LONGVIEW FIBRE CO - 10-Q Quarterly Report

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, 2005

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)

(360) 425-1550
(Registrant's telephone number including area code)

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 May 31, 2005

Page 1

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited)

	Three Months Ended						Six Months Ended
	April 30						April 30
(thousands except per share)	2005			2004			2005			2004
Net sales
Timber	$	52,200		$	61,373		$	95,567		$	95,883
Paper and paperboard		64,210			54,404			135,514			96,771
Converted products		107,999			97,606			217,408			190,656
		224,409			213,383			448,489			383,310

Cost of products sold, including outward freight		179,662			173,934			368,972			329,787
Gross profit		44,747			39,449			79,517			53,523

Selling, administrative and general expenses		21,773			20,874			43,520			40,311

Operating profit (loss)
Timber		26,026			31,875			45,481			45,532
Paper and paperboard		(48	)		(8,962	)		(3,352	)		(17,639	)
Converted products		(3,004	)		(4,338	)		(6,132	)		(14,681	)
		22,974			18,575			35,997			13,212

Interest income		56			43			100			79
Interest expense		(9,345	)		(9,355	)		(18,674	)		(18,975	)
Miscellaneous		218			175			641			388
Income (loss) before taxes		13,903			9,438			18,064			(5,296	)

Provision (benefit) for taxes
Current		375			95			488			(53	)
Deferred		4,769			3,396			6,196			(1,907	)
		5,144			3,491			6,684			(1,960	)

Net Income (loss)	$	8,759		$	5,947		$	11,380		$	(3,336	)

Earnings per share
Net income (loss)	$	0.17		$	0.12		$	0.22		$	(0.07	)
Dividends		0.02			-			0.04			-

Average shares outstanding in the hands of the public		51,077			51,077			51,077			51,077

The accompanying notes are an integral part of these financial statements.

Page 2

CONSOLIDATED BALANCE SHEET

	Apr. 30		Oct. 31		Apr. 30
	2005		2004		2004
(dollars in thousands except per share)	(Unaudited)				(Unaudited)
ASSETS
Current assets:
Accounts and notes receivable	$	106,389	$	111,723	$	95,426
Allowance for doubtful accounts		1,350		1,350		1,350
Inventories, at lower cost or market; costs are based on last-in,
first-out method except for supplies at current averages
Finished goods		17,149		21,791		17,069
Goods in process		12,519		16,275		8,529
Raw materials and supplies		47,675		45,457		40,999
Other		8,471		7,800		6,726
Total current assets		190,853		201,696		167,399
Capital assets:
Buildings, machinery and equipment at cost		1,837,187		1,828,195		1,829,095
Accumulated depreciation		1,168,211		1,139,390		1,127,120
Costs to be depreciated in future years		668,976		688,805		701,975
Plant sites at cost		3,549		3,549		3,549
		672,525		692,354		705,524
Timber at cost less depletion		195,912		196,440		198,529
Roads at cost less amortization		8,364		8,631		8,533
Timberlands at cost		24,615		24,598		24,423
		228,891		229,669		231,485
Total capital assets		901,416		922,023		937,009
Pension and other assets		148,553		147,211		141,430
	$	1,240,822	$	1,270,930	$	1,245,838

LIABILITIES AND SHAREHOLDERS' EQUITY

Current liabilities:
Payable to bank resulting from checks in transit	$	9,701	$	12,370	$	7,621
Accounts payable		61,949		66,063		58,461
Short-term borrowings		14,500		10,000		11,000
Payrolls payable		17,846		15,897		14,826
Other taxes payable		8,349		9,100		7,797
Current installments of long-term debt		13,000		30,000		30,000
Total current liabilities		125,345		143,430		129,705
Long-term debt		415,290		442,148		457,099
Deferred taxes - net		210,979		204,783		193,503
Other liabilities		36,217		36,915		36,560
Shareholders' equity:
Preferred stock; authorized 2,000,000 shares		-		-		-
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		373,070		363,733		349,050
Total shareholders' equity		452,991		443,654		428,971
	$	1,240,822	$	1,270,930	$	1,245,838

The accompanying notes are an integral part of the financial statements.

Page 3

CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)

	(000 Omitted)
	Three Months Ended						Six Months Ended
	April 30						April 30
	2005			2004			2005			2004
Cash provided by (used for) operations:
Net income (loss)	$	8,759		$	5,947		$	11,380		$	(3,336	)
Charges to income (loss) not requiring cash:
Depreciation		17,637			17,738			35,256			35,646
Depletion and amortization		2,558			2,189			5,348			3,522
Deferred taxes - net		4,769			3,396			6,196			(1,907	)
(Gain) loss on disposition of capital assets		(28	)		80			176			45

Change in:
Accounts and notes receivable		2,263			(11,221	)		5,334			4,328
Inventories		(1,447	)		(2,402	)		6,180			(1,249	)
Other		509			2,138			(671	)		383
Pension and other noncurrent assets		(1,065	)		6,823			(1,342	)		4,006
Accounts, payrolls and other taxes payable		6,923			11,235			(1,996	)		4,290
Other noncurrent liabilities		(835	)		1,501			(651	)		2,128
Cash provided by operations		40,043			37,424			65,210			47,856

Cash provided by (used for) investing:
Additions to: Plant and equipment		(8,269	)		(11,980	)		(17,709	)		(16,215	)
Timber and timberlands		(2,014	)		(18,619	)		(4,607	)		(21,193	)
Proceeds from sale of capital assets		1,203			203			2,143			293
Cash used for investing		(9,080	)		(30,396	)		(20,173	)		(37,115	)

Cash provided by (used for) financing:
Long-term debt		(24,952	)		(5,952	)		(43,905	)		24,096
Short-term borrowings		(5,500	)		(4,000	)		4,500			(33,000	)
Payable to bank resulting from checks in transit		1,446			1,220			(2,669	)		(3,569	)
Accounts payable for construction		(936	)		1,704			(920	)		1,732
Cash dividends		(1,021	)		-			(2,043	)		-
Cash used for financing		(30,963	)		(7,028	)		(45,037	)		(10,741	)

Change in cash position		-			-			-			-
Cash position, beginning of period		-			-			-			-
Cash position, end of period	$	-		$	-		$	-		$	-

Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest (net of amount capitalized)	$	3,357		$	2,284		$	19,356		$	17,617
Income taxes		348			12			416			11

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
(thousands except per share)		2005			2004		2005			2004
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		$	76,615

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	$	365,332		$	343,103	$	363,733		$	352,386
Net income (loss)		8,759			5,947		11,380			(3,336	)
Less cash dividends on common stock		(1,021	)		-		(2,043	)		-
Balance at end of period	$	373,070		$	349,050	$	373,070		$	349,050

DIVIDENDS PAID PER SHARE:	$	0.02		$	-	$	0.04		$	-

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 that are, in the opinion of management, necessary for fair presentation.

NOTE 2:

Retirement plans

We have two trusteed defined benefit pension programs that cover a majority of our employees who have completed one year of continuous service. The plans provide benefits of a stated amount for each year of service with an option for some employees to receive benefits based on an average earnings formula.

The components of net periodic pension income are summarized as follows:

	Three Months						Six Months
	Ended April 30						Ended April 30
thousands	2005			2004			2005			2004
Service cost - benefits earned
during the year	$	2,469		$	2,256		$	4,939		$	4,513
Interest cost on benefit obligation		6,098			5,987			12,195			11,975
Expected return on plan assets		(10,957	)		(11,308	)		(21,915	)		(22,617	)
Amortization of prior service cost		1,469			1,486			2,938			2,972
Net periodic (income)	$	(921	)	$	(1,579	)	$	(1,843	)	$	(3,157	)

We do not expect to make any contributions to our pension plans in 2005.

Savings plans

Voluntary savings plans are maintained for all employees who have completed one year of continuous service. The plans allow salary deferrals in accordance with IRC section 401(k) provisions. Our contribution as a matching incentive was $1,260,000 during the six-month period ended April 30, 2005 and we expect to contribute approximately $2.5 million for the full fiscal year.

Postretirement benefits other than pensions

We provide postretirement health care insurance benefits for all salaried and certain non-salaried employees and their dependents. Individual benefits generally continue until age 65. We do not pre-fund these benefits, and as such have no plan assets. We paid $1,070,000 for these benefits during the six-month period ended April 30, 2005 and we expect to pay approximately $2.0 million for the full fiscal year.

The components of net periodic postretirement cost are summarized as follows:

	Three Months				Six Months
	Ended April 30				Ended April 30
Thousands	2005		2004		2005		2004
Service cost - benefits earned
during the year	$	362	$	317	$	723	$	633
Interest cost on benefit obligation		579		574		1,157		1,148
Amortization of transition obligation		125		125		249		249
Amortization of net loss		28		11		54		22
Net periodic benefit cost	$	1,094	$	1,027	$	2,183	$	2,052

NOTE 3: We use derivative financial instruments that are designated as hedges of the fair value of long-term debt and meet the shortcut method requirements under Statement of Financial Accounting Standards No. 133 “Accounting for Derivative Instruments and Hedging Activities.” Interest rate swap agreements are used as part of our program to manage the fixed and floating interest rate mix of our total debt portfolio and related overall cost of borrowing by replacing fixed rate debt with floating rate debt. The interest rate swap agreements involve the periodic exchange of payments without the exchange of the notional amount upon which the payments are based. The changes in fair values of the interest rate swap agreements are exactly offset by changes in the fair value of the underlying long-term debt, therefore the adjustments are recorded on the balance sheet and do not impact income. Unrealized gains and losses are recorded as current or non-current assets or liabilities on the balance sheet based on the classification of the underlying debt. No ineffectiveness was recorded to net income related to interest rate swaps designated as fair value hedges for the fiscal quarter ended April 30, 2004.

During the quarter we terminated our two fixed-to-floating interest rate swap agreements related to $70 million of our senior subordinated notes and paid cash of $1.0 million resulting in a deferred loss of $1.1 million, which taken alone would increase our interest expense. However, this deferred loss will be netted with deferred gains on prior interest rate swap terminations. Total deferred net gain on all terminated interest rate swap agreements relating to our senior subordinated notes was $5.2 million and $7.9 million at April 30, 2005 and 2004, respectively. The deferred gain is included in Other long-term liabilities in the accompanying balance sheet and will reduce interest expense over the term of the senior subordinated notes, which mature in 2009. The mark-to-market adjustment for the outstanding interest rate swaps resulted in a derivative liability of $1.3 million at April 30, 2004, with a corresponding adjustment to long-term debt.

Page 6

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

CONSOLIDATED STATEMENT OF OPERATIONS

THREE AND SIX MONTHS ENDED APRIL 30, 2005 COMPARED WITH

THREE AND SIX MONTHS ENDED APRIL 30, 2004

Net Sales - - Second fiscal quarter 2005 net sales were $224.4 million, compared with $213.4 million for the second fiscal quarter of 2004. This 5.2% increase was attributed to an increase in paper and paperboard net sales of $9.8 million, or 18.0%, and an increase in converted products net sales of $10.4 million, or 10.6%, partially offset by a decrease in timber net sales of $9.2 million, or 14.9%.

Cost of Products Sold - - Second fiscal quarter 2005 cost of products sold was $179.7 million, or 80.1% of net sales, compared with $173.9 million, or 81.5% of net sales, for second fiscal quarter 2004. This decrease as a percentage of net sales was partially due to an increase in net sales resulting from increases in volume and price in the paper and paperboard and converting segments. In addition, total fiber costs decreased 4.7%, and labor cost per ton decreased 14.9% and 10.4% in our paper and paperboard and converting segments, respectively. These improvements were offset in part by lower allocated pension income.

Our cost of products sold also included depreciation, depletion and amortization costs. Depreciation, depletion and amortization consist 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 $20.2 million for second fiscal quarter 2005 compared with $19.9 million for second fiscal quarter 2004.

Selling, General and Administrative Expenses - - Second fiscal quarter 2005 selling, general and administrative expenses were $21.8 million, or 9.7% of net sales, compared with $20.9 million, or 9.8% of net sales for second fiscal quarter 2004. As a percent of sales, the decrease was primarily caused by increased sales, partially offset by higher salaries and wages, increased consulting and training costs associated with cost reduction initiatives and lower allocated pension income.

Operating Profit (Loss) - - Second fiscal quarter 2005 operating profit was $23.0 million compared with operating profit of $18.6 million for the second fiscal quarter 2004. See “Selected Segment Results” below.

Provision for Taxes on Income - - Second fiscal quarter 2005 provision for income taxes was $5.1 million, reflecting a tax rate of 37.0%. Second fiscal quarter 2004 provision for income taxes was $3.5 million, reflecting a tax rate of 37.0%.

Net Income (Loss) - - For the reasons noted above, the company earned net income of $8.8 million for the second fiscal quarter 2005 compared with net income of $5.9 million for second fiscal quarter 2004.

Selected Segment Results

Timber

	Three Months							Six Months
	Ended April 30				Percentage			Ended April 30				Percentage
	2005		2004		Increase/(Decrease)			2005		2004		Increase/(Decrease)
Timber net sales, $ millions	$	52.2	$	61.4		(14.9	)	$	95.6	$	95.9		(0.3	)
Timber operating profit, $ millions		26.0		31.9		(18.3	)		45.5		45.5		(0.1	)

Logs, thousands of board feet		76,752		85,972		(10.7	)		140,197		134,724		4.1
Lumber, thousands of board feet		16,774		29,544		(43.2	)		34,797		55,629		(37.4	)
Logs, $/thousand board feet	$	590	$	573		3.0		$	589	$	555		6.1
Lumber, $/thousand board feet		413		410		0.7			375		379		(1.1	)

Second fiscal quarter 2005 timber net sales were $52.2 million, compared with $61.4 million for second fiscal quarter 2004. This 14.9% decrease was due primarily to decreases in log and lumber volumes of 10.7% and 43.2%, respectively, partially offset by increases in log and lumber prices of 3.0% and 0.7%, respectively. During the second fiscal quarter 2005, we harvested logs at levels more consistent with our historical norms as compared with the increased harvest levels in fiscal second quarter 2004 following the weather-related low harvest levels of the first fiscal quarter 2004. The lumber volume decrease reflected our decision to optimize our total returns and discontinue the processing of logs into lumber at a third-party sawmill in Oregon.

Second fiscal quarter 2005 export log sales were $8.2 million, or 15.8% of timber net sales, compared with $17.1 million, or 27.9% of timber net sales, for second fiscal quarter 2004. This decrease was the result of decreased log export volume of 54.1%, offset by increased log export prices of 4.6%. The volume decline in export logs was a function of the characteristics of the timber we harvested in the second fiscal quarter 2005, the timing of export shipments, and a strong domestic market.

Second fiscal quarter 2005 operating profit was $26.0 million compared with $31.9 million for second fiscal quarter 2004. The primary reasons for this 18.3% decrease were the lower export log sales, a 5% increase in logging and hauling costs and increased depletion costs.

Page 7

Year-to-date 2005 sales were $95.6 million compared with $95.9 million for the first six months of fiscal 2004. Year-to-date export sales were $14.4 million or 15.1% of timber net sales, compared with $25.6 million or 26.7% of timber net sales for the first six months of fiscal 2004. The reduction in year-to-date export sales was due to characteristics of the timber we harvested discussed above and the strong domestic log and lumber markets.

Year-to-date 2005 operating profit was $45.5 million compared to $45.5 million for the first six months of fiscal 2004. Log volume and price improved year-to-date 4.1% and 6.1%, respectively, offset by decreases in lumber volume and price of 37.4% and 1.1%, respectively, and a 6.1% increase in total logging costs.

Paper and Paperboard

	Three Months							Six Months
	Ended April 30					Percentage		Ended April 30						Percentage
	2005		2004			Increase/(Decrease)		2005			2004			Increase/(Decrease)
Paper and Paperboard net sales,
$ millions	$	64.2	$	54.4			18.0	$	135.5		$	96.8			40.0
Paper and Paperboard operating
Profit (loss), $ millions		-		(9.0	)		-		(3.4	)		(17.6	)		-

Paper, tons		75,023		74,249			1.0		168,371			134,881			24.8
Paperboard, tons		48,742		31,786			53.3		91,778			51,677			77.6
Paper, $/ton FOB mill equivalent	$	583	$	548			6.4	$	564		$	549			2.7
Paperboard, $/ton FOB mill equivalent		343		337			1.8		346			338			2.4

Second fiscal quarter 2005 paper and paperboard net sales were $64.2 million, compared with $54.4 million for second fiscal quarter 2004. This 18.0% increase is primarily due to a 16.7% increase in paper and paperboard volume, and to increases in paper and paperboard prices of 6.4% and 1.8%, respectively. Demand for domestic paper and paperboard increased due to the improved U.S. economy, with volume of domestic paper and paperboard increasing 0.9% and 39.8%, respectively.

Second fiscal quarter 2005 export sales in the paper and paperboard segment were $20.4 million, or 31.7% of paper and paperboard net sales, compared with $15.3 million, or 28.1% of paper and paperboard net sales for second fiscal quarter 2004. The export sales increase was primarily the result of a 60.0% increase in the volume of export paperboard sales due to a 166.6% increase in roll pulp sold into the export market compared with second fiscal quarter 2004. Although roll pulp has a lower selling price than our kraft paper and paperboard, production of roll pulp at meaningful volumes allows more stable, efficient and cost effective operation of our Longview mill throughout the year.

Second fiscal quarter 2005 paper and paperboard operating loss was $48,000, compared with an operating loss of $9.0 million for the second fiscal quarter 2004. Paper and paperboard operating results compared with second fiscal quarter 2004 were positively affected by the paper and paperboard price increases, an 18.0% productivity improvement in labor hours per ton of paper and paperboard produced, a 13.0% decrease in total energy cost per ton of production as a result of our energy conservation efforts, and a 4.7% decrease in total fiber costs. In addition, our Longview mill utilization improved to 87% compared with 73% for the second fiscal quarter 2004. We expect to operate at 85 to 90% of capacity during the third fiscal quarter due to increased demand.

Year-to-date paper and paperboard sales were $135.5 million, compared with $96.8 million for the first six months of fiscal 2004. Paper volume increased 24.8% and paperboard volume improved 77.6% for the first six months of fiscal 2005 compared to 2004. Average paper prices improved 2.7% and average paperboard prices improved 2.4%. Demand was strong in both the domestic and export markets during year-to-date 2005 compared with the first six months of fiscal 2004.

Year-to-date export sales in the paper and paperboard segment were $39.6 million or 29.2% of paper and paperboard net sales compared with $26.0 million or 26.9% of paper and paperboard net sales for the first six months of fiscal 2004. Export paper volume increased 12.2% and export paperboard volume increased 103.1%. Export roll pulp volume accounted for 77.7% of the paperboard export volume increase, with the remainder attributed to the improved markets. Average export paper and paperboard prices were up 4.6% and 1.2%, respectively.

Year-to-date fiscal 2005 paper and paperboard operating loss was $3.4 million, compared with an operating loss of $17.6 million for the year-ago period. The improvement was primarily driven by the increases in paper and paperboard volume and price, higher mill utilization rates resulting in lower fixed costs per unit, labor productivity improvement of 17.9% based on hours per ton of production, a 16.9% reduction in total energy cost per ton of production, and a 2.4% decrease in total fiber costs.

LIQUIDITY AND CAPITAL RESOURCES

At April 30, 2005, our total borrowed debt of $442.8 million included long-term debt of $415.3 million, current installments of long-term debt of $13.0 million and short-term borrowings of $14.5 million.

At April 30, 2005, we had $84.5 million outstanding under our $250 million revolving credit facility, excluding letters of credit of $9.9 million. Also outstanding at April 30, 2005, were various senior notes totaling $124.5 million, revenue bonds of $14.5 million and $214.3 million of senior subordinated notes, net of original issuance discount. In addition, we had $5 million outstanding on a $15 million uncommitted line of credit. As of April 30, 2005, we had $165.6 million available under our bank lines of credit. Our financing arrangements require us to be in compliance with certain financial covenants, including minimum net worth, short- and long-term borrowing ratio and fixed charge coverage ratio requirements and restricting our payment of dividends. At April 30, 2005, we were in compliance with such covenants.

Net cash provided by operations was $40.0 million in the second fiscal quarter 2005 and $37.4 million for the second fiscal quarter 2004. The primary reason for the increase was an increase in net income.

Net cash used for investing was $9.1 million in the second fiscal quarter 2005 and $30.4 million in the second fiscal quarter 2004. Our capital expenditures, including timberland acquisitions, were $10.3 million in the second fiscal quarter 2005 and $30.6 million in the second fiscal quarter 2004. Capital expenditures are expected to be $40 to $50 million for fiscal year 2005 including expenditures for timberland purchases, plant and equipment, and environmental compliance.

Net cash used for financing in the second fiscal quarter 2005 was $31.0 million while net cash used for financing was $7.0 million for the second fiscal quarter 2004. Borrowed debt decreased by $30.5 million during the second fiscal quarter 2005 due to improved earnings and reduced capital expenditures.

Each quarter we determine the amount of our dividend based on, among other things, operating results, current market conditions, debt levels and covenants in financing agreements. Cash dividends of $0.02 per share were declared and paid in the second fiscal quarter 2005 in the aggregate amount of $1.0 million. Cash dividends were not paid in the second fiscal quarter 2004. The Board of Directors declared a regular quarterly cash dividend of $0.02 per share payable on July 8, 2005.

We believe that our cash flow generated from operations and available borrowings under our revolving credit facility 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 the effect of selling roll pulp, the anticipated cost of and availability of cash flow and financing to fund operations, meet debt payment obligations and for planned capital expenditures; anticipated capacity utilization; expected capital expenditures and anticipated operational benefits through improved mill operations. 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 assertion of additional claims; adverse changes in the capital markets or interest rates affecting the cost or availability of financing; and unforeseen developments in the company's business, including unforeseen capital requirements or reduced cash from operations. 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 DISCLOSURES ABOUT MARKET RISK

Our derivative activities are primarily limited to interest rate swaps. See Note 3 to our financial statements for a more detailed discussion of our interest rate swaps. The swaps were terminated in February 2005. 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. The fair market value of long-term fixed interest rate debt is subject to interest rate risk as well. Generally, the fair market value of fixed rate debt will increase as interest rates fall and decrease as interest rates rise. The interest rate changes affect the fair market value but do not impact earnings or cash flows.

ITEM 4. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures. We maintain disclosure controls and procedures designed to provide reasonable assurance that material information required to be disclosed by us in the reports we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that the information is accumulated and communicated to our management, including our Chief Executive Officer and Senior Vice President-Finance, as appropriate to allow timely decisions regarding required disclosure. 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 as of the end of the period covered by this report. Based on the material weakness in internal control over financial reporting discussed below, our management, including our Chief Executive Officer and Senior Vice President-Finance, concluded that the disclosure controls and procedures were not effective as of the end of the period covered by this report.

We do not expect that our disclosure controls or our internal controls will prevent all errors and all instances of 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.

Internal Control Over Financial Reporting. As of April 30, 2005, the company had a deficiency in internal controls over the valuation of inventory. As a result of the deficiency, a data entry error in the first quarter 2005 LIFO inventory calculation and related index rates was not detected prior to the issuance of the first quarter 2005 consolidated financial statements. This control deficiency resulted in the restatement of our first quarter 2005 consolidated financial statements. In light of the deficiency, we performed additional analysis and other procedures subsequent to the end of the second fiscal quarter but prior to the issuance of our second quarter 2005 results to ensure our second fiscal quarter consolidated financial statements were prepared without an error in the LIFO inventory calculation. In addition, unless effectively remediated, this control deficiency could result in a misstatement to inventory that could result in a material misstatement to the annual or interim financial statements.

Under the Public Company Accounting Oversight Board’s Auditing Standard No. 2, the restatement of previously issued financial statements to reflect the correction of a misstatement should be regarded as at least a significant deficiency and as a strong indicator that a material weakness in the design or operation of a company’s internal control over financial reporting exists. A material weakness is a control deficiency, or combination of control deficiencies, that results in a more than remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. Accordingly, management has concluded that the control deficiency constituted a material weakness.

Management Remediation Plan. Subsequent to the end of the second quarter, we undertook remedial action to address and correct the weakness in our internal controls and disclosure controls. These actions included adopting an adequate independent review of the LIFO calculation including performing a duplicate calculation.

Changes in Internal Control over Financial Reporting. We are in the process of implementing a new company-wide Enterprise Resource Planning System (ERP) with integrated point solution software. During the second fiscal quarter we implemented the human resources and payroll modules for the ERP system. As a result, we have updated our internal controls as necessary to accommodate the modifications to our business processes and accounting procedures. There have been no other changes in our internal controls over financial reporting during the most recent quarter that have materially affected, or are reasonably likely to materially affect, our internal controls over financial reporting.

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Nothing to report.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

Nothing to report.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

Nothing to report.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The Annual Meeting of Shareholders of Longview Fibre Company was held on March 15, 2005 at which time the following three Class III directors were elected:

CLASS III DIRECTORS
(Terms to Expire in 2008)
&nbs p; Votes Cast

	For	Withheld
Lisa J. McLaughlin	33,673,058	12,088,422
M. Alexis Dow	40,039,343	5,722,137
Michael C. Henderson	40,591,667	5,169,813

Page 10

The remaining directors of Longview Fibre Company are as follows:

CLASS I DIRECTORS

(Terms to Expire in 2006)

David A. Wollenberg

David L. Bowden

Richard H. Wollenberg

CLASS II DIRECTORS

(Terms to Expire in 2007)

Robert E. Wertheimer

John R. Kretchmer

Robert A. Kirchner

	Three Months								Six Months
	Ended April 30						Percentage		Ended April 30						Percentage
	2005			2004			Increase/(Decrease)		2005			2004			Increase/(Decrease)
Converted Products sales, $ millions	$	108.0		$	97.6			10.6	$	217.4		$	190.7			14.0
Converted Products operating
profit (loss), $ millions		(3.0	)		(4.3	)		-		(6.1	)		(14.7	)		-

Converted Products, tons		130,797			122,708			6.6		262,908			238,677			10.2
Converted Products, $/ton	$	826		$	795			3.9	$	827		$	799			3.5

Exhibit No.		Description

31.1		Section 302 Certification by R. H. Wollenberg, President and Chief Executive Officer.

31.2		Section 302 Certification by L. J. McLaughlin, Sr. Vice President-Finance, Secretary and Treasurer.

32.1		Section 1350 Certification by R. H. Wollenberg, President and Chief Executive Officer.

32.2		Section 1350 Certification by L. J. McLaughlin, Sr. Vice President-Finance, Secretary and Treasurer.