Attached files
| file | filename |
|---|---|
| EX-99.3 - EX-99.3 - POTLATCHDELTIC CORP | d477074dex993.htm |
| EX-99.2 - EX-99.2 - POTLATCHDELTIC CORP | d477074dex992.htm |
| 8-K - 8-K - POTLATCHDELTIC CORP | d477074d8k.htm |
Exhibit 99.1
News Release
For immediate release:
| Contact: | (Investors) | (Media) | ||
| Jerry Richards | Mark Benson | |||
| 509.835.1521 | 509.835.1513 |
Potlatch Corporation Reports Third Quarter 2017 Results
SPOKANE, Wash – October 23, 2017 - Potlatch Corporation (Nasdaq: PCH) today reported net income of $33.7 million, or $0.82 per diluted share, on revenues of $190.4 million for the quarter ended September 30, 2017. Excluding amounts related to a lumber swap and an environmental claim related to Avery Landing, adjusted net income was $38.7 million, or $0.94 per diluted share for the third quarter of 2017. Net income was $27.6 million, or $0.68 per diluted share, on revenues of $174.0 million in the quarter ended September 30, 2016.
“Our geographical diversity was apparent in our strong third quarter results, which were driven by robust northern sawlog markets and western lumber prices,” said Mike Covey, chairman and chief executive officer. “Cedar sawlog prices remain at a record level and mixed sawlog prices benefited from the increase in lumber prices in the quarter. 2017 is proving to be a banner year for Potlatch given solid earnings and our separate announcement that we have reached an agreement to merge with Deltic. I am very excited about our future prospects,” stated Mr. Covey.
Financial Highlights (in millions, except per share data)
| Q3 2017 | Q2 2017 | Q3 2016 | ||||||||||
| Revenues |
$ | 190.4 | $ | 163.2 | $ | 174.0 | ||||||
| Net income |
$ | 33.7 | $ | 24.2 | $ | 27.6 | ||||||
| Net income per diluted share |
$ | 0.82 | $ | 0.59 | $ | 0.68 | ||||||
| Distribution per share |
$ | 0.375 | $ | 0.375 | $ | 0.375 | ||||||
| Net cash from operations |
$ | 50.0 | $ | 37.4 | $ | 28.7 | ||||||
| Cash and cash equivalents |
$ | 116.8 | $ | 110.3 | $ | 72.9 | ||||||
1
Business Performance: Q3 2017 vs. Q2 2017
Resource
Resource’s operating income was $41.8 million on revenues of $94.7 million in the third quarter, compared to operating income of $19.5 million on revenues of $55.9 million in the second quarter of 2017. Northern sawlog prices increased 7% relative to the second quarter. Harvest volumes were seasonally higher in the North and the South.
Wood Products
Wood Products earned $19.3 million on revenues of $116.5 million in the third quarter, compared to operating income of $24.7 million on revenues of $114.5 million in the second quarter of 2017. Average lumber prices were comparable and lumber shipments increased 3% in the third quarter compared to the second quarter. The segment recorded a gain of $3.3 million in the second quarter and a loss of $2.1 million in the third quarter related to a lumber price swap.
Real Estate
Real Estate’s operating income was $1.4 million on revenues of $3.3 million in the third quarter, compared to operating income of $5.8 million on revenues of $8.1 million in the second quarter of 2017. Fewer acres were sold in the third quarter compared to the second quarter.
Reconciliation of Q3 2017 Earnings (in millions, except per share data)
| Amount | Per Share | |||||||
| Net income |
$ | 33.7 | $ | 0.82 | ||||
| Environmental charges for Avery Landing, net of taxes |
3.0 | 0.07 | ||||||
| Change in unrealized (gain) loss on lumber price swap, net of taxes1 |
1.3 | 0.03 | ||||||
| Lumber price swap settlements, net of taxes1 |
0.7 | 0.02 | ||||||
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| Adjusted net income2 |
$ | 38.7 | $ | 0.94 | ||||
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| 1 | Lumber price swap adjusted to exclude the change in unrealized (gain) loss and include settlements during the period. |
| 2 | Adjusted net income is a non-GAAP measure that management uses to evaluate the performance of the company. Adjusted net income should not be considered in isolation, and is not intended to represent an alternative to our GAAP results. We believe that these non-GAAP measures, when read in conjunction with our GAAP financials, provide useful information to investors by facilitating the comparability of our ongoing operating results over the periods presented, the ability to identify trends in our underlying business and the comparison of our operating results against analyst financial models and operating results of other public companies that supplement their GAAP results with non-GAAP financial measures. |
2
Transaction with Deltic and Conference Call Information
In a separate press release issued this morning, the Company also announced a definitive agreement to combine with Deltic in an all-stock transaction to create a leading domestic timberland owner and top-tier lumber manufacturer. Potlatch will host a conference call today at 5:30 a.m. Pacific Time / 8:30 a.m. Eastern Time to discuss third quarter results as well as the Deltic transaction.
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 90286636.
A replay of the conference call will be available two hours following the call until October 30, 2017 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 90286636 to access the replay.
Cancelling Third Quarter Conference Call
In light of today’s announced agreement with Deltic, Potlatch has cancelled its previously scheduled 2017 third quarter earnings call on Tuesday, October 24, 2017 at 9:00 a.m. Pacific Time / 12:00 p.m. Eastern Time.
About Potlatch
Potlatch is a Real Estate Investment Trust (REIT) with approximately 1.4 million acres of timberland in Alabama, Arkansas, Idaho, Minnesota and Mississippi. Potlatch, a certified 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. More information about Potlatch can be found on the company’s website at www.potlatchcorp.com.
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, our expectations regarding the U.S. housing market; strong repair and remodel market; lumber demand and pricing; future company performance; the direction of our business markets; business conditions, pricing, EBITDDA and earnings in our Resource, Wood Products and Real Estate segments; company earnings in the fourth quarter of 2017 and for the full year; harvest volumes in the fourth quarter of 2017 and for the full year; percentage of total harvest that will occur in the North and South and the percentage of sawlogs to be harvested in the North and the South in the fourth
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quarter of 2017; robust cedar sawlog market resulting in an increase in EBITDDA compared to 2016; lumber shipments in the fourth quarter of 2017 and for the year; real estate sales in the fourth quarter of 2017; capital projects and capital expenditures in 2017; corporate expenses and interest expense in the fourth quarter of 2017; final accrual relating to the Avery Landing environmental claim; tax rate for the fourth quarter of 2017 and full year; debt maturities; 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, the U.S. housing market, 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; availability of logging contractors and shipping capacity; changes in the United States and international economies; changes in the level of construction activity; changes in Asia demand; changes in tariffs, quotas and trade agreements involving wood products; currency fluctuation; 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; restrictions on harvesting due to fire danger; changes in raw material, fuel and other costs; changes in share price; failure to settle the Avery Landing environmental claim; the successful execution of the company’s strategic plans, including its ability to complete and realize the expected benefits of the proposed transaction with Deltic Timber; 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.
ADDITIONAL INFORMATION
This communication is being made in respect of the proposed merger transaction involving Potlatch Corporation (“Potlatch”) and Deltic Timber Corporation (“Deltic”). This communication does not constitute an offer to sell or the solicitation of an offer to buy any securities or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. In connection with the proposed merger, Potlatch and Deltic will file relevant materials with the Securities and Exchange Commission (“SEC”), including a Potlatch registration statement on Form S-4 that will include a joint proxy statement of Potlatch and Deltic and also constitutes a prospectus of Potlatch. Potlatch and Deltic also plan to file other documents with the SEC regarding the proposed merger transaction and a definitive joint proxy statement/prospectus will be mailed to stockholders of Potlatch and Deltic. BEFORE MAKING ANY VOTING OR INVESTMENT DECISION, SECURITY HOLDERS OF POTLATCH AND DELTIC ARE URGED TO READ THE JOINT PROXY
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STATEMENT/PROSPECTUS REGARDING THE PROPOSED TRANSACTION AND ANY OTHER RELEVANT DOCUMENTS CAREFULLY IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. The joint proxy statement/prospectus, as well as other filings containing information about Potlatch and Deltic will be available without charge, at the SEC’s Internet site (http://www.sec.gov). Copies of the joint proxy statement/prospectus and the filings with the SEC that will be incorporated by reference in the joint proxy statement/prospectus can also be obtained, when available, without charge, from Potlatch’s website at http://www.Potlatchcorp.com under the Investor Resources tab (in the case of documents filed by Potlatch) and on Deltic’s website at https://www.Deltic.com under the Investor Relations tab (in the case of documents filed by Deltic).
Potlatch and Deltic, and certain of their respective directors, executive officers and other members of management and employees may be deemed to be participants in the solicitation of proxies from the stockholders of Deltic and Potlatch in respect of the proposed merger transaction. Certain information about the directors and executive officers of Potlatch is set forth in its Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on February 17, 2017, its proxy statement for its 2017 annual meeting of stockholders, which was filed with the SEC on April 3, 2017 and its Current Report on Form 8-K, which was filed on May 1, 2017. Certain Information about the directors and executive officers of Deltic is set forth in its Annual Report on Form 10-K for the year ended December 31, 2016, which was filed with the SEC on March 7, 2017, its proxy statement for its 2017 annual meeting of stockholders, which was filed with the SEC on March 20, 2017, its supplement to the proxy statement for its 2017 annual meeting of the stockholders, which was filed with the SEC on March 30, 2017 and its Current Reports on Form 8-K, which were filed with the SEC on September 1, 2017, May 2, 2017, March 8, 2017 and February 27, 2017. Other information regarding the participants in the proxy solicitations and a description of their direct and indirect interests, by security holdings or otherwise, will be included in the joint proxy statement/prospectus and other relevant documents filed with the SEC when they become available.
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Potlatch Corporation
Consolidated Statements of Income (Loss)
Unaudited
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | |||||||||||||||||
| (Dollars in thousands, except per share amount) | 2017 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| Revenues |
$ | 190,441 | $ | 163,229 | $ | 174,027 | $ | 503,351 | $ | 443,418 | ||||||||||
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| Costs and expenses: |
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| Cost of goods sold |
124,971 | 111,556 | 122,132 | 349,310 | 345,324 | |||||||||||||||
| Selling, general and administrative expenses |
14,619 | 14,165 | 12,901 | 41,773 | 38,712 | |||||||||||||||
| Environmental charges for Avery Landing |
4,978 | — | — | 4,978 | 1,022 | |||||||||||||||
| Loss (gain) on lumber price swap |
2,080 | (3,265 | ) | — | (1,185 | ) | — | |||||||||||||
| Loss on sale of central Idaho1 |
— | — | — | — | 48,522 | |||||||||||||||
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| 146,648 | 122,456 | 135,033 | 394,876 | 433,580 | ||||||||||||||||
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| Operating income |
43,793 | 40,773 | 38,994 | 108,475 | 9,838 | |||||||||||||||
| Interest expense, net |
(7,336 | ) | (7,348 | ) | (7,786 | ) | (19,654 | ) | (22,017 | ) | ||||||||||
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| Income (loss) before income taxes |
36,457 | 33,425 | 31,208 | 88,821 | (12,179 | ) | ||||||||||||||
| Income tax (provision) benefit |
(2,757 | ) | (9,181 | ) | (3,562 | ) | (13,956 | ) | 8,744 | |||||||||||
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| Net income (loss) |
$ | 33,700 | $ | 24,244 | $ | 27,646 | $ | 74,865 | $ | (3,435 | ) | |||||||||
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| Net income (loss) per share: |
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| Basic |
$ | 0.83 | $ | 0.59 | $ | 0.68 | $ | 1.83 | $ | (0.08 | ) | |||||||||
| Diluted |
$ | 0.82 | $ | 0.59 | $ | 0.68 | $ | 1.82 | $ | (0.08 | ) | |||||||||
| Dividends per share |
$ | 0.375 | $ | 0.375 | $ | 0.375 | $ | 1.125 | $ | 1.125 | ||||||||||
| Weighted-average shares outstanding (in thousands): |
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| Basic |
40,829 | 40,823 | 40,740 | 40,814 | 40,807 | |||||||||||||||
| Diluted |
41,250 | 41,219 | 40,933 | 41,183 | 40,807 | |||||||||||||||
| 1 | In the second quarter of 2016, we sold approximately 172,000 acres of timberlands located in central Idaho for $114 million at a loss of $48.5 million before taxes. |
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Potlatch Corporation
Condensed Consolidated Balance Sheets
Unaudited
| (Dollars in thousands) | September 30, 2017 | December 31, 2016 | ||||||
| ASSETS |
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| Current assets: |
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| Cash and cash equivalents |
$ | 116,803 | $ | 82,584 | ||||
| Receivables, net |
23,461 | 17,284 | ||||||
| Inventories |
39,261 | 52,622 | ||||||
| Other assets |
8,820 | 11,155 | ||||||
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| Total current assets |
188,345 | 163,645 | ||||||
| Property, plant and equipment, net |
76,138 | 72,820 | ||||||
| Timber and timberlands, net |
657,546 | 641,856 | ||||||
| Deferred tax assets, net |
40,889 | 42,051 | ||||||
| Other assets |
8,075 | 7,309 | ||||||
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| Total assets |
$ | 970,993 | $ | 927,681 | ||||
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| LIABILITIES AND STOCKHOLDERS’ EQUITY |
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| Current liabilities: |
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| Current portion of long-term debt |
$ | 20,304 | $ | 11,032 | ||||
| Accounts payable and accrued liabilities |
60,741 | 43,710 | ||||||
| Current portion of pension and other postretirement employee benefits |
5,839 | 5,839 | ||||||
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| Total current liabilities |
86,884 | 60,581 | ||||||
| Long-term debt |
559,019 | 572,956 | ||||||
| Pension and other postretirement employee benefits |
118,505 | 123,284 | ||||||
| Other long-term obligations |
15,395 | 14,586 | ||||||
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| Total liabilities |
779,803 | 771,407 | ||||||
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| Commitments and contingencies |
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| Stockholders’ equity: |
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| Common stock, $1 par value |
40,611 | 40,519 | ||||||
| Additional paid-in capital |
357,736 | 355,274 | ||||||
| Accumulated deficit |
(99,677 | ) | (128,775 | ) | ||||
| Accumulated other comprehensive loss |
(107,480 | ) | (110,744 | ) | ||||
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| Total stockholders’ equity |
191,190 | 156,274 | ||||||
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| Total liabilities and stockholders’ equity |
$ | 970,993 | $ | 927,681 | ||||
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Potlatch Corporation
Condensed Consolidated Statements of Cash Flows
Unaudited
| Nine Months Ended September 30, | ||||||||
| (Dollars in thousands) | 2017 | 2016 | ||||||
| CASH FLOWS FROM OPERATING ACTIVITIES |
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| Net income (loss) |
$ | 74,865 | $ | (3,435 | ) | |||
| Adjustments to reconcile net income (loss) to net cash from operating activities: |
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| Depreciation, depletion and amortization |
21,908 | 25,723 | ||||||
| Basis of real estate sold |
6,351 | 6,686 | ||||||
| Change in deferred taxes |
(925 | ) | 1,375 | |||||
| Pension and other postretirement employee benefits |
9,863 | 11,743 | ||||||
| Equity-based compensation expense |
3,536 | 3,290 | ||||||
| Loss on sale of central Idaho timber and timberlands |
— | 48,522 | ||||||
| Other, net |
(1,467 | ) | (1,141 | ) | ||||
| Funding of qualified pension plans |
(5,275 | ) | (1,300 | ) | ||||
| Change in working capital and operating-related activities, net |
20,489 | (17,073 | ) | |||||
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| Net cash from operating activities |
129,345 | 74,390 | ||||||
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| CASH FLOWS FROM INVESTING ACTIVITIES |
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| Purchase of property, plant and equipment |
(9,445 | ) | (4,262 | ) | ||||
| Timberlands reforestation and roads |
(11,577 | ) | (10,421 | ) | ||||
| Acquisition of timber and timberlands |
(22,033 | ) | (1,180 | ) | ||||
| Net proceeds from sale of central Idaho timber and timberlands |
— | 111,460 | ||||||
| Other, net |
(106 | ) | 525 | |||||
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| Net cash from investing activities |
(43,161 | ) | 96,122 | |||||
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| CASH FLOWS FROM FINANCING ACTIVITIES |
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| Dividends to common stockholders |
(45,686 | ) | (45,647 | ) | ||||
| Repayment of revolving line of credit borrowings |
— | (30,000 | ) | |||||
| Repayment of long-term debt |
(5,000 | ) | (113,335 | ) | ||||
| Proceeds from issuance of long-term debt |
— | 93,235 | ||||||
| Repurchase of common stock |
— | (5,956 | ) | |||||
| Other, net |
(1,279 | ) | (3,879 | ) | ||||
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| Net cash from financing activities |
(51,965 | ) | (105,582 | ) | ||||
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| Change in cash and cash equivalents |
34,219 | 64,930 | ||||||
| Cash and cash equivalents at beginning of period |
82,584 | 7,925 | ||||||
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| Cash and cash equivalents at end of period |
$ | 116,803 | $ | 72,855 | ||||
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Potlatch Corporation
Segment Information
Unaudited
| Three Months Ended | Nine Months Ended | |||||||||||||||||||
| September 30, | June 30, | September 30, | September 30, | |||||||||||||||||
| (Dollars in thousands) | 2017 | 2017 | 2016 | 2017 | 2016 | |||||||||||||||
| Revenues: |
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| Resource |
$ | 94,705 | $ | 55,924 | $ | 85,822 | $ | 202,397 | $ | 189,358 | ||||||||||
| Wood Products |
116,487 | 114,529 | 97,620 | 326,608 | 271,782 | |||||||||||||||
| Real Estate |
3,282 | 8,136 | 8,426 | 25,922 | 23,946 | |||||||||||||||
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| 214,474 | 178,589 | 191,868 | 554,927 | 485,086 | ||||||||||||||||
| Intersegment Resource revenues |
(24,033 | ) | (15,360 | ) | (17,841 | ) | (51,576 | ) | (41,668 | ) | ||||||||||
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| Total consolidated revenues |
$ | 190,441 | $ | 163,229 | $ | 174,027 | $ | 503,351 | $ | 443,418 | ||||||||||
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| Income (loss) before income taxes: |
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| Resource |
$ | 41,796 | $ | 19,520 | $ | 33,303 | $ | 76,245 | $ | 59,182 | ||||||||||
| Wood Products |
19,281 | 24,705 | 10,657 | 52,670 | 16,308 | |||||||||||||||
| Real Estate |
1,469 | 5,725 | 5,885 | 15,837 | (35,469 | ) | ||||||||||||||
| Eliminations and adjustments |
(3,141 | ) | 1,053 | (1,946 | ) | (1,029 | ) | (1,450 | ) | |||||||||||
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| 59,405 | 51,003 | 47,899 | 143,723 | 38,571 | ||||||||||||||||
| Corporate |
(15,612 | ) | (10,230 | ) | (8,905 | ) | (35,248 | ) | (28,733 | ) | ||||||||||
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| Operating income |
43,793 | 40,773 | 38,994 | 108,475 | 9,838 | |||||||||||||||
| Interest expense, net |
(7,336 | ) | (7,348 | ) | (7,786 | ) | (19,654 | ) | (22,017 | ) | ||||||||||
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| Income (loss) before income taxes |
$ | 36,457 | $ | 33,425 | $ | 31,208 | $ | 88,821 | $ | (12,179 | ) | |||||||||
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| Depreciation, depletion and amortization: |
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| Resource |
$ | 6,207 | $ | 4,274 | $ | 6,456 | $ | 14,865 | $ | 17,971 | ||||||||||
| Wood Products |
1,821 | 1,839 | 1,837 | 5,487 | 5,538 | |||||||||||||||
| Real Estate |
— | — | — | 1 | 3 | |||||||||||||||
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| 8,028 | 6,113 | 8,293 | 20,353 | 23,512 | ||||||||||||||||
| Corporate |
168 | 158 | 187 | 443 | 608 | |||||||||||||||
| Bond discounts and deferred loan fees |
369 | 370 | 769 | 1,112 | 1,603 | |||||||||||||||
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| Total depreciation, depletion and amortization |
$ | 8,565 | $ | 6,641 | $ | 9,249 | $ | 21,908 | $ | 25,723 | ||||||||||
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| Basis of real estate sold: |
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| Real Estate |
$ | 618 | $ | 1,047 | $ | 1,364 | $ | 6,474 | $ | 7,118 | ||||||||||
| Eliminations and adjustments |
(39 | ) | (65 | ) | (99 | ) | (123 | ) | (432 | ) | ||||||||||
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| Total basis of real estate sold |
$ | 579 | $ | 982 | $ | 1,265 | $ | 6,351 | $ | 6,686 | ||||||||||
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