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Potlatch Corporation Reports Second Quarter 2017 Results

SPOKANE, Wash., July 24, 2017 (GLOBE NEWSWIRE) -- Potlatch Corporation (Nasdaq:PCH) today reported net income of $24.3 million, or $0.59 per diluted share, on revenues of $163.2 million for the quarter ended June 30, 2017. Net loss was $31.3 million, or $0.77 per diluted share, on revenues of $141.5 million in the second quarter of 2016. Excluding the after-tax loss of $36.7 million on the sale of central Idaho timber and timberlands, net income was $5.4 million, or $0.13 per diluted share for the quarter ended June 30, 2016.

“The power of our leverage to lumber prices was reflected in our strong financial performance in the second quarter,” said Mike Covey, chairman and chief executive officer. “Our Wood Products segment shipped a record volume of lumber for the third time in four quarters, maximizing the benefit of robust lumber prices. Lumber prices also lifted mixed sawlog prices in Idaho and cedar sawlog prices remain at record levels,” stated Mr. Covey.

Financial Highlights (in millions, except per share data)

Q2 2017 Q1 2017 Q2 2016
Revenues $163.2 $149.7 $141.5
Net income $24.3 $16.9 $(31.3)
Net income per diluted share $0.59 $0.41 $(0.77)
Distribution per share $0.375 $0.375 $0.375
Net cash from operations $37.5 $41.9 $16.8
Cash and cash equivalents $110.3 $101.7 $65.4

Business Performance: Q2 2017 vs. Q1 2017

Resource

Resource’s operating income was $19.5 million on revenues of $55.9 million in the second quarter, compared to operating income of $14.9 million on revenues of $51.8 million in the first quarter of 2017. Northern sawlog prices increased 26% relative to the first quarter due primarily to the effect of higher lumber prices on indexed sales agreements. Lower harvest volumes due to spring break-up in Idaho and slightly lower Southern sawlog prices partially offset the benefit of higher Northern sawlog prices.

Wood Products

Wood Products earned $24.7 million on revenues of $114.5 million in the second quarter, compared to operating income of $8.7 million on revenues of $95.6 million in the first quarter of 2017. Average lumber prices were 11% higher and shipments increased 13% in the second quarter compared to the first quarter.

Real Estate

Real Estate’s operating income was $5.8 million on revenues of $8.1 million in the second quarter, compared to operating income of $8.6 million on revenues of $14.5 million in the first quarter of 2017. Fewer acres were sold at a lower average sales price in the second quarter compared to the first quarter.

Outlook

“Due to a seasonal increase in our harvest volumes, we expect significantly improved operating results in our Resource segment in the third quarter. We are very pleased with the outlook for our three business segments and believe that our significant leverage to lumber pricing will translate into strong earnings for the balance of the year,” concluded Mr. Covey.

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 (loss), as adjusted $5.4 $0.13

Conference Call Information

A live conference call and webcast will be held today, July 25, 2017, at 9:00 a.m. Pacific Time (12:00 p.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 47086081. 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 1, 2017 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 47086081 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 the U.S. housing market; strong repair and remodel market; lumber demand and pricing; future company performance; the direction of our business markets; business conditions, pricing, EBITDDA and earnings in our Resource, Wood Products and Real Estate segments; company earnings in the third quarter of 2017 and for the full year; harvest volumes in the third quarter of 2017 and for the full year; percentage of total harvest that will occur in the North and South and the percentage of sawlogs to be harvested in the North and the South in the third quarter of 2017; robust cedar sawlog market resulting in an increase in EBITDDA compared to 2016; lumber shipments in the third quarter of 2017 and for the year; real estate sales in the third quarter of 2017; capital projects and capital expenditures in 2017; corporate expenses and interest expense in the third quarter of 2017; tax rate for the third quarter of 2017 and full year; debt maturities; 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 and shipping capacity; changes in the United States and international economies; changes in the level of construction activity; changes in Asia 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; 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
Three Months Ended
June 30, March 31, June 30, Six Months Ended June 30,
(Dollars in thousands, except per share amount) 2017 2017 2016 2017 2016
Revenues $163,229 $149,681 $141,495 $312,910 $269,391
Costs and expenses:
Cost of goods sold 111,556 112,783 113,377 224,339 223,192
Selling, general and administrative expenses 14,165 12,989 13,824 27,154 26,833
Gain on lumber price swap (3,265) (3,265)
Loss on sale of central Idaho1 48,522 48,522
122,456 125,772 175,723 248,228 298,547
Operating income (loss) 40,773 23,909 (34,228) 64,682 (29,156)
Interest expense, net (7,348) (4,970) (8,206) (12,318) (14,231)
Income (loss) before income taxes 33,425 18,939 (42,434) 52,364 (43,387)
Income tax (provision) benefit (9,181) (2,018) 11,196 (11,199) 12,306
Net income (loss) $24,244 $16,921 $(31,238) $41,165 $(31,081)
Net income (loss) per share:
Basic $0.59 $0.41 $(0.77) $1.01 $(0.76)
Diluted $0.59 $0.41 $(0.77) $1.00 $(0.76)
Dividends per share $0.375 $0.375 $0.375 $0.75 $0.75
(In thousands)
Weighted-average shares outstanding:
Basic 40,823 40,778 40,784 40,802 40,837
Diluted 41,219 41,071 40,784 41,144 40,837
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.


Potlatch Corporation
Condensed Consolidated Balance Sheets
Unaudited
(Dollars in thousands) June 30, 2017 December 31, 2016
ASSETS
Current assets:
Cash and cash equivalents $110,324 $82,584
Receivables, net 23,536 17,284
Inventories 40,124 52,622
Other assets 12,396 11,155
Total current assets 186,380 163,645
Property, plant and equipment, net 74,671 72,820
Timber and timberlands, net 639,178 641,856
Deferred tax assets, net 39,445 42,051
Other assets 7,100 7,309
Total assets $946,774 $927,681
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Current portion of long-term debt $20,349 $11,032
Accounts payable and accrued liabilities 53,130 43,710
Current portion of pension and other postretirement employee benefits 5,839 5,839
Total current liabilities 79,318 60,581
Long-term debt 558,853 572,956
Pension and other postretirement employee benefits 123,745 123,284
Other long-term obligations 14,529 14,586
Total liabilities 776,445 771,407
Commitments and contingencies
Stockholders' equity:
Common stock, $1 par value 40,610 40,519
Additional paid-in capital 356,453 355,274
Accumulated deficit (118,120) (128,775)
Accumulated other comprehensive loss (108,614) (110,744)
Total stockholders’ equity 170,329 156,274
Total liabilities and stockholders' equity $946,774 $927,681


Potlatch Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited
Six Months Ended June 30,
(Dollars in thousands) 2017 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $41,165 $(31,081)
Adjustments to reconcile net income to net cash from operating activities:
Depreciation, depletion and amortization 13,343 16,474
Basis of real estate sold 5,772 5,421
Change in deferred taxes 1,244 (6,784)
Pension and other postretirement employee benefits 6,575 7,830
Equity-based compensation expense 2,348 2,176
Loss on sale of central Idaho timber and timberlands 48,522
Other, net (983) (1,280)
Change in working capital and operating-related activities, net 9,919 4,383
Net cash from operating activities 79,383 45,661
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property, plant and equipment (5,939) (3,488)
Timberlands reforestation and roads (5,792) (5,544)
Acquisition of timber and timberlands (3,132) (1,161)
Net proceeds from sale of central Idaho timber and timberlands 111,460
Other, net (74) 109
Net cash from investing activities (14,937) 101,376
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends to common stockholders (30,457) (30,453)
Repayment of revolving line of credit borrowings (30,000)
Repayment of long-term debt (5,000) (47,600)
Proceeds from issuance of long-term debt 27,500
Repurchase of common stock (5,956)
Other, net (1,249) (3,075)
Net cash from financing activities (36,706) (89,584)
Change in cash and cash equivalents 27,740 57,453
Cash and cash equivalents at beginning of period 82,584 7,925
Cash and cash equivalents at end of period $110,324 $65,378


Potlatch Corporation
Segment Information
Unaudited
Three Months Ended
June 30, March 31, June 30, Six Months Ended June 30,
(Dollars in thousands) 2017 2017 2016 2017 2016
Revenues:
Resource $55,924 $51,768 $54,826 $107,692 $103,536
Wood Products 114,529 95,592 90,924 210,121 174,162
Real Estate 8,136 14,504 9,954 22,640 15,520
178,589 161,864 155,704 340,453 293,218
Intersegment Resource revenues (15,360) (12,183) (14,209) (27,543) (23,827)
Total consolidated revenues $163,229 $149,681 $141,495 $312,910 $269,391
Income (loss) before income taxes:
Resource $19,520 $14,929 $15,672 $34,449 $25,879
Wood Products 24,705 8,684 4,695 33,389 5,651
Real Estate 5,725 8,643 (43,429) 14,368 (41,354)
Eliminations and adjustments 1,053 1,059 (969) 2,112 496
51,003 33,315 (24,031) 84,318 (9,328)
Corporate (10,230) (9,406) (10,197) (19,636) (19,828)
Operating income (loss) 40,773 23,909 (34,228) 64,682 (29,156)
Interest expense, net (7,348) (4,970) (8,206) (12,318) (14,231)
Income (loss) before income taxes $33,425 $18,939 $(42,434) $52,364 $(43,387)
Depreciation, depletion and amortization:
Resource $4,274 $4,384 $5,387 $8,658 $11,515
Wood Products 1,839 1,827 1,800 3,666 3,701
Real Estate 1 1 1 3
6,113 6,212 7,188 12,325 15,219
Corporate 158 117 213 275 421
Bond discounts and deferred loan fees 370 373 468 743 834
Total depreciation, depletion and amortization $6,641 $6,702 $7,869 $13,343 $16,474
Basis of real estate sold:
Real Estate $1,047 $4,809 $3,509 $5,856 $5,754
Eliminations and adjustments (65) (19) (122) (84) (333)
Total basis of real estate sold $982 $4,790 $3,387 $5,772 $5,421


Contact: (Investors) Jerry Richards 509.835.1521 (Media) Mark Benson 509.835.1513

Source:Potlatch Corporation