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07/24/17
Potlatch Corporation Reports Second Quarter 2017 Results

SPOKANE, Wash., July 24, 2017 (GLOBE NEWSWIRE) -- Potlatch Corporation (Nasdaq:PCH) today reported net income of $24.3 million, or $0.59 per diluted share, on revenues of $163.2 million for the quarter ended June 30, 2017. Net loss was $31.3 million, or $0.77 per diluted share, on revenues of $141.5 million in the second quarter of 2016. Excluding the after-tax loss of $36.7 million on the sale of central Idaho timber and timberlands, net income was $5.4 million, or $0.13 per diluted share for the quarter ended June 30, 2016.

"The power of our leverage to lumber prices was reflected in our strong financial performance in the second quarter," said Mike Covey, chairman and chief executive officer. "Our Wood Products segment shipped a record volume of lumber for the third time in four quarters, maximizing the benefit of robust lumber prices. Lumber prices also lifted mixed sawlog prices in Idaho and cedar sawlog prices remain at record levels," stated Mr. Covey.

Financial Highlights (in millions, except per share data)

  Q2 2017  Q1 2017  Q2 2016 
Revenues $163.2  $149.7  $141.5 
Net income $24.3  $16.9  $(31.3)
Net income per diluted share $0.59  $0.41  $(0.77)
Distribution per share $0.375  $0.375  $0.375 
Net cash from operations $37.5  $41.9  $16.8 
Cash and cash equivalents $110.3  $101.7  $65.4 
             

Business Performance: Q2 2017 vs. Q1 2017

Resource

Resource's operating income was $19.5 million on revenues of $55.9 million in the second quarter, compared to operating income of $14.9 million on revenues of $51.8 million in the first quarter of 2017. Northern sawlog prices increased 26% relative to the first quarter due primarily to the effect of higher lumber prices on indexed sales agreements. Lower harvest volumes due to spring break-up in Idaho and slightly lower Southern sawlog prices partially offset the benefit of higher Northern sawlog prices.

Wood Products

Wood Products earned $24.7 million on revenues of $114.5 million in the second quarter, compared to operating income of $8.7 million on revenues of $95.6 million in the first quarter of 2017. Average lumber prices were 11% higher and shipments increased 13% in the second quarter compared to the first quarter.

Real Estate

Real Estate's operating income was $5.8 million on revenues of $8.1 million in the second quarter, compared to operating income of $8.6 million on revenues of $14.5 million in the first quarter of 2017. Fewer acres were sold at a lower average sales price in the second quarter compared to the first quarter.

Outlook

"Due to a seasonal increase in our harvest volumes, we expect significantly improved operating results in our Resource segment in the third quarter. 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.

Reconciliation of Q2 2016 Earnings (in millions, except per share data)

  Amount  Per Share 
Net income (loss) $(31.3) $(0.77)
Net loss on sale of central Idaho timberland  36.7   0.90 
Net income (loss), as adjusted $5.4  $0.13 
         

Conference Call Information

A live conference call and webcast will be held today, July 25, 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 47086081. 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 August 1, 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 47086081 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 the U.S. housing market; strong repair and remodel market; lumber demand and pricing; 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 third quarter of 2017 and for the full year; harvest volumes in the third quarter of 2017 and for the full year; percentage of total harvest that will occur in the North and South and the percentage of sawlogs to be harvested in the North and the South in the third quarter of 2017; robust cedar sawlog market resulting in an increase in EBITDDA compared to 2016; lumber shipments in the third quarter of 2017 and for the year; real estate sales in the third quarter of 2017; capital projects and capital expenditures in 2017; corporate expenses and interest expense in the third quarter of 2017; tax rate for the third 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 and shipping capacity; 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 (Loss)
Unaudited
            
  Three Months Ended         
  June 30,  March 31,  June 30,  Six Months Ended June 30, 
(Dollars in thousands, except per share amount) 2017  2017  2016  2017  2016 
Revenues $163,229  $149,681  $141,495  $312,910  $269,391 
Costs and expenses:                    
Cost of goods sold  111,556   112,783   113,377   224,339   223,192 
Selling, general and administrative expenses  14,165   12,989   13,824   27,154   26,833 
Gain on lumber price swap  (3,265)        (3,265)   
Loss on sale of central Idaho1        48,522      48,522 
   122,456   125,772   175,723   248,228   298,547 
Operating income (loss)  40,773   23,909   (34,228)  64,682   (29,156)
Interest expense, net  (7,348)  (4,970)  (8,206)  (12,318)  (14,231)
Income (loss) before income taxes  33,425   18,939   (42,434)  52,364   (43,387)
Income tax (provision) benefit  (9,181)  (2,018)  11,196   (11,199)  12,306 
Net income (loss) $24,244  $16,921  $(31,238) $41,165  $(31,081)
                     
Net income (loss) per share:                    
Basic $0.59  $0.41  $(0.77) $1.01  $(0.76)
Diluted $0.59  $0.41  $(0.77) $1.00  $(0.76)
Dividends per share $0.375  $0.375  $0.375  $0.75  $0.75 
(In thousands)                    
Weighted-average shares outstanding:                    
Basic  40,823   40,778   40,784   40,802   40,837 
Diluted  41,219   41,071   40,784   41,144   40,837 
                     
1 In the second quarter of 2016, we sold approximately 172,000 acres of timberlands located in central Idaho for $114 million at a loss of $48.5 million before taxes.
 

 

Potlatch Corporation
Condensed Consolidated Balance Sheets
Unaudited
       
(Dollars in thousands) June 30, 2017  December 31, 2016 
ASSETS        
Current assets:        
Cash and cash equivalents $110,324  $82,584 
Receivables, net  23,536   17,284 
Inventories  40,124   52,622 
Other assets  12,396   11,155 
Total current assets  186,380   163,645 
Property, plant and equipment, net  74,671   72,820 
Timber and timberlands, net  639,178   641,856 
Deferred tax assets, net  39,445   42,051 
Other assets  7,100   7,309 
Total assets $946,774  $927,681 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Current portion of long-term debt $20,349  $11,032 
Accounts payable and accrued liabilities  53,130   43,710 
Current portion of pension and other postretirement employee benefits  5,839   5,839 
Total current liabilities  79,318   60,581 
Long-term debt  558,853   572,956 
Pension and other postretirement employee benefits  123,745   123,284 
Other long-term obligations  14,529   14,586 
Total liabilities  776,445   771,407 
Commitments and contingencies        
Stockholders' equity:        
Common stock, $1 par value  40,610   40,519 
Additional paid-in capital  356,453   355,274 
Accumulated deficit  (118,120)  (128,775)
Accumulated other comprehensive loss  (108,614)  (110,744)
Total stockholders' equity  170,329   156,274 
Total liabilities and stockholders' equity $946,774  $927,681 
         

 

Potlatch Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited
    
   Six Months Ended June 30, 
(Dollars in thousands) 2017  2016 
CASH FLOWS FROM OPERATING ACTIVITIES        
Net income $41,165  $(31,081)
Adjustments to reconcile net income to net cash from operating activities:        
Depreciation, depletion and amortization  13,343   16,474 
Basis of real estate sold  5,772   5,421 
Change in deferred taxes  1,244   (6,784)
Pension and other postretirement employee benefits  6,575   7,830 
Equity-based compensation expense  2,348   2,176 
Loss on sale of central Idaho timber and timberlands     48,522 
Other, net  (983)  (1,280)
Change in working capital and operating-related activities, net  9,919   4,383 
Net cash from operating activities  79,383   45,661 
CASH FLOWS FROM INVESTING ACTIVITIES        
Purchase of property, plant and equipment  (5,939)  (3,488)
Timberlands reforestation and roads  (5,792)  (5,544)
Acquisition of timber and timberlands  (3,132)  (1,161)
Net proceeds from sale of central Idaho timber and timberlands     111,460 
Other, net  (74)  109 
Net cash from investing activities  (14,937)  101,376 
CASH FLOWS FROM FINANCING ACTIVITIES        
Dividends to common stockholders  (30,457)  (30,453)
Repayment of revolving line of credit borrowings     (30,000)
Repayment of long-term debt  (5,000)  (47,600)
Proceeds from issuance of long-term debt     27,500 
Repurchase of common stock     (5,956)
Other, net  (1,249)  (3,075)
Net cash from financing activities  (36,706)  (89,584)
Change in cash and cash equivalents  27,740   57,453 
Cash and cash equivalents at beginning of period  82,584   7,925 
Cash and cash equivalents at end of period $110,324  $65,378 
         


Potlatch Corporation
Segment Information
Unaudited
            
  Three Months Ended         
  June 30,  March 31,  June 30,  Six Months Ended June 30, 
(Dollars in thousands) 2017  2017  2016  2017  2016 
Revenues:                    
Resource $55,924  $51,768  $54,826  $107,692  $103,536 
Wood Products  114,529   95,592   90,924   210,121   174,162 
Real Estate  8,136   14,504   9,954   22,640   15,520 
   178,589   161,864   155,704   340,453   293,218 
Intersegment Resource revenues  (15,360)  (12,183)  (14,209)  (27,543)  (23,827)
Total consolidated revenues $163,229  $149,681  $141,495  $312,910  $269,391 
                     
Income (loss) before income taxes:                    
Resource $19,520  $14,929  $15,672  $34,449  $25,879 
Wood Products  24,705   8,684   4,695   33,389   5,651 
Real Estate  5,725   8,643   (43,429)  14,368   (41,354)
Eliminations and adjustments  1,053   1,059   (969)  2,112   496 
   51,003   33,315   (24,031)  84,318   (9,328)
Corporate  (10,230)  (9,406)  (10,197)  (19,636)  (19,828)
Operating income (loss)  40,773   23,909   (34,228)  64,682   (29,156)
Interest expense, net  (7,348)  (4,970)  (8,206)  (12,318)  (14,231)
Income (loss) before income taxes $33,425  $18,939  $(42,434) $52,364  $(43,387)
                     
Depreciation, depletion and amortization:                    
Resource $4,274  $4,384  $5,387  $8,658  $11,515 
Wood Products  1,839   1,827   1,800   3,666   3,701 
Real Estate     1   1   1   3 
   6,113   6,212   7,188   12,325   15,219 
Corporate  158   117   213   275   421 
Bond discounts and deferred loan fees  370   373   468   743   834 
Total depreciation, depletion and amortization $6,641  $6,702  $7,869  $13,343  $16,474 
                     
Basis of real estate sold:                    
Real Estate $1,047  $4,809  $3,509  $5,856  $5,754 
Eliminations and adjustments  (65)  (19)  (122)  (84)  (333)
Total basis of real estate sold $982  $4,790  $3,387  $5,772  $5,421 
                     

 

Contact:
(Investors)
Jerry Richards
509.835.1521

(Media)
Mark Benson
509.835.1513