Attached files
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| 8-K - FORM 8-K - POTLATCHDELTIC CORP | d265328d8k.htm |
 POTLATCH CORPORATION
Michael J. Covey
Chairman, President & Chief Executive Officer
Eric J. Cremers
Vice President, Finance and Chief Financial Officer
POTLATCH CORPORATION
DECEMBER 2011
Exhibit 99.1 |
 POTLATCH CORPORATION
2
Forward-Looking Statements
This presentation contains certain forward-looking statements within the
meaning of the Private Litigation Reform Act of 1995 as amended, including
without limitation statements about future company performance, the company’s business model, strength
of
the
company’s
balance
sheet
and
credit
metrics,
dividend
levels
and
yields,
direction
of
markets
and
the
economy,
management of timberlands to optimize values, projected inland private timber
growth and harvest, future harvest levels and their
relation
to
market
trends,
cash
flow
and
dividend
leverage
to
sawlog
pricing,
impact
of
the
pine
beetle
on
North
American
lumber supply, forecasts of North American exports of lumber to China, softwood
stumpage price trends, forecast of U.S. housing starts, the company’s
capital structure, weighted average cost of debt, cash flow generation, Canadian/U.S. dollar
exchange rate, funds available for distribution, real estate business potential and
land development potential, real estate value opportunities, biomass
opportunities, forecasts of U.S. biomass consumed to produce electricity, management of the output of
our Wood Products facilities, leverage and interest coverage ratios, debt
repayment, net asset value, and dividend policy. 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 domestic construction activity; changes in international tariffs, quotas and trade
agreements involving wood products; changes in domestic and international demand
for wood products; changes in production and production capacity in the
forest products industry; competitive pricing pressures for the company’s products; unanticipated
manufacturing disruptions; changes in general and industry-specific
environmental laws and regulations; unforeseen environmental liabilities or
expenditures; weather conditions; changes in fuel and energy costs; changes in raw material 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; and other risks and uncertainties described
from time to time in the company’s public filings with the Securities
and Exchange Commission. All forward-looking statements are made as of the date of this
presentation, and the company does not undertake to update any forward-looking
statements. |
 POTLATCH CORPORATION
3
Converted to tax efficient REIT in 2006
Single level of taxation
Lower cost of capital
Fourth largest US Timber REIT
1.45 million acres of owned timberland
Growing real estate business
Five wood products manufacturing facilities
Enterprise value of $1.5 billion
(1)
Market cap of ~$1.2 billion
Net debt
(2)
of ~$0.3 billion
Strong balance sheet with solid credit metrics
Attractive dividend at $1.24
Company Overview
(1)
Based on November 28, 2011 closing stock price of $30.66 a share.
(2)
We define net debt as the total of short-term and long-term debt less cash
and short-term investments, see reconciliation on page 29.
Potlatch
Corporation
(REIT)
Resource
(Timberlands)
Taxable REIT
Subsidiaries
North
South
Real
Estate
Wood
Products |
 POTLATCH CORPORATION
4
Wood Products
Manufacturing Facilities
Idaho:
813,000 acres
Arkansas:
407,000 acres
Minnesota:
225,000 acres
Total:
1,445,000 acres Timberlands
(1)
(1) As of September 30, 2011.
Potlatch owns approximately 1.45 million acres of FSC-certified timberland in
Arkansas, Idaho and Minnesota and five wood products manufacturing
facilities Potlatch Business Overview
[813,000 acres]
[813,000 acres]
[225,000 acres]
[225,000 acres]
[407,000
acres] [407,000 acres]
407,000 acres] |
 POTLATCH CORPORATION
5
Potlatch Financial Overview
($ in millions)
2010 Segment Revenues
(1)
2010 Segment EBITDDA
(2)
Segment EBITDDA Margin
(3)
Resource
$226
$83
36.7%
Real Estate
$85
$79
92.9%
Wood
Products
$274
$15
5.5%
(1)
Segment revenues and EBITDDA presented prior to intersegment eliminations.
(2) See page 33 of this presentation for definitions of EBITDDA and segment
EBITDDA, and page 28 for reconciliations to most comparable GAAP measures.
(3) Segment
EBITDDA
Margin
is
defined
as
Segment
EBITDDA
divided
by
Segment
Revenues.
Historical
Consolidated
Revenue
and
EBITDDA
(2)
$423
$440
$476
$539
$102
$107
$131
$151
$0
$200
$400
$600
2007
2008
2009
2010
Revenue
EBITDDA |
 POTLATCH
CORPORATION 0.0
1.0
2.0
3.0
4.0
5.0
2004
2005
2006
2007
2008
2009
2010
2011F
2012F
~3
Years
Forward
Sawlogs
Pulpwood
$72
$80
$70
$53
$60
$64
$27
$34
$36
$33
$34
$32
$0
$25
$50
$75
$100
2006
2007
2008
2009
2010
Q3 2011
YTD
Sawlogs ($/ton)
Pulpwood ($/ton)
6
Attractive Timber Inventory & Harvest Profile
Allows active management of harvest
volumes to correspond with the
strength or weakness in timber prices
Attractive distribution of timber across
age-classes
Flexibility to monetize sawlog or pulpwood
harvests
Overall, harvest volume increasing
over time
Recently lowered harvest volume to 3.5
million tons for 2012 to preserve net asset
value
4.6 million tons expected in approximately
3 years
Potlatch’s cash flow (and dividend) is
highly leveraged to sawlog pricing
$7/ton price increase in 2010 produced
incremental EBITDDA of $21 million
Fee Harvest Log Volume
Timber Prices
3.0
3.3
3.3
3.9
4.4
3.8
~4.6
$/Ton
Tons in millions
4.2
4.1
3.5 |
 POTLATCH CORPORATION
7
Total Housing Starts
Housing starts are presently far below the long-term average
(in thousands)
Source: U.S. Census Bureau
0
500
1,000
1,500
2,000
2,500
71
73
75
77
79
81
83
85
87
89
91
93
95
97
99
01
03
05
07
09
Year
Average Starts Since 1971:
1.5 million |
 POTLATCH CORPORATION
Million U.S. Starts
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
2.2
'03
'04
'05
'06
'07
'08
'09
'10
'11
'12
'13
U.S. Housing Starts Forecast
Single Family & Multifamily Only
Source: APA: Housing Starts: October 2011
(1)
RBC: Royal Bank of Canada
(2)
FEA: Forest Economic Advisors
(3)
NAR: National Association of Realtors
Actual
Forecast
8
Forecasts (000)
2011
2012
2013
RBC
(1)
-Nov 15
593
727
NA
NAHB-Oct 28
592
681
934
FEA
(2)
-Nov 11
595
668
878
Mesirow Financial-Nov 11
600
700
NA
NAR
(3)
-Nov 7
583
630
NA
RISI-Nov 1
590
630
NA
APA-Nov 16
595
630
730
Wells Fargo-Nov 9
580
610
740
Average
591
660
820 |
 POTLATCH CORPORATION
Impact of the Pine Beetle on North American Lumber Supply
Source:
British Columbia Ministry of Forest and Range
9
Combined with Eastern Canadian harvest reductions of 20%, the pine beetle in British
Columbia is projected to lower North American lumber supply up to 15% over
the next few years, depending on lumber price levels.
Cumulative Percentage of
Killed
British Columbia
2009
British Columbia
2016 |
 POTLATCH CORPORATION
10
North American Exports of Lumber to China as a % of North American Production
Source: RISI North American Lumber Forecast, June 2011 & Potlatch Internal
Forecast. 0.2%
0.5%
1.0%
2.6%
4.7%
7.6%
9.1%
8.8%
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
2006
2007
2008
2009
2010
2011
2012
2013
Actual
Forecast |
 POTLATCH CORPORATION
U.S. Biomass Consumed to Produce Electricity
(1)
(Millions Green Tons)
11
Actual
Forecast
(1) EIA Annual Energy Outlook 2011 & Potlatch Estimates.
0
50
100
150
200
250
300
1990
1994
1998
2002
2006
2010
2014
2018
2022
2026
2030
2034 |
 POTLATCH CORPORATION
Random Lengths Pricing for KD SYP (West) #2 2x6
($/MBF)
12
2007
2008
2009
2010
2006
2005
2011
(1)
(1) Pricing through October 2011. |
 POTLATCH CORPORATION
Wood Products Segment
$41
$13
$14
($4)
($11)
$15
$13
-$20
$0
$20
$40
$60
2005
2006
2007
2008
2009
2010
LTM
Q3 2011
13
Five manufacturing facilities, lumber and plywood
Sell to wholesalers for use in homebuilding and construction
Potlatch operates four sawmills in Idaho, Arkansas, Minnesota and Michigan as
well as one industrial-grade plywood mill in Idaho
Actively manage output of facilities to match supply and demand
$ in millions
(1)
(2)
Note: See page 33 of this presentation for the definition of segment EBITDDA, and page 28
for reconciliation to most comparable GAAP measure.
(1)
Wood Products EBITDDA excludes $31 million for Canadian lumber settlement. (2)
Wood Products EBITDDA includes asset impairment charge of $3 million. Wood
Products
Segment
EBITDDA |
 POTLATCH CORPORATION
14
Rural Real Estate
~95,000 acres
Frequently assess acreage to maximize
value through sale of non-core timberland
real estate
More than 3,000 miles of desirable water
frontage
More than 9 million people live within three
states of ownership
Potlatch Timberlands
(1)
Core Timberland
~1.2 million acres
Non-Strategic Timberland
~15,000 acres
HBU/Development
~125,000 acres
Land Portfolio
Idaho:
813,000 acres
Arkansas:
407,000 acres
Minnesota:
225,000 acres
(1)
As of September 30, 2011.
Real Estate Overview
Coeur d’Alene
Boise
Sun Valley
McCall
Little Rock
Hot Springs
Brainerd
Minneapolis
St. Paul |
 POTLATCH CORPORATION
15
Value Opportunities Are Unique to Each Category
CONSERVATION
EASEMENT
NON-STRATEGIC
TIMBERLAND
RURAL REAL
ESTATE
HIGHER-BETTER-USE
DEVELOPMENT
$400 to $1,000 per acre
$500 to $1,500 per acre
$1,000 to $1,500 per acre
$2,000 to $7,000 per acre
120,000
Opportunity dependent
10,000 to 20,000 acres
90,000 to 100,000 acres
120,000 to 130,000 acres
Characteristics:
-
Habitat related
-
Appropriate payment for
opportunity sold
-
Selective core lands
Characteristics:
-
Fringe of ownership
-
Location disadvantage
-
Higher operation cost
-
Capital allocation focus
Characteristics:
-
Fringe of ownership
-
Opportunity varies by
geographic market
-
Recreation character
and amenities
-
Adjacent ownership
influence
Characteristics:
-
Property attribute focus
-
Investor interest
-
Explore proper land use
and entitlements
-
Emerging development
focus
LOWER VALUE
OPPORTUNITIES
HIGHER VALUE
OPPORTUNITIES |
 POTLATCH CORPORATION
16
Significant Real Estate Portfolio
Realization of Non-Core Timberland Asset Value
16.3
46.1
70.1
69.5
16.2
20.5
12.5
9.2
11.1
7.9
9.3
5.6
5.9
5.3
1.2
$0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
2007
2008
2009
2010
LTM
Q3 2011
Segment Revenue
Conservation Easement
HBU/Development
Rural Real Estate
Non-Strategic Timberland
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
2007
2008
2009
2010
LTM
Q3 2011
$/Acre
Price Per Acre
42,841
30,168
93,974
71,561
13,166
14,266
11,234
7,796
8,991
3,009
3,562
2,430
2,967
2,583
954
0
20,000
40,000
60,000
80,000
100,000
120,000
2007
2008
2009
2010
LTM
Q3 2011
Acres
Acres Sold
(1)
$24.1
$46.1
$65.4
16,175
60,669
44,786
(1)
Segment Revenue in 2008 excludes sale of building.
(2)
Excludes the sale of the Boardman, Oregon tree farm of 17,000 acres.
$
in
millions
$85.2
104,737
(2)
$85.9
83,135 |
 POTLATCH CORPORATION
Potlatch Timberland Holdings
17
1,000
1,100
1,200
1,300
1,400
1,500
1,600
1,700
1,800
2005
2006
2007
2008
2009
1,471
(3)
1,468
218
1,653
36
(61)
1,628
(45)
1,583
(105)
1,478
Acres (000’s)
PCH Owned Acreage at End of Period
PCH Acquired Acreage During the Year
PCH Sold Acreage During the Year
2010
(33)
(1)
(1)
Includes the sale of the Boardman, Oregon tree farm of 17,000 acres.
(2)
Acreage through September 30, 2011.
(33)
2011
1,445
(2) |
 POTLATCH CORPORATION
18
Balance Sheet Review
ASSETS
Cash and short-term investments
81
$
Other current assets
78
Long-term assets
594
Total assets
753
$
LIABILITIES & EQUITY
Current liabilities
86
$
Long-term debt
345
Other liabilities
132
Total liabilities
563
Equity
190
Total liabilities & equity
753
$
September 30, 2011
($ in millions)
Strong credit metrics
$150
million
revolver
expiring
December
2013
(1)
$68 million of fixed rate debt swapped to
floating as of June 30, 2010
$63 million of floating rate debt outstanding
Maturities in 2012 -
2018
6.9% weighted average cost of debt (including
interest rate swaps)
8.6 weighted average years to maturity
7.1% weighted average cost of debt (all at fixed rate)
(1) Per an amendment to our credit agreement, the revolver decreased to
$150 million from $250 million, effective February 4, 2011. |
 POTLATCH CORPORATION
19
Conservative Leverage and Interest Coverage Ratios
(1)
as of September 30, 2011
(1)
Calculated per our bank credit agreement, using an accumulated other comprehensive loss
“AOCL” exclusion. Per an amendment to the credit agreement, the Minimum Collateral
Coverage ratio increased to 3.00 and the Maximum Funded Indebtedness to Capitalization ratio increased
to 70.0% effective as of February 4, 2011. (2)
This requirement will increase to 3.00 on October 1, 2011.
(3)
Updated for new appraisal dated June 15, 2011.
Note: We define net debt as the total of short-term and long-term debt less cash and
short-term investments, see page 29 for reconciliation. See page 33 of this presentation for
the definition of EBITDDA and page 28 for reconciliation to most comparable GAAP measure.
|
 POTLATCH CORPORATION
20
Strong Net Asset Value
Arkansas
Timberland
407,000 Acres
Secured Idaho
Timberland
352,000 Acres
Unsecured Idaho
Timberland
461,000 Acres
Wisconsin
Timberland 1,000 Acres
Minnesota
Timberland
225,000 Acres
Total = Approx. 1.45 Million Acres
Annually we obtain an appraisal on 352,000 acres of core Idaho timberland
The 2011 appraisal valued the secured core Idaho timberland at $707
million
(1)
,
or
$2,000
an
acre
Thus, while cash flows are currently depressed due to the weak housing
market, the Company’s net asset value remains intact
The
appraisal
is
done
by
an
independent
3
rd
party
appraiser
(1)
Updated for new appraisal dated June 15, 2011. The appraisal uses comparable transactions and
discounted cash flow analyses for purposes of the valuation. There is no assurance that sales
could be effected at the appraised values or as to the timing of sales. The calculation of discounted cash flows involves projection of future market conditions, harvest levels
and other factors, all of which could vary materially from those projected. There is no implication
that the company’s other timberlands would have a similar value per acre. |
 POTLATCH CORPORATION
Conservative Capital Structure –
Long Term Debt Maturity Profile
($ in millions)
21
Mandatory principal repayments of only $79 million through 2016
(1) $5 million maturity paid in January, 2011 with cash on hand.
|
 POTLATCH CORPORATION
Strong Cash Flow Generation
($ in millions)
$102
$107
$131
$151
$144
$0
$20
$40
$60
$80
$100
$120
$140
$160
2007
2008
2009
2010
LTM
Q3 2011
22
Total EBITDDA
(1)
$97
$95
$105
$83
$78
$0
$40
$80
$120
2007
2008
2009
2010
LTM
Q3 2011
Resource
$21
$41
$60
$79
$79
$0
$40
$80
$120
2007
2008
2009
2010
LTM
Q3 2011
Real Estate
$14
($4)
($11)
$15
$13
-$20
$0
$20
2007
2008
2009
2010
LTM
Q3 2011
Wood Products
Segment EBITDDA
(1)
(1)
See page 33 of this presentation for the definition of EBITDDA and Segment EBITDDA,
and page 28 for a reconciliation to most comparable GAAP measures. (2)
Consolidated and Wood Products EBITDDA includes a $3 million asset impairment
charge taken in 2009. (2)
(2) |
 POTLATCH CORPORATION
Exchange Rate
Canadian Dollar to U.S. Dollar
23
$1.05
$1.00
$0.95
$0.90
$0.85
$0.80
$0.75
$0.70
$0.65 |
 POTLATCH CORPORATION
Funds Available for Distribution (FAD)
($ in millions)
$85
$92
$111
$105
$99
$77
$81
$81
$82
$82
$50
$0
$20
$40
$60
$80
$100
$120
2007
2008
2009
2010
LTM
Q3 2011
2012F
FAD
Dividend Distribution
24
Note:
See page 33 of this presentation for the definition of FAD, and see page 29 for a
reconciliation to most comparable GAAP measure. Excludes dividend distribution of
Clearwater Paper stock in 2008. |
 POTLATCH CORPORATION
25
Attractive Dividend
Potlatch's dividend policy has been driven primarily by the performance of its
timber and real estate businesses
Given the prolonged downturn of the U.S. housing market, we recently reduced our
dividend from $0.51/share to $0.31/share
Dividend
remains
very
attractive
relative
to
peers
as
well
as
to
S&P
500
We anticipate increasing harvest levels and dividend as the housing market
improves |
 POTLATCH CORPORATION
26
Conclusion
Potlatch maintains a very attractive asset base of 1.45 million acres of
timberland We have the ability to meaningfully expand high margin sawlog
harvest levels Wood Products business stabilized and generating solid cash
flow Real Estate segment low risk, high margin
Attractive dividend
Strong balance sheet with attractive debt cost and maturity profile
Industry trends beginning to turn positive
Housing starts beginning to grow, albeit slowly
Exports to China from North America continue to expand
Pine beetle to impact supply from Canada
Biomass continues to hold promise |
 Appendix
POTLATCH CORPORATION
DECEMBER 2011 |
 POTLATCH
CORPORATION 28
EBITDDA and Segment EBITDDA Reconciliation
($ in millions)
2005
2006
(1)
2007
2008
2009
(2)
2010
LTM
Q3 2011
Consolidated
Earnings from continuing operations
74
$
73
$
81
$
40
$
51
$
Less:
Income tax benefit (provision)
17
25
16
(5)
(4)
Add:
Net cash interest expense
15
20
20
26
25
Depreciation, depletion, and amortization
26
30
35
31
30
Basis of real estate sold
4
9
11
49
36
Non-cash asset impairment and eliminations
(2)
Consolidated EBITDDA
102
$
107
$
131
$
151
$
144
$
Resource
Operating income
82
$
76
$
82
$
62
$
60
$
Depreciation, depletion, and amortization
15
19
23
21
18
Resource Segment EBITDDA
97
$
95
$
105
$
83
$
78
$
Real Estate
Operating income
17
$
32
$
49
$
30
$
43
$
Basis of real estate sold
4
9
11
49
36
Real Estate Segment EBITDDA
21
$
41
$
60
$
79
$
79
$
Wood Products
Operating income (loss)
29
$
2
$
4
$
(14)
$
(21)
$
7
$
5
$
Depreciation
12
11
10
10
10
8
8
Wood Products Segment EBITDDA
41
$
13
$
14
$
(4)
$
(11)
$
15
$
13
$
Fiscal Year
(1)
Wood Products EBITDDA excludes $31 million for Canadian lumber settlement.
(2)
Consolidated and Wood Products EBITDDA includes a $3 million asset impairment charge taken in
2009. |
 POTLATCH CORPORATION
29
Potlatch Net Debt Reconciliation
($ in millions)
September 30
2007
2008
2009
2010
2011
Long-term debt
321
$
221
$
368
$
363
$
345
$
Current installments on long-term debt
-
101
-
5
22
Current notes payable
110
129
-
-
-
Cash
(9)
(1)
(2)
(6)
(6)
Short-term investments
(22)
(3)
(53)
(85)
(75)
Net Debt
400
$
447
$
313
$
277
$
286
$
At December 31
FAD Calculation
($ in millions)
(1) Excludes distribution of Clearwater Paper stock in 2008.
2007
2008
2009
2010
LTM
Q3 2011
Operating income (loss):
Resource
82
$
76
$
82
$
62
$
60
$
Real Estate
17
32
49
30
43
Wood Products
4
(14)
(21)
7
5
Eliminations and adjustments
1
(1)
8
2
4
104
93
118
101
112
Corporate administration
(32)
(25)
(33)
(30)
(33)
Net cash interest expense
(15)
(20)
(20)
(26)
(25)
Income tax benefit (provision)
17
25
16
(5)
(3)
Earnings from continuing operations
74
73
81
40
51
Depreciation, depletion and amortization
26
30
35
31
30
Basis of real estate sold
4
9
11
49
36
Capital expenditures
(19)
(20)
(16)
(15)
(16)
Non-cash asset impairment & eliminations
(2)
Funds Available for Distribution
85
$
92
$
111
$
105
$
99
$
Distributions to Common Stockholders
(1)
77
$
81
$
81
$
82
$
82
$
Fiscal Year |
 POTLATCH CORPORATION
30
Softwood Stumpage Price Trends
Southwide Average Nominal Prices
Source: Timber Mart-South, updated through September 30, 2011.
$0
$5
$10
$15
$20
$25
$30
$35
$40
$45
$50
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
$/Ton
Years
Pine Sawtimber
Pine Pulpwood |
 POTLATCH CORPORATION
Projected Inland Private Timber Growth and Harvest (1995-2027)
31
Source: F2M and Potlatch Corporation
Actual
Forecast |
 POTLATCH
CORPORATION Inland Private Sawtimber Inventory –
Private Lands (1995-2007)
Inland West (Idaho, Eastern Washington, and Western Montana)
32
Source: F2M and Potlatch Corporation
510
486
462
459
462
430
440
450
460
470
480
490
500
510
520
1995
2000
2005
2006
2007
Million Tons |
 POTLATCH CORPORATION
33
Definitions of Non-GAAP Measures
EBITDDA
is a non-GAAP measure that management uses to evaluate the cash generating
capacity of the company. The most directly comparable GAAP measure is
net earnings. EBITDDA, as we define it, is net earnings from
continuing operations adjusted for net cash interest expense, provision/benefit for
income taxes, depreciation, depletion and amortization, basis of real estate
sold and non-cash asset impairment and eliminations. It should not be
considered as an alternative to net earnings computed under GAAP.
Funds
Available
for
Distribution
(FAD)
is
a
non-GAAP
measure.
FAD,
as
defined
in
the
indenture
governing
our
senior notes, is earnings from continuing operations, plus depreciation, depletion
and amortization, plus basis of real estate sold, minus capital expenditures
and non-cash asset impairment and eliminations. For purposes of this
definition, capital expenditures exclude all expenditures relating to direct or
indirect timberland purchases in excess of $5
million.
We
do
not
use
FAD
as,
nor
should
it
be
considered
to
be,
an
alternative
to
net
cash
provided
by
operating
activities computed under GAAP as an indicator of our operating performance, or as
an indicator of our ability to fund our cash needs. FAD, as defined in the
indenture governing our senior notes may not be comparable with measures of
similar titles reported by other companies.
Segment
EBITDDA
from
continuing
operations,
as
we
define
it,
is
segment
operating
income
(loss)
adjusted
for
depreciation, depletion, amortization and the basis of real estate sold.
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