Attached files
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| 8-K - FORM 8-K - POTLATCHDELTIC CORP | d383819d8k.htm |
Exhibit 99.1
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| 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 Second Quarter 2012 Results
SPOKANE, Wash — July 24, 2012 — Potlatch Corporation (Nasdaq:PCH) today reported financial results for the second quarter ended June 30, 2012.
“We are pleased with our second quarter results, particularly as our Wood Products segment greatly exceeded expectations during the quarter. Stronger than anticipated demand for manufactured wood products resulted in prices approximately 15 percent higher than the previous quarter. We had already increased our production and shipments in the first quarter to take advantage of greater demand, and we continued operating at this higher level in the second quarter. The combination of these factors resulted in our Wood Products segment having its highest quarterly operating income in over five years” said Michael Covey, chairman, president and chief executive officer of Potlatch Corporation. “The results from our Resource segment were slightly ahead of expectations, with harvest levels coming in as planned. The second quarter is the seasonally weakest quarter for this segment due to the effects of spring weather in Idaho on logging operations. Our Real Estate segment continued to post solid results, closing 55 sales transactions during the quarter,” concluded Mr. Covey.
Q2 2012 FINANCIAL SUMMARY
| • | Total consolidated revenues for the quarter were $117.5 million, compared to $112.4 million in Q2 2011 and $112.4 million in Q1 2012. |
| • | Net income for the quarter was $5.1 million, or $0.13 per diluted share, compared to $8.4 million, or $0.21 per diluted share for Q2 2011 and $5.1 million, or $0.13 per diluted share in Q1 2012. |
| • | EBITDDA was $22.6 million for Q2 2012 compared to $29.5 million in Q2 2011 and $18.3 million in Q1 2012. |
Q2 2012 Business Performance
Resource
Operating income for the Resource segment in Q2 2012 was $6.7 million, compared to $7.5 million in Q2 2011 and $8.7 million in Q1 2012, with both variances related to seasonal factors, primarily in Idaho, and the planned harvest deferral in 2012, primarily in Arkansas. The second quarter is typically the seasonally weakest quarter. In addition, in Q2 2011, a late spring break-up period in Idaho that resulted in a later than normal start to logging operations and an abundance of log supply in Arkansas both impacted harvest volumes in that period. The decreased harvest levels in Q2 2012 led to corresponding reductions in logging and hauling expenses.
Northern Region
| • | Total fee harvest volume for Q2 2012 increased 13 percent over Q2 2011, primarily due to the late spring break-up period in Q2 2011 in Idaho that resulted in a later than normal start to logging operations and decreased harvest levels in that period. Total fee harvest volume for Q2 2012 decreased 31 percent from Q1 2012 primarily due to normal seasonality. |
| • | Sawlog volume increased 9 percent in Q2 2012 over Q2 2011, primarily due to the late spring break-up in Idaho in Q2 2011. Sawlog prices decreased 2 percent from the previous year primarily due to product mix. |
| • | Sawlog volume decreased 26 percent in Q2 2012 compared to Q1 2012, primarily due to normal seasonality, while prices increased 6 percent due to stronger demand for both cedar and mixed sawlogs. |
| • | Pulpwood volume increased 37 percent in Q2 2012 over Q2 2011 due to an earlier spring break-up and return to logging in 2012, combined with increased demand for pulpwood in Idaho, which resulted in a 15 percent increase in prices. |
| • | Pulpwood volume decreased 49 percent in Q2 2012 from Q1 2012, due to normal seasonality. Prices increased 1 percent due to a change in product mix in Minnesota. |
Southern Region
| • | Total fee harvest volume in Q2 2012 decreased 20 percent from Q2 2011 due to the harvest deferral, and increased 6 percent over Q1 2012 due to increased demand for pulpwood. |
| • | Sawlog volume decreased 23 percent in Q2 2012 compared to Q2 2011 due to the harvest deferral. Sawlog prices decreased 4 percent year-over-year as a result of decreased demand due to a customer’s mill closure in late 2011. |
| • | Sawlog volume decreased 6 percent in Q2 2012 from Q1 2012 due to continued execution of our deferral strategy as pine sawlog markets continue to be depressed. A shift in product mix to larger pine sawlogs and higher valued hardwoods resulted in a 5 percent increase in overall sawlog prices. |
| • | Pulpwood volume in Q2 2012 decreased 15 percent compared to Q2 2011 due to the harvest deferral. Increased demand due to low inventories at pulp mills resulted in a 6 percent increase in pulpwood prices. |
| • | Pulpwood volume in Q2 2012 increased 19 percent over Q1 2012 due to wet weather in Q1 that pushed thinning operations into Q2. Pulpwood prices increased 4 percent due to the low pine inventories. |
Wood Products
Wood Products revenues were $83.6 million in Q2 2012 compared to $66.6 million in Q2 2011 and $73.9 million in Q1 2012. Operating income for the segment totaled $11.7 million in Q2 2012 compared to $2.8 million in Q2 2011 and $5.0 million in Q1 2012. Stronger than anticipated demand, which resulted in higher prices, combined with higher production levels that continued from Q1 2012, were responsible for the improved results.
| • | Lumber prices in Q2 2012 increased 17 percent and 15 percent over Q2 2011 and Q1 2012, respectively, due to strong demand. |
| • | Lumber shipments in Q2 2012 increased 13 percent and 1 percent over Q2 2011 and Q1 2012, respectively. |
| • | The unrealized mark to market adjustment related to lumber hedges resulted in a $0.9 million charge in Q2 2012, compared to a $2.4 million benefit in Q2 2011 and a $0.1 million benefit in Q1 2012. |
Real Estate
Real Estate revenues totaled $8.7 million in Q2 2012 compared to $19.0 million in Q2 2011 and $8.2 million in Q1 2012. Operating income for the segment was $6.7 million in Q2 2012 compared to $11.0 million in Q2 2011 and $6.3 million in Q1 2012. The second phase of a non-strategic/rural real estate sale in Idaho and another non-strategic timberland sale in Idaho occurred during Q2 2011, which combined provided $14.3 million of revenues in Q2 2011.
Corporate
Corporate expenses, including interest expense, were $15.0 million in Q2 2012 compared to $12.1 million in Q2 2011 and $14.3 million in Q1 2012. The year-over-year variance was primarily due to higher pension expense related to the company’s legacy plans of approximately $1.5 million, coupled with a $0.3 million non-cash charge for the mark to market adjustment related to the deferred compensation plans in Q2 2012 compared to a $1.2 million benefit in Q2 2011.
Balance Sheet
There were $5.2 million of debt maturities and redemptions during the second quarter that were paid with cash on hand. Potlatch finished the quarter with $50.2 million of cash and short-term investments on the balance sheet.
Dividend Distribution
During the second quarter, Potlatch paid a quarterly cash distribution on the company’s stock of $0.31 per share.
OUTLOOK
“Results for the first half of the year exceeded our expectations and we feel confident about continued strong operating results from all of our business segments moving into the second half of 2012. Although there have been, and will continue to be, some slowdowns and setbacks along the way, there are many indications that the domestic housing market has bottomed and is finally beginning to slowly turn upward toward solid and continued recovery. In our Wood Products business, prices have moved down from the peaks captured in April and May, but are still well above the first quarter prices, and we expect lumber and plywood prices to remain relatively elevated as we move through the third quarter. As a result, we expect continued strong performance from our Wood Products segment over the near term. In our Resource segment, we continue to defer harvest volume and expect our 2012 harvest to be approximately 3.5 million tons. Importantly, results from our Resource segment cannot improve until there is substantial and sustained improvement in the wood products industry, which we are beginning to see, as demonstrated by our own Wood Products segment results. We expect an improvement in log prices as we move into the third quarter due to improved demand and higher lumber pricing. Regarding our Real Estate segment, interest and demand for our non-
strategic timberlands and rural recreational real estate continues to be strong, so we expect solid earnings in our Real Estate business for the remainder of the year, though results will be skewed towards the fourth quarter. Our balance sheet remains strong with $50.2 million in cash and short-term investments and no debt maturities until the second half of next year,” concluded Mr. Covey.
CONFERENCE CALL INFORMATION
A live conference call and webcast will be held today, July 24, 2012, 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 93570066. 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 July 31, 2012 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 93570066 to access the replay.
ABOUT POTLATCH
Potlatch is a Real Estate Investment Trust (REIT) with approximately 1.43 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, operating results of our business segments in the second half of 2012, the direction of our business markets, the recovery of the domestic housing market and wood products industry, housing starts, business conditions in our Resource and Wood Products segments, log exports to China, domestic repair and remodel activities, our 2012 harvest levels, log, lumber and plywood pricing, performance of our Wood Products segment, demand and interest in non-strategic timberlands and rural recreational real estate and HBU lands, Real Estate segment earnings, our balance sheet and related 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 China 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)
| Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Revenues |
$ | 117,540 | $ | 112,370 | $ | 229,924 | $ | 234,603 | ||||||||
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| Costs and expenses: |
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| Cost of goods sold |
88,688 | 85,906 | 177,663 | 179,054 | ||||||||||||
| Selling, general and administrative expenses |
11,762 | 8,704 | 22,652 | 20,631 | ||||||||||||
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| 100,450 | 94,610 | 200,315 | 199,685 | |||||||||||||
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| Operating income |
17,090 | 17,760 | 29,609 | 34,918 | ||||||||||||
| Interest expense, net |
(6,277 | ) | (6,612 | ) | (12,763 | ) | (14,491 | ) | ||||||||
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| Income before income taxes |
10,813 | 11,148 | 16,846 | 20,427 | ||||||||||||
| Income tax provision |
(5,733 | ) | (2,699 | ) | (6,715 | ) | (4,282 | ) | ||||||||
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| Net income |
$ | 5,080 | $ | 8,449 | $ | 10,131 | $ | 16,145 | ||||||||
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| Net income per share: |
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| Basic |
$ | 0.13 | $ | 0.21 | $ | 0.25 | $ | 0.40 | ||||||||
| Diluted |
0.13 | 0.21 | 0.25 | 0.40 | ||||||||||||
| Cash distributions per share |
$ | 0.31 | $ | 0.51 | $ | 0.62 | $ | 1.02 | ||||||||
| Weighted-average shares outstanding (in thousands): |
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| Basic |
40,332 | 40,174 | 40,290 | 40,127 | ||||||||||||
| Diluted |
40,459 | 40,378 | 40,414 | 40,339 | ||||||||||||
Potlatch Corporation
Consolidated Condensed Balance Sheets
Unaudited (Dollars in thousands, except per-share amounts)
| June 30, 2012 |
December 31, 2011 |
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| ASSETS |
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| Current assets: |
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| Cash |
$ | 8,548 | $ | 7,819 | ||||
| Short-term investments |
41,646 | 62,989 | ||||||
| Receivables, net |
18,207 | 13,533 | ||||||
| Inventories |
22,848 | 28,603 | ||||||
| Deferred tax assets |
11,909 | 11,909 | ||||||
| Other assets |
11,021 | 9,998 | ||||||
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| Total current assets |
114,179 | 134,851 | ||||||
| Property, plant and equipment, net |
59,055 | 61,453 | ||||||
| Timber and timberlands, net |
457,410 | 459,687 | ||||||
| Deferred tax assets |
49,393 | 57,924 | ||||||
| Other assets |
11,568 | 32,305 | ||||||
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| $ | 691,605 | $ | 746,220 | |||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| Current liabilities: |
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| Current installments on long-term debt |
$ | 13 | $ | 21,661 | ||||
| Accounts payable and accrued liabilities |
60,022 | 55,948 | ||||||
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| Total current liabilities |
60,035 | 77,609 | ||||||
| Long-term debt |
345,347 | 344,742 | ||||||
| Liability for pensions and other postretirement employee benefits |
137,385 | 163,116 | ||||||
| Other long-term obligations |
18,268 | 18,615 | ||||||
| Stockholders’ equity |
130,570 | 142,138 | ||||||
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| $ | 691,605 | $ | 746,220 | |||||
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| Shares outstanding (in thousands) |
40,332 | 40,202 | ||||||
| Stockholders’ equity per common share |
$ | 3.24 | $ | 3.54 | ||||
| Working capital |
$ | 54,144 | $ | 57,242 | ||||
| Current ratio |
1.9:1 | 1.7:1 | ||||||
Potlatch Corporation
Consolidated Condensed Statements of Cash Flows
Unaudited (Dollars in thousands)
| Six Months Ended June 30, |
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| 2012 | 2011 | |||||||
| Cash Flows From Operating Activities |
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| Net income |
$ | 10,131 | $ | 16,145 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: |
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| Depreciation, depletion and amortization |
10,969 | 13,824 | ||||||
| Basis of real estate sold |
1,242 | 10,573 | ||||||
| Change in deferred taxes |
6,638 | 4,283 | ||||||
| Loss (gain) on disposition of property, plant and equipment |
29 | (54 | ) | |||||
| Employee benefit plans |
339 | (83 | ) | |||||
| Equity-based compensation expense |
1,998 | 2,047 | ||||||
| Proceeds from sales deposited with a like-kind exchange intermediary |
(556 | ) | — | |||||
| Funding of qualified pension plans |
(21,630 | ) | (9,400 | ) | ||||
| Working capital changes |
3,200 | 836 | ||||||
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| Net cash provided by operating activities |
12,360 | 38,171 | ||||||
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| Cash Flows From Investing Activities |
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| Decrease in short-term investments |
21,343 | 17,491 | ||||||
| Proceeds from COLI loan |
21,751 | — | ||||||
| Additions to property, plant and equipment |
(2,412 | ) | (2,993 | ) | ||||
| Additions to timber and timberlands |
(4,308 | ) | (4,110 | ) | ||||
| Proceeds from disposition of property, plant and equipment |
5 | 133 | ||||||
| Other, net |
(695 | ) | (852 | ) | ||||
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| Net cash provided by investing activities |
35,684 | 9,669 | ||||||
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| Cash Flows From Financing Activities |
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| Distributions to common stockholders |
(25,006 | ) | (40,963 | ) | ||||
| Payments on long-term debt |
(21,662 | ) | (5,008 | ) | ||||
| Issuance of common stock |
63 | 1,230 | ||||||
| Change in book overdrafts |
1,048 | 647 | ||||||
| Deferred financing costs |
(30 | ) | (343 | ) | ||||
| Employee tax withholdings on equity-based compensation |
(1,714 | ) | (1,605 | ) | ||||
| Other, net |
(14 | ) | (23 | ) | ||||
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| Net cash used for financing activities |
(47,315 | ) | (46,065 | ) | ||||
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| Increase in cash |
729 | 1,775 | ||||||
| Cash at beginning of period |
7,819 | 5,593 | ||||||
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| Cash at end of period |
$ | 8,548 | $ | 7,368 | ||||
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Potlatch Corporation
Segment Information
Unaudited (Dollars in thousands)
| Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2012 | 2011 | 2012 | 2011 | |||||||||||||
| Revenues |
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| Resource |
$ | 33,888 | $ | 34,265 | $ | 74,342 | $ | 85,817 | ||||||||
| Real Estate |
8,664 | 19,018 | 16,828 | 31,999 | ||||||||||||
| Wood Products |
83,623 | 66,632 | 157,547 | 135,104 | ||||||||||||
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| 126,175 | 119,915 | 248,717 | 252,920 | |||||||||||||
| Intersegment revenues—Resource |
(8,635 | ) | (7,545 | ) | (18,793 | ) | (18,317 | ) | ||||||||
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| Total consolidated revenues |
$ | 117,540 | $ | 112,370 | $ | 229,924 | $ | 234,603 | ||||||||
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| Operating income |
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| Resource |
$ | 6,711 | $ | 7,549 | $ | 15,380 | $ | 21,610 | ||||||||
| Real Estate |
6,689 | 11,000 | 13,001 | 19,366 | ||||||||||||
| Wood Products |
11,672 | 2,758 | 16,716 | 5,652 | ||||||||||||
| Eliminations and adjustments |
762 | 1,981 | 1,072 | 2,526 | ||||||||||||
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| 25,834 | 23,288 | 46,169 | 49,154 | |||||||||||||
| Corporate |
(15,021 | ) | (12,140 | ) | (29,323 | ) | (28,727 | ) | ||||||||
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| Income before income taxes |
$ | 10,813 | $ | 11,148 | $ | 16,846 | $ | 20,427 | ||||||||
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| Depreciation, depletion and amortization |
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| Resource |
$ | 2,792 | $ | 2,514 | $ | 6,010 | $ | 7,332 | ||||||||
| Real Estate |
9 | — | 18 | — | ||||||||||||
| Wood Products |
1,646 | 1,997 | 3,506 | 3,981 | ||||||||||||
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| 4,447 | 4,511 | 9,534 | 11,313 | |||||||||||||
| Corporate |
734 | 647 | 1,435 | 2,511 | ||||||||||||
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| Total depreciation, depletion and amortization |
$ | 5,181 | $ | 5,158 | $ | 10,969 | $ | 13,824 | ||||||||
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| Basis of real estate sold—Real Estate |
$ | 914 | $ | 6,958 | $ | 1,409 | $ | 10,573 | ||||||||
| Eliminations and adjustments |
(116 | ) | — | (167 | ) | — | ||||||||||
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| Total basis of real estate sold—Real Estate |
$ | 798 | $ | 6,958 | $ | 1,242 | $ | 10,573 | ||||||||
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Potlatch Corporation
EBITDDA*
(Earnings before interest, taxes, depreciation, depletion and amortization, and basis of real estate sold)
Unaudited (Dollars in thousands)
| 2nd Quarter 2012 |
1st Quarter 2012 |
2nd Quarter 2011 |
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| GAAP net income |
$ | 5,080 | $ | 5,051 | $ | 8,449 | ||||||
| Net cash interest expense |
5,846 | 6,052 | 6,223 | |||||||||
| Income tax provision |
5,733 | 982 | 2,699 | |||||||||
| Depreciation, depletion and amortization |
5,181 | 5,788 | 5,158 | |||||||||
| Basis of real estate sold |
914 | 495 | 6,958 | |||||||||
| Non-cash eliminations |
(116 | ) | (51 | ) | — | |||||||
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| EBITDDA |
$ | 22,638 | $ | 18,317 | $ | 29,487 | ||||||
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| * | 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 income. EBITDDA, as we define it, is net income adjusted for net cash interest expense, provision for income taxes, depreciation, depletion and amortization, the basis of real estate sold and non-cash eliminations. It should not be considered as an alternative to net income computed under GAAP. |