Potlatch Reports Second Quarter 2014 Results

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| Source: Potlatch Corporation

SPOKANE, Wash., July 23, 2014 (GLOBE NEWSWIRE) -- Potlatch Corporation (Nasdaq:PCH) today reported net income of $16.3 million, or $0.40 per diluted share, on revenues of $143.9 million for the quarter ended June 30, 2014. This compares to net income of $19.2 million, or $0.47 per diluted share, on revenues of $133.2 million in the second quarter of 2013.

"Increased activity in the housing market resulted in stronger takeaway for our lumber business in the quarter and we closed over 40 transactions in our Real Estate business as the effects of the harsh winter faded," said Michael Covey, chairman and chief executive officer of Potlatch Corporation. "We expect strong results in our Wood Products and Resource businesses in the second half of the year, particularly given that the third quarter is our seasonally highest harvest quarter. This quarter, our Real Estate segment also closed the second of two large sales that we planned this year. Our earnings are on track to increase for the third consecutive year," concluded Mr. Covey.

Financial Highlights
(millions, except per-share data)
       
  Q2 2014 Q1 2014 Q2 2013
Revenues  $ 143.9  $ 139.6  $ 133.2
Net income  $ 16.3  $ 20.3  $ 19.2
Net income per diluted share  $ 0.40  $ 0.50  $ 0.47
Distribution per share  $ 0.35  $ 0.35  $ 0.31
Net cash from operations  $ 28.4  $ 40.0  $ 13.6
Cash and short-term investments at end of period  $ 83.2  $ 76.3  $ 50.5

Business Performance: Q2 2014 vs. Q1 2014

Resource

Resource's operating income was $10.8 million on revenues of $39.5 million in the second quarter, compared to operating income of $16.2 million on revenues of $51.9 million in the first quarter of 2014. Harvest volumes were seasonally lower in the Northern region due to spring breakup and wet weather constrained operations in the Southern region in the second quarter. Sawlog price realizations increased 9% in Idaho, which reflects the effect of indexing log prices to higher first quarter lumber prices. Log prices increased slightly in the Southern region due to a seasonally higher mix of hardwood sawlogs. Southern pine sawlog price realizations were flat.

Wood Products

Wood Products' operating income was $14.9 million on revenues of $100.6 million in the second quarter, compared to operating income of $12.7 million on revenues of $87.8 million in the first quarter of 2014. Lumber shipments increased 13% in the second quarter of 2014 as a result of demand strengthening after the harsh winter weather ended. Average lumber prices realized in the second quarter were 1% higher than the first quarter of 2014.

Real Estate

Real Estate's operating income was $12.4 million on revenues of $15.7 million in the second quarter, compared to operating income of $8.3 million on revenues of $14.4 million in the first quarter of 2014. Second quarter results included the sale of 9,400 acres of rural recreation property in Minnesota for $10 million. First quarter results included the sale of 11,000 acres of rural recreation property in Idaho for $11 million.

Conference Call Information

A live conference call and webcast will be held today, July 23, 2014, 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 66856712. 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 July 30, 2014 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 66856712 to access the replay.

About Potlatch

Potlatch is a Real Estate Investment Trust (REIT) with approximately 1.4 million acres of timberland in Arkansas, Idaho and Minnesota. Potlatch, a verified 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.

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; the state of the domestic housing market; housing starts; business conditions in our Resource and Wood Products segments; lumber pricing; sawlog pricing; third quarter 2014 harvest levels; performance of our Wood Products, Resource and Real Estate segments in the second half of 2014; 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; 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; 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; performance of agreements to purchase Idaho land; 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
June 30,
Six Months Ended
June 30,
  2014 2013 2014 2013
Revenues  $143,919  $133,212  $283,498  $272,465
Costs and expenses:        
Cost of goods sold 101,849 91,904 200,442 190,203
Selling, general and administrative expenses 12,345 10,117 22,022 23,713
Environmental remediation charge 1,750 2,500
  114,194 103,771 222,464 216,416
Operating income 29,725 29,441 61,034 56,049
Interest expense, net (5,509) (5,667) (10,969) (12,003)
Income before income taxes 24,216 23,774 50,065 44,046
Income taxes (7,946) (4,592) (13,445) (9,377)
Net income  $ 16,270  $ 19,182  $ 36,620  $ 34,669
         
Net income per share:        
Basic  $ 0.40  $ 0.47  $ 0.90  $ 0.86
Diluted  $ 0.40  $ 0.47  $ 0.90  $ 0.85
Distributions per share  $ 0.35  $ 0.31  $ 0.70  $ 0.62
Weighted-average shares outstanding (in thousands):        
Basic 40,741 40,509 40,726 40,474
Diluted 40,850 40,694 40,833 40,655
         
         
 
Potlatch Corporation
Consolidated Condensed Balance Sheets
Unaudited (Dollars in thousands, except per-share amounts)
 
     
  June 30, 
2014
December 31,
2013
ASSETS    
Current assets:    
Cash  $ 9,252  $ 5,586
Short-term investments 73,916 52,251
Receivables, net 20,629 16,572
Inventories 26,071 36,275
Deferred tax assets 7,724 7,724
Other assets 7,584 11,961
Total current assets 145,176 130,369
Property, plant and equipment, net 62,402 59,976
Timber and timberlands, net 452,763 455,871
Deferred tax assets 16,728 21,576
Other assets 12,556 12,738
   $689,625  $680,530
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Current installments on long-term debt $ — $ —
Accounts payable and accrued liabilities 54,937 50,318
Total current liabilities 54,937 50,318
Long-term debt 320,003 320,092
Liability for pension and other postretirement employee benefits 74,792 83,619
Other long-term obligations 15,557 22,353
Stockholders' equity 224,336 204,148
   $689,625  $680,530
     
Shares outstanding (in thousands) 40,591 40,537
Working capital  $ 90,239  $ 80,051
Current ratio 2.6:1 2.6:1
     
 
Potlatch Corporation
Consolidated Condensed Statements of Cash Flows
Unaudited (Dollars in thousands)
 
   
  Six Months Ended
June 30,
  2014 2013
CASH FLOWS FROM OPERATING ACTIVITIES    
Net income  $ 36,620  $ 34,669
Adjustments to reconcile net income to net cash from operating activities:    
Depreciation, depletion and amortization 11,002 12,025
Basis of real estate sold 6,834 907
Change in deferred taxes 536 (338)
Employee benefit plans (267) 3,484
Equity-based compensation expense 2,032 2,101
Other, net (1,161) (61)
Working capital and operating related activities 12,836 (11,272)
Net cash from operating activities 68,432 41,515
CASH FLOWS FROM INVESTING ACTIVITIES    
Change in short-term investments (21,665) 19,032
Additions to property, plant and equipment (6,508) (5,792)
Additions to timber and timberlands (5,887) (4,683)
Other, net 334 (654)
Net cash from investing activities (33,726) 7,903
CASH FLOWS FROM FINANCING ACTIVITIES    
Distributions to common stockholders (28,413) (25,115)
Repayment of long-term debt (36,663)
Exercises of stock options 15 1,798
Employee tax withholdings on equity-based compensation (1,079) (1,700)
Change in book overdrafts (1,424) 1,723
Other, net (139) (40)
Net cash from financing activities (31,040) (59,997)
Change in cash 3,666 (10,579)
Cash at beginning of period 5,586 16,985
Cash at end of period  $ 9,252  $ 6,406
 
 
Potlatch Corporation
Segment Information
Unaudited (Dollars in thousands)
 
         
  Quarter Ended
June 30,
Six Months Ended
June 30,
  2014 2013 2014 2013
Revenues:        
Resource  $ 39,512  $ 45,269  $ 91,417  $100,237
Real Estate 15,737 5,809 30,176 10,444
Wood Products 100,572 94,982 188,376 186,526
  155,821 146,060 309,969 297,207
Elimination of intersegment revenues - Resource (11,902) (12,848) (26,471) (24,742)
Total consolidated revenues  $143,919  $133,212  $283,498  $272,465
         
Operating income:        
Resource  $ 10,818  $ 14,467  $ 27,042  $ 29,992
Real Estate 12,378 4,116 20,649 7,199
Wood Products 14,870 19,725 27,577 38,635
Eliminations and adjustments 788 235 1,630 724
  38,854 38,543 76,898 76,550
Corporate (9,129) (9,102) (15,864) (20,501)
Operating income 29,725 29,441 61,034 56,049
Interest expense, net (5,509) (5,667) (10,969) (12,003)
Income before income taxes  $ 24,216  $ 23,774  $ 50,065  $ 44,046
         
Depreciation, depletion and amortization:        
Resource  $ 2,728  $ 3,040  $ 6,644  $ 7,632
Real Estate 14 14 29 27
Wood Products 1,515 1,520 3,044 3,029
  4,257 4,574 9,717 10,688
Corporate 641 584 1,285 1,337
Total depreciation, depletion and amortization  $ 4,898  $ 5,158  $ 11,002  $ 12,025
         
Basis of real estate sold:        
Real Estate  $ 2,242  $ 584  $ 7,409  $ 1,200
Eliminations and adjustments (30) (134) (575) (293)
Total basis of real estate sold  $ 2,212  $ 450  $ 6,834  $ 907
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