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Potlatch Corporation Reports First Quarter 2017 Results

SPOKANE, Wash., April 26, 2017 (GLOBE NEWSWIRE) -- Potlatch Corporation (Nasdaq:PCH) today reported net income of $16.9 million, or $0.41 per diluted share, on revenues of $149.7 million for the quarter ended March 31, 2017. Net income was $0.2 million, or $0.00 per diluted share, on revenues of $127.9 million in the first quarter of 2016.

"Higher lumber prices continue to drive results in our Resource and Wood Products segments, resulting in strong first quarter earnings," said Mike Covey, chairman and chief executive officer.  "We were pleased with the preliminary countervailing duty announcement on Canadian lumber earlier this week and look forward to the antidumping announcement near the end of June.  Record cedar log prices in Idaho contributed to our strong results as well as closing a land conservation sale for almost $2,600 per acre," stated Mr. Covey.

Financial Highlights (in millions, except per share data)

  Q1 2017  Q4 2016  Q1 2016 
Revenues $149.7  $155.7  $127.9 
Net income $16.9  $14.4  $0.2 
Net income per diluted share $0.41  $0.35  $ 
Distribution per share $0.375  $0.375  $0.375 
Net cash from operations $41.9  $27.7  $28.9 
Cash and cash equivalents $101.7  $82.6  $7.8 

Business Performance: Q1 2017 vs. Q4 2016


Resource's operating income was $14.9 million on revenues of $51.8 million in the first quarter, compared to operating income of $22.7 million on revenues of $66.8 million in the fourth quarter of 2016. Harvest volumes were seasonally lower. A 3% increase in Northern sawlog prices was due largely to the strength of cedar sawlog prices. Southern sawlog prices decreased 9% primarily due to a seasonally lower mix of hardwood logs.

Wood Products

Wood Products earned $8.7 million on revenues of $95.6 million in the first quarter, compared to operating income of $8.3 million on revenues of $95.6 million in the fourth quarter of 2016. Average lumber prices were 7% higher in the first quarter compared to the fourth quarter while lumber shipments were 7% lower as a result of a scheduled boiler maintenance shutdown and capital project at the Warren, Arkansas sawmill.

Real Estate

Real Estate's operating income was $8.6 million on revenues of $14.5 million in the first quarter, compared to operating income of $6.0 million on revenues of $8.7 million in the fourth quarter of 2016.  A higher average sales price offset the effect of selling fewer acres.


"Due to strong lumber demand and the favorable duty determination, we expect significantly improved operating results in our Wood Products segment in the second quarter.  Due to seasonal harvest restrictions in Idaho we expect Resource income to decline due to lower harvest volumes.  We are very pleased with the outlook for our three business segments and believe that our significant leverage to lumber pricing will translate into strong earnings for the balance of the year," concluded Mr. Covey.

Conference Call Information

A live conference call and webcast will be held today, April 27, 2017, at 9:00 a.m. Pacific Time (12:00 p.m. 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 99765039. 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 May 2, 2017 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 99765039 to access the replay.

About Potlatch

Potlatch is a Real Estate Investment Trust (REIT) with approximately 1.4 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, our expectations regarding U.S. housing market recovery; 1.25 to 1.3 million housing units to be built in the U.S. in 2017; strong repair and remodel market; lumber demand, implementation of duties in the Canadian lumber trade case; future company performance; the direction of our business markets; business conditions, pricing, EBITDDA and earnings in our Resource, Wood Products and Real Estate segments; company earnings in the second quarter of 2017;  improved wood products markets in the second quarter of 2017; harvest volumes in the second quarter of 2017 and for the full year; percentage of North and South harvest and sawlogs to be harvested in the North and the South in the second quarter of 2017; robust cedar sawlog market resulting in an increase in EBITDDA compared to 2016; increased lumber shipments in the second quarter of 2017 and for the year; real estate sales in the second quarter of 2017; corporate expenses and interest expense in the second quarter of 2017; tax rate for the second quarter of 2017 and full year; debt maturities; 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, the U.S. housing market, 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; availability of logging contractors; changes in the United States and international economies; changes in the level of construction activity; changes in Asia 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; changes in share price; 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)
  Three Months Ended March 31, 
  2017  2016 
Revenues $149,681  $127,896 
Costs and expenses:        
Cost of goods sold  112,783   109,815 
Selling, general and administrative expenses  12,989   13,009 
   125,772   122,824 
Operating income  23,909   5,072 
Interest expense, net  (4,970)  (6,025)
Income (loss) before income taxes  18,939   (953)
Income tax (provision) benefit  (2,018)  1,110 
Net income $16,921  $157 
Net income per share:        
Basic $0.41  $ 
Diluted $0.41  $ 
Dividends per share $0.375  $0.375 
Weighted-average shares outstanding (in thousands):        
Basic  40,778   40,875 
Diluted  41,071   40,960 

Potlatch Corporation
Condensed Consolidated Balance Sheets
Unaudited (Dollars in thousands)
  March 31, 2017  December 31, 2016 
Current assets:        
Cash and cash equivalents $101,664  $82,584 
Receivables, net  16,328   17,284 
Inventories  45,347   52,622 
Other assets  8,675   11,155 
Total current assets  172,014   163,645 
Property, plant and equipment, net  74,466   72,820 
Timber and timberlands, net  637,319   641,856 
Deferred tax assets, net  41,550   42,051 
Other assets  7,322   7,309 
Total assets $932,671  $927,681 
Current liabilities:        
Current portion of long-term debt $25,408  $11,032 
Accounts payable and accrued liabilities  44,209   43,710 
Current portion of pension and other postretirement employee benefits  5,839   5,839 
Total current liabilities  75,456   60,581 
Long-term debt  558,510   572,956 
Pension and other postretirement employee benefits  123,939   123,284 
Other long-term obligations  15,504   14,586 
Total liabilities  773,409   771,407 
Commitments and contingencies        
Stockholders' equity:        
Common stock, $1 par value  40,608   40,519 
Additional paid-in capital  355,174   355,274 
Accumulated deficit  (127,109)  (128,775)
Accumulated other comprehensive loss  (109,411)  (110,744)
Total stockholders' equity  159,262   156,274 
Total liabilities and stockholders' equity $932,671  $927,681 


Potlatch Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited (Dollars in thousands)
  Three Months Ended March 31, 
  2017  2016 
Net income $16,921  $157 
Adjustments to reconcile net income to net cash from operating activities:        
Depreciation, depletion and amortization  6,702   8,605 
Basis of real estate sold  4,790   2,034 
Change in deferred taxes  (351)  (1,110)
Employee benefit plans  3,292   2,737 
Equity-based compensation expense  1,157   954 
Other, net  (528)  (531)
Change in working capital and operating-related activities, net  9,966   16,047 
Net cash from operating activities  41,949   28,893 
Purchase of property, plant and equipment  (3,636)  (932)
Timberlands reforestation and roads  (2,645)  (2,242)
Other, net  (102)  116 
Net cash from investing activities  (6,383)  (3,058)
Dividends to common stockholders  (15,228)  (15,258)
Repayment of revolving line of credit borrowings     (30,000)
Repayment of long-term debt     (5,000)
Proceeds from issuance of long-term debt     27,500 
Change in book overdrafts     (2,836)
Other, net  (1,258)  (342)
Net cash from financing activities  (16,486)  (25,936)
Change in cash and cash equivalents  19,080   (101)
Cash and cash equivalents at beginning of period  82,584   7,925 
Cash and cash equivalents at end of period $101,664  $7,824 

Potlatch Corporation
Segment Information
Unaudited (Dollars in thousands)
  Three Months Ended March 31, 
  2017  2016 
Resource $51,768  $48,710 
Wood Products  95,592   83,238 
Real Estate  14,504   5,566 
   161,864   137,514 
Intersegment Resource revenues  (12,183)  (9,618)
Total consolidated revenues $149,681  $127,896 
Income (loss) before income taxes:        
Resource $14,929  $10,207 
Wood Products  8,684   956 
Real Estate  8,643   2,075 
Eliminations and adjustments  1,059   1,465 
   33,315   14,703 
Corporate  (9,406)  (9,631)
Operating income  23,909   5,072 
Interest expense, net  (4,970)  (6,025)
Income (loss) before income taxes $18,939  $(953)
Depreciation, depletion and amortization:        
Resource $4,384  $6,128 
Wood Products  1,827   1,901 
Real Estate  1   2 
   6,212   8,031 
Corporate  117   208 
Bond discounts and deferred loan fees  373   366 
Total depreciation, depletion and amortization $6,702  $8,605 
Basis of real estate sold:        
Real Estate $4,809  $2,245 
Eliminations and adjustments  (19)  (211)
Total basis of real estate sold $4,790  $2,034 
Jerry Richards

Mark Benson