<PAGE> 1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT
(DATE OF EARLIEST EVENT REPORTED)
NOVEMBER 17, 1994
POPE & TALBOT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 1-7852 94-0777139
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (IRS EMPLOYER
OF INCORPORATION) IDENTIFICATION NO.)
1500 S.W. FIRST AVENUE
PORTLAND, OREGON 97201
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
</TABLE>
(503) 228-9161
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NONE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 2
ITEM 5. OTHER EVENTS
(a) On November 17, 1994, Pope & Talbot, Inc. sent a letter to its
shareholders discussing its operations during 1994. Such letter is
attached hereto as Exhibit 99 and is incorporated herein by this
reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(c) Exhibits
99 -- Letter to Shareholders
1
<PAGE> 3
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly authorized this report to be signed on its behalf by the
undersigned, thereunto duly authorized, on November 17, 1994.
POPE & TALBOT, INC.
By /s/ Carlos M. Lamadrid
Name: Carlos M. Lamadrid
Title: Chief Financial Officer
2
<PAGE> 4
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------ ---------------------------------------------------------------------
<C> <S>
99 Letter to Shareholders...............................................
</TABLE>
<PAGE> 1
EXHIBIT 99
November 17, 1994
To Pope and Talbot Shareholders:
This letter is being written as part of our commitment to keep you informed
about developments at Pope & Talbot. We in management share your disappointment
with the Company's earnings in 1994. After a good first quarter, earnings for
the balance of the year are only slightly above break-even. We expected much
better results for this year when we saw high lumber prices last winter. What
went wrong?
The surprisingly strong economic growth our nation has seen this year has
affected two of our businesses differently. Pulp has been helped and lumber has
been hurt. A major reason earnings have been disappointing is that lumber prices
did not act as we expected this year. Lumber prices peaked during the first
quarter and then declined pretty steadily through September. The decline from
peak during the first quarter to trough in September was nearly $50 per 1,000
board feet (or about 12 percent) for an average shipment. The cause for this
decline was buyer reaction to the sudden and persistent rise in interest rates
that has accompanied this year's growing economy. Higher interest rates mean
that home buyers are less able to qualify for mortgage loans, and home builders
are less willing and financially able to build homes in anticipation of customer
demand.
The strong economy that has meant trouble for lumber has helped pulp
markets. List prices for market pulp now are about 70 percent higher than the
unusually depressed prices for pulp last winter. Higher prices have helped
margins at our Halsey, Oregon pulp mill, but two decisions made last fall and
early winter have delayed the full benefit of higher industry pulp prices. One
decision was strategic, the other tactical.
The strategic decision was to enter into a long-term contract to supply
pulp to Grays Harbor Paper Company in Hoquiam, Washington. The initial contract
was for Pope & Talbot to supply their pulp needs at a specific pulp price plus a
fixed percentage of any price increases, above a base price, that they would
receive for the printing and business papers manufactured at their two-machine
mill. Additionally, Pope & Talbot was to receive a small share of the profits
made by Grays Harbor.
The strategic benefits to Pope & Talbot of this arrangement involve lower
fiber costs for the significant tonnage of sawdust pulp this customer uses, and
much lower freight costs compared with pulp sales into international markets.
Unfortunately, our experience with this contract in 1994 has hurt profits
substantially, because uncoated paper prices unexpectedly declined sharply early
in 1994, just as pulp prices began rising rapidly. This meant that throughout
the first three quarters of 1994 we were selling pulp at the agreed-upon base
price, and were not able to enjoy the benefits of a surprisingly-strong pulp
market because paper prices were advancing more slowly than pulp.
The tactical decision was to enter into a short-term price contract with a
customer that currently purchases about 25 percent of Halsey's output. The
contract price was better than pulp prices late last fall and early winter.
However, the contract delayed margin improvement when pulp prices exploded this
spring and summer. That contract expired during September, and prices to this
customer now are at their normal relationship to market pulp.
<PAGE> 2
The tissue and diaper operations of our Consumer Products Division have
been hurt because increased costs are not being passed on to our customers. With
the exception of minor improvement recently in tissue pricing, the very
competitive market conditions of the past several years have persisted. The
improvement we expected in this Division's results has not materialized.
Pope & Talbot will report lower earnings for 1994 than in 1993. This
clearly is not what we or the stock market expected, and our share price has
suffered because of the disappointment. What is the outlook from here? The
economic growth expected at least through 1995 should mean dramatic earnings
improvement next year in pulp. Pricing should remain strong, and the contract
with Grays Harbor has been renegotiated so that now Pope & Talbot also receives
a 40 percent share of profits. This same economic growth probably will have a
negative effect on lumber. However, the reduced supply of logs in the Pacific
Northwest due to environmental pressures means that lumber prices could be
reasonably strong in the spring and summer months of 1995. It could be a good
year for lumber despite higher interest rates.
We hope that market conditions for tissue and diapers will allow us to at
least pass on the higher prices we continue to see for wastepaper and diaper
pulp. There have been faint indications of this recently in tissue, but nothing
concrete yet. With most consumer tissue companies lagging in reported earnings
comparisons, and with price leader Procter and Gamble no longer an owner of pulp
mills, the conditions for general price relief seem good in this very
competitive area of the pulp and paper market.
Our view of the outlook for 1995 is cautiously optimistic. We expect better
balance in earnings between lumber and pulp than in any year since the mid
1980s. And, there is the possibility that tissue could become profitable. Pope &
Talbot remains in strong financial condition. We have few required
capital-spending projects in sight for 1995 and beyond. Furthermore,
discretionary capital projects are being curtailed so that our financial
condition should improve next year. We look forward to the second half of this
decade.
Sincerely,
Peter T. Pope
Chairman, President
and Chief Executive Officer
