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 January 31, 1998 Commission file number 0-1370
--------------------------- ----------
Longview Fibre Company
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
300 Fibre Way, Longview, Washington 91-0298760
- ------------------------------------ ------------------------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
P. O. Box 639, Longview, Washington 98632
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (360) 425-1550
------------------------------
Not Applicable
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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
----- -----
51,676,567 Common Shares were outstanding as of January 31, 1998
Page 1<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEET
- -------------------------- (000 Omitted)
Jan. 31 Oct. 31 Jan. 31
1998 1997 1997
(Unaudited) (Unaudited)
A S S E T S ----------- ----------- -----------
CURRENT ASSETS:
Accounts and notes receivable $83,603 $105,850 $87,762
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 24,718 24,832 17,792
Goods in process 21,276 13,868 14,043
Raw materials and supplies 48,660 45,802 53,587
Other 9,365 8,432 13,276
----------- ----------- -----------
Total current assets 186,522 197,684 185,360
----------- ----------- -----------
CAPITAL ASSETS:
Buildings, machinery and equipment at cost 1,593,101 1,572,089 1,489,100
Accumulated depreciation 795,329 774,852 729,766
----------- ----------- -----------
Costs to be depreciated in future years 797,772 797,237 759,334
Plant sites at cost 3,041 3,041 2,909
----------- ----------- -----------
800,813 800,278 762,243
Timber at cost less depletion 195,824 187,141 177,440
Roads at cost less amortization 8,768 8,866 8,785
Timberland at cost 19,702 17,076 16,206
----------- ----------- -----------
224,294 213,083 202,431
----------- ----------- -----------
Total capital assets 1,025,107 1,013,361 964,674
----------- ----------- -----------
OTHER ASSETS 54,089 49,858 44,805
----------- ----------- -----------
$1,265,718 $1,260,903 $1,194,839
=========== =========== ===========
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 $11,219 $9,834 $8,644
Accounts payable 42,299 53,647 41,822
Short-term borrowings 59,000 56,000 54,000
Payrolls payable 11,641 13,206 11,489
Federal income taxes payable -- -- --
Other taxes payable 10,837 10,498 13,099
Current installments of long-term debt 14,118 14,118 14,119
----------- ----------- -----------
Total current liabilities 149,114 157,303 143,173
----------- ----------- -----------
LONG-TERM DEBT 529,137 498,137 441,255
----------- ----------- -----------
DEFERRED TAXES - NET 138,532 141,623 135,114
----------- ----------- -----------
OTHER LIABILITIES 14,770 14,334 13,264
----------- ----------- -----------
SHAREHOLDERS' EQUITY
Common stock, ascribed value $1.50 per share;
authorized 150,000,000 shares; issued
51,676,567; 51,676,567 and 51,697,912
shares respectively 77,515 77,515 77,547
Additional paid-in capital 3,306 3,306 3,306
Retained earnings 353,344 368,685 381,180
----------- ----------- -----------
Total shareholders' equity 434,165 449,506 462,033
----------- ----------- -----------
$1,265,718 $1,260,903 $1,194,839
=========== =========== ===========
The accompanying note is an integral part of these financial statements.
Page 2<PAGE>
CONSOLIDATED STATEMENT OF INCOME (Unaudited)
- --------------------------------------------
(000 Omitted)
Three Months Ended
January 31
-----------------------
1998 1997
----------- -----------
Net sales:
Timber $35,395 $48,161
Paper and paperboard 46,824 37,115
Converted products 93,998 96,935
----------- -----------
176,217 182,211
----------- -----------
Cost of products sold, including outward freight 162,183 159,694
----------- -----------
Gross profit 14,034 22,517
----------- -----------
Selling, administrative and general expenses 15,988 15,446
----------- -----------
Operating profit (loss):
Timber 16,110 28,690
Paper and paperboard (5,723) (4,106)
Converted products (12,341) (17,513)
----------- -----------
(1,954) 7,071
----------- -----------
Other income (expense):
Interest income 152 146
Interest expensed (9,443) (7,442)
Miscellaneous 363 269
----------- -----------
(10,882) 44
Provision for taxes on income:
Current (718) 8
Deferred (3,091) 8
----------- -----------
(3,809) 16
----------- -----------
Net income (loss) ($7,073) $28
=========== ===========
Dollars per share:
Net income (loss) ($0.14) $ --
Dividends $0.16 $0.16
Average shares outstanding in the hands
of the public (000 omitted) 51,677 51,699
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
January 31
-----------------------
1998 1997
----------- -----------
Cash provided by (used for) operations:
Net income (loss) ($7,073) $28
Charges to income not requiring cash -
Depreciation 21,176 19,656
Depletion and amortization 1,230 1,314
Deferred taxes - net (3,091) 8
Loss on disposition of capital assets 439 790
Change in:
Accounts and notes receivable 22,247 11,385
Inventories (10,152) 8,296
Other (933) (1,353)
Other noncurrent assets (4,231) (2,350)
Accounts, payrolls and other taxes payable (4,814) 2,314
Other noncurrent liabilities 436 471
----------- -----------
Cash provided by operations 15,234 40,559
----------- -----------
Cash provided by (used for) investing:
Additions to: Plant and equipment (22,200) (34,360)
Timber and timberlands (12,458) (1,021)
Proceeds from sale of capital assets 67 84
----------- -----------
Cash used for investing (34,591) (35,297)
----------- -----------
Cash provided by (used for) financing:
Long-term debt 31,000 (5,000)
Short-term borrowings 3,000 16,000
Payable to bank resulting from checks in transit 1,385 (4,387)
Accounts payable for construction (7,760) (3,468)
Cash dividends (8,268) (8,272)
Purchase of common stock 0 (135)
----------- -----------
Cash used for financing 19,357 (5,262)
----------- -----------
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) $7,933 $8,723
Income taxes (657) (227)
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
January 31
-----------------------
1998 1997
----------- -----------
Common stock:
Balance at beginning of period $77,515 $77,558
Ascribed value of stock purchased -- (11)
----------- -----------
Balance at end of period $77,515 $77,547
=========== ===========
Additional paid-in capital:
Balance at beginning of period $3,306 $3,306
----------- -----------
Balance at end of period $3,306 $3,306
=========== ===========
Retained earnings:
Balance at beginning of period $368,685 $389,548
Net income (loss) (7,073) 28
Less cash dividends on common stock (8,268) (8,272)
Less purchases of common stock -- (124)
----------- -----------
Balance at end of period $353,344 $381,180
=========== ===========
Dividends paid per share $0.16 $0.16
=========== ===========
Common shares:
Balance at beginning of period 51,677 51,706
Purchases -- (8)
----------- -----------
Balance at end of period 51,677 51,698
=========== ===========
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 Months Ended January 31, 1998 compared with
-------------------------------------------------
Three Months Ended January 31, 1997
-----------------------------------
A net loss of $7 million was incurred in the first fiscal quarter of 1998 as
compared with net income of $28,000 in the first fiscal quarter of 1997. The
loss resulted from a significant decrease in timber operating profit and
continued operating losses in the manufacturing segments of the business.
Timber
- ------
Operating profits declined 44% in the first quarter 1998 as compared with the
first quarter 1997. The reduced profit resulted from average log and lumber
prices decreasing 22% and 39%, respectively, and log volume declining 6%
compared with year ago levels. These results were driven by the deterioration
of the log export market during the latter half of 1997 caused by an increase
in the supply of export quality logs, reduced end user demand in Japan and the
strengthening of the U.S. dollar.
The export market appears to have bottomed out in the first quarter 1998 as
the excess log supply in the marketplace was eliminated. Export log demand
improved substantially during the quarter and is currently good, and prices
have improved modestly. Domestic log markets appear stable.
Paper and Paperboard
- --------------------
Operating losses for paper and paperboard increased to $5.7 million from $4.1
million in the first quarter 1998 compared with the first quarter 1997. The
increased loss primarily resulted from a 5% and 1% reduction in average paper
and paperboard prices, respectively. The volume of paper and paperboard sold
increased 20% and 54% compared with year ago levels. Costs were high in both
the first quarter 1998 and the first quarter 1997 due to mill shutdowns of 9
and 12 days, respectively, during which extensive planned maintenance and
repair work was completed, and due to machine rebuilds. First quarter 1998
costs were adversely affected by a 15% increase in wood chip costs and
favorably affected by lower fixed costs per ton due to increased production.
The mill operated at 80% of capacity in the first quarter.
The domestic market for paper and paperboard appears to have bottomed out and
the price increases implemented last fall appear to have held. The demand for
export paperboard was weak during the first quarter 1998. It is unknown if
this is a pronounced temporary decline in demand or a longer term decline
associated with economic conditions in Asia or the Asian currency crisis.
Converted Products
- ------------------
First quarter 1998 sales decreased 3% as a result of a 2% reduction in volume
sold and a 1% reduction in average price. Operating losses from converted
products decreased to $12 million in first quarter 1998 from $18 million in
first quarter 1997 due to lower costs for containerboard used to manufacture
boxes and lower per unit operating costs at the box plants. Average price was
below the level needed for profitable results.
Page 7<PAGE>
Demand was at satisfactory levels during the first quarter 1998 and prices
improved 8% compared with the fourth quarter 1997. The company continues to
develop its specialty and niche products which approximates 25% of sales.
Three Months
Ended January 31
%
Other Data 1998 1997 CHANGE
- ---------- -----------------------------------
Sales
Logs, thousands of board feet 47,000 50,000 - 6
Lumber, thousands of board feet 17,000 14,000 + 21
Paper, tons 49,000 41,000 + 20
Paperboard, tons 43,000 28,000 + 54
Converted products, tons 127,000 130,000 - 2
Logs, $/thousand board feet $ 635 $ 812 - 22
Lumber, $/thousand board feet 335 550 - 39
Paper, $/ton FOB mill equivalent 606 635 - 5
Paperboard, $/ton FOB mill equivalent 343 347 - 1
Converted products, $/ton 741 745 - 1
Other
- -----
Interest expensed increased 27% for the first quarter 1998 as compared with
the like period in 1997 due to a higher level of borrowing.
Income Taxes
- ------------
Taxes are approximately 35% and 36% of pretax income (loss) for fiscal 1998
and 1997, respectively.
Liquidity and Capital Resources
-------------------------------
At January 31, 1998, the company had bank lines of credit totaling
$355 million. Of this amount $200 million was under a credit agreement with a
group of banks expiring February 28, 1999, and $55 million was under a credit
agreement expiring November 1, 1999. At the end of the first fiscal quarter
1998, the company had outstanding $255 million of notes payable under these
agreements. At January 31, 1998, the company had an outstanding balance of
$79 million under the remaining $100 million lines of credit leaving
$21 million of bank lines available for future borrowing needs. Also
outstanding at January 31, 1998, were senior notes of $239 million and revenue
bonds of $28.9 million.
During February 1998, the $200 million credit agreement and the $55 million
credit agreement were terminated and replaced by a three year credit agreement
with a group of banks in the amount of $260 million. The agreement provides
for borrowings at the Offshore Rate (LIBOR based) plus a spread, currently
0.50%, or the bank's Reference Rate. The credit agreement contains certain
financial covenants and provides for a facility fee, currently 0.25% per year.
Capital expenditures for plant and equipment and timberland purchases exceeded
available funds generated by operations and were funded by increased
borrowings. With reduced cash flow, capital expenditures are being reduced.
While much remains to be done to optimize our manufacturing capabilities, the
most urgent projects have been completed or will be completed in the near
Page 8<PAGE>
future. Capital expenditures for plant and equipment are expected to be
between $50 million and $70 million for fiscal 1998 of which $22 million was
incurred in the first quarter. The current backlog of approved projects is
$40 million. During the quarter, the company did not purchase any of its
common stock. Cash dividends of $0.16 per share were declared and paid in the
first quarter in the aggregate of $8,268,000.
Forward Looking Statements
--------------------------
This Form 10-Q contains forward-looking statements concerning anticipated
pricing and market conditions for the company's products, the expected results
of planned paper mill improvement projects and anticipated cost of and
availability of financing for planned capital improvement projects.
Forward-looking statements are based on the company estimates and projections
on the date when they are made, and are subject to a variety of risks and
uncertainties. Actual events could differ materially from those anticipated
by the company due to a variety of factors, including, among others,
developments in the world, national or regional economy or involving the
company's customers or competitors affecting supply of or demand for the
company's products or raw materials, changes in product or raw material
prices, changes in currency exchange rates between the U.S. dollar and the
currencies of important export markets, capital project delays or cost
overruns, weather, labor disputes, unforeseen adverse developments involving
environmental matters or other legal proceedings or the assertion of
additional claims, significant unforeseen developments in the company's
business, adverse changes in the capital markets or interest rates affecting
the cost or availability of financing or other unforeseen events.
Page 9<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.
The Annual Meeting of Shareholders of Longview Fibre Company was held
on January 27, 1998 at which time four Class II Directors were
elected.
CLASS II DIRECTORS ELECTED
(Terms to Expire in 2001) Votes Cast
For Withheld Abstentions
----------- ----------- -----------
Robert E. Wertheimer 44,687,544 1,170,587 586,216
Donald C. Stibich 44,691,262 1,166,869 586,216
Lisa J. Holbrook 44,533,271 1,324,860 586,216
John R. Kretchmer 44,682,665 1,175,466 586,216
DIRECTORS WHOSE TERM CONTINUES
CLASS III DIRECTORS
(Terms to Expire in 1999)
Richard P. Wollenberg
Robert B. Arkell
M. Alexis Dow
Page 10<PAGE>
CLASS I DIRECTORS
(Terms to Expire in 2000)
David A. Wollenberg
David L. Bowden
Richard H. Wollenberg
Richard J. Parker
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
Page 11<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 3-12-98 \s\ L. J. Holbrook
----------------------- ----------------------------------------------
L. J. Holbrook, Senior Vice President-Finance,
Secretary and Treasurer
Date 3-12-98 \s\ A. G. Higgens
----------------------- ----------------------------------------------
A. G. Higgens, Assistant Treasurer
Page 12
<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> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> JAN-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 83,603
<ALLOWANCES> 1,100
<INVENTORY> 94,654
<CURRENT-ASSETS> 186,522
<PP&E> 1,820,436
<DEPRECIATION> 795,329
<TOTAL-ASSETS> 1,265,718
<CURRENT-LIABILITIES> 149,114
<BONDS> 529,137
0
0
<COMMON> 77,515
<OTHER-SE> 356,650
<TOTAL-LIABILITY-AND-EQUITY> 1,265,718
<SALES> 176,217
<TOTAL-REVENUES> 176,217
<CGS> 162,183
<TOTAL-COSTS> 162,183
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,443
<INCOME-PRETAX> (10,882)
<INCOME-TAX> (3,809)
<INCOME-CONTINUING> (7,073)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,073)
<EPS-PRIMARY> (0.14)
<EPS-DILUTED> (0.14)
</TABLE>
