POTLATCHDELTIC CORP - FORM 8-K - EX-99.1 - EXHIBIT - January 28, 2014

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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)
 
 
Jerry Richards
Mark Benson
 
 
509.835.1521
509.835.1513
 


Potlatch Reports Fourth Quarter and Full Year 2013 Results

SPOKANE, Wash - January 28, 2014 - Potlatch Corporation (Nasdaq:PCH) today reported net income of $13.7 million, or $0.34 per diluted share, on revenues of $140.0 million for the quarter ended December 31, 2013. This compares to net income of $13.9 million, or $0.34 per diluted share, on revenues of $143.3 million in the fourth quarter of 2012.
Net income for the full year of 2013 was $70.6 million, or $1.73 per diluted share, on revenues of $570.3 million, which compares to net income of $42.6 million, or $1.05 per diluted share, on revenues of $525.1 million in 2012. After-tax charges of $2.4 million, or $0.06 per diluted share, were recorded in 2013 related to environmental remediation at a Northern Idaho property. No environmental charges were recorded in 2012.
“I am very pleased with our performance in 2013,” said Michael Covey, chairman and chief executive officer of Potlatch Corporation. “Northern sawlog prices have returned to pre-recession levels, Wood Products earnings were higher than they have been for almost ten years, and our Real Estate segment closed the highest number of real estate transactions since our REIT conversion in 2006. This business strength gave our board the confidence to raise our dividend to $0.35 per share from $0.31 per share in the fourth quarter,” concluded Mr. Covey.




Financial Highlights
(millions, except per-share data)            
 
 
Q4 2013
 
Q3 2013
 
Q4 2012
Revenues
 
$
140.0

 
$
157.9

 
$
143.3

Net income
 
$
13.7

 
$
22.2

 
$
13.9

Net income per diluted share
 
$
0.34

 
$
0.54

 
$
0.34

Distribution per share
 
$
0.35

 
$
0.31

 
$
0.31

Net cash from operations
 
$
17.2

 
$
33.6

 
$
36.9

Cash and short-term investments at end of period
 
$
57.8

 
$
62.8

 
$
80.1


Business Performance: Q4 2013 vs. Q3 2013
Resource
Resource’s operating income was $18.0 million on revenues of $61.0 million in the fourth quarter, compared to operating income of $25.4 million on revenues of $77.0 million in the third quarter. Harvest volumes were seasonally lower in both the Northern and Southern regions in the fourth quarter compared to the third quarter. Northern region average sawlog prices declined in the fourth quarter, which mirrored the decline in lumber prices in the third quarter, but remain strong. Southern region average sawlog prices also declined in the fourth quarter due to a lower mix of hardwood sawlog volume as compared to the third quarter.
Wood Products
Wood Products’ operating income was $9.0 million on revenues of $87.4 million in the fourth quarter, compared to operating income of $11.3 million on revenues of $92.1 million in the third quarter. Average lumber prices realized in the fourth quarter were 3% higher than the third quarter, while lumber shipments were 6% lower. Third quarter lumber shipments were higher than normal as inventory that had built at the end of the second quarter was sold when the market regained its footing.
Real Estate
Real Estate’s operating income was $4.6 million on revenues of $6.8 million in the fourth quarter, compared to operating income of $6.5 million on revenues of $8.9 million in the third quarter. Sales activity continued at a steady pace. A total of 41 real estate transactions closed in the fourth quarter compared to 53 transactions in the third quarter.
Outlook
“We expect further increases in housing starts, which will continue to bolster the operating results of our Resource and Wood Products segments. We plan to harvest 3.8 million tons in 2014. Demand and prices in our wood basket in the South need to increase before considering a meaningful increase in our annual harvest. Our Real Estate business is expected to remain




strong as interest in rural recreational real estate continues to be solid. Our year-end liquidity position is excellent, which provides financial flexibility,” concluded Mr. Covey.

Conference Call Information
A live conference call and webcast will be held today, January 28, 2014, 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 27312896. 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 February 4, 2014 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 27312896 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, anticipated operating results in our Resource and Wood Products segments, our estimated 2014 harvest levels, performance of our Real Estate segment, the demand and interest in real estate, our liquidity, 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.
###






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

 
Quarter Ended
 
Twelve Months Ended
  
December 31,
 
December 31,
 
2013
 
2012
 
2013
 
2012
Revenues
$
139,955

 
$
143,299

 
$
570,289

 
$
525,134

Costs and expenses:
 
 
 
 
 
 
 
Cost of goods sold
106,070

 
103,197

 
408,772

 
390,666

Selling, general and administrative expenses
13,240

 
13,425

 
50,397

 
49,419

Environmental remediation charge
—

 
—

 
3,522

 
—

Asset impairment charge
—

 
107

 
—

 
107

 
119,310

 
116,729

 
462,691

 
440,192

Operating income
20,645

 
26,570

 
107,598

 
84,942

Interest expense, net
(5,573
)
 
(6,496
)
 
(23,132
)
 
(25,539
)
Income before income taxes
15,072

 
20,074

 
84,466

 
59,403

Income tax provision
(1,351
)
 
(6,210
)
 
(13,885
)
 
(16,809
)
Net income
$
13,721

 
$
13,864

 
$
70,581

 
$
42,594

 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
Basic
$
0.34

 
$
0.34

 
$
1.74

 
$
1.06

Diluted
0.34

 
0.34

 
1.73

 
1.05

Cash distributions per share
$
0.35

 
$
0.31

 
$
1.28

 
$
1.24

Weighted-average shares outstanding (in thousands):
 
 
 
 
 
 
 
Basic
40,533

 
40,383

 
40,503

 
40,333

Diluted
40,739

 
40,630

 
40,709

 
40,553







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

 
December 31,
2013
 
December 31,
2012
ASSETS
 
 
 
Current assets:
 
 
 
Cash
$
5,586

 
$
16,985

Short-term investments
52,251

 
63,077

Receivables, net
16,786

 
10,668

Inventories
36,275

 
28,928

Deferred tax assets
7,724

 
10,507

Other assets
11,961

 
7,932

Total current assets
130,583

 
138,097

Property, plant and equipment, net
59,976

 
58,050

Timber and timberlands, net
455,871

 
464,467

Deferred tax assets
21,576

 
43,292

Other assets
12,738

 
14,991

Total assets
$
680,744

 
$
718,897

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

 
$
8,413

Accounts payable and accrued liabilities
50,532

 
55,174

Total current liabilities
50,532

 
63,587

Long-term debt
320,092

 
349,163

Liability for pensions and other postretirement employee benefits
83,619

 
145,047

Other long-term obligations
22,353

 
22,457

Total liabilities
476,596

 
580,254

Stockholders’ equity
204,148

 
138,643

Total liabilities and stockholders' equity
$
680,744

 
$
718,897

 
 
 
 
Shares outstanding (in thousands)
40,537

 
40,389

Stockholders’ equity per common share
$
5.04

 
$
3.43

Working capital
$
80,051

 
$
74,510

Current ratio
2.6
:1
 
2.2
:1






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

 
Twelve Months Ended
 
December 31,
 
2013
 
2012
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
70,581

 
$
42,594

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
Depreciation, depletion and amortization
26,962

 
26,247

Basis of real estate sold
2,904

 
5,048

Deferred income taxes
(2,467
)
 
15,992

Gain on disposition of property, plant and equipment
(54
)
 
(8
)
Employee benefit plans
7,561

 
4,317

Equity-based compensation expense
4,377

 
4,067

Asset impairment
—

 
107

Income tax benefit related to stock issued in conjunction with stock compensation plans
71

 
525

Other, net
11

 
(25
)
Funding of qualified pension plans
—

 
(21,630
)
Working capital changes
(17,694
)
 
2,747

Net cash from operating activities
92,252

 
79,981

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Short-term investments
10,826

 
(88
)
Proceeds from company owned life insurance (COLI) loan
—

 
21,751

Additions to property, plant and equipment
(10,280
)
 
(5,636
)
Additions to timber and timberlands
(13,373
)
 
(23,552
)
Proceeds from disposition of property, plant and equipment
213

 
71

Other, net
(1,390
)
 
(1,193
)
Net cash from investing activities
(14,004
)
 
(8,647
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Distributions to common stockholders
(51,868
)
 
(50,041
)
Repayment of long-term debt
(36,663
)
 
(21,662
)
Proceeds from issuance of long-term debt
—

 
12,000

Issuance of common stock
1,904

 
1,075

Change in book overdrafts
(955
)
 
462

Deferred financing costs
(25
)
 
(2,148
)
Employee tax withholdings on equity-based compensation
(1,738
)
 
(1,714
)
Other, net
(302
)
 
(140
)
Net cash from financing activities
(89,647
)
 
(62,168
)
Increase (decrease) in cash
(11,399
)
 
9,166

Cash at beginning of period
16,985

 
7,819

Cash at end of period
$
5,586

 
$
16,985







 
Potlatch Corporation
Segment Information
Unaudited (Dollars in thousands)
 
 
Quarter Ended
 
Twelve Months Ended
 
December 31,
 
December 31,
(Dollars in thousands)
2013
 
2012
 
2013
 
2012
Revenues:
 
 
 
 
 
 
 
Resource
$
60,974

 
$
51,360

 
$
238,228

 
$
207,846

Wood Products
87,373

 
85,125

 
366,015

 
329,404

Real Estate
6,848

 
19,057

 
26,160

 
38,238

 
155,195


155,542

 
630,403

 
575,488

Intersegment revenues - Resource
(15,240
)
 
(12,243
)
 
(60,114
)
 
(50,354
)
Total consolidated revenues
$
139,955

 
$
143,299

 
$
570,289

 
$
525,134

 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
Resource
$
18,064

 
$
10,532

 
$
73,425

 
$
49,543

Wood Products
8,938

 
13,508

 
58,892

 
45,456

Real Estate
4,574

 
13,800

 
18,266

 
28,056

Eliminations and adjustments
(840
)
 
(955
)
 
(907
)
 
(1,061
)
 
30,736

 
36,885

 
149,676

 
121,994

Corporate
(15,664
)
 
(16,811
)
 
(65,210
)
 
(62,591
)
Income before income taxes
$
15,072

 
$
20,074

 
$
84,466

 
$
59,403

 
 
 
 
 
 
 
 
Depreciation, depletion and amortization:
 
 
 
 
 
 
 
Resource
$
4,583

 
$
4,375

 
$
18,103

 
$
16,446

Wood Products
1,584

 
1,525

 
6,194

 
6,538

Real Estate
14

 
9

 
56

 
36

 
6,181

 
5,909

 
24,353

 
23,020

Corporate
710

 
1,067

 
2,609

 
3,227

Total depreciation, depletion and amortization
$
6,891

 
$
6,976

 
$
26,962

 
$
26,247

 
 
 
 
 
 
 
 
Basis of real estate sold - Real Estate
$
1,166

 
$
3,607

 
$
3,536

 
$
5,413

Eliminations and adjustments
(207
)
 
(182
)
 
(632
)
 
(365
)
Total basis of real estate sold - Real Estate
$
959

 
$
3,425

 
$
2,904

 
$
5,048





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