January 31, 2017

Potlatch Corporation Reports Fourth Quarter and Full Year 2016 Results

SPOKANE, Wash., Jan. 31, 2017 (GLOBE NEWSWIRE) -- Potlatch Corporation (Nasdaq:PCH) today reported net income of $14.4 million, or $0.35 per diluted share, on revenues of $155.7 million for the quarter ended December 31, 2016. This compares to net income of $3.5 million, or $0.09 per diluted share, on revenues of $138.0 million in the fourth quarter of 2015.

Net income for the full year of 2016 was $10.9 million, or $0.27 per diluted share, on revenues of $599.1 million.  Excluding the after-tax loss of $36.7 million ($0.89 per diluted share) on the previously announced sale of 172,000 acres in central Idaho, 2016 net income was $47.6 million, or $1.16 per diluted share.  Net income was $31.7 million, or $0.77 per diluted share, on revenues of $575.3 million in 2015.

"Strong performance by each of our three businesses and improved lumber prices resulted in solid earnings this year," said Mike Covey, chairman and chief executive officer. "Our mills continue to run well and we achieved new quarterly production records in the third and fourth quarters.  Resource successfully managed through challenging weather conditions to achieve our planned harvest volume for the year.  Real Estate continues to identify opportunities to drive value and closed a series of attractive conservation sales during 2016.  Turning to the balance sheet, we also reduced net debt by $125 million this year, increasing our financial flexibility, and returned $67 million to shareholders in the form of dividends and share repurchases," stated Mr. Covey.

      
Financial Highlights (in millions, except per share data)     
  Q4 2016  Q3 2016  Q4 2015 
Revenues $155.7  $174.0  $138.0 
Net income $14.4  $27.6  $3.5 
Net income per diluted share $0.35  $0.68  $0.09 
Distribution per share $0.375  $0.375  $0.375 
Net cash from operations $27.7  $28.7  $18.9 
Cash and cash equivalents $82.6  $72.9  $7.9 
             

Business Performance: Q4 2016 vs. Q3 2016

Resource

Resource's operating income was $22.7 million on revenues of $66.8 million in the fourth quarter, compared to operating income of $33.3 million on revenues of $85.8 million in the third quarter of 2016. Harvest volumes decreased 11% in the fourth quarter.  The highest harvest volume of the year consistently occurs in the third quarter due to more favorable operating conditions.  Northern sawlog prices were 13% lower in the fourth quarter due largely to a lower mix of cedar logs. Prices realized for sawlogs in the South decreased 7% primarily due to a seasonally lower mix of hardwood logs.

Wood Products

Wood Products earned $8.3 million on revenues of $95.6 million in the fourth quarter, compared to operating income of $10.6 million on revenues of $97.6 million in the third quarter of 2016.  Average lumber prices were 2% lower and lumber shipments increased 3% in the fourth quarter compared to the third quarter.

Real Estate

Real Estate's operating income was $6.0 million on revenues of $8.7 million in the fourth quarter, compared to operating income of $5.9 million on revenues of $8.4 million in the third quarter of 2016.  The effect of a 15% increase in the number of acres sold was offset by a lower average sales price.  The sales mix was more heavily weighted to non-strategic timberlands in the fourth quarter.

Outlook

"We expect the U.S. housing market to continue its modest pace of recovery and our 2017 outlook assumes that at least 1.2 million housing units will be built in the U.S. this year.  We also expect lumber prices to be volatile as a result of the lumber trade case which could result in an increase in our earnings this year relative to 2016.  We plan to harvest 4.2 million tons in our Resource segment and anticipate selling approximately 20,000 acres in our Real Estate segment in 2017," concluded Mr. Covey.

Conference Call Information

A live conference call and webcast will be held today, January 31, 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 48063972. 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 February 7, 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 48063972 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; 1.2 million housing units to be built in the U.S. in 2017; future company performance; the direction of our business markets; business conditions in our Resource, Wood Products and Real Estate segments; volatility in lumber pricing in 2017; harvest volumes in 2017; real estate sales in 2017; 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)
 
  
  
  For the Three Months Ended
December
 31,
  For the Years Ended
December
 31,
 
  2016  2015  2016  2015 
Revenues $155,681  $137,989  $599,099  $575,336 
Costs and expenses:                
Cost of goods sold  116,980   116,752   462,304   470,037 
Selling, general and administrative expenses  12,985   11,382   52,719   46,392 
Loss on sale of central Idaho timber and timberlands        48,522    
   129,965   128,134   563,545   516,429 
Operating income  25,716   9,855   35,554   58,907 
Interest expense, net  (6,924)  (8,341)  (28,941)  (32,761)
Income before income taxes  18,792   1,514   6,613   26,146 
Income tax (provision) benefit  (4,419)  2,035   4,325   5,568 
Net income $14,373  $3,549  $10,938  $31,714 
                 
Net income per share:                
Basic $0.35  $0.09  $0.27  $0.78 
Diluted $0.35  $0.09  $0.27  $0.77 
Dividends per share $0.375  $0.375  $1.50  $1.50 
Weighted-average shares outstanding (in thousands):                
Basic  40,752   40,866   40,798   40,842 
Diluted  41,069   40,948   41,033   40,988 

 

Potlatch Corporation
Condensed Consolidated Balance Sheets
Unaudited (Dollars in thousands)
 
  
  At December 31, 
  2016  2015 
ASSETS        
Current assets:        
Cash and cash equivalents $82,584  $7,925 
Receivables, net  17,284   13,420 
Inventories  52,622   35,162 
Other assets  11,155   14,246 
Total current assets  163,645   70,753 
Property, plant and equipment, net  72,820   75,285 
Timber and timberlands, net  641,856   816,599 
Deferred tax assets, net  42,051   46,600 
Other assets  7,309   7,375 
Total assets $927,681  $1,016,612 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Revolving line of credit borrowings $  $30,000 
Current portion of long-term debt  11,032   5,007 
Accounts payable and accrued liabilities  43,710   39,740 
Current portion of pension and other postretirement employee benefits  5,839   5,973 
Total current liabilities  60,581   80,720 
Long-term debt  572,956   598,874 
Pension and other postretirement employee benefits  123,284   119,369 
Other long-term obligations  14,586   13,913 
Total liabilities  771,407   812,876 
Commitments and contingencies        
Stockholders' equity:        
Common stock, $1 par value  40,519   40,681 
Additional paid-in capital  355,274   350,541 
Accumulated deficit  (128,775)  (72,983)
Accumulated other comprehensive loss  (110,744)  (114,503)
Total stockholders' equity  156,274   203,736 
Total liabilities and stockholders' equity $927,681  $1,016,612 
 

 

 
Potlatch Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited (Dollars in thousands)
 
  
  For the Years Ended December 31, 
  2016  2015 
CASH FLOWS FROM OPERATING ACTIVITIES        
Net income $10,938  $31,714 
Adjustments to reconcile net income to net cash from operating activities:        
Depreciation, depletion and amortization  34,190   38,105 
Basis of real estate sold  8,011   7,012 
Change in deferred taxes  1,853   (5,696)
Employee benefit plans  10,479   4,986 
Equity-based compensation expense  4,390   4,758 
Loss on sale of central Idaho timber and timberlands  48,522    
Other, net  (1,198)  (2,046)
Change in:        
Receivables  (3,712)  (3,864)
Inventories  (17,460)  (3,672)
Other assets  (473)  898 
Accounts payable and accrued liabilities  7,232   267 
Other liabilities  645   1,552 
Funding of qualified pension plans  (1,300)   
Net cash from operating activities  102,117   74,014 
CASH FLOWS FROM INVESTING ACTIVITIES        
Change in short-term investments     6,995 
Transfer from company owned life insurance (COLI)  2,417   1,492 
Purchase of property, plant and equipment  (5,866)  (18,987)
Timberlands reforestation and roads  (13,422)  (13,745)
Acquisition of timber and timberlands  (1,244)  (10,230)
Net proceeds from sale of central Idaho timber and timberlands  111,460    
Other, net  6   886 
Net cash from investing activities  93,351   (33,589)
CASH FLOWS FROM FINANCING ACTIVITIES        
Dividends to common stockholders  (60,842)  (61,017)
Revolving line of credit borrowings (repayment)  (30,000)  30,000 
Repayment of long-term debt  (113,335)  (22,500)
Repurchase of common stock  (5,956)   
Proceeds from issuance of long-term debt  93,235    
Other, net  (3,911)  (3,000)
Net cash from financing activities  (120,809)  (56,517)
Change in cash and cash equivalents  74,659   (16,092)
Cash and cash equivalents at beginning of year  7,925   24,017 
Cash and cash equivalents at end of year $82,584  $7,925 
 

 

Potlatch Corporation
Segment Information
Unaudited (Dollars in thousands)
 
  
  For the Three Months Ended December 31,  For the Years Ended December 31, 
(Dollars in thousands) 2016  2015  2016  2015 
Revenues:                
Resource $66,805  $63,487  $256,163  $263,875 
Wood Products  95,644   79,922   367,426   336,214 
Real Estate  8,658   7,305   32,604   28,989 
   171,107   150,714   656,193   629,078 
Intersegment Resource revenues  (15,426)  (12,725)  (57,094)  (53,742)
Total consolidated revenues $155,681  $137,989  $599,099  $575,336 
                 
Income (loss) before income taxes:                
Resource $22,736  $16,186  $81,918  $76,350 
Wood Products  8,279   (1,360)  24,587   (5,235)
Real Estate1  5,974   2,495   (29,495)  16,849 
Eliminations and adjustments  (1,551)  333   (3,001)  3,283 
   35,438   17,654   74,009   91,247 
Corporate  (9,722)  (7,799)  (38,455)  (32,340)
Operating income  25,716   9,855   35,554   58,907 
Interest expense, net  (6,924)  (8,341)  (28,941)  (32,761)
Income before income taxes $18,792  $1,514  $6,613  $26,146 
                 
Depreciation, depletion and amortization:                
Resource $6,119  $7,494  $24,090  $28,807 
Wood Products  1,819   1,880   7,357   6,810 
Real Estate  1   12   4   56 
   7,939   9,386   31,451   35,673 
Corporate  152   197   760   951 
Bond discounts and deferred loan fees  376   368   1,979   1,481 
Total depreciation, depletion and amortization $8,467  $9,951  $34,190  $38,105 
                 
Basis of real estate sold:                
Real Estate $1,400  $3,763  $8,518  $7,394 
Eliminations and adjustments  (75)  (140)  (507)  (382)
Total basis of real estate sold $1,325  $3,623  $8,011  $7,012 
  
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.

 

Contact:	
(Investors)
Jerry Richards
509.835.1521

(Media)
Mark Benson
509.835.1513


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