SPOKANE, Wash., Feb 09, 2010 (BUSINESS WIRE) -- Potlatch Corporation (NYSE:PCH) today reported financial results for the fourth quarter and full year ended December 31, 2009.
"Despite the poor economic conditions in 2009, we are pleased with our overall performance during the year. For full year 2009 we generated $81.4 million of earnings from continuing operations and $126.8 million of funds from continuing operations (FFO), and we continue to see gradual improvement in each of our core businesses," said Michael Covey, chairman, president and chief executive officer of Potlatch Corporation. "In our Resource segment, timber prices continue to stabilize and are now improving as we move into the first quarter of 2010. In our Wood Products segment, we had another quarter of positive cash flow. Our Real Estate segment had a solid quarter, completing 40 transactions which produced $4.5 million of operating income. Also, during the quarter we took steps to improve our balance sheet, as we issued $150 million of long-term debt in November, which allowed us to pay off the balance of our bank credit facility. Our $100 million of credit sensitive debentures matured and were redeemed in early December," concluded Mr. Covey.
Q4 2009 FINANCIAL SUMMARY
Q4 2009 BUSINESS PERFORMANCE
Overall prices decreased slightly for the period, with the exception of pulpwood prices in the northern region, which remained stable. Despite the slight decrease in Q4 2009 from Q3 2009, sawlog prices in the northern region remained higher in the fourth quarter than they were in the first and second quarters of 2009. With the exception of pulpwood volumes in the northern region, fee harvest volumes were lower in the fourth quarter of 2009 compared to the same period in 2008. In the fourth quarter of 2009, our planned harvest deferral and extremely wet weather conditions in the southern region contributed to decreased harvest levels. In the fourth quarter of 2008, both regions experienced ideal logging conditions.
Results from the Real Estate segment were higher in Q4 2009 compared to Q4 2008, primarily due to more acres of rural recreational real estate sold and at a slightly higher price per acre. The Q4 2009 results were also higher than Q3 2009, primarily due to the sales mix between the quarters. The demand for property has continued at a fairly steady level, particularly for rural recreational property. Real Estate segment results depend on the timing of sales transactions, and are often uneven from one reporting period to another.
During the fourth quarter of 2009, the Wood Products segment recorded a $3.0 million asset impairment charge related to our Post Falls particleboard plant. Excluding this charge, operating results for the fourth quarter were only slightly lower than for the third quarter. Operating losses declined in each consecutive quarter from the fourth quarter of 2008 through the third quarter of 2009. In addition, for the second consecutive quarter, the segment had positive operating cash flows.
2009 FULL YEAR FINANCIAL SUMMARY
Senior Notes Offering
In November, Potlatch issued $150 million aggregate principal amount of senior unsecured notes due 2019 in a private placement. The notes have an interest rate of 7.5% and were issued at a price equal to 98.284% of their face value. Approximately $73 million of the proceeds of the offering were used to repay the outstanding balance of the company's secured bank credit facility. The remainder of the proceeds will be used for general corporate purposes.
During the fourth quarter, Potlatch paid its regular quarterly cash distribution on the company's common stock of $0.51 per share.
"Our outlook for 2010 shows improvement as we move through the year. We expect operations in the first half to remain challenging but expect improved fundamentals as we move into the second half. We do expect an upturn in the housing market, but not until the second half of the year. The recent strengthening in lumber prices will benefit our Wood Products business and this trend, coupled with gradual improvement in housing starts, should lead to stronger demand and pricing for logs. We were encouraged that prices stabilized in our Resource business during the second and third quarters of 2009, and the slight dip in fourth quarter prices appears to have been temporary as prices have shown improvement early in Q1 2010. We anticipate increasing harvest volumes to approximately 4.2 million tons for 2010, but this will be dependent on improved pricing and is weighted to the back half of the year. In our Real Estate segment, we expect the business to perform very similar to the results we experienced in 2009. This outlook is supported by consistent performance throughout 2009, continued interest in our non-strategic timberlands and pricing that has remained stable.
"We remain optimistic about our long term prospects, as our businesses are positioned well for the housing market recovery," concluded Mr. Covey.
CONFERENCE CALL INFORMATION
A live webcast and conference call will be held Tuesday, February 9, 2010, at 11 a.m. Eastern (8 a.m. Pacific). 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 50483964. Supplemental materials that will be discussed during the call will be available on our Web site.
For those unable to participate in the call, an archived recording will be available through our Web site at http://www.potlatchcorp.com for approximately one year following the conference call. A telephone replay of the conference call will be available until February 16, 2010, by calling 800-642-1687 for U.S./Canada or 706-645-9291 for international callers and entering passcode number 50483964.
Funds from continuing operations (FFO) is a non-GAAP measure defined and reconciled to GAAP in the attached financial statements.
Potlatch is a Real Estate Investment Trust (REIT) with approximately 1.6 million acres of timberland in Arkansas, Idaho, Minnesota and Wisconsin. 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 future company performance, direction of markets, timber and log demand and pricing, future harvest levels, demand for real estate, lumber pricing, the recovery of the lumber and housing markets, and use of proceeds from our senior notes offering. 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 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. These forward-looking statements are made as of the date hereof and the company does not undertake to update any forward-looking statements.