-----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, WQ6crk3ToPxaegoc3nyb3m81X/UtNZfC9cFSBWPjeyO5fEHcFD9gzOo1D86PszYb /E6RGL5EmBKXeVjYnglHyQ== 0000053117-94-000024.txt : 19940527 0000053117-94-000024.hdr.sgml : 19940527 ACCESSION NUMBER: 0000053117-94-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19940327 FILED AS OF DATE: 19940510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JAMES RIVER CORP OF VIRGINIA CENTRAL INDEX KEY: 0000053117 STANDARD INDUSTRIAL CLASSIFICATION: 2621 IRS NUMBER: 540848173 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07911 FILM NUMBER: 94526989 BUSINESS ADDRESS: STREET 1: 120 TREDEGAR ST CITY: RICHMOND STATE: VA ZIP: 23219 BUSINESS PHONE: 8046445411 10-Q 1 FORM 10-Q 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 27, 1994 Commission File Number 1-7911 JAMES RIVER CORPORATION of Virginia (Exact name of registrant as specified in its charter) Virginia 54-0848173 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 120 Tredegar Street, Richmond, VA 23219 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (804) 644-5411 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 2, 1994: 81,631,601 shares JAMES RIVER CORPORATION of Virginia QUARTERLY REPORT ON FORM 10-Q March 27, 1994 TABLE OF CONTENTS Page No. PART I. FINANCIAL INFORMATION: ITEM 1. Financial Statements: Consolidated Balance Sheets as of March 27, 1994 and December 26, 1993 . . . . . . . . . . . . . . . . . 3 Consolidated Statements of Operations for the quarters ended March 27, 1994 and March 28, 1993 . . . . . . . . 5 Consolidated Statements of Cash Flows for the quarters ended March 27, 1994 and March 28, 1993 . . . . . . . . 6 Notes to Consolidated Financial Statements. . . . . . . . 7 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . . . . . . . 14 PART II. OTHER INFORMATION: ITEM 1. Legal Proceedings. . . . . . . . . . . . . . . . . . 17 ITEM 2. Changes in Securities. . . . . . . . . . . . . . . . 17 ITEM 3. Defaults Upon Senior Securities. . . . . . . . . . . 17 ITEM 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . . . 17 ITEM 5. Other Information. . . . . . . . . . . . . . . . . . 17 ITEM 6. Exhibits and Reports on Form 8-K . . . . . . . . . . 17 SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . 19 PART I. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS JAMES RIVER CORPORATION of Virginia and Subsidiaries CONSOLIDATED BALANCE SHEETS March 27, 1994 and December 26, 1993 (in thousands, except share data) March December 1994 1993 ASSETS Current assets: Cash and short-term securities $ 24,569 $ 23,620 Accounts receivable 410,092 422,894 Inventories 707,322 666,464 Prepaid expenses and other current assets 22,259 22,939 Deferred income taxes 80,885 83,538 Net assets held for sale 61,688 62,868 Total current assets 1,306,815 1,282,323 Net property, plant, and equipment 3,540,715 3,571,492 Investments in affiliates 527,065 519,448 Other assets 314,381 324,724 Goodwill 152,136 153,315 $5,841,112 $5,851,302 The accompanying notes are an integral part of the consolidated financial statements. JAMES RIVER CORPORATION of Virginia and Subsidiaries CONSOLIDATED BALANCE SHEETS, Continued March December 1994 1993 LIABILITIES AND CAPITAL Current liabilities: Accounts payable and accrued liabilities $ 617,867 $ 616,192 Income taxes payable 4,597 4,463 Current portion of long-term debt 79,383 97,287 Accrued restructuring liability 50,321 63,134 Total current liabilities 752,168 781,076 Long-term debt 1,999,668 1,942,836 Accrued postretirement benefits other than pensions 548,173 541,823 Other long-term liabilities 186,297 179,955 Deferred income taxes 418,162 430,421 Minority interests 5,806 7,010 Preferred stock, $10 par value, 5,000,000 shares authorized, issuable in series 454,048 454,108 Common stock, $.10 par value, 150,000,000 shares authorized; shares outstanding, March 27, 1994--81,630,635 and December 26, 1993--81,628,047 8,163 8,163 Additional paid-in capital 1,219,089 1,219,043 Retained earnings 249,538 286,867 $5,841,112 $5,851,302 The accompanying notes are an integral part of the consolidated financial statements. JAMES RIVER CORPORATION of Virginia and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS For the Quarters (13 Weeks) Ended March 27, 1994 and March 28, 1993 (in thousands, except per share amounts) 1994 1993 Net sales $1,105,503 $1,113,625 Cost of goods sold 934,866 934,720 Selling and administrative expenses 150,332 161,251 Income from operations 20,305 17,654 Interest expense 34,957 39,185 Other income, net 2,591 4,189 Loss before income taxes (12,061) (17,342) Income tax benefit (4,975) (7,212) Net loss $ (7,086) $ (10,130) Preferred dividend requirements (8,202) (8,208) Net loss applicable to common shares $ (15,288) $ (18,338) Net loss per common share and common share equivalent $(.19) $(.22) Quarterly rate of cash dividends per common share $ .15 $ .15 Weighted average number of common shares and common share equivalents 81,866 81,745 The accompanying notes are an integral part of the consolidated financial statements. JAMES RIVER CORPORATION of Virginia and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS For the Quarters (13 Weeks) Ended March 27, 1994 and March 28, 1993 (in thousands) 1994 1993 Cash provided by (used for) operating activities: Net loss $(7,086) $(10,130) Items not affecting cash: Depreciation expense and cost of timber harvested 88,474 88,375 Deferred income tax benefit (6,885) (8,762) Undistributed losses of unconsolidated affiliates 382 4,388 Amortization and other 2,777 3,052 Change in current assets and liabilities: Accounts receivable 12,913 1,094 Inventories (41,553) (11,192) Prepaid expenses and other current assets 656 12,063 Net assets held for sale (1,164) 1,458 Accounts payable and accrued liabilities 2,174 3,417 Income taxes payable 142 5,798 Accrued restructuring liability (8,335) (7,219) Retirement benefits expense in excess of (less than) funding 10,160 11,284 Other, net (325) (1,798) Cash provided by operating activities 52,330 91,828 Cash provided by (used for) investing activities: Expenditures for property, plant, and equipment (65,335) (62,957) Cash received from sale of assets 5,268 2,798 Investments in affiliates (12,108) (59) Proceeds received from redemption of SCI preferred stock 47,050 Other, net 1,880 2,172 Cash used for investing activities (70,295) (10,996) Cash provided by (used for) financing activities: Additions to long-term debt 58,413 132,688 Payments of long-term debt (18,992) (176,785) Common and preferred stock cash dividends paid (20,447) (20,376) Other, net (60) (105) Cash provided by (used for) financing activities 18,914 (64,578) Increase in cash and short-term securities 949 16,254 Cash and short-term securities, beginning of period 23,620 375,492 Cash and short-term securities, end of period $24,569 $391,746 The accompanying notes are an integral part of the consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Basis of Presentation In the opinion of management, the accompanying unaudited consolidated financial statements of James River Corporation of Virginia and Subsidiaries (the "Company" or "James River") contain all adjustments (consisting of only normal recurring accruals) necessary to present fairly the Company's consolidated financial position as of March 27, 1994 and March 28, 1993 and its results of operations and cash flows for the quarters (13 weeks) then ended. The results of operations for the quarter ended March 27, 1994 are not necessarily indicative of the results to be expected for the full year. Certain amounts in the prior year's financial statements and supporting footnote disclosures have been reclassified to conform to the current year's presentation. 2. Acquisitions and Dispositions In February 1994, the Company paid approximately $11.8 million as an additional investment in Jamont Holdings N.V. ("Holdings"). In accordance with the terms of the agreement with the other 50% owner of this investment, Rayne Holdings Inc., this transaction did not result in a change in James River's 50% ownership of Holdings. (See Notes 9 and 11 for other information regarding James River's investment in Holdings). In March 1994, the Company sold its 50% interest in Coastal Paper Company, a Mississippi-based producer of lightweight papers. During the first quarter of 1994, James River also completed the sale of approximately 9,300 acres of timberlands that it had acquired as part of its acquisition of Diamond Occidental Forest Inc. in 1993. The estimated realizable value of the timberlands was included in net assets held for sale prior to their disposition. (See Note 8 for summarized information related to these dispositions). 3. Other Income The components of other income were as follows for the quarters ended March 27, 1994 and March 28, 1993 (in thousands): March March 1994 1993 Interest and investment income $2,975 $5,783 Equity in net losses of unconsolidated affiliates (382) (3,831) Minority interests in losses of subsidiaries 330 641 Foreign currency exchange gain (loss) 6 (2,610) Other, net (338) 4,206 Total other income $2,591 $4,189 4. Income Taxes The Company's effective income tax rate was 41.2% for the quarter ended March 27, 1994, compared to 41.6% for the first quarter of 1993. In August 1993, the Omnibus Budget Reconciliation Act of 1993 was enacted providing for, among other things, an increase in the federal corporate income tax rate from 34% to 35%. This change in the federal rate increased the Company's effective tax rate from 1993 to 1994; however, the increase was offset by (i) favorable settlements on the finalization of audits on prior years' tax returns in the first quarter of 1993 and (ii) the favorable effect of a charitable conservation easement donation during the first quarter of 1994. In addition, the effective rates for the quarters ended March 27, 1994 and March 28, 1993 were impacted by the relative size of nondeductible items to pretax income. 5. Inventories The components of inventories were as follows as of March 27, 1994 and December 26, 1993 (in thousands): March December 1994 1993 Raw materials $162,152 $161,093 Finished goods and work in process 461,497 425,640 Stores and supplies 141,181 139,457 764,830 726,190 Reduction to state certain inventories at last-in, first-out cost (57,508) (59,726) Total inventories $707,322 $666,464 6. Property, Plant, and Equipment The components of net property, plant, and equipment were as follows as of March 27, 1994 and December 26, 1993 (in thousands): March December 1994 1993 Land and improvements $ 148,203 $ 147,805 Buildings 624,932 622,509 Machinery and equipment 4,384,230 4,364,416 Construction in progress 145,706 119,431 5,303,071 5,254,161 Accumulated depreciation (1,908,204) (1,829,267) 3,394,867 3,424,894 Timber and timberlands, net 145,848 146,598 Net property, plant, and equipment $3,540,715 $3,571,492 7. Preferred Stock Outstanding preferred stock, stated at liquidation value, was as follows as of March 27, 1994 and December 26, 1993: Shares Liquidation Value Liquidation Outstanding (in thousands) Value March December March December Per Share 1994 1993 1994 1993 Series D $100 12,400 13,000 $ 1,240 $ 1,300 Series K 50 1,999,995 1,999,995 100,000 100,000 Series L 200 1,000,000 1,000,000 200,000 200,000 Series N 200 264,042 264,042 52,808 52,808 Series O 500 200,000 200,000 100,000 100,000 Total preferred stock 3,476,437 3,477,037 $454,048 $454,108 8. Statements of Cash Flows Supplemental Data Cash payments for income taxes of consolidated subsidiaries totalled approximately $2.3 million and $1.4 million for the quarters ended March 27, 1994 and March 28, 1993, respectively. Interest paid totalled $17.0 million for the quarter ended March 27, 1994 and $28.8 million for the quarter ended March 28, 1993. Interest costs incurred and amounts capitalized in fixed asset accounts for the quarters ended March 27, 1994 and March 28, 1993 were as follows (in thousands): March March 1994 1993 Total interest costs $35,464 $40,682 Interest capitalized (507) (1,497) Net interest expense $34,957 $39,185 Businesses sold during the quarters ended March 27, 1994 and March 28, 1993 are summarized as follows (in thousands): March March 1994 1993 Fair value of assets sold $7,268 $5,498 Non-cash consideration received (2,000) (2,700) Cash received from sale of assets $5,268 $2,798 9. Commitments and Contingent Liabilities (a) Put and Call Arrangements: James River is a party to put and call arrangements in connection with its investment in Jamont N.V. ("Jamont"), the pan-European consumer products company in which James River currently has a 43% indirect ownership interest. James River and Rayne Holdings Inc. ("Rayne"), a British Virgin Islands company, each own 50% of Jamont Holdings N.V. ("Holdings"), which owns approximately 86% of Jamont. James River and Rayne are parties to a put and call agreement that provides various options by which James River may purchase Rayne's interest in Holdings (the "Option Shares"). James River has the option, exercisable until June 15, 1996 and again between September 1, 1996 and June 15, 1998, to purchase either 80% or 100% of the Option Shares at escalating amounts pursuant to a formula (the "Formula Price"). In addition, Rayne may put 80% of the Option Shares to James River during July and August 1996 and the remaining 20% of such shares during July and August 1998 at a proportionate value equal to the then Formula Price. If it has not otherwise been acquired, James River also has the option to purchase the remaining 20% of the Option Shares during September 1998 for 20% of the then Formula Price. The Formula Price was approximately $639 million in March 1994 for 100% of the Option Shares. In connection with this put and call agreement, the Company has obtained a letter of credit securing the contingent obligation to purchase 80% of the Option Shares. In April 1994, subsequent to the end of the first quarter, the Company announced the signing of a share acquisition agreement whereby it will acquire the 50% ownership interest in Holdings currently owned by Rayne for approximately $575 million in cash (see Note 11). In March 1993, EuroPaper Inc., ("EuroPaper") an unrelated entity, purchased the approximate 14% interest in Jamont previously owned by Nokia Corporation. In connection with this transaction, EuroPaper entered into a put and call agreement with James River. Pursuant to the agreement, EuroPaper may put its interest in Jamont (the "EuroPaper Shares") to James River during May 1996 and James River may call the EuroPaper Shares during August 1996, each at a fixed price of approximately 1.04 billion French francs (approximately $181.8 million using exchange rates in effect as of March 31, 1994). In addition, Holdings has a separate call agreement with EuroPaper under which it may call the EuroPaper Shares through April 1996 at a scheduled escalating price. James River and CRSS Capital, Inc. ("CRSS") each own 50% of the Naheola Cogeneration Limited Partnership (the "Naheola Partnership"), which was formed in order to develop and operate a $300 million chemical recovery unit at the Company's Naheola mill. James River has an option to purchase CRSS's interest at fair value. CRSS also has an option to put its interest in the partnership to James River at fair value. CRSS's option may only be exercised (i) if the facility becomes subject to regulation as a public utility, (ii) if production levels at the Naheola mill fall below certain levels due to the Company's shifting of production to other mills, or (iii) if the Naheola mill is sold to a competitor of CRSS; management believes the probability of the occurrence of any of these events is remote. (b) Hedge and Swap Agreements: The Company is a party to foreign currency contracts that hedge a portion of the foreign currency exposure of its net investment in Jamont. As of March 27, 1994, the Company had outstanding foreign currency contracts covering a total notional principal amount of $488 million, primarily denominated in French francs, British pounds, Belgian francs, and Spanish pesetas. The carrying value of these contracts was a net liability of $9.9 million as of March 27, 1994. Currency gains and losses on the contracts are recorded in the foreign currency translation component of retained earnings. These contracts mature on September 1, 1998. In connection with these contracts, the Company has entered into interest swap agreements to manage the related interest rate exposure. Gains and losses on these agreements are included in other income as incurred. In the first quarter of 1994, the Company also entered into five year interest rate swap and periodic cap agreements primarily to manage its interest rate exposure on certain issues of long-term debt. The agreements effectively converted $325 million of fixed rate debt, with an average rate of approximately 7.1%, to LIBOR-based floating rate debt. Gains and losses on these agreements are recorded in interest expense, as incurred. For the quarter ended March 27, 1994, interest expense was decreased by approximately $800,000 related to the effect of these agreements. (c) Environmental Matters: Like its competitors, James River is subject to extensive regulation by various federal, state, provincial, and local agencies concerning compliance with environmental control statutes and regulations. These regulations impose limitations on the discharge of materials into the environment, including effluent and emission limitations, as well as require the Company to obtain and operate in compliance with the conditions of permits and other governmental authorizations. Future regulations could materially increase the Company's capital requirements and certain operating expenses in future years. In December 1993, the U.S. Environmental Protection Agency (the "EPA") published draft rules, informally referred to as the "cluster rules," which contain proposed revisions to the effluent guidelines under the Clean Water Act in conjunction with new regulations relating to the discharge of certain substances under the Clean Air Act. The final rules are scheduled to be issued in late 1995, with a nominal compliance date of 1998. The new rules may require significant changes in the pulping and/or bleaching process presently used in some U.S. pulp mills, including several of James River's mills, necessitating additional capital expenditures to achieve compliance by approximately 1998. Based on preliminary estimates, the Company anticipates that such capital expenditures could be at least $300 million for James River. This estimate could change, depending on several factors, including, among others, (i) the ability of the Company and other pulp manufacturers to convince the EPA that the proposed regulations are unnecessarily complex, burdensome, and environmentally unjustified; (ii) the outcome of potential administrative and judicial challenges; (iii) new developments in control and process technology; and (iv) any unfavorable revisions to the proposed cluster rules based on public comment. In addition, James River has been identified as a potentially responsible party ("PRP") and is involved in remedial investigations and actions under federal and state laws. It is James River's policy to accrue remediation costs when it is probable that such costs will be incurred and when they can be reasonably estimated. As of March 27, 1994, James River's accrued environmental remediation liabilities totalled $22.4 million. This amount reflects management's best estimate of James River's ultimate liability for such costs. The Company periodically reviews the status of all significant existing or potential environmental issues and adjusts its accrual as necessary. 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 PRP's. The Company believes that its share of the ultimate costs of cleanup for its current remediation sites will not have a material adverse impact on its financial condition. 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. 10. Segment Information James River's net sales and income from operations by business segment were as follows for the quarters ended March 27, 1994 and March 28, 1993 (in thousands): March March 1994 1993 Net sales: Consumer products $ 557,224 $ 558,805 Food and consumer packaging 375,737 387,395 Communications papers 215,044 215,912 Intersegment elimination (42,502) (48,487) Total net sales $1,105,503 $1,113,625 Operating profit (loss): Consumer products $28,316 $23,190 Food and consumer packaging 26,633 23,309 Communications papers (25,059) (20,281) General corporate expenses (9,585) (8,564) Income from operations $20,305 $17,654 11. Subsequent Events (a) Jamont Acquisition Agreement On April 27, 1994, James River announced the signing of a share acquisition agreement with Montedison S.p.A. and Rayne, whereby James River will acquire the 50% ownership interest in Holdings currently owned by Rayne for approximately $575 million in cash. Upon the consummation of the acquisition, Jamont will become a consolidated subsidiary of James River. The final transaction, which is subject to normal closing conditions, as well as obtaining necessary financing and securing the approval of James River's lenders, is expected to be completed during the third quarter of 1994. (b) Securities Offerings On May 2, 1994, the Company filed registration statements with the Securities and Exchange Commission for shelf registrations of up to $600 million of debt securities and up to $287.5 million of preferred stock (or related depositary shares) to be issued from time to time in the future. James River currently expects to use a portion of the proceeds from these offerings to finance the acquisition of Rayne's interest in Jamont. The remainder of the proceeds may be used for the refinancing of existing long-term debt or for general corporate purposes, which may include capital expenditures, acquisitions, and working capital requirements. As of May 9, 1994, James River had not entered into any agreement with a third party with respect to an acquisition, other than as described in Note 11(a). (c) Pro Forma Operating Data The following pro forma information gives effect to (i) the acquisition by James River of the remaining 50% ownership interest in Holdings for a purchase price of $575 million in cash and (ii) the assumed financing of such acquisition with the proceeds from the issuance of $325 million of debt securities and $250 million of preferred stock. The pro forma results of operations assume that these transactions occurred on the first day of the year ended December 26, 1993 and resulted in the consolidation of Holdings by James River. The pro forma financial information does not purport to be indicative of the results of operations which would actually have been reported if the transactions had occurred for the period indicated or which may be reported in the future. 1993 Pro Forma (in millions, except per share data) Consolidated Net sales $6,132.3 Net loss $(20.8) Net loss per common share and common share equivalent $(0.88) Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Comparison of Quarters (13 Weeks) Ended March 27, 1994 and March 28, 1993 ($ in millions) March 27, 1994 March 28, 1993 % of % of Net Net $ Sales $ Sales Net sales $1,105.5 100.0% $1,113.6 100.0% Cost of goods sold 934.9 84.6 934.7 83.9 Selling and administrative expenses 150.3 13.6 161.2 14.5 Income from operations 20.3 1.8 17.7 1.6 Interest expense 35.0 3.2 39.2 3.5 Other income, net 2.6 0.3 4.2 0.4 Loss before income taxes (12.1) (1.1) (17.3) (1.5) Income tax benefit (5.0) (0.5) (7.2) (0.6) Net loss $ (7.1) (0.6)% $ (10.1) (0.9)% Net sales for the quarter were $1.1 billion, equivalent to the prior year's first quarter. The Company reported a net loss of $7.1 million, representing an improvement over the loss of $10.1 million reported in the first quarter of 1993. On a per share basis after preferred dividends, losses were $0.19 per share in 1994's first quarter compared to losses of $0.22 per share in the prior year. Income from operations totalled $20.3 million in the first quarter of 1994, a 15% improvement over the prior year's first quarter, despite the severe winter weather conditions and depressed paper and board prices, which hampered many of the Company's operations. Results for the Consumer Products Business increased by over 20%, to $28.3 million from $23.2 million, principally from strong retail volume and the benefits realized from productivity improvements. Operating results for the Food and Consumer Packaging Business increased 14%, to $26.6 million in 1994 from $23.3 million in 1993 due to improved production of coated recycled board, partially offset by softer volumes in both folding carton and flexible packaging because of customers using up existing packaging before the phase-in date for the new federally required labels. In the Communications Papers Business, operating losses increased 24%, to $25.1 million from $20.3 million last year, as pricing in most white paper grades continued to decline due to additional industry capacity and substantially higher levels of imports. Sales and income from operations by business segment are included in Note 10 of Notes to Consolidated Financial Statements, which should be read in conjunction herewith. Interest expense for the first quarter of 1994 declined by $4.2 million compared with the same period in 1993 and gross interest costs decreased by $5.2 million. The decline in net interest expense reflects the higher levels of interest expense due to additional borrowings in the first quarter of 1993 and interest savings in 1994 resulting from the Company's refinancing program, which was completed in April 1993. This decrease was partially offset by lower amounts of capitalized interest, as well as the effect of the interest rate swap agreements discussed in Note 9(b) of Notes to Consolidated Financial Statements. Other income decreased to $2.6 million in the first quarter of 1994 from $4.2 million in the first quarter of 1993. The decrease includes a decrease in the level of interest income, related to the higher-than- normal levels of cash held in the first quarter of 1993 in connection with the refinancing program. (See Note 3 of Notes to Consolidated Financial Statements). The change in the effective tax rate for 1994 is discussed in Note 4 of Notes to Consolidated Financial Statements. During the first quarter, the Company continued to implement its restructuring and cost reduction programs. In March, James River sold its 50% interest in Coastal Paper Company, a Mississippi-based producer of lightweight papers. Staffing reductions of approximately 200 employees were also realized during the quarter, bringing total staffing reductions to over 2,400 during the past year. In April 1994, the Company announced the signing of a share acquisition agreement pursuant to which James River will acquire an additional 43% indirect interest in Jamont. This agreement is described in Note 11 of Notes to Consolidated Financial Statements. Financial Condition Capital expenditures for the first quarter of 1994 totalled approximately $65 million, comparable to the $63 million of spending in the first quarter of 1993. This reflects the Company's continued focus on a reduced level of capital appropriations in response to recent operating performance. Cash provided by operations for the quarter ended March 27, 1994 totalled $52 million, compared to $92 million in the comparable period of 1993. This decrease is primarily due to (i) increased communications papers inventory levels and (ii) increases in certain consumer products inventories partially in anticipation of the stronger summer season. During the first quarter of 1994, the Company realized a total of $5.3 million in cash from the sale of assets, including the sale of its 50% interest in Coastal Paper Company and certain timberlands. These transactions are described in Note 2 of Notes to Consolidated Financial Statements. As of March 27, 1994, under the most restrictive provisions of the Company's debt agreements, the Company had additional borrowing capacity of approximately $275 million and net worth in excess of the minimum requirement specified by such agreements of approximately $250 million. James River's ratio of total debt, including the current portion, to total capitalization was 51.8% as of March 27, 1994, compared to 50.9% as of December 26, 1993. For purposes of calculating this ratio, total capitalization represents the sum of current and long-term debt and equity accounts. For the year ended December 26, 1993, the ratio of earnings to fixed charges was 1.04. For the quarters ended March 27, 1994 and March 28, 1993, earnings were inadequate to cover fixed charges. Earnings were inadequate to cover combined fixed charges and preferred stock dividends for the year ended December 26, 1993 and the quarters ended March 27, 1994 and March 28, 1993. In April 1994, Standard & Poor's and Moody's Investors Service Inc. each placed James River's securities ratings under review following the announcement of James River's intent to acquire a controlling interest in Jamont and the potential increase in the Company's debt levels associated with this acquisition. Moody's placed the ratings under review for a downgrade and Standard & Poor's placed the ratings on CreditWatch, with negative implications, which indicates that the rating group is aware of a potential for a rating change. Standard & Poor's currently rates James River's senior debt as BBB and preferred stock as BBB-, and Moody's currently rates such securities as Baa1 and baa2, respectively. If James River's ratings are lowered, management believes it is unlikely that such ratings will fall below investment grade. In May 1994, subsequent to quarter end, the Company filed registration statements with the Securities and Exchange Commission for shelf registrations of up to $600 million of debt securities and up to $287.5 million of preferred stock. James River currently expects to use a portion of the proceeds from such offerings to finance the acquisition of Jamont. The Company's current ratio increased to 1.74 as of March 27, 1994 from 1.64 as of December 26, 1993 and working capital increased to $555 million from $501 million for the same time period. The increase in working capital of $54 million was primarily attributable to an increase in inventory levels and a decrease in the current portion of long-term debt. PART II. OTHER INFORMATION Item 1. LEGAL PROCEEDINGS. None. Item 2. CHANGES IN SECURITIES. None. Item 3. DEFAULTS UPON SENIOR SECURITIES. None. Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. There were no matters submitted to a vote of security holders during the quarter ended March 27, 1994. The Annual Meeting of Shareholders was held on April 28, 1994; the information related to this meeting will be reported in the quarterly report on Form 10-Q for the quarter ending June 26, 1994, as required. Item 5. OTHER INFORMATION. None. 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. Exhibit Starts Number Description on Page 10 Share Acquisition Agreement, dated April 26, 1994, among James River Corporation of Virginia, James River International Holdings, Ltd., Montedison S.p.A., Tissue Paper Holding S.A., and Rayne Holdings Inc. -- filed herewith. 20 11 Computation of Earnings per Common Share and Common Share Equivalent -- filed herewith. 31 12.1 Computation of Ratio of Earnings to Fixed Charges -- filed herewith. 34 12.2 Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends -- filed herewith. 37 (b) Reports on Form 8-K: During the quarter ended March 27, 1994, and subsequent thereto, the Company filed the following Current Reports on Form 8-K: Date of Report Event Reported 1) January 25, 1994 The Company published a press release announcing its results of operations for the fourth quarter and year ended December 26, 1993. 2) February 22, 1994 The Company announced the nomination of Anne Marie Whittemore, partner in the Richmond law firm of McGuire, Woods, Battle & Boothe, to the Board of Directors of James River and other organizational changes. 3) April 21, 1994 The Company published a press release announcing its results of operations for the first quarter ended March 27, 1994. 4) April 27, 1994 The Company announced the signing of a share acquisition agreement with Montedison S.p.A. and Rayne Holdings Inc. Also included were the audited financial statements of Jamont Holdings N.V. for the year ended December 31, 1993, presented in U.S. dollars and prepared in accordance with accounting standards generally accepted in The Netherlands. 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. JAMES RIVER CORPORATION of Virginia By:/s/Stephen E. Hare Senior Vice President, Corporate Finance and Chief Financial Officer (Principal Financial and Accounting Officer) Date: May 9, 1994 EX-10 2 EXHIBIT 10 Exhibit 10 SHARE ACQUISITION AGREEMENT This Share Acquisition Agreement is made as of April 26, 1994 among James River Corporation of Virginia, a company organized under the laws of the Commonwealth of Virginia of the United States of America ("James River"), James River International Holdings, Ltd., a company organized under the laws of the Commonwealth of Virginia of the United States of America and a wholly-owned subsidiary of James River ("JRIH"), Montedison S.p.A., a company organized under the laws of Italy ("Montedison"), Tissue Paper Holding S.A., a company organized under the laws of the Grand Duchy of Luxembourg and a wholly-owned subsidiary of Montedison ("Tissue Paper"), and Rayne Holdings Inc., a company organized under the laws of the British Virgin Islands ("Rayne"). RECITALS A. Before or concurrently with the execution of this Agreement, Montedison and Tissue Paper have entered into arrangements with Rayne providing for the acquisition by Tissue Paper from Rayne of the Shares (as defined below) which will enable James River to acquire the Shares from Tissue Paper as contemplated herein. B. James River desires to acquire the shares. NOW, THEREFORE, in consideration of the covenants and obligations set forth in this Agreement, the parties hereto agree as follows: 1. Share Acquisition. Subject to the other terms and conditions of this Agreement, at the Closing (as defined below), James River will, directly or indirectly, acquire from Tissue Paper, and Tissue Paper will convey or cause to be conveyed, all of the shares and any rights to shares (the "Shares") of JAMONT Holdings N.V. ("Holdings") currently owned or hereafter acquired by Rayne. The Shares currently outstanding are numbered (in Holdings' share register) as follows: 358,532 up to and including 717,062; 1,431,230 up to and including 9,891,446; 17,637,497 up to and including 17,825,837; and 20,168,486 up to and including 24,422,292. The legal title to such Shares is held by Morgan Guaranty Trust Company of New York ("Morgan"), as escrow agent, under the Escrow Agreement dated as of September 21, 1991 among Rayne, James River and Morgan (the "Escrow Agreement"). 2. Acquisition Price. Against delivery of the Shares, James River will pay or cause to be paid to Tissue Paper or its designee for the Shares at the Closing an amount equal to $569,060,191 plus interest thereon accruing from March 1, 1994 to the date of payment at a rate per annum (on a basis of a 365-day year for the actual number of days involved) equal to 3.75%. 3. Montedison's and Tissue Paper's Representations and Warranties. Tissue Paper and Montedison, jointly and severally, represent and warrant to James River that (i) subject to James River fulfilling its obligations under the third sentence of Section 9 and subject to obtaining the consents and approvals contemplated by clause (vi) below (and assuming for purposes of making the representation as to its current right, that James River has already fulfilled such obligations and that all such consents and approvals have been obtained) Montedison has taken all steps necessary to cause Tissue Paper to have, and Tissue Paper currently has, the right (pursuant to the separate arrangements with Rayne referred to in the recitals to this Agreement) to, and at the Closing it will, transfer or cause to be transferred to James River good and valid title to the Shares free and clear of any liens, charges or other encumbrances, (ii) they each have the corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, (iii) the execution and delivery by Montedison and Tissue Paper of this Agreement and the consummation by each of them of the transactions contemplated hereby have been duly authorized by their respective boards of directors, and no other corporate proceedings on the part of Montedison or Tissue Paper are necessary with respect thereto, (iv) the execution and delivery by Montedison and Tissue Paper of this Agreement and the consummation by each of them of the transactions contemplated hereby does not require the consent of Rayne or Cragnotti & Partners Capital Investment, S.A. ("C&P") except for those consents already obtained by Montedison or Tissue Paper before the date hereof, (v) this Agreement constitutes a valid and binding obligation of each of Montedison and Tissue Paper enforceable in accordance with its terms, (vi) except for filings with and approvals of the Celtona B. V. Works Council, there is no requirement applicable to Montedison or Tissue Paper to make any filing with, or to obtain any permit, authorization, consent or approval of, any public body as a condition to the execution of this Agreement and consummation of the transactions contemplated by this Agreement, (vii) there is no requirement applicable to Montedison or Tissue Paper to make any filing with, or to obtain any permit, authorization, consent or approval of, any bank or other financial institution as a condition to the execution of this Agreement and the consummation of the transactions contemplated by this Agreement, (viii) the execution of this Agreement and the consummation of the transactions contemplated hereby will not violate or result in a breach of any order or decree applicable to Montedison's, Tissue Paper's or any of their affiliates' financial reorganization, and (ix) the execution of this Agreement and the consummation of the transactions contemplated hereby will not violate or result in a breach of any agreement to which Montedison, Tissue Paper or any of their affiliates is a party. Montedison will indemnify James River and JRIH for any losses, damages, claims, liabilities, expenses or other costs incurred in respect of any breach of these representations and warranties or of any other covenant contained herein. Montedison's and Tissue Paper's representations and warranties set forth in this Section shall survive the Closing. 4. James River's Representations and Warranties. James River represents and warrants to Montedison and Tissue Paper that (i) it has the corporate power and authority to execute and deliver this Agreement and to consummate the transactions contemplated hereby, (ii) the execution and delivery by James River of this Agreement and the consummation by it of the transactions contemplated hereby have been duly authorized by its board of directors, and no other corporate proceedings on the part of James River are necessary with respect thereto, (iii) this Agreement constitutes a valid and binding obligation of James River enforceable in accordance with its terms, (iv) except as contemplated by Sections 5(a) and (b) and except for filings with and approvals of the French Ministry of Economy, the Celtona B. V. Works Council, the Italian Ministry of Industry, the Irish Ministry of Industry-Department of Enterprise and Employment, and the United Kingdom's Office of Fair Trading, there is no requirement applicable to James River to make any filing with, or to obtain any permit, authorization, consent or approval of, any public body or any bank or other financial institution as a condition to the consummation of the transactions contemplated by this Agreement, and (v) subject to satisfying the condition in Section 5(a), the execution of this Agreement and the consummation of the transactions contemplated hereby will not violate or result in a breach of any agreement to which James River or any of its affiliates is a party. James River will indemnify Montedison and Tissue Paper for any losses, damages, claims, liabilities, expenses or other costs incurred in respect of any breach of these representations and warranties or of any other covenant contained herein. James River's representations and warranties set forth in this Section 4 shall survive the Closing. 5. James River's Closing Conditions. James River's obligation to acquire the Shares is subject, to the extent not waived by James River, to the delivery of all documents required to be delivered by Montedison, Tissue Paper or third parties other than James River before the Closing, the performance of all actions required to be taken by Montedison or Tissue Paper before the Closing and the satisfaction of the following conditions: (a) James River shall have renegotiated, or obtained appropriate waivers under, the covenants in its existing financing instruments on such terms as James River shall approve to permit it to obtain third party debt and equity financing in an aggregate amount equal to the acquisition price for the Shares (the "Financing"). (b) James River shall have obtained the Financing on such terms as James River shall reasonably approve. (c) All consents, authorizations, orders or approvals of governmental or regulatory authorities which are necessary, and of other entities which are materially necessary, for James River to obtain before acquiring the Shares (including without limitation those filings and approvals referred to in clause (iv) of Section 4) shall have been obtained and all required waiting periods specified by law shall have expired or been terminated. (d) No order of any court, arbitrator or administrative agency shall be in effect which restrains or prohibits the transfer of the Shares to James River and there shall not have been threatened, nor shall there be pending, any action or proceeding by or before any court or governmental agency or other regulatory or administrative agency or commission, seeking to prohibit or delay or challenging the validity of the transfer of the Shares to James River and such action or proceeding can reasonably be expected to result in an order which will restrain or prohibit the transfer of the Shares to James River. (e) No statute, rule or regulation shall have been enacted which prohibits, restricts or delays, in any material respect, the transfer of the Shares to James River. (f) The Shares shall be validly issued, fully paid and non- assessable. (g) Montedison shall have caused to be delivered to James River a legal opinion from a law firm reasonably acceptable to James River in the form attached to this Agreement as Exhibit A. (h) Rayne's designees on the governing boards of Holdings, Jamont N.V. and Stichting European Tissue shall have resigned effective as of the Closing and those designees shall have executed such documents as may be required to amend Stichting European Tissue's Articles of Association to eliminate Rayne's right to designate directors of that entity. (i) The representations and warranties of Montedison and Tissue Paper contained in Section 3 shall be true and correct in all material respects as of the date of this Agreement and as of the Closing. 6. Montedison's Closing Conditions. Montedison's obligations hereunder to cause Tissue Paper to convey or cause to be conveyed the Shares, and Tissue Paper's obligation to convey or cause to be conveyed the Shares, shall be subject, to the extent not waived by Montedison or Tissue Paper, to the delivery of all documents required to be delivered by James River or third parties other than Montedison or Tissue Paper before the Closing, the performance of all actions required to be taken by James River before the Closing, and the satisfaction of the following conditions: (a) All consents, authorizations, orders or approvals of governmental or regulatory authorities which are necessary, and of other entities which are materially necessary, for Montedison or Tissue Paper to obtain before conveying or causing to be conveyed the Shares (including without limitation those approvals referred to in clause (vi) of Section 3) shall have been obtained and all required waiting periods specified by law shall have expired or been terminated. (b) No order of any court, arbitrator or administrative agency (including but not limited to the Italian Stock Exchange Commission ("CONSOB")) shall be in effect which restrains or prohibits the transfer of the Shares to James River and there shall not have been threatened, nor shall there be pending, any action or proceeding by or before any court or governmental agency or other regulatory or administrative agency or commission, seeking to prohibit or delay or challenging the validity of the transfer of the Shares to James River and such action or proceeding can reasonably be expected to result in an order which will restrain or prohibit the transfer of the Shares to James River. (c) No statute, rule or regulation shall have been enacted which prohibits, restricts or delays, in any material respect, the transfer of the Shares to James River. (d) James River shall have caused to be delivered to Montedison a legal opinion from a law firm reasonably acceptable to Montedison in the form attached to this Agreement as Exhibit B. (e) The representations and warranties of James River contained in Section 4 shall be true and correct in all material respects as of the date of this Agreement and as of the Closing. 7. Closing. The closing of the transfer of the Shares to James River (the "Closing") shall take place at the principal office of James River, or at such other place as the parties shall otherwise agree, on June 30, 1994 or, if later, the date on which all the conditions set forth in Sections 5 and 6 are satisfied or waived before termination hereunder as provided in Section 10, unless that day is not a business day, in which case on the next day which is a business day. 8. Amendment. This Agreement may be amended, modified or supplemented only by written agreement executed by James River, Montedison and Tissue Paper. 9. Assignment. The provisions of this Agreement shall be binding upon James River, Montedison and Tissue Paper and their respective heirs, legal representatives, successors and assigns. No assignment of this Agreement by a party shall relieve that party of its obligations hereunder. Immediately before the Closing, James River, Montedison and Tissue Paper shall execute or cause to be executed any documents and take any and all action as may be required or advisable to facilitate the transfer of the Shares hereunder including but not limited to the release of the Shares from escrow and termination of the Escrow Agreement. 10. Termination. This Agreement shall terminate if the Closing has not occurred by June 30, 1994 or, if James River has notified Montedison on or before June 30, 1994 that Montedison or Tissue Paper is in breach of any of its representations in clause (iv), (vii) or (viii) of Section 3 (Montedison or Tissue Paper, as the case may be, shall have the right, up to and including July 11, 1994, to cure such breach without being in default hereunder with respect to such breach) and such breach has not been cured on or before July 11, 1994, then this Agreement shall terminate on July 11, 1994 (as applicable, the "Original Termination Date"); provided that if James River or Montedison and Tissue Paper, as the case may be, is in the process of satisfying a condition in Sections 5(c), 5(d), 5(e), 6(a), 6(b) or 6(c), then such termination shall be postponed until the date which is ten days after the date on which written notice of the satisfaction of such condition has been given to both James River and Montedison or Tissue Paper, but not beyond August 31, 1994; and provided, further, that James River has two successive options to extend the date of termination to July 11, 1994 (the "First Option Period") and to August 31, 1994 (the "Second Option Period"), respectively, which options are exercisable at any time on or before the then current termination date by the delivery of notice thereof from James River to Montedison and Tissue Paper (in the case of the Second Option Period, the notice shall be delivered on or before 11:00 a.m. (Richmond, Virginia time) on July 8, 1994), in the case of (i) the First Option Period, the interest rate referred to in Section 2 applicable to interest accruing after the Original Termination Date and up to and including July 11, 1994 shall be deemed to be 6.5% and (ii) the Second Option Period, the interest rate referred to in Section 2 applicable to interest accruing after July 11, 1994 and up to and including August 31, 1994 shall be deemed to be 9.5%. If James River elects to extend the date of termination into the Second Option Period, James River will reimburse Tissue Paper for 100% of any fees payable in respect of the calendar quarter in which the Second Option Period falls under the Agreement with respect to Letter of Credit Fees dated as of January 17, 1992 to keep Union Bank of Switzerland's Irrevocable Letter of Credit No. SBY 501335 in effect during that quarter. James River will not be obligated to make such reimbursement to Tissue Paper if Tissue Paper pays such fees before July 11, 1994. The time that any such termination shall become effective shall be at midnight, Richmond, Virginia time, on the date of termination. The termination of this Agreement shall not affect the parties' respective indemnity rights and liabilities under Sections 3 and 4 in respect of any breach of the representations and warranties set forth in either of such Sections which shall have accrued before such termination. Upon termination of this Agreement without the Closing having occurred hereunder, the parties shall continue to have their respective rights under the existing agreements related to Holdings and their respective interests therein and any consents or waivers granted by any party in contemplation of effecting the transactions contemplated by this Agreement, including without limitation any consent to a change in control of Rayne or any consent to the transfer of the legal or beneficial title to the Shares (but excluding any change in the written instructions from Rayne to Morgan made in accordance with the Escrow Agreement), shall be void ab initio. 11. Recapitalizations, Exchanges, Etc. Affecting the Shares. The provisions of this Agreement shall apply, to the full extent set forth herein with respect to the Shares or the shares of capital stock of any successor or assign of Holdings (whether by merger, consolidation, sale of assets or otherwise) which may be issued in respect of, in exchange for, or in substitution for the Shares by reason of any stock dividend, split, reverse split, combination, recapitalization, reclassification, merger, consolidation or otherwise. Except as otherwise expressly provided herein, this Agreement is not intended to confer upon any other person except James River, Montedison and Tissue Paper any rights or remedies hereunder. 12. Further Assurances. (a) Each party hereto shall (whether in its capacity as a shareholder of any entity or any other capacity whatsoever) do and perform or cause to be done and performed (including but not limited to causing any of its subsidiaries and affiliates to do or perform) all such further acts and things and shall execute and deliver all such other agreements, certificates, instruments and documents as any other party hereto may reasonably request to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby. (b) James River agrees to use its commercially reasonable efforts consistent with those efforts customarily taken by an issuer of securities in the United States public markets rated Baa1 (Moody's) and BBB (Standard & Poor's) to satisfy the conditions in Sections 5(a) and 5(b) promptly following the date hereof. (c) James River, Montedison and Tissue Paper agree to use their respective commercially reasonable efforts to cause the parties to whom fees have been paid under the Agreement with respect to Letter of Credit Fees dated as of January 17, 1992 in respect of periods after the Closing to refund such fees. James River shall be entitled to the amount of any refunded fees. (d) The parties agree that a portion of the acquisition price payable hereunder will be reported to the U.S. Internal Revenue Service, on Forms 1042 and 1042-S, as a payment of interest, and further agree that if Tissue Paper (or its designee) provides James River with (or causes to be provided to James River) such documentation as may be required properly to establish entitlement to an exemption from U.S. withholding under the U.S. Internal Revenue Code of 1986, as amended (the "Code") (including Form W-8, Form 1001 and such other forms and affidavits as may be required under the Code), then payment of such acquisition price shall be made free and clear of and without deduction for any such withholding, provided that if such documentation is at the time of Closing invalid, inaccurate or otherwise insufficient to establish the recipient's entitlement to exemption from withholding under the Code, then James River shall withhold such taxes as are required under the Code, and James River shall not be required to pay any additional amounts hereunder. In addition, the parties intend that payment of the acquisition price payable hereunder be made free and clear of and without deduction for any and all current or future taxes, levies, imposts, deductions, charges or withholdings other than those required under the Code (collectively, "Non-Code Withholdings"), and agree that they will cooperate in effecting the payment thereof so as to attempt to eliminate any such Non-Code Withholdings which might otherwise be applicable, but in any case James River will not be obligated to pay any additional amounts hereunder if any such Non-Code Withholdings are required. (e) The parties shall provide each other in advance of issuance any press release or other public filings describing the transactions contemplated hereby except where impracticable because of requirements of law or any exchange listing agreement. 13. Approvals for Transfer. The parties shall take all steps necessary to obtain all consents, authorizations, orders or approvals of governmental and regulatory authorities and of other entities which are necessary for the transfer of the Shares. 14. Governing Law; Exclusive jurisdiction. This Agreement and the rights and obligations of the parties hereunder shall be governed by and construed and interpreted in accordance with the laws of the State of New York. The parties hereby submit to the exclusive jurisdiction of the United States Federal District Court for the Southern District of New York with respect to the enforcement of any rights or remedies hereunder. 15. Invalidity of Provision. (a) The invalidity or unenforceability of any provision of this Agreement in any jurisdiction shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of this Agreement, including that provision, in any other jurisdiction. (b) If any of the covenants, terms or conditions of this Agreement are held illegal and, further, if director and/or shareholder action (including but not limited to the execution of any documents or instruments) will make such covenants, terms or conditions legal and enforceable, each of the parties hereby agrees that it shall take such action as may reasonably be required to make any such covenants, terms or conditions valid and enforceable. 16. Notices. All notices and other communications hereunder shall be in writing in English and, unless otherwise provided herein, shall be deemed duly given (i) one business day after delivery, if delivered personally; or (ii) one business day after dispatch, if sent by telefax (with a confirmatory copy sent within one day thereafter by a courier service of good international reputation) to the parties at the following addresses (or at such other address for the party as shall be specified by like notice): (a) If to James River, to: James River Corporation of Virginia Tredegar Street Richmond, Virginia 23219 Attention: Clifford A. Cutchins IV, Esquire Telecopy: (804) 343-4609 with copies to: McGuire, Woods, Battle & Boothe One James Center Richmond, Virginia 23219 Attention: Marshall H. Earl, Jr., Esquire Telecopy: (804) 775-1061 (b) If to Montedison or Tissue Paper, to: Montedison, S.p.A. Foro Buonparte, 31 20121 Milano, Italy Attention: General Counsel Telecopy: (39 2) 877-266 with copies to: Shook, Hardy & Bacon P.C. One Kansas City Place 1200 Main Street Kansas City, Missouri 64105-2118 Attention: Kevin Sweeney, Esq. Telecopy: (816) 421-5547 17. Headings; Counterparts. (a) The headings and captions contained herein are for convenience of reference only and shall not control or affect the meaning or construction of any provision hereof. Terms (including defined terms) used in the plural include the singular and vice versa, unless the context otherwise requires. (b) This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument. 18. Entire Agreement. This Agreement, including any exhibits and schedules hereto and the documents and instruments referred to herein, together with any contemporaneously executed agreements which refer to this Agreement, embodies the entire agreement and understanding of the parties hereto in respect of the subject matter contained herein. There are no restrictions, promises, representations, warranties, covenants or undertakings by or between the parties hereto, other than those expressly set forth or referred to herein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such subject matter. 19. Injunctive Relief; Remedies. Anything in this Agreement to the contrary notwithstanding, the parties hereto agree that each of the parties hereto may institute and prosecute proceedings in any court of competent jurisdiction in New York to enforce specific performance of or to enjoin breaches of this Agreement or to otherwise obtain equitable relief. Such remedies shall be cumulative and not exclusive and shall be in addition to any other remedy available to the parties hereto. 20. Service of Process. Each of the parties hereby appoints Prentice-Hall Corporation System, Inc. acting through its offices at 15 Columbus Circle, in New York, New York 10023-7773, and its successors as its authorized agent (the "Authorized Agent") upon which process may be served in any action arising out of or based on this Agreement. Such appointment shall be irrevocable until December 31, 2004, except that, if for any reason the Authorized Agent ceases to be able to act as Authorized Agent or no longer has an address in New York, New York, the parties hereto will appoint another person in New York, New York as such Authorized Agent. Each party hereto shall take any and all action, including the filing of any and all documents and instruments, that may be necessary to continue such appointment in full force and effect as aforesaid. Service of process upon the Authorized Agent at its address indicated above, as such address may be changed within New York, New York by notice given by the Authorized Agent to each party hereto, shall be deemed, in every respect, effective service of process upon such party. 21. Effect of Closing. All of the parties hereto acknowledge that, upon the Closing and the transfer of title to the Shares to James River as provided for herein, James River will directly or indirectly own all of the capital stock of Holdings and as a result thereof the JA/Mont Holdings Joint Venture Agreement, dated as of September 21, 1991, among Holdings, C&P, Rayne, James River and JRIH and the Puts and Calls Agreement, dated as of September 21, 1991, among Rayne, James River and C&P will terminate pursuant to their respective terms. In addition, upon the Closing and the transfer of title to the Shares to James River as provided for herein, all of the parties hereto agree to execute and deliver such documents and take such actions as may be reasonably requested by any party hereto to terminate (i) irrevocable Letter of Credit No. SBY 501335 issued by Union Bank of Switzerland in favor of Rayne (the "Letter of Credit"), (ii) the Agreement with respect to Letter of Credit Fees dated as of January 17, 1992 (related to the Letter of Credit), and (iii) the Escrow Agreement. 22. Rayne and JRIH as Parties. Rayne and JRIH join in this Agreement for the purpose of acknowledging its existence and agreeing that (a) before or at the Closing contemplated herein, they will execute such documents and take such other actions as James River, Montedison or Tissue Paper may request in connection with the transfer, directly or indirectly, of the Shares to James River, to terminate the interests, if any, of Rayne as a shareholder in Holdings, Jamont N.V. and their respective subsidiaries, to cancel the Letter of Credit and to terminate the Escrow Agreement, and (b) before or at the Closing, they will cooperate with James River, Montedison and Tissue Paper and take such actions as James River, Montedison or Tissue Paper may reasonably request in connection with carrying out the terms of the foregoing Agreement. The parties agree that, upon termination of this Agreement without the Closing having occurred hereunder, any documents executed, or actions taken, by Rayne or JRIH pursuant to this Section 22 shall be void ab initio and that the last sentence of Section 10 shall be applicable to Rayne and JRIH. 23. EC Consultation. For purposes of making the representations and warranties in Section 3(vi), Montedison and Tissue Paper have assumed that the transactions contemplated on their respective parts by this Agreement do not constitute a "notifiable transaction" by Montedison or Tissue Paper under the European Commission's Merger Control Regulations. For purposes of making the representations and warranties in Section 4(iv), James River has assumed that the transactions contemplated on its and JRIH's parts by this Agreement do not constitute a "notifiable transaction" by James River or JRIH under the European Commission's Merger Control Regulations. After the date of this Agreement, such parties are going to seek the informal concurrence of the European Commission as to these assumptions. If the European Commission does not concur in these assumptions and requires the parties to notify the European Commission, they agree that they will cooperate in making such notifications and that the representations and warranties in Sections 3(vi) and 4(iv) will not be considered to have been breached (and will not be deemed to be untrue or incorrect) as a result of these assumptions being incorrect and correspondingly the conditions to closing in Sections 5(c) and 6(a) will be deemed to include without limitation the notifications to and approval of the European Commission. IN WITNESS WHEREOF, this Agreement has been duly executed by each of the parties hereto as of the date first above written. MONTEDISON S.p.A. By:/s/Enrico Bondi Title: Chief Executive Officer and Managing Director JAMES RIVER CORPORATION OF VIRGINIA By:/s/Robert C. Williams Title: Chairman, President, and Chief Executive Officer JAMES RIVER INTERNATIONAL HOLDINGS, LTD. By:/s/Stephen E. Hare Title: Senior Vice President RAYNE HOLDINGS INC. By:/s/Carlo Galiano Title: Director TISSUE PAPER HOLDING S.A. By:/s/Fabio Todeschini Title: Director By:/s/Renato Papetti Title: Director EX-11 3 EXHIBIT 11 Exhibit 11 JAMES RIVER CORPORATION of Virginia and Subsidiaries COMPUTATION OF EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENT for the Quarters (13 weeks) Ended March 27, 1994 and March 28, 1993 (in thousands, except per share amounts) First Quarter PRIMARY: 1994 1993 Net loss applicable to common shares $(15,288) $(18,338) Weighted average number of common shares and common share equivalents: Common shares outstanding 81,630 81,579 Issuable upon exercise of outstanding stock options and pursuant to a deferred stock award plan 460 295 Less assumed acquisition of common shares, using proceeds from stock options and the impact of a deferred stock award plan, under the treasury stock method (224) (133) 81,866 81,741 Primary loss per common share $(.19) $(.22) Exhibit 11 (continued) JAMES RIVER CORPORATION of Virginia and Subsidiaries COMPUTATION OF EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENT for the Quarters (13 weeks) Ended March 27, 1994 and March 28, 1993 (in thousands, except per share amounts) First Quarter FULLY DILUTED: 1994 1993 Net loss applicable to common shares $(15,288) $(18,338) Weighted average number of common shares and common share equivalents: Common shares outstanding 81,630 81,579 Issuable upon exercise of outstanding stock options and pursuant to a deferred stock award plan 460 311 Less assumed acquisition of common shares, using proceeds from stock options and the impact of a deferred stock award plan, under the treasury stock method (224) (145) 81,866 81,745 Fully diluted loss per common share $(.19) $(.22) Exhibit 11 (continued) JAMES RIVER CORPORATION of Virginia and Subsidiaries NOTES TO COMPUTATIONS OF EARNINGS PER COMMON SHARE AND COMMON SHARE EQUIVALENT Primary earnings per common share is computed by dividing net income, after deducting dividends on outstanding preferred shares, by the weighted average number of common shares and dilutive common share equivalents outstanding during the period. Common share equivalents consist of shares issuable pursuant to stock options and a deferred stock award plan, and are calculated using an average market price for the period. Fully diluted earnings per common share is computed using the same method as for the primary computation except that (i) common share equivalents are computed using the higher of the market price at the end of the period or the average market price for the period, and (ii) the average number of common shares and dilutive common share equivalents outstanding is increased by the assumed conversion, if dilutive, of the Company's Series K $3.375 Cumulative Convertible Exchangeable Preferred Stock (the "Series K"), its Series L $14.00 Cumulative Convertible Exchangeable Preferred Stock (the "Series L"), and its Series N $14.00 Cumulative Convertible Exchangeable Preferred Stock (the "Series N"). The conversions of the Series K, the Series L, and the Series N have not been assumed for the periods presented, as such conversions are not dilutive. EX-12 4 EXHIBIT 12.1 Exhibit 12.1 JAMES RIVER CORPORATION of Virginia and Subsidiaries COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (a) (Dollar amounts in 000's)
Fiscal Year Ended April April December December December December 30, 1989 29, 1990 30, 1990 29, 1991 27, 1992 26, 1993 (53 weeks) (52 weeks) (35 weeks) (52 weeks) (52 weeks) (52 weeks) (b) (c,d) Pretax income (loss) from continuing operations, before minority interests $446,954 $371,501 $ 44,352 $115,170 $(182,817) $ 14,115 Add: Interest charged to operations 171,964 198,743 133,716 191,344 192,962 183,035 Portion of rental expense representative of interest factor (assumed to be one-third) 19,900 23,400 15,100 19,891 19,426 19,094 Total earnings, as adjusted $638,818 $593,644 $193,168 $326,405 $ 29,571 $216,244 Fixed charges: Interest charged to operations $171,964 $198,743 $133,716 $191,344 $ 192,962 $183,035 Capitalized interest 28,793 25,475 10,759 31,740 12,778 5,291 Portion of rental expense representative of interest factor (assumed to be one-third) 19,900 23,400 15,100 19,891 19,426 19,094 Total fixed charges $220,657 $247,618 $159,575 $242,975 $ 225,166 $207,420 Ratio 2.90 2.40 1.21 1.34 -- 1.04 See accompanying footnote explanations.
Exhibit 12.1 (continued) JAMES RIVER CORPORATION of Virginia and Subsidiaries COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (a) (Dollar amounts in 000's) Quarter Ended March 28, March 27, 1993 1994 (13 weeks) (13 weeks) (d) (d) Pretax income (loss) from continuing operations, before minority interests $(17,121) $(11,661) Add: Interest charged to operations 50,241 52,203 Portion of rental expense representative of interest factor (assumed to be one-third) 4,857 4,773 Total earnings, as adjusted $ 37,977 $ 45,315 Fixed charges: Interest charged to operations $ 50,241 $ 52,203 Capitalized interest 1,497 507 Portion of rental expense representative interest factor (assumed to be one-third) 4,857 4,773 Total fixed charges $ 56,595 $ 57,483 Ratio -- -- See accompanying footnote explanations. Exhibit 12.1 (continued) JAMES RIVER CORPORATION of Virginia and Subsidiaries NOTES TO COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (a) In computing the ratio of earnings to fixed charges, earnings consist of income before income taxes, minority interests, and fixed charges excluding capitalized interest. Fixed charges consist of interest expense, capitalized interest, and that portion of rental expense (one-third) deemed representative of the interest factor. Earnings and fixed charges also include the Company's proportionate share of such amounts for unconsolidated affiliates which are owned 50% or more and distributed income from less than 50% owned affiliates. (b) During 1990, the Company changed its fiscal year from one ending on the last Sunday in April to one ending on the last Sunday in December. During this period, the Company initiated an operational restructuring program designed to focus the Company's operations on those businesses in which it commands a substantial market share and which are less cyclical. In connection with that program, the Company recorded a $200 million pretax charge which has been included in the calculation of the ratio of earnings to fixed charges for this period. (c) During 1992, the Company initiated a productivity enhancement program and recorded a $112 million pretax charge which has been included in the calculation of the ratio of earnings to fixed charges for this year. (d) For the following periods, earnings were inadequate to cover fixed charges, and the amount of the deficiencies were: year ended December 27, 1992 - $195.6 million; quarter ended March 28, 1993 - $18.6 million; and quarter ended March 27, 1994 - $12.2 million. EX-12 5 EXHIBIT 12.2 Exhibit 12.2 JAMES RIVER CORPORATION of Virginia and Subsidiaries COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (a) (Dollar amounts in 000's)
Fiscal Year Ended April April December December December December 30, 1989 29, 1990 30, 1990 29, 1991 27, 1992 26, 1993 (53 weeks) (52 weeks) (35 weeks) (52 weeks) (52 weeks) (52 weeks) (b) (c,d) (d) Pretax income (loss) from continuing operations, before minority interests $446,954 $371,501 $ 44,352 $115,170 $(182,817) $ 14,115 Add: Interest charged to operations 171,964 198,743 133,716 191,344 192,962 183,035 Portion of rental expense representative of interest factor (assumed to be one-third) 19,900 23,400 15,100 19,891 19,426 19,094 Total earnings, as adjusted $638,818 $593,644 $193,168 $326,405 $ 29,571 $216,244 Fixed charges and preferred stock dividends: Interest charged to operations $171,964 $198,743 $133,716 $191,344 $ 192,962 $183,035 Capitalized interest 28,793 25,475 10,759 31,740 12,778 5,291 Pretax earnings require- ment for preferred dividend coverage 36,727 35,839 27,190 41,735 40,540 57,287 Portion of rental expense representative of interest factor (assumed to be one-third) 19,900 23,400 15,100 19,891 19,426 19,094 Total fixed charges and preferred stock dividends $257,384 $283,457 $186,765 $284,710 $ 265,706 $264,707 Ratio 2.48 2.09 1.03 1.15 -- -- See accompanying footnote explanations.
Exhibit 12.2 (continued) JAMES RIVER CORPORATION of Virginia and Subsidiaries COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (a) (Dollar amounts in 000's) Quarter Ended March 28, March 27, 1993 1994 (13 weeks) (13 weeks) (d) (d) Pretax income (loss) from continuing operations, before minority interests $(17,121) $(11,661) Add: Interest charged to operations 50,241 52,203 Portion of rental expense representative of interest factor (assumed to be one-third) 4,857 4,773 Total earnings, as adjusted $ 37,977 $ 45,315 Fixed charges and preferred stock dividends: Interest charged to operations $ 50,241 $ 52,203 Capitalized interest 1,497 507 Pretax earnings requirement for preferred dividend coverage 14,052 13,961 Portion of rental expense representative interest factor (assumed to be one-third) 4,857 4,773 Total fixed charges and preferred stock dividends $ 70,647 $ 71,444 Ratio -- -- See accompanying footnote explanations. Exhibit 12.2 (continued) JAMES RIVER CORPORATION of Virginia and Subsidiaries NOTES TO COMPUTATION OF RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS (a) In computing the ratio of earnings to combined fixed charges and preferred stock dividends, earnings consist of income before income taxes, minority interests, and fixed charges excluding capitalized interest. Fixed charges consist of interest expense, capitalized interest, and that portion of rental expense (one-third) deemed representative of the interest factor. Fixed charges are increased by the preferred stock dividend requirements of James River adjusted to amounts representing the pretax earnings which would be required to cover such dividend requirements. Earnings and fixed charges also include the Company's proportionate share of such amounts for unconsolidated affiliates which are owned 50% or more and distributed income from less than 50% owned affiliates. (b) During 1990, the Company changed its fiscal year from one ending on the last Sunday in April to one ending on the last Sunday in December. During this period, the Company initiated an operational restructuring program designed to focus the Company's operations on those businesses in which it commands a substantial market share and which are less cyclical. In connection with that program, the Company recorded a $200 million pretax charge which has been included in the calculation of the ratio of earnings to combined fixed charges and preferred stock dividends for this period. (c) During 1992, the Company initiated a productivity enhancement program and recorded a $112 million pretax charge which has been included in the calculation of the ratio of earnings to combined fixed charges and preferred stock dividends for this year. (d) For the following periods, earnings were inadequate to cover combined fixed charges and preferred stock dividends, and the amounts of the deficiencies were: year ended December 27, 1992 - $236.1 million; year ended December 26, 1993 - $48.5 million; quarter ended March 28, 1993 - $32.7 million; and quarter ended March 27, 1994 - $26.1 million. -----END PRIVACY-ENHANCED MESSAGE-----