POTLATCHDELTIC CORP - FORM 8-K - EX-99.1 - PRESS RELEASE - October 20, 2014

Attached files

file filename
8-K - 8-K - POTLATCHDELTIC CORPpch201409308-k.htm


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 Corporation Reports Third Quarter 2014 Results and
Signs Purchase Agreement for 201,000 Acres of Alabama & Mississippi Timberlands


SPOKANE, Wash - October 20, 2014 - Potlatch Corporation (Nasdaq: PCH) announced today its third quarter 2014 results and that it has signed a purchase agreement to acquire 201,000 acres of timberlands in Alabama and Mississippi from affiliates of Resource Management Services, LLC for $384 million. The transaction is expected to close late in the fourth quarter of 2014 and is subject to the satisfaction of customary closing conditions.

"We are pleased to add these very productive timberlands to our southern portfolio," said Michael Covey, chairman and chief executive officer of Potlatch Corporation. "The timberlands have been managed intensively and are well stocked. This transaction will expand our southern ownership by almost 50% into two new states contiguous to our existing Arkansas holdings and will increase our total acreage under management to nearly 1.6 million acres," concluded Mr. Covey.

Upon closing, the acquired timberlands are expected to be immediately accretive to funds available for distribution per share, which would support the company's ability to grow its dividend over time. The company plans to finance the acquisition with new long-term debt and cash.




Third Quarter 2014 Results

Potlatch today reported net income of $33.2 million, or $0.81 per diluted share, on revenues of $177.2 million for the quarter ended September 30, 2014. This compares to net income of $22.2 million, or $0.54 per diluted share, on revenues of $157.9 million in the third quarter of 2013.
"Our earnings and cash flow were seasonally strong, although our planned harvest was constrained somewhat by wet weather in the South," said Michael Covey. "Our Resource, Wood Products and Real Estate businesses all continue to perform well. It is an opportune time to add over 200,000 acres of high quality timberlands to our Southern portfolio given our continued belief that incremental lumber production will come from the U.S. South as housing starts continue to improve over the long term," concluded Mr. Covey.
Financial Highlights
(millions, except per-share data)            
 
Q3 2014
 
Q2 2014
 
Q3 2013
Revenues
$
177.2

 
$
143.9

 
$
157.9

Net income
$
33.2

 
$
16.3

 
$
22.2

Net income per diluted share
$
0.81

 
$
0.40

 
$
0.54

Distribution per share
$
0.35

 
$
0.35

 
$
0.31

Net cash from operations
$
39.2

 
$
28.4

 
$
33.6

Cash and short-term investments at end of period
$
73.3

 
$
83.2

 
$
62.8

Business Performance: Q3 2014 vs. Q2 2014
Resource
Resource’s operating income was $34.1 million on revenues of $91.9 million in the third quarter, compared to operating income of $10.8 million on revenues of $39.5 million in the second quarter of 2014. Harvest volumes were seasonally higher in the Northern region. Operations were constrained in the second quarter due to spring breakup in the North. Wet weather affected operations in the South in the second and third quarters. Sawlog price realizations increased 6% in the Northern region. Sawlog prices increased 16% in the Southern region due primarily to a higher mix of hardwood sawlogs and strong hardwood sawlog prices. Southern pine sawlog price realizations were up slightly due to a higher mix of plywood logs.


2


Wood Products
Wood Products’ operating income was $15.8 million on revenues of $99.2 million in the third quarter, compared to operating income of $14.9 million on revenues of $100.6 million in the second quarter of 2014. Slightly higher average lumber prices realized in the third quarter more than offset a 2% decline in lumber shipments.
Real Estate
Real Estate’s operating income was $4.6 million on revenues of $6.2 million in the third quarter, compared to operating income of $12.4 million on revenues of $15.7 million in the second quarter of 2014. Second quarter results included the sale of 9,400 acres of rural recreation property in Minnesota for $10 million. There were no individually significant sales in the third quarter.
Conference Call Information
A live conference call and webcast will be held today, October 20, 2014, at 3 p.m. Pacific Time (6 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 14967547. 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 through October 27, 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 14967547 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.

3


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 the closing of the purchase of timberlands in Alabama and Mississippi in the fourth quarter of 2014, the financing of the acquisition with cash on hand and long-term debt, the productivity of the acquired timberlands, the immediate cash accretion to funds available for distribution per share of the acquisition and its support of the company's ability to grow its dividend over time, 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; lumber pricing; sawlog pricing; 2014 harvest levels; performance of our Wood Products, Resource and Real Estate segments in the fourth quarter of 2014; earnings growth; 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, failure to satisfy the closing conditions or otherwise to close the purchase of the Alabama and Mississippi timberlands, 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; 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.





4


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

 
Quarter Ended
 
Nine Months Ended
  
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Revenues
$
177,215

 
$
157,869

 
$
460,713

 
$
430,334

Costs and expenses:
 
 
 
 
 
 
 
Cost of goods sold
121,574

 
112,499

 
322,016

 
302,702

Selling, general and administrative expenses
10,772

 
13,444

 
32,794

 
37,157

Environmental remediation charge
—

 
1,022

 
—

 
3,522

 
132,346

 
126,965

 
354,810

 
343,381

Operating income
44,869

 
30,904

 
105,903

 
86,953

Interest expense, net
(5,506
)
 
(5,556
)
 
(16,475
)
 
(17,559
)
Income before income taxes
39,363

 
25,348

 
89,428

 
69,394

Income taxes
(6,209
)
 
(3,157
)
 
(19,654
)
 
(12,534
)
Net income
$
33,154

 
$
22,191

 
$
69,774

 
$
56,860

 
 
 
 
 
 
 
 
Net income per share:
 
 
 
 
 
 
 
Basic
$
0.81

 
$
0.55

 
$
1.71

 
$
1.40

Diluted
0.81

 
0.54

 
1.71

 
1.40

Distributions per share
$
0.35

 
$
0.31

 
$
1.05

 
$
0.93

Weighted-average shares outstanding (in thousands):
 
 
 
 
 
 
 
Basic
40,745

 
40,530

 
40,733

 
40,493

Diluted
40,889

 
40,720

 
40,861

 
40,686




5


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

 
September 30, 
 2014
 
December 31,
2013
ASSETS
 
 
 
Current assets:
 
 
 
Cash
$
8,299

 
$
5,586

Short-term investments
65,044

 
52,251

Receivables, net
23,563

 
16,572

Inventories
30,728

 
36,275

Deferred tax assets
7,724

 
7,724

Other assets
8,769

 
11,961

Total current assets
144,127

 
130,369

Property, plant and equipment, net
63,788

 
59,976

Timber and timberlands, net
449,423

 
455,871

Deferred tax assets
15,383

 
21,576

Noncurrent investments
29,394

 
3,144

Other assets
9,063

 
9,594

Total assets
$
711,178

 
$
680,530

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

 
$
—

Accounts payable and accrued liabilities
59,977

 
50,318

       Total current liabilities
59,977

 
50,318

Long-term debt
319,749

 
320,092

Liability for pension and other postretirement employee benefits
70,130

 
83,619

Other long-term obligations
15,558

 
22,353

Stockholders’ equity
245,764

 
204,148

Total liabilities and stockholders' equity
$
711,178

 
$
680,530

 
 
 
 
Shares outstanding (in thousands)
40,596

 
40,537

Working capital
$
84,150

 
$
80,051

Current ratio
2.4:1

 
2.6:1




6


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

 
Nine Months Ended
 
September 30,
 
2014
 
2013
CASH FLOWS FROM OPERATING ACTIVITIES
 
 
 
Net income
$
69,774

 
$
56,860

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
Depreciation, depletion and amortization
19,326

 
20,071

Basis of real estate sold
7,289

 
1,945

Change in deferred taxes
1,127

 
(1,870
)
Employee benefit plans
616

 
5,182

Employee equity-based compensation expense
3,058

 
3,271

Other, net
(1,805
)
 
(22
)
Funding of qualified pension plans
(3,550
)
 
—

Working capital and operating related activities
11,829

 
(10,370
)
Net cash from operating activities
107,664

 
75,067

CASH FLOWS FROM INVESTING ACTIVITIES
 
 
 
Change in short-term investments
(12,793
)
 
6,272

Transfer to company owned life insurance (COLI)
(25,476
)
 
—

Property, plant and equipment
(9,174
)
 
(7,924
)
Timberlands reforestation and timberland roads
(7,840
)
 
(9,011
)
Acquisition of timber and timberlands
(3,143
)
 
—

Other, net
1,126

 
(901
)
Net cash from investing activities
(57,300
)
 
(11,564
)
CASH FLOWS FROM FINANCING ACTIVITIES
 
 
 
Distributions to common stockholders
(42,621
)
 
(37,680
)
Repayment of long-term debt
—

 
(36,663
)
Exercises of stock options
128

 
1,798

Deferred financing costs
(957
)
 
(25
)
Employee tax withholdings on equity-based compensation
(1,092
)
 
(1,757
)
Change in book overdrafts
(2,919
)
 
19

Other, net
(190
)
 
(186
)
Net cash from financing activities
(47,651
)
 
(74,494
)
Change in cash
2,713

 
(10,991
)
Cash at beginning of period
5,586

 
16,985

Cash at end of period
$
8,299

 
$
5,994









7


 
Potlatch Corporation
Segment Information
Unaudited (Dollars in thousands)
 
 
Quarter Ended
 
Nine Months Ended
 
September 30,
 
September 30,
 
2014
 
2013
 
2014
 
2013
Revenues:
 
 
 
 
 
 
 
Resource
$
91,919

 
$
77,017

 
$
183,336

 
$
177,254

Real Estate
6,176

 
8,868

 
36,352

 
19,312

Wood Products
99,213

 
92,116

 
287,589

 
278,642

 
197,308

 
178,001

 
507,277

 
475,208

Elimination of intersegment revenues - Resource
(20,093
)
 
(20,132
)
 
(46,564
)
 
(44,874
)
Total consolidated revenues
$
177,215

 
$
157,869

 
$
460,713

 
$
430,334

 
 
 
 
 
 
 
 
Operating income:
 
 
 
 
 
 
 
Resource
$
34,080

 
$
25,369

 
$
61,122

 
$
55,361

Real Estate
4,646

 
6,493

 
25,295

 
13,692

Wood Products
15,743

 
11,319

 
43,320

 
49,954

Eliminations and adjustments
(1,994
)
 
(791
)
 
(364
)
 
(67
)
 
52,475

 
42,390

 
129,373

 
118,940

Corporate
(7,606
)
 
(11,486
)
 
(23,470
)
 
(31,987
)
Operating income
44,869

 
30,904

 
105,903

 
86,953

Interest expense, net
(5,506
)
 
(5,556
)
 
(16,475
)
 
(17,559
)
Income before income taxes
$
39,363

 
$
25,348

 
$
89,428

 
$
69,394

 
 
 
 
 
 
 
 
Depreciation, depletion and amortization:
 
 
 
 
 
 
 
Resource
$
6,101

 
$
5,888

 
$
12,745

 
$
13,520

Real Estate
15

 
15

 
44

 
42

Wood Products
1,543

 
1,581

 
4,587

 
4,610

 
7,659

 
7,484

 
17,376

 
18,172

Corporate
665

 
562

 
1,950

 
1,899

Total depreciation, depletion and amortization
$
8,324

 
$
8,046

 
$
19,326

 
$
20,071

 
 
 
 
 
 
 
 
Basis of real estate sold:
 
 
 
 
 
 
 
Real Estate
$
519

 
$
1,170

 
$
7,928

 
$
2,370

Eliminations and adjustments
(64
)
 
(132
)
 
(639
)
 
(425
)
Total basis of real estate sold
$
455

 
$
1,038

 
$
7,289

 
$
1,945




8

POTLATCHDELTIC CORP Reports