-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VH05C6QXd9Mj4QvCOkSEdvsMZbqJVFu3+e0quFluE2FXzRItkPNeROu46YhEqlBY uQyHWRM8eAnox6Jjj0gtlg== 0000891020-97-001071.txt : 19970811 0000891020-97-001071.hdr.sgml : 19970811 ACCESSION NUMBER: 0000891020-97-001071 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970808 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: POPE & TALBOT INC /DE/ CENTRAL INDEX KEY: 0000311871 STANDARD INDUSTRIAL CLASSIFICATION: PAPER MILLS [2621] IRS NUMBER: 940777139 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-07852 FILM NUMBER: 97654434 BUSINESS ADDRESS: STREET 1: 1500 SW FIRST AVE CITY: PORTLAND STATE: OR ZIP: 97201 BUSINESS PHONE: 5032289161 MAIL ADDRESS: STREET 1: 1500 S W FIRST AVE CITY: PORTLAND STATE: OR ZIP: 97201 10-Q 1 POPE & TALBOT EDGAR ONLY 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission File No. 1-7852 ---------- POPE & TALBOT, INC. ------------------- Delaware 94-0777139 - ------------------------------- --------------------------------------- (State or other jurisdiction of (I.R.S. Employer Identification Number) incorporation or organization) 1500 S.W. 1st Ave., Portland, Oregon 97201 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (503) 228-9161 ------------------ NONE - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report. Indicate by checkmark 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, as of the close of the latest practicable date. Common stock, $1 par value - 13,459,951 shares as of August 4, 1997 2 PART I. FINANCIAL INFORMATION
Page No. -------- ITEM 1. Financial Statements: Consolidated Condensed Balance Sheets - June 30, 1997 and December 31, 1996 2 Consolidated Statements of Income - Three and Six Months Ended June 30, 1997 and 1996 3 Consolidated Condensed Statements of Cash Flows - Six Months Ended June 30, 1997 and 1996 4 Notes to Consolidated Condensed Financial Statements 5-6 ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 7-10 PART II. OTHER INFORMATION ITEM 1. Legal Proceedings 11 ITEM 6. Exhibits and Reports on Form 8-K 11-14
3 PART I. POPE & TALBOT, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (Dollars in Thousands)
June 30, December 31, 1997 1996 --------- ------------ ASSETS ------ Current assets: Cash and cash equivalents $ 44,533 $ 32,208 Accounts receivable 47,489 39,170 Inventories: Raw materials 26,786 49,353 Finished goods 29,922 31,683 --------- --------- 56,708 81,036 Prepaid expenses and other 12,679 12,088 --------- --------- Total current assets 161,409 164,502 Properties: Plant and equipment 460,436 458,281 Accumulated depreciation (279,425) (266,862) --------- --------- 181,011 191,419 Land and timber cutting rights 10,134 10,247 --------- --------- Total properties 191,145 201,666 Other assets: Deferred income tax assets, net 23,490 21,871 Goodwill, net of amortization 3,780 3,863 Other 18,405 16,027 --------- --------- Total other assets 45,675 41,761 --------- --------- $ 398,229 $ 407,929 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ Current liabilities: Notes payable $ 22,800 $ 30,000 Current portion of long-term debt 488 488 Accounts payable and accrued liabilities 52,504 55,215 Income taxes 3,217 1,364 --------- --------- Total current liabilities 79,009 87,067 Noncurrent liabilities: Reforestation 17,448 16,721 Postretirement benefits 13,207 12,887 Long-term debt, net of current portion 107,786 108,026 --------- --------- Total noncurrent liabilities 138,441 137,634 Stockholders' equity: Common stock 13,972 13,972 Additional paid-in capital 34,130 35,976 Retained earnings 150,844 150,563 Cumulative translation adjustments (7,065) (6,172) Less treasury shares at cost (11,102) (11,111) --------- --------- Total stockholders' equity 180,779 183,228 --------- --------- $ 398,229 $ 407,929 ========= =========
The accompanying notes are an integral part of these consolidated condensed balance sheets. 2 4 POPE & TALBOT, INC. CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (Dollars in Thousands Except Per Share Amounts)
Three months ended Six months ended June 30, June 30, -------------------- -------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Revenues: Wood products $ 70,014 $ 56,552 $ 134,328 $ 110,599 Pulp and paper products 54,823 54,015 107,383 110,650 ----------- ----------- ----------- ------------ Total 124,837 110,567 241,711 221,249 Costs and expenses: Cost of sales: Wood products 59,225 51,724 115,665 101,628 Pulp and paper products 51,292 51,880 102,292 109,912 Selling, general and administrative 5,082 3,926 9,952 8,744 Interest, net 2,212 1,932 4,401 4,469 ----------- ----------- ----------- ------------ Total 117,811 109,462 232,310 224,753 ----------- ----------- ----------- ------------ Income (loss) before income taxes and discontinued operations 7,026 1,105 9,401 (3,504) Income tax provision (benefit) 3,045 443 4,042 (1,401) ----------- ----------- ----------- ------------ Income (loss) from continuing operations 3,981 662 5,359 (2,103) Discontinued operations: Gain on disposal of discontinued operations (Net of applicable income taxes of $2,074) -- -- -- 3,110 ----------- ----------- ----------- ------------ Net income $ 3,981 $ 662 $ 5,359 $ 1,007 =========== =========== =========== ============ Income (loss) per common share: Income (loss) from continuing operations $ .30 $ .05 $ .40 $ (.15) Income from discontinued operations -- -- -- .23 ----------- ----------- ----------- ------------ Net income $ .30 $ .05 $ .40 $ .08 =========== =========== =========== ============ Cash dividends per common share $ .19 $ .19 $ .38 $ .38 =========== =========== =========== ============ Weighted average number of common shares outstanding 13,363,997 13,363,779 13,363,888 13,363,779 =========== =========== =========== ============
The accompanying notes are an integral part of these consolidated condensed financial statements. 3 5 POPE & TALBOT, INC. CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (Dollars in Thousands)
Six months ended June 30, ------------------ 1997 1996 ---- ---- Cash flow from operating activities: Net income $ 5,359 $ 1,007 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15,025 15,990 Gain on disposal of discontinued operations -- (5,184) Increase (decrease) in: Accounts payable and accrued liabilities (2,711) (18,778) Income taxes 1,853 (3,926) Reforestation 859 704 Postretirement benefits 320 348 Decrease (increase) in: Accounts receivable (8,319) 14,610 Inventories 24,328 10,934 Deposits on timber purchase contracts 192 (1,108) Prepaid expenses (809) (1,570) Deferred income taxes, net (1,640) (807) Other assets (3,129) 689 -------- -------- Net cash provided by operating activities 31,328 12,909 Cash flow from investing activities: Capital expenditures (4,662) (1,857) Proceeds from disposal of discontinued operations -- 50,500 Proceeds from sale of Paragon Trade Brands, Inc. common stock -- 4,819 Proceeds from sale of other properties 23 2,214 -------- -------- Net cash provided by (used for) investing activities (4,639) 55,676 Cash flow from financing activities: Net decrease in short-term borrowings (7,200) (39,000) Net reduction of long-term debt (240) (30,225) Partnership transaction tax settlement costs (1,846) -- Cash dividends (5,078) (5,078) -------- -------- Net cash used for financing activities (14,364) (74,303) -------- -------- Increase (decrease) in cash and cash equivalents 12,325 (5,718) Cash and cash equivalents at beginning of period 32,208 13,826 -------- -------- Cash and cash equivalents at end of period $ 44,533 $ 8,108 ======== ========
The accompanying notes are an integral part of these consolidated condensed financial statements. 4 6 POPE & TALBOT, INC. NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS June 30, 1997 and 1996 (Unaudited) 1. General The consolidated condensed interim financial statements have been prepared by the Company without audit and are subject to normal recurring year-end adjustments. Certain information and footnote disclosure normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of the Company, the accompanying unaudited consolidated condensed financial statements contain all adjustments (all of which are of a normal recurring nature) necessary to present fairly the financial position of the Company as of June 30, 1997 and December 31, 1996, the results of operations for the three and six months ended June 30, 1997 and 1996, and changes in cash flows for the six months ended June 30, 1997 and 1996. It is suggested that these interim statements be read in conjunction with the financial statements and notes thereto contained in the Company's 1996 report on Form 10-K. The results of operations for the three and six months ended June 30, 1997 and 1996 are not necessarily indicative of the results to be expected for the full year. 2. Income Taxes The income tax provision is estimated on an interim basis using the best available information for projected results for the entire year. In 1985, the stockholders of the Company approved a Plan of Distribution pursuant to which all of the Company's timber properties and development properties and related assets and liabilities in the State of Washington were transferred to newly-formed Pope Resources, A Delaware Limited Partnership (the Partnership). The transfer resulted in $10.3 million of taxes currently payable in 1985, which was charged to stockholders' equity. The distribution value for federal income tax purposes that was assigned to the assets transferred to the Partnership has been challenged by the Internal Revenue Service (IRS). In January 1993, the Company petitioned the United States Tax Court (Tax Court) in order to resolve the disputed value of the distribution. The issue was argued before the Tax Court during the third quarter 1995 and follow-up legal briefs were then filed into December 1995. Primarily in 1995, the Company incurred costs defending its tax position in this case. In 1995, these defense costs, together with related tax payments and interest charges totaling $4.9 million, net of tax benefits of $1.4 million, were recognized as a reduction in additional paid-in capital with respect to the Partnership transaction. In March 1997, the Tax Court rendered a decision which will become final, subject to appeal, when the Company and the IRS agree to the tax liability based upon the Court's decision. In the second quarter of 1997, based on the Company's best estimate of the ultimate tax settlement taking into consideration the Tax Court's decision, the Company recognized a reduction in additional paid-in capital of $1.8 million. This charge to equity, which represents the minimum in the estimated range of exposure to the Company, 5 7 reflected tax settlement and interest amounts totaling $2.5 million, net of tax benefits of $0.7 million. The Company estimates the potential for further equity reductions upon final tax settlement will range from zero up to $3 million. Any final tax settlements will be recognized as a reduction in equity with respect to the partnership transaction. 3. Earnings per Share Per share information is based on the weighted average number of common shares outstanding during each period. Refer to Exhibit 11.1 of this filing for the computation of average common shares outstanding and earnings per share. 6 8 POPE & TALBOT, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS June 30, 1997 AND 1996 (unaudited) RESULTS OF OPERATIONS Operating profits in both the wood products and pulp and paper products segments led to second quarter 1997 net income of $3,981,000, or $.30 per share, for Pope & Talbot, Inc. (the Company). The 1997 second quarter net income compared to net income of $662,000, or $.05 per share, in the second quarter of 1996. Revenues of $124,837,000 in the second quarter of 1997 were 13 percent higher than those in the 1996 second quarter reflecting higher lumber and tissue sales which more than offset lower pulp revenues. Second quarter 1997 year-to-date net income totaled $5,359,000, or $.40 per share, which compared to net income of $1,007,000, or $.08 per share, for the corresponding six months of 1996. The 1996 year-to-date net income reflected a loss from continuing operations of $2,103,000, or $.15 per share, and a gain on the disposal of the Company's discontinued disposable diaper business of $3,110,000, or $.23 per share. The wood products segment, which comprised 56 percent of 1997 second quarter sales, generated second quarter 1997 earnings of $9.6 million which were substantially improved over income of $3.9 million in the second quarter of 1996. Second quarter 1997 year-to-date wood products earnings were $16.4 million versus income of $6.9 million in the comparable 1996 period. Included in the 1996 year-to-date results was a $2.1 million gain recorded in the first quarter related to the sale of sawmill equipment at Port Gamble. The Port Gamble facility was permanently shut down in the fourth quarter of 1995. Total 1997 second quarter wood products revenues of $70.0 million were 24 percent higher than second quarter 1996 and year-to-date 1997 wood products revenues of $134.3 million compared to sales of $110.6 million for the corresponding 1996 period. These 1997 revenue increases reflect higher lumber prices and volumes which more than offset lower residual wood chip prices. Second quarter 1997 lumber price increases continued a trend of higher quarterly prices which began in mid-1995. Lumber prices in the 1997 second quarter were about 19 percent higher than for the corresponding period of 1996. Average lumber prices for the first six months of 1997 were about 25 percent above year-to-date 1996 levels. While it is difficult to project lumber prices due to the commodity nature of the business, lumber prices appear to have hit their cyclical peak in the 1997 second quarter. During the second quarter, sales prices were highest in May. June's prices were 4 percent lower than May and July's prices fell 4 percent from June levels. Although lumber prices have been strong through the first half of 1997, the sawmill's residual chip markets in the Pacific Northwest and British Columbia remain weak, reflecting the continued poor world pulp markets. Second quarter 1997 chip prices were 16 percent below the second quarter 1996 prices at levels which have remained fairly flat since the third quarter of 1996. The Company uses residual chips in its pulp business which mitigates somewhat the impact of these low chip prices in the lumber business. However, the Company produces more residual chips in its lumber business than it consumes in the pulp business, so on balance, weak chip prices have a detrimental impact on the Company's overall operating results. 7 9 Lumber sales volume of 151 million board feet in the second quarter of 1997 compared to shipments of 139 million in the corresponding 1996 quarter. Shipments for the first six months of 1997 totaled 290 million board feet versus 269 million board feet during the comparable 1996 period. The year-to-year volume increases reflected increased production at the Company's Canadian sawmills to take advantage of the favorable lumber markets. The Company's sawmills operated essentially at capacity during the second quarter of 1997. During 1996, U.S. and Canadian trade negotiators reached an agreement establishing volume quotas on Canadian softwood lumber shipments to the U.S. Based on this agreement, Canadian lumber producers are assigned volume quotas specifying on a company by company basis the lumber volumes which may be shipped to the U.S. tariff-free and those volumes subject to a per thousand board foot tariff. March 31, 1997, represented the end of the first fiscal year lumber quota period related to this agreement and the Company shipped volumes in excess of its quota during the period. In June 1997, the Company was informed of its fiscal year 1997/1998 quota volumes which applied retroactively to April 1. The Company's updated tariff-free volume allocation for the current fiscal year represents an 11.4 million board foot reduction from the 1996/1997 fiscal year allocations. Partially offsetting this tariff-free allocation reduction was a 2.6 million board foot increase in the Company's volume allocation subject to the lower $50 per thousand board foot tariff. The Company believes its volume allocations were determined consistently with other British Columbia lumber producers. During the first half of 1997, the Company reflected tariff charges of about $2.1 million related to shipments from the Company's Canadian sawmills into the U.S. Approximately 75 percent of the Company's 1997 lumber capacity is located in British Columbia. The pulp and paper segment generated profits of $1.9 million in the second quarter of 1997 compared to profits of $0.8 million in the 1996 second quarter. Year-to-date results reflect profits of $2.0 million and losses of $2.1 million in 1997 and 1996, respectively. In the second quarter and first half of 1997, profitable tissue operations more than offset continued losses in the Company's pulp business. Segment revenues of $54.8 million, or 44 percent of Company sales, were up slightly from second quarter 1996 revenues of $54.0 million. These second quarter revenues reflected higher tissue volumes which offset lower tissue and pulp prices. Year-to-date segment revenues of $107.4 million were down 3 percent from revenues in the first half of 1996 as increased tissue and pulp volumes were more than offset by lower tissue and pulp prices. The Company's pulp business represented 15 percent of second quarter 1997 revenues. In the 1997 second quarter, this business continued to incur losses as market pulp prices remained poor. Second quarter and year-to-date 1997 pulp losses were slightly larger than they were for the comparable 1996 periods due mainly to lower pulp prices. Pulp pricing peaked in the fourth quarter of 1995 followed by a rapid decline at the end of 1995 which continued through the first quarter of 1996. Pulp prices for the balance of 1996 approximated the low end of first quarter 1996 levels and prices in the first quarter of 1997 fell even further. Second quarter 1997 prices improved only slightly from the low first quarter levels. Second quarter 1997 Company pulp prices were 6 percent lower than the 1996 second quarter prices and were nearly 50 percent below prices realized at the fourth quarter 1995 peak. Year-to-date second quarter 1997 pulp prices were 18 percent below the first half 1996 pulp prices. The Company sold about half of its second quarter year-to-date 1997 and 1996 pulp volumes to the Grays Harbor Paper Company (Grays Harbor). Under the Company's supply agreement with Grays Harbor, pulp prices are tied to a formula based on white paper prices which typically move at different times during a cycle than market pulp. During 1996, the Company 8 10 benefited from this pricing formula because white paper prices did not fall as rapidly as market pulp prices. During the first half of 1997, however, Grays Harbor and market pulp pricing were relatively comparable. As discussed for the Company's wood products segment, residual wood chip prices have remained low during the first half of 1997. Consistent with these low residual wood chip prices, sawdust costs also remained low in the 1997 first half. The low sawdust costs are significant since sawdust pulp represented over half of second quarter year-to-date 1997 pulp production. These low chip and sawdust prices have helped somewhat to offset the impact of the depressed pulp sales prices. During the second quarter and first half of 1997, the Halsey mill operated at near capacity levels. The Company's tissue business, which represented about 29 percent of 1997 second quarter revenues, generated profits in the second quarter and first half of 1997 which exceeded the small profits produced in the corresponding 1996 periods. This improved profitability reflected higher tissue volumes and improved operating efficiencies at the Ransom, Pennsylvania facility which more than offset lower tissue prices. During 1996, particularly in the first quarter, the Company worked through the process of rebuilding lost business and correcting operating inefficiencies resulting from the seven-month 1995 labor strike at the Ransom facility. This labor strike was settled late in the 1995 fourth quarter. Due largely to these Ransom improvements, tissue sales volume in the first half of 1997 was 15 percent higher than the comparable 1996 period. After several years of poor tissue pricing, the Company benefited from continuously improving prices during 1995 and early 1996. During the second quarter of 1996, Procter & Gamble and Kimberly-Clark announced 6 to 8 percent average tissue price reductions and the Company responded by decreasing tissue prices in the second and third quarters of 1996. First quarter 1997 tissue prices were essentially flat relative to the fourth quarter of 1996 while the 1997 second quarter prices fell about 2 percent from the first quarter due to higher promotional activity. Second quarter and year-to-date 1997 tissue prices were 8 percent below tissue prices in the comparable 1996 periods. After being pushed to record levels during 1995, wastepaper pricing began to decline at year-end 1995 and accelerated through the first quarter of 1996 consistent with market pulp prices. The Company's wastepaper costs have remained fairly stable since the dramatic decreases early in 1996. Second quarter 1997 wastepaper costs were 7 percent higher than costs in the second quarter of 1996 while first half 1997 wastepaper costs were 3 percent below those in the 1996 first half. During the second quarter and first half of 1997, the tissue business operated essentially at capacity. LIQUIDITY AND CAPITAL RESOURCES During the first half of 1997, operations generated cash of $31.3 million. Income before non-cash charges for depreciation and amortization generated $20.4 million of cash during the first six months of 1997. Increases in accounts receivable related mainly to higher lumber shipments and prices in June 1997 than December 1996 combined with higher 1997 pulp business export sales used cash of $8.3 million. Reductions of inventories related primarily to seasonal decreases in log inventories from their relatively large year-end 1996 levels generated cash of $24.3 million. Capital spending of $4.7 million for the first six months of 1997 was used primarily for relatively small, business-sustaining projects. The Company anticipates that approximately $4 million will be required to complete previously approved projects and that total capital spending for 1997 will approximate $16 million. It is anticipated that capital spending for the remainder of the year will be financed from internally generated cash and, if necessary, from the Company's lines of credit. 9 11 Through the first six months of 1997, the Company returned $5.1 million to shareholders in the form of dividends. The Company has also paid down $7.4 million of debt during the first half of 1997. The Company currently has a $75 million revolving-credit agreement under which $22 million was outstanding at June 30, 1997. The Company also has a $10 million uncommitted credit line which is used primarily to facilitate cash management activities. This uncommitted credit line had $0.8 million outstanding at June 30, 1997. FACTORS THAT MAY AFFECT FUTURE RESULTS Statements in this report or in other Company communications, such as press releases, may relate to future events or the Company's future performance and such statements are forward-looking statements. Such forward-looking statements are based on present information the Company has related to its existing business circumstances. Investors are cautioned that such forward-looking statements are subject to an inherent risk that actual results may differ materially from such forward-looking statements. Factors that may result in such variances include, but are not limited to, changes in commodity prices and other economic conditions, actions by competitors, changing weather conditions and natural phenomena, actions by government authorities, uncertainties associated with legal proceedings and future decisions by management in response to changing conditions. Such factors are discussed in this report on Form 10-Q as well as in the Company's Annual Report on Form 10-K. 10 12 PART II. ITEM 1. Legal Proceedings In 1985, shareholders of the Company approved a Plan of Distribution pursuant to which all of the Company's timber properties and development properties and related assets and liabilities in the State of Washington were transferred to newly-formed Pope Resources, A Delaware Limited Partnership, with interests in the partnership distributed to the Company's shareholders on a pro rata basis. The Company assigned to the assets transferred a distribution value for federal income tax purposes based upon the public trading price of the partnership interests at the time of distribution. The Internal Revenue Service (IRS) has asserted that the Company owes additional federal income tax in connection with this transaction and the Company has disputed this asserted tax liability. The issue was argued before the U.S. Tax Court (Tax Court) during 1995. Primarily in 1995, the Company incurred costs defending its tax position in this case. In 1995, these defense costs, together with related tax payments and interest charges totaling $4.9 million, net of tax benefits of $1.4 million, were recognized as a reduction in equity. In March 1997, the Tax Court rendered a decision which will become final, subject to appeal, when the Company and the IRS agree to the tax liability based upon the Court's decision. In the second quarter of 1997, based on the Company's best estimate of the ultimate tax settlement taking into consideration the Tax Court's decision, the Company recognized a reduction in equity of $1.8 million. This charge to equity, which represents the minimum in the estimated range of exposure to the Company, reflected tax settlement and interest amounts totaling $2.5 million, net of tax benefits of $0.7 million. The Company estimates the potential for further equity reductions upon final tax settlement will range from zero up to $3 million. Any final tax settlements will be recognized as a reduction in equity with respect to the partnership transaction. ITEM 6. Exhibits and Reports on Form 8-K Exhibits 3.1 Certificate of Incorporation, as amended. (Incorporated herein by reference to Exhibit 3(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 3.2 Bylaws. (Incorporated herein by reference to Exhibit 3.2 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996.) 4.1 Indenture, dated June 2, 1993, between the Company and Chemical Trust Company of California as Trustee with respect to the Company's 8-3/8% Debentures due 2013. (Incorporated herein by reference to Exhibit 4.1 to the Company's registration statement on Form S-3 filed April 6, 1993.) 4.2 Revolving Credit Agreement, dated May 6, 1992, among the Company and United States National Bank of Oregon; CIBC, Inc.; ABN AMRO Bank N.V.; Continental Bank N.A.; and Wachovia Bank of Georgia, National Association. (Incorporated herein by reference to Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1992.) 11 13 4.3 Rights Agreement, dated as of April 13, 1988, between the Company and The Bank of California, as rights agent. (Incorporated herein by reference to Exhibit 4(e) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 4.4 Extension Agreement, dated as of June 30, 1994, to the Revolving Credit Agreement, dated May 6, 1992, among the Company and United States National Bank of Oregon; CIBC, Inc.; ABN AMRO Bank N.V.; Continental Bank N.A.; and Wachovia Bank of Georgia, National Association. (Incorporated herein by reference to Exhibit 4.6 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994.) 4.5 Modification Agreement, dated as of October 31, 1994, to the Revolving Credit Agreement, dated May 6, 1992, among the Company and United States National Bank of Oregon; CIBC, Inc.; ABN AMRO Bank N.V.; Continental Bank N.A.; and Wachovia Bank of Georgia, National Association. (Incorporated herein by reference to Exhibit 4.7 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994.) 4.6 Modification Agreement, dated as of December 31, 1994, to the Revolving Credit Agreement, dated May 6, 1992, among the Company and United States National Bank of Oregon; CIBC, Inc.; ABN AMRO Bank N.V.; Continental Bank N.A.; and Wachovia Bank of Georgia, National Association. (Incorporated herein by reference to Exhibit 4.8 to the Company's Annual Report on Form 10-K for the year ended December 31, 1994.) 4.7 Extension/Modification Agreement dated as of June 30, 1995, to the Revolving Credit Agreement, dated May 6, 1992, among the Company and United States National Bank of Oregon; CIBC, Inc.; ABN AMRO Bank N.V.; Bank of America Illinois, fka Continental Bank; and Wachovia Bank of Georgia, National Association. (Incorporated herein by reference to Exhibit 4.7 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.) 4.8 Modification Agreement dated as of October 16, 1995, to the Revolving Credit Agreement, dated May 6, 1992, among the Company and United States National Bank of Oregon; CIBC, Inc.; ABN AMRO Bank N.V.; Bank of America Illinois; and Wachovia Bank of Georgia, National Association. (Incorporated herein by reference to Exhibit 4.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995.) 4.9 Modification Agreement, dated as of January 22, 1996, to the Revolving Credit Agreement, dated May 6, 1992, among the Company and United States National Bank of Oregon; CIBC, Inc.; ABN AMRO Bank N.V.; Bank of America Illinois; and Wachovia Bank of Georgia, National Association. (Incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K filed February 8, 1996.) 4.10 Revolving Line of Credit Agreement, dated July 25, 1996, between the Company and the United States National Bank of Oregon. (Incorporated herein by reference to Exhibit 4.10 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996.) 12 14 4.11 Modification Agreement, dated as of November 18, 1996, to the Revolving Credit Agreement, dated May 6, 1992, among the Company and the United States National Bank of Oregon; CIBC, Inc.; ABN AMRO Bank N.V.; Bank of America Illinois; and Wachovia Bank of Georgia, National Association. (Incorporated herein by reference to Exhibit 4.11 to the Company's Annual Report on Form 10-K for the year ended December 31, 1996.) 4.12 Modification Agreement, dated as of June 9, 1997, to the Revolving Credit Agreement, dated May 6, 1992, among the Company and the United States National Bank of Oregon; CIBC, Inc.; ABN AMRO Bank N.V.; Bank of America Illinois; and Wachovia Bank of Georgia, National Association. 10.1 Executive Compensation Plans and Arrangements --------------------------------------------- 10.1.1 Stock Option and Appreciation Plan. (Incorporated herein by reference to Exhibit 10(a) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 10.1.2 Executive Incentive Plan. (Incorporated herein by reference to Exhibit 10(b) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 10.1.3 Restricted Stock Bonus Plan. (Incorporated herein by reference to Exhibit 10(c) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 10.1.4 Deferral Election Plan. (Incorporated herein by reference to Exhibit 10(d) to the Company's Annual Report on Form 10-K for the year ended December 31, 1992.) 10.1.5 Supplemental Executive Retirement Income Plan. (Incorporated herein by reference to Exhibit 10(e) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990.) 10.1.6 Form of Severance Pay Agreement among the Company and certain of its executive officers. (Incorporated herein by reference to Exhibit 10(f) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990.) 10.1.7 1996 Non-Employee Director Stock Option Plan. (Incorporated herein by reference to Exhibit 10.1.7 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996.) 10.2 Lease agreement between the Company and Pope Resources, dated December 20, 1985, for Port Gamble, Washington sawmill site. (Incorporated herein by reference to Exhibit 10(g) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990.) 10.3 Lease agreement between the Company and Shenandoah Development Group, Ltd., dated March 14, 1988, for Atlanta diaper mill site as amended September 1, 1988 and August 30, 1989. (Incorporated herein by reference to Exhibit 10(h) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990.) 13 15 10.4 Lease agreement between the Company and Shenandoah Development Group, Ltd., dated July 31, 1989, for additional facilities at Atlanta diaper mill as amended August 30, 1989 and February 1990. (Incorporated herein by reference to Exhibit 10(i) to the Company's Annual Report on Form 10-K for the year ended December 31, 1990.) 10.5 Grays Harbor Paper L.P. Amended and Restated Pulp Sales Supply Contract, dated September 28, 1994 (with certain confidential information deleted). (Incorporated herein by reference to Exhibit 10(j) to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994.) 10.6 Province of British Columbia Tree Farm License No. 8, dated March 1, 1995. (Incorporated herein by reference to Exhibit 10.6 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996.) 10.7 Province of British Columbia Tree Farm License No. 23, dated March 1, 1995. (Incorporated herein by reference to Exhibit 10.7 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996.) 10.8 Province of British Columbia Forest License A18969, dated December 1, 1993. (Incorporated herein by reference to Exhibit 10.8 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1996.) 11.1 Statement showing computation of per share earnings. 27.1 Financial Data Schedule. The undersigned registrant hereby undertakes to file with the Commission a copy of any agreement not filed under exhibit item (4) above on the basis of the exemption set forth in the Commission's rules and regulations. Reports on Form 8-K ------------------- No reports on Form 8-K were filed during the three months ended June 30, 1997. 14 16 POPE & TALBOT, INC. SIGNATURE 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. POPE & TALBOT, INC. ------------------------------------ Registrant Date: August 8, 1997 /s/ Robert J. Day ------------------------------------ Robert J. Day Senior Vice President and Chief Financial Officer EX-4.12 2 MODIFICATION AGREEMENT DATED, JUNE 9, 1997 1 Exhibit 4.12 MODIFICATION AGREEMENT This modification agreement is dated as of June 9, 1997, and is among POPE & TALBOT, INC., a Delaware corporation (the "Borrower"), UNITED STATES NATIONAL BANK OF OREGON now doing business as U.S. BANK ("U.S. Bank"), CIBC INC. ("CIBC"), ABN AMRO BANK N.V. ("ABN"), BANK OF AMERICA ILLINOIS ("BofA"), and WACHOVIA BANK OF GEORGIA, N.A. ("Wachovia"). Recitals A. U.S. Bank, CIBC, ABN, BofA, and Wachovia (individually a "Bank" and collectively the "Banks") and the Borrower are parties to a credit agreement dated as of May 6, 1992, as modified (the "Credit Agreement"). All of the capitalized terms used in this modification agreement (this "Agreement") are defined by the Credit Agreement. B. The Borrower and the Banks desire to enter into this Agreement to modify the clause in the Credit Agreement limiting the amount that the Borrower can spend in the 1997 Fiscal Year on consolidated capital expenditures and investments, to extend the Expiry Date, and to make certain other modifications. NOW, THEREFORE, for value, the Borrower and the Banks agree that: 1. INCREASE IN MAXIMUM AMOUNT OF CAPITAL EXPENDITURES AND INVESTMENTS IN 1997. Section 4 of the modification agreement dated as of January 22, 1996 (the "1/22/96 Modification Agreement"), which modified the Credit Agreement, is itself hereby modified to increase the maximum amount that the Borrower and its Subsidiaries can invest in consolidated capital expenditures and investments in the 1997 Fiscal Year from $25 million to $30 million. The Borrower has expressed its present intention to use approximately $15 million for budgeted capital expenditures and $15 million for investment purposes. No inference should be drawn from this consent that the Banks consent to the Borrower increasing the Borrower's investment beyond $15 million at any later date or dates without first providing additional information and obtaining additional consent from the Banks. 2. EXTENSION OF EXPIRY DATE. The Expiry Date of the Credit Facilities provided under the Credit Agreement is hereby extended to December 31, 1998. 3. TAX-RELATED CHANGES IN NET WORTH. The minimum Tangible Net Worth required for the Borrower under Section5.01(h)(i) of the Credit Agreement will be hereby reduced by the amounts charged to stockholders' equity as the Borrower's additional tax liability for the 1985 Pope Resources Partnership transaction plus related costs and expenses when such charges to stockholders' equity occur on the Borrower's financial statements. It will be an Event of Default if Tangible Net Worth drops below $164 million after reflecting such charges to stockholders' equity. After such charges are reflected on the Financial Statements of Borrower and its Subsidiaries, minimum Tangible Net Worth again will increase by an amount equal to 50% of the positive net income of Borrower and its Subsidiaries in each Fiscal Year thereafter. -1- 2 4. MISCELLANEOUS. The parties agree to issue any additional documents and instruments reasonably necessary to effectuate the objectives of this Agreement. The Loan Documents will continue in full force and effect as modified by this Agreement. This Agreement may be signed in one or more counterparts but all such counterparts will constitute but one agreement. The Borrower will reimburse the Agent for the reasonable out-of-pocket costs and expenses incurred by the Agent in preparing this Agreement. This agreement replaces a modification agreement dated as of February 14, 1997. 5. EFFECTIVE DATE. This Agreement will become effective only when the Agent has received by facsimile the signature page signed by the Borrower and the signature page(s) signed by all of the Banks. If the Borrower or a Bank delivers a facsimile of its signature, such delivery will constitute the promise of such person to deliver sufficient copies of the manually signed signature page for distribution to each other party to the Credit Agreement. POPE & TALBOT, INC. U.S. BANK, as the Agent and a Bank By /s/ C. Lamadrid By /s/ Janice T. Thede -------------------------------- ------------------------------- Carlos M. Lamadrid Janice T. Thede Chief Financial Officer Vice President CIBC INC. ABN AMRO BANK N.V. By /s/ R. A. Mendoza By /s/ Leif H. Olsson --------------------------------- ------------------------------- Ray A. Mendoza Leif H. Olsson Director, CIBC Wood Gundy Group Vice President Securities Corp., AS AGENT and Director By /s/ Errett S. Hummel ------------------------------- for David McGinnis Vice President and Director BANK OF AMERICA ILLINOIS WACHOVIA BANK OF GEORGIA NATIONAL ASSOCIATION By /s/ Michael J. Balock By /s/ William F. Hamlet --------------------------------- ------------------------------- Michael J. Balock William F. Hamlet Managing Director Senior Vice President -2- EX-11.1 3 STATEMENT SHOWING COMPUTATION OF PSHARE EARNINGS 1 Exhibit 11.1 POPE & TALBOT, INC. STATEMENT SHOWING CALCULATION OF AVERAGE COMMON SHARES OUTSTANDING AND EARNINGS PER AVERAGE COMMON SHARE
Three months ended Six months ended June 30, June 30, -------------------- -------------------- 1997 1996 1997 1996 ---- ---- ---- ---- Weighted average number of common shares outstanding 13,363,997 13,363,779 13,363,888 13,363,779 Application of the "treasury stock" method to the stock option plan 36,975 -- 36,975 -- ----------- ----------- ----------- ----------- Total common and common equivalent shares, assuming full dilution 13,400,972 13,363,779 13,400,863 13,363,779 =========== =========== =========== =========== Net income $ 3,981,000 $ 662,000 $ 5,359,000 $ 1,007,000 =========== =========== =========== =========== Net income per common share, assuming full dilution $ .30 $ .05 $ .40 $ .08 =========== =========== =========== ===========
The computation of primary net income per common share is not included because the computation can be clearly determined from the material contained in this report. EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE POPE & TALBOT, INC. CONSOLIDATED CONDENSED FINANCIAL STATEMENTS FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 6-MOS DEC-31-1997 JUN-30-1997 44,533 0 47,489 0 56,708 161,409 460,436 279,425 398,229 79,009 107,786 0 0 13,972 166,807 398,229 241,711 241,711 217,957 217,957 0 0 4,401 9,401 4,042 5,359 0 0 0 5,359 .40 .40
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