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, 2000
------------------
Commission File Number 1-12545
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Willamette Industries, Inc.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
State of Oregon 93-0312940
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1300 S.W. Fifth Avenue, Suite 3800, Portland, Oregon 97201
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(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: 109,206,002 at October 27, 2000.
<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
SEPTEMBER 30, DECEMBER 31,
ASSETS 2000 1999
------ ---------- -----------
<S> <C> <C>
Current assets:
Cash $ 16,350 25,557
Accounts receivable, less allowance
for doubtful accounts of $3,867 and $3,222 472,417 382,763
Inventories (Note 2) 441,700 445,110
Prepaid expenses and timber deposits 27,102 36,160
---------- ----------
Total current assets 957,569 889,590
Timber, timberlands and related facilities, net 1,027,320 1,057,529
Property, plant and equipment, at cost less
accumulated depreciation of $2,663,939 and
$2,485,524 2,949,643 2,751,210
Other assets 100,614 99,532
---------- ----------
$5,035,146 4,797,861
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current installments on long-term debt $ 3,053 3,256
Notes payable 29,487 13,617
Accounts payable, includes book overdrafts
of $72,561 and $53,653 227,944 212,222
Accrued expenses 200,601 180,824
Accrued income taxes 8,166 22,200
---------- ----------
Total current liabilities 469,251 432,119
Deferred income taxes 564,146 491,374
Other liabilities 36,613 41,813
Long-term debt, net of current installments 1,654,127 1,628,843
Stockholders' equity:
Preferred stock, cumulative, $.50 par value.
Authorized 5,000,000 shares - -
Common stock, $.50 par value. Authorized 150,000,000
shares; issued 109,206,002 and 111,587,433 shares 54,603 55,794
Capital surplus 222,672 303,626
Retained earnings 2,033,734 1,844,292
---------- -----------
Total stockholders' equity 2,311,009 2,203,712
---------- ----------
$5,035,146 4,797,861
========== =========
</TABLE>
2
<PAGE>
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED STATEMENTS OF EARNINGS PART I
(AMOUNTS, EXCEPT PER SHARE AMOUNTS, IN THOUSANDS) ITEM 1
<TABLE>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Net sales $1,116,937 1,087,899 $3,366,257 3,018,721
Cost of sales 887,590 844,980 2,665,489 2,431,683
---------- ---------- ---------- ----------
Gross profit 229,347 242,919 700,768 587,038
Selling and administrative expenses 68,539 67,368 206,607 198,429
---------- ---------- ---------- ----------
Operating earnings 160,808 175,551 494,161 388,609
Other expense - net (2,296) (9,791) (8,300) (10,186)
---------- ---------- ---------- ----------
158,512 165,760 485,861 378,423
Interest expense 31,129 31,068 90,545 95,437
---------- ---------- ---------- ----------
Earnings before provision for
income taxes 127,383 134,692 395,316 282,986
Provision for income taxes 43,947 52,734 136,384 106,120
---------- ---------- ---------- -----------
Net earnings $ 83,436 81,958 $ 258,932 176,866
========== ========== ========== ==========
Per share information:
Basic earnings per share $ 0.76 0.74 $ 2.35 1.59
========== ========== ========== ==========
Diluted earnings per share $ 0.76 0.73 $ 2.34 1.58
========== ========== ========== ==========
Dividends $ 0.21 0.18 $ .63 0.52
========== ========== ========== ==========
Weighted average shares outstanding:
Basic 109,203 111,552 110,216 111,307
========== ========== ========== ==========
Diluted 109,392 112,218 110,833 111,938
========== ========== ========== ==========
</TABLE>
Per share earnings, both basic and diluted, are based upon the weighted average
number of shares outstanding.
Diluted weighted average shares outstanding are calculated using the treasury
stock method and assume that all stock options with a market value greater than
the grant price at the balance sheet date are exercised.
3
<PAGE>
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS PART I
(DOLLAR AMOUNTS IN THOUSANDS) ITEM 1
<TABLE>
NINE MONTHS ENDED
SEPTEMBER 30,
-------------------------
2000 1999
---------- -----------
Cash flows from operating activities:
<S> <C> <C>
Net earnings $ 258,932 176,866
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation 186,010 179,982
Cost of fee timber harvested 33,037 35,532
Other amortization 14,347 12,494
Deferred income taxes 60,860 60,294
Changes in working capital items:
Accounts receivable (82,350) (87,518)
Inventories 14,620 (5,081)
Prepaid expenses and timber deposits 9,563 17,727
Accounts payable and accrued expenses 28,825 11,755
Accrued income taxes (14,034) 5,892
---------- ----------
Net cash provided by operating activities 509,810 407,943
---------- ----------
Cash flows from investing activities:
Proceeds from sale of assets 1,550 4,869
Expenditures for property, plant and equipment (246,065) (181,334)
Expenditures for timber and timberlands (2,318) (7,351)
Expenditures for roads and reforestation (12,607) (10,966)
Acquisitions (165,854) -
Other 16,981 (33,124)
---------- ----------
Net cash used in investing activities (408,313) (227,906)
---------- ----------
Cash flows from financing activities:
Net change in operating lines of credit 15,870 (6,156)
Debt borrowing 110,241 27,770
Proceeds from sale of common stock 1,906 17,913
Repurchased common stock (84,071) -
Cash dividends paid (69,490) (57,900)
Payment on debt (85,160) (172,874)
---------- ----------
Net cash used in financing activities (110,704) (191,247)
---------- ----------
Net change in cash (9,207) (11,210)
Cash at beginning of period 25,557 31,359
---------- ----------
Cash at end of period $ 16,350 20,149
========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized) $ 101,258 106,676
========== ==========
Income taxes $ 89,558 35,067
========== ==========
</TABLE>
4
<PAGE>
WILLAMETTE INDUSTRIES, INC. AND SUBSIDIARIES FORM 10-Q
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PART I
SEPTEMBER 30, 2000 ITEM 1
Note 1 The information furnished in this report reflects all adjustments
which are, in the opinion of management, necessary to fairly state
the results for the interim periods presented.
Note 2 The components of inventories are as follows (thousands of
dollars):
September 30, December 31,
2000 1999
---------- -----------
Finished product $ 136,283 139,385
Work in progress 8,712 7,722
Raw material 192,140 198,866
Supplies 104,565 99,137
---------- ----------
$ 441,700 445,110
========== ==========
Note 3 In May 2000, the company completed its acquisition of Corrugados
Tehuacan S.A. de C.V. for $70.1 million. This company operates a
state-of-the-art corrugated container plant, a solid fiber box
plant and a small recycled linerboard and medium mill, all located
in Mexico. Also in May 2000, the company purchased a hardwood
market pulp mill in Port Wentworth, Georgia. After process
improvements, the company's total investment in the Port Wentworth
facility is expected to be approximately $95.0 million.
These acquisitions were accounted for using the purchase method.
The operating results of these acquisitions have been included in
the consolidated statements of earnings from the date of
acquisition.
Note 4 Earnings before income taxes for the nine-month period ended
September 30, 2000, include charges totaling $5.1 million related
to closure costs of the Dallas, Oregon, plywood plant and
anticipated settlement costs for alleged violations of the federal
Clean Air Act and related state regulations involving the
company's building materials operations. In the third quarter of
1999, the company took a $10.0 million charge related to the
federal Clean Air Act allegations at the building materials
operations.
Note 5 In October 2000, the company announced its intentions to close its
plywood mill in Ruston, Louisiana, in January 2001. The company
will take a charge to earnings of approximately $4.0 million in
the fourth quarter of 2000 related to this closure.
Other notes have been omitted pursuant to Rule 10-01 (a)(5) of
Regulation S-X.
5
<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, 2000
The company's three basic businesses, white paper, brown paper and building
materials, are affected by changes in general economic conditions. White and
brown paper 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. All industry segments are
influenced by global economic factors of supply and demand. In addition, the
cost of wood and recycled fiber, basic raw materials for all segments, are
sensitive to various supply and demand factors including environmental issues
affecting supply.
SEGMENT INFORMATION
-------------------
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -----------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
Net Sales:
White Paper $ 359,771 294,774 $1,048,074 817,390
Brown Paper 442,241 393,924 1,273,833 1,080,809
Building Materials 314,925 399,201 1,044,350 1,120,522
---------- ---------- ---------- ----------
$1,116,937 1,087,899 $3,366,257 3,018,721
========== ========== ========== ==========
Operating Earnings:
White Paper $ 45,678 36,877 $ 164,300 58,058
Brown Paper 104,134 62,804 251,044 151,957
Building Materials 22,605 88,499 114,052 215,120
Corporate (11,609) (12,629) (35,235) (36,526)
---------- ---------- ---------- ----------
$ 160,808 175,551 $ 494,161 388,609
========== ========== ========== ==========
6
<PAGE>
RESULTS OF OPERATIONS
THIRD QUARTER 2000 VS. THIRD QUARTER 1999
-----------------------------------------
Consolidated net sales increased 2.7% in the third quarter of 2000 compared with
the third quarter of 1999. Operating earnings decreased 8.4% in the third
quarter of 2000 compared with the third quarter of 1999, as increases in the
white and brown paper segments did not offset the decline in the building
materials segment.
WHITE PAPER SEGMENT
White paper operating earnings improved 23.9% largely due to an increase in net
sales of 22.0% in the third quarter of 2000 compared to the third quarter of
1999. Average selling prices and unit shipments increased in the third quarter
of 2000 over 1999 in all product lines as follows:
Average Net Unit
Product Line Selling Price Shipments
------------ ------------- ---------
Cut sheets 7.4% 14.0%
Continuous forms 9.8% 5.1%
Fine paper 10.0% 6.0%
Hardwood market pulp 36.4% 30.7%
Our market pulp shipments increased as a result of shipments from the Port
Wentworth hardwood mill, which commenced operations in September 2000. In the
third quarter of 2000, average selling prices for all converted white paper
product lines weakened slightly from the second quarter of 2000. An announced
October price increase should improve the outlook in the white paper product
lines. After seven quarters of improved market pulp pricing, the condition of
this market is more uncertain.
The favorable impact of the increases in selling prices and unit shipments was
dampened by unfavorable increases in raw material costs, downtime, and start-up
costs. Chip costs increased 6.2% and softwood pulp
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costs increased 33.8% in the third quarter of 2000 compared to the third quarter
of 1999. In the third quarter of 2000, white paper operations were negatively
affected by downtime experienced because of construction activities at the
Johnsonburg, Pennsylvania, paper mill and start-up costs for the Port Wentworth
facility. These factors contributed to a slight decline in our gross profit
margin for the white paper segment to 17.1% in the third quarter of 2000
compared to 17.4% in the same period in 1999.
BROWN PAPER SEGMENT
Brown paper operating earnings increased 65.8% largely due to increases in net
sales of 12.3% and decreases in old corrugated container costs (OCC) of 19.2% in
the third quarter of 2000 compared to the third quarter of 1999. In the third
quarter of 2000, average selling prices and unit volumes changed from the third
quarter of 1999 as follows:
Average Net Unit
Product Line Selling Price Shipments
------------ ------------- ---------
Corrugated containers 12.1% 2.6%
Grocery bags 6.4% (6.9%)
Unit corrugated container shipments reflect the positive contributions of the
first full quarter of operations of Corrugados Tehuacan S.A. de C.V., which was
acquired by the company on May 31, 2000. Overall, gross profit margins for the
brown paper segment improved to 29.5% in the third quarter of 2000, compared to
22.3% in the third quarter of 1999. While there has been some slowdown of the
general economy, operating earnings in this business segment remain strong.
BUILDING MATERIALS SEGMENT
The building materials segment's results for the third quarter of 2000 continued
to reflect the pricing pressure due to increased industry production
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<PAGE>
and
softened demand due to general economic factors. Sales declined 21.1% in the
third quarter of 2000 compared to the third quarter of 1999, and operating
earnings declined 74.5% over the same periods. In the third quarter of 2000,
average selling prices and unit volumes changed from the third quarter of 1999
as follows:
Average Net Unit
Product Line Selling Price Shipments
------------ ------------- ---------
Lumber (26.9%) 2.2%
Plywood (28.7%) (16.4%)
OSB (39.7%) (2.0%)
Domestic Particleboard 1.0% (2.4%)
International Particleboard (18.2%) (18.7%)
Domestic MDF (0.1%) (1.4%)
International MDF (11.8%) (3.7%)
The overall declines in average selling prices and unit shipments reflect the
decline from recent peak prices in the third quarter of 1999 to current lows in
the third quarter of 2000. Additional downtime may be taken in the fourth
quarter of 2000 to better match production levels with market demand.
As a result of the market pricing pressures, the building materials segment's
gross profit margin decreased to 11.8% in the third quarter of 2000 from 25.9%
in the third quarter of 1999.
OTHER COSTS AND EXPENSES
Selling and administrative expenses increased $1.2 million, or 1.7%, in the
third quarter of 2000 compared to the third quarter of 1999, primarily due to
new operations. However, the ratio of selling and administrative expenses to net
sales declined slightly to 6.1% for the third quarter of 2000 compared to 6.2%
for the same period in 1999.
Other expense - net declined $7.5 million in the third quarter of 2000 compared
to the same period of 1999. This decline reflects a $10 million
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charge taken in the third quarter of 1999 for estimated settlement costs
associated with alleged violations of the federal Clean Air Act and related
state regulations involving the company's building materials operations.
Interest expense of $31.1 million for the third quarter of 2000 was comparable
to interest expense of $31.0 million for the third quarter of 1999. Interest
expense was flat due to the net effect of a decrease in average debt outstanding
of $58 million and an increase in the company's effective interest rate from
7.2% to 7.5% in the third quarter of 2000 compared to the same period in 1999.
NINE MONTHS ENDED SEPTEMBER 30, 2000 VS. NINE MONTHS ENDED SEPTEMBER 30, 1999
-----------------------------------------------------------------------------
Consolidated net sales increased 11.5% and operating earnings increased 27.2%
for the first nine months of 2000 due to the strong performance from the white
and brown paper operations.
WHITE PAPER SEGMENT
White paper sales for the first nine months of 2000 increased 28.2% over the
first nine months of 1999 due to price and volume increases in all product lines
as follows:
Average Net Unit
Product Line Selling Price Shipments
------------ ------------- ---------
Cut sheets 15.1% 14.8%
Continuous forms 13.5% 0.9%
Fine paper 17.3% 5.9%
Hardwood market pulp 41.8% 43.2%
Increased prices and unit shipments were offset, in part, by increases in raw
material costs. Chip costs increased 5.4% and softwood pulp costs increased
32.5% for the nine months ended September 30, 2000 when compared with the same
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period for 1999. Even after increased raw materials costs, white paper operating
earnings were nearly three times higher than operating earnings for the first
nine months of 1999. Gross profit margin increased to 20.2% for the first nine
months of 2000, up from 12.4% in the same period of 1999.
11
<PAGE>
BROWN PAPER SEGMENT
Net sales for the first nine months of 2000 for the brown paper segment
increased 17.9% over the first nine months of 1999 due to selling price
increases in all product lines and increased unit shipments of corrugated
containers. Selling prices and unit shipments for the first nine months of 2000
compared to the first nine months of 1999 changed as follows:
Average Net Unit
Product Line Selling Price Shipments
------------ ------------- ---------
Corrugated containers 14.8% 3.9%
Grocery bags 10.9% (3.1%)
The results for corrugated containers include four full months of activity from
Corrugados Tehuacan S.A. de C.V., which the company acquired in May 2000. Brown
paper operating earnings improved 65.2% as increased sales prices and unit
shipments more than offset increases in OCC costs of 28.8%. Brown paper gross
profit margins improved to 25.9% for the first nine months of 2000, up from
21.0% in the first nine months of 1999.
BUILDING MATERIALS SEGMENT
Building materials sales for the first nine months of 2000 declined 6.8% from
the first nine months of 1999 reflecting the erosion in prices for lumber and
structural panels which began early in the second quarter of 2000. By product
line, sales prices for the first nine months of 2000 generally declined and unit
shipments were mixed as follows:
Average Net Unit
Product Line Selling Price Shipments
------------ ------------- ---------
Lumber (12.8%) 3.6%
Plywood (17.6%) (7.2%)
OSB (10.9%) (4.2%)
Domestic Particleboard 5.3% 3.5%
International Particleboard (17.9%) 245.7%
Domestic MDF 6.8% 0.1%
International MDF (13.7%) 1.5%
12
<PAGE>
The increase in international particleboard unit shipments reflects the first
full nine months of operations of our Linxe, France particleboard facility which
was acquired by the company in June 1999.
As a result of increased market pressure, building materials operating earnings
decreased 47.0% for the first nine months of 2000 compared to the same period in
1999. Gross profit margins for the first nine months of 2000 were 15.2%, down
from 23.0% in the same period in 1999.
OTHER COSTS AND EXPENSES
Selling and administrative expenses increased $8.2 million, or 4.1%, primarily
due to the expansion of company operations. The ratio of selling and
administrative expenses to net sales decreased to 6.1% for the first nine months
of 2000 from 6.6% for the same period in 1999.
Interest expense was $90.5 million for the first nine months of 2000 compared
with $95.4 million for the first nine months of 1999. The decrease is
attributable to decreased average debt outstanding of over $160 million,
partially offset by an increase in the company's effective interest rate from
7.1% for the first nine months of 1999 to 7.5% for the first nine months of
2000. Capitalized interest increased slightly to $3.4 million for the first nine
months of 2000 from $2.3 million in 1999.
Other expense - net for the year-to-date period ended September 30, 2000,
includes charges totaling $5.1 million before taxes for the closure of the
Dallas, Oregon, plywood plant and settlement costs associated with penalties and
supplemental environmental projects in connection with alleged violations of the
federal Clean Air Act and related state regulations involving the
13
<PAGE>
company's building materials operations. Other expense - net for the
year-to-date period ended September 30, 1999, includes a $10 million charge
related to estimated settlement costs associated with the alleged violations of
environmental regulations involving the company's building materials operations.
FINANCIAL CONDITION AS OF SEPTEMBER 30, 2000
--------------------------------------------
LIQUIDITY
For the first nine months of 2000, cash flows from operating activities were
$509.8 million, representing an increase of 25.0% from the same period in 1999.
The increase was primarily attributable to increased earnings in the white paper
and brown paper segments.
Net working capital increased to $488.3 million at September 30, 2000, compared
to $457.5 million at December 31, 1999. The total debt to capital ratio was
42.2% at September 30, 2000, down from 42.8% at December 31, 1999. The company
believes it has the resources available to meet its short-term and long-term
liquidity requirements. Resources include internally generated funds, short-term
borrowing arrangements and the unused portion of the revolving loan available
under a bank credit agreement.
CAPITAL EXPENDITURES AND ACQUISITIONS
The company is continually making capital expenditures at its manufacturing
facilities to improve fiber utilization, achieve labor efficiency and expand
production. In the first nine months of 2000, the company incurred $246.1
million in capital expenditures for property, plant and equipment.
In May, the company acquired Corrugados Tehuacan, S.A. de C.V. for $70.1
million. This company operates a state-of-the-art corrugated container plant
14
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in Ixtac, a recycled linerboard and corrugating mill in Xalapa, and a solid
fiber box plant in Tehuacan.
Also in May, the company acquired a hardwood market pulp mill in Port Wentworth,
Georgia. After process improvements, the company's total investment in the Port
Wentworth facility is expected to be approximately $95.0 million. In September,
the mill commenced operations and is producing excellent quality pulp.
STOCK REPURCHASE AND DIVIDENDS
In June, the company completed its $100 million stock repurchase program. As a
result of the stock repurchase program, the company repurchased 2,447,100 common
shares for $84.1 million during the year-to-date period ended September 30,
2000.
In August, the Board of Directors declared a quarterly cash dividend of $0.21
per share. However, there is no assurance as to future dividends as they depend
on earnings, capital requirements and financial condition.
FACILITY CLOSURES
In June, the company announced the closure of the Dallas, Oregon, plywood plant.
In October, the company announced its intentions to close the Ruston, Louisiana,
plywood mill in January, 2001. Estimated closure costs for the Ruston facility
of $4.0 million will be reflected in the fourth quarter of 2000.
15
<PAGE>
FORWARD-LOOKING STATEMENTS
--------------------------
Statements contained in this report that are not historical in nature, including
without limitation trends in pricing levels, adequacy of the company's liquidity
resources and the impact of environmental regulations, are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Forward-looking statements are subject to risks and uncertainties that may
cause actual future results to differ materially from those projected. Such
risks and uncertainties with respect to the company, in addition to those
included with the forward-looking statements, include, but are not limited to,
the effect of general economic conditions; the level of new housing starts and
remodeling activity; the availability and terms of financing for construction;
competitive factors including pricing pressures; the cost and availability of
wood fiber; the effect of natural disasters on the company's timberlands;
construction delays; risk of non-performance by third parties; and the impact of
environmental regulations including the costs associated with complying with
such regulations. In view of these uncertainties, investors are cautioned not to
place undue reliance on such forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
----------------------------------------------------------
No disclosure is required under this item.
16
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FORM 10-Q
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
--------------------------
In the fourth quarter of 1997, the company received a series of requests from
the Environmental Protection Agency (EPA) for information under Section 114 of
the Clean Air Act (the Act) with respect to the company's building materials
operations. The requests focused on compliance with regulations under the
Prevention of Significant Deterioration (PSD) Program under the Act. On May 7,
1998, the EPA issued a Notice of Violation (NOV) alleging violations of the Act
and related state regulations, and on December 11, 1998, issued a second NOV
supplementing and clarifying the first NOV. The company has signed a consent
decree providing for implementation of a compliance program including
installation of pollution control technology at several facilities at an
estimated cost of $28 million, implementation of supplemental environmental
projects (SEPs) at a cost of $8 million and payment of a civil penalty of $11
million plus interest. The company has established reserves to provide for the
estimated final settlement costs for the civil penalty and SEPs. The consent
decree and related complaint were lodged with the United States District Court
for the District of Oregon on July 20, 2000. The consent decree is subject to
the court's approval.
In November 1998, the company received from the EPA a request for information
under Section 114 of the Act with respect to the company's Johnsonburg,
Pennsylvania, pulp and paper mill. This request also focused on compliance with
the PSD regulations. Subsequently, on April 19, 1999, the company received an
NOV relating to its Johnsonburg mill. The NOV asserts violations of the Act
relating to two alleged major modifications to the plant, allegedly without
proper PSD permits and without complying with applicable PSD
17
<PAGE>
requirements. The company received a demand letter from the EPA to correct the
alleged violations contained in this NOV. In February and September 2000, the
company responded to the demand letter and is continuing efforts to resolve the
matter.
In a separate matter at the Johnsonburg mill, the company entered into a consent
order and agreement in May 2000 with the Pennsylvania Department of
Environmental Protection providing for a fine of approximately $164,000 for air
quality violations.
In August 1999, the company received another Section 114 information request
from the EPA relating to the company's paper mill in Campti, Louisiana. The
company responded to the request in November 1999. The company has conducted
several meetings with state and federal officials regarding the Campti mill and
has agreed to provide additional information to the EPA. Also, in March and
November 1999, the company received Section 114 requests from the EPA relating
to the company's paper mill in Hawesville, Kentucky. In April 1999 and January
2000, the company provided the requested information to the EPA.
In March 2000, the company received requests for information from the EPA under
Section 114 of the Act related to the Marlboro, South Carolina, and Kingsport,
Tennessee, fine paper mills. The company responded to the requests in June 2000
and has requested a meeting with the EPA to discuss the responses. To date, NOVs
have not been issued by the EPA relating to the Campti, Hawesville, Marlboro or
Kingsport mills.
The company believes that the outcome of the foregoing proceedings and other
proceedings to which the company is a party will not have a material adverse
effect on the company's financial position.
18
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
--------
Exhibit No. Exhibit
----------- -------
10.1 Willamette Industries, Inc.,
1995 Long-Term Incentive
Compensation Plan as amended
August 3, 2000.
12 Ratio of Earnings to Fixed
Charges.
27 Financial Data Schedule for
nine-month period ended
September 30, 2000.
(b) Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the
quarter for which this report is filed.
19
<PAGE>
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/ G. W. Hawley
--------------------------------
G. W. HAWLEY
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial Officer)
Date: November 1, 2000
20
