<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 or 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
September 30, 1994
Commission File Number 0-3730
Willamette Industries, Inc.
(Exact name of registrant as specified in its charter)
State of Oregon 93-0312940
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3800 First Interstate Tower, Portland, Oregon 97201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (503) 227-5581
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.
Common Stock, 50 cent par value: 55,034,048, November 8, 1994.
<PAGE>
<TABLE>
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED BALANCE SHEETS PART I
(dollar amounts, except per share amounts, in thousands) ITEM 1
<CAPTION>
September 30, December 31,
ASSETS 1994 1993
------ ------------ ------------
<S> <C> <C>
Current assets:
Cash, including time deposits $ 7,857 9,543
Receivables, net of allowance
for doubtful accounts of $5,309 and $4,466 298,172 207,161
Inventories (Note 2) 257,307 269,063
Deposits on timber cutting contracts 42,657 36,321
Prepaid expenses 6,346 11,124
------------ ------------
Total current assets 612,339 533,212
Timber, timberlands and related facilities, at cost
less the cost of fee timber harvested and amortization 489,280 483,308
Property, plant and equipment, at cost less
accumulated depreciation of $1,243,793 and $1,121,860 1,814,409 1,718,063
Other assets 64,635 69,970
------------ ------------
Total assets $ 2,980,663 2,804,553
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt $ 1,031 1,278
Notes payable 148,000 96,000
Accounts payable, including book overdrafts
of $45,792 and $43,905 151,383 139,572
Accrued expenses 135,887 125,996
Accrued income taxes 7,065 12,790
------------ ------------
Total current liabilities 443,366 375,636
Deferred income taxes 216,359 198,295
Other liabilities 31,026 31,042
Long-term debt 966,279 941,710
Stockholders' equity:
Common stock, $.50 par value (55,033,291 and
54,897,648 shares outstanding) 27,517 27,449
Capital surplus 293,608 288,646
Retained earnings 1,002,508 941,775
------------ ------------
Total stockholders' equity 1,323,633 1,257,870
------------ ------------
Total liabilities & stockholders' equity $ 2,980,663 2,804,553
============ ============
</TABLE>
<PAGE>
<TABLE>
FORM 10-Q
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES PART I
CONSOLIDATED STATEMENTS OF EARNINGS ITEM 1
(dollar amounts, except per share amounts, in thousands)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ---------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 780,827 677,101 2,189,229 1,964,187
Cost of sales 647,902 570,882 1,829,786 1,645,109
------- ------- ------- -------
Gross profit 132,925 106,219 359,443 319,078
Selling and administrative expenses 47,090 44,022 137,276 129,502
------- ------- ------- -------
Operating earnings 85,835 62,197 222,167 189,576
Other income(expense), net (5,522) (327) (6,076) (2,459)
------- ------- ------- -------
80,313 61,870 216,091 187,117
Interest expense, net 18,980 16,140 52,945 48,698
------- ------- ------- -------
Earnings before taxes and accounting changes 61,333 45,730 163,146 138,419
Provision for income taxes 23,613 24,625 62,811 59,847
------- ------- ------- -------
Earnings before accounting changes 37,720 21,105 100,335 78,572
Accounting changes - - - 26,364
------- ------- ------- -------
Net earnings $ 37,720 21,105 100,335 104,936
======= ======= ======= =======
Weighted average number of shares outstanding 55,029,110 54,812,000 55,013,498 54,796,933
========== ========== ========== ==========
Per Share Information:
Earnings before accounting changes $ 0.68 0.38 1.82 1.43
Accounting changes - - - 0.48
----- ----- ----- -----
Net earnings $ 0.68 0.38 1.82 1.91
===== ===== ===== =====
Dividends per share $ 0.24 0.22 0.72 0.66
===== ===== ===== =====
</TABLE>
<PAGE>
<TABLE>
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS PART I
(dollar amounts in thousands) ITEM 1
<CAPTION>
Nine Months Ended
September 30,
---------------------
1994 1993
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 100,335 104,936
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 141,261 123,169
Cost of fee timber harvested 14,167 15,117
Other amortization 3,656 4,506
Increase in deferred income taxes 18,064 20,013
Cumulative impact of change in accounting standards - (26,364)
Changes in working capital items:
Accounts receivable (91,011) (59,477)
Inventories 11,756 (13,999)
Prepaid expenses and timber deposits (1,558) (6,512)
Accounts payable and accrued expenses 21,702 16,236
Federal and state taxes on income (5,725) 9,204
--------- ---------
Net cash provided by operating activities 212,647 186,829
--------- ---------
Cash flows from investing activities:
Proceeds from sale of equipment 2,023 6,216
Expenditures for property, plant and equipment (239,664) (267,645)
Expenditures for timber and timberlands, net (18,851) (9,467)
Expenditures for roads and reforestation (5,781) (5,509)
Other 6,312 3,489
--------- ---------
Net cash used in investing activities (255,961) (272,916)
--------- ---------
Cash flows from financing activities:
Debt borrowings 77,000 289,829
Proceeds from sale of capital stock 4,908 1,424
Cash dividends (39,602) (36,150)
Payment on debt (678) (176,938)
--------- ---------
Net cash provided from financing activities 41,628 78,165
--------- ---------
Net increase (decrease) in cash (1,686) (7,922)
Cash at beginning of year 9,543 9,034
--------- ---------
Cash at end of period $ 7,857 1,112
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 52,356 50,914
========= =========
Income taxes $ 50,472 29,530
========= =========
</TABLE>
<PAGE>
FORM 10-Q
PART I
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1994
Note 1 The information furnished in this report reflects all adjustments
which are, in the opinion of management, necessary to a fair
statement of the results for the interim periods presented.
Note 2 The components of inventories are as follows (thousands of
dollars):
September 30, December 31,
1994 1993
------------- ------------
Finished product $ 79,368 78,197
Work in process 6,345 6,205
Raw material 110,925 128,312
Supplies 60,669 56,349
------------- ------------
$257,307 269,063
Note 3 Effective January 1, 1993, the Company adopted the provisions
of Statement of Financial Accounting Standards (SFAS) #106
"Employers' Accounting for Postretirement Benefits Other than
Pensions" and SFAS #109 "Accounting for Income Taxes." The
total cumulative impact of these two changes was a credit to
net earnings in the first quarter of 1993 of $26.4 million or
$.48 per share.
Note 4 Earnings in the third quarter of 1994 were negatively
impacted by the announced closure of the Sweet Home, Oregon
plywood plant. A charge of $5 million was recorded as other
income(expense), net, in the third quarter of 1994. This
plant closure reduced net earnings by $.06 per share.
Other notes have been omitted pursuant to Rule 10-01(a)(5) of
Regulation S-X.
<PAGE>
FORM 10-Q
PART I
ITEM 2
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
September 30, 1994
The Company's two basic businesses, paper products and building materials,
are affected by changes in general economic conditions. Paper product sales
and earnings tend to follow the general economy. Building materials activity
is closely related to new housing starts and to the availability and terms of
financing for construction. Both industry segments use timber as their basic
raw material. The cost of timber is sensitive to various supply and demand
factors, including environmental issues affecting log supply.
RESULTS OF OPERATIONS
3rd Quarter 1994 vs. 3rd Quarter 1993
Net sales increased 15.3% in the third quarter of 1994 compared with the
third quarter of 1993. Paper product sales increased 16.6%. Except for a
slight decline in bleached market pulp shipments, unit sales volumes exceeded
levels from the same period a year ago by 4.4% or more in all paper product
lines. Selling prices of all unbleached paper products exceeded levels
compared with the third quarter of 1993. However, except for bleached market
pulp, selling prices for bleached paper products were below levels for the
same period a year ago. Building materials sales increased 13.2% compared
with the third quarter of 1993 as selling prices increased in all building
materials product lines. Demand has been particularly strong for medium
density fiberboard (MDF) and plywood. As a result, average price
realizations for MDF and plywood have increased 15.2% and 14.8%,
respectively, compared with the third quarter of 1993. MDF and particleboard
unit sales volumes exceeded levels from the same period a year ago by 12.6%
and 11.5%, respectively. Lumber and plywood unit sales volumes were slightly
below levels compared with the third quarter of 1993.
Gross profit margins increased to 17.0% in the third quarter of 1994 from
15.7% in the third quarter of 1993. Paper product gross margins decreased to
11.9% from 12.7% in the third quarter of 1993 as average sales prices
continued to decline for most bleached paper products. Paper product margins
were also being pressured as the prices for old corrugated containers (OCC),
a raw material used in the manufacture of unbleached containerboard,
escalated rapidly in the third quarter of 1994. However, OCC prices have
subsequently declined from the peak levels experienced in the third quarter
of 1994. Building materials gross margins improved to 25.6% compared with
20.6% in the third quarter of 1993. The increase in building materials
margins is mainly due to increases in average sales price realizations.
However, the cost of glue and resin, raw materials used in the manufacture of
plywood and reconstituted wood products, escalated sharply in the third
quarter of 1994. The increase in cost in these raw materials partially
offset the improved gross margins due to increased selling prices in the
building materials product lines.
Other income(expense), net, was an expense of $5.5 million in the third
quarter of 1994 versus an expense of $.3 million for the same period a year
ago. The expense increase is mainly due to the announced closure in August
1994 of the Sweet Home, Oregon plywood plant. Actual production ceased at
this facility October 20, 1994. The closure of this plant was due to the
shortage of federal timber that continues to face the forest products
industry in the northwestern United States. No additional closures are
anticipated in the immediate future as the Company is now able to supply
nearly three-quarters of its western saw log needs from its own timberlands,
a mix that appears sustainable.
Interest expense was $19.0 million in the third quarter of 1994 compared with
$16.1 million in the third quarter of 1993. The Company's average
outstanding debt increased $101.0 million between the two periods. However,
the Company experienced a decline of effective interest rates on average
outstanding debt from 7.84% in the third quarter of 1993 to 7.46% for the
same period in 1994. Capitalized interest declined to $1.7 million in 1994
versus $3.6 million in 1993 which accounted for most of the increase in
interest expense between the periods.
The increase in the Federal corporate tax rate to 35% in August 1993 impacted
the provision for taxes between the periods. Accounting standards required
that $5.9 million or $.11 per share be charged to the third quarter of 1993
with a corresponding increase in the deferred tax liability. In addition,
the retroactive feature of the law to January 1, 1993 required an additional
downward adjustment for the first half of 1993 earnings of $.02 per share
which resulted in a total charge to earnings of $.13 per share in the third
quarter of 1993.
Nine Months ended September 30, 1994 vs.
Nine Months ended September 30, 1993
Net sales increased 11.5% in the first nine months of 1994 from the
comparable period of 1993. Paper product sales increased 12.9%. Unit sales
volumes increased in all paper product lines. Unbleached paper product
selling prices were improved over the comparable period in 1993 as demand for
these products is strong while available supplies have grown at a far slower
pace. For bleached papers, market pulp prices continued their upward trend
while the other bleached paper prices were down from prior year levels.
Building materials sales increased 9.2% in the nine months ended September
30, 1994 as average sales price realizations increased over prior year levels
and unit sales volumes were basically at or above levels for the same period
a year ago.
The gross profit margin was 16.4% for the nine months ended September 30,
1994 compared to 16.2% for the comparable period in 1993. Paper product
gross margins decreased to 10.9% for the first nine months of 1994 compared
with 11.5% for the nine months ended September 30, 1993 reflecting mixed
pricing conditions for paper products and start-up costs associated with the
successful installation of a new pulping facility and paper machine at the
Company's Johnsonburg, Pennsylvania mill. An equipment failure in the
cogeneration plant at the same mill and significantly higher OCC costs at the
unbleached paper mills have also negatively affected results for this period.
Building materials gross profit margins increased to 25.3% compared with
23.5% in the first nine months of 1993. The improvement in building
materials margins is mainly due to increases in average sales price
realizations for all product lines. The Company continues to experience
increasing log costs due to environmental and supply and demand factors.
Other income (expense), net, was an expense of $6.1 million in the first nine
months of 1994 versus an expense of $2.5 million for the same period a year
ago. The expense increase is mainly due to the announced closure in August
1994 of the Sweet Home, Oregon plywood plant. Actual production ceased at
this facility October 20, 1994. A charge of $5 million was recorded as other
income(expense), net, in the third quarter of 1994 as a result of this plant
closure. The plant closure reduced net earnings by $.06 per share. The
shortage of federal timber that continues to face the forest products
industry in the northwestern United States was the reason for this plant
closure.
Interest expense was $52.9 million in the first nine months of 1994 compared
to $48.7 million in the first nine months of 1993. Although the Company's
average outstanding debt increased $112.1 million between the two periods,
gross interest was $59.8 million in 1994 versus $59.9 million in 1993 as the
Company experienced an overall lowering of effective interest rates. The
Company's effective interest rate on average outstanding debt declined from
8.22% in the first nine months of 1993 to 7.35% for the same period in 1994.
The decline in gross interest expense between the periods was more than
offset by a reduction in capitalized interest for 1994. Capitalized interest
declined to $6.8 million in 1994 versus $11.2 million in 1993.
The increase in the Federal corporate tax rate to 35% in August 1993 impacted
the provision for taxes between the periods. Accounting standards required
that $5.9 million or $.11 per share be charged to the third quarter of 1993
with a corresponding increase in the deferred tax liability. In addition,
the retroactive feature of the law to January 1, 1993 required an additional
downward adjustment for the first half of 1993 earnings of $.02 per share
which resulted in a total charge to earnings of $.13 per share in the third
quarter of 1993.
Effective January 1, 1993, the Company adopted the provisions of SFAS #106
"Employers Accounting for Post-Retirement Benefits Other Than Pensions" which
resulted in a change in accounting for such benefits from the "pay-as-you-go"
basis to the accrual basis. This change resulted in a charge to net earnings
after tax of $13.6 million or $.25 per share. In addition, the Company
adopted the provisions of SFAS #109 "Accounting For Income Taxes" which
required deferred taxes payable in the future be reflected at current
statutory tax rates. This change resulted in a credit to net earnings of
$40.0 million or $.73 per share. The total cumulative impact of these
changes was a credit to net earnings in the first quarter of 1993 of $26.4
million or $.48 per share.
Financial Condition as of September 30, 1994
During the first nine months of 1994, the Company had capital expenditures of
$264.3 million that were funded by internally generated cash flows and new
long-term external borrowing of $25.0 million. In June of 1994, the Company
drew down the remaining $25.0 million available under a $100.0 million
revolving credit facility at market interest rates from a bank. Cash flows
from operating activities have increased $25.8 million or 13.8% in the first
nine months of 1994 from the comparable period in 1993 mainly due to
increased operating earnings and higher non-cash charges against earnings.
The proceeds were used for capital expenditures.
The long-term debt-to-capital ratio has decreased to 42.2% at September 30,
1994 from 42.8% at December 31, 1993. Net working capital increased to
$169.0 million at September 30, 1994 from $157.6 million at December 31,
1993.
The Company believes it has the resources available to meet its liquidity
requirements. Resources include internally generated funds, short-term
borrowing agreements, revolving credit lines and term loans which could be
arranged with several banks as the Company has done in the past. In April of
1994, the Company registered under the Securities Act of 1933, senior debt
securities totaling $200.0 million. As of the date of this filing, none of
the debt securities have been issued.
The Board of Directors of the Company voted to pay a quarterly cash dividend
of $.24 per share in the third quarter of 1994; however, there is no
assurance to future dividends as they are dependent upon earnings, capital
requirements and financial condition.
<PAGE>
FORM 10-Q
PART II
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
--------
Exhibit No. Exhibit
----------- -------
12 Computation of
Ratio of Earnings
to Fixed Charges
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
None
SIGNATURE
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.
WILLAMETTE INDUSTRIES, INC.
By /s/J. A. Parsons
J. A. Parsons
Executive Vice President
Principal Financial Officer)
Date: November 8, 1994
<PAGE>
<PAGE>
EXHIBIT 12
<TABLE>
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
<CAPTION>
Nine Months Ended
Year Ended December 31, September 30,
------------------------------------------------ ------------------
1989 1990 1991 1992 1993 1993 1994
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Fixed Charges:
Interest Cost $42,140 $52,028 $63,986 $73,776 $79,194 $59,894 $59,790
One-third rent expense 2,518 2,948 3,725 4,495 4,819 3,605 3,892
-------- -------- -------- -------- -------- -------- --------
Total Fixed Charges 44,658 54,976 67,711 78,271 84,013 63,499 63,682
======== ======== ======== ======== ======== ======== ========
Add (Deduct):
Earnings before Income Taxes 308,056 208,671 73,609 129,452 189,168 138,419 163,146
Interest Capitalized (13,304) (22,129) (723) (7,354) (15,904) (11,196) (6,845)
-------- -------- -------- -------- -------- -------- --------
Earnings for Fixed Charges $339,410 $241,518 $140,597 $200,369 $257,277 $190,722 $219,983
======== ======== ======== ======== ======== ======== ========
Ratio of Earnings to
Fixed Charges 7.60 4.39 2.08 2.56 3.06 3.00 3.45
======== ======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
EXHIBIT 27
WILLAMETTE INDUSTRIES, INC.
FINANCIAL DATA SCHEDULE
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL
INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED BALANCE SHEETS AND RELATED
CONSOLIDATED STATEMENTS OF EARNINGS FOR THE
PERIOD ENDED SEPTEMBER 30, 1994 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 7,857
<SECURITIES> 0
<RECEIVABLES> 303,481
<ALLOWANCES> 5,309
<INVENTORY> 257,307
<CURRENT-ASSETS> 612,339
<PP&E> 3,547,482
<DEPRECIATION> 1,243,793
<TOTAL-ASSETS> 2,980,663
<CURRENT-LIABILITIES> 443,366
<BONDS> 966,279
0
0
<COMMON> 27,517
<OTHER-SE> 1,296,116
<TOTAL-LIABILITY-AND-EQUITY> 2,980,663
<SALES> 780,827
<TOTAL-REVENUES> 780,827
<CGS> 647,902
<TOTAL-COSTS> 647,902
<OTHER-EXPENSES> 52,612
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,980
<INCOME-PRETAX> 61,333
<INCOME-TAX> 23,613
<INCOME-CONTINUING> 37,720
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,720
<EPS-PRIMARY> .68
<EPS-DILUTED> .68
</TABLE>
