January 28, 2015

Potlatch Corporation Reports Fourth Quarter and Full Year 2014 Results

SPOKANE, Wash., Jan. 28, 2015 (GLOBE NEWSWIRE) -- Potlatch Corporation (Nasdaq:PCH) today reported net income of $20.1 million, or $0.49 per diluted share, on revenues of $146.2 million for the quarter ended December 31, 2014. Excluding transaction-related expenses of $0.4 million and nonrecurring tax benefits of $1.9 million, fourth quarter 2014 earnings were $18.6 million, or $0.45 per diluted share. Net income was $13.7 million, or $0.34 per diluted share, on revenues of $140.0 million in the fourth quarter of 2013.

Net income for the full year of 2014 was $89.9 million, or $2.20 per diluted share, on revenues of $607.0 million. This compares to net income of $70.6 million, or $1.73 per diluted share, on revenues of $570.3 million in 2013.

"We are pleased with our performance this year, including the fact that we grew both the company and the dividend," said Michael Covey, chairman and chief executive officer. "The addition of approximately 201,000 acres of high-quality timberlands in Alabama and Mississippi increases our geographic and market diversity in the South. We delivered solid financial results in 2014 and we expect 2015 to be another good year," concluded Mr. Covey.

Financial Highlights

(millions, except per-share data)  Q4 2014    Q3 2014    Q4 2013  
Revenues   $ 146.2     $ 177.2     $ 140.0  
Net income   $ 20.1     $ 33.2     $ 13.7  
Net income per diluted share    $ 0.49     $ 0.81     $ 0.34  
Distribution per share   $ 0.375     $ 0.35     $ 0.35  
Net cash from operations   $ 23.7     $ 39.2     $ 15.2  
Cash and short-term investments at end of period   $ 31.0     $ 73.3     $ 57.8  

Business Performance: Q4 2014 vs. Q3 2014

Resource

Resource's operating income was $23.9 million on revenues of $69.2 million in the fourth quarter, compared to operating income of $34.1 million on revenues of $91.9 million in the third quarter of 2014. Harvest volumes were seasonally lower in the Northern and Southern regions. Northern sawlog price realizations decreased 4% per ton in the quarter due primarily to seasonally higher moisture content, but were flat on a dimensional, or board foot, basis. Southern sawlog prices were 7% lower largely due to a lower mix of hardwood logs. Southern pine sawlog prices were flat compared to the third quarter.

Wood Products

Wood Products' operating income was $9.1 million on revenues of $88.7 million in the fourth quarter, compared to operating income of $15.8 million on revenues of $99.2 million in the third quarter of 2014. Lumber shipments declined 9% due to fewer operating days in the quarter and the average lumber price realized was 4% lower in the fourth quarter. Log costs were also under pressure in the Lake States due to pulp mill demand in the region.

Real Estate

Real Estate's operating income was $1.6 million on revenues of $4.1 million in the fourth quarter, compared to operating income of $4.6 million on revenues of $6.2 million in the third quarter of 2014. The decline in earnings was due to the sale of fewer acres and mix.

Outlook

"We expect the recovery in the U.S. housing market to continue in 2015, which will translate into higher earnings in Resource and another strong year in Wood Products. We plan to increase our harvest to 4.5 million tons in 2015. We are not planning any large sales in our Real Estate segment and expect to sell approximately 20,000 acres this year. Our balance sheet is in good shape and a core part of our strategy remains growing the company over time," concluded Mr. Covey.

Conference Call Information

A live conference call and webcast will be held today, January 28, 2015, at 9 a.m. Pacific Time (noon 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 61675140. 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 4, 2015 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 61675140 to access the replay.

About Potlatch

Potlatch is a Real Estate Investment Trust (REIT) with approximately 1.6 million acres of timberland in Alabama, Arkansas, Idaho, Minnesota and Mississippi. 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. More information about Potlatch can be found on the company's website at www.potlatch.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, statements about our expectations regarding future company performance; the direction of our business markets; the state of the domestic housing market; housing starts; business conditions in our Resource and Wood Products segments; lumber pricing; sawlog pricing; 2015 harvest levels; performance of our Wood Products, Resource and Real Estate segments in 2015; earnings growth; 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, 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 Chinese demand; 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, fuel 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.

         
Potlatch Corporation        
Consolidated Statements of Income        
Unaudited (Dollars in thousands, except per-share amounts)      
       
         
 Quarter Ended
December 31,
Twelve Months Ended
December 31,
 2014201320142013
Revenues  $ 146,237  $ 139,955  $ 606,950  $ 570,289
Costs and expenses:        
Cost of goods sold 107,773 106,070 429,789 408,772
Selling, general and administrative expenses 11,861 13,240 44,655 50,397
Environmental remediation charge 3,522
  119,634 119,310 474,444 462,691
Operating income 26,603 20,645 132,506 107,598
Interest expense, net (6,434) (5,573) (22,909) (23,132)
Income before income taxes 20,169 15,072 109,597 84,466
Income tax provision (33) (1,351) (19,687) (13,885)
Net income  $ 20,136  $ 13,721  $ 89,910  $ 70,581
         
Net income per share:        
Basic  $ 0.49  $ 0.34  $ 2.21  $ 1.74
Diluted 0.49 0.34 2.20 1.73
Cash distributions per share  $ 0.375  $ 0.35  $ 1.425  $ 1.28
Weighted-average shares outstanding (in thousands):        
Basic 40,764 40,533 40,749 40,503
Diluted 40,927 40,739 40,894 40,709
     
Potlatch Corporation    
Consolidated Condensed Balance Sheets    
Unaudited (Dollars in thousands, except per-share amounts)    
     
     
 December 31,
2014
December 31,
2013
ASSETS    
Current assets:    
Cash  $ 4,644  $ 5,586
Short-term investments 26,368 52,251
Receivables, net 9,928 16,572
Inventories 31,490 36,275
Deferred tax assets 6,168 7,724
Other assets 15,065 11,961
Total current assets 93,663 130,369
Property, plant and equipment, net 65,749 59,976
Timber and timberlands, net 828,420 455,871
Deferred tax assets 37,228 21,576
Other assets 10,361 12,738
Total assets  $ 1,035,421  $ 680,530
LIABILITIES AND STOCKHOLDERS' EQUITY    
Current liabilities:    
Current installments on long-term debt  $ 22,870  $ — 
Current liability for pensions and other postretirement employee benefits 6,260 6,701
Accounts payable and accrued liabilities 43,064 43,617
Total current liabilities 72,194 50,318
Long-term debt 606,473 320,092
Liability for pensions and other postretirement employee benefits 115,936 83,619
Other long-term obligations 15,752 22,353
Total liabilities 810,355 476,382
Stockholders' equity 225,066 204,148
Total liabilities and stockholders' equity  $ 1,035,421  $ 680,530
     
Shares outstanding (in thousands) 40,605 40,537
Stockholders' equity per common share  $ 5.54  $ 5.04
Working capital  $ 21,469  $ 80,051
Current ratio 1.3:1 2.6:1
     
Potlatch Corporation    
Consolidated Condensed Statements of Cash Flows    
Unaudited (Dollars in thousands)    
     
     
 Twelve Months Ended
December 31,
 20142013
CASH FLOWS FROM OPERATING ACTIVITIES    
Net income  $ 89,910  $ 70,581
Adjustments to reconcile net income to net cash provided by operating activities:    
Depreciation, depletion and amortization 26,749 26,962
Basis of real estate sold 8,646 2,904
Change in deferred taxes (1,616) (2,467)
Employee benefit plans 2,122 7,561
Equity-based compensation expense 4,137 4,377
Other, net (2,191) (1,972)
Funding of qualified pension plans (3,550)
Working capital changes 7,165 (17,694)
Net cash from operating activities 131,372 90,252
CASH FLOWS FROM INVESTING ACTIVITIES    
Change in short-term investments 25,884 10,826
Transfer from company owned life insurance (COLI) 28,870
Transfer to COLI (25,515)
Property, plant and equipment (13,261) (10,280)
Timberlands reforestation and timberland roads (10,971) (12,313)
Acquisition of timber and timberlands (388,952) (1,060)
Other, net 1,262 823
Net cash from investing activities (382,683) (12,004)
CASH FLOWS FROM FINANCING ACTIVITIES    
Distributions to common stockholders (57,848) (51,868)
Repayment of long-term debt (36,663)
Proceeds from issuance of long-term debt 310,000
Issuance of common stock 398 1,904
Change in book overdrafts 1,465 (955)
Deferred financing costs (2,388) (25)
Employee tax withholdings on vested performance share awards (1,104) (1,738)
Other, net (154) (302)
Net cash from financing activities 250,369 (89,647)
Increase (decrease) in cash (942) (11,399)
Cash at beginning of period 5,586 16,985
Cash at end of period  $ 4,644  $ 5,586
         
Potlatch Corporation        
Segment Information        
Unaudited (Dollars in thousands)        
         
         
 Quarter Ended
December 31,
Twelve Months Ended
December 31,
(Dollars in thousands)2014201320142013
Revenues:        
Resource  $ 69,245  $ 60,974  $ 252,581  $ 238,228
Wood Products 88,650 87,373 376,239 366,015
Real Estate 4,108 6,848 40,460 26,160
  162,003 155,195 669,280 630,403
Intersegment revenues - Resource (15,766) (15,240) (62,330) (60,114)
Total consolidated revenues  $ 146,237  $ 139,955  $ 606,950  $ 570,289
         
Operating income:        
Resource  $ 23,854  $ 18,064  $ 84,976  $ 73,425
Wood Products 9,122 8,938 52,442 58,892
Real Estate 1,650 4,574 26,945 18,266
Eliminations and adjustments 174 (840) (190) (907)
  34,800 30,736 164,173 149,676
Corporate (14,631) (15,664) (54,576) (65,210)
Income before income taxes  $ 20,169  $ 15,072  $ 109,597  $ 84,466
         
Depreciation, depletion and amortization:        
Resource  $ 5,102  $ 4,583  $ 17,847  $ 18,103
Wood Products 1,589 1,584 6,176 6,194
Real Estate 15 14 59 56
  6,706 6,181 24,082 24,353
Corporate 717 710 2,667 2,609
Total depreciation, depletion and amortization  $ 7,423  $ 6,891  $ 26,749  $ 26,962
         
Basis of real estate sold - Real Estate  $ 1,427  $ 1,166  $ 9,355  $ 3,536
Eliminations and adjustments (70) (207) (709) (632)
Total basis of real estate sold - Real Estate  $ 1,357  $ 959  $ 8,646  $ 2,904
CONTACT: (Investors)

         Jerry Richards

         509.835.1521

         

         (Media)

         Mark Benson

         509.835.1513


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