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 March 31, 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: 110,075,073 shares of Common Stock, $1 par value, outstanding as of March 31, 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)
Three Months Ended March 31, 1994 1993 ------- ------- Net sales $ 698.0 $ 649.2 ------- ------- Costs and expenses: Cost of sales 486.7 437.2 Depreciation and cost of timber harvested 44.6 39.7 Selling and administrative 27.5 30.1 Interest expense 2.6 3.8 Interest income (1.9) (1.9) ------- ------- Total costs and expenses 559.5 508.9 ------- ------- Income before taxes and cumulative effects of accounting changes 138.5 140.3 Provision for income taxes (53.3) (52.6) ------- ------- Income before cumulative effects of accounting changes 85.2 87.7 Cumulative effects of accounting changes, net of income taxes of $1.9 --- (10.4) ------- ------- Net income $ 85.2 $ 77.3 ======= ======= Earnings per share: Income before cumulative effects of accounting changes $ .77 $ .80 Cumulative effects of accounting changes --- (.09) ------- ------- Net income $ .77 $ .71 ======= ======= Cash dividends per share $ .11 $ .10 ======= ======= Consolidated Summary Balance Sheets Louisiana-Pacific Corporation and Subsidiaries (Dollar amounts in millions) (Unaudited)
Mar. 31, Dec. 31, 1994 1993 ------- ------- Cash and cash equivalents $ 243.1 $ 261.6 Accounts receivable 171.4 110.9 Inventories 253.4 234.7 Prepaid expenses 12.6 6.9 ------- ------- Total current assets 680.5 614.1 ------- ------- Timber and timberlands 677.5 673.5 Property, plant and equipment 2,152.3 2,112.8 Less reserves for depreciation (997.6) (966.9) ------- ------- Net property, plant and equipment 1,154.7 1,145.9 Investments and other assets 32.1 32.8 ------- ------- Total assets $2,544.8 $2,466.3 ======= ======= Current portion of long-term debt $ 106.6 $ 105.5 Short-term notes payable 45.8 41.7 Accounts payable and accrued liabilities 163.2 149.2 Income taxes payable 68.0 20.8 ------- ------- Total current liabilities 383.6 317.2 ------- ------- Long-term debt 236.5 288.6 Deferred income taxes 264.8 264.8 Other long-term liabilities 29.1 24.3 Stockholders' equity: Common Stock 117.0 117.0 Additional paid-in-capital 434.5 431.5 Retained earnings 1,290.3 1,217.2 Loans to Employee Stock Ownership Trusts (68.9) (72.5) Treasury stock (91.9) (85.6) Other equity transactions (50.2) (36.2) ------- ------- Total stockholders' equity 1,630.8 1,571.4 ------- ------- Total liabilities and equity $2,544.8 $2,466.3 ======= ======= Consolidated Summary Statements of Cash Flows Louisiana-Pacific Corporation and Subsidiaries (Dollar amounts in millions) (Unaudited)
Three Months Ended March 31, 1994 1993 ------- ------- Cash flows from operating activities: Net income $ 85.2 $ 77.3 Cumulative effects of accounting changes --- 10.4 Depreciation, amortization and depletion 44.6 39.7 Other non-cash charges 7.3 12.5 Decrease (increase) in working capital (23.7) 31.5 Increase in deferred income taxes --- .1 ------- ------- Net cash provided by operating activities 113.4 171.5 ------- ------- Cash flows from investing activities: Plant, equipment and logging road additions, net (54.0) (38.5) Timber and timberland additions (16.7) (17.7) Decrease in investments and other assets .6 8.6 ------- ------- Net cash used in investing activities (70.1) (47.6) ------- ------- Cash flows from financing activities: New borrowing .6 --- Repayment of long-term debt (51.4) (51.1) Cash dividends (12.1) (11.0) Increase in short-term notes payable 4.1 --- Purchase of treasury stock (7.5) (10.8) Miscellaneous financing activities 4.5 (5.2) ------- ------- Net cash used in financing activities (61.8) (78.1) ------- ------- Net increase (decrease) in cash and cash equivalents (18.5) 45.8 Cash and cash equivalents at beginning of year 261.6 228.1 ------- ------- Cash and cash equivalents at end of period $ 243.1 $ 273.9 ======= ======= Consolidated Statements of Stockholders' Equity Louisiana-Pacific Corporation and Subsidiaries (Dollar amounts in millions except per share) (Unaudited)
Three Months Ended Year Ended March 31, 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 3.0 9.0 ------- ------- Ending Balance $ 434.5 $ 431.5 ======= ======= Retained Earnings: Beginning Balance $1,217.2 $1,079.3 Net income 85.2 244.0 Par value of shares issued in 2-for-1 stock split --- (58.8) Cash dividends, $.11 and $.43 per share (12.1) (47.3) ------- ------- Ending Balance $1,290.3 $1,217.2 ======= ======= Loans to ESOTs: Beginning Balance $ (72.5) $ (87.0) Less accrued contribution 3.6 14.5 ------- ------- Ending Balance $ (68.9) $ (72.5) ======= ======= Treasury stock: Beginning Balance 6,755,938 $ (85.6) 3,848,800 $ (88.5) Reacquisition program 204,500 (7.5) 200,000 (13.8) Shares issued under 2-for-1 stock split --- --- 3,624,075 --- Shares reissued under employee stock plans (98,489) 1.2 (916,937) 16.7 ------- ------- ------- ------- Ending Balance 6,861,949 $ (91.9) 6,755,938 $ (85.6) ========= ======= ========= ======= Other Equity Adjustments: Beginning Balance $ (36.2) $ (23.8) Marketable equity securities adjustment --- (.6) Currency translation adjustment (14.0) (11.8) ------- ------- Ending Balance $ (50.2) $ (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 L-P, 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 L-P's 1993 Annual Financial Report to Stockholders. Interim financial statements are by necessity somewhat tentative; judgments 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 (110,200,000 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 Discussion and Analysis of Financial Condition and Results of Operation. Management's Discussion and Analysis Sales for the first quarter of 1994 were $698.0 million compared with $649.2 million in the first quarter of 1993. The registrant operates in two segments: building products and pulp, with building products being the most dominant segment by far. Building products sales in the first quarter of 1994 were $664.9 million versus $621.1 million in the first quarter of 1993. The increase in building products sales during the first quarter of 1994 is a result of improved lumber sales due to higher sales realizations, but lower volumes. Structural panel sales also improved with higher volumes, but lower sales realizations. Industrial panel and engineered wood products showed strong volume and sales realization improvements. As a result of these changes in sales volumes and realizations and increased costs, primarily log costs, building products operating profits were $166.5 million in the first quarter of 1994 compared to $176.3 million in the first quarter of 1993. In April 1994, sales of building products began to slow as a result of uncertainty about the effects of rising interest rates on demand for housing and construction. Sales for the pulp segment in the first quarter of 1994 were $33.1 million compared with $28.1 million in the first quarter of 1993. The increase was due primarily to better volumes and prices at the registrant's Chetwynd, B.C., Canada pulp mill. Pulp sales prices have fallen substantially due to weak demand and oversupply world-wide. As a result, the registrant has elected to take downtime at its pulp mills and will likely do so from time to time in the future until the market improves. During the first quarter of 1994, paper pulp prices improved slightly. As a result, operating losses from the pulp segment have improved to $10.0 million in the first quarter of 1994 compared to $17.1 million in the first quarter of 1993. Key segment information, production volumes, and industry product price trends are presented in the following tables labeled "Sales and Operating Profit by Major Group," "Operating Volume," and "Industry Product Price Trends." Income before cumulative effects of accounting changes for the first quarter of 1994 was $85.2 million, or $.77 per share, compared with $87.7 million, or $.80 per share, in the first quarter of 1993. During the first quarter of 1993, the registrant adopted two new accounting standards, which resulted in a net charge of $10.4 million or $.09 per share. Interest expense was $2.6 million in the first quarter of 1994 compared with $3.8 million in the first quarter of 1993 reflecting lower debt and lower interest rates. The strong earnings produced $113.4 million in cash from operating activities in the first quarter of 1994. However, increases in receivables and inventories caused a decrease compared with $171.5 million in the first quarter of 1993. In the first quarter of 1994, cash uses included plant and timber additions of $70.7 million, $51.4 million in loan repayments, $12.1 million in cash dividends, and $7.5 million in treasury stock purchases, which resulted in an $18.5 million decrease in cash and cash equivalents. Cash and cash equivalents were $243.1 million at March 31, 1994 compared with $273.9 million at March 31, 1993. On May 3, 1994, the board of directors authorized an increase in the cash dividend paid on the registrant's common stock to an annualized rate of 50 cents per share from the previous rate of 44 cents per share. The timing and amount of future dividends will be determined at the discretion of the board of directors in light of prevailing conditions. The registrant continues to show very strong financial condition. Long-term debt as a percentage of total capitalization was 12.7 percent at March 31, 1994 compared with 15.5 percent at December 31, 1993. Sales and Operating Profit by Major Product Group Louisiana-Pacific Corporation and Subsidiaries (Dollar amounts in millions) (Unaudited)
Three Months Ended March 31, 1994 1993 ------- ------- Sales: Lumber $ 222.1 $ 222.4 Structural panel products 282.6 277.0 Other panel products 55.2 39.3 Other building products 105.0 82.4 ------- ------- Building products 664.9 621.1 Pulp 33.1 28.1 ------- ------- Total sales $ 698.0 $ 649.2 ======= ======= Export sales $ 73.4 $ 68.0 ======= ======= Operating profit: Building products $ 166.5 $ 176.3 Pulp (10.0) (17.1) ------- ------- Total operating profit 156.5 159.2 Unallocated expense, net (17.3) (17.0) Interest expense, net (.7) (1.9) ------- ------- Income before taxes and cumulative effects of accounting changes $ 138.5 $ 140.3 ======= ======= Operating Volume Louisiana-Pacific Corporation and Subsidiaries
1st Quarter 1994 1993 1993 1994 1994 Production 1st 4th 1st Normal as a % of Quarter Quarter Quarter Annual Normal Production Production Production Capacity Capacity ------- ------- ------- ------- --------- Lumber 446,000M' 461,000M' 540,000M' 2,315,000M' 93% Inner-Seal/OSB 745,000M' 770,000M' 808,000M' 3,205,000M' 101% Softwood ply- wood 373,000M' 364,000M' 402,000M' 1,515,000M' 106% Medium Density Fiberboard 42,000M' 52,000M' 56,000M' 220,000M' 101% Particleboard 86,000M' 87,000M' 93,000M' 350,000M' 106% Hardboard 41,000M' 51,000M' 54,000M' 210,000M' 103% Hardwood veneer 69,000M' 66,000M' 69,000M' 255,000M' 107% Pulp 79,000T 37,000T 94,000T 612,000T 62% Chips 541,000U 486,000U 582,000U Industry Product Price Trends Louisiana-Pacific Corporation and Subsidiaries
Pulp Lumber OSB Plywood Particleboard -------- -------- -------- -------- ---------- N. Central Southern Bleached Framing 7/16" basis Pine 1/2" softwood lumber, 24/16 basis Inland sulfate composite span CDX Industrial short ton* prices rating (3 ply) 3/4" basis -------- -------- -------- -------- ---------- Annual Average 1989 753 240 171 201 219 1990 723 229 131 182 199 1991 519 235 148 191 198 1992 509 283 217 248 200 1993 418 396 236 282 258 1993 First Quarter Average 500 435 299 333 214 1993 Fourth Quarter Average 380 443 237 293 277 1994 First Quarter Average 411 468 259 277 281 Weekly Average April 1 411 419 245 260 300 April 8 411 393 235 245 300 April 15 411 374 220 235 300 *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 seeks to require the registrant to correct the alleged violations and also seeks penalties in an unspecified amount. A tentative settlement of $550,000 was reached in 1993 but has not been consummated due to continuing differences between the parties. 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: May 12, 1994 EXHIBIT INDEX Exhibit Number Description of Exhibit 11 Calculation of Net Income Per Share for the Three Months Ended March 31, 1994.
EXHIBIT 11 Louisiana-Pacific Corporation and Subsidiaries Calculation of Net Income Per Share For the Three Months Ended March 31, 1994
Number of shares Including Excluding Common Stock Common Stock Equivalents Equivalents (1) ------------ ------------ Weighted average number of shares of common stock outstanding 116,937,022 116,937,022 Annualized weighted average number of shares of treasury stock held during the period (6,737,781) (6,737,781) Common stock equivalents: Application of the "treasury stock" method to stock option and purchase plans 1,540,356 --- ------------ ------------ Weighted average number of shares of common stock and common stock equivalents 111,739,597 110,199,241 ============ ============ Rounded to 111,740,000 110,200,000 ============ ============ Net income $ 85,200,000 $ 85,200,000 ============ ============ Net income per share $ .76 $ .77 ============ ============ (1) Accounting Principles Board Opinion No. 15, "Earnings Per Share", allows companies to disregard dilution of less than three percent in the computation of earnings per share. Therefore, shares used in computing earnings per share for financial reporting purposes is 110,200,000 shares. EXHIBIT 11