UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended July 31, 1997 Commission File Number 0-1370
-------------------------- ------------
Longview Fibre Company
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Washington 91-0298760
- ---------------------------------- ------------------------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
P. O. Box 639, Longview, Washington 98632
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (360) 425-1550
---------------------------------
Not Applicable
- -------------------------------------------------------------------------------
Former name, former address and former fiscal year,if changed since last report
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
----- -----
51,685,757 Common Shares were outstanding as of July 31, 1997
Page 1<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEET
- -------------------------- (000 Omitted)
Jul. 31 Oct. 31 Jul. 31
1997 1996 1996
(Unaudited) (Unaudited)
A S S E T S ----------- ----------- -----------
CURRENT ASSETS:
Accounts and notes receivable $83,796 $99,147 $88,348
Allowance for doubtful accounts 1,100 1,100 1,100
Inventories, at lower of cost or market; costs
are based on last-in, first-out method except
for supplies at current averages
Finished goods 18,634 24,321 18,890
Goods in process 14,083 17,328 17,939
Raw materials and supplies 54,232 52,069 46,380
Other 10,504 11,923 9,980
----------- ----------- -----------
Total current assets 180,149 203,688 180,437
----------- ----------- -----------
CAPITAL ASSETS:
Buildings, machinery and equipment at cost 1,543,270 1,456,432 1,422,919
Accumulated depreciation 763,733 710,946 698,488
----------- ----------- -----------
Costs to be depreciated in future years 779,537 745,486 724,431
Plant sites at cost 3,041 2,909 2,909
----------- ----------- -----------
782,578 748,395 727,340
Timber at cost less depletion 177,980 177,683 177,848
Roads at cost less amortization 8,525 8,956 8,578
Timberland at cost 16,232 16,103 16,068
----------- ----------- -----------
202,737 202,742 202,494
----------- ----------- -----------
Total capital assets 985,315 951,137 929,834
----------- ----------- -----------
OTHER ASSETS 46,882 42,455 41,881
----------- ----------- -----------
$1,212,346 $1,197,280 $1,152,152
=========== =========== ===========
L I A B I L I T I E S A N D S H A R E H O L D E R S ' E Q U I T Y
CURRENT LIABILITIES:
Payable to bank resulting from
checks in transit $6,719 $13,031 $3,057
Accounts payable 40,544 44,533 37,947
Short-term borrowings 59,600 38,000 41,000
Payrolls payable 10,502 11,125 13,812
Federal income taxes payable -- -- 1,158
Other taxes payable 12,596 11,906 12,234
Current installments of long-term debt 14,119 34,119 34,119
----------- ----------- -----------
Total current liabilities 144,080 152,714 143,327
----------- ----------- -----------
LONG-TERM DEBT 461,537 426,255 404,255
----------- ----------- -----------
DEFERRED TAXES - NET 138,432 135,106 128,339
----------- ----------- -----------
OTHER LIABILITIES 14,237 12,793 12,623
----------- ----------- -----------
SHAREHOLDERS' EQUITY
Common stock, ascribed value $1.50 per share;
authorized 150,000,000 shares; issued
51,685,757; 51,705,577 and 51,720,902
shares respectively 77,529 77,558 77,581
Additional paid-in capital 3,306 3,306 3,306
Retained earnings 373,225 389,548 382,721
----------- ----------- -----------
Total shareholders' equity 454,060 470,412 463,608
----------- ----------- -----------
$1,212,346 $1,197,280 $1,152,152
=========== =========== ===========
The accompanying note is an integral part of these financial statements.
Page 2<PAGE>
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
- --------------------------------------------
(000 Omitted)
Three Months Ended Nine Months Ended
July 31 July 31
--------------------- -----------------------
1997 1996 1997 1996
--------- ----------- ----------- -----------
Net sales:
Timber $51,830 $46,289 $149,304 $137,914
Paper and paperboard 51,496 50,115 135,279 140,820
Converted products 94,059 101,189 280,873 327,788
--------- ----------- ----------- -----------
197,385 197,593 565,456 606,522
--------- ----------- ----------- -----------
Cost of products sold, including
outward freight 166,546 164,365 482,425 488,450
--------- ----------- ----------- -----------
Gross profit 30,839 33,228 83,031 118,072
--------- ----------- ----------- -----------
Selling, administrative
and general expenses 16,566 15,021 47,542 45,048
--------- ----------- ----------- -----------
Operating profit:
Timber 27,869 23,444 85,302 77,252
Paper and paperboard (1,679) (584) (6,697) 624
Converted products (11,917) (4,653) (43,116) (4,852)
--------- ----------- ----------- -----------
14,273 18,207 35,489 73,024
--------- ----------- ----------- -----------
Other income (expense):
Interest income 107 155 381 458
Interest expensed (8,191) (7,340) (22,880) (22,272)
Miscellaneous 282 9,906 753 10,506
--------- ----------- ----------- -----------
6,471 20,928 13,743 61,716
Provision for taxes on income:
Current 720 4,519 1,621 13,084
Deferred 1,609 2,485 3,326 9,134
--------- ----------- ----------- -----------
2,329 7,004 4,947 22,218
--------- ----------- ----------- -----------
Net income $4,142 $13,924 $8,796 $39,498
========= =========== =========== ===========
Dollars per share:
Net income $0.08 $0.27 $0.17 $0.76
Dividends $0.16 $0.15 $0.48 $0.45
Average shares outstanding in the
hands of the public (000 omitted) 51,689 51,727 51,695 51,738
The accompanying note is an integral part of these financial statements.
Page 3<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
- ------------------------------------------------
(000 Omitted)
Three Months Ended Nine Months Ended
July 31 July 31
--------------------- -----------------------
1997 1996 1997 1996
--------- ----------- ----------- -----------
Cash provided by (used for) operations:
Net income $4,142 $13,924 $8,796 $39,498
Charges to income not
requiring cash -
Depreciation 20,429 18,822 59,945 55,356
Depletion and amortization 1,329 1,428 3,573 3,489
Deferred taxes - net 1,610 2,485 3,326 9,134
(Gain) loss on disposition of
capital assets 1,455 4,390 2,697 6,054
Change in:
Accounts and notes receivable 322 4,513 15,351 29,816
Inventories (1,042) 697 6,769 (675)
Other 425 (726) 1,419 (608)
Other noncurrent assets (1,241) (384) (4,427) (3,614)
Accounts, payrolls and other
taxes payable (878) (1,397) 754 (16,128)
Federal income taxes payable -- 764 -- (1,317)
Other noncurrent liabilities 503 542 1,444 1,689
--------- ----------- ----------- -----------
Cash provided by operations 27,054 45,058 99,647 122,694
--------- ----------- ----------- -----------
Cash provided by (used for) investing:
Additions to: Plant and equipment (29,745) (25,708) (97,297) (86,760)
Timber and timberlands (777) (427) (3,624) (2,196)
Proceeds from sale of
capital assets 345 481 528 809
--------- ----------- ----------- -----------
Cash used for investing (30,177) (25,654) (100,393) (88,147)
--------- ----------- ----------- -----------
Cash provided by (used for) financing:
Long-term debt 10,282 (18,119) 15,282 (5,119)
Short-term borrowings 2,600 11,000 21,600 5,000
Payable to bank resulting from
checks in transit (2,049) (3,560) (6,312) (7,215)
Accounts payable for construction 714 (716) (4,676) (3,424)
Cash dividends (8,270) (7,759) (24,814) (23,282)
Purchase of common stock (154) (250) (334) (507)
--------- ----------- ----------- -----------
Cash provided by (used for)
financing 3,123 (19,404) 746 (34,547)
--------- ----------- ----------- -----------
Change in cash position -- -- -- --
Cash position, beginning of period -- -- -- --
--------- ----------- ----------- -----------
Cash position, end of period $ -- $ -- $ -- $ --
========= =========== =========== ===========
Supplemental disclosures of
cash flow information:
Cash paid during the year for:
Interest (net of amount
capitalized) $8,567 $9,648 $23,682 $24,388
Income taxes 87 3,881 (72) 14,526
The accompanying note is an integral part of these financial statements.
Page 4<PAGE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Unaudited)
- ----------------------------------------------------------
(000 Omitted)
Three Months Ended Nine Months Ended
July 31 July 31
--------------------- -----------------------
1997 1996 1997 1996
--------- ----------- ----------- -----------
Common stock:
Balance at beginning of period $77,542 $77,603 $77,558 $77,627
Ascribed value of stock
purchased (13) (22) (29) (46)
--------- ----------- ----------- -----------
Balance at end of period $77,529 $77,581 $77,529 $77,581
========= =========== =========== ===========
Additional paid-in capital:
Balance at beginning of period $3,306 $3,306 $3,306 $3,306
--------- ----------- ----------- -----------
Balance at end of period $3,306 $3,306 $3,306 $3,306
========= =========== =========== ===========
Retained earnings:
Balance at beginning of period $377,494 $376,784 $389,548 $366,966
Net income 4,142 13,924 8,796 39,498
Cash dividends on common stock (8,270) (7,759) (24,814) (23,282)
Purchases of common stock (141) (228) (305) (461)
--------- ----------- ----------- -----------
Balance at end of period $373,225 $382,721 $373,225 $382,721
========= =========== =========== ===========
Dividends paid per share $0.16 $0.15 $0.48 $0.45
========= =========== =========== ===========
Common shares:
Balance at beginning of period 51,695 51,736 51,706 51,751
Purchases (9) (15) (20) (30)
--------- ----------- ----------- -----------
Balance at end of period 51,686 51,721 51,686 51,721
========= =========== =========== ===========
The accompanying note is an integral part of these financial statements.
Page 5<PAGE>
NOTE 1: The consolidated interim financial statements have been prepared by
the company, without audit and subject to year-end adjustment, in accordance
with generally accepted accounting principles, except that certain
information and footnote disclosure made in the latest annual report have
been condensed or omitted for the interim statements. Accordingly, these
statements should be read in conjunction with the company's latest annual
report. Certain costs of a normal recurring nature are estimated for the
full year and allocated in interim periods based on estimates of operating
time expired, benefit received, or activity associated with the interim
period. The consolidated financial statements reflect all adjustments which
are, in the opinion of management, necessary for fair presentation.
Page 6<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Consolidated Statement of Income
--------------------------------
Three and Nine Months Ended July 31, 1997 compared with
-------------------------------------------------------
Three and Nine Months Ended July 31, 1996
-----------------------------------------
Net income decreased 70% and 78% for the third quarter and year-to-date 1997,
respectively, as compared with like periods in 1996. The primary reasons for
the reduced results were the operating losses incurred by the manufacturing
segments of the business. Timber operating profits improved 19% and 10% for
the quarter and year-to-date periods, respectively.
Timber
- ------
Operating profits for the third quarter 1997 improved due to a 4% and 19%
increase in the average price for logs and lumber, respectively, and a 78%
increase in volume of lumber sold. For the year-to-date period, average log
and lumber prices increased 4% and 46%, respectively, over the first nine
months of fiscal 1996. The volume of logs sold during the year-to-date
period decreased 7% from 1996, while the volume of lumber sold improved 109%.
During the third quarter 1997, demand and prices in the domestic log market
were strong. Export log markets weakened during the third quarter due to an
increase in the export log supply which exceeded demand.
Paper and Paperboard
- --------------------
Third quarter 1997 and year-to-date 1997 operating results deteriorated
primarily due to proportionately more paperboard tonnage sold in the
depressed export market. Volume of paper sold declined 2% compared with
year-ago levels while paperboard tonnage sold increased 18% and 45% in the
third quarter 1997 and year-to-date 1997, respectively. Average paper prices
realized by the company during the third quarter increased 2% over the third
quarter of fiscal 1996 due to a more favorable product mix. Average paper
prices for 1997 to date declined 4% from the first nine months of 1996.
Average paperboard prices for the third quarter were unchanged from low
levels realized during the third quarter of 1996. Average paperboard prices
for 1997 to date declined 12% from the first nine months of 1996.
During the quarter, an 11-day shutdown was taken to improve the balance
between incoming orders and paper machine production. Extensive planned
maintenance and repair work was completed during the shutdown. The mill
operated at 81% of capacity.
Pricing for linerboard is extremely weak in both the domestic and export
markets. Price increases are being implemented as gradual growth in customer
demand continues to absorb increased industry capacity added in the last
several years. Paper markets are fair.
Page 7<PAGE>
Converted Products
- ------------------
Average price decreases of 11% and 13% for the third quarter and year-to-date
periods, respectively, were the primary causes of the operating losses
incurred by the converted products segment. Tonnage sold during the third
quarter increased 5% as compared with year-ago levels while year-to-date
tonnage was down modestly from tonnage sold in the first nine months of 1996.
During the quarter demand improved, but prices remained weak particularly for
commodity products. Although markets are expected to remain competitive, the
pricing environment has improved with price increases currently being
implemented.
Other
- -----
Increased interest expensed for the third quarter and year-to-date 1997 was
due to a higher level of total borrowing which was modestly offset by lower
interest rates.
Income Taxes
- ------------
Taxes on income are approximately 36% of pretax income for fiscal 1997 and
1996.
Three Months Nine Months
Ended July 31 Ended July 31
% %
Other Data 1997 1996 Change 1997 1996 Change
- ---------- ---------------------- ---------------------
Sales
Logs, thousands of board feet 65,000 65,000 - 171,000 183,000 - 7
Lumber, thousands of board feet 16,000 9,000 +78 46,000 22,000 +109
Paper, tons 52,000 53,000 - 2 139,000 142,000 - 2
Paperboard, tons 47,000 40,000 +18 122,000 84,000 + 45
Converted products, tons 135,000 129,000 + 5 390,000 395,000 - 1
Logs, $/thousand board feet $ 691 $ 662 + 4 $ 745 $ 714 + 4
Lumber, $/thousand board feet 424 357 +19 474 324 + 46
Paper, $/ton FOB mill equivalent 654 643 + 2 646 675 - 4
Paperboard, $/ton FOB mill equiv. 325 325 - 327 373 - 12
Converted products, $/ton 698 785 -11 721 830 - 13
Liquidity and Capital Resources
-------------------------------
Capital expenditures for the year were above available funds from cash flow
and, therefore, increased total borrowings. The company has undertaken major
paper mill projects which management believes will improve quality and
capability to make diverse grades, reduce costs and modestly increase
capacity. The backlog of approved projects is $62 million. Adequate
financing is available as needed. During the quarter, the company purchased
9,155 shares of its common stock. Cash dividends of $.16 per share were
declared and paid in the third quarter in the aggregate of $8,270,000.
Subsequent to July 31, 1997, the company completed private placements of $20
million of notes due August 15, 2002 and $20 million of notes due September 8,
2003. The company intends to use the proceeds for general corporate purposes
and to repay short term borrowings.
Forward Looking Statements
--------------------------
This Form 10-Q contains forward-looking statements concerning anticipated
pricing and market conditions, the expected results of planned paper mill
improvement projects and anticipated cost and availability of financing for
planned capital improvement projects. Actual events could differ from those
anticipated by the company due to a variety of factors, including, among
others, developments in the world, national or regional economy involving the
company's customers or competitors affecting supply of or demand for the
company's products or raw materials, project delays, cost overruns, weather,
labor disputes or other unforeseen events, or significant unforeseen
developments in the company's business or adverse changes in the capital
markets or interest rates affecting the availability of financing.
Page 8<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS.
Nothing to report.
Item 2. CHANGES IN SECURITIES.
Nothing to report.
Item 3. DEFAULTS UPON SENIOR SECURITIES.
Nothing to report.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Nothing to report.
Item 5. OTHER INFORMATION.
Nothing to report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits required to be filed by Item 601 of Regulation S-K:
27 Financial Data Schedule
(b) Reports of Form 8-K - Nothing to report.
Page 9<PAGE>
SIGNATURES
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.
LONGVIEW FIBRE COMPANY
---------------------------------------------
(Registrant)
Date 9-12-97 \s\ L. J. Holbrook
----------------------- ---------------------------------------------
L. J. Holbrook, Senior Vice President-Finance
Secretary and Treasurer
Date 9-12-97 \s\ A. G. Higgens
----------------------- ---------------------------------------------
A. G. Higgens, Assistant Treasurer
Page 10<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM PART I OF THIS FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1997
<PERIOD-END> JUL-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 83,796
<ALLOWANCES> 1,100
<INVENTORY> 86,949
<CURRENT-ASSETS> 180,149
<PP&E> 1,749,048
<DEPRECIATION> 763,733
<TOTAL-ASSETS> 1,212,346
<CURRENT-LIABILITIES> 144,080
<BONDS> 0
0
0
<COMMON> 77,529
<OTHER-SE> 376,531
<TOTAL-LIABILITY-AND-EQUITY> 1,212,346
<SALES> 565,456
<TOTAL-REVENUES> 565,456
<CGS> 482,425
<TOTAL-COSTS> 482,425
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,880
<INCOME-PRETAX> 13,743
<INCOME-TAX> 4,947
<INCOME-CONTINUING> 8,796
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,796
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
