Longview Fibre (NYSE:LFB)
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Longview Fibre Company's (NYSE:LFB) consolidated net sales for the
fourth quarter of 2006 increased 10.6 percent to $238.5 million,
compared with net sales of $215.7 million in the fourth quarter of 2005(1).
Net sales declined 2.9 percent sequentially compared with $245.6 million
in the third quarter of 2006, as seasonal declines in manufacturing
segment sales were partially offset by increased timber segment sales.
Full year consolidated net sales for 2006 totaled $950.2 million, up 6.1
percent from net sales of $895.8 million in 2005, a result of
single-digit percentage increases in both of the company’s
operating segments.
Fourth quarter 2006 consolidated operating profit totaled $6.2 million,
compared with an operating loss of $11.1 million in the fourth quarter
of 2005 which included the effect of a non-cash pre-tax charge of $9.7
million related to the permanent shut down and write-off of two paper
machines. Fourth quarter operating profit improved sequentially,
compared with $4.6 million in the third quarter of 2006 that included a
$10.8 million non-cash pre-tax charge to reduce the carrying value of a
sawmill to net realizable value. Consolidated 2006 operating profit
declined to $32.1 million from $43.3 million in 2005, primarily
reflecting increased advisory fees and REIT-related expenses.
Consolidated net income for the fourth quarter of 2006 totaled $3.1
million, or $0.05 per share, compared with a net loss of $16.0 million,
or $(0.24) per share, in the fourth quarter of 2005, and net income of
$21.4 million for the third quarter of 2006. Fourth quarter 2005 net
loss included a non-cash charge of $6.1 million, or $(0.09) per share,
on an after-tax basis, related to the permanent shut down and write-off
of two paper machines. Third quarter 2006 net income included the
recognition of $20.0 million in tax benefits associated with the company’s
REIT conversion.
Consolidated net income for the full year totaled $19.0 million in 2006,
compared with 2005 net income of $1.3 million. The increase in
net income was primarily driven by the tax benefits associated with the
company’s REIT conversion, partially offset by
increased advisory and REIT-related costs and expenses related to the
early redemption of Senior Subordinated Notes.
Richard H. Wollenberg, President, Chief Executive Officer and Chairman
of the Board, said, “2006 was a year of great
accomplishment for Longview Fibre and one in which we delivered
substantial value to shareholders. During the year we completed our
conversion to a REIT, made a special distribution of $385 million,
including cash of $77 million, and paid $43.2 million of regular
dividends. We also restructured our debt, resulting in a lower aggregate
interest rate. Finally, we implemented a new operating plan including an
increased timber harvest, a more proactive sale program for higher and
better use lands, and a process to explore the divestiture of non-core
operations. We also made important tactical adjustments to our
manufacturing operations to partially mitigate higher raw materials and
energy costs.”
Selected Segment and Consolidated
Operating Results
Timber
Fourth quarter 2006 timber segment net sales totaled $51.2 million, a
25.4 percent increase from the fourth quarter of 2005 and up 18.0
percent sequentially from the third quarter of 2006. Log sales volume of
approximately 82 million board feet was 41.8 percent higher than the
fourth quarter of 2005 and up 29.7 percent sequentially from the third
quarter of 2006. Average log prices during the fourth quarter of 2006
were down 7.7 percent compared to the year-ago period and down 6.5
percent sequentially.
Fourth quarter timber segment operating profit was $26.8 million, up
47.4 percent from the year-ago period and up fourfold compared with
segment operating profit of $6.2 million in the third quarter of 2006,
which included the effect of a non-cash $10.8 million asset impairment
charge taken to reflect the net realizable value of the company’s
sawmill operation.
Timber segment sales in 2006 totaled $193.0 million, up 2.9 percent
compared with sales of $187.6 million for 2005, primarily reflecting
higher log prices throughout most of the year. Timber segment operating
profit was $78.6 million in 2006, including the effect of the non-cash
$10.8 million asset impairment charge, compared with segment operating
profit of $86.5 million in 2005.
Manufacturing
Fourth quarter manufacturing net sales of $187.2 million represented a
7.1 percent increase compared with net sales of $174.8 million in the
fourth quarter of 2005 and a 7.4 percent sequential decline from the
third quarter of 2006. Fourth quarter paper and paperboard sales were
comparable to the year-ago period and down 14.6 percent sequentially
reflecting seasonal weakness and the curtailment of certain low-margin
products; converted products sales were up 10.8 percent from the fourth
quarter of 2005 and were 3.3 percent lower than the third quarter of
2006.
Fourth quarter manufacturing segment operating losses were $20.6 million
compared with an operating loss of $29.2 million in last year’s
comparable period which included the effect of a $9.7 million pre-tax,
non-cash charge related to the permanent shut down and write-off of two
paper machines. On a sequential basis, lower seasonal sales, combined
with significantly higher wood chip prices and energy costs, resulted in
a substantial increase in fourth quarter segment operating losses
compared with the $1.6 million segment operating loss reported in the
third quarter of 2006.
Manufacturing segment sales in 2006 totaled $757.6 million, an increase
of 7.0 percent compared with sales of $708.3 million in 2005.
Manufacturing segment operating loss in 2006 totaled $46.5 million,
including $12.1 million of allocated advisory and REIT-related costs,
compared with a segment operating loss of $43.2 million in 2005,
including the effect of the $9.7 million non-cash charge referred to
above.
Selling, Administrative & General
Fourth quarter 2006 selling, administrative and general expenses and
advisory fees and REIT related expenses totaled $24.1 million, or 10.1
percent of total net sales, compared with $27.6 million, or 12.8 percent
of total net sales, in last year’s comparable
period and $23.6 million, or 9.6 percent of net sales, in the third
quarter of 2006.
Selling, administrative and general expenses and advisory fees and REIT
related expenses in 2006 totaled $110.3 million, or 11.6 percent of net
sales, compared with $97.0 million, or 10.8 percent of net sales, in
2005.
Balance Sheet and Cash From Operations
The company continues to have a strong balance sheet, with $519 million
of debt at year-end and significant remaining borrowing capacity. The
company generated $9.0 million and $65.9 million in cash from operations
during the fourth quarter and full year 2006, respectively. Cash from
operations in 2006 declined $28.4 million from 2005’s
results due primarily to changes in inventory and deferred taxes. In the
fourth quarter, the company declared a regular quarterly dividend of
$0.23 per share for shareholders of record on December 15, 2006, payable
January 3, 2007.
Declaration of Regular Quarterly Dividend
The Board of Directors declared today a regular quarterly cash dividend
of $0.23 per share on the company’s common
stock, payable April 3, 2007 to shareholders of record at the close of
business March 15, 2007.
The company’s future dividend payments are
subject to final board approval and will be based on the company’s
results of operations, cash flow and prospects at the time, as well as
any contractual limitations in the company’s
debt instruments.
No Conference Call to be Conducted
The company will not be conducting a conference call to discuss its
fourth quarter and full year 2006 financial results.
(1) Comparisons to Prior Period Financial Results
Effective January 1, 2006, the company changed its year-end to December
31 from October 31 as required by REIT regulations. All comparisons to
the three months and year ended December 31, 2005 in this press release
and accompanying tables refer to unaudited financial statements that
have been recast to facilitate comparison to this year’s
comparable periods ended December 31, 2006.
Except as noted otherwise, all per share amounts referenced in this
press release and accompanying tables have been restated to reflect
retroactive effect of the special distribution of 14,673,663 shares of
common stock on August 7, 2006 as part of a special cash-and-stock
distribution to shareholders in conjunction with the company’s
conversion to a REIT.
In the fourth quarter of 2006, the company changed its method of
reporting its business operations from three segments –
Timber, Paper and Paperboard, and Converted Products –
to two reporting segments – Timber and
Manufacturing. All segment information for prior periods referenced in
this press release and accompanying tables has been reclassified to
reflect this change.
About Longview Fibre Company
Longview Fibre Company is a real estate investment trust (REIT) engaged
in the ownership and management of 588,000 acres of softwood timberlands
predominantly located in western Washington and Oregon, and manufactures
specialty paper and containers through a wholly owned subsidiary. For
more information, please visit Longview's Web site at www.longviewfibre.com.
Forward-Looking Statements
Except for historical information, the statements made in this press
release are forward-looking statements made pursuant to the safe-harbor
provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements are based on certain assumptions or
estimates, discuss future expectations, describe future plans and
strategies, contain projections of results of operations or of financial
condition or state other forward-looking information. The company’s
ability to predict results or the actual effect of future plans or
strategies is inherently uncertain. Although the company believes that
the expectations reflected in such forward-looking statements are based
on reasonable assumptions, actual results and performance could differ
materially from those set forth in the forward-looking statements.
Forward-looking statements in some cases can be identified by the use of
words such as “may,”
“will,” “should,”
“potential,” “intend,”
“expect,” “seek,”
“anticipate,” “estimate,”
“believe,” “could,”
“would,” “project,”
“predict,” “continue,”
“plan,” “propose”
or other similar words or expressions. Forward-looking statements are
based on the company’s estimates and
projections on the date they are made, and are subject to a variety of
risks and uncertainties. Actual events, circumstances or results could
differ materially from those anticipated by the company or reflected in
the forward-looking statements due to a variety of factors, including,
but not limited to: the completion of our acquisition by a third party,
cash available to pay dividends, actual log harvest levels; the company’s
ability to realize anticipated benefits from the sale of higher and
better use lands; unanticipated changes in pricing and market conditions
for its products, energy and certain raw materials, including changes in
log, paper, paperboard and converted products pricing and demand;
unexpected capital expenditures and the timing of completion and results
of capital expenditure projects; changes in interest rates and new
housing starts; For additional information about factors that could
impact future results, see the risk factors in the company’s
Annual Report on Form 10-K for the year ended December 31, 2006 and
subsequent filings with the SEC.
(Financial Tables Follow)
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
Three Months Ended
December 31
Twelve Months Ended
December 31
(in thousands, except per share)
2006
2005
2006
(Unaudited)
2005
Net sales
$
238,491
$
215,678
$
950,666
$
895,847
Cost of products sold, including outward freight
211,537
190,395
800,997
746,169
Gross profit
26,954
25,283
149,669
149,678
Selling, administrative and general expenses
22,839
27,623
96,391
96,975
Loss (gain) on impairment and disposition of assets
(3,343)
8,717
7,229
9,409
Advisory fees and REIT-related expenses
1,265
—
13,940
—
Operating profit (loss)
6,193
(11,057)
32,109
43,294
Interest income
228
179
984
358
Interest expense
(9,942)
(9,347)
(36,394)
(37,133)
Other income (expense)
484
(5,017)
(12,946)
(4,261)
Income (loss) before income taxes
(3,037)
(25,242)
(16,247)
2,258
Provision (benefit) for income taxes
(6,151)
(9,216)
(35,222)
984
Net income (loss)
$
3,114
$
(16,026)
$
18,975
$
1,274
Net income (loss) per share
$
0.05
$
(0.24)
$
0.29
$
0.02
Average shares outstanding
65,759
65,750
65,752
65,750
SEGMENT AND OTHER INFORMATION
(Unaudited)
Three Months Ended
December 31
Twelve Months Ended
December 31
(dollars in thousands)
2006
2005
% Change
2006
(Unaudited)
2005
% Change
Net sales:
Timber
$
51,242
$
40,866
25.4
$
193,021
$
187,595
2.9
Manufacturing
187,249
174,812
7.1
757,645
708,252
7.0
Total net sales
$
238,491
$
215,678
10.6
$
950,666
$
895,847
6.1
Operating profit (loss):
Timber
$
26,791
$
18,171
47.4
$
78,595
$
86,469
(9.1)
Manufacturing
(20,598)
(29,228)
29.5
(46,486)
(43,175)
(7.6)
Total operating profit (loss)
$
6,193
$
(11,057)
—
$
32,109
$
43,294
(25.9)
Sales:
Logs, thousands of board feet
82,191
57,976
41.8
279,002
269,645
3.5
Lumber, thousands of board feet
16,116
14,712
9.5
65,134
67,647
(3.7)
Paper, tons
85,402
75,049
13.8
344,382
315,210
9.3
Paperboard, tons
16,616
44,241
(62.4)
117,322
174,426
(32.7)
Converted products, tons
138,088
139,446
(1.0)
548,128
545,299
0.5
Logs, $/thousand board feet
$
564
$
611
(7.7)
$
610
$
603
1.2
Lumber, $/thousand board feet
301
371
(18.9)
351
371
(5.4)
Paper, $/ton FOB mill equivalent
597
581
2.8
603
587
2.7
Paperboard, $/ton FOB mill equivalent
434
334
29.9
396
339
16.8
Converted products, $/ton
902
805
12.0
882
819
7.7
Consolidated Balance Sheets
December 31
(dollars in thousands)
2006
2005
ASSETS
Current assets:
Cash
$
2,753
$ 1,608
Accounts and notes receivable
122,194
111,514
Allowance for doubtful accounts
(755)
(1,000)
Refundable income taxes
319
3,898
Inventories
75,785
65,727
Prepaid expenses and other assets
11,934
9,295
Total current assets
212,230
191,042
Capital assets:
Buildings, machinery and equipment at cost
1,757,092
1,815,044
Accumulated depreciation
(1,196,042)
(1,186,618)
Costs to be depreciated in future years
561,050
628,426
Plant sites at cost
3,335
3,549
564,385
631,975
Timber at cost less depletion
202,953
198,462
Roads at cost less amortization
8,613
8,967
Timberlands at cost
25,213
24,807
236,779
232,236
Total capital assets
801,164
864,211
Pension and other noncurrent assets
123,724
155,010
Total assets
$
1,137,118
$ 1,210,263
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Payable to bank resulting from checks in transit
$
827
$
5,115
Trade accounts payable
52,648
48,414
Dividends payable
15,125
—
Advisory fees and REIT-related expenses payable
3,443
1,063
Short term borrowings
6,000
—
Accrued payroll liabilities
17,938
15,940
Other taxes payable
6,779
6,782
Other accrued liabilities
14,461
17,587
Current portion of long-term debt
2,987
—
Total current liabilities
120,208
94,901
Long-term debt
510,202
428,918
Deferred tax liabilities – net
158,407
205,698
Postretirement and other liabilities
47,241
36,677
Total liabilities
836,058
766,194
Shareholders' equity:
Preferred stock
—
—
Common stock
98,639
76,615
Additional paid-in capital
289,577
3,306
Retained earnings (deficit)
(60,345)
364,148
Accumulated other comprehensive loss
(26,811)
—
Total shareholders' equity
301,060
444,069
Total liabilities and shareholders’ equity
$
1,137,118
$
1,210,263
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
December 31
Twelve Months Ended
December 31
(dollars in thousands)
2006
2005
2006
(Unaudited)
2005
Cash provided by (used for) operations:
Net income (loss)
$
3,114
$
(16,026)
$
18,975
$
1,274
Adjustments to income (loss) not requiring (providing)
cash:
Depreciation
17,050
18,261
70,696
72,086
Depletion and amortization
2,566
1,862
9,964
10,049
Deferred tax liabilities – net
(6,102)
(6,598)
(35,218)
(598)
Loss (gain) on impairment and disposition of assets
(3,343)
8,717
7,229
9,409
Loss (gain) on extinguishment of debt
—
1,013
(742)
1,013
Change in:
Accounts and notes receivable — net
(884)
(4,156)
(10,925)
(4,231)
Refundable income taxes
(81)
(3,898)
3,579
(3,898)
Inventories
(3,056)
13,056
(10,058)
11,896
Prepaid expenses and other assets
(579)
(418)
7
(614)
Pension and other noncurrent assets
2,513
(1,658)
4,503
(4,438)
Trade accounts payable, payroll and other taxes payable, and other
accrued liabilities
2,186
3,877
3,956
2,743
Advisory fees and REIT-related expenses payable
(5,399)
—
2,380
—
Federal income taxes payable
—
(2,700)
—
—
Postretirement and other liabilities
983
129
1,597
(314)
Cash provided by operations
8,968
11,461
65,943
94,377
Cash provided by (used for) investing:
Additions to:
Plant and equipment
(5,261)
(6,027)
(22,245)
(30,113)
Timber and timberlands
(236)
(3,222)
(14,762)
(11,413)
Proceeds from sale of capital assets
7,520
(123)
11,312
2,011
Cash provided by (used for) investing
2,023
(9,372)
(25,695)
(39,515)
Cash provided by (used for) financing:
Additions to long-term debt
—
200,048
314,086
200,192
Reduction in long-term debt
(1,311)
(129,500)
(230,311)
(129,500)
Short-term borrowings, net
2,300
(66,000)
6,000
(117,000)
Debt issue costs
—
(3,959)
(4,542)
(3,959)
Payable to bank resulting from checks in transit
827
(2,004)
(4,288)
(1,166)
Cash dividends paid:
Regular dividends
(15,122)
(1,021)
(43,214)
(4,086)
REIT E&P Dividend Distribution
—
—
(77,012)
—
Proceeds from sale of common stock
178
—
178
—
Cash used for financing
(13,128)
(2,436)
(39,103)
(55,519)
Change in cash position
(2,137)
(347)
1,145
(657)
Cash position, beginning of period
4,890
1,955
1,608
2,265
Cash position, end of period
$
2,753
$
1,608
$
2,753
$
1,608