SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended June 30, 1994
Commission File Number 1-7107
LOUISIANA-PACIFIC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 93-0609074
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
111 S. W. Fifth Avenue, Portland, Oregon 97204-3699
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 221-0800
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 the number of shares outstanding of each of the issuer's classes of
common stock: 109,607,901 shares of Common Stock, $1 par value, outstanding
as of June 30, 1994.
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Summary Statements of Income
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions except per share) (Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
----------------- -----------------
1994 1993 1994 1993
------- ------- ------- -------
Net sales $ 774.7 $ 596.6 $1,472.7 $1,245.8
------- ------- ------- -------
Costs and expenses:
Cost of sales 558.9 421.4 1,045.6 858.7
Depreciation and cost of
timber harvested 51.0 43.6 95.6 83.3
Selling and administrative 33.2 25.8 60.7 55.8
Interest expense 2.6 3.1 5.2 6.9
Interest income (2.0) (2.0) (3.9) (3.9)
------- ------- ------- -------
Total costs and expenses 643.7 491.9 1,203.2 1,000.8
------- ------- ------- -------
Income before taxes and
cumulative effects of
accounting changes 131.0 104.7 269.5 245.0
Provision for income taxes (49.1) (39.0) (102.4) (91.6)
------- ------- ------- -------
Income before cumulative
effects of accounting
changes 81.9 65.7 167.1 153.4
Cumulative effects of
accounting changes, net
of income taxes of $1.9 --- --- --- (10.4)
------- ------- ------- -------
Net income $ 81.9 $ 65.7 $ 167.1 $ 143.0
======== ======== ======== ========
Earnings per share:
Income before cumulative
effects of accounting
changes $ .75 $ .60 $ 1.52 $ 1.40
Cumulative effects of
accounting changes --- --- --- (.09)
------ ------- ------- -------
Net income $ .75 $ .60 $ 1.52 $ 1.31
======= ======== ======== ========
Cash dividends per share $ .125 $ .11 $ .235 $ .21
======= ======== ======== ========
Consolidated Summary Balance Sheets
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions) (Unaudited)
June 30, 1994 Dec. 31, 1993
----------------- -----------------
Cash and cash equivalents $ 188.1 $ 261.6
Accounts receivable, net 181.2 110.9
Inventories 238.9 234.7
Prepaid expenses 17.5 6.9
-------- --------
Total current assets 625.7 614.1
-------- --------
Timber and timberlands 698.5 673.5
Property, plant and equipment 2,222.8 2,112.8
Less reserves for depreciation (1,027.3) (966.9)
-------- --------
Net property, plant and equipment 1,195.5 1,145.9
Investments and other assets 32.7 32.8
-------- --------
Total assets $2,552.4 $2,466.3
======== ========
Current portion of long-term debt $ 70.3 $ 105.5
Short-term notes payable 45.5 41.7
Accounts payable and
accrued liabilities 192.3 149.2
Income taxes payable 28.9 20.8
-------- --------
Total current liabilities 337.0 317.2
-------- --------
Long-term debt 227.1 288.6
Deferred income taxes 264.8 264.8
Other long-term liabilities 32.5 24.3
Stockholders' equity:
Common Stock 117.0 117.0
Additional paid-in capital 437.7 431.5
Retained earnings 1,358.4 1,217.2
Loans to Employee Stock
Ownership Trusts (65.3) (72.5)
Treasury stock (107.9) (85.6)
Other equity transactions (48.9) (36.2)
-------- --------
Total stockholders' equity 1,691.0 1,571.4
-------- --------
Total liabilities and equity $2,552.4 $2,466.3
======== ========
Consolidated Summary Statements of Cash Flows
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions) (Unaudited)
Six Months Ended June 30, 1994 1993
--------- ---------
Cash flows from operating activities:
Net income $ 167.1 $ 143.0
Cumulative effects of accounting changes --- 10.4
Depreciation, amortization and depletion 95.6 83.3
Other non-cash charges 13.1 18.2
Decrease in working capital (33.8) (26.3)
Increase in deferred income taxes --- 2.0
------- -------
Net cash provided by operating activities 242.0 230.6
------- -------
Cash flows from investing activities:
Plant, equipment and logging
road additions, net (132.0) (84.0)
Timber and timberland additions (50.3) (44.8)
Other investing activities --- 16.7
------- -------
Net cash used in investing activities (182.3) (112.1)
------- -------
Cash flows from financing activities:
New borrowing 0.5 ---
Repayment of long-term debt (96.9) (96.6)
Cash dividends (25.9) (23.0)
Increase in short-term notes payable 3.7 ---
Purchase of treasury stock (24.3) (13.8)
Other financing activities 9.7 (.9)
------- -------
Net cash used in financing activities (133.2) (134.3)
------- -------
Net decrease in cash and cash equivalents (73.5) (15.8)
Cash and cash equivalents at
beginning of year 261.6 228.1
------- -------
Cash and cash equivalents at end of period $ 188.1 $ 212.3
======== ========
Consolidated Statements of Stockholders' Equity
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions except per share) (Unaudited)
Six Months Ended Year Ended
June 30, 1994 December 31, 1993
-------------------- --------------------
Shares Amount Shares Amount
Common Stock: ----------- ------- ----------- -------
Beginning Balance 116,937,022 $ 117.0 58,457,749 $ 58.5
Shares issued for employee
stock plans --- --- 10,762 ---
Shares issued under 2-for-1
stock split 58,468,511 58.5
----------- ------- ----------- -------
Ending Balance 116,937,022 $ 117.0 116,937,022 $ 117.0
=========== ======= =========== =======
Additional Paid-in-Capital:
Beginning Balance $ 431.5 $ 422.5
Shares issued for employee
stock plans 6.2 9.0
------- -------
Ending Balance $ 437.7 $ 431.5
======= =======
Retained Earnings:
Beginning Balance $1,217.2 $1,079.3
Net income 167.1 244.0
Par value of shares issued in
2-for-1 stock split --- (58.8)
Cash dividends, $.235 and $.43 per share (25.9) (47.3)
-------- -------
Ending Balance $1,358.4 $1,217.2
======== ========
Loans to ESOTs:
Beginning Balance $ (72.5) $ (87.0)
Less accrued contribution 7.2 14.5
------- -------
Ending Balance $ (65.3) $ (72.5)
======== ========
Treasury Stock:
Beginning Balance 6,755,938 $ (85.6) 3,848,800 $ (88.5)
Reacquisition program 731,500 (24.3) 200,000 (13.8)
Shares issued under 2-for-1
stock split --- --- 3,624,075 ---
Shares reissued under employee
stock plans (158,317) 2.0 (916,937) 16.7
---------- ------- ---------- -------
Ending Balance 7,329,121 $(107.9) 6,755,938 $ (85.6)
========== ======= ========== =======
Other Equity Adjustments:
Beginning Balance $ (36.2) $ (23.8)
Marketable equity securities adjustment --- (.6)
Currency translation adjustment (12.7) (11.8)
------- -------
Ending Balance $ (48.9) $ (36.2)
======== ========
Notes To Financial Statements
Louisiana-Pacific Corporation and Subsidiaries
1. The interim period information included herein reflects all adjustments
which are, in the opinion of the management of the registrant, necessary
for a fair statement of the results of the respective interim periods.
Results of operations for interim periods are not necessarily indicative
of results to be expected for an entire year. It is suggested that
these summary financial statements be read in conjunction with the
financial statements and the notes thereto included in the registrant's
1993 Annual Financial Report to Stockholders and its 1994 First Quarter
Interim Report to Stockholders. Interim financial statements are by
necessity somewhat tentative; judgements are used to estimate quarterly
amounts for items that are normally determinable only on an annual
basis.
2. Earnings per share is based on the weighted average number of shares of
common stock outstanding during the periods (110,070,000 in 1994 and
109,670,000 in 1993). The effect of common stock equivalents is not
material. The number of shares and per share data have been
retroactively adjusted for stock splits.
3. The effective income tax rate is based on estimates of annual amounts of
taxable income, foreign sales corporation income and other factors.
These estimates are updated quarterly.
4. Determination of interim LIFO inventories requires estimates of year-end
inventory quantities and costs. These estimates are revised quarterly
and the estimated annual change in the LIFO inventory reserve is
expensed over the remainder of the year.
5. The cumulative effects of accounting changes relate to the adoption of
two Financial Accounting Standards Board Statements during the first
quarter of 1993. Adoption of Statement No. 106 "Employers' Accounting
for Postretirement Benefits Other Than Pensions" resulted in a charge of
$3.2 million or three cents per share, net of $1.9 million in income
taxes. Adoption of Statement No. 109 "Accounting for Income Taxes"
resulted in a charge of $7.2 million or six cents per share.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
General
Net sales for the second quarter of 1994 were $774.7 million, a
30 percent increase over second quarter 1993 sales of $596.6 million. Net
sales for the six months ended June 30, 1994 were $1,472.7 million, an
increase of 18 percent over sales for the six months ended June 30, 1993 of
$1,245.8 million. Sales for the second quarter and first six months of 1994
were both records.
Net income for the second quarter of 1994 was $81.9 million ($.75 per
share), a 25 percent increase over second quarter 1993 net income of
$65.7 million ($.60 per share). Net income for the six months ended June 30,
1994 was $167.1 million ($1.52 per share), an increase of 17 percent over net
income for the six months ended June 30, 1993 of $143.0 million ($1.31 per
share). Net income for the first six months of 1993 included a $10.4 million
($.09 per share) charge to income, net of income taxes, for the cumulative
effect of adopting two new accounting standards. Refer to the registrant's
1993 annual report on Form 10-K for further discussion regarding the adoption
of these accounting principles. Excluding this charge, net income increased
9 percent in the first six months of 1994 over 1993.
The registrant operates in two segments: building products and pulp.
Building products is the most significant segment, accounting for more than
90 percent of sales and more than 100 percent of operating profit in the
second quarter and first six months of 1994 and 1993. The results of
operations are discussed separately for each of these segments below. Key
segment information, production volumes and industry product price trends are
presented in the following tables labeled "Sales and Operating Profit by
Major Product Group," "Operating Volume" and "Industry Product Price Trends."
Building Products Segment
Building products segment sales in the second quarter of 1994 were a
record $726.5 million, a 27 percent increase over 1993 second quarter sales
of $572.7 million. Building products segment sales for the six months ended
June 30, 1994 were $1,391.4 million, an increase of 17 percent over sales for
the six months ended June 30, 1993 of $1,193.8 million.
Increased sales of lumber and structural panel products were primarily
attributable to volume increases, with sales prices showing slight increases.
Lumber volume increased due to higher production as the registrant added more
shifts and took less downtime in its sawmills as demand increased.
Structural panel volume increased due to higher demand and one new OSB plant.
Industrial panel products also showed sales increases which were primarily
due to higher sales prices on relatively stable volume. Engineered wood
products (laminated veneer lumber, I-Beams, etc.) showed improved sales on
higher volumes despite reductions in sales prices.
Building products segment operating profits in the second quarter of
1994 were $154.8 million, a 16 percent increase over second quarter 1993
operating profits of $133.5 million. Six-month building products operating
profits increased 3.7 percent to $321.3 million in 1994 from $309.8 million
in 1993. These increases reflected the higher sales volumes and prices
discussed above. However, the increases in operating profits lagged behind
the sales increases principally due to higher log costs, especially in the
first three months of 1994.
Pulp Segment
Pulp segment sales in the second quarter increased 102 percent to
$48.2 million in 1994 from $23.9 million in the second quarter of 1993.
Sales in the pulp segment for the first six months of 1994 were $81.3 million
which was 56 percent higher than $52.0 million in the first six months of
1993. These higher sales resulted primarily from increased volume and sales
prices at the registrant's Chetwynd, B.C. pulp mill. This mill was producing
far below capacity in 1993 due to problems with the water treatment system
and poor market conditions.
Pulp segment operating losses in the second quarter improved to
$6.0 million in 1994 from $12.0 million in 1993. Six month operating losses
improved to $16.0 million in 1994 from $29.1 million in 1993. The reduction
of losses in both periods was primarily attributable to the higher sales
discussed above. Also, the registrant's Totally Chlorine Free pulp is
gaining acceptance, resulting in improved operating results at the Samoa,
California pulp mill.
Financial Condition, Liquidity and Capital Resources
Cash flow provided by operations increased 5 percent in the first
six months of 1994 to $242.0 million from $230.6 million in the first
six months of 1993. This was largely a result of increased net income. High
levels of capital expenditures for plant and equipment additions, timber
additions, debt repayments and treasury stock purchases resulted in a
decrease in cash and equivalents of $73.5 million during the first six months
of 1994. Plant and equipment additions include new OSB plants under
construction, environmental projects at existing mills and upgrades of
existing facilities. Cash and equivalents at June 30, 1994 was
$188.1 million compared with $212.3 million at June 30, 1993 and
$261.6 million at December 31, 1993, reflecting the investments in plants and
equipment and debt repayments.
Overall, the registrant's financial condition remains very strong.
Long-term debt as a percent of total capitalization is 11.8 percent compared
with 15.5 percent at December 31, 1993. The registrant has a $100 million
revolving line of credit available to meet its cash needs in addition to the
cash and equivalents discussed above.
Sales and Operating Profit by Major Product Group
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions) (Unaudited)
Quarter Ended Six Months Ended
June 30, June 30,
----------------- -----------------
1994 1993 1994 1993
------- ------- ------- -------
Sales:
Structural panel products $ 293.7 $ 236.2 $ 576.3 $ 513.2
Lumber 241.4 177.3 463.5 399.7
Other panel products 62.2 50.3 117.4 89.6
Other building products 129.2 108.9 234.2 191.3
------- ------- ------- -------
Building products 726.5 572.7 1,391.4 1,193.8
Pulp 48.2 23.9 81.3 52.0
------- ------- ------- -------
Total sales $ 774.7 $ 596.6 $1,472.7 $1,245.8
======== ======== ======== ========
Export sales $ 85.6 $ 75.5 $ 159.0 $ 143.5
======== ======== ======== ========
Operating profit:
Building products $ 154.8 $ 133.5 $ 321.3 $ 309.8
Pulp (6.0) (12.0) (16.0) (29.1)
------- ------- ------- -------
Total operating profit 148.8 121.5 305.3 280.7
Unallocated expense, net (17.2) (15.7) (34.5) (32.7)
Interest expense, net (0.6) (1.1) (1.3) (3.0)
------- ------- ------- -------
Income before taxes and
cumulative effects of
accounting changes $ 131.0 $ 104.7 $ 269.5 $ 245.0
======== ======== ======== ========
Operating Volume
Louisiana-Pacific Corporation and Subsidiaries
(volume amounts stated in millions except pulp and
as a percent of normal capacity)
Quarter Ended Six Months Ended
June 30, June 30,
--------------- ---------------
1994 1993 1994 1993
---- ---- ---- ----
Inner-Seal/OSB,
sq ft 3/8" basis 924 105% 789 101% 1,732 98% 1,533 98%
Softwood plywood,
sq ft 3/8" basis 411 109 362 101 813 107 736 103
Lumber, board feet 522 90 421 81 1,062 92 867 84
Particleboard,
sq ft 3/4" basis 94 107 93 110 186 106 179 105
Medium Density
Fiberboard,
sq ft 3/4" basis 62 112 55 99 117 106 97 88
Hardboard,
sq ft 1/8" basis 56 107 50 96 110 105 91 87
Hardwood veneer,
sq ft surface
measure 67 105 61 102 135 106 130 108
Pulp, thousand
short tons 100 65 30 20 195 64 109 36
Chips, units 588 466 1,170 1,006
Industry Product Price Trends
Louisiana-Pacific Corporation and Subsidiaries
OSB Plywood Lumber Particleboard Pulp
----------- -------- --------- ------------- ----------
N. Central Southern
7/16" basis Pine 1/2" Framing Bleached
24/16 basis lumber Inland softwood
span CDX composite Industrial sulfate
rating 3 ply prices 3/4" basis short ton*
----------- -------- --------- ------------- ----------
Annual Average
1989 171 201 240 219 753
1990 131 182 229 199 723
1991 148 191 235 198 519
1992 217 248 283 200 509
1993 236 282 396 258 418
1993 Second Quarter Average
210 246 364 261 410
1994 First Quarter Average
259 277 468 281 411
1994 Second Quarter Average
242 266 395 300 472
Weekly Average
July 1 230 267 364 300 508
July 8 241 275 365 300 508
July 15 255 287 377 300 508
*Discounting sometimes occurs from the published price.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The following sets forth the current status of certain legal
proceedings, all of which have been previously reported.
The registrant has received a Notice of Violation issued by the
U.S. Environmental Protection Agency alleging air emissions violations at the
registrant's Dungannon, Virginia, OSB plant. The registrant has also
received a Notice of Violation issued by the state of Michigan alleging air
emissions violations at the registrant's Newberry, Michigan, OSB plant. The
potential costs to the registrant cannot be determined at this time, but are
not expected to have a material adverse effect on the registrant.
The registrant has been informed that it and one or more employees at
its Olathe, Colorado, oriented strand board plant are the targets of a
federal grand jury investigation concerning alleged tampering with emissions
monitoring equipment and alteration of plant records. The registrant does
not know when the investigation will be completed. The registrant began an
internal investigation in the summer of 1992 and reported its initial
findings of irregularities to governmental authorities in September, 1992.
On September 9, 1992, the U.S. Department of Justice filed suit in the
U.S. District Court in Anchorage, Alaska, against the registrant's wholly-
owned subsidiary Ketchikan Pulp Company ("KPC") alleging that the pulp mill
in Ketchikan, Alaska, operated by KPC violated the Clean Air Act and the
terms of KPC's wastewater discharge permit. The plaintiff seeks to require
KPC to correct the alleged violations and also seeks penalties in an
unspecified amount. Settlement discussions are currently underway.
The registrant has been informed that KPC and one or more employees at
KPC's pulp mill are the targets of a federal grand jury investigation
concerning wastewater discharges. No charges have been made and the
registrant does not know when the investigation will be completed.
The registrant understands that a federal grand jury is investigating
possible violations in connection with the disposal by a contractor of a
transformer containing polychlorinated biphenyls (PCBs) previously located at
the registrant's former sawmill at Pendleton, Oregon. The registrant does
not know whether it or any of its employees are targets of the investigation.
On October 19, 1992, the State of Wisconsin filed a suit against the
registrant in state court in Dane County Circuit Court alleging that the
registrant's oriented strand board plant at Hayward, Wisconsin, is in
violation of state and federal clean air laws. The plaintiff sought to
require the registrant to correct the alleged violations, as well as
penalties in an unspecified amount. A settlement of $550,000 was finalized
in July, 1994.
Management of the registrant believes that the outcome of the above
matters will not have a materially adverse effect on the consolidated
business or financial condition or results of operations of the registrant.
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits filed as part of this report or incorporated by
reference herein are listed in the accompanying exhibit index.
(b) Reports on Form 8-K. No reports on Form 8-K have been filed during
the quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LOUISIANA-PACIFIC CORPORATION
By /s/ WILLIAM L. HEBERT
William L. Hebert
Treasurer
(Principal Financial Officer)
DATED: August 10, 1994
EXHIBIT INDEX
Exhibit Number Description of Exhibit
11 Calculation of Net Income Per Share for the Three
Months Ended June 30, 1994.