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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended April 30, 2003 Commission File No. 0-1370
LONGVIEW FIBRE COMPANY
(Exact name of registrant as specified in its charter)
Washington 91-0298760
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
300 Fibre Way, Longview, Washington 98632
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (360) 425-1550
Not Applicable
Former name, former address and former fiscal year, if changed since last
report
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 is an accelerated filer (as
defined in Rule 12b-2 of the Act). Yes X No
51,076,567 Common Shares were outstanding as of April 30, 2003
Page 1
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheet (000 Omitted)
Apr. 30 Oct. 31 Apr. 30
2003 2002 2002
(Unaudited) (Unaudited)
ASSETS
Current assets:
Accounts and notes receivable $ 85,890 $ 101,930 $ 88,621
Allowance for doubtful accounts 1,350 1,350 1,350
Taxes on income, refundable - 2,293 -
Inventories, at lower of cost or market;
costs are based on last-in, first-out method
except for supplies at current averages
Finished goods 16,850 17,134 18,146
Goods in process 12,708 11,691 11,631
Raw materials and supplies 38,118 42,764 42,048
Restricted cash - - 20,607
Other 14,105 7,458 7,672
Total current assets 166,321 181,920 187,375
Capital assets:
Buildings, machinery and equipment at cost 1,829,564 1,828,841 1,823,965
Accumulated depreciation 1,081,171 1,059,778 1,032,805
Costs to be depreciated in future years 748,393 769,063 791,160
Plant sites at cost 3,524 3,524 3,480
751,917 772,587 794,640
Timber at cost less depletion 186,781 187,597 189,980
Roads at cost less amortization 8,529 8,976 8,897
Timberland at cost 20,148 20,133 20,093
215,458 216,706 218,970
Total capital assets 967,375 989,293 1,013,610
Pension and other assets 137,736 135,229 126,458
$1,271,432 $1,306,442 $1,327,443
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Payable to bank resulting from
checks in transit $ 6,027 $ 7,464 $ 4,606
Accounts payable 45,538 51,168 41,640
Short-term borrowings 3,000 2,000 29,000
Payrolls payable 18,122 12,138 17,039
Other taxes payable 8,507 9,634 8,712
Current installments of long-term debt 50,000 62,400 32,400
Total current liabilities 131,194 144,804 133,397
Long-term debt 486,163 510,195 569,716
Deferred taxes-net 192,831 191,742 182,992
Other liabilities 31,363 30,705 23,446
Shareholders' equity:
Common stock, ascribed value $1.50 per share;
authorized 150,000,000 shares;
issued 51,076,567 shares 76,615 76,615 76,615
Additional paid-in capital 3,306 3,306 3,306
Retained earnings 349,960 349,075 337,971
Total shareholders' equity 429,881 428,996 417,892
$1,271,432 $1,306,442 $1,327,443
The accompanying notes are an integral part of these financial statements.
Page 2
Consolidated Statement of Income (Unaudited)
(000 Omitted)
Three Months Ended Six Months Ended
April 30 April 30
2003 2002 2003 2002
Net sales:
Timber $ 39,517 $ 44,439 $ 80,814 $ 81,875
Paper and paperboard 47,531 40,130 95,536 76,391
Converted products 94,542 98,682 194,894 200,659
Power sales - - - 1,881
181,590 183,251 371,244 360,806
Cost of Products sold, including
outward freight 157,008 158,670 316,903 320,297
Gross profit 24,582 24,581 54,341 40,509
Selling, administrative
and general expenses 17,599 17,794 34,625 36,503
Operating profit (loss):
Timber 16,172 21,408 33,201 36,906
Paper and paperboard (including
allocated power losses) (3,578) (8,603) (6,636) (16,875)
Converted products (including
allocated power losses) (5,611) (6,018) (6,849) (16,025)
6,983 6,787 19,716 4,006
Interest income 79 1,393 153 1,480
Interest expensed (10,946) (12,477) (21,878) (21,270)
Miscellaneous 4,668 352 5,036 2,338
Income (loss) before income taxes 784 (3,945) 3,027 (13,446)
Provision for taxes on income:
Current 8 (5,416) 31 (5,520)
Deferred 282 1,456 1,089 (1,955)
290 (3,960) 1,120 (7,475)
Net income (loss) $ 494 $ 15 $ 1,907 $ (5,971)
Dollars per share:
Net income (loss) $ 0.01 $ - $ 0.04 $ (0.12)
Dividends 0.02 - 0.02 0.03
Average shares outstanding in the
hands of the public (000 omitted) 51,077 51,077 51,077 51,077
The accompanying notes are an integral part of these financial statements.
Page 3
Consolidated Statement of Cash Flows (Unaudited)
(000 Omitted)
Three Months Ended Six Months Ended
April 30 April 30
2003 2002 2003 2002
Cash provided by (used for)
operations:
Net income (loss) $ 494 $ 15 $ 1,907 $(5,971)
Charges to income not
requiring cash:
Depreciation 17,479 17,469 34,877 34,398
Depletion and amortization 1,386 1,284 3,333 2,711
Deferred taxes - net 282 1,456 1,089 (1,955)
(Gain) loss on disposition of
capital assets (3,286) 315 (3,024) (1,132)
Change in:
Accounts and notes receivable - net 7,089 (2,093) 16,040 10,798
Taxes on income refundable 2,293 - 2,293 -
Inventories 509 8,397 3,913 11,393
Other (5,611) 731 (6,647) 923
Pension and other
noncurrent assets (1,346) (4,950) (1,634) (17,725)
Accounts, payrolls and other
taxes payable 7,431 3,754 4,132 (11,118)
Federal income taxes payable - (2,544) - (606)
Other noncurrent liabilities (89) 948 658 1,563
Cash provided by operations 26,631 24,782 56,937 23,279
Cash provided by (used for)
investing:
Additions to: Plant and equipment (10,089) (11,454) (19,091) (24,965)
Timber and timberlands (1,334) (1,357) (2,172) (1,790)
Proceeds from sale of capital assets 7,699 236 7,995 3,001
Cash used for investing (3,724) (12,575) (13,268) (23,754)
Cash provided by (used for)
financing:
Long-term debt (12,952) 48 (37,305) 16,716
Short-term borrowings (9,000) (12,000) 1,000 21,000
Restricted cash - (99) - (20,607)
Payable to bank resulting from
checks in transit 3,272 227 (1,437) (6,759)
Accounts payable for construction (3,205) (383) (4,905) (8,343)
Cash dividends (1,022) - (1,022) (1,532)
Cash provided by (used for) financing (22,907) (12,207) (43,669) 475
Change in cash position - - - -
Cash position, beginning of period - - - -
Cash position, end of period $ - $ - $ - $ -
Supplemental disclosures of
cash flow information:
Cash paid during the year for:
Interest (net of amount
capitalized) $ 6,754 $ 7,374 $14,663 $15,991
Income taxes (2,218) (2,839) (2,228) (4,771)
The accompanying notes are an integral part of these financial statements.
Page 4
Consolidated Statement of Shareholders' Equity (Unaudited)
(000 Omitted)
Three Months Ended Six Months Ended
April 30 April 30
2003 2002 2003 2002
Common stock:
Balance at beginning of period $ 76,615 $ 76,615 $ 76,615 $ 76,615
Balance at end of period $ 76,615 $ 76,615 $ 76,615 $ 76,515
Additional paid-in capital:
Balance at beginning of period $ 3,306 $ 3,306 $ 3,306 $ 3,306
Balance at end of period $ 3,306 $ 3,306 $ 3,306 $ 3,306
Retained earnings:
Balance at beginning of period $350,488 $337,956 $349,075 $345,474
Net income (loss) 494 15 1,907 (5,971)
Less cash dividends on common
stock (1,022) - (1,022) (1,532)
Balance at end of period $349,960 $337,971 $349,960 $337,971
Dividends paid per share $ 0.02 $ - $ 0.02 $ 0.03
Common shares:
Balance at beginning of period 51,077 51,077 51,077 51,077
Balance at end of period 51,077 51,077 51,077 51,077
The accompanying notes are an integral part of these financial statements.
Page 5
NOTE 1: The consolidated interim financial statements have been prepared by
the company, without audit and subject to year-end adjustment, in accordance
with generally accepted accounting principles, except that certain information
and footnote disclosure made in the latest annual report have been condensed
or omitted for the interim statements. Accordingly, these statements should
be read in conjunction with the company's latest annual report. Certain costs
of a normal recurring nature are estimated for the full year and allocated in
interim periods based on estimates of operating time expired, benefit
received, or activity associated with the interim period. The consolidated
financial statements reflect all adjustments which are, in the opinion of
management, necessary for fair presentation.
NOTE 2: In April 2002 we entered into two interest rate swap agreements (the
"Agreements") relating to $70 million of our 10% Senior Subordinated Notes due
2009 in an effort to manage our exposure to fixed rate debt by converting a
portion of our outstanding debt from a fixed to variable interest rate. In
October 2002, we terminated the Agreements and received cash of $5.4 million
resulting in a deferred gain of $4.9 million at April 30, 2003. The deferred
gain is included in other liabilities in the accompanying balance sheet and
will reduce interest expense over the term of the Senior Subordinated Notes.
Simultaneously, we entered into two new interest rate swap agreements (the
"New Agreements") with notional amounts of $70 million which mature on January
15, 2009 and involve the exchange of fixed interest rate payments for variable
interest rate payments without the exchange of the underlying principal
amounts. Variable rates are based on LIBOR and are reset on a semi-annual
basis. The differential between fixed and variable rates to be paid or
received is accrued as interest rates change in accordance with the New
Agreements and recognized as an adjustment to interest expense. The mark-to
market adjustment at April 30, 2003 resulted in a derivative asset of
$1,256,000, with a corresponding fair value adjustment to long-term debt.
In May 2003, we terminated the New Agreements and received cash of $3.3
million resulting in a deferred gain of $2.7 million. The deferred gain will
be included in other liabilities in the balance sheet and will reduce interest
expense over the term of the Senior Subordinated Notes.
NOTE 3: Reclassifications - Prior year amounts have been reclassified to
conform to current year classifications. These reclassifications have no
impact upon net income or shareholders' equity.
Page 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
CONSOLIDATED STATEMENT OF INCOME
THREE AND SIX MONTHS ENDED APRIL 30, 2003 COMPARED WITH
THREE AND SIX MONTHS ENDED APRIL 30, 2002
Net Sales - Second fiscal quarter 2003 net sales were $181.6 million, compared
with $183.3 million for the second fiscal quarter of 2002. This 0.9% decline
resulted from a decrease in timber net sales of $4.9 million, or 11.1%, and
converted products net sales of $4.1 million, or 4.2%, offset in part by an
increase in paper and paperboard net sales of $7.4 million, or 18.4%.
Cost of Products Sold - Second fiscal quarter 2003 cost of products sold was
$157.0 million, or 86.5% of net sales, compared with $158.7 million, or 86.6%
of net sales, for second fiscal quarter 2002. Costs of products sold were
favorably impacted by a 21% decrease in the cost to produce steam and a 14%
decrease in the cost of electrical power used at the mill in Longview. These
improvements were offset in large part by a 31% increase in the cost of old
corrugated containers (OCC), a 9% increase in logging costs, and a 5.7%
increase in labor costs per ton of production at the converting plants. Cost
of products sold also increased due to reduction in pension income of $1.8
million compared to pension income in the prior period. Pension income has a
positive effect on cost of products sold in all of our segments by reducing
our accrued labor obligations. Our cost of products sold also included
depreciation, depletion and amortization costs. Depreciation, depletion and
amortization consists primarily of depreciation of our plant and equipment,
the depletion cost of timber harvested and, to a lesser degree, amortization
of logging roads. This expense was $18.9 million for second fiscal quarter
2003 compared with $18.8 million for second fiscal quarter 2002.
Selling, General and Administrative Expenses - Second fiscal quarter 2003
selling, general and administrative expenses were $17.6 million, or 9.7% of
net sales, compared with $17.8 million, or 9.7% of net sales, for second
fiscal quarter 2002. Costs were favorably impacted by reduced costs
associated with our business process improvement initiative offset in part by
lower pension income of $0.3 million allocated to the selling, general and
administrative function and higher health & welfare costs.
Operating Profit (Loss) - Second fiscal quarter 2003 operating profit was $7.0
million compared with operating profit of $6.8 million for the second fiscal
quarter 2002. See "Selected Segment Results" below.
Income Before Income Taxes - Second fiscal quarter 2003 income before income
taxes reflected miscellaneous income that resulted from proceeds received from
an insurance settlement for the replacement cost of a chipping facility
destroyed by fire and not replaced. The gain on disposal of the chipping
assets was $4.6 million. Second fiscal quarter 2002 income before income
taxes benefited from $1.2 million interest income related to the settlement
with the IRS of several tax issues. See "Provision for Taxes on Income"
below.
Provision for Taxes on Income - Second fiscal quarter 2003 provision for
income taxes was $0.3 million, reflecting a tax rate of 37.0%. Second fiscal
quarter 2002 provision for income taxes was $(4.0) million. The increase was
primarily the result of last year's settlement with the IRS of several tax
issues providing a total benefit to the company of $2.5 million in second
fiscal quarter 2002.
Net Income (Loss) - For the reasons noted above, the company earned net income
of $0.5 million for the second fiscal quarter 2003 compared with net income of
$15,000 for second fiscal quarter 2002.
Page 7
Selected Segment Results
Timber Three Months Six Months
Ended April 30 Ended April 30
% %
2003 2002 Change 2003 2002 Change
Timber net sales, $ millions $39.5 $44.4 (11.1) $80.8 $81.9 (1.3)
Timber operating profit,
$ millions 16.2 21.4 (24.5) 33.2 36.9 (10.0)
Logs, thousands of board
feet 63,156 72,163 (12.5) 130,506 132,516 (1.5)
Lumber, thousands of board
feet 23,812 21,941 8.5 43,490 40,871 6.4
Logs, $/thousand board feet $504 $513 (1.8) $512 $519 (1.3)
Lumber, $/thousand board feet 324 337 (3.9) 322 321 0.3
Second fiscal quarter 2003 timber net sales were $39.5 million, compared with
$44.4 million for second fiscal quarter 2002. This 11.1% decrease was due
primarily to a decrease in log volume of 12.5% and decreases in log and lumber
prices of 1.8% and 3.9%, respectively, partially offset by an increase in
lumber volume of 8.5%. The log price decline was in part due to pressure from
price competitive domestic lumber markets, partially offset by a 3.7% increase
in log export prices. The log volume decline was primarily the result of a
32.5% reduction in volume sold in the export market due to continued weak
economic conditions in Japan. Second fiscal quarter export sales were $9.1
million, or 22.9% of timber net sales, compared with $13.5 million, or 30.5%
of timber net sales for second fiscal quarter 2002. Operating profits were
also affected by a 9.0% increase in logging costs, and the impact of
proportionately lower volume of logs sold in the export market where margins
tend to be higher. As a result, second fiscal quarter 2003 operating profit
was $16.2 million compared with $21.4 million for second fiscal quarter 2002.
Year-to-date 2003 sales were $80.8 million compared to $81.9 million for year-
to-date 2002. The primary reasons for this 1.3% decline in sales were a 1.5%
decrease in log volume, and a 1.3% decrease in log prices, partially offset
by an increase of 6.4% in lumber volume with a modest increase of 0.3% in
lumber price. The decreases in volume and price reflect the continuing
weakness of the Japanese economy. Year-to-date 2003 operating profit was
$33.2 million compared to $36.9 million for year-to-date 2002. The primary
reasons for this 10% decline were an 8% increase in logging costs,
proportionately less volume sold in the export market and reduced volume and
prices.
Page 8
Paper and Paperboard Three Months Six Months
Ended April 30 Ended April 30
% %
2003 2002 Change 2003 2002 Change
Paper and Paperboard net sales,
$ millions $ 47.5 $ 40.1 18.4 $ 95.5 $ 76.4 25.1
Paper and Paperboard operating
profit (loss), $ millions (3.6) (8.6) - (6.6) (16.9) -
Paper, tons 66,575 56,698 17.4 136,308 105,468 29.2
Paperboard, tons 23,071 21,444 7.6 42,822 40,228 6.4
Paper, $/ton FOB mill
equivalent $565 $550 2.7 $560 $563 (0.5)
Paperboard, $/ton FOB mill
equivalent 338 315 7.3 341 315 8.3
Second fiscal quarter 2003 paper and paperboard net sales were $47.5 million,
compared with $40.1 million for second fiscal quarter 2002. This 18.4%
increase is primarily due to a 14.7% increase in paper and paperboard volume
and increases in paper and paperboard prices of 2.7% and 7.3%, respectively.
Export price increases of 14.4% and 14.6% for paper and paperboard,
respectively, were primarily the reason for the overall segment price
increases. In first fiscal quarter 2003, we renegotiated a long-standing
barter agreement whereby we swapped equivalent units of paper for paperboard.
The new buy/sell agreement provides that we now sell paper to our
counterpart's converting facility and we now purchase paperboard from them for
our Midwest converting facilities. As a result of the new agreement, we had
an 7.6% increase in paper and paperboard sales over second quarter 2002, and
an 8.3% increase in paper and paperboard volume over second quarter 2002.
Paperboard volume improved 7.6% primarily due to increased export sales as a
result of the weakening of the U.S. dollar causing an increase in demand for
U.S. paperboard. The weakening of the U.S. dollar also allowed us to achieve
higher prices for export paperboard sales. However, export paperboard volume
remained below historic levels due to our decision to reduce our exposure to
the competitive Asian market. Second fiscal quarter 2003 export sales in the
paper and paperboard segment were $18.1 million, or 38.1% of paper and
paperboard net sales, compared with $12.0 million, or 30.0% of paper and
paperboard net sales for second fiscal quarter 2002. The export sales
increase was the result of a 37.0% and 20.4% increase in the volume of paper
and paperboard sold, respectively, in the export market due to the weaker U.S.
dollar and improved demand in Asia. Second fiscal quarter 2003 paper and
paperboard operating loss was $3.6 million compared with an operating loss of
$8.6 million for the second fiscal quarter 2002. Paper and paperboard
operating results were favorably affected by a 14% decrease in the cost of
electrical power used at the mill, a 21% decrease in the cost of steam
resulting from lower natural gas costs and a lower cost mix of fuels, improved
labor productivity of 8.3% measured in hours per ton and a 2.7% and 7.3%
increase in paper and paperboard selling prices, respectively. These
improvements were partially offset by a 31% increase in the cost of old
corrugated containers and reduced pension income. Our business process
improvement initiatives to improve mill optimization, improve customer
service, reduce inventories and lower our procurement costs have contributed
favorably to the results. During the quarter the mill operated at 70% of
capacity due to seasonal factors and the generally weak economy.
Paper and paperboard sales improved 25.1% for fiscal year-to-date 2003
compared to 2002. The primary reasons for the improvement were increased
volume and increased paperboard prices. Paper and paperboard volume
improved 29.2% and 6.4% for fiscal year-to-date 2003 compared to 2002,
respectively, with the new buy/sell agreement accounting for 13.2% of the
paper volume increase. Average paper prices declined 0.5% while average
paperboard prices increased 8.3%. Year-to-date fiscal 2003 paper and
paperboard operating loss was $6.6 million, compared with an operating loss of
$16.9 million for the year-ago period. The improvement was primarily due to
lower cost of electrical power used at the mill, lower natural gas costs per
Page 9
MMBTU and lower wood chip costs, offset in part by higher OCC costs.
Operating results for year-to-date 2002 were also negatively affected by
allocated losses associated with the sale of electrical power of $2.2 million.
Converted Products
Three Months Six Months
Ended April 30 Ended April 30
% %
2003 2002 Change 2003 2002 Change
Converted Products sales,
$ millions $ 94.5 $ 98.7 (4.2) $194.9 $200.7 (2.9)
Converted Products
operating profit (loss),
$ millions (5.6) (6.0) - (6.8) (16.0) -
Converted Products, tons 117,637 122,606 (4.1) 242,516 247,864 (2.2)
Converted Products, $/ton $804 $805 (0.1) $804 $810 (0.7)
Second fiscal quarter 2003 converted products net sales were $94.5 million,
compared with $98.7 million for second fiscal quarter 2002. This 4.2%
decrease was primarily due to a decrease in volume of 4.1%, with prices
holding steady. Demand for our products declined due to the slowdown in the
general economy caused by the recent war and soft food-processing markets.
Second fiscal quarter operating loss was $5.6 million, compared with an
operating loss of $6.0 million for second fiscal quarter 2002. Operating
results were favorably impacted by our business process improvement
initiatives to improve customer service, reduce inventories, and lower our
procurement costs. Business process improvements have been offset in part by
lower pension income, increased health and welfare expense and other indirect
payroll costs.
The year-to-date fiscal 2003 converted products sales decreased 2.9%,
primarily due to a 2.2% decrease in tons sold coupled with a modest 0.7%
decrease in price. Our converted product sales are heavily influenced by the
general U.S. economy and results of this converted segment reflect the
sluggish domestic economy. The year-to-date fiscal 2003 converted products
operating loss was $6.8 million, compared with a loss of $16.0 million for
year-to-date fiscal 2002. The improvement was primarily the result of the
decreased cost of paper and paperboard supplied to us in the first quarter by
our Longview mill and third party suppliers. The average mill cost of paper
and paperboard supplied to our converting plants decreased 4.4% for year-to-
date 2003, compared with year-to-date 2002. Operating results for year-to-
date fiscal 2002 were negatively affected by the allocated loss associated
with the sale of electrical power of $3.2 million.
LIQUIDITY AND CAPITAL RESOURCES
At April 30, 2003, our borrowed debt included long-term debt of $534.9
million, including current installments of long-term debt of $50.0 million.
Additionally, short-term borrowings at April 30, 2003 were $3.0 million.
Since October 31, 2002, total borrowed debt decreased by $35.4 million.
At April 30, 2003, we had $100.0 million outstanding under our $250 million
senior unsecured revolving credit facility. We also have issued letters of
credit of $15.5 million under this facility. In addition, we had $213.9
million of 10% Senior Subordinated Notes due 2009. Also outstanding at April
30, 2003, were various other senior notes totaling $204.5 million, $5.0
million under an unsecured and uncommitted bank line of credit, and revenue
bonds of $14.5 million. As of April 30, 2003, we have $144.5 million
available under our bank lines of credit. Our financing arrangements require
Page 10
us to be in compliance with certain financial covenants, including minimum net
worth, short- and long-term borrowing ratio, current ratio and fixed charge
coverage ratio requirements and restrict our payment of dividends. At April
30, 2003, we were in compliance with such covenants as amended or waived.
During the quarter ended April 30, 2003, we obtained a limited waiver from the
holders of certain senior notes with respect to compliance with covenants that
require us to maintain a specified ratio of net income available for fixed
charges to fixed charges. This limited waiver is effective through the
September 8 maturity date of the applicable senior notes.
Net cash provided by operations was $26.6 million in the second fiscal quarter
2003 and $24.8 million for the second fiscal quarter 2002. The increase was
primarily due to a $2.3 million income tax refund.
Net cash used for investing was $3.8 million in the second fiscal quarter 2003
and $12.6 million in the second fiscal quarter 2002. Results for the second
fiscal quarter 2003 reflected the settlement of an insurance claim for the
replacement cost of a chipping facility destroyed by fire for $7.1 million.
Our capital expenditures, including timberland acquisitions, were $11.4
million in the second fiscal quarter 2003 and $12.8 million in the second
fiscal quarter 2002. Capital expenditures are expected to be approximately
$43 million for fiscal year 2003, including expenditures for timberland
acquisitions, plant and equipment maintenance and improvements and
environmental compliance.
Net cash used for financing was $22.9 million in the second fiscal quarter
2003 and $12.2 million for the second fiscal quarter 2002. This was primarily
the result of our using free cash flow to reduce debt by $22.0 million during
the second fiscal quarter 2003.
Each quarter we determine the amount of our dividend based on, among other
things, operating results, current market conditions and debt levels. Cash
dividends of $0.02 per share were declared and paid in the second fiscal
quarter of 2003 in the aggregate amount of $1.0 million.
We believe that our cash flow generated from operations and available
borrowings under our revolving credit facility and our other line of credit
provide sufficient resources to fund operations and to meet our debt payment
obligations and foreseeable capital expenditure requirements.
FORWARD-LOOKING STATEMENTS
This Form 10-Q contains forward-looking statements, including statements
concerning anticipated pricing and market conditions for the company's
products, energy and certain raw materials; expected capital expenditures;
expected resources to fund operations, meet debt payment obligations and
foreseeable capital expenditures; expected results of planned capital
expenditure projects for the converted product segment and paper mill
improvement projects; anticipated cost of and market conditions for energy;
and the effects of currency exchange rates on the company.
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 could differ materially from those
anticipated by the company due to a variety of factors, including, among
others, developments in the world, national, or regional economy or involving
the company's customers or competitors affecting supply of or demand for the
company's products, energy or raw materials, changes in product, energy or raw
material prices; capital project delay, cost overruns or unforeseen
maintenance on capital assets or advantageous capital acquisitions; changes in
currency exchange rates between the U.S. dollar and the currencies of
important export markets; weather; labor disputes; unforeseen adverse
developments involving environmental matters or other legal proceedings or the
Page 11
assertion of additional claims; unforeseen developments in the company's
business; adverse changes in the capital markets or interest rates affecting
the cost or availability of financing; or other unforeseen events. The
company does not undertake any obligation to update forward-looking statements
should circumstances or the company's estimates or projections change.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
Our exposure to market risks on our financial instruments is limited to
interest rate changes on variable rate debt, including debt under our
revolving credit facilities. The interest rates applied to our variable rate
borrowings are adjusted often and therefore react quickly to any movement in
the general trend of market interest rates. Interest expense incurred
annually related to our variable rate debt is dependent upon the amount
outstanding during the year and the extent to which interest rates rise and
fall. Except for the $70 million interest rate swap we did not engage in
commodity, currency or interest rate hedging arrangements or engage in
transactions involving derivatives during the quarter, however we may do so in
the future, on a non-speculative basis, if business conditions warrant. The
$70 million interest rate swap was terminated in May 2003.
ITEM 4. CONTROLS AND PROCEDURES
We maintain a system of controls and procedures designed to provide reasonable
assurance as to the reliability of the financial statements and other
disclosures included in this quarterly report. Within 90 days before the
filing of this quarterly report, we performed an evaluation, under the
supervision and with the participation of our management, including our Chief
Executive Officer and Senior Vice President-Finance, of the effectiveness of
the design and operation of our disclosure controls and procedures. Based on
that evaluation, our management, including our Chief Executive Officer and
Senior Vice President-Finance, concluded that the disclosure controls and
procedures were effective, in all material respects, in timely alerting them
to material information relating to us, and our consolidated subsidiary, that
is required to be included in our periodic reports filed pursuant to the
Securities Exchange Act of 1934. There have been no significant changes in
our internal controls or in other factors which could significantly affect
internal controls subsequent to the date we carried out our evaluation.
Our Chief Executive Officer and Senior Vice President-Finance do not expect
that our disclosure controls or our internal controls will prevent all error
and all fraud. A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of
the system are met. Further, the design of a control system must reflect the
fact that there are resource constraints, and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in
all control systems, no evaluation of controls can provide absolute assurance
that we have detected all our control issues and instances of fraud, if any.
The design of any system of controls also is based partly on certain
assumptions about the likelihood of future events, and there can be no
assurance that any design will succeed in achieving its stated goals under all
potential future conditions.
Page 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Nothing to report.
ITEM 2. CHANGES IN SECURITIES
Nothing to report.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Nothing to report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Nothing to report.
ITEM 5. OTHER INFORMATION
Nothing to report.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits required to be filed by Item 601 of Regulation S-K:
The Exhibits to this report on Form 10-Q are listed on the
accompanying Exhibit Index.
(b) Reports of Form 8-K - Nothing to report.
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.
LONGVIEW FIBRE COMPANY
(Registrant)
L. J. McLAUGHLIN 06/12/03
L. J. McLAUGHLIN
Senior Vice President-Finance,
Secretary and Treasurer
A. G. HIGGENS 06/12/03
A. G. HIGGENS
Assistant Treasurer
Page 13
302 CERTIFICATIONS:
I, R.H. Wollenberg, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Longview Fibre
Company;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
R. H. WOLLENBERG 06/12/03
R. H. WOLLENBERG,
President and Chief Executive Officer
Page 14
I, L.J. McLaughlin, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Longview Fibre
Company;
2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date"); and
(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the
audit committee of registrant's board of directors (or persons performing the
equivalent function):
(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in
internal controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
L. J. McLAUGHLIN 06/12/03
L. J. McLAUGHLIN,
Senior Vice President-Finance,
Secretary and Treasurer
Page 15
EXHIBIT INDEX
Exhibit No. Description
99.1 Certification Pursuant to 18 U.S.C. Section 1350 dated
June 12, 2003 signed by R. H. Wollenberg,
President and Chief Executive Officer.
99.2 Certification Pursuant to 18 U.S.C. Section 1350 dated
June 12, 2003 signed by L. J. McLaughlin,
Sr. Vice President-Finance, Secretary and Treasurer.
Page 16