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| Longview Fibre Announces Fourth Quarter and Full Year 2006 Financial Results |
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- Declares Regular Quarterly Dividend of $0.23 Per Share - LONGVIEW, Wash.--(BUSINESS WIRE)--Feb. 27, 2007--Longview Fibre Company's (NYSE:LFB) consolidated net sales for the fourth quarter of 2006 increased 10.6 percent to $238.5 million, compared with net sales of $215.7 million in the fourth quarter of 2005(1). Net sales declined 2.9 percent sequentially compared with $245.6 million in the third quarter of 2006, as seasonal declines in manufacturing segment sales were partially offset by increased timber segment sales. Full year consolidated net sales for 2006 totaled $950.2 million, up 6.1 percent from net sales of $895.8 million in 2005, a result of single-digit percentage increases in both of the company's operating segments. Fourth quarter 2006 consolidated operating profit totaled $6.2 million, compared with an operating loss of $11.1 million in the fourth quarter of 2005 which included the effect of a non-cash pre-tax charge of $9.7 million related to the permanent shut down and write-off of two paper machines. Fourth quarter operating profit improved sequentially, compared with $4.6 million in the third quarter of 2006 that included a $10.8 million non-cash pre-tax charge to reduce the carrying value of a sawmill to net realizable value. Consolidated 2006 operating profit declined to $32.1 million from $43.3 million in 2005, primarily reflecting increased advisory fees and REIT-related expenses. Consolidated net income for the fourth quarter of 2006 totaled $3.1 million, or $0.05 per share, compared with a net loss of $16.0 million, or $(0.24) per share, in the fourth quarter of 2005, and net income of $21.4 million for the third quarter of 2006. Fourth quarter 2005 net loss included a non-cash charge of $6.1 million, or $(0.09) per share, on an after-tax basis, related to the permanent shut down and write-off of two paper machines. Third quarter 2006 net income included the recognition of $20.0 million in tax benefits associated with the company's REIT conversion. Consolidated net income for the full year totaled $19.0 million in 2006, compared with 2005 net income of $1.3 million. The increase in net income was primarily driven by the tax benefits associated with the company's REIT conversion, partially offset by increased advisory and REIT-related costs and expenses related to the early redemption of Senior Subordinated Notes. Richard H. Wollenberg, President, Chief Executive Officer and Chairman of the Board, said, "2006 was a year of great accomplishment for Longview Fibre and one in which we delivered substantial value to shareholders. During the year we completed our conversion to a REIT, made a special distribution of $385 million, including cash of $77 million, and paid $43.2 million of regular dividends. We also restructured our debt, resulting in a lower aggregate interest rate. Finally, we implemented a new operating plan including an increased timber harvest, a more proactive sale program for higher and better use lands, and a process to explore the divestiture of non-core operations. We also made important tactical adjustments to our manufacturing operations to partially mitigate higher raw materials and energy costs." Selected Segment and Consolidated Operating Results Timber Fourth quarter 2006 timber segment net sales totaled $51.2 million, a 25.4 percent increase from the fourth quarter of 2005 and up 18.0 percent sequentially from the third quarter of 2006. Log sales volume of approximately 82 million board feet was 41.8 percent higher than the fourth quarter of 2005 and up 29.7 percent sequentially from the third quarter of 2006. Average log prices during the fourth quarter of 2006 were down 7.7 percent compared to the year-ago period and down 6.5 percent sequentially. Fourth quarter timber segment operating profit was $26.8 million, up 47.4 percent from the year-ago period and up fourfold compared with segment operating profit of $6.2 million in the third quarter of 2006, which included the effect of a non-cash $10.8 million asset impairment charge taken to reflect the net realizable value of the company's sawmill operation. Timber segment sales in 2006 totaled $193.0 million, up 2.9 percent compared with sales of $187.6 million for 2005, primarily reflecting higher log prices throughout most of the year. Timber segment operating profit was $78.6 million in 2006, including the effect of the non-cash $10.8 million asset impairment charge, compared with segment operating profit of $86.5 million in 2005. Manufacturing Fourth quarter manufacturing net sales of $187.2 million represented a 7.1 percent increase compared with net sales of $174.8 million in the fourth quarter of 2005 and a 7.4 percent sequential decline from the third quarter of 2006. Fourth quarter paper and paperboard sales were comparable to the year-ago period and down 14.6 percent sequentially reflecting seasonal weakness and the curtailment of certain low-margin products; converted products sales were up 10.8 percent from the fourth quarter of 2005 and were 3.3 percent lower than the third quarter of 2006. Fourth quarter manufacturing segment operating losses were $20.6 million compared with an operating loss of $29.2 million in last year's comparable period which included the effect of a $9.7 million pre-tax, non-cash charge related to the permanent shut down and write-off of two paper machines. On a sequential basis, lower seasonal sales, combined with significantly higher wood chip prices and energy costs, resulted in a substantial increase in fourth quarter segment operating losses compared with the $1.6 million segment operating loss reported in the third quarter of 2006. Manufacturing segment sales in 2006 totaled $757.6 million, an increase of 7.0 percent compared with sales of $708.3 million in 2005. Manufacturing segment operating loss in 2006 totaled $46.5 million, including $12.1 million of allocated advisory and REIT-related costs, compared with a segment operating loss of $43.2 million in 2005, including the effect of the $9.7 million non-cash charge referred to above. Selling, Administrative & General Fourth quarter 2006 selling, administrative and general expenses and advisory fees and REIT related expenses totaled $24.1 million, or 10.1 percent of total net sales, compared with $27.6 million, or 12.8 percent of total net sales, in last year's comparable period and $23.6 million, or 9.6 percent of net sales, in the third quarter of 2006. Selling, administrative and general expenses and advisory fees and REIT related expenses in 2006 totaled $110.3 million, or 11.6 percent of net sales, compared with $97.0 million, or 10.8 percent of net sales, in 2005. Balance Sheet and Cash From Operations The company continues to have a strong balance sheet, with $519 million of debt at year-end and significant remaining borrowing capacity. The company generated $9.0 million and $65.9 million in cash from operations during the fourth quarter and full year 2006, respectively. Cash from operations in 2006 declined $28.4 million from 2005's results due primarily to changes in inventory and deferred taxes. In the fourth quarter, the company declared a regular quarterly dividend of $0.23 per share for shareholders of record on December 15, 2006, payable January 3, 2007. Declaration of Regular Quarterly Dividend The Board of Directors declared today a regular quarterly cash dividend of $0.23 per share on the company's common stock, payable April 3, 2007 to shareholders of record at the close of business March 15, 2007. The company's future dividend payments are subject to final board approval and will be based on the company's results of operations, cash flow and prospects at the time, as well as any contractual limitations in the company's debt instruments. No Conference Call to be Conducted The company will not be conducting a conference call to discuss its fourth quarter and full year 2006 financial results. (1) Comparisons to Prior Period Financial Results Effective January 1, 2006, the company changed its year-end to December 31 from October 31 as required by REIT regulations. All comparisons to the three months and year ended December 31, 2005 in this press release and accompanying tables refer to unaudited financial statements that have been recast to facilitate comparison to this year's comparable periods ended December 31, 2006. Except as noted otherwise, all per share amounts referenced in this press release and accompanying tables have been restated to reflect retroactive effect of the special distribution of 14,673,663 shares of common stock on August 7, 2006 as part of a special cash-and-stock distribution to shareholders in conjunction with the company's conversion to a REIT. In the fourth quarter of 2006, the company changed its method of reporting its business operations from three segments - Timber, Paper and Paperboard, and Converted Products - to two reporting segments - Timber and Manufacturing. All segment information for prior periods referenced in this press release and accompanying tables has been reclassified to reflect this change. About Longview Fibre Company Longview Fibre Company is a real estate investment trust (REIT) engaged in the ownership and management of 588,000 acres of softwood timberlands predominantly located in western Washington and Oregon, and manufactures specialty paper and containers through a wholly owned subsidiary. For more information, please visit Longview's Web site at www.longviewfibre.com. Forward-Looking Statements Except for historical information, the statements made in this press release are forward-looking statements made pursuant to the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on certain assumptions or estimates, discuss future expectations, describe future plans and strategies, contain projections of results of operations or of financial condition or state other forward-looking information. The company's ability to predict results or the actual effect of future plans or strategies is inherently uncertain. Although the company believes that the expectations reflected in such forward-looking statements are based on reasonable assumptions, actual results and performance could differ materially from those set forth in the forward-looking statements. Forward-looking statements in some cases can be identified by the use of words such as "may," "will," "should," "potential," "intend," "expect," "seek," "anticipate," "estimate," "believe," "could," "would," "project," "predict," "continue," "plan," "propose" or other similar words or expressions. 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, circumstances or results could differ materially from those anticipated by the company or reflected in the forward-looking statements due to a variety of factors, including, but not limited to: the completion of our acquisition by a third party, cash available to pay dividends, actual log harvest levels; the company's ability to realize anticipated benefits from the sale of higher and better use lands; unanticipated changes in pricing and market conditions for its products, energy and certain raw materials, including changes in log, paper, paperboard and converted products pricing and demand; unexpected capital expenditures and the timing of completion and results of capital expenditure projects; changes in interest rates and new housing starts; For additional information about factors that could impact future results, see the risk factors in the company's Annual Report on Form 10-K for the year ended December 31, 2006 and subsequent filings with the SEC. (Financial Tables Follow)
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
(Unaudited)
Three Months Ended Twelve Months Ended
December 31 December 31
------------------- ----------------------
(in thousands, except per (Unaudited)
share) 2006 2005 2006 2005
-------------------------- --------- ---------- ---------- -----------
Net sales $238,491 $215,678 $ 950,666 $ 895,847
Cost of products sold,
including outward freight 211,537 190,395 800,997 746,169
--------- --------- ---------- -----------
Gross profit 26,954 25,283 149,669 149,678
Selling, administrative
and general expenses 22,839 27,623 96,391 96,975
Loss (gain) on impairment
and disposition of assets (3,343) 8,717 7,229 9,409
Advisory fees and REIT-
related expenses 1,265 -- 13,940 --
--------- --------- ---------- -----------
Operating profit (loss) 6,193 (11,057) 32,109 43,294
Interest income 228 179 984 358
Interest expense (9,942) (9,347) (36,394) (37,133)
Other income (expense) 484 (5,017) (12,946) (4,261)
--------- --------- ---------- -----------
Income (loss) before
income taxes (3,037) (25,242) (16,247) 2,258
--------- --------- ---------- -----------
Provision (benefit) for
income taxes (6,151) (9,216) (35,222) 984
--------- --------- ---------- -----------
Net income (loss) $ 3,114 $(16,026) $ 18,975 $ 1,274
========= ========= ========== ===========
Net income (loss) per
share $ 0.05 $ (0.24) $ 0.29 $ 0.02
Average shares outstanding 65,759 65,750 65,752 65,750
-------------------------- --------- ---------- ---------- -----------
SEGMENT AND OTHER INFORMATION
(Unaudited)
Three Months Ended
December 31
------------------------------
(dollars in thousands) 2006 2005 % Change
-------------------------------------- --------- --------- ----------
Net sales:
Timber $ 51,242 $ 40,866 25.4
Manufacturing 187,249 174,812 7.1
--------- --------- ----------
Total net sales $238,491 $215,678 10.6
========= ========= ==========
Operating profit (loss):
Timber $ 26,791 $ 18,171 47.4
Manufacturing (20,598) (29,228) 29.5
--------- --------- ----------
Total operating profit (loss) $ 6,193 $(11,057) --
-------------------------------------- --------- --------- ----------
Sales:
Logs, thousands of board feet 82,191 57,976 41.8
Lumber, thousands of board feet 16,116 14,712 9.5
Paper, tons 85,402 75,049 13.8
Paperboard, tons 16,616 44,241 (62.4)
Converted products, tons 138,088 139,446 (1.0)
Logs, $/thousand board feet $ 564 $ 611 (7.7)
Lumber, $/thousand board feet 301 371 (18.9)
Paper, $/ton FOB mill equivalent 597 581 2.8
Paperboard, $/ton FOB mill
equivalent 434 334 29.9
Converted products, $/ton 902 805 12.0
-------------------------------------- --------- --------- ----------
SEGMENT AND OTHER INFORMATION
Twelve Months Ended
December 31
-------------------------------
(Unaudited)
(dollars in thousands) 2006 2005 % Change
------------------------------------ --------- ----------- ---------
Net sales:
Timber $193,021 $ 187,595 2.9
Manufacturing 757,645 708,252 7.0
--------- ----------- ---------
Total net sales $950,666 $ 895,847 6.1
========= =========== =========
Operating profit (loss):
Timber $ 78,595 $ 86,469 (9.1)
Manufacturing (46,486) (43,175) (7.6)
--------- ----------- ---------
Total operating profit (loss) $ 32,109 $ 43,294 (25.9)
------------------------------------ --------- ----------- ---------
Sales:
Logs, thousands of board feet 279,002 269,645 3.5
Lumber, thousands of board feet 65,134 67,647 (3.7)
Paper, tons 344,382 315,210 9.3
Paperboard, tons 117,322 174,426 (32.7)
Converted products, tons 548,128 545,299 0.5
Logs, $/thousand board feet $ 610 $ 603 1.2
Lumber, $/thousand board feet 351 371 (5.4)
Paper, $/ton FOB mill equivalent 603 587 2.7
Paperboard, $/ton FOB mill
equivalent 396 339 16.8
Converted products, $/ton 882 819 7.7
------------------------------------ --------- ----------- ---------
Consolidated Balance Sheets
December 31
--------------------------
(dollars in thousands) 2006 2005
-------------------------------------------- ------------ ------------
ASSETS
Current assets:
Cash $ 2,753 $1,608
Accounts and notes receivable 122,194 111,514
Allowance for doubtful accounts (755) (1,000)
Refundable income taxes 319 3,898
Inventories 75,785 65,727
Prepaid expenses and other assets 11,934 9,295
------------ ------------
Total current assets 212,230 191,042
------------ ------------
Capital assets:
Buildings, machinery and equipment at cost 1,757,092 1,815,044
Accumulated depreciation (1,196,042) (1,186,618)
------------ ------------
Costs to be depreciated in future
years 561,050 628,426
Plant sites at cost 3,335 3,549
------------ ------------
564,385 631,975
------------ ------------
Timber at cost less depletion 202,953 198,462
Roads at cost less amortization 8,613 8,967
Timberlands at cost 25,213 24,807
------------ ------------
236,779 232,236
------------ ------------
Total capital assets 801,164 864,211
------------ ------------
Pension and other noncurrent assets 123,724 155,010
------------ ------------
Total assets $ 1,137,118 $1,210,263
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Payable to bank resulting from checks in
transit $ 827 $ 5,115
Trade accounts payable 52,648 48,414
Dividends payable 15,125 --
Advisory fees and REIT-related expenses
payable 3,443 1,063
Short term borrowings 6,000 --
Accrued payroll liabilities 17,938 15,940
Other taxes payable 6,779 6,782
Other accrued liabilities 14,461 17,587
Current portion of long-term debt 2,987 --
------------ ------------
Total current liabilities 120,208 94,901
------------ ------------
Long-term debt 510,202 428,918
------------ ------------
Deferred tax liabilities - net 158,407 205,698
------------ ------------
Postretirement and other liabilities 47,241 36,677
------------ ------------
Total liabilities 836,058 766,194
------------ ------------
Shareholders' equity:
Preferred stock -- --
Common stock 98,639 76,615
Additional paid-in capital 289,577 3,306
Retained earnings (deficit) (60,345) 364,148
Accumulated other comprehensive loss (26,811) --
------------ ------------
Total shareholders' equity 301,060 444,069
------------ ------------
Total liabilities and shareholders' equity $1,137,118 $1,210,263
-------------------------------------------- ============ ============
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended Twelve Months Ended
December 31 December 31
-------------------- ----------------------
(Unaudited)
(dollars in thousands) 2006 2005 2006 2005
------------------------ --------- ---------- ---------- -----------
Cash provided by (used
for) operations:
Net income (loss) $ 3,114 $ (16,026) $ 18,975 $ 1,274
Adjustments to income
(loss) not requiring
(providing)
cash:
Depreciation 17,050 18,261 70,696 72,086
Depletion and
amortization 2,566 1,862 9,964 10,049
Deferred tax
liabilities - net (6,102) (6,598) (35,218) (598)
Loss (gain) on
impairment and
disposition of
assets (3,343) 8,717 7,229 9,409
Loss (gain) on
extinguishment of
debt -- 1,013 (742) 1,013
Change in:
Accounts and notes
receivable -- net (884) (4,156) (10,925) (4,231)
Refundable income
taxes (81) (3,898) 3,579 (3,898)
Inventories (3,056) 13,056 (10,058) 11,896
Prepaid expenses and
other assets (579) (418) 7 (614)
Pension and other
noncurrent assets 2,513 (1,658) 4,503 (4,438)
Trade accounts
payable, payroll and
other taxes payable,
and other accrued
liabilities 2,186 3,877 3,956 2,743
Advisory fees and
REIT-related
expenses payable (5,399) -- 2,380 --
Federal income taxes
payable -- (2,700) -- --
Postretirement and
other liabilities 983 129 1,597 (314)
--------- ---------- ---------- -----------
Cash provided by
operations 8,968 11,461 65,943 94,377
--------- ---------- ---------- -----------
Cash provided by (used
for) investing:
Additions to:
Plant and equipment (5,261) (6,027) (22,245) (30,113)
Timber and
timberlands (236) (3,222) (14,762) (11,413)
Proceeds from sale of
capital assets 7,520 (123) 11,312 2,011
--------- ---------- ---------- -----------
Cash provided by (used
for) investing 2,023 (9,372) (25,695) (39,515)
--------- ---------- ---------- -----------
Cash provided by (used
for) financing:
Additions to long-term
debt -- 200,048 314,086 200,192
Reduction in long-term
debt (1,311) (129,500) (230,311) (129,500)
Short-term borrowings,
net 2,300 (66,000) 6,000 (117,000)
Debt issue costs -- (3,959) (4,542) (3,959)
Payable to bank
resulting from checks
in transit 827 (2,004) (4,288) (1,166)
Cash dividends paid:
Regular dividends (15,122) (1,021) (43,214) (4,086)
REIT E&P Dividend
Distribution -- -- (77,012) --
Proceeds from sale of
common stock 178 -- 178 --
--------- ---------- ---------- -----------
Cash used for financing (13,128) (2,436) (39,103) (55,519)
--------- ---------- ---------- -----------
Change in cash position (2,137) (347) 1,145 (657)
Cash position, beginning
of period 4,890 1,955 1,608 2,265
Cash position, end of
period $ 2,753 $ 1,608 $ 2,753 $ 1,608
------------------------ ========= =========== ========== ===========
CONTACT: Longview Fibre Company
R. H. Wollenberg, 360-425-1550
President and Chief Executive Officer
www.longviewfibre.com
SOURCE: Longview Fibre Company
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