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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

Source:Potlatch Corporation