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 October 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition from ___________________ to __________________
Commission file number 0-16158
WTD Industries, Inc.
(Exact name of Registrant as specified in its charter)
Oregon 93-0832150
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10260 S.W. Greenburg Road, Suite 900, Portland, Oregon 97223
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (503) 246-3440
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_____
Indicate by check mark whether the Registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes__X__ No_____
The number of shares outstanding of Registrant's Common Stock,
no par value, at November 30, 1994 was 11,077,074.<PAGE>
WTD INDUSTRIES, INC.
INDEX
Page
Number
PART I. Financial Information (Unaudited)
Item 1. Financial Statements
Consolidated Statements of Income -
Three Months and Six Months Ended
October 31, 1994 and 1993 3
Consolidated Balance Sheets -
October 31, 1994 and April 30, 1994 4
Consolidated Statements of Cash Flows -
Six Months Ended October 31, 1994 and 1993 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 11
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 15
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WTD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per-Share Amounts)
(Unaudited)
<CAPTION>
THREE MONTHS ENDED OCTOBER 31, SIX MONTHS ENDED OCTOBER 31,
----------------------------- ----------------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET SALES $ 79,157 $ 65,885 $ 155,623 $ 119,744
COST OF SALES 72,829 59,012 143,756 111,574
---------- ---------- ---------- ----------
GROSS PROFIT 6,328 6,873 11,867 8,170
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,901 3,074 5,609 5,540
REORGANIZATION CREDITS -- (615) (39) (1,694)
---------- ---------- ---------- ----------
OPERATING INCOME 3,427 4,414 6,297 4,324
OTHER INCOME (EXPENSE)
Interest Expense (1,534) (1,646) (3,146) (3,334)
Miscellaneous 268 (27) 455 132
---------- ---------- ---------- ----------
(1,266) (1,673) (2,691) (3,202)
---------- ---------- ---------- ----------
INCOME BEFORE INCOME TAXES 2,161 2,741 3,606 1,122
PROVISION FOR INCOME TAXES 497 247 902 247
---------- ---------- ---------- ----------
NET INCOME 1,664 2,494 2,704 875
PREFERRED DIVIDENDS 512 404 972 807
---------- ---------- ---------- ----------
NET INCOME APPLICABLE
TO COMMON SHAREHOLDERS $ 1,152 $ 2,090 $ 1,732 $ 68
========== ========== ========== ==========
NET INCOME PER COMMON SHARE
- PRIMARY BASIS $0.10 $0.18 $0.15 $0.01
===== ===== ===== =====
- FULLY DILUTED $0.10 $0.18 $0.15 $0.01
===== ===== ===== =====
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
WTD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands)
<CAPTION>
OCTOBER 31, APRIL 30,
1994 1994
---------- ----------
<S> <C> <C>
CURRENT ASSETS (Unaudited)
Cash and cash equivalents $ 13,933 $ 8,101
Accounts receivable, net 13,022 8,634
Inventories 22,068 26,796
Prepaid expenses 3,471 3,145
Deferred tax asset 2,197 2,197
Timber, timberlands and
timber-related assets 9,738 11,743
---------- ----------
Total current assets 64,429 60,616
NOTES AND ACCOUNTS RECEIVABLE 67 121
TIMBER AND TIMBERLANDS 801 845
PROPERTY, PLANT AND EQUIPMENT,
at cost
Land 2,733 2,602
Buildings and improvements 10,122 10,067
Machinery and equipment 62,145 60,148
---------- ----------
75,000 72,817
Less accumulated depreciation 45,147 42,001
---------- ----------
29,853 30,816
Construction in progress 1,985 1,361
---------- ----------
31,838 32,177
IDLE ASSETS 350 350
Less costs of disposal 82 82
---------- ----------
268 268
OTHER ASSETS 2,198 3,073
---------- ----------
$ 99,601 $ 97,100
========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
WTD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(In Thousands, Except Share Information)
<CAPTION>
OCTOBER 31, APRIL 30,
1994 1994
---------- ----------
<S> <C> <C>
CURRENT LIABILITIES (Unaudited)
Accounts payable $ 6,687 $ 3,361
Accrued expenses 8,304 7,656
Reserve for disputed and
unallowed prepetition claims 150 290
Income taxes payable 556 283
Timber contracts payable 3,217 2,292
Current maturities of long-term debt 2,085 1,938
---------- ----------
Total current liabilities 20,999 15,820
DEFERRED INCOME TAXES PAYABLE 2,181 2,181
LONG-TERM DEBT, less current maturities 56,159 60,587
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, 10,000,000 shares authorized
Series A 20,688 20,654
Series B 333 333
Common stock, no par value 28,641 28,617
Additional paid-in capital 15 15
Retained deficit (29,415) (31,107)
---------- ----------
20,262 18,512
---------- ----------
$ 99,601 $ 97,100
========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
<TABLE>
WTD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<CAPTION>
SIX MONTHS ENDED OCTOBER 31,
------------------------------------------------
1994 1993
---------- ----------
<S> <C> <C>
CASH PROVIDED BY (USED FOR) OPERATING ACTIVTIES:
Net income $ 2,704 $ 875
Adjustments to reconcile net income to
cash provided by (used for) operations:
Depreciation, depletion and amortization 4,366 4,056
Reorganization credits -- (1,694)
Accounts receivable (4,388) 3,750
Inventories 4,728 (10,428)
Prepaid expenses (326) (1,472)
Timber, timberlands and
timber-related assets - current 1,368 6,220
Payables and accruals 4,880 880
Income taxes payable 273 247
---------- ----------
Cash provided by operating activities 13,605 2,434
---------- ----------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
Notes and other receivables 54 24
Net reductions of timber,
timberlands and timber-related assets 44 13
Acquisition of property, plant and equipment (3,383) (1,359)
Cost of holding idle assets -- (74)
Proceeds from sale of idle assets -- 1,766
Other investing activities 121 181
---------- ----------
Cash provided by (used for) investing activities (3,164) 551
---------- ----------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Principal payments on long-term debt (4,369) (2,087)
Other assets 748 (862)
Dividends paid on preferred stock (1,012) (807)
Issuance of common stock 24 28
---------- ----------
Cash used for financing activities (4,609) (3,728)
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 5,832 (743)
CASH BALANCE AT BEGINNING OF PERIOD 8,101 2,124
---------- ----------
CASH BALANCE AT END OF PERIOD $ 13,933 $ 1,381
========== ==========
CASH PAID DURING THE PERIOD FOR:
Interest $3,308 $4,135
Income taxes $619 --
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
NOTE 1 - SUMMARY OF FINANCIAL STATEMENT PRESENTATION
In the opinion of management, the consolidated financial
statements of WTD Industries, Inc. and subsidiaries ("WTD" or "the
Company") presented herein include all adjustments, which are
solely of a normal recurring nature, necessary for a fair
presentation of the financial position, results of operations and
cash flows for the interim periods presented. The financial
statements should be read with reference to "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" contained in this report, and the "Notes to
Consolidated Financial Statements" set forth in the Company's
Annual Report on Form 10-K for the year ended April 30, 1994 filed
with the Securities and Exchange Commission. The results of
operations for the current interim periods are not necessarily
indicative of the results to be expected for the current year.
NOTE 2 - INVENTORIES
Inventories are valued at the lower of cost or market. The
amounts included in inventories at October 31, 1994 and April 30,
1994 are as follows (in thousands):
October 31, April 30,
1994 1994
------------- -------------
Logs $ 10,580 $ 11,777
Lumber 10,271 13,818
Supplies 1,217 1,201
------------- -------------
$ 22,068 $ 26,796
============= =============
NOTE 3 - STOCKHOLDERS' EQUITY AND COMMON SHARES OUTSTANDING
Stockholders' equity at October 31, 1994 consists of the
following:
Series A preferred stock, $100 per share liquidation preference;
500,000 shares authorized; 270,079 shares issued and outstanding;
limited voting rights; cumulative dividends payable quarterly in
advance at the prime rate, with a minimum rate of 6% and a maximum
rate of 9%; convertible into common stock at $7.50 per share after
April 30, 1999; redeemable at original issue price plus accrued
dividends at the option of the Board of Directors, in the form of
cash or in exchange for senior unsecured debt with 12% coupon. The
holders of the Series A preferred stock will be granted voting
control of the Company's Board of Directors in the event the
Company misses three consecutive quarterly dividend payments, four
quarterly dividend payments within twenty-four months or a total of
eight quarterly dividend payments.
Series B preferred stock, $100 per share liquidation preference;
500,000 shares authorized; 6,111 shares issued and outstanding;
limited voting rights; convertible into 212,693 shares of common
stock; dividends payable only if paid on the Company's common
stock; redeemable at original issue price plus accrued dividends at
the option of the Board of Directors after all Series A preferred
stock has been redeemed.
Common stock, no par value; 40,000,000 shares authorized;
11,077,074 shares issued and outstanding. Before giving effect to
any shares that might be issued pursuant to the management
incentive stock option plan or conversion of any Series A preferred
stock, the total number of common shares would increase to
11,289,767 shares if all remaining Series B preferred stock
outstanding at October 31, 1994 is converted to common stock.
NOTE 4 - NET INCOME PER SHARE
The calculations of net income per share for the three and six
month periods ended October 31, 1994 and 1993 are summarized below
(in thousands, except per-share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED OCTOBER 31, SIX MONTHS ENDED OCTOBER 31,
----------------------------- ----------------------------
1994 1993 1994 1993
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
NET INCOME (LOSS) APPLICABLE
TO COMMON SHAREHOLDERS $ 1,152 $ 2,090 $ 1,732 $ 68
====== ====== ====== ======
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 11,077 9,355 11,073 9,046
ADDITIONAL SHARES ASSUMED FROM:
Conversion of Series B
preferred stock 213 1,882 213 2,185
Exercise of stock options 166 164 190 182
------ ------ ------ ------
AVERAGE NUMBER OF SHARES AND
EQUIVALENTS OUTSTANDING
-PRIMARY BASIS 11,456 11,401 11,476 11,413
ADDITIONAL SHARES ASSUMED FROM
EXERCISE OF STOCK OPTIONS 2 33 7 23
------ ------ ------ ------
AVERAGE NUMBER OF SHARES AND
EQUIVALENTS OUTSTANDING
- ASSUMING FULL DILUTION 11,458 11,434 11,483 11,436
====== ====== ====== ======
NET INCOME PER COMMON SHARE
-PRIMARY BASIS $0.10 $0.18 $0.15 $0.01
====== ====== ====== ======
- ASSUMING FULL DILUTION $0.10 $0.18 $0.15 $0.01
====== ====== ====== ======
</TABLE>
NOTE 5 - PROVISION FOR INCOME TAXES
The income tax provision is based on the estimated effective
annual tax rate for each fiscal year. The provision includes
anticipated current income taxes payable, the tax effect of
anticipated differences between financial reporting and tax basis
of assets and liabilities and the expected utilization of net
operating loss carryforwards.
At October 31, 1994, the Company had a valuation allowance of
approximately $10.3 million which represents the tax benefit of
substantially all of the unused net operating loss carryforward.
Management periodically assesses the likelihood for future
utilization of the net operating loss carryforward and changes the
amount of the valuation allowance as facts and circumstances
dictate.
NOTE 6 - COMMITMENTS AND CONTINGENCIES
The Company is involved in various litigation primarily arising
in the normal course of its business. In the opinion of
management, the Company's liability, if any, under such pending
litigation would not have a material adverse impact upon the
Company's consolidated financial condition or results of
operations.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- - ---------------------
On a quarter-to-quarter basis, the Company's financial results
have varied widely, and will continue to vary, due to seasonal
fluctuations and market factors affecting the demand for logs,
lumber and other wood products. The industry is subject to
fluctuations in sales and earnings due to such factors as industry
production in relation to product demand and variations in interest
rates and housing starts. Currency fluctuations affect the forest
products industry when exchange rates spur log exports and drive up
domestic log prices, and when a relatively strong U.S. Dollar
encourages lumber imports from other countries.
The industry is also affected by weather conditions and changing
timber management policies. Fire danger and excessively dry or wet
conditions temporarily reduce logging activity and may increase
open market log prices. Timber management policies of various
governmental agencies change from time to time, causing actual or
feared shortages in some areas periodically. These policies change
because of environmental concerns, public agency budget issues, and
a variety of other reasons. Therefore, past results for any given
year or quarter are not necessarily indicative of future results.
It is generally the Company's practice to curtail production at
facilities from time to time due to conditions which temporarily
impair log flow, or when imbalances between log costs and product
prices cause the cost of operation to exceed the cost of shutdown.
Management believes its labor practices and compensation systems,
as well as a relatively low capital cost in relation to production
capacity, give it the flexibility to efficiently curtail operations
and resume production as conditions warrant.
Raw materials comprise the majority of the cost of products sold
by the Company. The Company depends principally on open market log
purchases for its raw materials needs. WTD's log inventory policy
is to maintain, where possible, a supply equal to three to four
weeks of production.
In the last three years, lumber prices rose sharply during the
winter and spring months in anticipation of the coming building
season. However, prices then fell as the building season actually
commenced. During the first half of calendar 1994, prices declined
steadily from peaks reached in December 1993. Log prices did not
decline as quickly as lumber prices during this period, resulting
in lower gross margins.
Log prices, while very high by historical standards, generally
allow a gross profit margin at current lumber prices. However,
there can be no assurance that the margins recently experienced by
the Company will continue or improve.
The following table sets forth the percentages which certain
expenses and income items bear to net sales, and the period-to-
period percentage change in each item.
<TABLE> Percentage
<CAPTION>
Income and Expense Items as a Percentage of Net Sales Increase (Decrease)
----------------------------------------------------------------- ------------------------
Three Months Six Months
Three Months Six Months Ended Ended
Ended October 31, Ended October 31, 10/31/94 10/31/94
--------------------------- --------------------------- to to
1994 1993 1994 1993 10/31/93 10/31/93
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 % 20.1 % 30.0 %
Cost of sales 92.0 89.6 92.4 93.2 23.4 28.8
---------- ---------- ---------- ----------
Gross profit 8.0 10.4 7.6 6.8 (7.9) 45.3
Selling, general and
administrative expense 3.7 4.7 3.6 4.6 (5.6) 1.2
Reorganization credits 0.0 (0.9) (0.0) (1.4) NM NM
---------- ---------- ---------- ----------
Operating income 4.3 6.7 4.0 3.6 (22.4) 45.6
Interest expense (1.9) (2.5) (2.0) (2.8) (6.8) (5.6)
Miscellaneous 0.3 (0.0) 0.3 0.1 NM 244.7
---------- ---------- ---------- ----------
Income before income taxes 2.7 4.2 2.3 0.9 (21.2) 221.4
Provision for income taxes 0.6 0.4 0.6 0.2 101.2 265.2
---------- ---------- ---------- ----------
Net income 2.1 % 3.8 % 1.7 % 0.7 % (33.3) 209.0
========== ========== ========== ==========
Comparison of Three Months Ended October 31, 1994 and 1993
- - ----------------------------------------------------------
Net sales for the three months ended October 31, 1994 increased
$13.3 million (20%) from the three months ended October 31, 1993.
This was principally caused by a 27% increase in lumber shipments
and a 13% increase in chip deliveries, partially offset by a 4%
decrease in lumber prices.
Gross profit for the quarter ended October 31, 1994 was 8% of
net sales, compared to 10.4% of net sales for the quarter ended
October 31, 1993. The margin between the Company's average lumber
sales prices and average raw materials costs on a unit basis was 7%
lower in the second quarter of fiscal 1995 than in the comparable
period last year. Such lumber prices declined by 4% from the
quarter ended October 31, 1993, while the Company's log costs
declined by only 3%.
Selling, general and administrative (S, G & A) expenses in the
three months ended October 31, 1994 decreased by $0.2 million (6%)
from the three months ended October 31, 1993. This decrease was
due to lower profit sharing bonus payments stemming from lower
pretax profits as well as the Company's continued focus on cost
control. S, G & A expenses were 3.7% of net sales in the quarter
ended October 31, 1994, compared to 4.7% of net sales in the
quarter ended October 31, 1993.
Reorganization credits in the quarter ended October 31, 1993
principally reflect the disposal of certain assets associated with
the Company's idle facilities at amounts in excess of their
carrying values, resulting in net gains of about $0.6 million.
In the quarter ended October 31, 1994, the Company recorded a
tax provision resulting in 25% of pretax profits for the six months
ended October 31, 1994. In the quarter ended October 31, 1993, the
Company recorded a tax provision resulting in 22% of pretax profits
for the six months ended October 31, 1993.
Comparison of Six Months Ended October 31, 1994 and 1993
- - --------------------------------------------------------
Net sales for the six months ended October 31, 1994 increased
$35.9 million (30%) from the six months ended October 31, 1993.
This increase was principally caused by a 33% increase in lumber
shipments, a 22% increase in chip deliveries and a 1% increase in
lumber prices. The higher lumber shipments and chip deliveries in
the current year resulted from production curtailments in the
quarter ended July 31, 1993 caused by an adverse relationship
between product prices and raw material costs. In addition,
several mills increased their productivity from the prior six month
period.
Gross profit for the six months ended October 31, 1994 was 7.6%
of net sales, compared to 6.8% of net sales for the six months
ended October 31, 1993. The margin between the Company's average
lumber prices and log costs on a unit basis improved by 8% in the
first half of fiscal 1995 over the comparable period in fiscal
1994, as product prices improved slightly and log prices were
slightly lower.
S,G&A expenses in the six months ended October 31, 1994
increased by $0.1 million (1.2%) from the six months ended October
31, 1993. S,G& A expenses were 3.6% of sales in the six months
ended October 31, 1994 and 4.6% of sales in the six months ended
October 31, 1993.
During the six months ended October 31, 1993, the Company
disposed of certain assets associated with its idle facilities at
amounts in excess of their carrying values. This resulted in net
gains of about $1.7 million, which were recognized as
reorganization credits. Reorganization credits in the six months
ended October 31, 1994 reflect settlement of certain pre-petition
obligations at less than their carrying value.
During the quarter ended October 31, 1994, the Company recorded
a tax provision resulting in 25% of pretax profits for the six
months ended October 31, 1994. During the quarter ended October
31, 1993, the Company recorded a tax provision resulting in 22% of
pretax profits for the six months ended October 31, 1993. The
provisions reflect the estimated rate for the fiscal year, given
current income expectations for the balance of the year and
utilization of net operating loss carryforwards.
Liquidity and Capital Resources
- - -------------------------------
The Company relies on cash provided by its operations to fund
its working capital needs. There can be no assurance that such
cash will be sufficient to fund the Company's future operations.
Substantially all of the Company's assets are pledged as security
for its various debt obligations.
During the six months ended October 31, 1994, the Company's cash
and cash equivalents increased by $5.8 million, to $13.9 million at
October 31. The increase was principally caused by profitable
operations, the return of deposits held to secure various
obligations and a reduction of timber and related assets. These
items were partially offset by capital spending, the prepayment of
certain debt obligations and scheduled principal repayments.
Working capital decreased by $1.4 million during the first six
months of fiscal 1995, to $43.4 million at October 31. This was
principally the result of capital spending, scheduled principal
payments and optional prepayments of certain debts, offset by
profitable operating activity and the return of cash deposits used
to secure certain obligations.
During the quarter ended October 31, 1994, the Company entered
into bonding agreements for its timber acquisition and workers'
compensation self-insurance (WCSI) activities. Such bonding
allowed the return of approximately $2.1 million in cash deposits
the Company had made to secure its timber and WCSI activities.
During this same period, the Company repurchased $0.7 million of
its unsecured debt at a discount from its carrying value, and made
a voluntary prepayment of $2.8 million on its senior secured debt.
Approximately 75% of the prepayment was deemed to reduce twelve
scheduled quarterly principal payments beginning on March 15, 1995
and ending on December 15, 1997. The remaining 25% of the
prepayment was applied to the final maturity of the senior secured
debt.
Capital spending in the first six months of fiscal 1995 was $3.4
million. Capital spending for the balance of the fiscal year is
currently forecast to be approximately $2.6 million. The Company
had commitments for capital spending of about $300,000 at October
31, 1994.
WTD INDUSTRIES, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits.
The Index to Exhibits is located on page 17.
(b) No reports on Form 8-K were filed during the three months
ended October 31, 1994.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
WTD INDUSTRIES, INC.
------------------------
(Registrant)
By: s/Bruce L. Engel
------------------------
Bruce L. Engel
President
By: s/K. Stanley Martin
------------------------
K. Stanley Martin
Vice President-Finance
Dated: December 1, 1994
INDEX TO EXHIBITS
Sequential
Number
System
Page
Number
4.2.1 Amendment dated as of October 18, 1994 to Credit
& Security Agreement dated as of November 30, 1992. 18
19 Other reports furnished to securities holders with
respect to the quarter ended October 31, 1994:
President's letter excerpted from Interim Report
to Shareholders for the second quarter of fiscal
1995. 22
</TABLE>
AMENDMENT
DATED AS OF October 18, 1994
TO
CREDIT AND SECURITY AGREEMENT
DATED AS OF NOVEMBER 30, 1992
Reference is hereby made to that certain Credit and Security
Agreement ("Credit Agreement") dated as of November 30, 1992 among
Principal Mutual Life Insurance Company, Aetna Life Insurance
Company, Northwestern Mutual Life Insurance Company, Chemical Bank,
Seattle-First National Bank and Bank of America Oregon, and WTD
Industries, Inc. and its Affiliates and the Term Notes issued by
the Borrowers in connection with the Credit Agreement. Capitalized
terms used herein shall have the same meaning ascribed thereto in
the Credit Agreement.
The Term Note originally issued to Aetna Life Insurance
Company has been split into two Notes now held by
Franklin/Templeton Group of Funds and Foothill Group, Inc. The
Term Notes originally issued to Chemical Bank, Seattle-First
National Bank, and Bank of America Oregon are now held by
Oppenheimer & Co., Inc.
Borrowers intend to make an optional prepayment of principal
on the Term Notes to be applied in the manner set forth below.
Said optional prepayment of $2,800,000 shall be known as the
October 1994 Prepayment.
The Credit Agreement is hereby modified as follows:
1. Credit Agreement Exhibits 2.04(a) and 2.05(b) are hereby
restated in the form, respectively, of Exhibit 2.04(a) (Restated)
and Exhibit 2.05(b) (Restated) attached hereto and incorporated
herein.
2. Notwithstanding any contrary provision of the Credit
Agreement, the October 1994 Prepayment shall be deemed partial
prepayments of each of the following originally scheduled principal
payments, in the amounts set forth below:
Original
Scheduled October 1994 New Scheduled
Scheduled Payment Date Amount Prepayment Amount
- - ----------------------- ---------- ------------- -------------
March 15, 1995 $400,000 $175,000 $225,000
June 15, 1995 400,000 175,000 225,000
September 15, 1995 400,000 175,000 225,000
December 15, 1995 400,000 175,000 225,000
March 15, 1996 400,000 175,000 225,000
June 15, 1996 400,000 175,000 225,000
September 15, 1996 400,000 175,000 225,000
December 15, 1996 400,000 175,000 225,000
March 15, 1997 400,000 175,000 225,000
June 15, 1997 400,000 175,000 225,000
September 15, 1997 400,000 175,000 225,000
December 15, 1997 400,000 175,000 225,000
December 15, 2004 Balance Due 700,000 Balance Due
Future scheduled principal payments shall be due as set forth
in Exhibit 2.04(a) (Restated) and shall be paid ratably to the
Lenders in the percentages set forth in Exhibit 2.05(b) (Restated).
1. Each Lender will surrender its Term Note or Notes to
Borrowers. Upon receiving each Lender's Term Note or Notes,
Borrowers will: (a) mark each Note as "cancelled"; and (b) issue to
each Lender in substitution therefor a restated Term Note
substantially in the form attached hereto.
In all other respects, the Credit Agreement shall remain
unchanged and in full force and effect.
Dated as of October 18, 1994.
PRINCIPAL MUTUAL LIFE NORTHWESTERN MUTUAL LIFE
INSURANCE COMPANY INSURANCE COMPANY
By:_/c/_______________________ By:_/c/_______________________
Its:__________________________ Its:__________________________
By:_/c/_______________________ FOOTHILL GROUP, INC.
Its:__________________________
By:_/c/_______________________
OPPENHEIMER & CO., INC. Its:__________________________
By:_/c/_______________________ WTD INDUSTRIES, INC.
Its:__________________________
By:_/c/_______________________
FRANKLIN/TEMPLETON GROUP OF Its:__________________________
FUNDS
By:_/c/_______________________
Its:__________________________
<TABLE>
WTD INDUSTRIES, INC. EXHIBIT 2.04(a) (RESTATED) 11/04/94
ALLOCATION OF PRINCIPAL PAYMENTS to Credit and Security Agreement 04:20 PM
FOR SECURED PROMISSORY NOTES Dated as of November 30, 1994
(RESTATED AS OF OCT 18, 1994)
<CAPTION>
100.000000% TOTAL 44.317804% PRINCIPAL 18.988863% NORTHWEST'N 11.371764% OPPENHEIMER
-------------------------- -------------------------- -------------------------- ------------------------
PAYMENT BALANCE PAYMENT BALANCE PAYMENT BALANCE PAYMENT BALANCE
------------ ------------ ----------- ------------- ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
BALANCE
SEP 30, 1994 56,889,368.84 25,212,119.02 10,802,644.63 6,469,324.67
PAYMENT
OCT 18, 1994 2,800,000.00 54,089,368.84 1,240,898.51 23,971,220.51 531,688.16 10,270,956.47 318,409.39 6,150,915.28
SCHEDULED PAYMENTS:
MAR 15, 1995 225,000.00 53,864,368.84 99,715.06 23,871,505.45 42,724.94 10,228,231.53 25,586.47 6,125,328.81
JUN 15, 1995 225,000.00 53,639,368.84 99,715.06 23,771,790.39 42,724.94 10,185,506.59 25,586.47 6,099,742.34
SEP 15, 1995 225,000.00 53,414,368.84 99,715.06 23,672,075.33 42,724.94 10,142,781.65 25,586.47 6,074,155.87
DEC 15, 1995 225,000.00 53,189,368.84 99,715.06 23,572,360.27 42,724.94 10,100,056.71 25,586.47 6,048,569.40
MAR 15, 1996 225,000.00 52,964,368.84 99,715.06 23,472,645.21 42,724.94 10,057,331.77 25,586.47 6,022,982.93
JUN 15, 1996 225,000.00 52,739,368.84 99,715.06 23,372,930.15 42,724.94 10,014,606.83 25,586.47 5,997,396.46
SEP 15, 1996 225,000.00 52,514,368.84 99,715.06 23,273,215.09 42,724.94 9,971,881.89 25,586.47 5,971,809.99
DEC 15, 1996 225,000.00 52,289,368.84 99,715.06 23,173,500.03 42,724.94 9,929,156.95 25,586.47 5,946,223.52
MAR 15, 1997 225,000.00 52,064,368.84 99,715.06 23,073,784.97 42,724.94 9,886,432.01 25,586.47 5,920,637.05
JUN 15, 1997 225,000.00 51,839,368.84 99,715.06 22,974,069.91 42,724.94 9,843,707.07 25,586.47 5,895,050.58
SEP 15, 1997 225,000.00 51,614,368.84 99,715.06 22,874,354.85 42,724.94 9,800,982.13 25,586.47 5,869,464.11
DEC 15, 1997 225,000.00 51,389,368.84 99,715.06 22,774,639.79 42,724.94 9,758,257.19 25,586.47 5,843,877.64
MAR 15, 1998 400,000.00 50,989,368.84 177,271.21 22,597,368.58 75,955.45 9,682,301.74 45,487.06 5,798,390.58
JUN 15, 1998 400,000.00 50,589,368.84 177,271.21 22,420,097.37 75,955.45 9,606,346.29 45,487.06 5,752,903.52
SEP 15, 1998 400,000.00 50,189,368.84 177,271.21 22,242,826.16 75,955.45 9,530,390.84 45,487.06 5,707,416.46
DEC 15, 1998 400,000.00 49,789,368.84 177,271.21 22,065,554.95 75,955.45 9,454,435.39 45,487.06 5,661,929.40
MAR 15, 1999 1,000,000.00 48,789,368.84 443,178.04 21,622,376.91 189,888.63 9,264,546.76 113,717.64 5,548,211.76
JUN 15, 1999 1,000,000.00 47,789,368.84 443,178.04 21,179,198.87 189,888.63 9,074,658.13 113,717.64 5,434,494.12
SEP 15, 1999 1,000,000.00 46,789,368.84 443,178.04 20,736,020.83 189,888.63 8,884,769.50 113,717.64 5,320,776.48
DEC 15, 1999 1,000,000.00 45,789,368.84 443,178.04 20,292,842.79 189,888.63 8,694,880.87 113,717.64 5,207,058.84
MAR 15, 2000 1,000,000.00 44,789,368.84 443,178.04 19,849,664.75 189,888.63 8,504,992.24 113,717.64 5,093,341.20
JUN 15, 2000 1,000,000.00 43,789,368.84 443,178.04 19,406,486.71 189,888.63 8,315,103.61 113,717.64 4,979,623.56
SEP 15, 2000 1,000,000.00 42,789,368.84 443,178.04 18,963,308.67 189,888.63 8,125,214.98 113,717.64 4,865,905.92
DEC 15, 2000 1,000,000.00 41,789,368.84 443,178.04 18,520,130.63 189,888.63 7,935,326.35 113,717.64 4,752,188.28
MAR 15, 2001 1,000,000.00 40,789,368.84 443,178.04 18,076,952.59 189,888.63 7,745,437.72 113,717.64 4,638,470.64
JUN 15, 2001 1,000,000.00 39,789,368.84 443,178.04 17,633,774.55 189,888.63 7,555,549.09 113,717.64 4,524,753.00
SEP 15, 2001 1,000,000.00 38,789,368.84 443,178.04 17,190,596.51 189,888.63 7,365,660.46 113,717.64 4,411,035.36
DEC 15, 2001 1,000,000.00 37,789,368.84 443,178.04 16,747,418.47 189,888.63 7,175,771.83 113,717.64 4,297,317.72
MAR 15, 2002 1,000,000.00 36,789,368.84 443,178.04 16,304,240.43 189,888.63 6,985,883.20 113,717.64 4,183,600.08
JUN 15, 2002 1,000,000.00 35,789,368.84 443,178.04 15,861,062.39 189,888.63 6,795,994.57 113,717.64 4,069,882.44
SEP 15, 2002 1,000,000.00 34,789,368.84 443,178.04 15,417,884.35 189,888.63 6,606,105.94 113,717.64 3,956,164.80
DEC 15, 2002 1,000,000.00 33,789,368.84 443,178.04 14,974,706.31 189,888.63 6,416,217.31 113,717.64 3,842,447.16
MAR 15, 2003 1,000,000.00 32,789,368.84 443,178.04 14,531,528.27 189,888.63 6,226,328.68 113,717.64 3,728,729.52
JUN 15, 2003 1,000,000.00 31,789,368.84 443,178.04 14,088,350.23 189,888.63 6,036,440.05 113,717.64 3,615,011.88
SEP 15, 2003 1,000,000.00 30,789,368.84 443,178.04 13,645,172.19 189,888.63 5,846,551.42 113,717.64 3,501,294.24
DEC 15, 2003 1,000,000.00 29,789,368.84 443,178.04 13,201,994.15 189,888.63 5,656,662.79 113,717.64 3,387,576.60
MAR 15, 2004 1,000,000.00 28,789,368.84 443,178.04 12,758,816.11 189,888.63 5,466,774.16 113,717.64 3,273,858.96
JUN 15, 2004 1,000,000.00 27,789,368.84 443,178.04 12,315,638.07 189,888.63 5,276,885.53 113,717.64 3,160,141.32
SEP 15, 2004 1,000,000.00 26,789,368.84 443,178.04 11,872,460.03 189,888.63 5,086,996.90 113,717.64 3,046,423.68
DEC 15, 2004 BALANCE DUE BALANCE DUE BALANCE DUE BALANCE DUE
</TABLE>
<TABLE>
WTD INDUSTRIES, INC. EXHIBIT 2.04(a) (RESTATED)
ALLOCATION OF PRINCIPAL PAYMENTS to Credit and Security Agreement 11/04/94
FOR SECURED PROMISSORY NOTES Dated as of November 30, 1994 04:20 PM
(RESTATED AS OF OCT 18, 1994)
<CAPTION>
17.575572% FOOTHILL 7.745997% FRANKLIN
---------------------- ----------------------
PAYMENT BALANCE PAYMENT BALANCE
--------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE
SEP 30, 1994 9,998,631.57 4,406,648.95
PAYMENT
OCT 18, 1994 492,116.02 9,506,515.55 216,887.92 4,189,761.03
SCHEDULED PAYMENTS:
MAR 15, 1995 39,545.04 9,466,970.51 17,428.49 4,172,332.54
JUN 15, 1995 39,545.04 9,427,425.47 17,428.49 4,154,904.05
SEP 15, 1995 39,545.04 9,387,880.43 17,428.49 4,137,475.56
DEC 15, 1995 39,545.04 9,348,335.39 17,428.49 4,120,047.07
MAR 15, 1996 39,545.04 9,308,790.35 17,428.49 4,102,618.58
JUN 15, 1996 39,545.04 9,269,245.31 17,428.49 4,085,190.09
SEP 15, 1996 39,545.04 9,229,700.27 17,428.49 4,067,761.60
DEC 15, 1996 39,545.04 9,190,155.23 17,428.49 4,050,333.11
MAR 15, 1997 39,545.04 9,150,610.19 17,428.49 4,032,904.62
JUN 15, 1997 39,545.04 9,111,065.15 17,428.49 4,015,476.13
SEP 15, 1997 39,545.04 9,071,520.11 17,428.49 3,998,047.64
DEC 15, 1997 39,545.04 9,031,975.07 17,428.49 3,980,619.15
MAR 15, 1998 70,302.29 8,961,672.78 30,983.99 3,949,635.16
JUN 15, 1998 70,302.29 8,891,370.49 30,983.99 3,918,651.17
SEP 15, 1998 70,302.29 8,821,068.20 30,983.99 3,887,667.18
DEC 15, 1998 70,302.29 8,750,765.91 30,983.99 3,856,683.19
MAR 15, 1999 175,755.72 8,575,010.19 77,459.97 3,779,223.22
JUN 15, 1999 175,755.72 8,399,254.47 77,459.97 3,701,763.25
SEP 15, 1999 175,755.72 8,223,498.75 77,459.97 3,624,303.28
DEC 15, 1999 175,755.72 8,047,743.03 77,459.97 3,546,843.31
MAR 15, 2000 175,755.72 7,871,987.31 77,459.97 3,469,383.34
JUN 15, 2000 175,755.72 7,696,231.59 77,459.97 3,391,923.37
SEP 15, 2000 175,755.72 7,520,475.87 77,459.97 3,314,463.40
DEC 15, 2000 175,755.72 7,344,720.15 77,459.97 3,237,003.43
MAR 15, 2001 175,755.72 7,168,964.43 77,459.97 3,159,543.46
JUN 15, 2001 175,755.72 6,993,208.71 77,459.97 3,082,083.49
SEP 15, 2001 175,755.72 6,817,452.99 77,459.97 3,004,623.52
DEC 15, 2001 175,755.72 6,641,697.27 77,459.97 2,927,163.55
MAR 15, 2002 175,755.72 6,465,941.55 77,459.97 2,849,703.58
JUN 15, 2002 175,755.72 6,290,185.83 77,459.97 2,772,243.61
SEP 15, 2002 175,755.72 6,114,430.11 77,459.97 2,694,783.64
DEC 15, 2002 175,755.72 5,938,674.39 77,459.97 2,617,323.67
MAR 15, 2003 175,755.72 5,762,918.67 77,459.97 2,539,863.70
JUN 15, 2003 175,755.72 5,587,162.95 77,459.97 2,462,403.73
SEP 15, 2003 175,755.72 5,411,407.23 77,459.97 2,384,943.76
DEC 15, 2003 175,755.72 5,235,651.51 77,459.97 2,307,483.79
MAR 15, 2004 175,755.72 5,059,895.79 77,459.97 2,230,023.82
JUN 15, 2004 175,755.72 4,884,140.07 77,459.97 2,152,563.85
SEP 15, 2004 175,755.72 4,708,384.35 77,459.97 2,075,103.88
DEC 15, 2004 BALANCE DUE BALANCE DUE
</TABLE>
EXHIBIT 2.05(b) (RESTATED)
Lenders' Percentages
(Restated as of October 18, 1994)
Principal 44.317804%
Northwestern 18.988863%
Oppenheimer 11.371764%
Foothill 17.575572%
Franklin 7.745997%
Report From The President
Dear WTD Shareholders:
We are pleased to report continued success in fulfilling our
two major goals of profitable operations and reduced indebtedness,
despite less than robust lumber market conditions.
We earned $1,664,000 or $.10 a share for our second quarter.
Although the second quarter was down somewhat from the same quarter
last fiscal year, for our first half of this fiscal year we are
well ahead of the first half of last year.
We have accomplished significant early retirement of debt.
Our unscheduled debt reduction payments totalled $3.3 million for
the quarter and $3.7 million for the fiscal year to date. We have
been able to achieve this debt reduction and maintain healthy cash
reserves. Our cash and cash equivalents at quarter-end totalled
$13.9 million.
Because November 30, 1994 will mark the second anniversary of
our emergence from Chapter 11, it is appropriate to review the
progress that this Company has made in achieving its financial
goals.
Since the end of the quarter in which we completed our Chapter
11 (January 31, 1993), your stockholders' equity has doubled, from
less than $10 million to more than $20 million. Long-term debt,
including current maturities, has been reduced from $66.7 million
to $58.2 million and the long-term debt to total capitalization
ratio has improved substantially, from 86.8% to 73.5%. Our working
capital has gone from $38 million to $43.4 million.
Looking ahead, we expect to complete, during our next quarter,
major capital improvements at two of our stud mills. The projects
will increase our drying capacity and allow us to utilize different
log species more efficiently and avoid using more expensive off-
site custom drying.
As we move into our third quarter, which is often our weakest
quarter, we have seen modest declines in lumber prices reflecting
a seasonal slowdown of activity. We will continue to do our best
in matching log costs to lumber prices to achieve our goals of
generating earnings and reducing debt.
Bruce L. Engel
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CMPANY'S BALANCE SHEET AND STATEMENT OF INCOME FOR THE PERIOD ENDED OCTOBER 31,
1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1995
<PERIOD-START> AUG-1-1994
<PERIOD-END> OCT-31-1994
<CASH> 13933
<SECURITIES> 0
<RECEIVABLES> 13022
<ALLOWANCES> 0
<INVENTORY> 22068
<CURRENT-ASSETS> 64429
<PP&E> 76985
<DEPRECIATION> 45147
<TOTAL-ASSETS> 99601
<CURRENT-LIABILITIES> 20999
<BONDS> 56159
<COMMON> 28641
0
21021
<OTHER-SE> (29400)
<TOTAL-LIABILITY-AND-EQUITY> 99601
<SALES> 155623
<TOTAL-REVENUES> 155623
<CGS> 143756
<TOTAL-COSTS> 143756
<OTHER-EXPENSES> 6025
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3146
<INCOME-PRETAX> 3606
<INCOME-TAX> 902
<INCOME-CONTINUING> 2704
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2704
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
