 per share in the first quarter of 1995 compared to $0.40 per share for the same period in 1994. Total net loss per share after extraordinary items decreased to $0.66 per share in the first quarter of 1995 from $1.14 per share for the same period in 1994. If the company's IPO had occurred on January 1, 1995, the first quarter net loss per share would have been $.02 per share based on 63,100,000 shares outstanding. Fort Howard is a leading manufacturer of tissue products for both the away-from-home and consumer market place in the United States and United Kingdom. In the domestic consumer market, its principal brands include Mardi Gras printed napkins (which hold the leading domestic market position) and paper towels, Soft 'N Gentle bath and facial tissue, So-Dri paper towels, Page paper towels, bath tissue and table napkins, and Green Forest, the leading domestic line of environmentally positioned, recycled tissue paper products. (Financial information and notes follow on separate pages. The notes are an integral part of these statements.) # # # # # FORT HOWARD CORPORATION CONSOLIDATED STATES OF INCOME (Unaudited) Three Months Ended March 31, ------------------ 1995 1994 ---- ---- (In thousands, except per share amounts) Net sales $ 367,376 $ 275,330 Cost of sales 267,856 188,495 --------- --------- Gross income 99,520 86,835 Selling, general and administrative 28,745 26,702 --------- --------- Operating income 70,775 60,133 Interest expense 86,770 84,318 Other (income) expense, net (224) 588 --------- --------- Loss before taxes (15,771) (24,773) Income taxes (credit) (6,253) (9,601) --------- --------- Loss before extraordinary item (9,518) (15,172) Extraordinary item--loss on debt repurchases, net (18,748) (28,170) --------- --------- Net loss $ (28,266) $ (43,342) ========= ========= Net loss per share: Before extraordinary item $ (0.22) $ (0.40) Extraordinary item (0.44) (0.74) --------- --------- Total $ (0.66) $ (1.14) ========= ========= FORT HOWARD CORPORATION CONSOLIDATED BALANCE SHEETS (Unaudited) March 31, December 31, 1995 1994 ---- ---- (In thousands) Assets Current assets: Cash and cash equivalents $ 210 $ 422 Receivables, less allowances of $1,675 in 1995 and $1,589 in 1994 139,284 123,150 Inventories 145,311 130,843 Deferred income taxes 20,000 20,000 Income taxes receivable 8,200 5,200 ----------- ----------- Total current assets 313,005 279,615 Property, plant and equipment 1,949,068 1,932,713 Less: Accumulated depreciation 637,574 611,762 ----------- ----------- Net property, plant and equipment 1,311,494 1,320,951 Other assets 101,326 80,332 ----------- - ----------- Total assets $ 1,725,825 $ 1,680,898 =========== =========== Liabilitites and Shareholders' Deficit Current liabilities: Accounts payable $ 126,809 $ 100,981 Interest payable 63,192 84,273 Income taxes payable 112 224 Other current liabilities 50,595 75,450 Current portion of long-term debt 11,669 116,203 ----------- ----------- Total current liabilities 252,377 377,131 Long-term debt 3,123,994 3,189,644 Deferred and other long-term income taxes 194,231 209,697 Other liabilities 37,332 41,162 Common Stock with put right -- 11,711 Shareholders' deficit: Common Stock 631 381 Additional paid-in capital 892,598 600,090 Cumulative translation adjustment (484) (2,330) Retained deficit (2,774,854) (2,746,588) ----------- ----------- Total shareholders' deficit (1,882,109) (2,148,447) ----------- ----------- Total liabilities and shareholders' deficit $ 1,725,825 $ 1,680,898 =========== =========== FORT HOWARD CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) Three Months Ended March 31, ------------------ 1995 1994 ---- ---- (In thousands) Cash provided from (used for) operations: Net loss $ (28,266) $(43,342) Depreciation 24,331 22,098 Non-cash interest expense 3,223 21,287 Deferred income tax credit (16,191) (21,760) Pre-tax loss on debt repurchases 30,734 42,901 Increase in receivables (16,134) (6,954) Increase in inventories (14,468) (3,320) Increase in income taxes receivable (3,000) (2,100) Increase (decrease) in accounts payable 25,828 (2,402) Decrease in interest payable (21,081) (22,123) Increase (decrease) in income taxes payable (112) 133 All other, net (30,281) (28,646) -------- -------- Net cash used for operations (45,417) (44,228) Cash used for investment activity -- Additions to property, plant and equipment (10,845) (30,411) Cash provided from (used for) financing activities: Proceeds from long-term borrowings 655,800 800,600 Repayment of long-term borrowings (832,596) (703,770) Debt issuance costs (48,201) (21,635) Issuance of Common Stock, net of offering costs 281,047 -- ---------- --------- Net cash provided from financing activities 56,050 75,195 ---------- --------- Increase (decrease) in cash (212) 556 Cash at beginning of period 422 227 ---------- --------- Cash at end of period $ 210 $ 783 ========== ========= ***** FORT HOWARD CORPORATION NOTES TO FINANCIAL INFORMATION (Unaudited) 1. On April 15, 1995, the company completed a recapitalization plan (the "Recapitalization") to prepay or redeem a substantial portion of its indebtedness in order to reduce the level and overall cost of its debt, extend certain debt maturities, increase shareholders' equity and enhance its access to capital markets. The Recapitalization included the following components: (1) The offer and sale by the company of 25,000,000 shares of Common Stock on March 16, 1995 and an additional 269,555 shares of Common Stock on April 12, 1995 at $12.00 per share (the "Offering"); (2) Entering into a bank credit agreement (the "New Bank Credit Agreement") consisting of a $300 million revolving credit facility (the "1995 Revolving Credit Facility"), an $810 million term loan (the "1995 Term Loan A") and a $330 million term loan (the "1995 Term Loan B" and, together with the 1995 Term Loan A, the "New Term Loans"); and entering into a receivable credit agreement consisting of a $60 million term loan (the "1995 Receivables Facility"); (3) The application on March 16, 1995 of the net proceeds of the sale of 25,000,000 shares of Common Stock pursuant to the Offering, together with borrowings under the New Term Loans, to prepay or redeem all the Company's indebtedness outstanding under the 1988 Bank Credit Agreement, 1993 Term Loan and Senior Secured Notes. (4) The application on April 15, 1995 of borrowings under the New Term Loans, the 1995 Receivables Facility and the 1995 Revolving Credit Facility to redeem all outstanding 14 1/8% Debentures (at par) and 12 5/8% Debentures (at 102.5% of the principal amount thereof). 2. In the first quarter of 1995, the company reported an extraordinary loss of $19 million (net of income taxes of $12 million) representing the redemption premiums on the repurchases of all the company's outstanding 12 5/8% Subordinated Debentures at the redemption price of 102.5% of the principal amount thereof and write-offs of deferred loan costs associated with the prepayment or repurchases of all indebtedness outstanding under the company's 1988 Bank Credit Agreement, the 1993 Term Loan and the Senior Secured Floating Rate Notes on March 16, 1995, and the repurchase of all outstanding 12 5/8% Subordinated Debentures and 14 1/8% Junior Subordinated Discount Debentures on April 15, 1995. In the first quarter of 1994, the company reported an extraordinary loss of $28 million (net of income taxes of $15 million) representing the redemption premiums and write-offs of deferred loan costs associated with the repayment of $100 million of term loan indebtedness under the company's 1988 Bank Credit Agreement on February 10, 1994 and the repurchases of all the company's remaining 12 3/8% Senior Subordinated Notes and $238 million of the company's 12 5/8% Subordinated Debentures on March 11, 1994. 3. Assuming that all components of the recapitalization had been consummated as of January 1, 1995, for the first quarter of 1995, pro forma interest expense would have decreased $14 million from amounts reported to $73 million. After adjusting the income tax (credit) for the decrease in interest expense at an effective rate of 39%, the pro forma net loss before extraordinary item and the pro forma net loss per share before extraordinary item (assuming that 63,101,239 weighted average shares were outstanding for the quarter) would have been $1 million and $0.02 per share for the first quarter of 1995. # # # # # -----END PRIVACY-ENHANCED MESSAGE-----