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, 2000 Commission File No. 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.)
300 Fibre Way, 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
51,676,567 Common Shares were outstanding as of July 31, 2000
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet (000 Omitted)
Jul. 31 Oct. 31 Jul. 31
2000 1999 1999
(Unaudited) (Unaudited)
ASSETS
Current assets:
Accounts and notes receivable $ 96,969 $ 106,095 $ 88,957
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 20,782 21,206 19,009
Goods in process 15,225 14,599 14,188
Raw materials and supplies 41,936 43,758 40,726
Other 10,464 8,162 7,874
Total current assets 184,276 192,720 169,654
Capital assets:
Buildings, machinery and equipment at cost 1,679,537 1,635,298 1,634,982
Accumulated depreciation 949,884 912,366 901,618
Costs to be depreciated in future years 729,653 722,932 733,364
Plant sites at cost 3,116 3,116 3,116
732,769 726,048 736,480
Timber at cost less depletion 193,848 192,860 193,737
Roads at cost less amortization 8,922 9,198 8,852
Timberland at cost 19,633 19,253 19,233
222,403 221,311 221,822
Total capital assets 955,172 947,359 958,302
Pension and other assets 86,004 72,674 69,453
$1,225,452 $1,212,753 $1,197,409
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Payable to bank resulting from
checks in transit $ 4,328 $ 8,892 $ 3,281
Accounts payable 53,547 43,701 39,024
Short-term borrowings 13,000 18,000 20,000
Payrolls payable 13,455 14,321 12,020
Federal income taxes payable 1,769 926 929
Other taxes payable 10,587 8,761 9,608
Current installments of long-term debt 40,000 30,118 10,118
Total current liabilities 136,686 124,719 94,980
Long-term debt 470,900 495,900 520,900
Deferred taxes-net 168,636 153,945 147,410
Other liabilities 19,067 17,726 17,397
Shareholders' equity:
Common stock, ascribed value $1.50 per share;
authorized 150,000,000 shares; issued
51,676,567 shares 77,515 77,515 77,515
Additional paid-in capital 3,306 3,306 3,306
Retained earnings 349,342 339,642 335,901
Total shareholders' equity 430,163 420,463 416,722
$1,225,452 $1,212,753 $1,197,409
The accompanying note is an integral part of these financial statements.
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Consolidated Statement of Income (Unaudited)
(000 Omitted)
Three Months Ended Nine Months Ended
July 31 July 31
2000 1999 2000 1999
Net sales:
Timber $ 40,443 $ 44,407 $122,918 $123,551
Paper and paperboard 66,576 64,105 195,611 151,459
Converted products 113,238 89,081 323,977 272,332
220,257 197,593 642,506 547,342
Cost of Products sold, including
outward freight 177,604 166,473 519,113 461,590
Gross profit 42,653 31,120 123,393 85,752
Selling, administrative
and general expenses 16,531 15,876 50,455 46,728
Operating profit (loss)
Timber 15,689 21,779 54,825 61,775
Paper and paperboard 2,945 (1,823) 4,004 (7,509)
Converted products 7,488 (4,712) 14,109 (15,242)
26,122 15,244 72,938 39,024
Other income (expense):
Interest income 164 94 354 389
Interest expensed (10,205) (9,463) (29,606) (28,718)
Miscellaneous 735 407 1,239 1,964
16,816 6,282 44,925 12,659
Provision for taxes on income:
Current 20 50 1,931 101
Deferred 6,202 2,274 14,691 4,583
6,222 2,324 16,622 4,684
Net income $ 10,594 $ 3,958 $ 28,303 $ 7,975
Dollars per share:
Net income $ 0.21 $ 0.08 $ 0.55 $ 0.15
Dividends 0.12 0.08 0.36 0.12
Average shares outstanding in the
hands of the public (000 omitted) 51,677 51,677 51,677 51,677
The accompanying note is an integral part of these financial statements.
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Consolidated Statement of Cash Flows (Unaudited)
(000 Omitted)
Three Months Ended Nine Months Ended
July 31 July 31
2000 1999 2000 1999
Cash provided by (used for)
operations:
Net income $10,594 $ 3,958 $28,303 $ 7,975
Charges to income not
requiring cash -
Depreciation 15,421 19,886 46,269 59,950
Depletion and amortization 1,105 1,067 3,701 3,032
Deferred taxes - net 6,202 2,274 14,691 4,583
(Gain) loss on disposition of
capital assets 1,038 82 2,319 (373)
Change in:
Accounts and notes receivable 3,199 (1,232) 9,126 10,866
Taxes on income, refundable - - - 7,020
Inventories (3,329) 422 1,620 10,036
Other (835) 404 (2,302) 262
Pension and other
noncurrent assets (3,823) (3,112) (13,330) (8,785)
Accounts, payrolls and other
taxes payable 5,269 4,119 10,894 1,192
Federal income taxes payable (766) 31 843 929
Other noncurrent liabilities 447 456 1,341 1,368
Cash provided by operations 34,522 28,355 103,475 98,055
Cash provided by (used for)
investing:
Additions to: Plant and equipment (30,020) (5,379) (56,173) (18,415)
Timber and timberlands (1,660) (463) (4,899) (2,298)
Proceeds from sale of capital assets 471 177 970 4,639
Cash used for investing (31,209) (5,665) (60,102) (16,074)
Cash provided by (used for)
financing:
Long-term debt (118) (20,119) (15,118) (36,119)
Short-term borrowings 5,000 5,000 (5,000) (30,500)
Payable to bank resulting from
checks in transit (3,369) (3,474) (4,564) (6,761)
Accounts payable for construction 1,375 38 (88) (2,399)
Cash dividends (6,201) (4,135) (18,603) (6,202)
Cash used for financing (3,313) (22,690) (43,373) (81,981)
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) $ 7,737 $ 7,710 $27,283 $27,078
Income taxes 835 19 778 (7,904)
The accompanying note is an integral part of these financial statements.
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Consolidated Statement of Shareholders' Equity (Unaudited)
(000 Omitted)
Three Months Ended Nine Months Ended
July 31 July 31
2000 1999 2000 1999
Common stock:
Balance at beginning of period $ 77,515 $ 77,515 $ 77,515 $ 77,515
Balance at end of period $ 77,515 $ 77,515 $ 77,515 $ 77,515
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 $344,949 $336,078 $339,642 $334,128
Net income 10,594 3,958 28,303 7,975
Less cash dividends on common
stock (6,201) (4,135) (18,603) (6,202)
Balance at end of period $349,342 $335,901 $349,342 $335,901
Dividends paid per share $ 0.12 $ 0.08 $ 0.36 $ 0.12
Common shares:
Balance at beginning of period 51,677 51,677 51,677 51,677
Balance at end of period 51,677 51,677 51,677 51,677
The accompanying note is an integral part of these financial statements.
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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.
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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, 2000 COMPARED WITH
THREE AND NINE MONTHS ENDED JULY 31, 1999
Net income improved 168% for the third quarter 2000 and 255% for the first
nine months of 2000 as compared with like periods in 1999. Operating results
improved in the manufacturing segments of the business but declined in the
timber segment.
TIMBER
Operating profits declined 28% in the third quarter 2000 due primarily to a 9%
decrease in log volume sold, higher logging and depletion costs and a 13%
decrease in average lumber prices. Average log prices improved 2%. For the
year-to-date period, operating profits declined 11% due to a 7% decrease in
log volume sold and higher costs for logging and depletion. Average log
prices improved 4% while lumber prices declined 2% for the year-to-date
period.
Demand and prices declined for domestic logs during the quarter due to weak
lumber markets. Export log prices were firm and demand for Douglas Fir
remains strong and currently exceeds available supply. At the present time,
logging activity has been curtailed modestly due to fire conditions in the
region.
PAPER AND PAPERBOARD
Operating income for the third quarter 2000 was $2.9 million compared with an
operating loss of $1.8 million in the third quarter 1999. The primary reasons
for the improvement were a 4% and 9% increase in average paper and paperboard
prices, respectively. The volume of paper sold increased 19% while the volume
of paperboard sold decreased 44%. Operating results in the third quarter were
negatively affected by a 3% increase in wood chip costs, a 42% increase in OCC
costs and a 22% increase in natural gas costs. During the quarter, the mill
operated at 85% of capacity due to a 3-day shutdown and the dryer section
rebuild of #1 paper machine. Operating income for year-to-date 2000 was $4.0
million compared with an operating loss of $7.5 million for year-to-date 1999.
The improvement resulted from average paper and paperboard prices increasing
2% and 17%, respectively.
During the quarter domestic prices for paper and paperboard improved while
demand was stable. Export demand declined during the quarter.
CONVERTED PRODUCTS
Operating income for the third quarter 2000 was $7.5 million as compared with
an operating loss of $4.7 million in the third quarter 1999. The primary
reasons for the improvement were a 17% increase in tonnage sold and a 9%
increase in average price. For the year-to-date period operating income was
$14.1 million compared with an operating loss of $15.2 million. Volume sold
and average price improved 8% and 10%, respectively, for the year-to-date
period as compared to like periods in 1999.
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Demand was strong and prices improved during the quarter. The company
continues to develop its specialty products in order to improve margins.
OTHER
Selling, administrative and general expenses were 8% and 9% for the nine
months ended July 31, 2000 and 1999, respectively.
Third quarter 2000 interest expensed increased 8% due to higher interest
rates, offset in part by a lower level of borrowing.
The company adjusted the estimated useful lives of certain capital assets at
the beginning of the fiscal year, which contributed to the $4.5 million
decrease in depreciation expense in the third quarter 2000 as compared with
the third quarter 1999.
INCOME TAXES
Taxes are approximately 37% of pretax income for fiscal 2000 and 1999.
OTHER DATA Three Months Nine Months
Ended July 31 Ended July 31
% %
2000 1999 Change 2000 1999 Change
Sales
Logs, thousands of board feet 51,000 56,000 - 9 155,000 167,000 - 7
Lumber, thousand of board feet 25,000 25,000 -- 70,000 61,000 + 15
Paper, tons 76,000 64,000 + 19 223,000 165,000 + 35
Paperboard, tons 42,000 75,000 - 44 150,000 161,000 - 7
Converted products, tons 134,000 115,000 + 17 397,000 366,000 + 8
Logs, $/thousand board feet $ 618 $ 605 + 2 $ 627 $ 603 + 4
Lumber, $/thousand board feet 356 411 - 13 368 374 - 2
Paper, $/ton FOB mill equivalent 590 567 + 4 572 563 + 2
Paperboard, $/ton FOB mill equiv. 401 367 + 9 381 325 + 17
Converted products, $/ton 845 774 + 9 816 744 + 10
LIQUIDITY AND CAPITAL RESOURCES
During the third quarter, total borrowing increased $5 million. Capital
expenditures for plant and equipment are expected to be approximately $86
million for fiscal 2000. The backlog of approved projects was $121 million at
August 31, 2000. During the quarter, the company did not purchase any of its
common stock. Cash dividends of $0.12 per share were declared and paid in the
third quarter in the aggregate of $6,201,000. The restoration of the dividend
remains a high priority, which will be accomplished when operating results and
debt levels make increased dividends prudent.
At July 31, 2000, the company had bank lines of credit totaling $355 million.
Of this amount $320 million was under a credit agreement with a group of banks
expiring February 24, 2003. The agreement provides for borrowing at the
Offshore Rate (LIBOR based) plus a spread, 1.875% at July 31, 2000, or the
bank's Reference Rate. The credit agreement contains certain financial
covenants and provides for a commitment fee on the unused commitment, 0.40%
per year at July 31, 2000. At the end of the third fiscal quarter 2000, the
company had outstanding $250 million of notes payable under this agreement.
At July 31, 2000, the company had an outstanding balance of $20 million under
the remaining $35 million of lines of credit. Also outstanding at July 31,
2000, were senior notes of $227 million and revenue bonds of $26.9 million.
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During fiscal year 1999 the company obtained amendments from the holders of
certain senior notes with respect to compliance with certain covenants. The
amendments were effective for the quarter ending January 31, 1999 through the
quarter ending January 31, 2000. In connection with the grant of the
amendments, the company agreed to pay 0.75% per annum over the original note
coupon rates until certain conditions are met and has paid an additional one-
time fee. Starting with October 31, 1999 the company is in full compliance
with all financial covenants of the original Note Agreements without regard to
the amendments. The company will continue to pay the additional 0.75% per
annum over the original note coupon rates until it obtains an investment grade
credit rating for its long-term unsecured senior debt.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements, including statements
concerning anticipated pricing and market conditions for the company's
products and certain raw materials, anticipated competitive conditions and the
actions of competitors, the expected results of planned paper mill improvement
projects and operating schedules and the anticipated cost of and availability
of financing. Forward-looking statements are based on the company's 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 delay 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. The company
does not undertake any obligation to update forward-looking statements should
circumstances or the company's estimates or projections change.
Item 3. Quantitative and Qualitative Disclosure About Market Risk.
No disclosure is required under this item.
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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.
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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 9-7-00 L. J. HOLBROOK
--------------
L. J. HOLBROOK
SENIOR VICE PRESIDENT, FINANCE - SECRETARY
AND TREASURER
Date 9-7-00 A. G. HIGGENS
-------------
A. G. HIGGENS
ASSISTANT TREASURER
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