<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
June 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: 55,029,930, August 9, 1994.
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<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>
June 30, December 31,
ASSETS 1994 1993
------ ------------ ------------
<S> <C> <C>
Current assets:
Cash, including time deposits $ 3,626 9,543
Receivables, net of allowance
for doubtful accounts of $4,932 and $4,466 268,337 207,161
Inventories (Note 2) 276,345 269,063
Deposits on timber cutting contracts 44,002 36,321
Prepaid expenses 5,727 11,124
------------ ------------
Total current assets 598,037 533,212
Timber, timberlands and related facilities, at cost
less the cost of fee timber harvested and amortization 482,767 483,308
Property, plant and equipment, at cost less
accumulated depreciation of $1,196,909 and $1,121,860 1,775,836 1,718,063
Other assets 69,638 69,970
------------ ------------
Total assets $ 2,926,278 2,804,553
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of long-term debt $ 1,132 1,278
Notes payable 140,000 96,000
Accounts payable, including book overdrafts
of $47,460 and $43,905 147,634 139,572
Accrued expenses 127,099 125,996
Accrued income taxes 6,509 12,790
------------ ------------
Total current liabilities 422,374 375,636
Deferred income taxes 208,095 198,295
Other liabilities 30,656 31,042
Long-term debt 966,280 941,710
Stockholders' equity:
Common stock, $.50 par value (55,028,207 and
54,897,648 shares outstanding) 27,514 27,449
Capital surplus 293,369 288,646
Retained earnings 977,990 941,775
------------ ------------
Total stockholders' equity 1,298,873 1,257,870
------------ ------------
Total liabilities & stockholders' equity $ 2,926,278 2,804,553
============ ============
</TABLE>
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<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 Six Months Ended
June 30, June 30,
---------------------- ---------------------
1994 1993 1994 1993
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 728,701 654,064 1,408,402 1,287,086
Cost of sales 617,147 550,442 1,181,884 1,074,227
------- ------- ------- -------
Gross profit 111,554 103,622 226,518 212,859
Selling and administrative expenses 44,755 42,775 90,186 85,480
------- ------- ------- -------
Operating earnings 66,799 60,847 136,332 127,379
Other income(expense), net (404) (1,587) (554) (2,132)
------- ------- ------- -------
66,395 59,260 135,778 125,247
Interest expense, net 18,053 16,403 33,965 32,558
------- ------- ------- -------
Earnings before taxes and accounting changes 48,342 42,857 101,813 92,689
Provision for income taxes 18,612 16,286 39,198 35,222
------- ------- ------- -------
Earnings before accounting changes 29,730 26,571 62,615 57,467
Accounting changes - - - 26,364
------- ------- ------- -------
Net earnings $ 29,730 26,571 62,615 83,831
======= ======= ======= =======
Weighted average number of shares outstanding 55,026,874 54,798,196 55,005,562 54,789,275
========== ========== ========== ==========
Per Share Information:
Earnings before accounting changes $ 0.54 0.49 1.14 1.05
Accounting changes - - - 0.48
----- ----- ----- -----
Net earnings $ 0.54 0.49 1.14 1.53
===== ===== ===== =====
Dividends per share $ 0.24 0.22 0.48 0.44
===== ===== ===== =====
</TABLE>
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<TABLE>
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS PART I
(dollar amounts in thousands) ITEM 1
<CAPTION>
Six Months Ended
June 30,
---------------------
1994 1993
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 62,615 83,831
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 92,683 81,302
Cost of fee timber harvested 10,493 9,852
Other amortization 2,437 2,600
Increase in deferred income taxes 9,800 9,862
Cumulative impact of change in accounting standards - (26,364)
Changes in working capital items:
Accounts receivable (61,176) (35,785)
Inventories (7,282) (3,122)
Prepaid expenses and timber deposits (2,284) (8,236)
Accounts payable and accrued expenses 9,165 12,362
Federal and state taxes on income (6,281) 176
--------- ---------
Net cash provided by operating activities 110,170 126,478
--------- ---------
Cash flows from investing activities:
Proceeds from sale of equipment 1,869 5,303
Expenditures for property, plant and equipment (152,346) (179,868)
Expenditures for timber and timberlands, net (9,896) (9,732)
Expenditures for roads and reforestation (3,220) (2,543)
Other 772 2,510
--------- ---------
Net cash used in investing activities (162,821) (184,330)
--------- ---------
Cash flows from financing activities:
Debt borrowings 69,000 259,129
Proceeds from sale of capital stock 4,710 945
Cash dividends (26,400) (24,095)
Payment on debt (576) (176,610)
--------- ---------
Net cash provided from financing activities 46,734 59,369
--------- ---------
Net increase (decrease) in cash (5,917) 1,517
Cash at beginning of year 9,543 9,034
--------- ---------
Cash at end of period $ 3,626 10,551
========= =========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 33,744 34,368
========= =========
Income taxes $ 34,068 25,184
========= =========
</TABLE>
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FORM 10-Q
PART I
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 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):
June 30, December 31,
1994 1993
-------- ------------
Finished product $ 85,089 78,197
Work in process 8,032 6,205
Raw material 124,023 128,312
Supplies 59,201 56,349
-------- ------------
$276,345 269,063
======== ============
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.
Other notes have been omitted pursuant to Rule 10-01(a)(5) of
Regulation S-X.
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FORM 10-Q
PART I
ITEM 2
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
June 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 the basic
raw material. The cost of timber is sensitive to various supply and demand
factors, including environmental issues affecting log supply.
RESULTS OF OPERATIONS
2nd Quarter 1994 vs. 2nd Quarter 1993
Net sales increased 11.4% in the second quarter of 1994 compared with the
second quarter of 1993. Paper product sales increased 14.1%. Unit sales
volumes exceeded levels from the same period a year ago by at least 5.2% in
all paper product lines. Selling prices of all unbleached paper products
exceeded levels compared with the second 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 7.3% compared with the second quarter of 1993 as unit sales volumes
and prices increased in all building materials product lines except for small
declines in lumber. Demand has been strong for particleboard and medium
density fiberboard (MDF) since the last half of 1993. As a result, average
price realizations for particleboard and MDF have increased 18.2% and 16.0%,
respectively, compared with the second quarter of 1993.
Gross profit margins decreased to 15.3% in the second quarter of 1994 from
15.8% in the second quarter of 1993. Paper product gross margins decreased
to 9.8% from 10.7% in the second quarter of 1993 as average sales prices
continued to decline for most bleached paper products. The results of this
group were also negatively affected by costs associated with the successful
start-up of the Company's new pulping facility at the Johnsonburg,
Pennsylvania mill and an equipment failure in the cogeneration plant at that
same location. Paper product margins are also being squeezed as the prices
for old corrugated containers, a raw material used in the manufacture of
unbleached containerboard, are escalating rapidly. Building materials gross
margins improved to 24.2% compared with 23.6% in the second quarter of 1993.
The increase in building materials margins is mainly due to increases in both
average sales price realizations and unit sales volumes. Higher log costs
partially offset the improvement in margins realized by higher unit sales
volumes and prices. The reduced supply of federal timber continues to drive
the cost of open market logs upward in Oregon. The Company is able to supply
60% of its Oregon log needs from its own timberlands. However, because of
the federal timber supply problem, the Company announced on August 8, 1994,
that it has decided to close its Sweet Home, Oregon, plywood and timber
finishing plants. Additional curtailment of Oregon wood product operations
may be necessary unless there is a meaningful resolution to the federal
timber supply problem.
Interest expense was $18.1 million in the second quarter of 1994 compared
with $16.4 million in the second quarter of 1993. Although the Company's
average outstanding debt increased $113.4 million between the two periods,
gross interest expense decreased slightly in the second quarter of 1994 as
the Company experienced an overall lowering of effective interest rates. The
Company's effective interest rate on average outstanding debt declined from
8.27% in the second quarter of 1993 to 7.32% for the same period in 1994.
The slight decline in gross interest expense between the periods was more
than offset by a reduction in capitalized interest for 1994. Capitalized
interest declined to $1.9 million in 1994 versus $3.8 million in 1993.
Six Months ended June 30, 1994 vs.
Six Months ended June 30, 1993
Net sales increased 9.4% in the first six months of 1994 from the comparable
period of 1993. Paper product sales increased 10.9%. Unit sales volumes
increased in all paper product lines; however, average sales price
realizations were mixed for this segment. Unbleached paper product prices
were improved over the comparable period in 1993 as demand for these products
continues to increase. On the bleached paper side of the business, market
pulp prices continued their upward trend while the other bleached paper
prices were down from prior year levels. Building materials sales increased
7.2% in the six months ended June 30, 1994 compared with the first six months
of 1993 as both average sales price realizations and unit sales volumes
increased over prior year levels.
The gross profit margin was 16.1% for the six months ended June 30, 1994
compared to 16.5% for the comparable period in 1993. Paper product gross
margins decreased to 10.3% for the first six months of 1994 compared with
10.9% for the six months ended June 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. Building materials gross profit
margins increased to 25.2% compared with 25.0% in the first six months of
1993. The improvement in building materials margins is mainly due to
increases in both unit sales volumes and average sales price realizations.
The Company continues to experience increasing log costs mainly due to
environmental and supply and demand factors.
Interest expense was $34.0 million in the first six months of 1994 compared
to $32.6 million in the first six months of 1993. Although the Company's
average outstanding debt increased $117.6 million between the two periods,
gross interest was $39.1 million in 1994 versus $40.2 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
8.41% in the first six months of 1993 to 7.30% 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 $5.2 million in 1994 versus $7.6 million in 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.
The increase in the federal corporate tax rate in August 1993 also impacted
the comparison of the provision for taxes between the periods. The effective
tax rate used for the first six months of 1994 was 38.5% compared with 38.0%
for the same period in 1993.
Financial Condition as of June 30, 1994
During the first six months of 1994, the Company had capital expenditures of
$165.5 million that were funded by internally generated cash flows and net
new long-term and short-term external borrowing of $68.4 million. Cash flows
from operating activities have decreased $16.3 million or 12.9% in the first
six months of 1994 from the comparable period in 1993 mainly due to increases
in the investment for working capital items. 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. The proceeds
were used for capital expenditures.
The long-term debt-to-capital ratio has decreased slightly to 42.7% at June
30, 1994 from 42.8% at December 31, 1993. Net working capital increased to
$175.7 million at June 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.
On August 4, 1994, the Board of Directors of the Company voted to continue
the quarterly cash dividend of $.24 per share; however, there is no assurance
to future dividends as they are dependent upon earnings, capital requirements
and financial condition.
<PAGE>
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
(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: August 9, 1994
<PAGE>
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EXHIBIT 12
<TABLE>
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLAR AMOUNTS IN THOUSANDS)
<CAPTION>
Six Months Ended
Year Ended December 31, June 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 $40,156 $39,140
One-third rent expense 2,518 2,948 3,725 4,495 4,819 2,401 2,644
-------- -------- -------- -------- -------- -------- --------
Total Fixed Charges 44,658 54,976 67,711 78,271 84,013 42,557 41,784
======== ======== ======== ======== ======== ======== ========
Add (Deduct):
Earnings before Income Taxes 308,056 208,671 73,609 129,452 189,168 92,689 101,813
Interest Capitalized (13,304) (22,129) (723) (7,354) (15,904) (7,598) (5,175)
-------- -------- -------- -------- -------- -------- --------
Earnings for Fixed Charges $339,410 $241,518 $140,597 $200,369 $257,277 $127,648 $138,422
======== ======== ======== ======== ======== ======== ========
Ratio of Earnings to
Fixed Charges 7.60 4.39 2.08 2.56 3.06 3.00 3.31
======== ======== ======== ======== ======== ======== ========
</TABLE>
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