POTLATCHDELTIC CORP - FORM 8-K - EX-99.1 - PRESS RELEASE - October 22, 2013

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Exhibit 99.1
 
 
 
 
Potlatch Corporation
601 W. First Ave., Suite 1600
Spokane, WA 99201
509.835.1500
www.potlatchcorp.com
News Release
For immediate release:
Contact:
(Investors)
(Media)
 
 
Eric Cremers
Mark Benson
 
 
509.835.1521
509.835.1513
 

Potlatch Reports Third Quarter 2013 Results

SPOKANE, Wash - October 22, 2013 - Potlatch Corporation (Nasdaq:PCH) today reported net income of $22.2 million, or $0.54 per diluted share, on revenues of $157.9 million for the quarter ended September 30, 2013. This compares to net income of $18.6 million, or $0.46 per diluted share, on revenues of $151.9 million in the third quarter of 2012. An after-tax charge of $0.7 million, or $0.02 per diluted share, was recorded in the third quarter related to environmental remediation at a Northern Idaho property. The corresponding second quarter charge was $1.2 million after taxes, or $0.03 per diluted share. Physical clean-up activities were completed at the site in the third quarter.

“We are very pleased with the strong third quarter operating results provided by each of our business segments,” said Michael Covey, chairman and chief executive officer of Potlatch Corporation. “Our Resource segment’s harvest volumes, revenues and earnings increased significantly in the third quarter, which is typically our seasonally strongest quarter of the year. While average lumber prices were lower than the second quarter, prices bottomed near the end of the second quarter and increased during the third quarter. Our lumber shipments have remained strong. Our Real Estate segment had another good quarter, completing 53 sales transactions. This is among the highest number of transactions that we have closed since the REIT conversion in 2006,” concluded Mr. Covey.




Financial Highlights
(millions, except per share data)            
 
Q3 2013
 
Q2 2013
 
Q3 2012
Revenues
$
157.9

 
$
133.2

 
$
151.9

Net income
$
22.2

 
$
19.2

 
$
18.6

Net income per diluted share
$
0.54

 
$
0.47

 
$
0.46

Distribution per share
$
0.31

 
$
0.31

 
$
0.31

Net cash from operations
$
33.6

 
$
13.6

 
$
30.7

Cash and short-term investments at end of period
$
62.8

 
$
50.5

 
$
62.5


Business Performance: Q3 2013 vs. Q2 2013
Resource
Resource’s operating income was $25.4 million on revenues of $77.0 million in the third quarter, compared to operating income of $14.5 million on revenues of $45.3 million in the second quarter. The third quarter is typically our strongest seasonal quarter, particularly in Idaho, while the second quarter is typically our weakest seasonal quarter. Harvest volumes were 87% higher in the Northern region and 30% higher in the Southern region in the third quarter compared to the second quarter. Sawlog prices remain strong in Idaho and are flat in the South, excluding the effect of a slightly higher mix of hardwood sawlogs in the third quarter.
Wood Products
Wood Products’ operating income was $11.3 million on revenues of $92.1 million in the third quarter, compared to operating income of $19.7 million on revenues of $95.0 million in the second quarter. Average lumber prices realized in the third quarter were 14 percent lower than the second quarter. After falling from a peak reached early in the second quarter, lumber prices started an upward trend in the third quarter and are higher than prices at the end of the second quarter. Lumber shipments were 14 percent higher in the third quarter.
Real Estate
Real Estate’s operating income was $6.5 million on revenues of $8.9 million in the third quarter, compared to operating income of $4.1 million on revenues of $5.8 million in the second quarter. Activity continues to be strong. We closed a total of 53 real estate transactions in the third quarter compared to a record 65 transactions in the second quarter. The majority of the transactions were HBU and rural real estate sales in Minnesota.

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Outlook
“Each of our business segments will be influenced by normal seasonal factors in the fourth quarter as we close out a solid year. We expect our total 2013 harvest to be approximately 3.7 million tons. Log prices will likely decrease slightly in the fourth quarter due to seasonal factors, mix and timing. We expect performance of our Wood Products business to be comparable to the third quarter. Our Real Estate business remains strong as interest in rural recreational real estate continues to be solid, as witnessed by the number of sales transactions and acres sold in the last two quarters. As we look into 2014, we expect housing starts to continue to rise and anticipate firmer log and lumber prices ahead. We will provide an update on planned 2014 harvest levels during our fourth quarter earnings call in early 2014,” concluded Mr. Covey.

Conference Call Information
A live conference call and webcast will be held today, October 22, 2013, 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 68495721. 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 29, 2013 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 68495721 to access the replay.

About Potlatch
Potlatch is a Real Estate Investment Trust (REIT) with approximately 1.4 million acres of timberland in Arkansas, Idaho and Minnesota. 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.

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, our fourth quarter 2013 and total 2013 harvest levels, lumber and plywood pricing, sawlog and pulpwood pricing, performance of our Wood Products, Resource

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and Real Estate segments, the demand and interest in HBU and rural recreational real estate, 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; performance of agreements to purchase Idaho land; 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.
###



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Potlatch Corporation
Consolidated Statements of Income
Unaudited (Dollars in thousands, except per-share amounts)
 

 
Quarter Ended
 
Nine Months Ended
  
September 30,
 
September 30,
 
2013
 
2012
 
2013
 
2012
Revenues
$
157,869

 
$
151,911

 
$
430,334

 
$
381,835

Costs and expenses:
 
 
 
 
 
 
 
Cost of goods sold
112,499

 
109,806

 
302,702

 
287,469

Selling, general and administrative expenses
13,444

 
13,342

 
37,157

 
35,994

Environmental remediation charge
1,022

 
—

 
3,522

 
—

 
126,965

 
123,148

 
343,381

 
323,463

Operating income
30,904

 
28,763

 
86,953

 
58,372

Interest expense, net
(5,556
)
 
(6,280
)
 
(17,559
)
 
(19,043
)
Income before income taxes
25,348

 
22,483

 
69,394

 
39,329

Income tax provision
(3,157
)
 
(3,884
)
 
(12,534
)
 
(10,599
)
Net income
$
22,191

 
$
18,599

 
$
56,860

 
$
28,730

 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
Basic
$
0.55

 
$
0.46

 
$
1.40

 
$
0.71

Diluted
0.54

 
0.46

 
1.40

 
0.71

Distributions per share
$
0.31

 
$
0.31

 
$
0.93

 
$
0.93

Weighted-average shares outstanding (in thousands):
 
 
 
 
 
 
 
Basic
40,530

 
40,357

 
40,493

 
40,317

Diluted
40,720

 
40,571

 
40,686

 
40,503




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Potlatch Corporation
Consolidated Condensed Balance Sheets
Unaudited (Dollars in thousands, except per-share amounts)
 

 
September 30, 
 2013
 
December 31,
2012
ASSETS
 
 
 
Current assets:
 
 
 
Cash
$
5,994

 
$
16,985

Short-term investments
56,805

 
63,077

Receivables, net
18,671

 
10,668

Inventories
35,381

 
28,928

Deferred tax assets
10,507

 
10,507

Other assets
7,514

 
7,932

Total current assets
134,872

 
138,097

Property, plant and equipment, net
59,855

 
58,050

Timber and timberlands, net
460,389

 
464,467

Deferred tax assets
41,007

 
43,292

Other assets
12,866

 
14,991

 
$
708,989

 
$
718,897

LIABILITIES AND STOCKHOLDERS’ EQUITY
 
 
 
Current liabilities:
 
 
 
Current installments on long-term debt
$
—

 
$
8,413

Accounts payable and accrued liabilities
59,256

 
55,174

Total current liabilities
59,256

 
63,587

Long-term debt
320,230

 
349,163

Liability for pensions and other postretirement employee benefits
140,090

 
145,047

Other long-term obligations
21,706

 
22,457

Stockholders’ equity
167,707

 
138,643

 
$
708,989

 
$
718,897

 
 
 
 
Shares outstanding (in thousands)
40,531

 
40,389

Stockholders’ equity per share
$
4.14

 
$
3.43

Working capital
$
75,616

 
$
74,510

Current ratio
2.3
:1
 
2.2
:1



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Potlatch Corporation
Consolidated Condensed Statements of Cash Flows
Unaudited (Dollars in thousands)
 

 
Nine Months Ended
 
September 30,
 
2013
 
2012
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
56,860

 
$
28,730

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Depreciation, depletion and amortization
20,071

 
19,271

Basis of real estate sold
1,945

 
1,623

Change in deferred taxes
(1,870
)
 
10,539

Employee benefit plans
5,182

 
3,001

Equity-based compensation expense
3,271

 
3,057

Other, net
(22
)
 
(527
)
Funding of qualified pension plans
—

 
(21,630
)
Working capital and operating related activities
(10,370
)
 
(1,031
)
Net cash from operating activities
75,067

 
43,033

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Decrease in short-term investments
6,272

 
9,560

Proceeds from company owned life insurance (COLI) loan
—

 
21,751

Additions to property, plant and equipment
(7,924
)
 
(3,502
)
Additions to timber and timberlands
(9,011
)
 
(8,367
)
Other, net
(901
)
 
(1,217
)
Net cash from investing activities
(11,564
)
 
18,225

CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Distributions to common stockholders
(37,680
)
 
(37,520
)
Repayment of long-term debt
(36,663
)
 
(21,662
)
Issuance of common stock
1,798

 
709

Employee tax withholdings on equity-based compensation
(1,757
)
 
(1,714
)
Other, net
(192
)
 
143

Net cash from financing activities
(74,494
)
 
(60,044
)
Increase (decrease) in cash
(10,991
)
 
1,214

Cash at beginning of period
16,985

 
7,819

Cash at end of period
$
5,994

 
$
9,033


Certain 2012 amounts have been reclassified to conform to the 2013 presentation.






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Potlatch Corporation
Segment Information
Unaudited (Dollars in thousands)
 
 
Quarter Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2013
 
2012
 
2013
 
2012
Revenues:
 
 
 
 
 
 
 
Resource
$
77,017

 
$
82,144

 
$
177,254

 
$
156,486

Real Estate
8,868

 
2,353

 
19,312

 
19,181

Wood Products
92,116

 
86,732

 
278,642

 
244,279

 
178,001

 
171,229

 
475,208

 
419,946

Elimination of intersegment revenues - Resource
(20,132
)
 
(19,318
)
 
(44,874
)
 
(38,111
)
Total consolidated revenues
$
157,869

 
$
151,911

 
$
430,334

 
$
381,835

 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
Resource
$
25,369

 
$
23,631

 
$
55,361

 
$
39,011

Real Estate
6,493

 
1,255

 
13,692

 
14,256

Wood Products
11,319

 
15,232

 
49,954

 
31,948

Eliminations and adjustments
(791
)
 
(1,178
)
 
(67
)
 
(106
)
 
42,390

 
38,940

 
118,940

 
85,109

Corporate
(17,042
)
 
(16,457
)
 
(49,546
)
 
(45,780
)
Income before income taxes
$
25,348

 
$
22,483

 
$
69,394

 
$
39,329

 
 
 
 
 
 
 
 
Depreciation, depletion and amortization:
 
 
 
 
 
 
 
Resource
$
5,888

 
$
6,061

 
$
13,520

 
$
12,071

Real Estate
15

 
9

 
42

 
27

Wood Products
1,581

 
1,507

 
4,610

 
5,013

 
7,484

 
7,577

 
18,172

 
17,111

Corporate
562

 
725

 
1,899

 
2,160

Total depreciation, depletion and amortization
$
8,046

 
$
8,302

 
$
20,071

 
$
19,271

 
 
 
 
 
 
 
 
Basis of real estate sold:
 
 
 
 
 
 
 
Real Estate
$
1,170

 
$
397

 
$
2,370

 
$
1,806

Eliminations and adjustments
(132
)
 
(16
)
 
(425
)
 
(183
)
Total basis of real estate sold
$
1,038

 
$
381

 
$
1,945

 
$
1,623




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POTLATCHDELTIC CORP Reports