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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 June 30, 1997
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 No. 1-7852
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POPE & TALBOT, INC.
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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
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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 - 13,459,951 shares as of August 4, 1997
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PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page No.
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ITEM 1. Financial Statements:
Consolidated Condensed Balance Sheets -
June 30, 1997 and December 31, 1996 2
Consolidated Statements of Income -
Three and Six Months Ended June 30, 1997 and 1996 3
Consolidated Condensed Statements of Cash Flows -
Six Months Ended June 30, 1997 and 1996 4
Notes to Consolidated Condensed Financial Statements 5-6
ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-10
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings 11
ITEM 6. Exhibits and Reports on Form 8-K 11-14
</TABLE>
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PART I.
POPE & TALBOT, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
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ASSETS
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 44,533 $ 32,208
Accounts receivable 47,489 39,170
Inventories:
Raw materials 26,786 49,353
Finished goods 29,922 31,683
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56,708 81,036
Prepaid expenses and other 12,679 12,088
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Total current assets 161,409 164,502
Properties:
Plant and equipment 460,436 458,281
Accumulated depreciation (279,425) (266,862)
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181,011 191,419
Land and timber cutting rights 10,134 10,247
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Total properties 191,145 201,666
Other assets:
Deferred income tax assets, net 23,490 21,871
Goodwill, net of amortization 3,780 3,863
Other 18,405 16,027
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Total other assets 45,675 41,761
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$ 398,229 $ 407,929
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Notes payable $ 22,800 $ 30,000
Current portion of long-term debt 488 488
Accounts payable and accrued liabilities 52,504 55,215
Income taxes 3,217 1,364
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Total current liabilities 79,009 87,067
Noncurrent liabilities:
Reforestation 17,448 16,721
Postretirement benefits 13,207 12,887
Long-term debt, net of current portion 107,786 108,026
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Total noncurrent liabilities 138,441 137,634
Stockholders' equity:
Common stock 13,972 13,972
Additional paid-in capital 34,130 35,976
Retained earnings 150,844 150,563
Cumulative translation adjustments (7,065) (6,172)
Less treasury shares at cost (11,102) (11,111)
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Total stockholders' equity 180,779 183,228
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$ 398,229 $ 407,929
========= =========
</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 Six months ended
June 30, June 30,
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1997 1996 1997 1996
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<S> <C> <C> <C> <C>
Revenues:
Wood products $ 70,014 $ 56,552 $ 134,328 $ 110,599
Pulp and paper products 54,823 54,015 107,383 110,650
----------- ----------- ----------- ------------
Total 124,837 110,567 241,711 221,249
Costs and expenses:
Cost of sales:
Wood products 59,225 51,724 115,665 101,628
Pulp and paper products 51,292 51,880 102,292 109,912
Selling, general and administrative 5,082 3,926 9,952 8,744
Interest, net 2,212 1,932 4,401 4,469
----------- ----------- ----------- ------------
Total 117,811 109,462 232,310 224,753
----------- ----------- ----------- ------------
Income (loss) before income taxes and
discontinued operations 7,026 1,105 9,401 (3,504)
Income tax provision (benefit) 3,045 443 4,042 (1,401)
----------- ----------- ----------- ------------
Income (loss) from continuing operations 3,981 662 5,359 (2,103)
Discontinued operations:
Gain on disposal of discontinued operations
(Net of applicable income taxes of $2,074) -- -- -- 3,110
----------- ----------- ----------- ------------
Net income $ 3,981 $ 662 $ 5,359 $ 1,007
=========== =========== =========== ============
Income (loss) per common share:
Income (loss) from continuing operations $ .30 $ .05 $ .40 $ (.15)
Income from discontinued operations -- -- -- .23
----------- ----------- ----------- ------------
Net income $ .30 $ .05 $ .40 $ .08
=========== =========== =========== ============
Cash dividends per common share $ .19 $ .19 $ .38 $ .38
=========== =========== =========== ============
Weighted average number of
common shares outstanding 13,363,997 13,363,779 13,363,888 13,363,779
=========== =========== =========== ============
</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>
Six months ended
June 30,
------------------
1997 1996
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<S> <C> <C>
Cash flow from operating activities:
Net income $ 5,359 $ 1,007
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 15,025 15,990
Gain on disposal of discontinued operations -- (5,184)
Increase (decrease) in:
Accounts payable and accrued liabilities (2,711) (18,778)
Income taxes 1,853 (3,926)
Reforestation 859 704
Postretirement benefits 320 348
Decrease (increase) in:
Accounts receivable (8,319) 14,610
Inventories 24,328 10,934
Deposits on timber purchase contracts 192 (1,108)
Prepaid expenses (809) (1,570)
Deferred income taxes, net (1,640) (807)
Other assets (3,129) 689
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Net cash provided by operating activities 31,328 12,909
Cash flow from investing activities:
Capital expenditures (4,662) (1,857)
Proceeds from disposal of discontinued operations -- 50,500
Proceeds from sale of Paragon Trade Brands, Inc.
common stock -- 4,819
Proceeds from sale of other properties 23 2,214
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Net cash provided by (used for)
investing activities (4,639) 55,676
Cash flow from financing activities:
Net decrease in short-term borrowings (7,200) (39,000)
Net reduction of long-term debt (240) (30,225)
Partnership transaction tax settlement costs (1,846) --
Cash dividends (5,078) (5,078)
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Net cash used for financing activities (14,364) (74,303)
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Increase (decrease) in cash and
cash equivalents 12,325 (5,718)
Cash and cash equivalents at
beginning of period 32,208 13,826
-------- --------
Cash and cash equivalents at
end of period $ 44,533 $ 8,108
======== ========
</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
June 30, 1997 and 1996
(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 have 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
June 30, 1997 and December 31, 1996, the results of operations for the
three and six months ended June 30, 1997 and 1996, and changes in cash
flows for the six months ended June 30, 1997 and 1996. It is suggested
that these interim statements be read in conjunction with the financial
statements and notes thereto contained in the Company's 1996 report on
Form 10-K. The results of operations for the three and six months ended
June 30, 1997 and 1996 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.
In 1985, the stockholders 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 (the Partnership). The transfer resulted
in $10.3 million of taxes currently payable in 1985, which was charged
to stockholders' equity.
The distribution value for federal income tax purposes that was
assigned to the assets transferred to the Partnership has been
challenged by the Internal Revenue Service (IRS). In January 1993, the
Company petitioned the United States Tax Court (Tax Court) in order to
resolve the disputed value of the distribution. The issue was argued
before the Tax Court during the third quarter 1995 and follow-up legal
briefs were then filed into December 1995. Primarily in 1995, the
Company incurred costs defending its tax position in this case. In
1995, these defense costs, together with related tax payments and
interest charges totaling $4.9 million, net of tax benefits of $1.4
million, were recognized as a reduction in additional paid-in capital
with respect to the Partnership transaction. In March 1997, the Tax
Court rendered a decision which will become final, subject to appeal,
when the Company and the IRS agree to the tax liability based upon the
Court's decision. In the second quarter of 1997, based on the Company's
best estimate of the ultimate tax settlement taking into consideration
the Tax Court's decision, the Company recognized a reduction in
additional paid-in capital of $1.8 million. This charge to equity,
which represents the minimum in the estimated range of exposure to the
Company,
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reflected tax settlement and interest amounts totaling $2.5 million,
net of tax benefits of $0.7 million. The Company estimates the
potential for further equity reductions upon final tax settlement will
range from zero up to $3 million. Any final tax settlements will be
recognized as a reduction in equity with respect to the partnership
transaction.
3. Earnings per Share
Per share information is based on the weighted average number of common
shares outstanding during each period.
Refer to Exhibit 11.1 of this filing for the computation of average
common shares outstanding and earnings per share.
6
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POPE & TALBOT, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
June 30, 1997 AND 1996
(unaudited)
RESULTS OF OPERATIONS
Operating profits in both the wood products and pulp and paper products segments
led to second quarter 1997 net income of $3,981,000, or $.30 per share, for Pope
& Talbot, Inc. (the Company). The 1997 second quarter net income compared to net
income of $662,000, or $.05 per share, in the second quarter of 1996. Revenues
of $124,837,000 in the second quarter of 1997 were 13 percent higher than those
in the 1996 second quarter reflecting higher lumber and tissue sales which more
than offset lower pulp revenues. Second quarter 1997 year-to-date net income
totaled $5,359,000, or $.40 per share, which compared to net income of
$1,007,000, or $.08 per share, for the corresponding six months of 1996. The
1996 year-to-date net income reflected a loss from continuing operations of
$2,103,000, or $.15 per share, and a gain on the disposal of the Company's
discontinued disposable diaper business of $3,110,000, or $.23 per share.
The wood products segment, which comprised 56 percent of 1997 second quarter
sales, generated second quarter 1997 earnings of $9.6 million which were
substantially improved over income of $3.9 million in the second quarter of
1996. Second quarter 1997 year-to-date wood products earnings were $16.4 million
versus income of $6.9 million in the comparable 1996 period. Included in the
1996 year-to-date results was a $2.1 million gain recorded in the first quarter
related to the sale of sawmill equipment at Port Gamble. The Port Gamble
facility was permanently shut down in the fourth quarter of 1995. Total 1997
second quarter wood products revenues of $70.0 million were 24 percent higher
than second quarter 1996 and year-to-date 1997 wood products revenues of $134.3
million compared to sales of $110.6 million for the corresponding 1996 period.
These 1997 revenue increases reflect higher lumber prices and volumes which more
than offset lower residual wood chip prices. Second quarter 1997 lumber price
increases continued a trend of higher quarterly prices which began in mid-1995.
Lumber prices in the 1997 second quarter were about 19 percent higher than for
the corresponding period of 1996. Average lumber prices for the first six months
of 1997 were about 25 percent above year-to-date 1996 levels. While it is
difficult to project lumber prices due to the commodity nature of the business,
lumber prices appear to have hit their cyclical peak in the 1997 second quarter.
During the second quarter, sales prices were highest in May. June's prices were
4 percent lower than May and July's prices fell 4 percent from June levels.
Although lumber prices have been strong through the first half of 1997, the
sawmill's residual chip markets in the Pacific Northwest and British Columbia
remain weak, reflecting the continued poor world pulp markets. Second quarter
1997 chip prices were 16 percent below the second quarter 1996 prices at levels
which have remained fairly flat since the third quarter of 1996. The Company
uses residual chips in its pulp business which mitigates somewhat the impact of
these low chip prices in the lumber business. However, the Company produces more
residual chips in its lumber business than it consumes in the pulp business, so
on balance, weak chip prices have a detrimental impact on the Company's overall
operating results.
7
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Lumber sales volume of 151 million board feet in the second quarter of 1997
compared to shipments of 139 million in the corresponding 1996 quarter.
Shipments for the first six months of 1997 totaled 290 million board feet versus
269 million board feet during the comparable 1996 period. The year-to-year
volume increases reflected increased production at the Company's Canadian
sawmills to take advantage of the favorable lumber markets. The Company's
sawmills operated essentially at capacity during the second quarter of 1997.
During 1996, U.S. and Canadian trade negotiators reached an agreement
establishing volume quotas on Canadian softwood lumber shipments to the U.S.
Based on this agreement, Canadian lumber producers are assigned volume quotas
specifying on a company by company basis the lumber volumes which may be shipped
to the U.S. tariff-free and those volumes subject to a per thousand board foot
tariff. March 31, 1997, represented the end of the first fiscal year lumber
quota period related to this agreement and the Company shipped volumes in excess
of its quota during the period. In June 1997, the Company was informed of its
fiscal year 1997/1998 quota volumes which applied retroactively to April 1. The
Company's updated tariff-free volume allocation for the current fiscal year
represents an 11.4 million board foot reduction from the 1996/1997 fiscal year
allocations. Partially offsetting this tariff-free allocation reduction was a
2.6 million board foot increase in the Company's volume allocation subject to
the lower $50 per thousand board foot tariff. The Company believes its volume
allocations were determined consistently with other British Columbia lumber
producers. During the first half of 1997, the Company reflected tariff charges
of about $2.1 million related to shipments from the Company's Canadian sawmills
into the U.S. Approximately 75 percent of the Company's 1997 lumber capacity is
located in British Columbia.
The pulp and paper segment generated profits of $1.9 million in the second
quarter of 1997 compared to profits of $0.8 million in the 1996 second quarter.
Year-to-date results reflect profits of $2.0 million and losses of $2.1 million
in 1997 and 1996, respectively. In the second quarter and first half of 1997,
profitable tissue operations more than offset continued losses in the Company's
pulp business. Segment revenues of $54.8 million, or 44 percent of Company
sales, were up slightly from second quarter 1996 revenues of $54.0 million.
These second quarter revenues reflected higher tissue volumes which offset lower
tissue and pulp prices. Year-to-date segment revenues of $107.4 million were
down 3 percent from revenues in the first half of 1996 as increased tissue and
pulp volumes were more than offset by lower tissue and pulp prices.
The Company's pulp business represented 15 percent of second quarter 1997
revenues. In the 1997 second quarter, this business continued to incur losses as
market pulp prices remained poor. Second quarter and year-to-date 1997 pulp
losses were slightly larger than they were for the comparable 1996 periods due
mainly to lower pulp prices. Pulp pricing peaked in the fourth quarter of 1995
followed by a rapid decline at the end of 1995 which continued through the first
quarter of 1996. Pulp prices for the balance of 1996 approximated the low end of
first quarter 1996 levels and prices in the first quarter of 1997 fell even
further. Second quarter 1997 prices improved only slightly from the low first
quarter levels. Second quarter 1997 Company pulp prices were 6 percent lower
than the 1996 second quarter prices and were nearly 50 percent below prices
realized at the fourth quarter 1995 peak. Year-to-date second quarter 1997 pulp
prices were 18 percent below the first half 1996 pulp prices. The Company sold
about half of its second quarter year-to-date 1997 and 1996 pulp volumes to the
Grays Harbor Paper Company (Grays Harbor). Under the Company's supply agreement
with Grays Harbor, pulp prices are tied to a formula based on white paper prices
which typically move at different times during a cycle than market pulp. During
1996, the Company
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benefited from this pricing formula because white paper prices did not fall as
rapidly as market pulp prices. During the first half of 1997, however, Grays
Harbor and market pulp pricing were relatively comparable. As discussed for the
Company's wood products segment, residual wood chip prices have remained low
during the first half of 1997. Consistent with these low residual wood chip
prices, sawdust costs also remained low in the 1997 first half. The low sawdust
costs are significant since sawdust pulp represented over half of second quarter
year-to-date 1997 pulp production. These low chip and sawdust prices have helped
somewhat to offset the impact of the depressed pulp sales prices. During the
second quarter and first half of 1997, the Halsey mill operated at near capacity
levels.
The Company's tissue business, which represented about 29 percent of 1997 second
quarter revenues, generated profits in the second quarter and first half of 1997
which exceeded the small profits produced in the corresponding 1996 periods.
This improved profitability reflected higher tissue volumes and improved
operating efficiencies at the Ransom, Pennsylvania facility which more than
offset lower tissue prices. During 1996, particularly in the first quarter, the
Company worked through the process of rebuilding lost business and correcting
operating inefficiencies resulting from the seven-month 1995 labor strike at the
Ransom facility. This labor strike was settled late in the 1995 fourth quarter.
Due largely to these Ransom improvements, tissue sales volume in the first half
of 1997 was 15 percent higher than the comparable 1996 period. After several
years of poor tissue pricing, the Company benefited from continuously improving
prices during 1995 and early 1996. During the second quarter of 1996, Procter &
Gamble and Kimberly-Clark announced 6 to 8 percent average tissue price
reductions and the Company responded by decreasing tissue prices in the second
and third quarters of 1996. First quarter 1997 tissue prices were essentially
flat relative to the fourth quarter of 1996 while the 1997 second quarter prices
fell about 2 percent from the first quarter due to higher promotional activity.
Second quarter and year-to-date 1997 tissue prices were 8 percent below tissue
prices in the comparable 1996 periods. After being pushed to record levels
during 1995, wastepaper pricing began to decline at year-end 1995 and
accelerated through the first quarter of 1996 consistent with market pulp
prices. The Company's wastepaper costs have remained fairly stable since the
dramatic decreases early in 1996. Second quarter 1997 wastepaper costs were 7
percent higher than costs in the second quarter of 1996 while first half 1997
wastepaper costs were 3 percent below those in the 1996 first half. During the
second quarter and first half of 1997, the tissue business operated essentially
at capacity.
LIQUIDITY AND CAPITAL RESOURCES
During the first half of 1997, operations generated cash of $31.3 million.
Income before non-cash charges for depreciation and amortization generated $20.4
million of cash during the first six months of 1997. Increases in accounts
receivable related mainly to higher lumber shipments and prices in June 1997
than December 1996 combined with higher 1997 pulp business export sales used
cash of $8.3 million. Reductions of inventories related primarily to seasonal
decreases in log inventories from their relatively large year-end 1996 levels
generated cash of $24.3 million.
Capital spending of $4.7 million for the first six months of 1997 was used
primarily for relatively small, business-sustaining projects. The Company
anticipates that approximately $4 million will be required to complete
previously approved projects and that total capital spending for 1997 will
approximate $16 million. 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.
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Through the first six months of 1997, the Company returned $5.1 million to
shareholders in the form of dividends. The Company has also paid down $7.4
million of debt during the first half of 1997. The Company currently has a $75
million revolving-credit agreement under which $22 million was outstanding at
June 30, 1997. The Company also has a $10 million uncommitted credit line which
is used primarily to facilitate cash management activities. This uncommitted
credit line had $0.8 million outstanding at June 30, 1997.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Statements in this report or in other Company communications, such as press
releases, may relate to future events or the Company's future performance and
such statements are forward-looking statements. Such forward-looking statements
are based on present information the Company has related to its existing
business circumstances. Investors are cautioned that such forward-looking
statements are subject to an inherent risk that actual results may differ
materially from such forward-looking statements. Factors that may result in such
variances include, but are not limited to, changes in commodity prices and other
economic conditions, actions by competitors, changing weather conditions and
natural phenomena, actions by government authorities, uncertainties associated
with legal proceedings and future decisions by management in response to
changing conditions. Such factors are discussed in this report on Form 10-Q as
well as in the Company's Annual Report on Form 10-K.
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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
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 (IRS) has asserted that the Company owes
additional federal income tax in connection with this transaction and
the Company has disputed this asserted tax liability. The issue was
argued before the U.S. Tax Court (Tax Court) during 1995. Primarily
in 1995, the Company incurred costs defending its tax position in
this case. In 1995, these defense costs, together with related tax
payments and interest charges totaling $4.9 million, net of tax
benefits of $1.4 million, were recognized as a reduction in equity.
In March 1997, the Tax Court rendered a decision which will become
final, subject to appeal, when the Company and the IRS agree to the
tax liability based upon the Court's decision. In the second quarter
of 1997, based on the Company's best estimate of the ultimate tax
settlement taking into consideration the Tax Court's decision, the
Company recognized a reduction in equity of $1.8 million. This charge
to equity, which represents the minimum in the estimated range of
exposure to the Company, reflected tax settlement and interest
amounts totaling $2.5 million, net of tax benefits of $0.7 million.
The Company estimates the potential for further equity reductions
upon final tax settlement will range from zero up to $3 million. Any
final tax settlements 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 3.2
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.)
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.)
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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.)
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.)
4.10 Revolving Line of Credit Agreement, dated July 25, 1996,
between the Company and the United States National Bank of
Oregon. (Incorporated herein by reference to Exhibit 4.10
to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996.)
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4.11 Modification Agreement, dated as of November 18, 1996, to
the Revolving Credit Agreement, dated May 6, 1992, among
the Company and the 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 4.11 to the
Company's Annual Report on Form 10-K for the year ended
December 31, 1996.)
4.12 Modification Agreement, dated as of June 9, 1997, to the
Revolving Credit Agreement, dated May 6, 1992, among the
Company and the 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.)
10.1.6 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.)
10.1.7 1996 Non-Employee Director Stock Option Plan.
(Incorporated herein by reference to Exhibit 10.1.7 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1996.)
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.)
13
<PAGE> 15
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.)
10.6 Province of British Columbia Tree Farm License No. 8, dated
March 1, 1995. (Incorporated herein by reference to Exhibit
10.6 to the Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1996.)
10.7 Province of British Columbia Tree Farm License No. 23,
dated March 1, 1995. (Incorporated herein by reference to
Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996.)
10.8 Province of British Columbia Forest License A18969, dated
December 1, 1993. (Incorporated herein by reference to
Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996.)
11.1 Statement showing 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
June 30, 1997.
14
<PAGE> 16
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: August 8, 1997 /s/ Robert J. Day
------------------------------------
Robert J. Day
Senior Vice President and
Chief Financial Officer
<PAGE> 1
Exhibit 4.12
MODIFICATION AGREEMENT
This modification agreement is dated as of June 9, 1997, and
is among POPE & TALBOT, INC., a Delaware corporation (the "Borrower"), UNITED
STATES NATIONAL BANK OF OREGON now doing business as U.S. BANK ("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 a "Bank" and
collectively the "Banks") and the Borrower 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 (this "Agreement") are defined by the Credit Agreement.
B. The Borrower and the Banks desire to enter into this Agreement to
modify the clause in the Credit Agreement limiting the amount that the
Borrower can spend in the 1997 Fiscal Year on consolidated capital
expenditures and investments, to extend the Expiry Date, and to make
certain other modifications.
NOW, THEREFORE, for value, the Borrower and the Banks agree
that:
1. INCREASE IN MAXIMUM AMOUNT OF CAPITAL EXPENDITURES AND INVESTMENTS IN
1997. Section 4 of the modification agreement dated as of January 22,
1996 (the "1/22/96 Modification Agreement"), which modified the Credit
Agreement, is itself hereby modified to increase the maximum amount
that the Borrower and its Subsidiaries can invest in consolidated
capital expenditures and investments in the 1997 Fiscal Year from $25
million to $30 million. The Borrower has expressed its present
intention to use approximately $15 million for budgeted capital
expenditures and $15 million for investment purposes. No inference
should be drawn from this consent that the Banks consent to the
Borrower increasing the Borrower's investment beyond $15 million at any
later date or dates without first providing additional information and
obtaining additional consent from the Banks.
2. EXTENSION OF EXPIRY DATE. The Expiry Date of the Credit Facilities
provided under the Credit Agreement is hereby extended to December 31,
1998.
3. TAX-RELATED CHANGES IN NET WORTH. The minimum Tangible Net Worth
required for the Borrower under Section5.01(h)(i) of the Credit
Agreement will be hereby reduced by the amounts charged to
stockholders' equity as the Borrower's additional tax liability for the
1985 Pope Resources Partnership transaction plus related costs and
expenses when such charges to stockholders' equity occur on the
Borrower's financial statements. It will be an Event of Default if
Tangible Net Worth drops below $164 million after reflecting such
charges to stockholders' equity. After such charges are reflected on
the Financial Statements of Borrower and its Subsidiaries, minimum
Tangible Net Worth again will increase by an amount equal to 50% of the
positive net income of Borrower and its Subsidiaries in each Fiscal
Year thereafter.
-1-
<PAGE> 2
4. MISCELLANEOUS. The parties agree to issue any additional documents and
instruments reasonably necessary to effectuate the objectives of this
Agreement. The Loan Documents will continue in full force and effect as
modified by this Agreement. This Agreement may be signed in one or more
counterparts but all such counterparts will constitute but one
agreement. The Borrower will reimburse the Agent for the reasonable
out-of-pocket costs and expenses incurred by the Agent in preparing
this Agreement. This agreement replaces a modification agreement dated
as of February 14, 1997.
5. EFFECTIVE DATE. This Agreement will become effective only when the
Agent has received by facsimile the signature page signed by the
Borrower and the signature page(s) signed by all of the Banks.
If the 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. U.S. BANK, as the Agent and a Bank
By /s/ C. Lamadrid By /s/ Janice T. Thede
-------------------------------- -------------------------------
Carlos M. Lamadrid Janice T. Thede
Chief Financial Officer Vice President
CIBC INC. ABN AMRO BANK N.V.
By /s/ R. A. Mendoza By /s/ Leif H. Olsson
--------------------------------- -------------------------------
Ray A. Mendoza Leif H. Olsson
Director, CIBC Wood Gundy Group Vice President
Securities Corp., AS AGENT and Director
By /s/ Errett S. Hummel
-------------------------------
for David McGinnis
Vice President and Director
BANK OF AMERICA ILLINOIS WACHOVIA BANK OF GEORGIA
NATIONAL ASSOCIATION
By /s/ Michael J. Balock By /s/ William F. Hamlet
--------------------------------- -------------------------------
Michael J. Balock William F. Hamlet
Managing Director Senior Vice President
-2-
<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 Six months ended
June 30, June 30,
-------------------- --------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Weighted average number
of common shares
outstanding 13,363,997 13,363,779 13,363,888 13,363,779
Application of the "treasury
stock" method to the stock
option plan 36,975 -- 36,975 --
----------- ----------- ----------- -----------
Total common and common
equivalent shares,
assuming full dilution 13,400,972 13,363,779 13,400,863 13,363,779
=========== =========== =========== ===========
Net income $ 3,981,000 $ 662,000 $ 5,359,000 $ 1,007,000
=========== =========== =========== ===========
Net income per common share,
assuming full dilution $ .30 $ .05 $ .40 $ .08
=========== =========== =========== ===========
</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 JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 44,533
<SECURITIES> 0
<RECEIVABLES> 47,489
<ALLOWANCES> 0
<INVENTORY> 56,708
<CURRENT-ASSETS> 161,409
<PP&E> 460,436
<DEPRECIATION> 279,425
<TOTAL-ASSETS> 398,229
<CURRENT-LIABILITIES> 79,009
<BONDS> 107,786
0
0
<COMMON> 13,972
<OTHER-SE> 166,807
<TOTAL-LIABILITY-AND-EQUITY> 398,229
<SALES> 241,711
<TOTAL-REVENUES> 241,711
<CGS> 217,957
<TOTAL-COSTS> 217,957
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,401
<INCOME-PRETAX> 9,401
<INCOME-TAX> 4,042
<INCOME-CONTINUING> 5,359
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,359
<EPS-PRIMARY> .40
<EPS-DILUTED> .40
</TABLE>
