Potlatch Corporation Reports Third Quarter 2015 Results

SPOKANE, Wash., Oct. 27, 2015 (GLOBE NEWSWIRE) — Potlatch Corporation (Nasdaq:PCH) today reported net income of $21.8 million, or $0.53 per diluted share, on revenues of $174.5 million for the quarter ended September 30, 2015.  Net income was $33.2 million, or $0.81 per diluted share, on revenues of $177.2 million in the third quarter of 2014.

“While our consolidated results were up significantly in the third quarter relative to the second quarter due to seasonally higher harvest volumes, sequentially lower lumber prices provided a headwind,” said Mike Covey. “We are encouraged by increases in lumber prices the last few weeks and continued improvement in the U.S. housing market.  Our Resource business continues to be a steady contributor of cash and the Minnesota rural recreational real estate market remains strong,” concluded Mr. Covey.

Financial Highlights

(millions, except per share data)                                             

      Q3 2015   Q2 2015   Q3 2014
Revenues     $ 174.5     $ 128.7     $ 177.2  
Net income     $ 21.8     $ 0.7     $ 33.2  
Net income per diluted share     $ 0.53     $ 0.02     $ 0.81  
Distribution per share     $ 0.375     $ 0.375     $ 0.35  
Net cash from operations     $ 38.5     $ (7.7 )   $ 39.2  
Cash and short-term investments at end of period     $ 1.3     $ 10.6     $ 73.3  


Business Performance: Q3 2015 vs. Q2 2015

Resource

Resource’s operating income was $36.4 million on revenues of $102.3 million in the third quarter, compared to operating income of $8.8 million on revenues of $44.1 million in the second quarter of 2015.  Earnings increased due to seasonally higher harvest volumes.  Prices realized for sawlogs in the South increased 15% primarily due to a seasonally higher mix of hardwood logs.

Wood Products 

Wood Products lost $5.4 million on revenues of $82.9 million in the third quarter, compared to a loss of $2.0 million on revenues of $84.2 million in the second quarter of 2015.  Average lumber prices were down 5% in the third quarter compared to the second quarter.  Slightly higher lumber shipments partially offset the effect of lower lumber prices.

Real Estate 

Real Estate’s operating income was $4.2 million on revenues of $7.8 million in the third quarter, compared to operating income of $8.5 million on revenues of $10.7 million in the second quarter of 2015.  Second quarter results included the sale of two commercial sites.  The Minnesota rural recreational real estate market remained strong in the third quarter. 

Conference Call Information 

A live conference call and webcast will be held today, October 27, 2015, at 9 a.m. Pacific Time (noon Eastern Time).  Investors may access the webcast at www.potlatchcorp.com by clicking on the Investor Resources link or by conference call at 1-866-393-8403 for U.S./Canada and 1-706-679-7929 for international callers.  Participants will be asked to provide conference I.D. number 52573706.  Supplemental materials that will be discussed during the call are available on the website.

A replay of the conference call will be available two hours following the call until November 3, 2015 by calling 1-800-585-8367 for U.S./Canada or 1-404-537-3406 for international callers.  Callers must enter conference I.D. number 52573706 to access the replay. 

About Potlatch 

Potlatch is a Real Estate Investment Trust (REIT) with approximately 1.6 million acres of timberland in Alabama, Arkansas, Idaho, Minnesota and Mississippi.  Potlatch, a certified forest practices leader, is committed to providing superior returns to stockholders through long-term stewardship of its forest resources.  The company also conducts a land sales and development business and operates wood products manufacturing facilities through its taxable REIT subsidiary.  More information about Potlatch can be found on the company’s website at www.potlatchcorp.com

Forward-Looking Statements 

This press release contains certain forward-looking statements within the meaning of the Private Litigation Reform Act of 1995 as amended, including without limitation, statements about our expectations regarding future company performance; the direction of our business markets; business conditions in our Resource and Wood Products segments; the U.S. housing market; lumber pricing; sawlog pricing; performance of our Wood Products, Resource and Real Estate segments in 2015; strength of Minnesota rural recreational real estate market; earnings growth; and similar matters.  These forward-looking statements are based on current expectations, estimates, assumptions and projections that are subject to change, and actual results may differ materially from the forward-looking statements.  Factors that could cause actual results to differ materially include, but are not limited to, changes in timberland values; changes in timber harvest levels on the company’s lands; changes in timber prices; changes in policy regarding governmental timber sales; changes in the United States and international economies; changes in the level of construction activity; changes in Chinese demand; changes in tariffs, quotas and trade agreements involving wood products; currency fluctuation; changes in demand for our products; changes in production and production capacity in the forest products industry; competitive pricing pressures for our products; unanticipated manufacturing disruptions; changes in general and industry-specific environmental laws and regulations; unforeseen environmental liabilities or expenditures; weather conditions; restrictions on harvesting due to fire danger; changes in raw material, fuel and other costs; the ability to satisfy complex rules in order to remain qualified as a REIT; changes in tax laws that could reduce the benefits associated with REIT status; and other risks and uncertainties described from time to time in the company’s public filings with the Securities and Exchange Commission.  The forward-looking statements are made as of the date of this press release and the company does not undertake to update any forward-looking statements.

 

Potlatch Corporation
Consolidated Statements of Income
Unaudited (Dollars in thousands, except per share amounts)
 
  Quarter Ended   Nine Months Ended
  September 30,   September 30,
  2015   2014   2015   2014
Revenues $ 174,475     $ 177,215     $ 437,347     $ 460,713  
Costs and expenses:              
Cost of goods sold 136,072     121,574     353,285     322,016  
Selling, general and administrative expenses 10,689     10,772     35,010     32,794  
  146,761     132,346     388,295     354,810  
Operating income 27,714     44,869     49,052     105,903  
Interest expense, net (8,335 )   (5,506 )   (24,420 )   (16,475 )
Income before income taxes 19,379     39,363     24,632     89,428  
Income tax benefit (provision) 2,419     (6,209 )   3,533     (19,654 )
Net income $ 21,798     $ 33,154     $ 28,165     $ 69,774  
               
Net income per share:              
Basic $ 0.53     $ 0.81     $ 0.69     $ 1.71  
Diluted $ 0.53     $ 0.81     $ 0.69     $ 1.71  
Distributions per share $ 0.375     $ 0.35     $ 1.13     $ 1.05  
Weighted-average shares outstanding (in thousands):              
Basic 40,846     40,745     40,831     40,733  
Diluted 40,985     40,889     40,967     40,861  

 

Potlatch Corporation
Condensed Consolidated Balance Sheets
Unaudited (Dollars in thousands)
 
  September 30,
 2015
  December 31,
 2014
ASSETS      
Current assets:      
Cash $ 1,306     $ 4,644  
Short-term investments 40     26,368  
Receivables, net 29,645     9,928  
Inventories 40,379     31,490  
Deferred tax assets, net 6,168     6,168  
Other assets 16,754     15,065  
Total current assets 94,292     93,663  
Property, plant and equipment, net 74,716     65,749  
Timber and timberlands, net 822,353     828,420  
Deferred tax assets, net 36,715     37,228  
Other assets 11,499     10,361  
Total assets $ 1,039,575     $ 1,035,421  
LIABILITIES AND STOCKHOLDERS’ EQUITY      
Current liabilities:      
Accounts payable and accrued liabilities $ 66,233     $ 49,324  
Current portion of long-term debt 27,500     22,870  
Total current liabilities 93,733     72,194  
Long-term debt 602,675     606,473  
Liability for pension and other postretirement employee benefits 114,542     115,936  
Other long-term obligations 13,586     15,752  
Stockholders’ equity 215,039     225,066  
Total liabilities and stockholders’ equity $ 1,039,575     $ 1,035,421  

 

Potlatch Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited (Dollars in thousands)
 
  Nine Months Ended
  September 30,
  2015   2014
CASH FLOWS FROM OPERATING ACTIVITIES      
Net income $ 28,165     $ 69,774  
Adjustments to reconcile net income to net cash from operating activities:      
Depreciation, depletion and amortization 28,154     19,326  
Basis of real estate sold 3,389     7,289  
Change in deferred taxes (2,786 )   1,127  
Employee benefit plans 4,774     616  
Equity-based compensation expense 3,589     3,058  
Other, net (675 )   (1,805 )
Funding of qualified pension plans     (3,550 )
Working capital and operating related activities, net (9,462 )   11,829  
Net cash from operating activities 55,148     107,664  
CASH FLOWS FROM INVESTING ACTIVITIES      
Change in short-term investments 26,328     (12,793 )
Transfer to company owned life insurance (COLI)     (25,476 )
Property, plant and equipment (16,240 )   (9,174 )
Timberlands reforestation and roads (11,155 )   (7,840 )
Acquisition of timber and timberlands (9,320 )   (3,143 )
Other, net 644     1,126  
Net cash from investing activities (9,743 )   (57,300 )
CASH FLOWS FROM FINANCING ACTIVITIES      
Distributions to common stockholders (45,761 )   (42,621 )
Employee tax withholdings on equity-based compensation (1,445 )   (1,092 )
Change in book overdrafts (1,440 )   (2,919 )
Other, net (97 )   (1,019 )
Net cash from financing activities (48,743 )   (47,651 )
Change in cash (3,338 )   2,713  
Cash at beginning of period 4,644     5,586  
Cash at end of period $ 1,306     $ 8,299  

 

Potlatch Corporation
Segment Information
Unaudited (Dollars in thousands)
 
  Quarter Ended   Nine Months Ended
  September 30,   September 30,
  2015   2014   2015   2014
Revenues:              
Resource $ 102,322     $ 91,919     $ 200,388     $ 183,336  
Wood Products 82,868     99,213     256,292     287,589  
Real Estate 7,828     6,176     21,684     36,352  
  193,018     197,308     478,364     507,277  
Elimination of intersegment revenues – Resource (18,543 )   (20,093 )   (41,017 )   (46,564 )
Total consolidated revenues $ 174,475     $ 177,215     $ 437,347     $ 460,713  
               
Operating income (loss):              
Resource $ 36,389     $ 34,080     $ 60,164     $ 61,122  
Wood Products (5,422 )   15,743     (3,875 )   43,320  
Real Estate 4,234     4,646     14,354     25,295  
Eliminations and adjustments (564 )   (1,994 )   2,950     (364 )
  34,637     52,475     73,593     129,373  
Corporate (6,923 )   (7,606 )   (24,541 )   (23,470 )
Operating income 27,714     44,869     49,052     105,903  
Interest expense, net (8,335 )   (5,506 )   (24,420 )   (16,475 )
Income before income taxes $ 19,379     $ 39,363     $ 24,632     $ 89,428  
               
Depreciation, depletion and amortization:1              
Resource $ 10,262     $ 6,101     $ 21,313     $ 12,745  
Wood Products 1,693     1,543     4,930     4,587  
Real Estate 14     15     44     44  
  11,969     7,659     26,287     17,376  
Corporate 588     665     1,867     1,950  
Total depreciation, depletion and amortization $ 12,557     $ 8,324     $ 28,154     $ 19,326  
               
Basis of real estate sold:              
Real Estate $ 2,450     $ 519     $ 3,631     $ 7,928  
Eliminations and adjustments (69 )   (64 )   (242 )   (639 )
Total basis of real estate sold $ 2,381     $ 455     $ 3,389     $ 7,289  


1
  The presentation of depreciation, depletion and amortization in Segment Information and the Condensed Consolidated Statements of Cash Flows includes amortization of bond discounts and deferred loan fees. Bond discounts and deferred loan fees are recorded in Interest expense, net in the Consolidated Statements of Income.

 

 

 

CONTACT: Contact:	

(Investors)
Jerry Richards 
509.835.1521

(Media)
Mark Benson
509.835.1513