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, 1995
[ ] 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, 1995 was 11,077,074.
WTD INDUSTRIES, INC.
INDEX
Page
Number
PART I. Financial Information (Unaudited)
Item 1. Financial Statements
Consolidated Statements of Operations -
Three Months and Six Months Ended
October 31, 1995 and 1994 3
Consolidated Balance Sheets -
October 31, 1995 and April 30, 1995 4
Consolidated Statements of Cash Flows -
Six Months Ended October 31, 1995 and 1994 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 1. Legal Proceedings 15
Item 4. Submission of Matters to a Vote of Security
Holders 15
Item 6. Exhibits and Reports on Form 8-K 15
<TABLE>
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WTD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per-Share Amounts)
(Unaudited)
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET SALES $ 64,161 $ 79,157 $ 102,959 $ 155,623
COST OF SALES 61,057 72,829 99,258 143,756
---------- ---------- ---------- ----------
GROSS PROFIT 3,104 6,328 3,701 11,867
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,711 2,901 5,149 5,609
REORGANIZATION CREDITS -- -- -- (39)
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS) 393 3,427 (1,448) 6,297
OTHER INCOME (EXPENSE)
Interest expense (1,350) (1,534) (2,714) (3,146)
Miscellaneous 94 268 202 455
---------- ---------- ---------- ----------
(1,256) (1,266) (2,512) (2,691)
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (863) 2,161 (3,960) 3,606
PROVISION FOR INCOME TAXES (BENEFIT) (328) 497 (1,505) 902
---------- ---------- ---------- ----------
NET INCOME (LOSS) (535) 1,664 (2,455) 2,704
PREFERRED DIVIDENDS 595 512 1,203 972
---------- ---------- ---------- ----------
NET INCOME (LOSS) APPLICABLE
TO COMMON SHAREHOLDERS $ (1,130) $ 1,152 $ (3,658) $ 1,732
======= ======= ======= =======
NET INCOME (LOSS) PER COMMON SHARE
- PRIMARY ($0.10) $0.10 ($0.33) $0.15
===== ===== ===== =====
- FULLY DILUTED ($0.10) $0.10 ($0.33) $0.15
===== ===== ===== =====
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
-3-
</TABLE>
<TABLE>
WTD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands)
<CAPTION>
OCTOBER 31, APRIL 30,
1995 1995
<S> <C> <C>
CURRENT ASSETS (Unaudited)
Cash and cash equivalents $ 4,188 $ 6,023
Accounts receivable, net 11,258 11,404
Inventories 19,043 18,104
Prepaid expenses 2,153 4,024
Income tax refund receivable -- 503
Deferred tax asset 1,672 1,830
Timber, timberlands and
timber-related assets 7,689 9,299
---------- ----------
Total current assets 46,003 51,187
NOTES AND ACCOUNTS RECEIVABLE 89 89
TIMBER AND TIMBERLANDS 698 705
PROPERTY, PLANT AND EQUIPMENT,
at cost
Land 3,087 2,733
Buildings and improvements 11,011 11,008
Machinery and equipment 66,030 65,511
---------- ----------
80,128 79,252
Less accumulated depreciation 49,675 47,727
---------- ----------
30,453 31,525
Construction in progress 1,483 600
---------- ----------
31,936 32,125
DEFERRED TAX ASSET 4,083 2,448
OTHER ASSETS 2,268 2,390
---------- ----------
$ 85,077 $ 88,944
======= =======
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
-4-
</TABLE>
<TABLE>
WTD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(In Thousands, Except Share Information)
<CAPTION>
OCTOBER 31, APRIL 30,
1995 1995
<S> <C> <C>
CURRENT LIABILITIES (Unaudited)
Accounts payable $ 5,710 $ 6,023
Accrued expenses 7,332 7,466
Timber contracts payable 2,693 1,660
Current maturities of long-term debt 1,945 2,298
---------- ----------
Total current liabilities 17,680 17,447
LONG-TERM DEBT, less current maturities 50,974 51,421
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY
Preferred stock, 10,000,000 shares authorized
Series A, 270,079 shares outstanding 20,688 20,688
Series B, 6,111 shares outstanding 333 333
Common stock, no par value, 40,000,000 shares
authorized, 11,077,074 issued and outstanding 28,641 28,641
Additional paid-in capital 15 15
Retained deficit (33,254) (29,601)
---------- ----------
16,423 20,076
---------- ----------
$ 85,077 $ 88,944
======= =======
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
-5-
</TABLE>
<TABLE>
WTD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
<CAPTION>
SIX MONTHS ENDED OCTOBER 31,
1995 1994
<S> <C> <C>
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net income (loss) $ (2,455) $ 2,704
Adjustments to reconcile net income (loss) to
cash provided by operating activities:
Depreciation, depletion and amortization 2,823 4,366
Deferred income tax (1,477) --
Accounts receivable 146 (4,388)
Inventories (939) 4,728
Prepaid expenses 1,871 (326)
Timber, timberlands and
timber-related assets - current 1,137 1,368
Payables and accruals 664 4,880
Income taxes 503 273
---------- ----------
Cash provided by operating activities 2,273 13,605
---------- ----------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
Notes and other receivables -- 54
Net reductions of timber,
timberlands and timber-related assets 7 44
Acquisition of property, plant and equipment (2,089) (3,383)
Other investing activities 51 121
---------- ----------
Cash used for investing activities (2,031) (3,164)
---------- ----------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Principal payments on long-term debt (878) (4,369)
Other assets (1) 748
Dividends paid on preferred stock (1,198) (1,012)
Issuance of common stock -- 24
---------- ----------
Cash used for financing activities (2,077) (4,609)
---------- ----------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,835) 5,832
CASH BALANCE AT BEGINNING OF PERIOD 6,023 8,101
---------- ----------
CASH BALANCE AT END OF PERIOD $ 4,188 $ 13,933
======= =======
CASH PAID (REFUNDED) DURING THE PERIOD FOR:
Interest $523 $3,308
Income taxes ($530) $619
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
-6-
</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. Certain
reclassifications have been made to the prior period results and
balances to conform to the current period classifications. 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, 1995, 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, 1995 and April 30,
1995 are as follows (in thousands):
October 31, April 30,
1995 1995
---------- ----------
Logs $ 9,297 $ 6,100
Lumber 8,584 10,808
Supplies 1,162 1,196
__________ __________
$ 19,043 $ 18,104
========== ==========
NOTE 3 - STOCKHOLDERS' EQUITY AND COMMON SHARES OUTSTANDING
Stockholders' equity at October 31, 1995 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 remaining Series B preferred stock outstanding
at October 31, 1995 is converted to common stock.
NOTE 4 - NET INCOME (LOSS) PER SHARE
The calculations of net income (loss) per share for the three month
and six month periods ended October 31, 1995 and 1994 are
summarized below (in thousands, except per-share data):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
NET INCOME (LOSS) APPLICABLE
TO COMMON SHAREHOLDERS $ (1,130) $ 1,152 $ (3,658) $ 1,732
====== ====== ====== ======
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 11,077 11,077 11,077 11,073
ADDITIONAL SHARES ASSUMED FROM:
Conversion of Series B
preferred stock -- 213 -- 213
Exercise of stock options -- 166 -- 190
------ ------ ------ ------
AVERAGE NUMBER OF SHARES AND
EQUIVALENTS OUTSTANDING
-PRIMARY 11,077 11,456 11,077 11,476
ADDITIONAL SHARES ASSUMED FROM
EXERCISE OF STOCK OPTIONS -- 2 -- 7
------ ------ ------ ------
AVERAGE NUMBER OF SHARES AND
EQUIVALENTS OUTSTANDING
- FULLY DILUTED 11,077 11,458 11,077 11,483
====== ====== ====== ======
NET INCOME (LOSS) PER COMMON SHARE
-PRIMARY ($0.10) $0.10 ($0.33) $0.15
====== ====== ====== ======
- FULLY DILUTED ($0.10) $0.10 ($0.33) $0.15
====== ====== ====== ======
</TABLE>
NOTE 5 - INCOME TAXES
The income tax provision (benefit) is based on the estimated
effective annual tax rate for each fiscal year. The provision
(benefit) includes anticipated current income taxes payable or
refundable, the tax effect of anticipated differences between the
financial reporting and tax basis of assets and liabilities, and
the expected utilization of net operating loss (NOL) carryforwards.
The federal and state income tax provision (benefit) consists
of the following (in thousands):
Three months ended Six months ended
October 31, October 31,
------------------ ------------------
1995 1994 1995 1994
-------- -------- -------- --------
Income (loss) before
income taxes $ (863) $ 2,161 $(3,960) $ 3,606
======== ======== ======== ========
Income tax provision
(benefit):
Federal $ (293) $ 446 $(1,347) $ 809
State (35) 51 (158) 93
-------- -------- -------- --------
$ (328) $ 497 $(1,505) $ 902
======== ======== ======== ========
Current $ 115 $ 497 $ (28) 902
Deferred (443) -- (1,477) --
-------- -------- -------- --------
$ (328) $ 497 $(1,505) $ 902
======== ======== ======== ========
Deferred tax assets increased during the quarter ended October
31, 1995, principally the result of additional net operating loss
carryforwards stemming from pretax losses. Current taxes during
the quarter ended October 31, 1995 reflect payments required for
the Company's Foreign Sales Corporation.
Management continually assesses the likelihood of utilizing
the recorded deferred tax asset related to its NOL carryforwards,
including its operating history, the cyclical nature of the
industry in which the Company operates, current economic conditions
and the potential outcome of any IRS audits. After considering the
foregoing factors, management established a valuation allowance at
April 30, 1995 of approximately $2.9 million. No change to this
reserve was considered necessary during the quarter ended October
31, 1995.
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.
The Company is subject to various federal, state and
local regulations regarding waste disposal and pollution control.
The Company believes it is in substantial compliance with all
existing regulations and orders. Various government agencies are
considering new regulations, including those related to log yard
management and disposal of log yard waste. Management believes
that it will be able to comply with any final regulations in this
area without a material adverse impact on its financial condition
or results of operations.
On October 8, 1995, the United States Environmental Protection
Agency (EPA) notified the Company that EPA is investigating a site
to which a subsidiary of the Company sent certain substances for
disposal in 1991. The Company, along with approximately 1,000
other firms, has been declared a Potentially Responsible Party in
this matter, giving the Company some potential financial liability
toward the cost of cleaning up the site. The Company believes that
its liability in this matter, if any, is small and would not have
a material adverse impact on its 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
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 competing 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.
The following table sets forth the percentages which certain
expenses and income (loss) items bear to net sales, and the period
to-period percentage change in each item.
<TABLE>
<CAPTION>
PERCENTAGE
INCREASE (DECREASE)
Three Six
INCOME AND EXPENSE ITEMS AS Months Months
A PERCENTAGE OF NET SALES Ended Ended
Three Months Six Months 10/31/95 10/31/95
Ended October 31, Ended October 31, to to
1995 1994 1995 1994 10/31/94 10/31/94
<S> <C> <C> <C> <C> <C> <C>
Net sales 100.0 % 100.0 % 100.0 % 100.0 % (18.9)% (33.8)%
Cost of sales 95.2 92.0 96.4 92.4 (16.2) (31.0)
------- ------- ------- -------
Gross profit 4.8 8.0 3.6 7.6 (50.9) (68.8)
Selling, general and
administrative expense 4.2 3.7 5.0 3.6 (6.5) (8.2)
Reorganization credits 0.0 0.0 0.0 (0.0) NM NM
------- ------- ------- -------
Operating income (loss) 0.6 4.3 (1.4) 4.0 (88.5) NM
Interest expense (2.1) (1.9) (2.6) (2.0) (12.0) (13.7)
Miscellaneous 0.1 0.3 0.2 0.3 (64.9) (55.6)
------- ------- ------- -------
Income (loss) before income taxes (1.3) 2.7 (3.8) 2.3 NM NM
Provision for income taxes (benefit) (0.5) 0.6 (1.5) 0.6 NM NM
------- ------- ------- -------
Net income (loss) (0.8)% 2.1 % (2.4)% 1.7 % NM NM
===== ===== ===== =====
<FN>
Note: Percentages may not add precisely due to rounding
NM - Not meaningful
</TABLE>
Comparison of Three Months Ended October 31, 1995 and 1994
- ----------------------------------------------------------
Net sales for the three months ended October 31, 1995
decreased $15.0 million (19%) from the three months ended October
31, 1994. This was principally caused by a 20% decrease in lumber
shipments, a 19% decrease in chip volume, and a 5% decrease in
lumber prices, partially offset by a 70% increase in chip prices.
The reduced lumber and chip deliveries reflect reduced production
resulting from a weak lumber market. Chip prices during the
quarter ended October 31, 1995 were about 4% above those of the
quarter ended July 31, 1995. However, chip prices for the quarter
ending January 31, 1996 are expected to decline about 10% - 20%
from second quarter levels.
Gross profit for the quarter ended October 31, 1995 was 4.8%
of net sales, compared to 8% of net sales for the quarter ended
October 31, 1994. Lumber prices declined by 5% from the quarter
ended October 31, 1994, while the Company's log costs increased by
about 9% from the same period. The substantial increases in chip
prices mentioned earlier were not sufficient to overcome the
weakness in lumber prices and higher log costs. Management
believes a significant portion of the increases in log cost can be
attributed to the high chip prices. Unit manufacturing costs
declined by 7% from the quarter ended October 31, 1994, despite the
reduced production levels. This resulted from steps taken to
increase operating time without increasing payroll costs, and by
continued focus on cost control.
Selling, general and administrative (S, G & A) expenses in the
three months ended October 31, 1995 decreased by $0.2 million
(6.5%) from the three months ended October 31, 1994. This decrease
reflects reduced profit-sharing bonus payments stemming from lower
pre-tax profits, as well as the Company's continued focus on cost
control.
In the quarter ended October 31, 1995, the Company recorded a
tax benefit equal to 38% of its pretax loss. In the quarter ended
October 31, 1994, the Company recorded a tax provision equal to 25%
of pretax profits for the six months ended October 31, 1994. See
Note 5 to Consolidated Financial Statements.
Comparison of Six Months Ended October 31, 1995 and 1994
- --------------------------------------------------------
Net sales for the six months ended October 31, 1995 decreased
$52.7 million (34%) from the six months ended October 31, 1994.
This was principally caused by a 34% decrease in lumber shipments,
a 32% decrease in chip deliveries, and an 8% decrease in lumber
prices, partially offset by a 69% increase in chip prices. The
reduced lumber and chip deliveries reflect reduced production
resulting from a weak lumber market in the first half of fiscal
1996.
Gross profit for the six months ended October 31, 1995 was
3.6% of net sales, compared to 7.6% of net sales for the six months
ended October 31, 1994. Lumber prices declined by 8% from the six
months ended October 31, 1994, while the Company's log costs
increased by 5%. The higher chip prices were not sufficient to
offset the lower lumber prices and higher log costs. Management
believes a significant portion of the increases in log cost is
attributable to the strength in chip demand. Despite the sharply
lower production levels in the first half of fiscal 1996, the
Company reduced its unit manufacturing costs by 2% from the first
half of fiscal 1995. This reduction results from steps taken to
increase operating time without increasing payroll costs, and from
continued focus on cost control.
Selling, general and administrative (S, G & A) expenses in the
six months ended October 31, 1995 decreased by $0.5 million (8%)
from the six months ended October 31, 1994. This decrease reflects
reduced profit-sharing bonus payments stemming from lower pre-tax
profits, as well as the Company's continued focus on cost control.
In the six months ended October 31, 1995, the Company recorded
a tax benefit equal to 38% of its pretax loss. In the six months
ended October 31, 1994, the Company recorded a tax provision equal
to 25% of pretax profits for the six months ended October 31, 1994.
See Note 5 to Consolidated Financial Statements.
Liquidity and Capital Resources
- -------------------------------
During the six months ended October 31, 1995, the Company's
cash and cash equivalents decreased by $1.8 million, to $4.2
million at October 31. The decrease was principally caused by
operating losses, capital spending, scheduled principal repayments,
and dividend payments on the Company's Series A preferred stock.
Working capital decreased by $5.4 million during the first six
months of fiscal 1996, to $28.3 million at October 31. This was
principally the result of operating losses, capital spending, and
scheduled principal and dividend payments.
Capital spending in the first six months of fiscal 1996 was
$2.1 million. Capital spending for the balance of the fiscal year
is currently forecast to be approximately $1.8 million. The
Company had commitments for capital spending at October 31, 1995 of
approximately $0.3 million.
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.
The Company's Credit and Security Agreement dated as of
November 30, 1992, as amended, contains certain covenants,
including the maintenance of prescribed levels of tangible net
worth, working capital and adjusted cumulative operating income (as
defined). At October 31, 1995 the Company's tangible net worth was
$15.8 million, compared to $15 million required by the covenant.
At that same date, the Company's working capital was $28.3 million,
compared to $25 million required by the covenant throughout the
term of the agreement. Also, at October 31, 1995, the Company's
adjusted cumulative operating income was $23.2 million, compared to
$20 million required. The required level of tangible net worth
decreases to $13.5 million from November 1, 1995 through April 30,
1996, and increases to $15 million from May 1, 1996 through April
30, 1998. The required level of adjusted cumulative operating
income increases to $22.5 million at January 1, 1996, to $27.5
million at May 1, 1996 and $35 million at May 1, 1997. Improved
operating results will be necessary for the Company to remain in
compliance with its Credit and Security Agreement.
On October 8, 1995, the United States Environmental Protection
Agency (EPA) notified the Company that EPA is investigating a site
to which a subsidiary of the Company sent certain substances for
disposal in 1991. The Company, along with approximately 1,000
other firms, has been declared a Potentially Responsible Party in
this matter, giving the Company some potential financial liability
toward the cost of cleaning up the site. The Company believes that
its liability in this matter, if any, is small and should not have
a material adverse impact on its financial condition or results of
operations.
WTD INDUSTRIES, INC.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On October 8, 1995, the United States Environmental
Protection Agency (EPA) notified the Company that EPA is
investigating a site to which a subsidiary of the Company
sent certain substances for disposal in 1991. The
Company, along with approximately 1,000 other firms, has
been declared a Potentially Responsible Party in this
matter, giving the Company some potential financial
liability toward the cost of cleaning up the site. The
Company believes that its liability in this matter, if
any, is small and should not have a material adverse
impact on its financial condition or results of
operations.
Item 4. Submission of Matters to a Vote of Security Holders
On September 26, 1995, the Company held its Annual
Meeting of Shareholders. Directors H. Raymond Bingham,
Scott Christie and William H. Wright were re-elected to
two year terms. The number of votes cast for each
nominated Director was as follows:
Against or
For Withheld
---------- ------------
Bingham 9,595,225 234,855
Christie 9,601,255 228,825
Wright 9,600,690 229,390
Bruce L. Engel, K. Stanley Martin and Robert J. Riecke
continued as Directors after the meeting. The firm of Moss Adams
was re-appointed as the Company's auditors. The vote for re
appointment of Moss Adams was 9,769,180 for, 30,530 against or
withheld, and 30,370 abstentions.
Shareholders holding 1,246,994 shares did not vote.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The Index to Exhibits is located on page 17.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the three months
ended October 31, 1995.
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 12, 1995
WTD INDUSTRIES, INC.
INDEX TO EXHIBITS
Sequential
Number
System
Page
Number
3.1 Fourth Restated Articles of Incorporation
of Registrant adopted effective November
27, 1992 (1)
3.2 Second Restated Bylaws of the Registrant
adopted effective November 27, 1992 (2)
19 Other reports furnished to securities holders 18
with respect to the quarter ended October 31,
1995: President's letter excerpted from
Interim Report to Shareholders for the second
quarter of fiscal 1996.
27 Financial Data Schedule (3)
- -------------------------------------------------------------------
(1) Incorporated by reference to the exhibit of like number to
the Registrant's report of Form 8-K dated November 23, 1992,
previously filed with the Commission.
(2) Incorporated by reference to the exhibit of like number to
the Registrant's annual report on Form 10-K for the year ended
April 30, 1993, previously filed with the Commission.
(3) This schedule has been submitted in the electronic form
prescribed by EDGAR.
- -------------------------------------------------------------------
All other required Exhibits are listed in the Company's Annual
Report of Form 10-K for the year ended April 30, 1995.
Report from the President
Dear WTD Shareholders:
Our second quarter produced a disappointing net loss of
$535,000, or $.10 per share. Although lumber prices allowed
profitable operations during the first part of the quarter, the
lumber market suffered from significant weakness in October. Chip
price declines in October contributed to the loss.
We are doing a number of things to make our operations more
efficient and improve our survivability during these tough times,
such as making selected capital improvements, running through
breaks and meal periods, and keeping our log inventories short in
order to better match lumber prices.
A number of larger economic and policy issues affect our
performance, including the following:
Federal Timber - As a result of recent actions by Congress,
some federal timber is now being released for harvest.
Although historically WTD has not been dependent on federal
timber, any addition to the available raw material supply is
welcomed and hopefully can help restore more reasonable raw
material costs relative to lumber prices.
Canadian Imports - Our northern neighbors, benefiting from
favorable exchange rates, subsidized timber costs, and fewer
environmental restrictions, have captured in excess of 30% of
the U.S. lumber market. Over the long term, more
environmental and other timber harvesting restrictions are
predicted in Canada which should help blunt the Canadian
impact.
Interest Rates - It is our hope that continued reasonable
interest rates and general economic strength will contribute
to a healthy lumber market during calendar 1996.
Operating conditions have been difficult for the last twelve
months and there have been additional permanent mill closures in
the Pacific Northwest. Our view is that less efficient lumber
producers will continue to be driven out of business by the
challenging industry conditions, leaving fewer, more efficient
operations. We intend to continue to be among the most efficient
producers.
Bruce L. Engel
President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S
QUARTERLY REPORT ON FORM 10Q FOR THE PERIOD ENDED OCTOBER 31, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CIK> 0000797543
<NAME> WTD INDUSTRIES, INC.
<MULTIPLIER> 1000
<S> <C>
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<PERIOD-END> OCT-31-1995
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