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 January 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 February 28, 1995 was 11,077,074.
WTD INDUSTRIES, INC.
INDEX
Page
Number
PART I. Financial Information (Unaudited)
Item 1. Financial Statements
Consolidated Statements of Income -
Three Months and Nine Months Ended
January 31, 1995 and 1994 3
Consolidated Balance Sheets -
January 31, 1995 and April 30, 1994 4
Consolidated Statements of Cash Flows -
Nine Months Ended January 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 13
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K 17
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WTD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In Thousands, Except Per-Share Amounts)
(Unaudited)
THREE MONTHS ENDED JANUARY 31, NINE MONTHS ENDED JANUARY 31,
----------------------------- ----------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
NET SALES $ 61,592 $ 85,673 $ 217,215 $ 205,417
COST OF SALES 60,341 74,470 204,097 186,044
---------- ---------- ---------- ----------
GROSS PROFIT 1,251 11,203 13,118 19,373
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 2,314 3,814 7,923 9,354
REORGANIZATION CREDITS (493) (110) (532) (1,804)
---------- ---------- ---------- ----------
OPERATING INCOME (LOSS) (570) 7,499 5,727 11,823
OTHER INCOME (EXPENSE)
Interest Expense (1,463) (1,640) (4,609) (4,974)
Miscellaneous 583 150 1,038 282
---------- ---------- ---------- ----------
(880) (1,490) (3,571) (4,692)
---------- ---------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES (1,450) 6,009 2,156 7,131
PROVISION FOR INCOME TAXES (BENEFIT) (5,447) 2,035 (4,545) 2,282
---------- ---------- ---------- ----------
NET INCOME 3,997 3,974 6,701 4,849
PREFERRED DIVIDENDS 558 405 1,530 1,212
---------- ---------- ---------- ----------
NET INCOME APPLICABLE
TO COMMON SHAREHOLDERS $ 3,439 $ 3,569 $ 5,171 $ 3,637
========== ========== ========== ==========
NET INCOME PER COMMON SHARE
- PRIMARY BASIS $0.30 $0.31 $0.45 $0.32
===== ===== ===== =====
- FULLY DILUTED $0.30 $0.31 $0.45 $0.32
===== ===== ===== =====
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
WTD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(In Thousands)
JANUARY 31, APRIL 30,
1995 1994
---------- ----------
CURRENT ASSETS (Unaudited)
Cash and cash equivalents $ 12,189 $ 8,101
Accounts receivable, net 12,334 8,634
Inventories 19,652 26,796
Prepaid expenses 2,730 3,145
Income tax refund receivable 1,900 --
Deferred tax asset 1,761 2,197
Timber, timberlands and
timber-related assets 10,417 11,743
---------- ----------
Total current assets 60,983 60,616
NOTES AND ACCOUNTS RECEIVABLE 102 121
TIMBER AND TIMBERLANDS 712 845
PROPERTY, PLANT AND EQUIPMENT,
at cost
Land 2,733 2,602
Buildings and improvements 10,377 10,067
Machinery and equipment 63,099 60,148
---------- ----------
76,209 72,817
Less accumulated depreciation 46,759 42,001
---------- ----------
29,450 30,816
Construction in progress 3,185 1,361
---------- ----------
32,635 32,177
IDLE ASSETS 350 350
Less costs of disposal 34 82
---------- ----------
316 268
DEFERRED TAX ASSET 1,416 --
OTHER ASSETS 2,135 3,073
---------- ----------
$ 98,299 $ 97,100
========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
WTD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
(In Thousands, Except Share Information)
JANUARY 31, APRIL 30,
1995 1994
---------- ----------
CURRENT LIABILITIES (Unaudited)
Accounts payable $ 9,316 $ 3,361
Accrued expenses 7,747 7,656
Reserve for disputed and
unallowed prepetition claims 50 290
Income taxes payable -- 283
Timber contracts payable 3,375 2,292
Current maturities of long-term debt 2,269 1,938
---------- ----------
Total current liabilities 22,757 15,820
DEFERRED INCOME TAXES PAYABLE -- 2,181
LONG-TERM DEBT, less current maturities 51,857 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 (25,992) (31,107)
---------- ----------
23,685 18,512
---------- ----------
$ 98,299 $ 97,100
========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
WTD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
(Unaudited)
NINE MONTHS ENDED JANUARY 31,
------------------------------------------------
1995 1994
---------- ----------
CASH PROVIDED BY (USED FOR) OPERATING ACTIVTIES:
Net income $ 6,701 $ 4,849
Adjustments to reconcile net income to
cash provided by (used for) operations:
Depreciation, depletion and amortization 6,032 6,304
Deferred income tax (3,161) --
Reorganization credits (493) (1,804)
Accounts receivable (3,700) 2,338
Inventories 7,144 (15,110)
Prepaid expenses 415 (851)
Timber, timberlands and
timber-related assets - current 712 5,988
Payables and accruals 7,248 2,320
Income taxes (2,183) 2,193
---------- ----------
Cash provided by operating activities 18,715 6,227
---------- ----------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES:
Net reductions of timber,
timberlands and timber-related assets 133 13
Acquisition of property, plant and equipment (5,616) (2,107)
Proceeds from sale of idle assets -- 2,013
Other investing activities 190 83
---------- ----------
Cash provided by (used for) investing activities (5,293) 2
---------- ----------
CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES:
Principal payments on long-term debt (8,520) (3,817)
Other assets 748 (876)
Dividends paid on preferred stock (1,586) (1,212)
Issuance of common stock 24 57
---------- ----------
Cash used for financing activities (9,334) (5,848)
---------- ----------
INCREASE IN CASH AND CASH EQUIVALENTS 4,088 381
CASH BALANCE AT BEGINNING OF PERIOD 8,101 2,124
---------- ----------
CASH BALANCE AT END OF PERIOD $ 12,189 $ 2,505
========== ==========
CASH PAID DURING THE PERIOD FOR:
Interest $4,395 $5,765
Income taxes $790 $75
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
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 January 31, 1995 and April 30,
1994 are as follows (in thousands):
January 31, April 30,
1995 1994
----------- ----------
Logs $ 5,407 $ 11,777
Lumber 12,952 13,818
Supplies 1,293 1,201
----------- ----------
$ 19,652 $ 26,796
=========== ==========
NOTE 3 - STOCKHOLDERS' EQUITY AND COMMON SHARES OUTSTANDING
Stockholders' equity at January 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 all remaining Series B preferred stock
outstanding at January 31, 1995 is converted to common stock.
NOTE 4 - NET INCOME PER SHARE
The calculations of net income per share for the three and nine
month periods ended January 31, 1995 and 1994 are summarized below
(in thousands, except per-share data):
THREE MONTHS ENDED JANUARY 31, NINE MONTHS ENDED JANUARY 31,
----------------------------- ----------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
NET INCOME (LOSS) APPLICABLE
TO COMMON SHAREHOLDERS $ 3,439 $ 3,569 $ 5,171 $ 3,637
====== ====== ====== ======
WEIGHTED AVERAGE SHARES OUTSTANDING 11,077 9,379 11,075 9,157
ADDITIONAL SHARES ASSUMED FROM:
Conversion of Series B
preferred stock 213 1,874 213 2,082
Exercise of stock options 147 136 224 128
------ ------ ------ ------
AVERAGE NUMBER OF SHARES AND
EQUIVALENTS OUTSTANDING
-PRIMARY BASIS 11,437 11,389 11,512 11,367
ADDITIONAL SHARES ASSUMED FROM
EXERCISE OF STOCK OPTIONS 55 76 18 90
------ ------ ------ ------
AVERAGE NUMBER OF SHARES AND
EQUIVALENTS OUTSTANDING
- ASSUMING FULL DILUTION 11,492 11,465 11,530 11,457
====== ====== ====== ======
NET INCOME PER COMMON SHARE
-PRIMARY BASIS $0.30 $0.31 $0.45 $0.32
====== ====== ====== ======
- ASSUMING FULL DILUTION $0.30 $0.31 $0.45 $0.32
====== ====== ====== ======
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 Nine months ended
January 31, January 31,
------------------ ------------------
1995 1994 1995 1994
------- ------- ------- -------
Income (loss) before income taxes ($1,450) $6,009 $2,156 $7,131
======= ======= ======= =======
Income tax provision (benefit)
Federal ($5,229) $1,826 ($4,363) $1,989
State (218) 209 (182) 293
------- ------- ------- -------
($5,447) $2,035 ($4,545) $2,282
======= ======= ======= =======
Current ($2,802) $2,035 ($1,900) $2,282
Deferred (2,645) -- (2,645) --
------- ------- ------- -------
($5,447) $2,035 ($4,545) $2,282
======= ======= ======= =======
In the quarter ended January 31, 1995, the Company recorded
current and deferred income tax benefits of $5.4 million associated
with elections made by the Company under Internal Revenue Service
(IRS) Regulations regarding the calculation and use of NOL
carryforwards. These elections required the Company to reduce its
federal NOL by approximately $8.2 million and its state NOL by
approximately $5.9 million. These reductions relate to interest
expense recorded on debts which were converted to equity in the
reorganization and taxable income not recognized on the conversion
of debt to stock. However, the elections permit the remaining NOL
to offset taxable income without annual limitation.
Accordingly, the Company amended its tax returns for fiscal
year 1993 and filed its 1994 tax returns to reflect utilization of
its remaining federal and state NOL without annual limitation.
This results in anticipated refunds of prior year and current year
taxes and deposits aggregating approximately $1.9 million. The
Company can expect audits of its tax returns by various taxing
authorities for the years ending after April 30, 1991. The results
of any such examinations could affect the amount of NOL
carryforwards available to offset future tax liabilities. The
Company's remaining NOL at January 31, 1995 is approximately $14.5
million for federal income tax and $13.2 million for state income
tax purposes.
At January 31, 1995 and April 30, 1994, deferred tax assets
and liabilities were comprised of the following (in thousands):
January 31, April 30,
1995 1994
Current deferred tax assets: --------- ---------
Non-deductible accruals $ 1,533 $ 1,953
Reserves for doubtful accounts
and discounts 228 244
--------- ---------
Net current deferred tax assets 1,761 2,197
Non-current deferred tax assets:
Tax benefit of net operating
loss carryforward 5,493 11,028
Valuation allowance against
tax benefit of net operating loss (2,470) (11,028)
--------- --------
3,023 -0-
Non-current deferred tax liabilities:
Differences in depreciation and
capitalization of assets for
financial reporting and tax
purposes (1,607) (2,181)
--------- --------
Net long-term deferred tax
assets (liabilities) $ 1,416 ($ 2,181)
========= ========
Total net deferred tax asset $ 3,177 $ 16
========= ========
Management has assessed 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 and maintaining its desire to remain conservative
in its application of SFAS 109, management believes that a
valuation allowance of approximately $2.5 million is necessary.
Management periodically reviews the above factors and may change
the amount of valuation allowance as facts and circumstances
dictate.
NOTE 6 - REORGANIZATION CREDITS AND MISCELLANEOUS INCOME
During the quarter ended January 31, 1995, the Company reduced
certain valuation and holding cost reserves associated with its
remaining non-core assets. This resulted in reorganization credits
of $493,000.
Miscellaneous income in the quarter ended January 31, 1995
includes $0.3 million of gains on repurchase of debt and $0.2
million of interest income. Miscellaneous income in the nine
months ended January 31, 1995 includes $0.4 million of gains on
repurchase of certain debt obligations and $0.4 million of interest
income.
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. 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.
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 fiscal 1992, 1993 and 1994, lumber prices rose during the
winter and spring months in anticipation of the coming building
season, and then fell as the building season actually commenced.
In the fall of 1994, lumber prices began declining, as is more
historically typical. During January 1995, lumber prices generally
increased from levels reached in December 1994. Log prices did not
decline during the fall and winter months. This resulted in lower
gross margins.
Log prices, while very high by historical standards, generally
allow a small 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.
Income and Expense Items as a Percentage of Net Sales Increase (Decrease)
----------------------------------------------------------------- ------------------------
Three Months Nine Months
Three Months Nine Months Ended Ended
Ended January 31, Ended January 31, 1/31/95 1/31/95
--------------------------- --------------------------- to to
1995 1994 1995 1994 1/31/94 1/31/94
---------- ---------- ---------- ---------- ---------- ----------
Net sales 100.0 % 100.0 % 100.0 % 100.0 % (28.1)% 5.7 %
Cost of sales 98.0 86.9 94.0 90.6 (19.0) 9.7
---------- ---------- ---------- ----------
Gross profit 2.0 13.1 6.0 9.4 (88.8) (32.3)
Selling, general and
administrative expense 3.8 4.5 3.6 4.6 (39.3) (15.3)
Reorganization credits (0.8) (0.1) (0.2) (0.9) NM NM
---------- ---------- ---------- ----------
Operating income (loss) (0.9) 8.8 2.6 5.8 (107.6) (51.6)
Interest expense (2.4) (1.9) (2.1) (2.4) (10.8) (7.3)
Miscellaneous 0.9 0.2 0.5 0.1 NM NM
---------- ---------- ---------- ----------
Income (loss) before income taxes (2.4) 7.0 1.0 3.5 (124.1) (69.8)
Provision for income taxes (benefit) (8.8) 2.4 (2.1) 1.1 NM NM
---------- ---------- ---------- ----------
Net income 6.5 % 4.6 % 3.1 % 2.4 % 0.6 38.2
========== ========== ========== ==========
Comparison of Three Months Ended January 31, 1995 and 1994
- ----------------------------------------------------------
Net sales for the three months ended January 31, 1995
decreased $24.1 million (28%) from the three months ended January
31, 1994. This was principally caused by a 16% decrease in lumber
shipments, an 11% decrease in chip deliveries, and a 16% decrease
in lumber prices. The reduced lumber and chip deliveries reflect
reduced production resulting from a weak lumber market in the
current quarter and a very strong market in the prior year quarter.
Gross profit for the quarter ended January 31, 1995 was 2.0%
of net sales, compared to 13.1% of net sales for the quarter ended
January 31, 1994. Lumber prices declined by 16% from the quarter
ended January 31, 1994, while the Company's log costs declined by
only 7%.
Selling, general and administrative (S, G & A) expenses in the
three months ended January 31, 1995 decreased by $1.5 million (39%)
from the three months ended January 31, 1994. 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 3.8% of net sales in the quarter
ended January 31, 1995, compared to 4.5% of net sales in the
quarter ended January 31, 1994.
During the quarter ended January 31, 1995, the Company reduced
certain valuation and holding cost reserves associated with its
remaining non-core assets. This resulted in reorganization credits
of about $0.5 million. Reorganization credits in the quarter ended
January 31, 1994 principally reflect net gains of about $0.1
million on the disposal of certain assets in excess of their
carrying values.
In the quarter ended January 31, 1995, the Company recorded a
tax credit of $5.4 million. The Company made certain elections
under Internal Revenue Service Regulations which enable it to
utilize its net operating loss carryforwards without annual
limitation. See Note 5 to Consolidated Financial Statements. In
the quarter ended January 31, 1994, the Company recorded a tax
provision equal to 32% of pretax profits for the nine months ended
January 31, 1994.
Comparison of Nine Months Ended January 31, 1995 and 1994
- ---------------------------------------------------------
Net sales for the nine months ended January 31, 1995 increased
$11.8 million (6%) from the nine months ended January 31, 1994.
This increase was principally caused by a 14% increase in lumber
shipments and a 9% increase in chip deliveries, offset by a 7%
decrease in lumber prices. The higher lumber shipments and chip
deliveries in the current year primarily resulted from production
curtailments in the quarter ended July 31, 1993 caused by an
adverse relationship between product prices and raw material costs,
partially offset by reduced production in the quarter ended January
31, 1995 caused by seasonably weak lumber prices. In addition,
several mills increased their productivity from the prior nine
month period.
Gross profit for the nine months ended January 31, 1995 was
6.0% of net sales, compared to 9.4% of net sales for the nine
months ended January 31, 1994. Average lumber prices in the nine
months ended January 31, 1995 were 7% below those of the comparable
period last year, while log costs were only 3% below those of the
same period in fiscal 1994.
S,G&A expenses in the nine months ended January 31, 1995
decreased by $1.4 million (15%) from the nine months ended January
31, 1994. This decrease is principally the result of reduced
profit-sharing bonus payments. S,G& A expenses were 3.6% of sales
in the nine months ended January 31, 1995 and 4.6% of sales in the
nine months ended January 31, 1994.
During the quarter ended January 31, 1995, the Company reduced
certain valuation and holding cost reserves associated with its
remaining non-core assets. This resulted in reorganization credits
of about $0.5 million. Reorganization credits in the nine months
ended January 31, 1994 reflect disposal of certain idle assets at
amounts exceeding their carrying values.
During the nine months ended January 31, 1995, the Company
recorded a tax benefit of $4.5 million. This benefit reflects the
impact of certain elections made by the Company under Internal
Revenue Service Regulations to utilize its net operating loss
carryforwards without annual limitation. See Note 5 to
Consolidated Financial Statements. The Company recorded a tax
provision equal to 32% of pretax profits for the nine months ended
January 31, 1994. This provision reflects the estimated rate for
the fiscal year and expected 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 nine months ended January 31, 1995, the Company's
cash and cash equivalents increased by $4.1 million, to $12.2
million at January 31. The increase was principally caused by
profitable operations, the return of deposits held to secure
various obligations, and reductions in log inventory and timber and
related assets. These items were partially offset by capital
spending, the optional prepayment of certain debt obligations and
scheduled principal repayments, and increases in accounts
receivable.
Working capital decreased by $6.6 million during the first
nine months of fiscal 1995, to $38.2 million at January 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 the second quarter of fiscal 1995, 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 applied 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. In the quarter ended January 31, 1995,
the Company voluntarily repurchased another $3.3 million face value
of its senior secured debt at a discount to its carrying value.
Capital spending in the first nine months of fiscal 1995 was
$5.6 million. Capital spending for the balance of the fiscal year
is currently forecast to be approximately $1.4 million. The
Company had commitments for capital spending of about $0.5 million
at January 31, 1995.
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 19.
(b) No reports on Form 8-K were filed during the three months
ended January 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: March 3, 1995
INDEX TO EXHIBITS
Sequential
Number
Page
Number
10.66 Amendment No. 5 to WTD Industries, Inc.
Retirement Savings Plan & Trust adopted
December 28, 1994. 20
19 Other reports furnished to securities
holders with respect to the quarter ended
January 31, 1995: President's letter
excerpted from Interim Report to Shareholders
for the third quarter of fiscal 1995. 24