SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarterly Period Ended September 30, 1994
Commission File Number 1-7107
LOUISIANA-PACIFIC CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 93-0609074
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
111 S. W. Fifth Avenue, Portland, Oregon 97204-3699
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (503) 221-0800
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes X . No .
Indicate the number of shares outstanding of each of the issuer's
classes of common stock: 112,206,471 shares of Common Stock,
$1 par value, outstanding as of October 31, 1994.
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Summary Statements of Income
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions except per share) (Unaudited)
Quarter Ended Nine Months Ended
September 30 September 30
----------------- -----------------
1994 1993 1994 1993
------- ------- ------- -------
Net sales $ 818.4 $ 629.4 $2,291.1 $1,875.2
------- ------- ------- -------
Costs and expenses:
Cost of sales 576.6 462.6 1,622.2 1,321.3
Depreciation, amortization
and depletion 52.9 51.5 148.5 134.8
Selling and administrative 33.8 29.9 92.0 85.7
Interest expense 2.2 2.9 7.4 9.8
Interest income (2.5) (1.8) (6.4) (5.7)
------- ------- ------- -------
Total costs and expenses 663.0 545.1 1,863.7 1,545.9
------- ------- ------- -------
Income before taxes,
minority interest and
accounting changes 155.4 84.3 427.4 329.3
Provision for income taxes (59.0) (42.8) (162.4) (134.4)
Minority interest in net income
of consolidated subsidiary (1.3) --- (2.8) ---
------- ------- ------- -------
Income before
accounting changes 95.1 41.5 262.2 194.9
Cumulative effects of
accounting changes, net
of income taxes of $1.9 --- --- --- (10.4)
------- ------- ------- -------
Net income $ 95.1 $ 41.5 $ 262.2 $ 184.5
======= ======= ======= =======
Earnings per share:
Income before
accounting changes $ .86 $ .38 $ 2.38 $ 1.78
Cumulative effects of
accounting changes --- --- --- (.09)
------- ------- ------- -------
Net income $ .86 $ .38 $ 2.38 $ 1.69
======= ======= ======= =======
Cash dividends per share $ .125 $ .11 $ .36 $ .32
======= ======= ======= =======
Consolidated Summary Balance Sheets
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions) (Unaudited)
Sept. 30, 1994 Dec. 31, 1993
----------------- -----------------
Cash and cash equivalents $ 301.1 $ 261.6
Accounts receivable, net 188.3 110.9
Inventories 215.3 234.7
Prepaid expenses 12.8 6.9
-------- --------
Total current assets 717.5 614.1
-------- --------
Timber and timberlands 691.7 673.5
Property, plant and equipment 2,290.0 2,112.8
Less reserves for depreciation (1,055.8) (966.9)
-------- --------
Net property, plant and equipment 1,234.2 1,145.9
Investments and other assets 54.1 32.8
-------- --------
Total assets $2,697.5 $2,466.3
======== ========
Current portion of long-term debt $ 71.3 $ 105.5
Short-term notes payable 48.0 41.7
Accounts payable and
accrued liabilities 202.0 149.2
Income taxes payable 36.8 20.8
-------- --------
Total current liabilities 358.1 317.2
-------- --------
Long-term debt 230.0 288.6
Deferred income taxes 264.8 264.8
Other long-term liabilities
and minority interest 30.3 24.3
Stockholder' equity:
Common Stock 117.0 117.0
Additional paid-in capital 485.5 431.5
Retained earnings 1,439.8 1,217.2
Loans to Employee Stock
Ownership Trusts (117.6) (72.5)
Treasury stock (70.1) (85.6)
Other equity adjustments (40.3) (36.2)
-------- --------
Total stockholders' equity 1,814.3 1,571.4
-------- --------
Total liabilities and equity $2,697.5 $2,466.3
======== ========
Consolidated Summary Statements of Cash Flows
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions) (Unaudited)
Nine Months Ended September 30, 1994 1993
--------- ---------
Cash flows from operating activities:
Net income $ 262.2 $ 184.5
Cumulative effects of accounting changes --- 10.4
Depreciation, amortization and depletion 148.5 134.8
Other non-cash charges 25.1 25.8
Decrease (increase) in certain
working capital components 11.1 (12.0)
Increase in deferred income taxes --- 5.4
------- -------
Net cash provided by operating activities 446.9 348.9
------- -------
Cash flows from investing activities:
Plant, equipment and logging
road additions, net (192.5) (140.7)
Timber and timberland additions (57.5) (55.3)
Other investing activities, net (1.0) 28.6
------- -------
Net cash used in investing activities (251.0) (167.4)
------- -------
Cash flows from financing activities:
New borrowing .5 .2
Repayment of long-term debt (97.5) (96.5)
Cash dividends (39.6) (35.1)
Increase in short-term notes payable 3.2 ---
Purchase of treasury stock (34.6) (13.8)
Loan to ESOTs (56.0) ---
Treasury stock sold to ESOTs 56.0 ---
Other financing activities, net 11.6 5.4
------- -------
Net cash used in financing activities (156.4) (139.8)
------- -------
Net increase in cash and cash equivalents 39.5 41.7
Cash and cash equivalents at
beginning of year 261.6 228.1
------- -------
Cash and cash equivalents at end of period $ 301.1 $ 269.8
======= =======
Consolidated Statements of Stockholders' Equity
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions except per share) (Unaudited)
Nine Months Ended Year Ended
September 30, 1994 December 31, 1993
-------------------- --------------------
Shares Amount Shares Amount
----------- ------- ----------- -------
Common Stock:
Beginning Balance 116,937,022 $ 117.0 58,457,749 $ 58.5
Shares issued for employee
stock plans --- --- 10,762 ---
Shares issued under 2-for-1
stock split --- --- 58,468,511 58.5
----------- ------- ----------- -------
Ending Balance 116,937,022 $ 117.0 116,937,022 $ 117.0
=========== ======= =========== =======
Additional Paid-in-Capital:
Beginning Balance $ 431.5 $ 422.5
Excess of market value over
cost of treasury shares
reissued for employee stock
plans and other purposes 54.0 9.0
------- -------
Ending Balance $ 485.5 $ 431.5
======= =======
Retained Earnings:
Beginning Balance $1,217.2 $1,079.3
Net income 262.2 244.0
Par value of shares issued in
2-for-1 stock split --- (58.8)
Cash dividends, $.36 and $.43 per share (39.6) (47.3)
-------- -------
Ending Balance $1,439.8 $1,217.2
======== =======
Loans to ESOTs:
Beginning Balance $ (72.5) $ (87.0)
Less accrued contribution 10.9 14.5
Additional loans (56.0) ---
------- -------
Ending Balance $(117.6) $ (72.5)
======= =======
Treasury stock:
Beginning Balance 6,755,938 $ (85.6) 3,848,800 $ (88.5)
Reacquisition program 1,062,600 (34.6) 200,000 (13.8)
Shares issued under 2-for-1
stock split --- --- 3,624,075 ---
Shares reissued for employee
stock plans and for other
purposes (3,337,579) 50.1 (916,937) 16.7
---------- ------- ---------- -------
Ending Balance 4,480,959 $( 70.1) 6,755,938 $ (85.6)
========== ======= ========== =======
Other Equity Adjustments:
Beginning Balance $ (36.2) $ (23.8)
Marketable equity securities adjustment --- (.6)
Currency translation adjustment (4.1) (11.8)
------- -------
Ending Balance $ (40.3) $ (36.2)
======= =======
Notes To Financial Statements
Louisiana-Pacific Corporation and Subsidiaries
1. The interim period information included herein reflects all
adjustments which are, in the opinion of the management of registrant,
necessary for a fair statement of the results of the respective interim
periods. Such adjustments are of a normal recurring nature. Results of
operations for interim periods are not necessarily indicative of results to
be expected for an entire year. It is suggested that these summary financial
statements be read in conjunction with the financial statements and the notes
thereto included in registrant's 1993 Annual Financial Report to
Stockholders. Interim financial statements are by necessity somewhat
tentative; judgments are used to estimate quarterly amount for items that
are normally determinable only on an annual basis.
2. Earnings per share is based on the weighted average number of
shares of common stock outstanding during the periods (110,120,000 in 1994
and 109,670,000 in 1993). The effect of common stock equivalents is not
material. The number of shares and per share data have been retroactively
adjusted for stock splits.
During the third quarter of 1994, registrant sold approximately
1,840,000 shares of treasury stock to its Employee Stock Ownership Trusts.
In accordance with Statement of Position No. 93-6 "Employers' Accounting for
Employee Stock Ownership Plans" (the SOP) issued by the American Institute of
Certified Public Accountants, these shares are excluded from weighted average
shares outstanding. Also, the SOP requires cash dividends paid on these
shares not be recorded as dividends in the financial statements. These
shares will be included in weighted average shares outstanding in future
years and dividends paid will be recorded in the financial statements as the
shares are allocated to ESOT participants' accounts. Shares held by the
ESOTs prior to January 1, 1994, continue to be included in weighted average
shares outstanding and dividends paid are recorded in the financial
statements regardless of whether or not the shares have been allocated to
ESOT participants' accounts.
3. The effective income tax rate is based on estimates of annual
amounts of taxable income, foreign sales corporation income and other
factors. These estimates are updated quarterly.
4. Determination of interim LIFO inventories requires estimates of
year-end inventory quantities and costs. These estimates are revised
quarterly and the estimated annual change in the LIFO inventory reserve is
expensed over the remainder of the year.
5. The cumulative effects of accounting changes relate to the adoption
of two Financial Accounting Standards Board Statements during the first
quarter of 1993. Adoption of Statement No. 106 "Employers' Accounting for
Postretirement Benefits Other Than Pensions" resulted in a charge of
$3.2 million or three cents per share, net of $1.9 million in income taxes.
Adoption of Statement No. 109 "Accounting for Income Taxes" resulted in a
charge of $7.2 million or six cents per share.
Statement No. 115 "Accounting for Certain Investments in Debt and Equity
Securities" did not have a material impact on registrant's consolidated
financial statements.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operations
General
Net sales for the third quarter of 1994 were $818.4 million, a 30%
increase over second quarter 1993 sales of $629.4 million. Net sales for the
nine months ended September 30, 1994, were $2,291.1 million, an increase of
22% over sales for the nine months ended September 30, 1993, of
$1,875.2 million. Sales for the third quarter and first nine months of 1994
were both records for the registrant.
Net income for the third quarter of 1994 was $95.1 million ($.86 per
share), a 129% increase over third quarter 1993 net income of $41.5 million
($.38 per share). Net income for the nine months ended September 30, 1994,
was $262.2 million ($2.38 per share), an increase of 42% over net income for
the nine months ended September 30, 1993, of $184.5 million ($1.69 per
share). Net income for the first nine months of 1993 included a
$10.4 million ($.09 per share) charge to income, net of income taxes, for the
cumulative effect of adopting two new accounting standards. Refer to the
registrant's 1993 annual report on Form 10-K for further discussion regarding
the adoption of these accounting principles. Excluding this charge, income
increased 35% in the first nine months of 1994 over 1993.
The registrant operates in two segments: building products and pulp.
Building products is the most significant segment accounting for more than
90% of sales and operating profit in the third quarter and first nine months
of 1994 and 1993. The results of operations are discussed separately for
each of these segments below. Key segment information, production volumes
and industry product price trends are presented in the following tables
labeled "Sales and Operating Profit by Major Product Group," "Operating
Volume" and "Industry Product Price Trends."
Building Products Segment
Building products segment sales in the third quarter of 1994 were
$753.0 million, a 23% increase over 1993 third quarter sales of
$611.6 million. Building products segment sales for the nine months ended
September 30, 1994, were $2,144.4 million, an increase of 19% over sales for
the nine months ended September 30, 1993, of $1,805.4 million.
Structural panel products sales increased more than 36% in the third
quarter of 1994 over 1993 (20% increase for the first nine months of 1994
over 1993), due to a 24% increase in average selling prices (6% increase for
nine months) and a 12% increase in sales volume (14% increase for the nine
months). The volume increases are due to one new OSB plant and a general
increase in demand. Price increases have generally been attributed to
shrinking supply as numerous plywood mills in the Northwest region of the
country have shut down due to log shortages and high costs.
Lumber sales have increased approximately 11% in the third quarter of
1994 over 1993 (14% for the nine months), on a 4% volume increase (10% for
the nine months) and 7% price increase (5% for the nine months). Volume
increased due to higher production as the registrant added more shifts and
took less downtime in its sawmills as demand increased. Lumber prices have
also benefited from the shrinking supply also partially attributable to mill
closures in the Northwest.
Other panel products also showed sales increases which were primarily
due to higher sales prices on relatively stable volume.
The major components of the increases in sales of other building
products for both the quarter and nine month periods were engineered wood
products (laminated veneer lumber, I-Beams, etc.) due to new plants and
strong demand and increased sales of logs from the registrant's California
timberlands.
Building products segment operating profits in the third quarter of 1994
were $172.5 million, a 44% increase over third quarter 1993 operating profits
of $119.5 million. Nine-month building products operating profits increased
15.0% to $493.8 million in 1994 from $429.3 million in 1993. These increases
reflected the higher sales volumes and prices discussed above. However,
$141.4 of increased sales ($339.0 for the nine month periods) resulted in
only a $53.0 increase in operating profits ($64.5 for the nine months)
principally due to higher cost of sales of the increased product volumes and
higher log costs.
The registrant's building products are primarily sold as commodities and
therefore sales prices fluctuate based on market factors over which the
registrant has no control. Therefore, the registrant cannot predict with
much certainty whether the prices of its products will remain at current
levels, or will increase or decrease in the future because the demand is
influenced by many factors outside the registrant's control. There can be no
assurance that the registrant will be able to pass any future material
increases in the price of raw materials on to customers through product price
increases.
Pulp Segment
Pulp segment sales in the third quarter increased 267% to $65.4 million
in 1994 from $17.8 million in the third quarter of 1993. Sales in the pulp
segment for the first nine months of 1994 were $146.7 million which was 110%
higher than $69.8 million in the first nine months of 1993. These higher
sales resulted primarily from increased volume at all three of the
registrant's pulp mills as stronger demand allowed the registrant to take
less down-time at the mills. Volume increases averaged 189% for the third
quarter of 1994 over 1993 (89% for the nine month periods). The largest
volume increase was at the registrant's pulp mill in Chetwynd, B.C., which
was producing far below capacity in 1993 due to problems with the water
treatment system and poor market conditions. Price increases in the third
quarter 1994 over 1993 averaging 27% (11% for the nine month periods) also
contributed to the increased sales.
The registrant's pulp products are sold primarily to export customers.
Because pulp prices were at low levels in 1993, the percentage of pulp sales
to total registrant sales (2.8% for third quarter and 3.7% for nine months)
and export sales to total registrant sales (8.7% for the third quarter and
10.6% for nine months) were relatively low. Because of current year volume
and price increases, the percentage of 1994 pulp sales to total registrant
sales (8.0% for the third quarter and 6.4% for nine months) and export sales
(12.9% for the third quarter and 11.5% for nine months) to total registrant
sales have increased over 1993.
The pulp segment operated at a profit of $2.1 million in the third
quarter, an improvement over third quarter 1993 loss of $14.4 million. Nine
month operating losses improved to $13.9 million in 1994 from a $43.5 million
loss in 1993. The reduction of losses in both periods was primarily
attributable to the higher sales discussed above.
The registrant's pulp products are sold worldwide as commodity products.
Sales prices fluctuate based on market factors and economic factors in the
world market over which the registrant has no control. Pulp prices have
increased significantly over the past year resulting in a return to
profitability of the registrant's pulp segment. However, there can be no
assurance that this trend will continue or that pulp prices will sustain
their current levels because demand is influenced by many factors outside the
registrant's control. There can be no assurance that the registrant will be
able to pass any future material increases in the prices of raw materials on
to customers through product price increases.
Depreciation, Amortization and Depletion
Depreciation, amortization and depletion expense has increased for both
the third quarter ($1.4 million increase) and nine month ($13.7 million
increase) periods. The increases are primarily due to increased depreciation
charges as a result of new plants and production increases (machinery and
equipment is depreciated using the units-of-production method). Also
contributing to the increase is an 11% increase in the volume harvested from
the registrant's fee timberlands and an 8% increase in the cost of timber
harvested from long-term timber deeds in the South. These increases were
partially offset by road amortization decreases in Alaska resulting from
reduced harvests of government timber as the United States Forest Service has
reduced the amount of timber made available to Ketchikan Pulp Company,
registrant's subsidiary in Alaska.
Selling and Administrative
Selling and administrative expenses increased for both the third quarter
($3.9 million increase) and nine month ($6.3 million increase) periods
principally due to increased advertising expenses. The registrant has
increased its national advertising campaign in 1994.
Interest Expense
Interest expense has decreased in all periods in 1994 due to lower
amounts of long-term debt, including current portion. The registrant has
repaid substantially more debt in 1994 than it has incurred on new
borrowings. Also, the registrant has capitalized more interest in 1994 due
to higher levels of capital expenditures. These factors were partially
offset by higher interest rates on the registrant's variable rate debt.
Interest Income
Interest income has increased slightly in all periods in 1994 due to
higher levels of cash and cash equivalents on which the registrant earns
interest. Higher cash levels have resulted from operating cash flow
exceeding cash used for investing activities and financing activities. Also,
higher interest rates in 1994 have contributed to the increase.
Provision for Income Taxes
Increases in the provision for income taxes in the current year are due
to increases in pre-tax income. The effective tax rate in 1994 is
approximately 38%. The third quarter 1993 effective tax rate was nearly 51%
due to $4.4 million of additional expense booked due to a 1% increase in the
U.S. corporate income tax rate and $3.3 million of other tax accrual
estimates which were booked during the third quarter. The nine-month 1993
effective tax rate was 40.8% which was also impacted by the additional
expense booked in the third quarter.
Environmental Update
The registrant maintains a reserve for estimated environmentally-related
contingent liabilities. As of September 30, 1994, and December 31, 1993, the
balance of the reserve was $16.3 million and $8.2 million, respectively. The
reserve has increased during 1994 due to increases in estimates of potential
exposure to liabilities. As with all accounting estimates, significant
uncertainty exists in the reliability and precision of the estimates because
the facts and circumstances surrounding each contingency vary from case to
case. Certain facts become known as the process evolves which can
significantly increase or decrease the original estimate. The registrant
cannot estimate the time frame over which these accrued amounts are likely to
be paid out. The registrant monitors its estimated exposure for
environmental liabilities and adjusts its accrual accordingly. A portion of
the registrant's environmental reserve is related to liabilities for clean-up
of properties which the registrant currently owns or has owned in the past.
Certain of these sites are subject to cost sharing arrangements with other
parties who were also involved with the site. The registrant does not
believe that any of these cost sharing agreements will likely result in an
additional material liability of the registrant due to non-performance by the
other party. See the "LEGAL PROCEEDINGS" section of this Form 10-Q for
discussion of certain environmental litigation.
Financial Condition, Liquidity and Capital Resources
Cash provided by operations increased 28% in the first nine months of
1994 to $446.9 million from $348.9 million in the first nine months of 1993.
This was largely a result of increased net income and a net decrease in
certain working capital components.
Cash used in investing activities has increased significantly to
$251.0 million in the first nine months of 1994 from $167.4 in 1993. This is
principally due to higher levels of capital expenditures for property, plant
and equipment. The registrant has built, or is in the process of building
new operating facilities in 1994 (including five OSB plants in the U.S.,
Canada and Ireland) as well as continuing to make more routine capital
expenditures to improve and upgrade existing facilities. In 1993, other
investing activities resulted in a source of cash as the registrant sold non-
strategic assets.
Cash used in financing activities has also increased to $156.4 million
in the first nine months of 1994 from $139.8 in 1993. The increase is
primarily due to increase purchases of treasury stock under a buy-back
program approved by the registrant's Board of Directors.
Cash and cash equivalents at September 30, 1994, was $301.1 compared to
$269.8 million at September 30, 1993, and $261.6 million at December 31,
1993.
Overall, the registrant's financial condition remains very strong.
Long-term debt as a percent of total capitalization is 11.2% compared with
15.5% at December 31, 1993. The registrant has an available $100 million
revolving line of credit available to meet its cash needs in addition to the
cash and equivalents discussed above.
Oriented Strandboard Siding Products Update
The registrant manufactures a complete line of oriented strandboard
("OSB") products for the building and construction industry. Such products
include sheathing, roof decking, flooring, siding, soffit, and engineered I-
joists using OSB as the web material.
In 1985, the registrant began producing and selling an OSB-based
exterior siding product in both a lap and a panel style. The siding uses OSB
as the substrate and is overlaid with a resin-impregnated paper. The siding
products are used primarily in residential home construction, both single
family as well as multifamily, and also to a lesser extent in commercial
construction. The registrant offers a warranty on both the OSB substrate and
the siding surface, if certain standards are adhered to, such as proper
installation and proper care and maintenance of the product.
From 1985 through September 30, 1994, the registrant has sold
approximately 2.4 billion square feet of these siding products throughout the
United Sates.
During the time that the registrant has produced and sold OSB siding,
warranty claims against the registrant have been made. Where such claims
resulted from improper installation or improper care and maintenance, the
registrant has sought to hold the installer or homeowner responsible for a
portion of the claim. Where claims were based on a problem with the product,
the registrant has honored its warranty and settled the claims in a timely
manner.
From 1985 through September 30, 1994, the registrant has paid
approximately $35 million to settle siding warranty related claims on
approximately 14,000 dwelling units at an average cost of about $2,500 per
unit. This amount includes approximately $7.5 million in claims paid in the
first nine months of 1994.
Management believes that it is probable that additional OSB siding
claims will be made against the registrant. Some of these claims will likely
be made in the form of warranty claims, while others will likely be made as
litigation claims. The registrant maintains a reserve for estimated siding
claims, including amounts for unpaid settled claims, unsettled known claims,
and future claims. As with all accounting estimates, due to many factors
involved in estimating future claims, significant uncertainty exists in the
reliability and precision of such estimates. There can be no assurance that
management's estimates will not significantly increase or decrease in the
future as additional facts and circumstances become known, and actual claims
are made. The registrant monitors its estimated exposure to future siding
claims and adjusts its accrual accordingly. However, due to the significant
uncertainties involved, including the related matters as described under
"LEGAL PROCEEDINGS" in this Form 10-Q, management cannot estimate the impact
of siding claims on the business, financial position, liquidity, or results
of operations of the registrant.
Sales and Operating Profit by Major Product Group
Louisiana-Pacific Corporation and Subsidiaries
(Dollar amounts in millions) (Unaudited)
Quarter Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1994 1993 1994 1993
------- ------- ------- -------
Sales:
Structural panel products $ 327.8 $ 240.2 $ 904.1 $ 753.4
Lumber 225.5 203.4 689.0 603.1
Other panel products 62.5 53.9 179.9 143.5
Other building products 137.2 114.1 371.4 305.4
------- ------- ------- -------
Total building products 753.0 611.6 2,144.4 1,805.4
Pulp 65.4 17.8 146.7 69.8
------- ------- ------- -------
Total sales $ 818.4 $ 629.4 $2,291.1 $1,875.2
======= ======= ======= =======
Export sales $ 105.3 $ 55.0 $ 264.3 $ 198.5
======= ======= ======= =======
Operating profit:
Building products $ 172.5 $ 119.5 493.8 $ 429.3
Pulp 2.1 (14.4) (13.9) (43.5)
------- ------- ------- -------
Total operating profit 174.6 105.1 479.9 385.8
Unallocated expense, net (19.5) (19.7) (51.5) (52.4)
Interest, net .3 (1.1) (1.0) (4.1)
------- ------- ------- -------
Income before taxes,
minority interest and
accounting changes $ 155.4 $ 84.3 $ 427.4 $ 329.3
======= ======= ======= =======
Operating Volume
Louisiana-Pacific Corporation and Subsidiaries
(volume amounts stated in millions except pulp and
as a percent of normal capacity)
Quarter Ended Nine Months Ended
September 30 September 30
--------------- -----------------
1994 1993 1994 1993
---- ---- ---- ----
Inner-Seal/OSB,
sq ft 3/8" basis 874 99% 797 93% 2,606 99% 2,330 90%
Softwood plywood,
sq ft 3/8" basis 423 112% 408 114% 1,237 109% 1,144 106%
Lumber, board feet 504 87% 469 90% 1,565 90% 1,336 86%
Particleboard,
sq ft 3/4" basis 95 108% 93 110% 281 107% 272 107%
Medium Density
Fiberboard,
sq ft 3/4" basis 61 111% 56 103% 178 108% 153 93%
Hardboard,
sq ft 1/8" basis 56 106% 49 94% 166 105% 141 89%
Hardwood veneer,
sq ft surface
measure 68 107% 64 106% 204 107% 194 108%
Pulp, thousand
short tons 115 75% 79 52% 309 67% 188 41%
Chips, units 508 568 1,678 1,575
Industry Product Price Trends
Louisiana-Pacific Corporation and Subsidiaries
OSB Plywood Lumber Particleboard Pulp
----------- -------- --------- ------------- ----------
N. Central Southern
7/16" basis Pine 1/2" Framing Bleached
24/16 basis lumber Inland softwood
span CDX composite Industrial sulfate
rating 3 ply prices(2) 3/4" basis short ton(1)
----------- -------- --------- ------------- ----------
Annual Average
1989 171 201 241 219 753
1990 131 182 230 199 723
1991 148 191 236 198 519
1992 217 248 287 200 509
1993 236 282 394 258 418
1993 Third Quarter Average
197 256 342 279 383
1994 Second Quarter Average
242 266 395 300 472
1994 Third Quarter Average
273 301 374 300 540
Weekly Average
October 7 253 310 353 300 635
October 14 260 320 366 300 635
October 21 289 340 396 300 635
(1) Discounting sometimes occurs from the published price.
(2) All lumber averages restated to reflect new formula in effect
September 9, 1994.
PART II
OTHER INFORMATION
Item 1. Legal Proceedings.
The following sets forth the current status of certain legal
proceedings.
The registrant has received a Notice of Violation issued by the
U.S. Environmental Protection Agency alleging air emissions violations at the
registrant's Dungannon, Virginia, OSB plant. The registrant has also
received a Notice of Violation issued by the state of Michigan alleging air
emissions violations at the registrant's Newberry, Michigan, OSB plant. The
potential costs to the registrant cannot be estimated this time because the
registrant's past experiences with notices of violation indicated wide
variation in possible outcomes, but are not expected to have a material
adverse effect on the registrant since past notices of violation have not had
such an effect.
The registrant has been informed that it and one or more employees at
its Olathe, Colorado, oriented strandboard plant are the targets of a federal
grand jury investigation concerning alleged tampering with emissions
monitoring equipment and alteration of plant records. The registrant does
not know when the investigation will be completed, but has been informed that
indictment of the registrant is likely. The registrant began an internal
investigation in the summer of 1992 and reported its initial findings of
irregularities to governmental authorities in September, 1992.
On September 9, 1992, the U.S. Department of Justice filed suit in the
U.S. District Court in Anchorage, Alaska, against the registrant's wholly-
owned subsidiary Ketchikan Pulp Company ("KPC") alleging that the pulp mill
in Ketchikan, Alaska, operated by KPC violated the Clean Air Act and the
terms of KPC's wastewater discharge permit. The plaintiff seeks to require
KPC to correct the alleged violations and also seeks penalties in an
unspecified amount. Settlement discussions are currently underway.
The registrant has been informed that KPC and one or more employees at
KPC's pulp mill are the targets of a federal grand jury investigation
concerning wastewater discharges. No charges have been made and the
registrant does not know when the investigation will be completed.
On September 13, 1994, the U.S. Environmental Protection Agency filed an
administrative action alleging that KPC and two other parties violated
provisions of the Clean Air Act related to asbestos. The action seeks to
recover a penalty of $122,800.
The registrant understands that a federal grand jury is investigating
possible violations in connection with the disposal by a contractor of a
transformer containing polychlorinated biphenyls (PCBs) previously located at
the registrant's former sawmill at Pendleton, Oregon. The registrant does
not know whether it or any of its employees are targets of the investigation.
Management of the registrant believes that the outcome of the above
matters will not have a materially adverse effect on the consolidated
business, financial condition, liquidity, or results of operations of the
registrant.
On October 25, 1994, the registrant received service of a summons and
complaint relating to an action instituted in the Circuit Court for Lake
County, Florida, on behalf of a purported class of homeowners in the state of
Florida whose homes were constructed using oriented strandboard ("OSB")
exterior siding manufactured by the registrant, which is allegedly
deteriorating prematurely due to latent defects in the siding material. The
complaint seeks damages for alleged breaches of express or implied warranties
and for alleged failure to disclose material defects, and also seeks an
injunction barring the defendants from selling and using OSB as an exterior
siding material in the state of Florida. The attorney for plaintiffs claims
the class may number in excess of 30,000 homeowners and that the claim for
damages may exceed $5,000 per home, resulting in aggregate claimed damages in
excess of $150 million. The registrant has not yet fully evaluated the
complaint and the allegations therein and therefore no estimate of a range of
possible loss can be made at this time. However, based on its preliminary
review, the registrant believes that there are defenses to the complaint and
it intends to defend the action vigorously. Although the registrant has not
been able to fully analyze the allegations of the complaint, it appears that
the damages being sought assume that all homes in the state of Florida which
use the registrant's OSB siding would be entitled to recover the full
replacement cost of the siding, an assumption the registrant believes to be
unfounded.
From time to time, the registrant has been named as a defendant in other
actions seeking damages because of alleged deterioration in OSB siding
material manufactured by the registrant. None of these other actions has
involved individually or in the aggregate an amount of claims that would be
material to the registrant's financial condition. Some of the other claims
have been resolved and claims involving approximately 1,300 dwelling units
remain pending. In addition, the registrant has received numerous individual
homeowner complaints involving OSB siding which are handled as warranty
claims rather than as litigation matters. For additional information, see
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" elsewhere in this Form 10-Q.
Item 6. Exhibits and Reports on Form 8-K.
(a) The exhibits filed as part of this report or incorporated
by reference herein are listed in the accompanying
exhibit index.
(b) Reports on Form 8-K. The registrant filed a report on
Form 8-K July 27, 1994, for the purpose of filing a
description of its common stock.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LOUISIANA-PACIFIC CORPORATION
By /s/ WILLIAM L. HEBERT
William L. Hebert
Treasurer
(Principal Financial Officer)
DATED: November 14, 1994
EXHIBIT INDEX
Exhibit Number Description of Exhibit
11 Calculation of Net Income Per Share for the Nine
Months Ended September 30, 1994.
27 Financial Data Schedule.
EXHIBIT 11
Louisiana-Pacific Corporation and Subsidiaries
Calculation of Net Income Per Share
For the Nine Months Ended September 30, 1994
Number of shares
Including Excluding
Common Stock Common Stock
Equivalents Equivalents (1)
------------ ------------
Weighted average number of shares
of common stock outstanding 116,937,022 116,937,022
Annualized weighted average number
of shares of treasury stock held
during the period (6,261,932) (6,261,932)
Annualized weighted average number
of shares sold to ESOTs subsequent
to January 1, 1994, not allocated
to participant accounts (2) (553,086) (553,086)
Common stock equivalents:
Application of the "treasury
stock" method to stock option
and purchase plans 968,020 ---
------------ ------------
Weighted average number of shares
of common stock and common stock
equivalents 111,090,023 110,122,004
============ ============
Rounded to 111,090,000 110,120,000
============ ============
Net income $262,200,000 $262,200,000
============ ============
Net income per share $ 2.36 $ 2.38
============ ============
(1) Accounting Principles Board Opinion No. 15, "Earnings Per Share", allows
companies to disregard dilution of less than three percent in the
computation of earnings per share. Therefore, shares used in computing
earnings per share for financial reporting purposes is 110,120,000
shares.
(2) American Institute of Certified Public Accountants Statement of Position
No. 93-6, "Employers' Accounting for Employee Stock Ownership Plans"
requires that shares held by registrant's ESOTs which were acquired by
the ESOTs on or after January 1, 1994, which are not allocated to
participants' accounts, are not considered outstanding for purposes of
computing earnings per share. Shares held by the ESOTs which were
acquired by the ESOTs prior to January 1, 1994, continue to be
considered outstanding (whether or not allocated to participants'
accounts) for purposes of computing earnings per share.
EXHIBIT 27
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