October 21, 2016

Potlatch Corporation Reports Third Quarter 2016 Results

SPOKANE, Wash., Oct. 21, 2016 (GLOBE NEWSWIRE) -- Potlatch Corporation (Nasdaq:PCH) today reported net income of $27.6 million, or $0.68 per diluted share, on revenues of $174.0 million for the quarter ended September 30, 2016. Net income was $21.8 million, or $0.53 per diluted share, on revenues of $174.5 million in the third quarter of 2015.

"All three of our business segments contributed to our solid third quarter results," said Mike Covey, chairman and chief executive officer. "Our Northern Resource log prices were very strong during the quarter, led by cedar sawlogs. Wood Products set a quarterly lumber production record and delivered its strongest earnings in two years. Real Estate continues to identify and close transactions that create value. We also refinanced $65.7 million of tax exempt bonds which reduced the interest rate from 6% to 2.75% and we did not repurchase any shares in the quarter. Our stock price increased 14% in the third quarter and is up 30% this year," stated Mr. Covey.

Financial Highlights (in millions, except per share data)         
          
  Q3 2016  Q2 2016  Q3 2015 
Revenues $174.0  $141.5  $174.5 
Net income (loss) $27.6  $(31.3) $21.8 
Net income (loss) per diluted share $0.68  $(0.77) $0.53 
Distribution per share $0.375  $0.375  $0.375 
Net cash from operations $28.7  $16.8  $38.5 
Cash and short-term investments at end of period $72.9  $65.4  $1.3 
             

Business Performance: Q3 2016 vs. Q2 2016

Resource

Resource's operating income was $33.3 million on revenues of $85.8 million in the third quarter, compared to operating income of $15.7 million on revenues of $54.8 million in the second quarter of 2016. Harvest volumes increased 39% in the third quarter due to seasonally more favorable operating conditions.  Northern sawlog prices were 13% higher in the third quarter. Prices realized for sawlogs in the South increased 14% primarily due to a seasonally higher mix of hardwood logs.

Wood Products

Wood Products earned $10.6 million on revenues of $97.6 million in the third quarter, compared to operating income of $4.7 million on revenues of $90.9 million in the second quarter of 2016.  Average lumber prices were 5% higher and lumber shipments increased 3% in the third quarter compared to the second quarter.

Real Estate

Real Estate's operating income was $5.9 million on revenues of $8.4 million in the third quarter, compared to operating income of $5.0 million on revenues of $10.0 million in the second quarter of 2016 excluding the central Idaho timberland sale.  The sales mix was more heavily weighted to rural recreational real estate in the third quarter.  The effect of a 14% increase in the number of acres sold and lower land basis compared to the second quarter, was partially offset by a lower average sales price.

Other

The following notable items also occurred during the third quarter:

  • Potlatch refinanced $65.7 million of revenue bonds at a rate of 2.75%, which will reduce interest expense $2 million per year. The bonds previously carried a rate of 6.0%. The maturity date in 2024 remains unchanged.
  • No common shares were repurchased during the quarter. Potlatch repurchased 169,625 common shares at an average price of $35.08 per share during the second quarter.

Conference Call Information

A live conference call and webcast will be held today, October 21, 2016, at 7:30 a.m. Pacific Time (10:30 a.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 83949575. 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 October 28, 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 83949575 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 in the North and South; stumpage sales; lumber pricing; lumber shipments; Wood Products EBITDDA; sawlog pricing in the North and South; pulpwood pricing; real estate sales; real estate pricing; land basis; performance of our Wood Products, Resource and Real Estate segments in 2016; share repurchase; capital expenditures; corporate expenses; interest expense; tax rate; earnings for the Fourth Quarter; 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 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; changes in share price; 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)
 
 
  Three Months Ended September 30,  Nine Months Ended September 30, 
  2016  2015  2016  2015 
Revenues $174,027  $174,475  $443,418  $437,347 
Costs and expenses:                
Cost of goods sold  122,132   136,072   345,324   353,285 
Selling, general and administrative expenses  12,901   10,689   39,734   35,010 
Loss on sale of central Idaho timber and timberlands        48,522    
   135,033   146,761   433,580   388,295 
Operating income  38,994   27,714   9,838   49,052 
Interest expense, net  (7,786)  (8,335)  (22,017)  (24,420)
Income (loss) before income taxes  31,208   19,379   (12,179)  24,632 
Income tax (provision) benefit  (3,562)  2,419   8,744   3,533 
Net income (loss) $27,646  $21,798  $(3,435) $28,165 
                 
Net income (loss) per share:                
Basic $0.68  $0.53  $(0.08) $0.69 
Diluted $0.68  $0.53  $(0.08) $0.69 
Dividends per share $0.375  $0.375  $1.125  $1.125 
Weighted-average shares outstanding (in thousands):                
Basic  40,740   40,846   40,807   40,831 
Diluted  40,933   40,985   40,807   40,967 
                 


 
 
Potlatch Corporation
Condensed Consolidated Balance Sheets
Unaudited (Dollars in thousands)
 
 
  September 30, 2016  December 31, 2015 
ASSETS        
Current assets:        
Cash $32,734  $7,886 
Short-term investments  40,121   39 
Receivables, net  37,175   13,420 
Inventories  41,006   35,162 
Other assets  9,940   14,246 
Total current assets  160,976   70,753 
Property, plant and equipment, net  73,259   75,285 
Timber and timberlands, net  647,875   816,599 
Deferred tax assets, net  42,393   46,600 
Other assets  8,622   7,375 
Total assets $933,125  $1,016,612 
         
LIABILITIES AND STOCKHOLDERS' EQUITY        
Current liabilities:        
Revolving line of credit borrowings $  $30,000 
Current portion of long-term debt  5,053   5,007 
Accounts payable and accrued liabilities  52,838   39,740 
Current portion of pension and other postretirement employee benefits  5,973   5,973 
Total current liabilities  63,864   80,720 
Long-term debt  580,317   598,874 
Pension and other postretirement employee benefits  118,679   119,369 
Other long-term obligations  14,502   13,913 
Total liabilities  777,362   812,876 
Commitments and contingencies        
Stockholders' equity:        
Common stock, $1 par value  40,519   40,681 
Additional paid-in capital  353,702   350,541 
Accumulated deficit  (127,926)  (72,983)
Accumulated other comprehensive loss  (110,532)  (114,503)
Total stockholders' equity  155,763   203,736 
Total liabilities and stockholders' equity $933,125  $1,016,612 
         


 
 
Potlatch Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited (Dollars in thousands)
 
    
   Nine Months Ended September 30, 
  2016  2015 
CASH FLOWS FROM OPERATING ACTIVITIES        
Net income (loss) $(3,435) $28,165 
Adjustments to reconcile net income (loss) to net cash from operating activities:        
Depreciation, depletion and amortization  25,723   28,154 
Basis of real estate sold  6,686   3,389 
Change in deferred taxes  1,375   (2,786)
Employee benefit plans  7,988   4,774 
Equity-based compensation expense  3,290   3,589 
Loss on sale of central Idaho timber and timberlands  48,522    
Other, net  (1,141)  (675)
Change in working capital and operating-related activities, net  (13,318)  (9,462)
Funding of qualified pension plans  (1,300)   
Net cash from operating activities  74,390   55,148 
CASH FLOWS FROM INVESTING ACTIVITIES        
Change in short-term investments  (40,082)  26,328 
Property, plant and equipment  (4,262)  (16,240)
Timberlands reforestation and roads  (10,421)  (11,155)
Acquisition of timber and timberlands  (1,180)  (9,320)
Net proceeds from sale of central Idaho timber and timberlands  111,460    
Other, net  525   644 
Net cash from investing activities  56,040   (9,743)
CASH FLOWS FROM FINANCING ACTIVITIES        
Dividends to common stockholders  (45,647)  (45,761)
Repayment of revolving line of credit borrowings  (30,000)   
Repayment of long-term debt  (113,335)   
Proceeds from issuance of long-term debt  93,235    
Repurchase of common stock  (5,956)   
Change in book overdrafts  (2,836)  (1,440)
Other, net  (1,043)  (1,542)
Net cash from financing activities  (105,582)  (48,743)
Change in cash  24,848   (3,338)
Cash at beginning of period  7,886   4,644 
Cash at end of period $32,734  $1,306 
         

  

 
 
Potlatch Corporation
Segment Information
Unaudited (Dollars in thousands)
 
 
  Three Months Ended September 30,  Nine Months Ended September 30, 
(Dollars in thousands) 2016
 2015
 2016
 2015
Revenues:                
Resource $85,822  $102,322  $189,358  $200,388 
Wood Products  97,620   82,868   271,782   256,292 
Real Estate  8,426   7,828   23,946   21,684 
   191,868   193,018   485,086   478,364 
Intersegment Resource revenues  (17,841)  (18,543)  (41,668)  (41,017)
Total consolidated revenues $174,027  $174,475  $443,418  $437,347 
                 
Income (loss) before income taxes:                
Resource $33,303  $36,389  $59,182  $60,164 
Wood Products  10,657   (5,422)  16,308   (3,875)
Real Estate1  5,885   4,234   (35,469)  14,354 
Eliminations and adjustments  (1,946)  (564)  (1,450)  2,950 
   47,899   34,637   38,571   73,593 
Corporate  (8,905)  (6,923)  (28,733)  (24,541)
Operating income  38,994   27,714   9,838   49,052 
Interest expense, net  (7,786)  (8,335)  (22,017)  (24,420)
Income (loss) before income taxes $31,208  $19,379  $(12,179) $24,632 
                 
Depreciation, depletion and amortization:                
Resource $6,456  $10,262  $17,971  $21,313 
Wood Products  1,837   1,693   5,538   4,930 
Real Estate     14   3   44 
   8,293   11,969   23,512   26,287 
Corporate  187   219   608   754 
Bond discounts and deferred loan fees  769   369   1,603   1,113 
Total depreciation, depletion and amortization $9,249  $12,557  $25,723  $28,154 
                 
Basis of real estate sold:                
Real Estate $1,364  $2,450  $7,118  $3,631 
Eliminations and adjustments  (99)  (69)  (432)  (242)
Total basis of real estate sold $1,265  $2,381  $6,686  $3,389 
                 
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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