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 July 31, 1997
-------------------------
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition from to
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Commission file number 0-16158
WTD Industries, Inc.
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(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
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(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 and
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 August 31, 1997 was 11,123,874.
<PAGE>
WTD INDUSTRIES, INC.
INDEX
Page
Number
------
PART I. Financial Information (Unaudited)
Item 1. Financial Statements
Consolidated Statements of Income -
Three Months Ended July 31, 1997 and 1996 3
Consolidated Balance Sheets -
July 31, 1997 and April 30, 1997 4
Consolidated Statements of Cash Flows -
Three Months Ended July 31, 1997 and 1996 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 14
2
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
WTD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per-Share Amounts)
(Unaudited)
THREE MONTHS ENDED JULY 31,
---------------------------------------------
1997 1996
----------------- -----------------
<S> <C> <C>
NET SALES $ 68,881 $ 66,973
COST OF SALES 61,841 59,311
----------------- -----------------
GROSS PROFIT 7,040 7,662
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 3,230 3,083
----------------- -----------------
OPERATING INCOME 3,810 4,579
OTHER INCOME (EXPENSE)
Interest Expense (1,211) (1,297)
Miscellaneous 101 95
----------------- -----------------
(1,110) (1,202)
----------------- -----------------
INCOME BEFORE INCOME TAXES 2,700 3,377
PROVISION FOR INCOME TAXES 756 1,283
----------------- -----------------
NET INCOME 1,944 2,094
PREFERRED DIVIDENDS 569 557
----------------- -----------------
NET INCOME APPLICABLE TO COMMON STOCKHOLDERS $ 1,375 $ 1,537
================= =================
NET INCOME PER COMMON SHARE
PRIMARY $0.12 $0.14
===== =====
FULLY DILUTED $0.12 $0.14
===== =====
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
3
<PAGE>
WTD INDUSTRIES, INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands)
JULY 31, APRIL 30,
1997 1997
-------------- --------------
<S> <C> <C>
CURRENT ASSETS (Unaudited)
Cash and cash equivalents $ 5,370 $ 8,209
Accounts receivable, net 13,105 16,830
Inventories 22,800 17,760
Prepaid expenses 2,650 1,817
Income tax refund receivable 1,145 1,145
Deferred tax asset 970 1,383
Assets held for sale 361 361
Timber, timberlands and timber-related assets 3,220 3,936
-------------- --------------
Total current assets 49,621 51,441
NOTES AND ACCOUNTS RECEIVABLE 118 124
TIMBER AND TIMBERLANDS 631 629
PROPERTY, PLANT AND EQUIPMENT, at cost
Land 3,343 3,343
Buildings and improvements 11,279 11,194
Machinery and equipment 70,773 70,391
-------------- --------------
85,395 84,928
Less accumulated depreciation 57,853 56,557
-------------- --------------
27,542 28,371
Construction in progress 5,546 4,365
-------------- --------------
33,088 32,736
DEFERRED TAX ASSET -- 280
OTHER ASSETS 1,267 1,276
-------------- --------------
$ 84,725 $ 86,486
============== ==============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
WTD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(In Thousands, Except Share Information)
JULY 31, APRIL 30,
1997 1997
-------------- --------------
<S> <C> <C>
CURRENT LIABILITIES (Unaudited)
Accounts payable $ 10,317 $ 9,709
Accrued expenses 7,512 9,644
Timber contracts payable 80 246
Current maturities of long-term debt 2,069 2,367
-------------- --------------
Total current liabilities 19,978 21,966
LONG-TERM DEBT, less current maturities 44,943 46,086
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, 11,083,474 issued and outstanding 28,647 28,647
Additional paid-in capital 15 15
Retained deficit (29,879) (31,249)
-------------- --------------
19,804 18,434
-------------- --------------
$ 84,725 $ 86,486
============== ==============
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
WTD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
THREE MONTHS ENDED JULY 31,
-------------------------------------
1997 1996
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<S> <C> <C>
CASH PROVIDED BY (USED FOR) OPERATING ACTIVITIES:
Net income $ 1,944 $ 2,094
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation, depletion and amortization 1,427 1,506
Deferred income tax 693 1,283
Accounts receivable 3,725 (2,535)
Inventories (5,040) (5,520)
Prepaid expenses (833) (368)
Timber, timberlands and timber-related assets - current 667 1,336
Payables and accruals (1,670) 1,523
Income taxes -- 905
-------------- --------------
Cash provided by operating activities 913 224
-------------- --------------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
Net reductions of (additions to) timber and timberlands (2) 50
Acquisition of property, plant and equipment (1,703) (562)
Other investing activities 7 22
-------------- --------------
Cash used for investing activities (1,698) (490)
-------------- --------------
CASH USED FOR FINANCING ACTIVITIES:
Principal payments on long-term debt (1,461) (382)
Other assets (19) (16)
Dividends paid on preferred stock (574) (557)
-------------- --------------
Cash used for financing activities (2,054) (955)
-------------- --------------
DECREASE IN CASH AND CASH EQUIVALENTS (2,839) (1,221)
CASH BALANCE AT BEGINNING OF PERIOD 8,209 4,576
-------------- --------------
CASH BALANCE AT END OF PERIOD $ 5,370 $ 3,355
============== ==============
CASH PAID (REFUNDED) DURING THE PERIOD FOR:
Interest $1,215 $1,295
Income taxes $62 ($905)
The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>
6
<PAGE>
WTD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
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 may 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, 1997, 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 July 31, 1997 and April 30, 1997 are as follows (in
thousands):
July 31, April 30,
1997 1997
---------- ----------
Logs $ 11,864 $ 9,054
Lumber 9,518 7,379
Supplies and other 1,418 1,327
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$ 22,800 $ 17,760
========== ==========
NOTE 3 - LONG-TERM DEBT
The Company's primary debt agreement includes certain covenants, including
the maintenance of specified levels of adjusted cumulative operating income (as
defined), tangible net worth, working capital, collateral coverage (as defined)
and total liabilities ratio (as defined). This agreement also imposes certain
restrictions and limitations on capital expenditures, investments, dividend
payments, new indebtedness, and transactions with officers, directors,
shareholders and affiliates. This debt agreement was most recently amended as of
May 1, 1996, with respect to certain affirmative financial performance covenants
and payment terms.
7
<PAGE>
NOTE 3 - LONG-TERM DEBT (Continued)
At July 31, 1997 the Company's tangible net worth was $19.5 million,
compared to $10 million required by the covenant. At that same date, the
Company's working capital was $29.6 million, compared to $25 million required by
the covenant. Also, at July 31, 1997, the Company's adjusted cumulative
operating income was $40.3 million, compared to $27.5 million required. The
collateral coverage ratio at July 31, 1997 was 81%, compared to a 60% minimum
required level. The total liabilities ratio was 76.6% at July 31, 1997, compared
to a maximum allowed of 87%. The required level of tangible net worth increases
to $12 million at May 1, 1998 and $14.5 million at May 1, 1999. The required
level of adjusted cumulative operating income increases to $40 million at May 1,
1998, $52.5 million at May 1, 1999 and $67.5 million at May 1, 2000. The minimum
required collateral coverage ratio increases to 65% at May 1, 1998. The maximum
allowed total liabilities ratio drops to 85% at May 1, 1998. During the quarter
ended July 31, 1997, the Company's adjusted cumulative operating income
increased by $3.4 million while showing income before taxes of $2.7 million. The
Company continues to be in compliance with all covenants contained in this
agreement.
In addition, this debt agreement requires prepayments if the Company's
cumulative operating income exceeds certain specified amounts. No such
prepayment was required for the year ended April 30, 1997. In connection with
the May 1, 1996 amendment, the Company agreed to an additional prepayment
computed at 30% of quarterly net income. The next prepayment under this
provision will be $536,000 due September 29, 1997.
NOTE 4 - STOCKHOLDERS' EQUITY AND COMMON SHARES OUTSTANDING
Stockholder's equity at July 31, 1997 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 a 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. The
Company has not missed any dividend payments on the Series A preferred
stock.
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.
8
<PAGE>
NOTE 4 - STOCKHOLDERS' EQUITY AND COMMON SHARES OUTSTANDING
(Continued)
Common stock, no par value; 40,000,000 shares authorized; 11,083,474
shares issued and outstanding. Before giving effect to any shares that
might be issued pursuant to the exercise of any stock options or
conversion of any Series A preferred stock, the total number of common
shares would increase to 11,296,167 shares if remaining Series B
preferred stock outstanding at July 31, 1997 is converted to common
stock.
NOTE 5 - NET INCOME PER SHARE
The calculations of net income per share for the three-month periods ended
July 31, 1997 and 1996 are summarized below (in thousands, except per-share
data):
Three Months Ended
July 31,
------------------------
1997 1996
---------- ----------
Net income applicable to common shareholders $ 1,375 $ 1,537
========== ==========
Weighted average shares outstanding 11,083 11,077
Additional shares assumed from:
- Conversion of Series B preferred stock 213 213
- Exercise of stock options 431 8
---------- ----------
Average number of shares and equivalents outstanding
- Primary basis 11,727 11,298
Additional shares assumed from exercise of stock options 121 14
---------- ----------
Average number of shares and equivalents outstanding
- Fully diluted 11,848 11,312
========== ==========
Net income per common share
- Primary basis $0.12 $0.14
===== =====
- Fully diluted $0.12 $0.14
===== =====
NOTE 6 - 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 the financial
reporting and tax basis of assets and liabilities, and the expected utilization
of net operating loss (NOL) carryforwards.
9
<PAGE>
NOTE 6 - INCOME TAXES (Continued)
The federal and state income tax provision consists of the following (in
thousands):
Three months ended
July 31,
------------------------
1997 1996
---------- ----------
Income before income taxes $ 2,700 $ 3,377
========== ==========
Income tax provision:
Federal $ 648 $ 1,148
State 108 135
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$ 756 $ 1,283
========== ==========
Current $ 63 $ 95
Deferred 693 1,188
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$ 756 $ 1,283
========== ==========
Deferred tax assets declined during the quarter ended July 31, 1997,
principally the result of recording utilization of the tax benefit from NOL
carryforwards.
During the quarter ended July 31, 1997, the Company utilized approximately
$2.8 million of its NOL carryforwards, leaving approximately $7.2 million for
future periods. Management also estimates that current economic conditions will
provide for some reductions in its valuation reserve in fiscal 1998. These
reductions should result in a lowering of the Company's effective tax rate from
38% to approximately 28% in fiscal 1998.
NOTE 7 - 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. Various governmental agencies
have enacted, or are considering, regulations regarding log yard management and
disposal of log yard waste that may require material expenditures in the future.
Management believes that the Company will be able to comply with any final
regulations in this area without a material adverse impact on its consolidated
financial condition or results of operations.
10
<PAGE>
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. Trade policies and agreements between the United States and other
countries, such as Canada, can also significantly affect log and lumber prices
in the Company's markets.
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 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 Company has experienced relatively stable operating conditions over the
past 15 months. Lumber usage and demand continue to be strong and the Company
has responded to certain lumber price adjustments by altering product mix and
reducing log costs where possible. There is currently an oversupply of lumber in
the U.S. market, caused in part by weakness in the export lumber market,
particularly exports to Japan and some export producers manufacturing for the
domestic lumber market. Log costs were relatively stable during the first
quarter. There can be no assurance that the margins recently experienced by the
Company will continue or improve.
11
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
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:
Percentage
Increase (Decrease)
Income and Expense Items as Three Months
a Percentage of Net Sales Ended
Three Months ended July 31, 7/31/97
---------------------------- to
1997 1996 7/31/96
---------- ---------- ---------
Net Sales 100.0% 100.0% 2.8%
Cost of sales 89.8 88.6 4.3
---------- ----------
Gross profit 10.2 11.4 (8.1)
Selling, general and
administrative expenses 4.7 4.6 4.8
---------- ----------
Operating income 5.5 6.8 (16.8)
Interest expense (1.8) (1.9) (6.6)
Miscellaneous 0.1 0.1 6.3
---------- ----------
Income before income taxes 3.9 5.0 (20.0)
Provision for income taxes 1.1 1.9 (41.1)
---------- ----------
Net income 2.8% 3.1% (7.2)%
========== ==========
Note: Percentages may not add precisely due to rounding.
Comparison of Three Months Ended July 31, 1997 and 1996
- -------------------------------------------------------
Net sales for the three months ended July 31, 1997 increased $1.9 million
(3%) from the three months ended July 31, 1996. Lumber shipments and prices
remained relatively constant, while chip deliveries decreased by 6% and chip
prices decreased by 9%. While the lumber market was slightly weaker in the
current quarter compared to the first quarter of fiscal 1997, lumber production
was substantially unchanged.
Gross profit for the quarter ended July 31, 1997 was 10.2% of net sales,
compared to 11.4% of net sales for the quarter ended July 31, 1996. While lumber
prices and log costs remained relatively unchanged from the first quarter of
fiscal 1997, unit manufacturing costs increased by 6%, partially due to a
general wage increase in September 1996.
Selling, general and administrative expenses in the three months ended July
31, 1997 increased by $0.2 million (5%) from the three months ended July 31,
1996. This increase reflects a general salary increase in September 1996 and the
start-up of two WTD subsidiaries in the current quarter, partially offset by
lower profit-sharing bonus payments stemming from lower pretax profits.
12
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (Continued)
In the quarter ended July 31, 1997, the Company's tax provision equaled 28%
of its pretax profit. In the quarter ended July 31, 1996, the Company recorded a
tax provision equal to 38% of its pretax profit. See Note 6 to Consolidated
Financial Statements.
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 primary debt obligation.
At July 31, 1997, the Company had net working capital of $29.6 million,
$0.1 million more than at April 30, 1997. The working capital increase was
primarily the result of profitable operations, partially offset by capital
spending, principal payments on debt and dividends paid on the Company's Series
A preferred stock.
Cash and cash equivalents decreased by $2.8 million during the first
quarter of fiscal 1998, to $5.4 million at July 31. Approximately $0.9 million
of cash was provided by operations. About $1.5 million was used to repay various
debt obligations and $1.7 million for acquisition of property, plant and
equipment. The Company also paid $0.6 million in dividends to holders of its
Series A preferred stock.
During the three months ended July 31, 1997, the Company spent $1.7 million
for capital improvements to its facilities. Capital spending for the balance of
the fiscal year is currently forecast to be approximately $6 million. The
Company had commitments of approximately $3.7 million for capital spending at
July 31, 1997.
The Company's Credit and Security Agreement dated as of November 30, 1992
contains certain covenants, including the maintenance of prescribed levels of
collateral coverage (as defined), tangible net worth, working capital, adjusted
cumulative operating income (as defined) and total liabilities ratio (as
defined). This debt agreement was most recently amended as of May 1, 1996, with
respect to certain affirmative financial performance covenants and payment
terms. See Note 3 to Consolidated Financial Statements.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contains "forward-looking" information (as defined in Section 27A of
the Securities Act of 1933, as amended) that involve risks and uncertainties,
including, but not limited to, the impact of general economic conditions,
increased interest rates, the impact of competitive products and pricing,
availability and cost of raw materials, inadequate cash reserves, labor strikes,
changes in environmental and other regulations, changes in the Company's ability
to use its net operating loss carryforward and the risk factors listed from time
to time in the Company's SEC reports, including, but not limited to, the report
on Form 10-K for the fiscal year ended April 30, 1997 (Part II, Item 7,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations").
13
<PAGE>
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 16.
(b) Reports on Form 8-K
A current report on Form 8-K, describing the agreement between
WTD Industries, Inc., Bruce L. Engel, Quinault Corporation and Larry G. Black,
regarding the Company's common stock was filed with the Securities and Exchange
Commission on June 12, 1997.
14
<PAGE>
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
September 9, 1997
15
<PAGE>
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)
10.7 Agreement dated June 10, 1997 between WTD Industries, Inc.,
Bruce L. Engel, Quinault Corporation and Larry G. Black(3)
19 Other reports furnished to securities holders with respect to the 17
quarter ended July 31, 1997: President's letter excerpted from
Interim Report to Shareholders for the first quarter of fiscal 1998
27 Financial Data Schedule(4)
- ----------
(1)Incorporated by reference to the exhibit of like number to the
Registrant's report on 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)Incorporated by reference to the exhibit of like number to the
Registrant's report on Form 8-K dated June 10, 1997, previously filed with the
Commission.
(4)This schedule has been submitted in the electronic form prescribed by
EDGAR.
----------
All other required Exhibits are listed in the Company's Annual Report
on Form 10-K for the year ended April 30, 1997.
16
Exhibit 19
Report from The President
Dear WTD Shareholders:
I am pleased to report that our first quarter of the new fiscal year
produced net income of $1,944,000 or $.12 per share, compared with net income of
$2,094,000 or $.14 per share for the same period in 1996. First quarter net
sales were $68.9 million, compared to $67.0 million for the comparable period
last year.
Despite a decline in lumber prices compared to a year ago and last
quarter, we continue to book a solid profit. Lumber usage and demand continue to
be strong, but lumber prices have declined because of oversupply in the U.S.
market, caused in part by weakness in the export lumber market, particularly
exports to Japan. Consequently, some export producers are now manufacturing for
the domestic lumber market. We have responded to the lumber price adjustments by
altering product mix and reducing log costs where possible.
We are also beginning to see some benefit from an improved chip market.
Commencing July 1, WTD obtained modest chip price increases at most facilities,
and we intend to seek further chip price increases next quarter.
We continue to progress with our capital improvement projects.
Construction of the modernization improvements at our Burke, Vermont facility
and expansion of drying capacity to benefit our Sedro-Woolley, Pacific
Softwoods, and Philomath Forest Products mills will be completed in the current
quarter. Our fingerjoint facility at Midway Engineered Wood Products, Inc. is
substantially complete and initial operations have commenced.
During its first quarter WTD reduced its senior secured debt by $1.45
million. Its profit during the first quarter will require the Company to make an
additional debt payment of approximately $0.5 million in September.
We have finalized an agreement with Greenweld Technologies Ltd. whereby
WTD's subsidiary, Greenweld North America Co., has been granted exclusive
authority to license the GREENWELD(TM) manufacturing process to other
manufacturers in North America. GREENWELD(TM) is a patented process for gluing
green or unseasoned lumber. Negotiations are ongoing with potential North
American licensees of the GREENWELD(TM) technology. WTD uses the GREENWELD(TM)
technology in its fingerjointing facility and has obtained certification by the
Western Wood Products Association for certain vertical use products manufactured
by WTD with the GREENWELD(TM) process. Certification is now being sought for
horizontal use applications.
We are holding our Annual Meeting of Shareholders at 10:00 a.m. local time
on Tuesday, October 7, 1997 at the Tigard Courtyard Marriott, 15686 S.W. Sequoia
Parkway, Tigard, Oregon. We look forward to discussing with our shareholders the
past fiscal year and our current operations.
Bruce L. Engel
President
17
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM REGISTRANT'S
REPORT ON FORM 10-Q FOR THE PERIOD ENDED JULY 31, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-START> MAY-01-1997
<PERIOD-END> JUL-31-1997
<CASH> 5,370
<SECURITIES> 0
<RECEIVABLES> 13,105
<ALLOWANCES> 0
<INVENTORY> 22,800
<CURRENT-ASSETS> 49,621
<PP&E> 90,941
<DEPRECIATION> 57,853
<TOTAL-ASSETS> 84,725
<CURRENT-LIABILITIES> 19,978
<BONDS> 44,943
0
21,021
<COMMON> 28,647
<OTHER-SE> (29,864)
<TOTAL-LIABILITY-AND-EQUITY> 84,725
<SALES> 68,881
<TOTAL-REVENUES> 68,881
<CGS> 61,841
<TOTAL-COSTS> 61,841
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,211
<INCOME-PRETAX> 2,700
<INCOME-TAX> 756
<INCOME-CONTINUING> 1,944
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,944
<EPS-PRIMARY> .12
<EPS-DILUTED> .12
</TABLE>
