July 26, 2016

Potlatch Corporation Reports Second Quarter 2016 Results

SPOKANE, Wash., July 26, 2016 (GLOBE NEWSWIRE) -- Potlatch Corporation (Nasdaq:PCH) today reported a net loss of $31.3 million, or $0.77 per diluted share, on revenues of $141.5 million for the quarter ended June 30, 2016.  Excluding the after-tax loss of $36.7 million on the previously announced sale of 172,000 acres in central Idaho, net income was $5.4 million, or $0.13 per diluted share, in the second quarter.  Net income was $0.7 million, or $0.02 per diluted share, on revenues of $128.7 million in the second quarter of 2015.

"Our solid second quarter results were driven by favorable hauling conditions in northern Idaho, a meaningful increase in lumber prices and the early completion of a conservation real estate transaction," said Mike Covey, chairman and chief executive officer. "Proceeds from the central Idaho timberlands sale that we announced in April were used to pay $42.6 million of debt and repurchase almost 170,000 common shares at an average price of $35 per share.  We expect seasonally higher harvest volumes and sawlog prices along with increased lumber shipments and prices to drive strong third quarter results," stated Mr. Covey.

Financial Highlights (in millions, except per share data)

  Q2 2016  Q1 2016  Q2 2015 
Revenues $141.5  $127.9  $128.7 
Net income (loss) $(31.3) $0.2  $0.7 
Net income (loss) per diluted share $(0.77) $  $0.02 
Distribution per share $0.375  $0.375  $0.375 
Net cash from operations $16.8  $28.9  $(7.7)
Cash and short-term investments at end of period $65.4  $7.8  $10.6 
             

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, as adjusted $5.4  $0.13 
         

Business Performance: Q2 2016 vs. Q1 2016

Resource

Resource's operating income was $15.7 million on revenues of $54.8 million in the second quarter, compared to operating income of $10.2 million on revenues of $48.7 million in the first quarter of 2016. Harvest volumes were higher than typical in the North in the second quarter due to drier than normal conditions. Northern sawlog prices were 14% higher in the second quarter. Prices realized for sawlogs in the South increased 6% primarily due to a seasonally higher mix of hardwood logs.

Wood Products

Wood Products earned $4.7 million on revenues of $90.9 million in the second quarter, compared to operating income of $1.0 million on revenues of $83.2 million in the first quarter of 2016.  Average lumber prices were 8% higher and lumber shipments were 5% higher in the second quarter compared to the first quarter.  Our Warren, Arkansas sawmill took 12 days of downtime in the second quarter for a capital project and annual boiler maintenance.

Real Estate

Excluding the central Idaho timberland sale, Real Estate's operating income was $5.0 million on revenues of $10.0 million in the second quarter, compared to operating income of $2.1 million on revenues of $5.6 million in the first quarter of 2016.  More acres were sold in the second quarter at a higher average sales price, compared to the first quarter.

Other

The following notable items also occurred during the second quarter:

  • Potlatch recorded an after-tax loss of $36.7 million, or $0.90 per diluted share, on the sale of 172,000 acres of timberland in central Idaho on April 21, 2016.
  • Proceeds from the sale were used to redeem $42.6 million of 5.9% revenue bonds on June 6, 2016.  The bonds were due October 1, 2026.
  • Potlatch also repurchased 169,625 of its common shares during the quarter at an average price of $35.08 per share.
  • An after-tax charge of $0.5 million was recorded in connection with an Environmental Protection Agency claim for unreimbursed costs related to a northern Idaho environmental remediation project that was completed in 2013.

Conference Call Information

A live conference call and webcast will be held today, July 26, 2016, 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 43252194. 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 2, 2016 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 43252194 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 future company performance; the direction of our business markets; business conditions in our Resource, Wood Products and Real Estate segments; harvest volumes; lumber pricing; sawlog pricing; performance of our Wood Products, Resource and Real Estate segments in 2016; 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; 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; 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; 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 (Loss)
Unaudited (Dollars in thousands, except per share amounts)
 
  Quarters Ended June 30,  Six Months Ended June 30, 
  2016  2015  2016  2015 
Revenues $141,495  $128,747  $269,391  $262,872 
Costs and expenses:                
Cost of goods sold  113,377   109,441   223,192   217,213 
Selling, general and administrative expenses  13,824   11,995   26,833   24,321 
Loss on sale of central Idaho timber and timberlands  48,522      48,522    
   175,723   121,436   298,547   241,534 
Operating income (loss)  (34,228)  7,311   (29,156)  21,338 
Interest expense, net  (8,206)  (8,016)  (14,231)  (16,085)
Income (loss) before income taxes  (42,434)  (705)  (43,387)  5,253 
Income tax benefit  11,196   1,416   12,306   1,114 
Net income (loss) $(31,238) $711  $(31,081) $6,367 
                 
Net income (loss) per share:                
Basic $(0.77) $0.02  $(0.76) $0.16 
Diluted $(0.77) $0.02  $(0.76) $0.16 
Dividends per share $0.375  $0.375  $0.75  $0.75 
Weighted-average shares outstanding (in thousands):                
Basic  40,784   40,843   40,837   40,822 
Diluted  40,784   40,963   40,837   40,933 
                 


 
Potlatch Corporation
Condensed Consolidated Balance Sheets
Unaudited (Dollars in thousands)
 
  June 30, 2016  December 31, 2015 
ASSETS        
Current assets:        
Cash $25,301  $7,886 
Short-term investments  40,077   39 
Receivables, net  22,531   13,420 
Inventories  30,045   35,162 
Other assets  17,162   14,246 
Total current assets  135,116   70,753 
Property, plant and equipment, net  74,558   75,285 
Timber and timberlands, net  643,814   816,599 
Deferred tax assets, net  51,569   46,600 
Other assets  9,088   7,375 
Total assets $914,145  $1,016,612 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Revolving line of credit borrowings $  $30,000 
Current portion of long-term debt  5,082   5,007 
Accounts payable and accrued liabilities  48,290   39,740 
Current portion of pension and other postretirement employee benefits  5,973   5,973 
Total current liabilities  59,345   80,720 
Long-term debt  581,205   598,874 
Pension and other postretirement employee benefits  119,590   119,369 
Other long-term obligations  13,462   13,913 
Total liabilities  773,602   812,876 
Commitments and contingencies        
Stockholders' equity:        
Common stock, $1 par value  40,519   40,681 
Additional paid-in capital  352,497   350,541 
Accumulated deficit  (140,351)  (72,983)
Accumulated other comprehensive loss  (112,122)  (114,503)
Total stockholders' equity  140,543   203,736 
Total liabilities and stockholders' equity $914,145  $1,016,612 
         

 

 
Potlatch Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited (Dollars in thousands)
 
  Six Months Ended June 30, 
  2016  2015 
CASH FLOWS FROM OPERATING ACTIVITIES        
Net income (loss) $(31,081) $6,367 
Adjustments to reconcile net income (loss) to net cash from operating activities:        
Depreciation, depletion and amortization  16,474   15,597 
Basis of real estate sold  5,421   1,008 
Change in deferred taxes  (6,784)  (1,707)
Employee benefit plans  6,416   3,166 
Equity-based compensation expense  2,176   2,259 
Loss on sale of central Idaho timber and timberlands  48,522    
Other, net  (1,280)  (5,496)
Working capital and operating-related activities, net  5,797   (4,538)
Net cash from operating activities  45,661   16,656 
CASH FLOWS FROM INVESTING ACTIVITIES        
Change in short-term investments  (40,038)  24,537 
Property, plant and equipment  (3,488)  (12,248)
Timberlands reforestation and roads  (5,544)  (6,004)
Acquisition of timber and timberlands  (1,161)   
Net proceeds from sale of central Idaho timber and timberlands  111,460    
Other, net  109   433 
Net cash from investing activities  61,338   6,718 
CASH FLOWS FROM FINANCING ACTIVITIES        
Dividends to common stockholders  (30,453)  (30,507)
Repayment of revolving line of credit borrowings  (30,000)   
Revolving line of credit borrowings     15,000 
Repayment of long-term debt  (47,600)   
Proceeds from issuance of long-term debt  27,500    
Repurchase of common stock  (5,956)   
Change in book overdrafts  (2,836)  (2,246)
Employee tax withholdings on vested performance share awards  (102)  (1,445)
Other, net  (137)  (37)
Net cash from financing activities  (89,584)  (19,235)
Increase in cash  17,415   4,139 
Cash at beginning of period  7,886   4,644 
Cash at end of period $25,301  $8,783 
         

 

 
Potlatch Corporation
Segment Information
Unaudited (Dollars in thousands)
 
   Quarters Ended June 30,  Six Months Ended June 30, 
(Dollars in thousands) 2016  2015  2016  2015 
Revenues:                
Resource $54,826  $44,111  $103,536  $98,066 
Wood Products  90,924   84,191   174,162   173,424 
Real Estate  9,954   10,745   15,520   13,856 
   155,704   139,047   293,218   285,346 
Elimination of intersegment revenues - Resource  (14,209)  (10,300)  (23,827)  (22,474)
Total consolidated revenues $141,495  $128,747  $269,391  $262,872 
                 
Operating income (loss):                
Resource $15,672  $8,797  $25,879  $23,775 
Wood Products  4,695   (1,953)  5,651   1,547 
Real Estate1  (43,429)  8,521   (41,354)  10,120 
Eliminations and adjustments  (969)  539   496   3,514 
   (24,031)  15,904   (9,328)  38,956 
Corporate  (10,197)  (8,593)  (19,828)  (17,618)
Operating income (loss)  (34,228)  7,311   (29,156)  21,338 
Interest expense, net  (8,206)  (8,016)  (14,231)  (16,085)
Income (loss) before income taxes $(42,434) $(705) $(43,387) $5,253 
                 
Depreciation, depletion and amortization:                
Resource $5,387  $4,797  $11,515  $11,051 
Wood Products  1,800   1,661   3,701   3,237 
Real Estate  1   15   3   30 
   7,188   6,473   15,219   14,318 
Corporate  213   251   421   535 
Bond discounts and deferred loan fees  468   369   834   744 
Total depreciation, depletion and amortization $7,869  $7,093  $16,474  $15,597 
                 
Basis of real estate sold:                
Real Estate $3,509  $710  $5,754  $1,181 
Eliminations and adjustments  (122)  (110)  (333)  (173)
Total basis of real estate sold $3,387  $600  $5,421  $1,008 
 
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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