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 April 30, 2000 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.
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 April 30, 2000
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet (000 Omitted)
Apr. 30 Oct. 31 Apr. 30
2000 1999 1999
(Unaudited) (Unaudited)
ASSETS
Current assets:
Accounts and notes receivable $ 100,168 $ 106,095 $ 87,725
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 22,807 21,206 19,196
Goods in process 11,877 14,599 13,655
Raw materials and supplies 39,930 43,758 41,494
Other 9,629 8,162 8,278
Total current assets 183,311 192,720 169,248
Capital assets:
Buildings, machinery and equipment at cost 1,656,095 1,635,298 1,631,984
Accumulated depreciation 939,550 912,366 883,869
Costs to be depreciated in future years 716,545 722,932 748,115
Plant sites at cost 3,116 3,116 3,116
719,661 726,048 751,231
Timber at cost less depletion 193,713 192,860 194,250
Roads at cost less amortization 8,851 9,198 8,967
Timberland at cost 19,302 19,253 19,224
221,866 221,311 222,441
Total capital assets 941,527 947,359 973,672
Pension and other assets 82,181 72,674 66,341
$1,207,019 $1,212,753 $1,209,261
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Payable to bank resulting from
checks in transit $ 7,697 $ 8,892 $ 6,755
Accounts payable 46,131 43,701 33,214
Short-term borrowings 8,000 18,000 15,000
Payrolls payable 15,540 14,321 14,883
Federal income taxes payable 2,535 926 898
Other taxes payable 9,274 8,761 8,398
Current installments of long-term debt 30,118 30,118 20,119
Total current liabilities 119,295 124,719 99,267
Long-term debt 480,900 495,900 531,018
Deferred taxes-net 162,434 153,945 145,136
Other liabilities 18,620 17,726 16,941
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 344,949 339,642 336,078
Total shareholders' equity 425,770 420,463 416,899
$1,207,019 $1,212,753 $1,209,261
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 Six Months Ended
April 30 April 30
2000 1999 2000 1999
Net sales:
Timber $ 44,329 $ 42,895 $ 82,475 $ 79,144
Paper and paperboard 66,427 50,116 129,035 87,354
Converted products 106,047 93,414 210,739 183,251
216,803 186,425 422,249 349,749
Cost of products sold, including
outward freight 170,022 154,124 341,509 295,117
Gross profit 46,781 32,301 80,740 54,632
Selling, administrative
and general expenses 17,894 15,854 33,924 30,852
Operating profit (loss):
Timber 23,532 22,614 39,136 39,996
Paper and paperboard 1,849 (2,741) 1,059 (5,686)
Converted products 3,506 (3,426) 6,621 (10,530)
28,887 16,447 46,816 23,780
Other income (expense):
Interest income 97 174 190 295
Interest expensed (9,820) (9,562) (19,401) (19,255)
Miscellaneous 131 1,243 504 1,557
19,295 8,302 28,109 6,377
Provision for taxes on income:
Current 1,030 65 1,911 51
Deferred 6,109 3,007 8,489 2,309
7,139 3,072 10,400 2,360
Net income (loss) $ 12,156 $ 5,230 $ 17,709 $ 4,017
Dollars per share:
Net income (loss) $ 0.24 $ 0.10 $ 0.34 $ 0.08
Dividends 0.12 0.02 0.24 0.04
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 Six Months Ended
April 30 April 30
2000 1999 2000 1999
Cash provided by (used for)
operations:
Net income (loss) $ 12,156 $ 5,230 $ 17,709 $ 4,017
Charges to income not
requiring cash -
Depreciation 15,443 20,015 30,848 40,064
Depletion and amortization 1,148 951 2,596 1,965
Deferred taxes - net 6,109 3,007 8,489 2,309
(Gain) loss on disposition of
capital assets 236 (618) 1,281 (455)
Change in:
Accounts and notes receivable (7,343) (5,586) 5,927 12,098
Taxes on income, refundable - 750 - 7,020
Inventories 157 3,924 4,949 9,614
Other (953) 471 (1,467) (142)
Pension and other
noncurrent assets (4,778) (2,959) (9,507) (5,673)
Accounts, payrolls and other
taxes payable 4,426 (311) 5,625 (2,927)
Federal income taxes payable 841 898 1,609 898
Other noncurrent liabilities 447 456 894 912
Cash provided by operations 27,889 26,228 68,953 69,700
Cash provided by (used for)
investing:
Additions to: Plant and equipmen (16,973) (5,529) (26,153) (13,036)
Timber and timberland (1,293) (1,049) (3,239) (1,835)
Proceeds from sale of capital
assets 173 4,147 499 4,462
Cash used for investing (18,093) (2,431) (28,893) (10,409)
Cash provided by (used for)
financing:
Long-term debt (5,000) (30,000) (15,000) (16,000)
Short-term borrowings - 7,400 (10,000) (35,500)
Payable to bank resulting from
checks in transit 1,151 88 (1,195) (3,287)
Accounts payable for construction 254 (252) (1,463) (2,437)
Cash dividends (6,201) (1,033) (12,402) (2,067)
Cash used for financing (9,796) (23,797) (40,060) (59,291)
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) $ 12,260 $ 11,166 $ 19,546 $ 19,368
Income taxes 60 (1,617) (57) (7,923)
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 Six Months Ended
April 30 April 30
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 $ 338,994 $ 331,881 $ 339,642 $ 334,128
Net income (loss) 12,156 5,230 17,709 4,017
Less cash dividends on common
stock (6,201) (1,033) (12,402) (2,067)
Balance at end of period $ 344,949 $ 336,078 $ 344,949 $ 336,078
Dividends paid per share $ 0.12 $ 0.02 $ 0.24 $ 0.04
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.
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 SIX MONTHS ENDED APRIL 30, 2000 COMPARED WITH
THREE AND SIX MONTHS ENDED APRIL 30, 1999
Net income improved 132% for the second quarter 2000 and 341% for the first six
months of 2000 as compared with like periods in 1999. Second quarter operating
results improved in all segments of the business.
TIMBER
Operating profits increased 4% in the second quarter 2000 as compared with the
second quarter 1999 due primarily to a 5% increase in average log prices and a
4% increase in average lumber prices. Log volume sold in the quarter held
steady with year-ago levels while lumber volume sold decreased 5%. For the
year-to-date period, operating results declined 2% due to a 6% decrease in log
volume sold and higher costs for logging and depletion. Average log and lumber
prices improved 5% and 7% respectively.
During the second quarter 2000, demand and prices were stable in the export and
domestic log markets. Domestic lumber demand and prices declined during the
quarter.
PAPER AND PAPERBOARD
Operating profit for the second quarter 2000 was $1.8 million compared with an
operating loss of $2.7 million in the second quarter 1999. The primary reasons
for the improvement were a 22% and 3% increase in average paperboard and paper
prices, respectively, and a 35% increase in the volume of paper sold. Operating
results in the second quarter were negatively affected by wood chip costs and
old corrugated container costs increasing 3% and 61%, respectively, compared
with the second quarter 1999. With #1 paper machine down pending a dryer
section rebuild, the mill operated at 88% of capacity during the quarter.
Operating profit for year-to-date 2000 was $1.1 million compared with an
operating loss of $5.7 million for year-to-date 1999. The improved results were
caused by a 19% increase in average paperboard prices and a 36% increase in the
volume of paper and paperboard sold.
Domestic markets continue to improve and new capacity appears limited. The
company continues to focus on expanding its specialty business. Export
linerboard demand was strong and a price increase was implemented.
CONVERTED PRODUCTS
Operating profit for the second quarter 2000 was $3.5 million compared with an
operating loss of $3.4 million in the second quarter 1999. The primary reasons
for the improvement were a 10% increase in average price and a 3% increase in
tonnage sold. For the year-to-date period operating income was $6.6 million
compared with an operating loss of $10.5 million for the year-ago period.
Volume sold increased 5% and average price improved 10%.
Demand was strong during the second quarter and a price increase was initiated
in April. The company continues to develop its specialty products and to reduce
costs in order to improve margins.
Page 7<PAGE>
OTHER
Interest expensed in the second quarter 2000 increased 3% 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 $4.6 million decrease in
depreciation expense in the second quarter 2000 as compared with the second
quarter 1999.
INCOME TAXES
Taxes are approximately 37% of pretax income for fiscal 2000 and 1999.
OTHER DATA Three Months Six Months
Ended April 30 Ended April 30
% %
2000 1999 Change 2000 1999 Change
Sales
Logs, thousands of board feet 57,000 57,000 -- 104,000 111,000 - 6
Lumber, thousand of board feet 21,000 22,000 - 5 45,000 36,000 +25
Paper, tons 70,000 52,000 +35 147,000 101,000 +46
Paperboard, tons 61,000 61,000 -- 108,000 86,000 +26
Converted products, tons 132,000 128,000 + 3 263,000 251,000 + 5
Logs, $/thousand board feet $ 645 $ 615 + 5 $ 632 $ 602 + 5
Lumber, $/thousand board feet 372 357 + 4 374 349 + 7
Paper, $/ton FOB mill equivalent 568 549 + 3 562 560 --
Paperboard, $/ton FOB mill equiv. 383 315 -22 373 314 +19
Converted products, $/ton 804 729 +10 801 731 +10
LIQUIDITY AND CAPITAL RESOURCES
During the second quarter, total borrowing was reduced by $5 million. Capital
expenditures for plant and equipment are expected to be approximately $65
million for fiscal 2000. The current backlog of approved projects is $87
million. The company expects that capital expenditures will be financed
principally from internally generated funds. 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 second 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 April 30, 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 April 30, 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 April 30, 2000. At the end of the second fiscal quarter 2000, the
company had outstanding $248 million of notes payable under this agreement. At
April 30, 2000, the company had an outstanding balance of $15 million under the
remaining $35 million of lines of credit. Also outstanding at April 30, 2000,
were senior notes of $227 million and revenue bonds of $28.9 million.
Page 8<PAGE>
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.
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.
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 10<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 6-13-00 \s\ L. J. Holbrook
L. J. Holbrook, Senior Vice President-Finance,
Secretary and Treasurer
Date 6-13-00 \s\ A. G. Higgens
A. G. Higgens, Assistant Treasurer
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