<PAGE> 1
UNITED STATES 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, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 1-7852
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POPE & TALBOT, INC.
---------------------
Delaware 94-0777139
- ---------------------------------------- -------------------------------------
(State or other jurisdiction of I.R.S. Employer Identification Number
incorporation or organization)
1500 S.W. 1st Ave., Portland, Oregon 97201
- ---------------------------------------- -------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 228-9161
------------------
NONE
- --------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by checkmark 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 close of the latest practicable date.
Common stock, $1 par value - 13,363,779 shares as of November 3, 1995
<PAGE> 2
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
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<S> <C>
ITEM 1. Financial Statements:
Consolidated Condensed Balance Sheets -
September 30, 1995 and December 31, 1994 2
Consolidated Statements of Income -
Three and Nine Months Ended September 30, 1995 and 1994 3
Consolidated Condensed Statements of Cash Flows -
Three and Nine Months Ended September 30, 1995 and 1994 4
Notes to Consolidated Condensed Financial Statements 5
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-8
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 9
ITEM 6. Exhibits and Reports on Form 8-K 9-11
</TABLE>
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PART I.
POPE & TALBOT, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
----------------- ----------------
<S> <C> <C>
ASSETS
------
Current assets:
Cash and cash equivalents $ 4,475 $ 6,847
Accounts receivable 69,086 71,477
Inventories:
Raw materials 52,579 81,156
Finished goods 39,903 46,236
--------- ---------
92,482 127,392
Deposits on timber purchase contracts 4,022 5,997
Prepaid expenses 12,433 11,337
--------- ---------
Total current assets 182,498 223,050
Properties:
Plant and equipment 571,039 548,430
Accumulated depreciation (305,031) (276,465)
--------- ---------
266,008 271,965
Land and timber cutting rights 11,090 10,862
--------- ---------
Total properties 277,098 282,827
Other assets:
Restricted bond funds 851 15,458
Deferred charges 21,638 13,853
Goodwill, net of amortization 4,071 4,196
Deferred income tax assets, net 8,758 -
--------- ---------
Total other assets 35,318 33,507
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$ 494,914 $ 539,384
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable $ 15,000 $ 20,000
Current portion of long-term debt 928 928
Accounts payable and accrued liabilities 63,102 74,048
Income taxes 1,641 8,600
--------- ---------
Total current liabilities 80,671 103,576
Noncurrent liabilities:
Reforestation 16,441 15,136
Postretirement benefits 14,272 13,641
Long-term debt, net of current portion 177,152 177,471
Deferred income tax liabilities, net - 1,365
--------- ---------
Total noncurrent liabilities 207,865 207,613
Stockholders' equity:
Common stock 13,972 13,972
Additional paid-in capital 40,860 40,858
Retained earnings 167,297 191,804
Cumulative translation adjustments (4,640) (7,315)
Less treasury shares at cost (11,111) (11,124)
--------- ---------
Total stockholders' equity 206,378 228,195
--------- ---------
$ 494,914 $ 539,384
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
balance sheets.
2
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POPE & TALBOT, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Dollars in Thousands Except Per Share Amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
-------------------------- --------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Wood products $ 67,237 $ 73,033 $ 198,667 $ 228,771
Pulp and paper products 104,306 98,221 304,962 269,144
----------- ----------- ----------- -----------
Total 171,543 171,254 503,629 497,915
Costs and expenses:
Cost of sales:
Wood products 65,121 62,008 193,529 178,114
Pulp and paper products 103,585 95,976 301,406 268,505
Selling, general and administrative 8,296 8,209 24,136 22,756
Interest, net 3,567 2,867 10,695 7,675
----------- ----------- ----------- -----------
Total 180,569 169,060 529,766 477,050
Income (loss) before income taxes (9,026) 2,194 (26,137) 20,865
Income tax provision (benefit) (2,381) 1,273 (9,247) 8,555
----------- ----------- ----------- -----------
Net income (loss) $ (6,645) $ 921 $ (16,890) $ 12,310
=========== =========== =========== ===========
Net income (loss) per common share:
Primary $(.49) $.07 $(1.26) $.95
===== ==== ====== ====
Fully diluted $(.49) $.07 $(1.26) $.93
===== ==== ======= ====
Cash dividends per common share $ .19 $.19 $ .57 $.57
===== ==== ====== ====
Weighted average number of
common shares outstanding:
Primary 13,363,779 13,362,729 13,363,433 13,024,349
=========== =========== =========== ===========
Fully diluted 13,363,779 13,362,729 13,363,433 13,500,946
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
3
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POPE & TALBOT, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------------------- ------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flow from operating activities:
Net income (loss) $ (6,645) $ 921 $(16,890) $ 12,310
Adjustments to reconcile net income (loss) to net
cash provided by (used for) operating activities:
Depreciation and amortization 11,263 10,050 32,775 28,472
Increase (decrease) in:
Accounts payable and accrued liabilities 7,398 13,255 (10,946) (301)
Income taxes (1,099) 2,260 (6,959) (12,699)
Reforestation 23 47 613 772
Postretirement benefits 196 265 631 776
Deferred income taxes, net (2,740) (6,175) (10,105) (6,175)
Decrease (increase) in:
Accounts receivable 904 (2,168) 2,391 (7,943)
Inventories 7,975 (9,935) 34,910 (15,414)
Deposits on timber purchase contracts 2,547 (2,103) 147 (2,739)
Prepaid expenses 847 (568) (1,096) (1,675)
Deferred charges and other (936) 2,367 (4,573) (144)
-------- -------- -------- --------
Net cash provided by (used for)
operating activities 19,733 8,216 20,898 (4,760)
Cash flow from investing activities:
Capital expenditures (6,901) (12,459) (25,443) (48,073)
Proceeds from sale of other properties 186 193 487 199
-------- -------- -------- --------
Net cash used for investing activities (6,715) (12,266) (24,956) (47,874)
Cash flow from financing activities:
Net increase (decrease) in short-term borrowings (11,200) (1,000) (5,000) 9,000
Proceeds from issuance of long-term debt - 10,000 - 50,000
Reduction of long-term debt (108) (101) (319) (298)
Decrease in restricted bond funds 4,987 - 14,607 -
Cash dividends (2,539) (2,538) (7,617) (7,315)
Net proceeds from issuance of treasury stock - - 15 1,927
-------- -------- -------- --------
Net cash provided by (used for)
financing activities (8,860) 6,361 1,686 53,314
-------- -------- -------- --------
Increase (decrease) in cash and
cash equivalents 4,158 2,311 (2,372) 680
Cash and cash equivalents at
beginning of period 317 2,137 6,847 3,768
-------- -------- -------- --------
Cash and cash equivalents at
end of period $ 4,475 $ 4,448 $ 4,475 $ 4,448
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
4
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POPE & TALBOT, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
September 30, 1995 and 1994
(Unaudited)
1. General
The consolidated condensed interim financial statements have been
prepared by the Company without audit and are subject to normal recurring
year-end adjustments. Certain information and footnote disclosure
normally included in financial statements prepared in accordance with
generally accepted accounting principles has been condensed or omitted
pursuant to the rules and regulations of the Securities and Exchange
Commission. In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all adjustments (all
of which are of a normal recurring nature) necessary to present fairly
the financial position of the Company as of September 30, 1995 and
December 31, 1994, and the results of operations and changes in cash
flows for the three and nine months ended September 30, 1995 and 1994.
It is suggested that these interim statements be read in conjunction with
the financial statements and notes thereto contained in the Company's
1994 report on Form 10-K. The results of operations for the three and
nine months ended September 30, 1995 and 1994 are not necessarily
indicative of the results to be expected for the full year.
2. Income Taxes
The income tax provision is estimated on an interim basis using the best
available information for projected results for the entire year.
3. Earnings per Share
Per share information is based on the weighted average number of common
shares outstanding during each period. The computation includes the
assumed issuance of common shares under the Stock Option and Appreciation
Plan, net of an assumed buyback of treasury shares at the average market
price.
Refer to Exhibit 11.1 of this filing for the computation of average
common shares outstanding and earnings per share.
4. Debt
In 1995, the Company's unsecured revolving-credit agreement and its
uncommitted short-term lines of credit were modified. The modified
agreements provide for $100 million of available credit of which $80
million was outstanding at September 30, 1995.
5. Litigation and Legal Matters
Reference is made to PART II, ITEM 1, "Legal Proceedings" with respect to
recent developments in a tax dispute.
5
<PAGE> 7
POPE & TALBOT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SEPTEMBER 30, 1995 AND 1994
(unaudited)
RESULTS OF OPERATIONS
- ---------------------
Continued losses in the Company's pulp and paper segment were greater than
profits from the wood products segment resulting in a loss for the third
quarter of 1995. The third quarter loss of $6.6 million, or $.49 per share,
was an improvement over the second quarter loss of $9.0 million, or $.68 per
share, but was worse than the $900,000, or $.07 per share, of income in the
third quarter of 1994. Third quarter 1995 revenues were essentially unchanged
from the third quarter of 1994 as lower revenue levels resulting from lower
lumber, tissue and diaper sales volumes were offset by higher pulp pricing.
The wood products segment, which comprised approximately 39 percent of third
quarter sales, was profitable in the third quarter of 1995 after a second
quarter 1995 loss. Third quarter income was $1.2 million and compared to a
second quarter 1995 loss of $2.5 million and a third quarter 1994 income of
$9.7 million. The third quarter 1994 income included a $3.7 million refund of
a portion of a tariff eliminated by the United States Government on Canadian
lumber sold in the United States. The remainder of the tariff refund was
recognized in the fourth quarter of 1994. Lumber pricing improved from the
second quarter of 1995 when prices, at their lowest level, reached their lowest
point since 1992. These third quarter prices were, however, 15 percent lower
than prices in the third quarter of 1994. Lumber sales volume decreased to 149
million board feet, or approximately 82 percent of capacity in the third
quarter of 1995 from approximately 162 million board feet in both the second
quarter of 1995 and the third quarter of 1994. The second quarter sales volume
was approximately 90 percent of 1995 capacity. The third quarter 1994 sales
volume was 80 percent of 1994 capacity and the below-capacity volumes were due
to operating inefficiencies caused by poor log quality at the Company's
Canadian sawmills and shutdown for a portion of the third quarter of 1994 of
the Port Gamble sawmill due to poor lumber prices. The below-capacity volumes
in the third quarter of 1995 were due almost entirely to closure for a
significant portion of the third quarter of the Port Gamble sawmill due to poor
lumber prices. During the third quarter of 1995, the Company announced that it
will permanently close the Port Gamble sawmill by the end of 1995 due to a
continuing inability to obtain acceptably priced logs. At the beginning of
1995, the Company reduced its Grand Forks, British Columbia sawmill from two
shifts to one shift due to a lack of available timber. With the closure of the
Port Gamble sawmill and reduction of Grand Forks to one shift, the Company's
overall annual lumber capacity is now approximately 575 million board feet.
The third quarter 1995 pulp and paper segment loss of $4.7 million was an
improvement over the second quarter 1995 loss of $6.8 million, but worse than
the third quarter 1994 loss of $2.2 million. A strong pulp market in 1995
returned the Company's pulp business to profitability in 1995 after incurring
losses in 1994. The Company's tissue and diaper businesses continued to
generate losses in the third quarter of 1995 as competitive market conditions,
high fluff pulp and wastepaper costs and strike-related costs at the Company's
Ransom tissue mill continued into the third quarter.
6
<PAGE> 8
Pulp prices continued to strengthen in the third quarter of 1995 resulting in
further improvement in pulp earnings. Pulp losses declined steadily throughout
1994 and the Company's pulp business, which comprised 25 percent of third
quarter sales, returned to profitability in the fourth quarter of 1994. Pulp
sales prices improved again in the third quarter, although at a slower pace
than in the second quarter, with average third quarter prices increasing
approximately 7 percent from average prices in the second quarter of 1995 and
about 80 percent from one year ago. Although pulp prices have increased,
prices for wood chips, a primary raw material for pulp production have also
increased. Chip prices increased rapidly in the first half of 1995, declined
in the third quarter from second quarter levels, and were approximately 66
percent higher in the third quarter of 1995 compared to the third quarter of
1994. To expand the source of fiber for the Halsey pulp mill, the Company in
1994 began using sawdust as an additional fiber source. Sawdust is currently
in adequate supply and has not increased in price as wood chips have. During
the third quarter of 1995, approximately 49 percent of Halsey's pulp mill
production was from sawdust. During the third quarter of 1995, the Company's
Halsey pulp mill operated at slightly greater-than-rated capacity although
sales volumes were slightly below capacity as a Northwest customer phased out
of using the Company's pulp. The Company does not anticipate that the loss of
this customer will have a significant effect on overall Company pulp sales as
the Company is currently selling increased volumes of pulp to foreign
customers. The losses during the third quarter of 1994 were due primarily to
volume shipped under pricing arrangements which were below then-current
industry pricing. Those contracts expired late in the third quarter of 1994.
The Company's tissue business, which comprised approximately 13 percent of
third quarter 1995 sales again incurred a significant loss in the third
quarter, although the loss was smaller than the second quarter 1995 loss.
Tissue prices, which have been either flat or declining since 1990, realized
the first general price increases since 1990 during the first half of 1995.
Tissue pricing continued to improve in the third quarter of 1995, with average
sales prices approximately 20 percent higher than the third quarter of 1994 and
about 12 percent higher than the second quarter of 1995. Although tissue
pricing has improved, pricing for wastepaper, the primary raw material
component for tissue, has also increased substantially during 1995. Wastepaper
pricing, which has generally followed the pricing trends of world pulp markets,
has been pushed to record levels by a combination of strong pulp markets and a
shortage of certain wastepaper grades caused primarily by the start-up in 1994
of new recycled fiber mills in the United States. As a result of these
pressures, the Company's wastepaper costs have more than doubled since the
third quarter of 1994, although prices did begin to stabilize in the third
quarter of 1995 and declined from the record levels reached in the second
quarter of 1995.
The tissue market has been, and continues to be, extremely competitive. The
majority of the tissue losses have been incurred at the Company's Ransom tissue
mill and to reduce these losses the Company implemented a labor contract having
a revised, lower compensation structure for the Ransom employees during the
second quarter of 1995. The union employees went on strike over this wage
structure implementation and the mill is currently operating on a curtailed
basis with salaried and temporary workers. The loss at Ransom was further
increased by higher shipping and packaging costs incurred to supply some of the
Company's East Coast customers. The long-term viability of the mill remains
uncertain unless a combination of a satisfactory resolution of the labor
situation, lower other manufacturing costs, including raw materials, and stable
pricing make it advantageous to operate the mill. The Ransom tissue mill
represents approximately 50 percent of the Company's tissue capacity and
7
<PAGE> 9
as a result of the strike at Ransom, tissue operated at approximately 58
percent of capacity during the third quarter of 1995. The Company's other
tissue mill, at Eau Claire, Wisconsin, operated at capacity during the third
quarter of 1995.
The Company's diaper business, which comprised approximately 23 percent of
third quarter 1995 sales, incurred a loss in the third quarter of 1995 compared
to the third quarter of 1994 when diapers produced a small profit. The third
quarter 1995 loss approximated the diaper loss incurred in the second quarter
of 1995. Procter & Gamble, a significant producer of disposable diapers,
continued to attempt to gain market share through aggressive pricing. As a
result of Procter & Gamble's pricing, prices for the Company's diapers declined
in the third quarter of 1995 approximately 2 percent from the second quarter of
1995 and 4 percent from the third quarter of 1994. Diaper sales volumes were
approximately 80 percent of capacity in the third quarter of 1995. This was an
improvement over the first half of 1995, when diapers operated at approximately
72 percent of capacity as a result of branded producers instituting packaging
count reductions which the Company did not complete until late in the second
quarter. Contributing to the diaper losses has also been rising costs for
fluff pulp, a primary component for disposable diapers. Costs for fluff pulp
have not risen as fast as world pulp markets, but are still 60 percent higher
than the third quarter of 1994.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
During the first nine months of 1995, operations generated cash of $20.9
million and for the third quarter of 1995 generated cash of $19.7 million.
Income before non-cash charges for depreciation and amortization generated
$15.9 million of cash during the first nine months. Efforts to reduce
inventories from year-end 1994 levels generated cash of $34.9 million during
the first nine months of 1995. The most significant inventory reductions have
been liquidating the Port Gamble inventory in preparation for its permanent
closure, reductions in Canadian log inventories and reductions in tissue and
diaper inventories. Pulp inventories have increased as a result of the longer
lead times required for shipping to export customers. Approximately $11
million of cash was used in the first nine months of 1995 as accounts payable
and accrued liabilities declined due to timing of payments.
Capital spending for the first half of 1995 was $25.4 million, of which $16.5
million was related to completion of a project to modernize the recycled
pulping operations at the Eau Claire tissue facility. In 1994, the Company
obtained restricted funding to finance this pulp modernization project. The
remaining expenditures were for various smaller projects to sustain existing
operations. The Company is currently restricting capital spending to only
those projects to sustain existing operations, and accordingly the company
anticipates that approximately $2 million will be required to complete
previously approved projects and only minimal additional projects will be
undertaken for the remainder of 1995, primarily to sustain existing operations.
It is anticipated that capital spending for the remainder of the year will be
financed from internally generated cash and, if necessary, from the Company's
lines of credit.
Year to date 1995, the Company has returned $7.6 million to shareholders in the
form of dividends. The Company currently has $100 million available under a
long-term revolving credit agreement, of which $80 million was outstanding at
September 30, 1995.
8
<PAGE> 10
PART II.
ITEM 1. Legal Proceedings
In 1985, shareholders of the Company approved a Plan of Distribution
pursuant to which all of the Company's timber properties and the
development properties and related assets and liabilities in the State
of Washington were transferred to newly-formed Pope Resources, A
Delaware Limited Partnership, with interests in the partnership
distributed to the Company's shareholders on a pro rata basis.
The Company assigned to the assets transferred a distribution value
for federal income tax purposes based upon the public trading price of
the partnership interests at the time of distribution. The Internal
Revenue Service has asserted that the Company owes additional federal
income tax in the amount of approximately $14 million (plus applicable
interest) in connection with this transaction and the Company has
disputed this asserted tax liability. The issue was heard in U.S. Tax
Court during the third quarter 1995 and follow-up legal briefs are
being filed until late December 1995. The Tax Court will not render a
decision until after the briefs are filed with a likely outcome not
known until mid 1996. The Company will continue to vigorously contest
the assessed tax liability through independent tax counsel. The
Company believes, based upon consultation with independent tax
counsel, that the additional tax due in this matter, if any, will
ultimately be significantly less than the assessed amount and will not
have a material adverse effect on the Company's financial position.
The final tax settlement, if any, will be recognized as a reduction in
equity with respect to the partnership transaction.
ITEM 6. Exhibits and Reports on Form 8-K
Exhibits
--------
3.1 Certificate of Incorporation, as amended. (Incorporated
herein by reference to Exhibit 3(a) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992.)
3.2 Bylaws. (Incorporated herein by reference to Exhibit 3(b)
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1992.)
4.1 Indenture, dated June 2, 1993, between the Company and
Chemical Trust Company of California as Trustee with
respect to the Company's 8-3/8% Debentures due 2013.
(Incorporated herein by reference to Exhibit 4.1 to the
Company's registration statement on Form S-3 filed April 6,
1993.)
4.2 Revolving Credit Agreement, dated May 6, 1992, among the
Company and United States National Bank of Oregon; CIBC,
Inc.; ABN AMRO Bank N.V.; Continental Bank N.A.; and
Wachovia Bank of Georgia, National Association.
(Incorporated herein by reference to Exhibit 4 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1992.)
4.3 Rights Agreement, dated as of April 13, 1988, between the
Company and The Bank of California, as rights agent.
(Incorporated herein by reference to Exhibit 4(e) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1992.)
9
<PAGE> 11
4.4 Extension Agreement, dated as of June 30, 1994, to the
Revolving Credit Agreement, dated May 6, 1992, among the
Company and United States National Bank of Oregon; CIBC,
Inc.; ABN AMRO Bank N.V.; Continental Bank N.A.; and
Wachovia Bank of Georgia, National Association.
(Incorporated herein by reference to Exhibit 4.6 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994.)
4.5 Modification Agreement, dated as of October 31, 1994, to
the Revolving Credit Agreement, dated May 6, 1992, among
the Company and United States National Bank of Oregon;
CIBC, Inc.; ABN AMRO Bank N.V.; Continental Bank N.A.; and
Wachovia Bank of Georgia, National Association.
(Incorporated herein by reference to Exhibit 4.7 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994.)
4.6 Modification Agreement, dated as of December 31, 1994, to
the Revolving Credit Agreement, dated May 6, 1992, among
the Company and United States National Bank of Oregon;
CIBC, Inc.; ABN AMRO Bank N.V.; Continental Bank N.A.; and
Wachovia Bank of Georgia, National Association.
(Incorporated herein by reference to Exhibit 4.8 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1994.)
4.7 Extension/Modification Agreement, dated as of June 30,
1995, to the Revolving Credit Agreement, dated May 6, 1992,
among the Company and United States National Bank of
Oregon; CIBC, Inc.; ABN AMRO Bank N.V.; Bank of America
Illinois, fka Continental Bank; and Wachovia Bank of
Georgia, National Association. (Incorporated herein by
reference to Exhibit 4.7 to the Company's Quarterly Report
on Form 10-Q for the quarter ended June 30, 1995.)
4.8 Modification Agreement, dated as of October 16, 1995, to
the Revolving Credit Agreement, dated May 6, 1992, among
the Company and United States National Bank of Oregon;
CIBC, Inc.; ABN AMRO Bank N.V.; Bank of America Illinois;
and Wachovia Bank of Georgia, National Association.
10.1 Executive Compensation Plans and Arrangements
---------------------------------------------
10.1.1 Stock Option and Appreciation Plan. (Incorporated herein
by reference to Exhibit 10(a) to the Company's Annual
Report on Form 10-K for the year ended December 31, 1992.)
10.1.2 Executive Incentive Plan. (Incorporated herein by
reference to Exhibit 10(b) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1992.)
10.1.3 Restricted Stock Bonus Plan. (Incorporated herein by
reference to Exhibit 10(c) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1992.)
10.1.4 Deferral Election Plan. (Incorporated herein by reference
to Exhibit 10(d) to the Company's Annual Report on Form
10-K for the year ended December 31, 1992.)
10.1.5 Supplemental Executive Retirement Income Plan.
(Incorporated herein by reference to Exhibit 10(e) to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1990.)
10
<PAGE> 12
10.1.6 Form of Severance Pay Agreement among the Company and
certain of its executive officers. (Incorporated herein by
reference to Exhibit 10(f) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1990.)
10.2 Lease agreement between the Company and Pope Resources,
dated December 20, 1985, for Port Gamble, Washington
sawmill site. (Incorporated herein by reference to Exhibit
10(g) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1990.)
10.3 Lease agreement between the Company and Shenandoah
Development Group, Ltd., dated March 14, 1988, for Atlanta
diaper mill site as amended September 1, 1988 and August
30, 1989. (Incorporated herein by reference to Exhibit
10(h) to the Company's Annual Report on Form 10-K for the
year ended December 31, 1990.)
10.4 Lease agreement between the Company and Shenandoah
Development Group, Ltd., dated July 31, 1989, for
additional facilities at Atlanta diaper mill as amended
August 30, 1989 and February 1990. (Incorporated herein by
reference to Exhibit 10(i) to the Company's Annual Report
on Form 10-K for the year ended December 31, 1990.)
10.5 Grays Harbor Paper L.P. Amended and Restated Pulp Sales
Supply Contract, dated September 28, 1994 (with certain
confidential information deleted). (Incorporated herein by
reference to Exhibit 10(j) to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1994.)
11.1 Statement regarding computation of per share earnings.
27.1 Financial Data Schedule.
The undersigned registrant hereby undertakes to file with the
Commission a copy of any agreement not filed under exhibit item (4)
above on the basis of the exemption set forth in the Commission's
rules and regulations.
Reports on Form 8-K
-------------------
No reports on Form 8-K were filed during the three months ended
September 30, 1995.
11
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POPE & TALBOT, INC.
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.
POPE & TALBOT, INC.
-----------------------------
Registrant
Date: November 13, 1995 /s/ C. Lamadrid
-----------------------------
By: C. Lamadrid
Senior Vice President and
Chief Financial Officer
<PAGE> 1
Exhibit 4.8
MODIFICATION AGREEMENT
This modification agreement is dated as of October 16, 1995,
and is among POPE & TALBOT, INC., a Delaware corporation ("Borrower"), UNITED
STATES NATIONAL BANK OF OREGON ("U.S. Bank"), CIBC, INC. ("CIBC"), ABN AMRO
BANK N.V. ("ABN"), BANK OF AMERICA ILLINOIS ("BofA"), and WACHOVIA BANK OF
GEORGIA, N.A. ("Wachovia").
Recitals
A. U.S. Bank, CIBC, ABN, BofA, and Wachovia
(individually "Bank" and collectively "Banks") are parties to a credit
agreement dated as of May 6, 1992, as modified (the "Credit Agreement"). All
of the capitalized terms used in this modification agreement are defined by the
Credit Agreement.
B. Borrower has notified U.S. Bank as agent for Banks
that Borrower may not be in compliance with the Interest Coverage Ratio
specified in section 5.01(h)(iv) of the Credit Agreement as of September 30,
1995.
C. Borrower and Banks desire to enter into this
modification agreement to modify the Credit Agreement.
NOW, THEREFORE, for value, Borrower and Banks agree that:
1. Temporary Change in Interest Coverage Ratio. The minimum Interest
Coverage Ratio that Borrower must maintain will be:
a. 2.80 to 1 for the four-quarter period ending on September 30,
1995;
b. 2.45 to 1 for the four-quarter period ending on December 31,
1995;
c. 2.75 to 1 for the four-quarter period ending on March 31, 1996;
and
d. 3.50 to 1 for each rolling four-quarter period ending on June
30, 1996, and on the last day of each calendar quarter
thereafter.
2. Change in Pricing. Effective immediately and continuing until
Borrower meets or exceeds an Interest Coverage Ratio of 3.5 to 1, the
pricing on existing and future advances will be the highest provided
in the pricing grid (the Interbank Margin on existing and future
advances = 75.00 basis points ("bps"), the Commitment Fee = 25.00 bps,
and the Unused Fee = 10.00 bps). The foregoing pricing will continue
in effect even if Borrower is in compliance with the Leverage Ratio
which might, except for this paragraph, result in lower pricing.
-1-
<PAGE> 2
3. Modification Fee. Borrower promises to pay a modification fee of
$50,000 to Banks in care of Agent. Agent will distribute each Bank's
prorata share of such fee to each Bank.
4. Reduction in Revolving Line of Credit. The Aggregate Commitment will
be reduced from $100 million to $85 million effective as of March 31,
1996, and from $85 million to $75 million as of June 30, 1996. Each
such reduction will be prorata among Banks. Borrower will pay to
Banks without notice or demand on a prorata basis all outstanding
advances that exceed the Aggregate Commitment on the effective date of
each such reduction in the Aggregate Commitment.
5. Financial Reporting. Section 5.01(i) of the Credit Agreement is
modified to also require Borrower to deliver:
a. Monthly company-prepared Financial Statements within 30 days
following the end of each calendar month; and
b. Quarterly company-prepared, consolidating Financial Statements
within 45 days following the end of each of the first three
calendar quarters of each Fiscal Year and within 90 days
following the end of each Fiscal Year.
6. Negative Covenants. Section 5.02(a) of the Credit Agreement is
modified to prohibit a transfer by Borrower or any of its Subsidiaries
of more than 5% of such organization's assets except for sales of
inventory and surplus or obsolete equipment and collection of accounts
in the ordinary course of business and for acquisition of Subsidiaries
or assets subject to existing encumbrances, security interests or
liens.
A new negative covenant is added as section 5.04 as follows:
"5.04 Additional Debt. Except for trade debt incurred in the ordinary
course of business and a guaranty to be issued to Wachovia to support
the $19,552,000 reimbursement liability of Pope & Talbot, Wis., Inc.
under a reimbursement and security agreement dated as of November 1,
1994 (the "P&T, Wis Liability"), Borrower will not allow its Canadian
Subsidiary, Pope & Talbot, Ltd., a British Columbia corporation ("P&T
Canada"), to borrow money from any person (individual, organization, or
governmental unit) except Borrower or to otherwise incur debt
(liability on a claim) for borrowed money without the prior written
consent of Majority Banks."
7. Guaranties by Significant Subsidiaries. Borrower promises and agrees
to cause each "Significant Subsidiary" (a Subsidiary contributing 5%
or more of Borrower's consolidated assets) to unconditionally
guarantee payment of the Loans and performance of the P&T, Wis
Liability on a prorata basis in a form acceptable to Banks within 30
days following the date of this agreement.
-2-
<PAGE> 3
All such guaranties will include, among other terms, (a) a waiver of
claims and defenses based on recoupment, any disability or defense of
Borrower other than payment (including claims such as failure of
consideration, duress, lack of capacity, illegality, fraud, statute of
limitations, accord and satisfaction, impairment of recourse,
discharge of Borrower through insolvency proceedings or otherwise, the
manner, order, or timing of any foreclosure or disposition rights, or
the forbearance by Bank of or with respect to any right or remedy that
it may have against Borrower, the collateral, or any other guarantor),
and/or suretyship (including extension of due dates, material
modifications, and impairment of rights of recourse and/or of
collateral) and (b) an agreement for mandatory arbitration of
disputes.
Notwithstanding the foregoing, P&T Canada and any other Significant
Subsidiaries which are not incorporated in the United States (a
"foreign Significant Subsidiary") will not issue such a guaranty but
will, instead, either (a) subordinate their claims against Borrower to
the claims of Banks against Borrower to assure Banks that their claims
against Borrower will be fully satisfied by payment before any foreign
Significant Subsidiary receives any payment on account of its claims
against Borrower or (b) provide such other financial assurances or
accommodations as Banks may consider reasonable under the
circumstances.
The failure of Borrower to obtain and deliver such guaranties and
subordinations within such 30-day period will constitute an event of
Default under the Loan Documents.
8. Subordination. Effective upon an event of Default under the Loan
Documents, Borrower hereby subordinates its present and future claims
against and equity interests in the non-foreign Significant
Subsidiaries to the present and future claims of Banks against the
non-foreign Significant Subsidiaries under the guaranties required by
section 7 of this agreement to assure Banks that their claims against
the non-foreign Significant Subsidiaries will be fully satisfied by
payment before Borrower receives any payment or distribution on
account of its claims and/or equity interests after such event of
Default.
9. Miscellaneous. The parties agree to issue any additional documents
and instruments reasonably necessary to effectuate the objectives of
this modification agreement. The Loan Documents will continue in full
force and effect as modified by this modification agreement. This
modification agreement may be signed in one or more counterparts but
all such counterparts will constitute but one agreement. The Loan
Documents, as modified by this modification agreement, are intended to
be the complete, final, and exclusive statement of the terms upon
which Banks make their Individual Commitments to Borrower and Borrower
promises to repay Loans.
-3-
<PAGE> 4
10. Effective Date. This modification agreement will become effective
only when U.S. Bank, in its capacity as administrative agent for
Banks, has received (a) by facsimile the signature page signed by
Borrower and the signature page(s) signed by Majority Banks and (b)
the modification fee.
If Borrower or a Bank delivers a facsimile of its signature, such
delivery will constitute the promise of such person to deliver
sufficient copies of the manually signed signature page for
distribution to each other party to the Credit Agreement.
POPE & TALBOT, INC. UNITED STATES NATIONAL BANK
OF OREGON
By
/s/ Peter T. Pope By /s/ Janice T. Thede
--------------------------------- ----------------------------------
Peter T. Pope Janice T. Thede
Chairman of the Board Vice President
-4-
<PAGE> 5
CIBC INC. ABN AMRO BANK N.V.
By /s/ Ray Mendoza By /s/ Leif H. Olsson
------------------------------- ----------------------------------
Ray Mendoza Leif H. Olsson
Vice President Group Vice President
By /s/ David McGinnis
----------------------------------
David McGinnis
Vice President
BANK OF AMERICA ILLINOIS WACHOVIA BANK OF GEORGIA,
NATIONAL ASSOCIATION
By /s/ Michael J. Balok By /s/ William F. Hamlet
------------------------------- ----------------------------------
Michael J. Balok William F. Hamlet
Vice President Senior Vice President
-5-
<PAGE> 1
Exhibit 11.1
POPE & TALBOT, INC.
STATEMENT SHOWING CALCULATION OF AVERAGE
COMMON SHARES OUTSTANDING AND EARNINGS
PER AVERAGE COMMON SHARE
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
------------------------- -------------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average number
of common shares
outstanding 13,363,779 13,362,729 13,363,433 13,024,349
Weighted average of common
stock equivalent shares
attributable to
convertible debentures - - - 333,257
Application of the "treasury
stock" method to the stock
option plan 8,897 37,903 10,563 143,340
----------- ----------- ------------ -----------
Total common and common
equivalent shares,
assuming full dilution 13,372,676 13,400,632 13,373,996 13,500,946
=========== =========== ============ ===========
Net income (loss) $(6,645,000) $ 921,000 $(16,890,000)$ 12,310,000
Add: interest on convertible
debentures, net of applicable
income taxes - - - 244,000
----------- ----------- ------------ -----------
Net income (loss), assuming
full dilution $(6,645,000) $ 921,000 $(16,890,000) $12,554,000
=========== =========== ============ ===========
Net income (loss) per common
share, assuming full dilution $ (.49) $ .07 $ (1.26) $ .93
=========== =========== ============ ===========
</TABLE>
The computation of primary net income per common share is not included because
the computation can be clearly determined from the material contained in this
report.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE POPE &
TALBOT, INC. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FOR THE QUARTERLY
PERIOD ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<CASH> 4,475
<SECURITIES> 0
<RECEIVABLES> 64,214
<ALLOWANCES> 0
<INVENTORY> 92,482
<CURRENT-ASSETS> 182,498
<PP&E> 582,129
<DEPRECIATION> 305,031
<TOTAL-ASSETS> 494,914
<CURRENT-LIABILITIES> 80,671
<BONDS> 177,152
<COMMON> 13,972
0
0
<OTHER-SE> 192,406
<TOTAL-LIABILITY-AND-EQUITY> 494,914
<SALES> 503,629
<TOTAL-REVENUES> 503,629
<CGS> 494,935
<TOTAL-COSTS> 494,935
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,695
<INCOME-PRETAX> (26,137)
<INCOME-TAX> (9,247)
<INCOME-CONTINUING> (16,890)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,890)
<EPS-PRIMARY> (1.26)
<EPS-DILUTED> (1.26)
</TABLE>
