SPOKANE, Wash., Oct 28, 2010 (BUSINESS WIRE) -- Potlatch Corporation (NYSE:PCH) today reported financial results for the third quarter ended September 30, 2010.
"We continue to improve our balance sheet with the sale of non-strategic timberland and each of our business segments reported solid quarterly results based on each segment's market conditions through the third quarter," said Michael Covey, chairman, president and chief executive officer of Potlatch Corporation. "Our Resource segment had another strong quarter as both fee harvest volumes and prices increased over the second quarter of 2010 and the third quarter of 2009. This was the Resource segment's highest quarterly operating income since the third quarter of 2008, if the results of the timber deed in 2009 are removed. In our Real Estate segment, we completed the sale of non-strategic timberland in Wisconsin and Arkansas, and we continue to see steady interest in our higher and better use, or HBU, and rural real estate properties. As expected, our Wood Products segment experienced price pressure during the third quarter, but lumber sales volumes were adequate to operate our mills at capacity and the segment managed to operate at a positive cash flow level," concluded Mr. Covey.
Q3 2010 FINANCIAL SUMMARY
Q3 2010 BUSINESS PERFORMANCE
The Resource segment posted excellent results for the third quarter, which is seasonally the Northern region's strongest production quarter. Operating income for the segment was $24.3 million in Q3 2010, compared to $15.0 million in Q2 2010 and $55.4 million in Q3 2009. The Q3 2009 results include the timber deed sale, which provided $41.5 million of operating income for that period. Total fee harvest volumes increased 47 percent and 14 percent over Q2 2010 and Q3 2009, respectively. The harvest increase over Q3 2009 was due primarily to higher sawlog prices, but more favorable weather conditions in the south in Q3 2010 were an important contributor as well. Prices were up 4 percent and 16 percent over Q2 2010 and Q3 2009, respectively.
Operating income for the Real Estate segment was $9.8 million in Q3 2010 compared to $5.1 million in Q2 2010 and $1.5 million in Q3 2009. Real Estate segment results depend on the timing of sales transactions, the basis of the land sold and the types of properties that are sold, and are often uneven from one reporting period to another.
The Wood Products segment reported an operating loss of $0.6 million in Q3 2010 compared to operating income of $6.0 million in Q2 2010 and an operating loss of $1.5 million in Q3 2009. This was the first quarterly operating loss since Q4 2009, and is a result of lower lumber selling prices. However, the segment continued to have positive EBITDDA during Q3 2010.
During the third quarter, Potlatch paid a regular quarterly cash distribution on the company's common stock of $0.51 per share.
In August 2010, Potlatch sold approximately 29,800 acres of timberland in Wisconsin and 11,900 acres in Arkansas to RMK Timberland Group, or RMK, a timber investment management organization, for $28.7 million. In mid-October, Potlatch sold an additional 29,000 acres in Wisconsin and another 17,400 acres in Arkansas to RMK for approximately $36 million. The total Wisconsin sale includes all but approximately 1,200 acres of our land in Wisconsin, and those remaining Wisconsin properties are currently under contract to sell, or are expected to be sold within the next two to three years.
"The year-to-date performance of all three business segments improved compared to this period last year and reflects the fact that the economy has slowly begun to improve. However, lumber prices have recently receded from the sharp run-up we experienced earlier in the year, impacting our Wood Products operating results. We expect lumber prices to remain under pressure as we move through the fourth quarter of 2010 and into 2011. In addition, lower lumber prices are putting modest downward pressure on sawlog pricing, impacting our Resource segment's results. The third quarter is our seasonally strongest quarter in the Resource business, and weather conditions often begin to deteriorate about mid-November, particularly in our Northern region, so we expect harvest levels and the demand for logs to decrease as we move through the fourth quarter. Our 2010 harvest is still projected to be approximately 4.1 to 4.2 million tons. Results from the Real Estate segment for the fourth quarter will be higher than the third quarter due to the non-strategic land sale to RMK that occurred earlier this month for approximately $36 million. Finally, we are well positioned as we move into 2011, as the strong year-to-date operating performance of our business segments has resulted in over $71 million of cash and short-term investments on our balance sheet at the end of the third quarter," concluded Mr. Covey.
EBITDDA is a non-GAAP measure defined and reconciled to GAAP in the attached financial schedules.
CONFERENCE CALL INFORMATION
A live webcast and conference call will be held today, October 28, 2010, at 9 a.m. Pacific time (12 p.m. Eastern). Those interested may access the webcast at http://ir.potlatchcorp.com and conference call by dialing 866-393-8403 for U.S./Canada and 706-679-7929 for international callers. Participants will be asked to provide conference I.D. number 13233709. Supplemental materials that will be discussed during the call are available on our website.
For those unable to participate in the call, an archived recording will be available through the Potlatch Corporation website at http://ir.potlatchcorp.com for approximately one year following the conference call. A telephone replay of the conference call will be available until November 4, 2010, by calling 800-642-1687 for U.S./Canada or 706-645-9291 for international callers and entering passcode number 13233709.
Potlatch is a Real Estate Investment Trust (REIT) with approximately 1.5 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.
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, directions of markets, housing starts over the next several years, earnings and cashflows in our Resource and Wood Products segments, demand and price levels for logs and wood products, our 2010 harvest levels, performance of our Real Estate segment, demand and interest in non-strategic timberlands and rural recreational real estate and HBU lands, quarterly dividend levels, dividend policy, liquidity, and related 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 lumber 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 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 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.