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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
Commission File Number 1-7852
POPE & TALBOT, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
Delaware 94-0777139
(State or other jurisdiction (IRS Employer Identification No.)
of incorporation or organization)
1500 SW 1st Avenue, Portland, Oregon 97201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (503) 228-9161
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of each class on which registered
------------------- ---------------------
Common Shares, par value $1.00 New York Stock Exchange
Common Shares, par value $1.00 Pacific Stock Exchange
8-3/8% Debentures, Due June 1, 2013 None
</TABLE>
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. / /
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 / /
The aggregate market value of voting stock held by nonaffiliates of the
registrant is $170,937,419 as of March 8, 1996 ($13.50 per share).
13,363,779
(Number of shares of common stock outstanding as of March 8, 1996)
Part I and Part II incorporate specified information by reference from the
annual report to shareholders for the year ended December 31, 1995 and from the
Company's Current Report on Form 8-K dated February 8, 1996. Part III
incorporates specified information by reference from the proxy statement for
the annual meeting of shareholders on April 30, 1996.
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PART I
Item 1. Business
INTRODUCTION AND DEVELOPMENTS IN 1995
Pope & Talbot, Inc. (the "Company") is engaged principally in the wood
products and pulp and paper products businesses. The Company's wood products
business involves the manufacture and sale of standardized and specialty lumber
and wood chips. In its pulp and paper business, the Company manufactures and
sells private label consumer tissue, bleached kraft pulp for newsprint and
writing paper, and brokers wood chips. On December 11, 1995, the Company
entered into a definitive agreement to sell its disposable diaper business to
Paragon Trade Brands, Inc. ("Paragon"). The sale of this business was
completed on February 8, 1996 and the disposable diaper business results for
1995, 1994 and 1993 have been reflected as discontinued operations. During
1995, wood products accounted for approximately 51 percent of the Company's
revenues from continuing operations of $524.4 million, consumer tissue
accounted for 20 percent and bleached kraft pulp and brokered wood chips 29
percent. Disposable diaper revenues were $144.0 million in 1995.
The Company, a Delaware corporation, was originally incorporated as a
California corporation in 1940. It is the successor to a partnership formed in
San Francisco, California in 1849 that acquired its first timberlands and
opened a lumber mill in the Seattle, Washington area in 1853. Subsequently,
the Company developed a lumber business based on timberland and facilities in
the U.S. Pacific Northwest, British Columbia, Canada, and the Black Hills
region of South Dakota and Wyoming.
Since the mid-1980s, the Company has reduced its dependency on timber from
the Pacific Northwest, where environmental concerns about the preservation of
old-growth forests have sharply restricted the availability and increased the
cost of public timber. At the same time, the Company has increased its
operations in regions presently having more stable timber supplies, namely in
British Columbia and the Black Hills region of South Dakota and Wyoming. In
1985, the Company distributed its timber and land development properties in the
State of Washington to its shareholders through interests in a newly formed
master limited partnership. In 1989, the Company sold its Oregon sawmill, and
the Company has since sold its remaining Oregon timberlands. In 1992, the
Company acquired a sawmill and related timber cutting rights in Castlegar,
British Columbia. At the end of 1995, the Company permanently closed its Port
Gamble, Washington sawmill. The Company currently operates five sawmills with
an estimated annual capacity of 526 million board feet, of which approximately
73 percent is located in British Columbia and 27 percent in the Black Hills.
The Company no longer has any lumber capacity in Oregon and Washington.
In order to expand and broaden its sources of revenue, the Company
acquired its pulp, consumer tissue and disposable diaper businesses in the late
1970s and 1980s. The Halsey, Oregon pulp mill produces bleached kraft pulp
which is sold in the open market and to newsprint manufacturers and a writing
paper manufacturer in the Pacific Northwest. The Company's private label
tissue business manufactures towels, napkins, bathroom tissue and facial tissue
from recycled paper at two mills in the U.S. The Company sells its tissue
products under private labels to supermarkets, drugstores, mass merchandisers,
food and drug distribution companies and warehouse club stores. In early 1994,
the Company completed projects resulting in significant product and cost
improvements to its pulp mill. Up to the completion of the previously
mentioned diaper business sale in early 1996, the Company produced private
label diapers at four mills in the U.S.
The businesses in which the Company is engaged are extremely competitive,
and a number of the Company's competitors are substantially larger than the
Company with correspondingly greater resources. In particular, competition in
the tissue products market is
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extremely strong, both in terms of price and product innovation. See "Pulp and
Paper Products Business - Paper Products."
Environmental regulations to which the Company is subject require the
Company from time to time to incur significant operating costs and capital
expenditures. In addition, as discussed herein, environmental concerns have in
the past materially affected the availability and cost of raw materials used in
the Company's business. See "Wood Products Business", "Pulp and Paper Products
Business" and "Environmental Matters."
WOOD PRODUCTS BUSINESS
The Company's wood products business involves the manufacture and sale of
standardized and specialty lumber and wood chips. The Company's principal wood
product categories and the sales generated by each over the past three years
are set forth in the following table:
<TABLE>
<CAPTION>
Classes of Wood Products 1995 1994 1993
------------------------ -------- -------------- --------
(In thousands)
<S> <C> <C> <C>
Lumber $194,350 $261,322 $256,842
Wood chips 46,514 30,284 29,695
Logs and other 24,712 12,599 13,498
-------- -------- --------
Total wood products sales $265,576 $304,205 $300,035
======== ======== ========
</TABLE>
In 1995, lumber revenues decreased $67.0 million, or 26 percent, compared
with 1994. These reduced lumber revenues were due to a combination of 13
percent lower average lumber prices and 9 percent lower sales volumes. The
volume decreases related to reduced Port Gamble, Washington sawmill operations
and the Grand Forks, British Columbia sawmill operating at one shift, down from
the two-shift basis operated prior to 1995. The 1995 wood chip revenues
increased $16.2 million, or 54 percent, over 1994 as average chip prices nearly
doubled which more than offset lower chip volumes. Log sales were higher in
1995 due mainly to the liquidation of Port Gamble log inventories related to
the fourth quarter 1995 sawmill closure. In 1994, lumber revenues increased
$4.5 million, or 2 percent, compared with 1993. These increased revenues were
due to higher lumber sales prices which more than offset the impact of lower
sales volumes, primarily due to downtime taken at the Port Gamble sawmill.
The Company's lumber products consist principally of boards and dimension
lumber, some of which are specialty, value-added items, such as stress-rated
lumber. Wood chips and other similar materials are obtained as a by-product of
the Company's lumber operations. Wood chips were also obtained from direct
chipping of whole logs in 1993.
The principal sources of raw material for the Company's wood products
operations are timber obtained through long-term cutting licenses on public
lands, logs purchased in open log markets, timber offered for sale via
competitive bidding by federal and state agencies and private sources, and
timber purchased under long-term contracts to cut timber on private lands.
During 1995, the Port Gamble sawmill was either shut down or operating on
a reduced one-shift basis due to a lack of acceptably priced timber in relation
to end-product prices. Timber harvest levels in the mill's operating region
were significantly reduced in recent years as a result of environmental
pressures to reduce the amount of timber available for harvest. A strong
export log market further reduced domestic log supplies in the region. These
reduced log volumes, combined with weakened lumber markets, resulted in
operating losses at Port Gamble over the last two years and significantly
below-capacity production. With no prospect of a resolution to the timber
supply situation, the Company permanently closed the Port Gamble sawmill in the
fourth quarter of 1995.
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Approximately 73 percent of the Company's current lumber capacity is
located in British Columbia, Canada and 27 percent in the Black Hills region of
South Dakota and Wyoming, where timber supplies are presently more stable than
in the U.S. Pacific Northwest. In Canada, timber requirements are obtained
primarily from the Provincial Government of British Columbia under long-term
timber harvesting licenses which allow the Company to remove timber from
defined areas annually on a sustained yield basis. Approximately 30 percent of
the Company's Canadian log requirements are satisfied through open market log
purchases. The Provincial Government of British Columbia has the authority to
modify prices and harvest volumes at any time. During 1994, the Provincial
Government of British Columbia adjusted upward the price charged for a
substantial portion of the wood used by the Company's three Canadian sawmills
effective May 1, 1994. The new pricing formula, which is based on a
relationship to end-product prices, had the effect of increasing 1995 log costs
by approximately $7 million in both 1995 and 1994. In the Black Hills, the
Company obtains its timber from various public and private sources under
long-term timber harvesting contracts in addition to buying logs on open
markets. Under these Black Hills contracts, prices are subject to periodic
adjustment based upon formulas set forth therein.
During the early 1990's, the Company's Canadian sawmills benefited from
processing additional volumes of pine timber which had been killed by the
mountain pine beetle. This beetle kill volume was essentially harvested by the
end of 1994. As a result, Canadian timber harvest levels were reduced and
resulted in the January 1, 1995 curtailment of the Grand Forks, British
Columbia sawmill to a one-shift production basis. This Grand Forks curtailment
reduced lumber capacity by 60 million board feet annually, or approximately 8
percent of the Company's then existing lumber capacity. During 1994, the
Provincial Government of British Columbia's Commission of Resources and
Environment ("CORE") began reviewing the future use of the forest resources in
the province, including reserving additional forest resources to park lands.
This review continued into 1995. Based on preliminary reports of the
Commission, it appears that the amount of timber available to the Company's
Canadian sawmills could be reduced in future years by 5 percent to 10 percent
from current levels. These reductions in allowable timber harvests may result
in further decreases in lumber production levels at one or more of the
Company's Canadian sawmills.
On February 16, 1996, U.S. and Canadian trade negotiators reached an
agreement in principle establishing quotas on Canadian softwood lumber
shipments to the U.S. The 5-year agreement takes effect April 1, 1996.
Although the final terms of the agreement are not yet settled, based on
preliminary terms, the Company believes this agreement will not have a
significant effect on the results of its Canadian sawmill operations.
MARKETING AND DISTRIBUTION. The Company's lumber products are sold
primarily to wholesale distributors. Wood chips produced by the Company's
sawmills are sold to manufacturers of pulp and paper in the U.S. and Canada.
Sales of logs are made to other U.S. and Canadian forest products companies.
Marketing of the Company's wood products is centralized in its Portland,
Oregon offices. Although the Company does not have distribution facilities at
the retail level, the Company does utilize several reload facilities around the
U.S. to assist in moving the product closer to the customer. The Company sold
wood products to numerous customers during 1995, the ten largest of which
accounted for approximately 37 percent of total wood products sales. No single
wood products customer accounted for more than 10 percent of the Company's
revenues in 1995.
BACKLOG. The Company maintains a minimal finished goods inventory of wood
products. At December 31, 1995, orders were approximately $4.7 million,
compared with approximately $7.5 million at December 31, 1994. This backlog
represented an order file for the Company which generally would be shipped in
two weeks to one month. The decrease from 1994 to
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1995 reflects both reduced lumber sales prices and lower order volume. The
lower order volume is a function of timing, the fourth quarter 1995 closing of
the Company's Port Gamble sawmill and the changing of the Grand Forks sawmill
from two shifts at the end of 1994 to one shift for all of 1995.
COMPETITION. The wood products industry is highly competitive, with a
large number of companies producing products that are reasonably standardized.
There are numerous competitors of the Company that are of comparable size or
larger, none of which is believed to be dominant. The principal means of
competition in the Company's wood products business are pricing and an ability
to satisfy customer demands for various types and grades of lumber and other
finished products.
For further information regarding amounts of revenue, operating profit and
loss and identifiable assets attributable to the wood products industry
segment, see Note 11 of "Notes to Consolidated Financial Statements" in the
Company's 1995 Annual Report to Shareholders.
PULP AND PAPER PRODUCTS BUSINESS
The Company's principal pulp and paper products categories and the sales
generated by each over the last three years are set forth in the following
table:
<TABLE>
<CAPTION>
Classes of Pulp and Paper Products 1995 1994 1993
---------------------------------- -------- -------------- --------
(In thousands)
<S> <C> <C> <C>
Tissue products $107,013 $104,885 $105,041
Bleached kraft pulp 124,361 77,950 40,319
Brokered wood chips 27,459 15,767 13,404
-------- -------- --------
Total pulp and paper products sales $258,833 $198,602 $158,764
======== ======== ========
</TABLE>
As discussed previously, at the end of 1995 the Company entered into a
definitive agreement to sell its disposable diaper business to Paragon. The
disposable diaper business results for the three years ended 1995 were
reflected as discontinued operations. Revenues for this discontinued diaper
business were $144.0 million, $157.1 million and $170.1 million in 1995, 1994
and 1993, respectively.
Pulp and paper revenues from continuing operations increased $60.2
million, or 30 percent, from 1994 to 1995 due mainly to improved pulp sales
prices. The Company's pulp sales prices were nearly 70 percent higher on
average in 1995 than 1994. In tissue, a 17 percent average price improvement
more than offset a 13 percent drop in volume related mainly to a seven-month
labor strike at the Ransom, Pennsylvania facility. Higher brokered wood chip
revenues reflected the significant chip price improvement from 1994 to 1995.
Pulp and paper revenues increased $39.8 million, or 25 percent, from 1993 to
1994 due mainly to higher pulp sales. From 1993 to 1994, pulp volumes and
prices increased 54 percent and 25 percent, respectively. The volume increase
related primarily to the Halsey pulp mill's return to essentially full
production for the majority of 1994. In tissue, a 2 percent drop in volume was
offset by a 2 percent price improvement from 1993 to 1994.
1. PAPER PRODUCTS
The Company produces a line of private label consumer tissue products
including towels, napkins, bathroom tissue and facial tissue. These products
are sold under private and controlled labels.
The raw material for the Company's tissue mills is wastepaper purchased
from wastepaper dealers located in the upper Midwest, mid-Atlantic and, to a
lesser extent, on the
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East Coast. Prices for wastepaper generally follow the pricing trends of world
pulp markets. During 1995, wastepaper pricing was pushed to record levels by a
combination of strong pulp markets and shortages of certain wastepaper grades
caused primarily by the start-up of new recycled fiber mills in the U.S. As a
result of these pressures, the Company's wastepaper prices during 1995 doubled
over 1994 pricing. However, by year-end 1995, wastepaper prices were declining
and prices paid for wastepaper in December 1995 were 5 percent lower than the
same time in 1994. The Company believes that there will continue to be an
adequate supply of wastepaper in the foreseeable future.
MARKETING AND DISTRIBUTION. The Company utilizes its own sales force and
some retail consumer products brokers to sell its products to supermarkets,
drugstores, mass merchandisers, food and drug distribution companies and
warehouse club stores. The Company's products enjoy national distribution;
however, the majority are sold east of the Rocky Mountains. Sales to the
Company's ten largest paper products customers represented 67 percent of tissue
products sales in 1995. No single paper products customer accounted for 10
percent or more of total Company revenues in 1995.
BACKLOG. The Company carries a minimal finished goods inventory of tissue
products. At the end of 1995 the tissue order file was approximately $4.2
million compared to a backlog of approximately $6.3 million at December 31,
1994. The lower order backlog at year-end 1995 as compared to year-end 1994
relates to timing of order receipts and the reduction of orders due to the
effects of the 1995 Ransom mill strike. The Company does not believe the lower
backlog is indicative of a business trend. At the end of 1995, the diaper
order file for the discontinued diaper operations was approximately $3.2
million compared to a backlog of approximately $5.5 million at December 31,
1994. The lower order backlog at year-end 1995 as compared to year-end 1994
relates to reduced diaper sales prices and lower order volume. Both the tissue
and diaper backlogs are generally shipped in less than one month.
COMPETITION. The tissue market is extremely competitive, with
approximately 10 major producers. Of these, Kimberly-Clark Corporation, Fort
Howard Corporation, James River Corporation and Procter & Gamble Corporation
are dominant and account for approximately 67 percent of the market. Within
the tissue market, the Company estimates that the private label tissue segment
accounts for approximately 12 percent to 30 percent of the total, depending on
the product.
In the tissue business, tissue industry capacity increases in the late
1980's and early 1990's resulted in capacity which exceeded demand growth
causing tissue prices to decline an average of 14 percent from 1989 through
1993. This condition began to stabilize in 1994, and in 1995 industry-wide
tissue operating rates improved to approximately 93 percent of capacity
generating tissue price increases for the Company at the end of 1995 of
approximately 30 percent over year-end 1994 levels. The 1995 price increases
were the first general price increases for the Company's tissue products since
1990.
2. PULP PRODUCTS
The Company owns a pulp mill at Halsey, Oregon. This mill produces
bleached kraft pulp which is sold in various forms in the open market and to
newsprint manufacturers and a writing paper manufacturer in the Pacific
Northwest. In conjunction with the fiber acquisition program for the pulp
mill, the Company brokers pulp chips for sale primarily into the export market.
The total annual capacity of the mill is 180,000 air dry metric tons; 175,000
metric tons were produced in 1995, 158,000 metric tons were produced in 1994
and 109,000 metric tons were produced in 1993. The Company's pulp business was
affected in 1992 and to a greater extent in 1993 by relatively high wood chip
costs, weak demand, declining pulp prices and by the loss of a major customer.
However, the pulp market rebounded dramatically in 1994 which, along with sales
to a significant new pulp customer in 1994, allowed the Company to increase its
pulp sales volume 54 percent over the 1993 level. The market improvement
continued into 1995 and resulted in the near capacity production.
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In order to provide additional sales flexibility and attempt to improve
margins through higher value products, the Company initiated mill modifications
in 1993 totaling $41 million, which were completed in early 1994, to improve
pulp quality and expand pulp drying capabilities. These modifications were in
addition to a $24 million oxygen delignification project which reduced both the
use of chlorine in the bleaching process and dioxin discharges. This oxygen
delignification project, which was completed late in 1993, was necessary to
comply with an agreement entered into with the Oregon Department of
Environmental Quality on meeting target emission levels. These mill
improvements have allowed the Company to expand its pulp product offerings and
to dry its total pulp production, thus providing greater access to new pulp
markets within and outside the Pacific Northwest, which has historically been
the Company's primary pulp market region.
The pulp mill modifications mentioned previously made it possible for the
Company to enter into a significant pulp supply agreement in late 1993. Under
this agreement with Grays Harbor Paper L.P. ("Grays Harbor"), the Company began
supplying pulp to the Grays Harbor writing grade paper mill. Grays Harbor
purchased approximately 103,000 metric tons and 89,000 metric tons of pulp from
the Company in 1995 and 1994, respectively. All output from the paper mill is
sold to one customer. In the event that the paper mill's sales to its customer
are adversely impacted for any reason, sales of the Company's pulp may be
adversely impacted. A portion of the pulp sold to the paper mill is produced
from sawdust and hardwood chips, which have historically been less expensive
than softwood chips, which has been the primary raw material for the pulp mill.
Pricing for this pulp is computed using a formula based on prices for white
paper.
Weyerhaeuser Company ("Weyerhaeuser") owns a pulp mill, which it recently
upgraded and expanded, located adjacent to the North Pacific Paper Company
("Norpac") newspaper manufacturing facility in Longview, Washington.
Weyerhaeuser is a part owner of Norpac. Norpac purchased 22,000 metric tons,
48,000 metric tons and 46,000 metric tons from the Company in 1995, 1994 and
1993, respectively. Norpac began to phase out its purchases from the Company
in early 1995 and discontinued its purchases in the third quarter 1995 as
Weyerhaeuser completed its upgrade and expansion project. As a result of the
mill's pulp enhancements brought about by the previously mentioned mill
modifications, the Company does not anticipate that the discontinuation of
Norpac sales volume will have a material adverse effect on the Company's pulp
business or results of operations.
Substantially all of the Company's wood chip and sawdust requirements for
the Halsey pulp mill are satisfied through purchases by the Company from third
parties. The Company has long-term chip supply contracts with sawmills in the
Pacific Northwest.
Environmental concerns over timber harvests, which caused high log costs
and led to the shutdown of the Company's Port Gamble sawmill, have also caused
higher chip costs and reduced chip availability from historic sources at the
Halsey pulp mill over the past several years. In order to maintain an adequate
supply of wood fiber for the mill, the Company has expanded its geographic base
from which it obtains the softwood chips normally used as the primary raw
material for the pulp mill. The Company has also expanded the capability of
using sawdust and hardwood chips, which historically have been less expensive
than softwood chips, as raw materials for a portion of the production. In
order to maintain an adequate supply of chips for the approximately 50 percent
of the pulp mill's production which will remain based on softwood chips, the
Company will continue to use an expanded geographic base to obtain chips,
adding to their cost. Although chip costs remained essentially constant during
1993 and 1994, the environmental restrictions on timber harvests coupled with
the strong pulp market resulted in a 71 percent increase in chip prices from
year-end 1994 levels to mid 1995 levels. A weakening pulp market in late 1995
and early 1996, however, has reduced chip demand and greatly reduced chip
prices from their mid 1995 highs. Unless environmental
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restrictions on timber harvests are relaxed, chip prices likely will remain
relatively high, and sawdust and hardwood chip prices may also increase. The
Company believes that its third-party chip and sawdust purchases will be
adequate for the Halsey pulp mill in the foreseeable future.
MARKETING AND DISTRIBUTION. The Company utilizes its own sales force and
pulp brokers to sell its pulp products. A large majority of the Company's pulp
products are sold in the Pacific Northwest. In 1995, sales to Grays Harbor
represented 52 percent of the Company's pulp revenues, sales to Norpac
represented 14 percent of the Company's pulp revenues and the remaining eight
largest customers accounted for an additional 25 percent of pulp revenues.
Grays Harbor accounted for 12 percent of total Company revenues from continuing
operations in 1995.
BACKLOG. The Company's pulp customers either enter into contracts for
periods of one to three years or purchase products without obligation for
future purchases. The contractual customers provide the Company with annual
estimates of their requirements, followed by periodic orders based on more
definitive information. As of December 31, 1995, the Company's backlog of
orders for contractual customers for the first quarter of 1996 was $16 million,
including $11 million attributable to Grays Harbor, compared to $27 million at
December 31, 1994, including $15 million attributable to Grays Harbor. The
backlog of orders for non-contractual customers at December 31, 1995 and
December 31, 1994 was not significant. The decrease in order backlog from
year-end 1994 to year-end 1995 reflects lower order volume and prices due to
weakened pulp markets in the first quarter of 1996 compared to the first
quarter of 1995.
COMPETITION. The pulp industry is highly competitive, with a substantial
number of competitors having extensive financial resources, manufacturing
expertise and sales and distribution organizations, most of which are larger
than the Company, but none of which is believed to be dominant. The principal
methods of competition in the pulp market are price, quality, volume,
reliability of supply and customer service.
For further information regarding amounts of revenue, operating profit and
loss and identifiable assets attributable to the pulp and paper products
industry segment, see Note 11 of "Notes to Consolidated Financial Statements"
in the Company's 1995 Annual Report to Shareholders.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state, Canadian and local air, water
and land pollution control, solid and hazardous waste management, disposal and
remediation laws and regulations in all areas where it has operations.
Compliance with these laws and regulations generally requires operating costs
as well as capital expenditures. It is difficult to estimate the costs related
solely to environmental matters of many capital projects which have been
completed in the past or which may be required in the future. Changes required
to comply with environmental standards will affect other areas such as facility
life and capacity, changes in raw material requirements and costs and product
value. It is estimated that during 1995, capital expenditures for
environmental controls amounted to less than $1 million. It is expected that
capital expenditures will continue into the future and may increase over time.
Based on the understanding of future compliance standards, expenditures for
such purposes are currently estimated to be minimal in 1996 and 1997; however,
the ultimate outcome of future compliance is uncertain due to various factors
such as the interpretation of environmental laws and evolving technologies.
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In response to environmental concerns in Western Oregon and Western
Washington, specifically the preservation of old-growth forests and wildlife
habitat, substantial amounts of federal timberlands have been set aside as
wilderness areas. This has affected and may continue to affect the amount and
cost of timber obtainable from public agencies in this region. Currently, the
Company's exposure in this region is the Halsey, Oregon pulp mill. The Halsey
pulp mill is affected by the decrease in timber availability, since its primary
raw materials, wood chips, sawdust and hardwood chips, are by-products of the
lumber manufacturing process. The Company believes that, based on existing
wood chip and sawdust availability both within the Willamette Valley region of
Oregon and from other sources discussed previously, wood chip and sawdust
resources will be adequate for the Company's requirements at the Halsey pulp
mill in the foreseeable future.
In Canada during 1994, the Provincial Government of British Columbia's
Commission of Resources and Environment ("CORE") began reviewing the future use
of the forest resources in the province, including reserving additional forest
resources to park lands. This review continued into 1995. Based on
preliminary reports of the Commission, it appears that the amount of timber
available to the Company's Canadian sawmills in the future could be reduced by
5 to 10 percent.
The Environmental Protection Agency ("EPA") has published proposed
regulations which would establish standards and limitations for non-combustion
sources under the Clean Air Act and revised regulations under the Clean Water
Act. These proposals are collectively referred to as the "cluster rules" and
have been the subject of extensive discussions between the pulp and paper
industry and the EPA. The Company's primary exposure to these proposals relate
to the Company's Halsey pulp mill, and to a much lesser degree the Company's
two tissue mills. Based on preliminary evaluation of the proposed rules,
required modifications to the Company's mills could range from $15 million to
$30 million. The proposed rules could be made effective in 1999, although
later enactment is possible.
In 1992, the Company was contacted by the local governmental owner of a
vacant industrial site in Oregon on which the Company previously conducted
business. The owner informed the Company that the site has been identified as
one containing creosote and coal tar, and that it plans to undertake a
voluntary cleanup effort of the site. The owner has requested that the Company
participate in the cost of the cleanup. The Company, in conjunction with an
environmental consultant has performed preliminary assessment of soil
contamination on the site and, in conjunction with the site owner, is beginning
to make more extensive site assessments which will take up to two years. The
results of the preliminary assessment indicate there is some soil contamination
present from creosote and coal tar as well as pollutants from other sources,
and that the responsibility for the contamination is not clear. The total
estimated cost of cleaning up the known contamination at this time could be in
the range of $1 million to $3 million although no determination of the
responsibility for the cleanup has been established. If the more extensive
site assessment indicates additional contamination which has not been shown at
this time, the costs of remediation could be much higher. The Company believes
it is reasonably possible that the costs associated with the cleanup of this
site may exceed current accruals by amounts which may range from insignificant
up to approximately $5 million over several years. This upper range estimate
of possible outcomes is substantially less certain than the estimates upon
which accruals are currently based, and utilizes assumptions substantially less
favorable to the Company among the range of reasonably possible outcomes.
EMPLOYEES
At December 31, 1995, the Company employed approximately 2,800 employees
of whom 2,300 were paid hourly and a majority of which were members of various
labor unions. Included in these numbers were approximately 400 salaried and
hourly employees who were
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employed by the discontinued diaper operations. Approximately 54 percent of
the Company's employees from continuing operations were associated with the
Company's wood products business, 43 percent were associated with the Company's
pulp and paper business and 3 percent were corporate management and
administration personnel.
FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES
The Company's foreign manufacturing operations consist of three lumber
mills located in Canada. The Company's primary exports from continuing
operations are pulp sold to Europe and brokered wood chips sold to Japan. The
Company's export sales from continuing operations from the United States were
$26.3 million for 1995, $18.2 million for 1994 and $13.4 million for 1993.
Export sales from the discontinued diaper operations were $12.6 million, $13.7
million and $15.7 million for 1995, 1994 and 1993, respectively, primarily to
Canada. Of the total 1995 export sales, 35 percent were to Canada, 38 percent
were to Japan and 23 percent were to France and Italy.
Financial information regarding the Company's domestic and foreign
operations is included in Note 11 of "Notes to Consolidated Financial
Statements" on page 29 of the Company's 1995 Annual Report to Shareholders.
Item 2. Properties
WOOD PRODUCTS PROPERTIES
1. Mills and Plants
The following tabulation briefly states the location, character, capacity
and 1995 production of the Company's lumber mills:
<TABLE>
<CAPTION>
Estimated Annual 1995
Location Capacity (4) Production(4)
----------------------------- ---------------------- -------------------
<S> <C> <C>
Port Gamble, Washington -(1) 53,000,000 bd. ft.
Spearfish, South Dakota 110,000,000 bd. ft.(2) 106,000,000 bd. ft.
Newcastle, Wyoming 31,000,000 bd. ft.(2) 31,000,000 bd. ft.
Grand Forks, British Columbia 50,000,000 bd. ft.(3) 50,000,000 bd. ft.
Midway, British Columbia 145,000,000 bd. ft.(3) 140,000,000 bd. ft.
Castlegar, British Columbia 190,000,000 bd. ft.(3) 222,000,000 bd. ft.
</TABLE>
- --------------
(1) The Port Gamble, Washington sawmill was permanently closed late in
1995.
(2) Based on operating two shifts, five days per week for the
Spearfish, South Dakota lumber mill and one shift, five days per
week for the Newcastle, Wyoming lumber mill.
(3) Based on operating two shifts, five days per week for the
Midway and Castlegar, British Columbia mills and one shift, five
days per week for the Grand Forks, British Columbia mill.
Additionally, these capacities reflect reduced operations
resulting from timber license quota limitations.
(4) Wood chips are produced as a result of the operation of the
Company's lumber mills. It is estimated that the aggregate
annual capacity for such production is 300,000 bone dry units.
In 1995, 339,000 bone dry units were produced.
10
<PAGE> 11
The Company believes that its wood products manufacturing facilities are
adequate and suitable for current operations. Nevertheless, the Company is
committed to continually improving its manufacturing facilities.
The Company owns all of its wood products manufacturing facilities.
PULP AND PAPER PROPERTIES
1. Tissue and Diaper Mills
The following table briefly states the location, character, capacity and
1995 production of the Company's tissue and diaper products manufacturing
facilities:
<TABLE>
<Captions>
Estimated Annual 1995
Location Capacity(1) Production
-------- ---------------- ----------
<S> <C> <C>
Tissue Products
---------------
Eau Claire, Wisconsin 55,000 tons 53,000 tons
Ransom, Pennsylvania(3) 55,000 tons 29,000 tons
Diapers(2)
----------
Shenandoah, Georgia - 171,000,000 diapers
Eau Claire, Wisconsin - 210,000,000 diapers
Oneonta, New York - 353,000,000 diapers
Porterville, California - 250,000,000 diapers
Incontinents(2)
---------------
Shenandoah, Georgia - 21,000,000 pads
</TABLE>
- ----------------
(1) Based on normal industry practice of operating three shifts per
day, seven days per week, less scheduled downtime.
(2) The Company's diaper and incontinent businesses were sold in
February of 1996, therefore, capacity information is not included.
(3) Ransom's below-capacity production reflects production
curtailments caused by a seven-month labor strike in 1995.
The Company believes that its tissue manufacturing facilities are adequate
and suitable for current operations. In 1994, the Company began a project to
significantly upgrade the Eau Claire wastepaper pulping capabilities. This
pulping upgrade project was completed in mid 1995.
The Company owns all of its tissue production facilities.
2. Pulp Mill
The Company owns a bleached kraft pulp mill near Halsey, Oregon. In 1995,
175,000 air dry metric tons of pulp were produced, compared with an estimated
annual capacity of 180,000 metric tons. The Company believes that its pulp
facility is adequate and suitable for current operations.
11
<PAGE> 12
Item 3. Legal Proceedings
In 1985, shareholders of the Company approved a Plan of Distribution
pursuant to which all of the Company's timber properties and 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 argued before the U.S. Tax Court during the third quarter 1995
and follow-up legal briefs were then filed into December 1995. The Tax Court
will likely render a decision on the case in 1996. Primarily in 1995, the
Company incurred costs defending its tax position in this case. In 1995, these
defense costs, together with related tax settlements and interest charges
totaling $4.9 million, net of tax benefits of $1.4 million, were recognized as
a reduction in equity with respect to the partnership transaction. The Company
believes, based upon consultation with independent tax counsel, that the
additional tax due in this matter, if any, will 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 also be recognized
as a reduction in equity.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT WHO ARE NOT DIRECTORS
In addition to the executive officers who are also directors of the
Company, the following executive officers are not directors:
CARLOS M. LAMADRID, 60, Senior Vice President, Secretary, and Chief Financial
Officer since August 1987.
WILLIAM G. FROHNMAYER, 57, Vice President - Division Manager, Fiber Products
since August 1987.
All officers hold office at the pleasure of the Board of Directors.
12
<PAGE> 13
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SECURITY HOLDER
MATTERS
Pope & Talbot, Inc. common stock is traded on the New York and Pacific
stock exchanges under the symbol POP. The number of shareholders at year-end
1995 and 1994 were 1,243 and 1,372, respectively. The high and low sales
prices for the common stock on the New York Stock Exchange and the dividends
paid per common share for each quarter in the last two fiscal years are shown
below:
<TABLE>
<CAPTION>
Sales price per share
------------------------ Cash dividends
High Low per share
----------- --------- --------------
<S> <C> <C> <C>
1995
1st Quarter $16-7/8 $15-1/8 $.19
2nd Quarter 17-7/8 15-3/8 .19
3rd Quarter 17 15-1/4 .19
4th Quarter 15-5/8 12-1/2 .19
----
$.76
1994
1st Quarter $32-5/8 $23-3/4 $.19
2nd Quarter 25-5/8 17-3/8 .19
3rd Quarter 22-1/4 17-1/4 .19
4th Quarter 18-7/8 15-1/4 .19
----
$.76
</TABLE>
ITEM 6. SELECTED FINANCIAL DATA
Information required by Item 6 of Part II is presented in the table
entitled "Five Year Summary of Selected Financial Data" on page 12 of the
Company's 1995 Annual Report to Shareholders. Such information is incorporated
herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The information required by Item 7 of Part II is presented on pages 13,
14, 15, 16 and 17 of the Company's 1995 Annual Report to Shareholders. Such
information is incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements required by Item 8 of Part II is incorporated by
reference to the Company's Current Report on Form 8-K dated February 8, 1996
and presented on pages 18 through 29 of the Company's 1995 Annual Report to
Shareholders. Additionally, the required supplementary quarterly financial
information is incorporated herein by reference to page 30 of the Company's
1995 Annual Report to Shareholders.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
13
<PAGE> 14
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The information required by Item 10 of Part III is presented on page 12 as
a separate item entitled "Executive Officers of the Registrant Who are Not
Directors" in Part I of this Report on Form 10-K and on pages 2 and 3 (under
the item entitled "Certain Information Regarding Directors and Officers") of
the Company's Definitive Proxy Statement for the Annual Meeting of Shareholders
on April 30, 1996. Such information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 of Part III is presented on pages 4
through 12 of the Company's Definitive Proxy Statement for the Annual Meeting
of Shareholders on April 30, 1996. Such information is incorporated herein by
reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 of Part III is presented on page 3 and
on page 4 (beginning just after the title "Beneficial Ownership of Over Five
Percent of Pope & Talbot Common Stock" on page 4) of the Company's Definitive
Proxy Statement for the Annual Meeting of Shareholders on April 30, 1996. Such
information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not applicable
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) Financial Statements
The financial statements listed in the accompanying Index to
Financial Statements and Financial Statement Schedules are filed as
part of this annual report.
(a) (2) Schedules
All schedules are omitted since the required information is not
present or is not present in amounts sufficient to require submission
of the related schedule, or because the information required is
included in the financial statements and notes thereto.
(a) (3) Exhibits
The following exhibits are filed as part of this annual report.
Exhibit No.
- -----------
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.)
14
<PAGE> 15
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.)
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. (Incorporated herein by reference to Exhibit
4.8 to the Company's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995.)
15
<PAGE> 16
4.9 Modification Agreement, dated as of January 22, 1996, 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. (Incorporated herein by reference to
Exhibit 4.1 to the Company's Current Report on Form 8-K filed
February 8, 1996.)
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.)
10.1.6 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.)
16
<PAGE> 17
11.1 Statement showing computation of per share earnings.
13.1 Portions of the annual report to shareholders for the year ended
December 31, 1995 which have been incorporated by reference in this
report.
21.1 Listing of parents and subsidiaries. (Incorporated herein by
reference to Exhibit 22 to the Company's Annual Report on Form 10-K
for the year ended December 31, 1992.)
23.1 Consent of Arthur Andersen LLP.
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.
(b) Reports on Form 8-K
A Current Report on Form 8-K was filed on December 11, 1995 reporting that
a definitive agreement had been reached to sell the Company's disposable
diaper business to Paragon Trade Brands, Inc.
17
<PAGE> 18
INDEX TO FINANCIAL STATEMENTS
AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
Annual
Report
to
Shareholders
------------
<S> <C>
Report of Independent Public Accountants 17
Consolidated balance sheets at December 31, 1995 and 1994 18
Consolidated statements of income for each of the three years
in the period ended December 31, 1995 19
Consolidated statements of stockholders' equity for each of the
three years in the period ended December 31, 1995 20
Consolidated statements of cash flows for each
of the three years in the period ended December 31, 1995 21
Notes to consolidated financial statements 22-29
Supplementary information:
Quarterly financial information (unaudited) 30
</TABLE>
All schedules are omitted since the required information is not present or
is not present in amounts sufficient to require submission of the schedule, or
because the information required is included in the financial statements and
notes thereto.
The consolidated financial statements listed in the above index are
included in the Annual Report to Shareholders of Pope & Talbot, Inc. for the
year ended December 31, 1995. The financial information listed in the above
index has been incorporated by reference to the Company's Current Report on
Form 8-K dated February 8, 1996, except for the supplementary quarterly
financial information (unaudited) which has been incorporated by reference to
the Company's 1995 Annual Report to Shareholders. With the exception of the
items referred to in Items 1, 6, 7 and 8, the 1995 Annual Report to
Shareholders is not to be deemed filed as part of this report.
18
<PAGE> 19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of
Portland, State of Oregon, on this 26th day of March, 1996.
POPE & TALBOT, INC.
BY: \s\ Peter T. Pope
-------------------------------------
Peter T. Pope
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Chairman of the Board and
\s\ Peter T. Pope Chief Executive Officer March 26, 1996
------------------------------
Peter T. Pope
\s\ Gordon P. Andrews Director March 26, 1996
------------------------------
Gordon P. Andrews
\s\ Hamilton W. Budge Director March 26, 1996
------------------------------
Hamilton W. Budge
\s\ Charles Crocker Director March 26, 1996
------------------------------
Charles Crocker
\s\ Michael Flannery President and Director March 26, 1996
------------------------------
Michael Flannery
\s\ Warren E. McCain Director March 26, 1996
------------------------------
Warren E. McCain
\s\ Robert Stevens Miller, Jr. Director March 26, 1996
------------------------------
Robert Stevens Miller, Jr.
\s\ Hugo G. L. Powell Director March 26, 1996
------------------------------
Hugo G. L. Powell
\s\ Brooks Walker, Jr. Director March 26, 1996
------------------------------
Brooks Walker, Jr.
Senior Vice President,
Secretary and
\s\ Carlos M. Lamadrid Chief Financial Officer March 26, 1996
------------------------------
Carlos M. Lamadrid
\s\ Robert L. Bluhm Financial Controller March 26, 1996
------------------------------
Robert L. Bluhm
</TABLE>
19
<PAGE> 1
EXHIBIT 11.1
POPE & TALBOT, INC. AND SUBSIDIARIES
Statement Showing Calculation of Average
Common Shares Outstanding and Earnings
Per Average Common Share
Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994(1) 1993
---- ---- ----
<S> <C> <C> <C>
Weighted average number of
common shares outstanding 13,363,520 13,109,640 11,685,313
Weighted average of common stock
equivalent shares attributable
to convertible debentures - 249,258 1,542,020
Application of the "treasury stock"
method to the stock option plan 3,903 108,755 264,323
------------ ----------- -----------
Total common and common
equivalent shares,
assuming full dilution 13,367,423 13,467,653 13,491,656
============ =========== ===========
Net income (loss) $(24,838,000) $15,897,000 $21,013,000
Add: interest on convertible
debentures, net of
applicable income taxes - 244,000 1,464,000
------------ ----------- -----------
Net income (loss), assuming
full dilution $(24,838,000) $16,141,000 $22,477,000
============ =========== ===========
Net income (loss) per common share,
assuming full dilution $(1.86) $1.20 $1.67
====== ===== =====
</TABLE>
(1) The 1994 calculation reflects the February 1994 month-end conversion of
convertible debentures to 1.5 million shares of common stock.
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.
<PAGE> 1
EXHIBIT 13.1
FIVE YEAR SUMMARY OF SELECTED FINANCIAL DATA
Pope & Talbot, Inc. and Subsidiaries
<TABLE>
<CAPTION>
Years ended December 31 (Dollars in thousands except per share) 1995 1994 1993 1992 1991
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS
Revenues $ 524,409 $ 502,807 $ 458,799 $ 404,830 $ 383,764
Depreciation and amortization 45,066 39,061 29,303 28,564 27,948
Interest expense, net 13,784 9,322 8,714 5,622 3,941
Income (loss) from continuing operations (13,796) 15,952 10,770 (7,507) (9,957)
Income (loss) from discontinued operations (11,042) (55) 10,805 5,255 4,862
Cumulative effect of accounting changes - - (562) - (6,467)
------------------------------------------------------------
Net income (loss) $ (24,838) $ 15,897 $ 21,013 $ (2,252) $ (11,562)
============================================================
Effective tax rate (32)% 40% 41% (9)% (28)%
PER COMMON SHARE
Income (loss) from continuing operations - primary $ (1.03) $ 1.21 $ .92 $ (.63) $ (.86)
Income (loss) from continuing operations - fully diluted (1.03) 1.20 .85 (.63) (.86)
Income (loss) from discontinued operations - primary (.83) - .93 .44 .42
Income (loss) from discontinued operations - fully diluted (.83) - .86 .44 .42
Effect of accounting changes - primary - - (.05) - (.56)
Effect of accounting changes - fully diluted - - (.04) - (.56)
Cash dividends .76 .76 .76 .76 .76
Stockholders' equity 14.19 17.08 15.73 14.85 16.09
YEAR-END COMMON SHARES OUTSTANDING, NET OF TREASURY STOCK 13,363,779 13,362,729 11,715,798 11,610,664 11,597,560
FINANCIAL POSITION (at December 31)
Current assets $ 207,252 $ 223,050 $ 169,897 $ 138,288 $ 122,393
Properties, net 225,760 282,827 269,200 222,500 213,964
Deferred income tax assets, net 16,531 - - - -
Other assets 22,684 33,507 16,724 8,893 10,626
------------------------------------------------------------
$ 472,227 $ 539,384 $ 455,821 $ 369,681 $ 346,983
============================================================
Current liabilities $ 113,495 $ 103,576 $ 101,162 $ 79,668 $ 64,545
Long-term obligations 30,526 28,777 27,803 24,227 16,934
Long-term debt 138,514 177,471 134,599 89,500 69,000
Deferred income tax liabilities, net - 1,365 7,936 3,892 9,896
Stockholders' equity 189,692 228,195 184,321 172,394 186,608
------------------------------------------------------------
$ 472,227 $ 539,384 $ 455,821 $ 369,681 $ 346,983
============================================================
CASH FLOW
Operating activities:
Net income (loss) $ (24,838) $ 15,897 $ 21,013 $ (2,252) $ (11,562)
Depreciation and amortization 45,066 39,061 29,303 28,564 27,948
Other (gains) losses, net - (13,845) - 1,589 1,940
Cumulative effect of accounting changes - - 562 - 6,467
Working capital and other 29,519 (51,686) (13,990) 10,833 2,717
------------------------------------------------------------
Cash provided by (used for) operating activities 49,747 (10,573) 36,888 38,734 27,510
Investing activities:
Capital expenditures (27,777) (55,582) (82,585) (32,276) (37,268)
Acquisition of sawmill - - - (19,417) -
Cash provided by restructuring activities - - - 11,480 2,750
Proceeds from sale of other properties 1,004 722 1,156 1,158 1,848
------------------------------------------------------------
Cash used for investing activities (26,773) (54,860) (81,429) (39,055) (32,670)
Financing activities:
Net increase (decrease) in borrowings (16,428) 91,899 51,017 9,483 8,440
Change in restricted bond funds 15,458 (15,458) - - -
Partnership transaction tax settlement costs (4,884) - - - -
Cash dividends (10,156) (9,855) (8,871) (8,821) (8,806)
Other 15 1,926 1,819 229 293
------------------------------------------------------------
Cash provided by (used for) financing activities (15,995) 68,512 43,965 891 (73)
------------------------------------------------------------
Increase (decrease) in cash and cash equivalents $ 6,979 $ 3,079 $ (576) $ 570 $ (5,233)
============================================================
</TABLE>
12
<PAGE> 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
POPE & TALBOT, INC. AND SUBSIDIARIES
OVERVIEW
Several adverse factors resulted in Pope & Talbot incurring a $24.8
million, or $1.86 per share, loss in 1995, the largest loss in the Company's
history. These included a seven-month strike at the Company's Ransom,
Pennsylvania tissue mill, rapidly escalating wastepaper prices, continued
losses at the Company's Port Gamble, Washington sawmill and losses in the
diaper business. Earnings were $15.9 million, or $1.21 per share ($1.20 on a
fully diluted basis), and $21.0 million, or $1.80 per share ($1.67 on a fully
diluted basis), in 1994 and 1993, respectively. In December 1995, the Company
announced it had reached a definitive agreement to sell the Company's diaper
business to Paragon Trade Brands, Inc. and the sale was completed on February
8, 1996. The diaper business has been reflected as a discontinued operation in
the 1995 financial statements. The loss from continuing operations in 1995 was
$13.8 million, or $1.03 per share, versus income of $15.9 million, or $1.21 per
share in 1994, and of $10.8 million, or $.92 per share, in 1993.
The seven-month strike at the Ransom tissue mill and high wastepaper
costs combined to create record tissue losses. By the end of 1995, the Ransom
strike had been settled and wastepaper costs were declining. Continued
competitive pricing and increased fluff pulp prices generated a loss in the
Company's diaper business after a break-even year in 1994. The Company's
lumber business, which in 1994 and 1993 produced the two best wood products
segment earnings in the Company's history, declined to a small profit in 1995
on 13 percent lower lumber selling prices. During 1995, it became increasingly
difficult to obtain an adequate supply of acceptably priced logs for the
Company's Port Gamble sawmill, and during 1995, this mill was permanently
closed after incurring numerous temporary shutdowns during the last two years.
The only improved business for the Company during 1995 was in pulp where a full
year of strong pulp prices resulted in profitable pulp operations after four
years of losses.
Revenues increased to a record $524.4 million from $502.8 million
(after restatement for discontinued operations) in 1994. Effects of the
seven-month strike at the Ransom tissue mill and lower lumber sales prices were
offset by higher pulp, tissue and wood chip sales prices to produce the higher
revenues.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary source of internally generated cash is operating
income before depreciation and the principal external source of cash is debt
financing. Despite the loss of $24.8 million in 1995, $20.2 million was
generated from operating income before depreciation in 1995. During the year,
total long-term and short-term debt declined $16.4 million as the Company
focused on conserving cash during this loss year. The long-term debt to total
capitalization ratio was 42 percent at the end of 1995 and 44 percent at the
end of 1994. The current ratio at December 31, 1995 was 1.8 to 1 compared to
2.2 to 1 at the end of 1994.
At the end of 1995, the Company reached an agreement to sell its
diaper business to Paragon. The sale was completed on February 8, 1996. The
sale includes essentially all of the Company's diaper assets, except
receivables. The Company will collect the diaper receivables and pay the
remaining diaper liabilities. Total consideration for the sale was $65.0
million. This consideration was comprised of $50.5 million of cash and Paragon
common stock valued at $14.5 million, subject to post closing adjustments, if
any. The Company will use the cash received, less expenses, to pay down bank
debt. Although no assurances can be given as to the ultimate disposition of
the Paragon stock acquired in the transaction, it is currently anticipated that
when the stock is sold, any net cash proceeds will be used to pay down debt.
See Note 9 of Notes to Consolidated Financial Statements for further discussion
of the sale of the diaper business.
Cash generated from operations was $49.7 million in 1995. Operating
income before non-cash charges for depreciation and amortization generated cash
of $20.2 million in 1995. Net deferred income tax assets increased $15.9
million as the income tax benefit recognized was not realized as cash,
resulting in a reduction in cash generated from operations. Inventories
declined $40.9 million from the liquidation of the Port Gamble sawmill log and
lumber inventories, a reduction in the volume of purchased log inventories at
the Company's Canadian sawmills and reductions in tissue and diaper raw
material and finished goods inventories. These inventory reductions were
partially offset by higher pulp inventories, which were required as the Company
increased its export pulp sales business, where longer inventory lead times are
required. Receivables declined due to collection of the remaining $16.1
million Canadian duty refund during 1995. Income taxes payable were lower due
to the timing of
13
<PAGE> 3
recognition and payment of 1995 Canadian taxes. Deferred charges and other
were higher primarily due to recognition of a profit sharing receivable from a
pulp customer, Grays Harbor Paper Company. Accounts payable were lower due to
the timing of the payment of liabilities.
Cash provided by operations was used to pay dividends of $10.2
million, reduce net short- and long-term debt by $16.4 million and, when
combined with the remaining $15.5 million proceeds available from a City of Eau
Claire, Wisconsin solid waste disposal revenue bond program, were used to
finance capital expenditures of $27.8 million. Scheduled long-term debt
repayments were $928 thousand in 1995 and are anticipated to be $457 thousand
in 1996. Capital spending was reduced to $27.8 million in 1995 from $55.6
million in 1994 and $82.6 million in 1993. During 1993 and 1994, the Company
spent record amounts upgrading and modernizing its facilities and completing
necessary pollution control projects. With the projects completed in 1993 and
1994, the only significant project during 1995 was the completion of a project
to improve the quality of the recycled pulp at the Eau Claire tissue facility.
This project was started in 1994 and financed almost entirely from the $18.8
million Eau Claire solid waste disposal revenue bond proceeds. At the end of
1994, $15.5 million remained available under this bond and was held in escrow
for the completion of the project in 1995. All other 1995 capital expenditures
were undertaken to sustain existing operations. There were no significant
capital projects in process at year-end and to complete existing projects in
1996 will require about about $1 million. With the projects completed in the
last three years, the Company's facilities are suitable for existing operations
and 1996 capital projects will be to sustain existing operations, with total
capital spending expected to be less than 1995. Projected 1996 capital
spending will be funded with internally generated cash and supplemented, if
necessary, with borrowings on the Company's line of credit. At December 31,
1995, the Company had available $100 million under an existing credit line, of
which $73 million was outstanding at December 31, 1995. The amount available
under the existing credit line was reduced to $75 million concurrent with the
sale of the diaper business in February 1996 and the total outstanding was $20
million after the cash proceeds of the diaper sale received at closing were
used to pay down bank debt.
The impact of fluctuations in foreign currency exchange rates has not
had, and is not expected to have, a significant effect on the Company's
liquidity or results of operations.
RESULTS OF OPERATIONS
WOOD PRODUCTS
Earnings from the Company's wood products business, which comprised 51
percent of 1995 consolidated revenues, declined to slightly above break-even in
1995 after generating earnings of $55.2 million in 1994 and $62.1 million in
1993. Lumber earnings in 1994 and 1993 were the two best years in the
Company's history. Income of $13.8 million representing the return by the
United States government of a duty paid in 1993 and 1992 to the government for
Canadian lumber sold in the United States was recognized in 1994 and is in
addition to the $55.2 million.
Wood Products revenues were $265.6 million in 1995, down 13 percent
from $304.2 million in 1994 and $300.0 million in 1993. The 1995 decrease was
a combination of lower sales volumes as a result of reduced Port Gamble
operations and the Grand Forks, British Columbia sawmill operating at one
shift, down from the two shifts prior to 1995, and lumber sales prices which
averaged 13 percent lower than 1994.
Relatively good housing markets and restricted lumber supplies as a
result of environmental restrictions on timber harvests in the Pacific
Northwest led to generally strong, although volatile, lumber prices during 1993
and 1994. Housing starts in 1995 of 1.35 million were only slightly lower than
1994; however, a very strong pulp market pushed wood chip prices to record
levels, inducing increased lumber production which resulted in downward
pressure on lumber pricing. The Company's lumber sales volume decreased to 624
million board feet in 1995, or 86 percent of the estimated 726 million board
feet of 1995 capacity. Sales volumes in 1995 declined from 686 million board
feet in 1994 and 726 million board feet in 1993. This decline has been the
result of curtailed production at the Company's Port Gamble sawmill and reduced
timber availability in Canada. Log costs averaged approximately 20 percent
higher in Canada in 1995 compared to 1994, primarily because of a full year
under a new stumpage pricing formula in 1995, and only a partial year in 1994.
14
<PAGE> 4
During 1995, the Port Gamble sawmill was either shut down or operating
on a reduced one-shift basis due to a lack of acceptably priced timber in
relation to end-product prices. Timber harvest levels in the Port Gamble
operating region have been significantly reduced in recent years as a result of
environmental pressures to reduce the amount of timber available for harvest.
A strong log export market further reduced domestic log supplies in this
region. These reduced log supplies resulted in the Port Gamble mill, which has
an annual capacity of 150 million board feet, operating at 87 million board
feet in 1994 and 53 million board feet in 1995. These reduced volumes,
combined with weakened lumber markets, have resulted in losses at Port Gamble
over the last two years, and with no prospect of a resolution to the timber
supply situation, the Company permanently closed the Port Gamble sawmill in the
fourth quarter of 1995. The mill equipment will be sold during 1996 and it is
anticipated that the sale of the assets will not generate a significant gain or
loss. Port Gamble plant and equipment of $30 million, net of related
accumulated depreciation of $29 million, were reclassified to current assets at
year-end 1995.
Annual timber harvest levels under the Canadian timber harvesting
licenses declined effective January 1, 1995 to more normal levels following
several years of accelerated harvests to remove mountain pine beetle damaged
trees. With the lower wood supply in Canada, the Company reduced its Grand
Forks sawmill to a one-shift basis effective January 1, 1995, reducing the
Company's lumber production capacity by approximately 8 percent of the
Company's 1994 lumber capacity. Except for Port Gamble and Grand Forks, all of
the remaining Company sawmills operated essentially at capacity in 1995.
Following the closure of the Port Gamble sawmill and reduction of Grand Forks
to one shift, the Company's lumber capacity is now approximately 526 million
board feet, of which approximately 27 percent is in the Black Hills region of
the United States, and the remainder in British Columbia, Canada.
During 1994, the provincial government of British Columbia's
Commission of Resources and Environment (CORE) began reviewing the future use
of the forest resources in the province, including reserving additional forest
resources for park lands. This review continued into 1995. Based on
preliminary reports of the Commission, it appears that the amount of timber
available to the Company's Canadian sawmills in the future could be reduced by
5 to 10 percent.
PULP AND PAPER PRODUCTS
The pulp and paper segment, which in 1995 produced market pulp and
private label tissue and diapers generated 49 percent of 1995 revenues. The
pulp and paper segment has posted losses for the last four years although the
loss in 1995 was substantially reduced from either 1994 or 1993. Pulp and
paper operating losses (after reflecting diapers as discontinued operations in
the financial statements) were $1.5 million in 1995, $23.1 million in 1994 and
$26.9 million in 1993. Pulp operations returned to profitability in 1995 on
sharply improved pulp prices after four years of losses. Although tissue
selling prices increased during 1995, the tissue loss in 1995 was greater than
the 1994 loss as a result of a seven-month strike at the Company's Ransom
tissue facility and high wastepaper costs. Diapers, which are presented as
discontinued operations, incurred losses in 1995 after essentially break-even
results in 1994.
Pulp and paper revenues increased 30 percent in 1995 with sales of
$258.8 million. The sales increase (after restatement for discontinued
operations) was due to pulp business revenues increasing to $151.8 million in
1995 from $93.7 million in 1994 as a result of higher pulp selling prices.
Tissue revenues remained essentially unchanged as the lost volume from the
Ransom strike was offset by 17 percent higher selling prices.
The Company's market pulp business, which comprised 29 percent of
total Company revenues in 1995, returned to profitability in 1995 as the world
pulp markets continued strong throughout the majority of the year. Industry
pricing for a standard grade of bleached softwood pulp increased 70 percent in
1994 and increased another 37 percent in 1995 over 1994 levels. Although
industry-wide pulp prices began to escalate rapidly in 1994, due to fixed price
contracts the Company was not able to take full advantage of the price
improvements until late in that year, which was not adequate to prevent a full
year loss in 1994. Pricing for the Company's pulp in 1995 was more consistent
with industry-wide pricing. The Company currently sells approximately 40
percent of its pulp production into domestic and foreign markets at pricing
based on market prices for various grades of pulp. The remaining 60 percent is
sold to the Grays Harbor Paper Company, with pricing tied to a formula based on
white paper prices. During 1994, white paper prices did not increase as
rapidly as pulp pricing; however, during 1995 these paper prices increased so
that by the end of 1995 the
15
<PAGE> 5
pricing obtained for the pulp sold under this pricing arrangement was only
slightly below that obtained from other customers. A significant portion of
the pulp not sold to Grays Harbor was sold under pricing arrangements which
were for the majority of 1994 below industry pricing. Late in the third
quarter of 1994 these pricing provisions expired and during 1995 prices for
these sales returned to a normal relationship to market. Overall, pulp prices
in 1995 for the Company's pulp sales were 70 percent higher than 1994 prices
and 1994 prices were 25 percent higher than 1993 pricing. During 1995, the
pulp mill operated essentially at capacity except for a one-week shutdown at
the end of the year to align production with demand. Industry pulp pricing and
demand during the fourth quarter of 1995 and early in the first quarter of 1996
have declined from the 1995 peak levels.
Over the last several years environmental restrictions on timber
harvests in the Pacific Northwest have resulted in higher wood chip costs, and
reduced chip availability. Additionally during 1995, the strong pulp market
placed additional pressure on chip prices and availability. Chip prices
increased 71 percent from year-end 1994 levels during the middle of 1995;
however, reduced demand for chips as a result of a reduced pulp demand at the
end of 1995 reduced chip prices by year-end from the mid-year highs. Overall,
chip costs were 42 percent higher in 1995 than 1994. In order to maintain an
adequate supply of wood fiber to the mill, the Company began in 1994 to use
sawdust as a raw material for a portion of its pulp production, and during 1995
sawdust pulp comprised 38 percent of the mill's production. Sawdust has
historically been in greater supply and less expensive than the wood chips
normally used as the primary raw material for the pulp mill.
The Company's tissue business, which comprised 20 percent of total
Company revenues, incurred a loss in 1995 for the fourth consecutive year. The
losses in 1995 were incurred, however, for different reasons than the prior
years' losses. Tissue losses in 1992 through 1994 were caused primarily by
poor pricing within the industry. Tissue capacity increases in the late 1980's
and early 1990's resulted in capacity which exceeded demand growth causing
tissue prices to decline an average of 14 percent from 1989 through 1993. This
condition began to stabilize in 1994, and in 1995 industry-wide tissue
operating rates improved to approximately 93 percent of capacity generating
tissue price increases for the Company at the end of 1995 of approximately 30
percent over year-end 1994 levels. The 1995 price increases were the first
general price increases for the Company's tissue products since 1990. Prices
for wastepaper, the primary raw material component for tissue, generally
follows the pricing trends of world pulp markets. During 1995, wastepaper
pricing was pushed to record levels by a combination of strong pulp markets and
shortages of certain wastepaper grades caused primarily by the start-up of new
recycled fiber mills in the United States. As a result of these pressures,
wastepaper prices during 1995 doubled over 1994 pricing although by year-end
1995 wastepaper prices were declining and the prices paid for wastepaper in
December 1995 were 5 percent lower than the same time in 1994.
In addition to poor tissue pricing, losses have also been incurred
because of a high cost structure at the Company's Ransom tissue mill. To
reduce these losses the Company in 1995 implemented a labor contract having a
revised, lower cost structure for Ransom. The union employees rejected this
contract and were on strike for seven months in 1995 over this contract
implementation. In December 1995, the union employees accepted a revised
contract and returned to work. The losses caused by the strike, which were a
significant reason for the 1995 tissue loss, included costs for operating the
mill with temporary workers and salaried employees and higher shipping and
packaging costs, all of which were necessary to supply some of the Company's
East Coast customers. The Ransom tissue mill represents approximately 50
percent of the Company's tissue capacity and, as a result of the strike, Ransom
operated at approximately 53 percent of capacity in 1995. The Company's other
tissue mill at Eau Claire, Wisconsin operated at capacity during the year. In
total, the Company's tissue business operated at 75 percent of capacity. As of
the end of 1995 tissue operating conditions had improved over most of 1995.
These improvements include the settlement of the Ransom strike, 35 percent
higher tissue sales prices in the fourth quarter of 1995 than the fourth
quarter 1994, and wastepaper prices which, after peaking in mid 1995, were 5
percent lower in December 1995 than December 1994.
In the Company's diaper business (which has been reflected as a
discontinued operation in the financial statements) higher prices for fluff
pulp and continued competitive pricing for diapers resulted in a loss in the
Company's diaper business for 1995 after essentially a break-even year in 1994.
In December 1995, the Company entered into a
16
<PAGE> 6
definitive agreement to sell the diaper business to Paragon. The sale was
completed on February 8, 1996. To remain cost competitive in the diaper
business would have required substantial capital investments to consolidate
facilities and, even if such capital investments were made, it was unclear if
the size of the Company's diaper operations would have enabled the Company to
effectively compete against the larger branded producers. The competitive
pricing environment continued into 1995 and under pressure from both branded
producers and other private label producers, sales prices declined another 3
percent in 1995, after a 3 percent price decline in 1994. In this competitive
environment, overall demand for diapers has not increased significantly during
the last three years, which has impacted capacity utilization. During 1995,
diapers operated at approximately 75 percent of capacity, largely unchanged
from 81 percent of capacity in 1994. Contributing to the diaper losses was
also the rising costs for fluff pulp, a primary component for disposable
diapers. Costs for fluff pulp in 1995 were 50 percent higher than average 1994
levels.
OTHER MATTERS
The Environmental Protection Agency (EPA) has published proposed
regulations which would establish standards and limitations for non-combustion
sources under the Clean Air Act and revised regulations under the Clean Water
Act. These proposals are collectively referred to as the "cluster rules" and
have been the subject of extensive discussions between the pulp and paper
industry and the EPA. The Company's primary exposure to these proposals relate
to the Company's Halsey pulp mill, and to a much lesser degree the Company's
two tissue mills. Based on preliminary evaluation of the proposed rules, the
costs of modifications to the Company's mills could range from $15 million to
$30 million. The proposed rules could be made effective in 1999, although
later enactment is possible.
17
<PAGE> 7
QUARTERLY FINANCIAL INFORMATION
The following quarterly information is unaudited, but includes all adjustments
which management considers necessary for a fair presentation of such
information. For interim quarterly statements, the income tax provision
(benefit) is estimated using the best available information for projected
results for the entire year. The 1995 fourth quarter results include year-end
adjustments to certain accruals and valuation reserves approximating
$3,200,000, net of tax. During the fourth quarter of 1994, the Company
recognized other gains of $13,845,000 relating to the announced refund
of countervailing duties originally paid in 1992 and 1993 (see Note 8).
<TABLE>
<CAPTION>
Quarter
---------------------------------------------------
(Thousands except per share) First Second Third Fourth Year
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1995
Revenues $133,837 $124,491 $131,773 $134,308 $524,409
Gross profit (loss) 7,146 (2,108) 3,598 5,110 13,746
Loss from continuing
operations (1,043) (6,323) (3,380) (3,050) (13,796)
Loss from discontinued
operations (191) (2,688) (3,265) (4,898) (11,042)
------------------------------------------------------------------
Net loss $ (1,234) $ (9,011) $ (6,645) $ (7,948) $ (24,838)
==================================================================
Primary and fully diluted loss per common share:
Loss from continuing
operations $(.08) $(.48) $(.25) $(.22) $(1.03)
Loss from discontinued
operations (.01) (.20) (.24) (.38) (.83)
------------------------------------------------------------------
Net loss $(.09) $(.68) $(.49) $(.60) $(1.86)
==================================================================
1994
Revenues $130,550 $119,177 $126,195 $126,885 $502,807
Gross profit 19,857 10,942 9,100 5,171 45,070
Other gains (losses) - - - 13,845 13,845
Income (loss) from
continuing operations 7,439 1,919 (30) 6,624 15,952
Income (loss) from
discontinued operations 1,149 882 951 (3,037) (55)
------------------------------------------------------------------
Net income $ 8,588 $ 2,801 $ 921 $ 3,587 $ 15,897
==================================================================
Primary income (loss) per common share:
Income from
continuing operations $.61 $.14 $ - $ .50 $1.21
Income (loss) from
discontinued operations .09 .07 .07 (.23) -
------------------------------------------------------------------
Primary net income $.70 $.21 $.07 $ .27 $1.21
==================================================================
Fully diluted income (loss) per common share:
Income from
continuing operations $.56 $.14 $ - $ .50 $1.20
Income (loss) from
discontinued operations .09 .07 .07 (.23) -
------------------------------------------------------------------
Fully diluted net income $.65 $.21 $.07 $ .27 $1.20
==================================================================
</TABLE>
30
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report incorporated by reference in this Form 10-K into the Company's
previously filed Registration Statement No. 33-34996 on Form S-8 and
Registration Statement No. 33-64764 on Form S-8.
ARTHUR ANDERSEN LLP
Portland, Oregon
March 26, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 13826
<SECURITIES> 0
<RECEIVABLES> 52931
<ALLOWANCES> 0
<INVENTORY> 68710
<CURRENT-ASSETS> 207252
<PP&E> 457959
<DEPRECIATION> 232199
<TOTAL-ASSETS> 472227
<CURRENT-LIABILITIES> 113495
<BONDS> 138514
0
0
<COMMON> 13972
<OTHER-SE> 175720
<TOTAL-LIABILITY-AND-EQUITY> 472227
<SALES> 524409
<TOTAL-REVENUES> 524409
<CGS> 510663
<TOTAL-COSTS> 510663
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13784
<INCOME-PRETAX> (21347)
<INCOME-TAX> (7551)
<INCOME-CONTINUING> (13796)
<DISCONTINUED> (11042)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (24838)
<EPS-PRIMARY> (1.86)
<EPS-DILUTED> (1.86)
</TABLE>
